Technical Support Material Handling

W.W. Grainger, Inc. - Climate Change ****

C*. Introduction

C0.1

(C0.1) Give a general description and introduction to your organization. W.W. Grainger, Inc. is a broad line, business-to-business distributor of maintenance, repair, and operating (MRO) supplies and other related products and services. More than 4.5 million customers worldwide rely on Grainger for products in categories such as safety, material handling, and metalworking, along with services like inventory management and technical support. These customers represent a broad collection of industries, including commercial, government, healthcare, and manufacturing and place orders online, on mobile devices, through sales representatives, over the phone, and at local branches. Approximately 5,000 suppliers provide Grainger with more than 1.5 million products stocked in the company’s distribution centers (DCs) and branches worldwide. Collectively, Grainger offers more than 2 million MRO products in its High-touch Solutions assortment and more than 30 million products collectively through its expanding Endless Assortment offering. Grainger employs approximately 24,200 team members across the globe. For more information on Grainger, visit invest.grainger.com. C0.2

(C0.2) State the start and end date of the year for which you are reporting data. Start date End date Indicate if you are providing emissions data for past reporting years

Select the number of past reporting years you will be providing emissions data for

Reporting

year

January 1

2021

December 31

2021

No <Not Applicable>

C0.3

(C0.3) Select the countries/areas in which you operate. Canada

China

Czechia

France

Germany

Guam

Hong Kong SAR, China

Hungary

India

Indonesia

Ireland

Japan

Mexico

Panama

Poland

Republic of Korea

South Africa

Thailand

United Arab Emirates

United Kingdom of Great Britain and Northern Ireland United States of America

C0.4

(C0.4) Select the currency used for all financial information disclosed throughout your response. USD

C0.5

(C0.5) Select the option that describes the reporting boundary for which climate-related impacts on your business are being reported. Note that this option should align with your chosen approach for consolidating your GHG inventory. Operational control

C0.8

CDP Page 1 of 64

(C0.8) Does your organization have an ISIN code or another unique identifier (e.g., Ticker, CUSIP, etc.)? Indicate whether you are able to provide a unique identifier for your organization Provide your unique identifier Yes, a Ticker symbol GWW

Yes, a CUSIP number 384802104

C1. Governance

C1.1

(C1.1) Is there board-level oversight of climate-related issues within your organization? Yes

C1.1a

(C1.1a) Identify the position(s) (do not include any names) of the individual(s) on the board with responsibility for climate-related issues. Position of

individual(s)

Please explain

Board-level

committee

General ESG oversight is by the Board Affairs and Nominating Committee (BANC), which is comprised of all independent Directors and, in effect, is a Committee of the Whole. The BANC annually reviews the Company’s ESG strategy, programs, and reporting, including environmental and sustainability, social responsibility to its communities, governance, the Company’s culture, talent strategy, and diversity, equity and inclusion. An example of a climate related decision made by the BANC was to review and approve Grainger's decision to disclose against the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Decisions (TCFD) in 2020 and provided feedback on climate-related disclosures on Form 10-K risk factors. The Board’s Compensation Committee oversees the Company’s programs and policies for human capital management and assists the BANC in its oversight of the Company’s programs and policies with respect to employee engagement and leadership effectiveness. In addition to the annual review, the BANC and the Compensation Committee receive routine reports and updates on ESG matters on an as-needed basis. The Board includes one Director with expertise in corporate sustainability and one Director with expertise in environmental matters. Chief

Executive

Officer

(CEO)

The Company’s ESG efforts are led by the Chairman and CEO who chairs management’s ESG Leadership Council. The key objectives of the ESG Leadership Council include providing strategic direction of the Company’s ESG program, identifying ways to incorporate the appropriate ESG initiatives into operations and strategy, and making regular reports to the BANC and the Compensation Committee, as appropriate. The Company’s ESG strategy as set by the ESG Leadership Council is implemented by two cross- functional groups: (a) the ESG Steering Committee, senior leaders who drive the ESG Leadership Council’s strategic objectives; and (b) the ESG Working Group, subject matter experts who implement day-to-day programs in pursuit of those objectives. Core initiatives relating to culture and talent, including human capital management and diversity, equity and inclusion, are led by the Grainger Human Resources team in coordination with the ESG Leadership Council.

C1.1b

CDP Page 2 of 64

(C1.1b) Provide further details on the board’s oversight of climate-related issues. Frequency

with

which

climate-

related

issues are

a

scheduled

agenda

item

Governance

mechanisms

into which

climate-

related issues

are integrated

Scope of

board-

level

oversight

Please explain

Scheduled

– some

meetings

Reviewing and

guiding

strategy

Reviewing and

guiding major

plans of action

Reviewing and

guiding risk

management

policies

Reviewing and

guiding annual

budgets

Monitoring

implementation

and

performance of

objectives

Overseeing

major capital

expenditures,

acquisitions

and

divestitures

Monitoring and

overseeing

progress

against goals

and targets for

addressing

climate-related

issues

<Not

Applicabl

e>

The Board recognizes the importance of ensuring that our strategy is designed to create sustainable long-term value for Grainger’s shareholders and other stakeholders. The Board maintains an active role in formulating, planning, and overseeing the implementation of Grainger’s strategy as to operational, financial, regulatory and ESG matters. The Company integrates ESG initiatives into its strategy and daily operations at each level of its business. This begins with general ESG oversight by the Board Affairs and Nominating Committee (BANC), which is comprised of all independent Directors and, in effect, is a Committee of the Whole. The BANC annually reviews the Company’s ESG programs and reporting, including environmental and sustainability, social responsibility to its communities, governance, the Company’s culture, talent strategy, and diversity, equity and inclusion. In turn, the Compensation Committee oversees the Company’s programs and policies for human capital management and assists the BANC in its oversight of the Company’s programs and policies with respect to employee engagement and leadership effectiveness. The Board includes one Director with expertise in corporate sustainability and one Director with expertise in environmental matters. In addition to its annual review, the BANC and the Compensation Committee receive routine reports and updates on ESG matters on an as-needed basis. Continuing its practice begun in 2017, the Company also proactively made the Board’s Lead Director available to investors in 2021 to explain and discuss the Company’s ESG and executive compensation practices and policies. C1.1d

(C1.1d) Does your organization have at least one board member with competence on climate-related issues? Board

member(s) have

competence on

climate-related

issues

Criteria used to assess competence of board member(s) on climate-related issues Primary reason for no board-level

competence on

climate-related

issues

Explain why your organization does not have at

least one board member with competence on

climate-related issues and any plans to address

board-level competence in the future

Row

1

Yes The Board’s various experiences and viewpoints benefit us most when they are aligned with our global business needs, our strong corporate governance practices and our ESG goals. As a result of the Board’s ongoing refreshment efforts, in recent years, we added Directors whose professional occupations include expertise in corporate sustainability and environmental matters.

<Not Applicable> <Not Applicable>

C1.2

(C1.2) Provide the highest management-level position(s) or committee(s) with responsibility for climate-related issues. Name of the position(s) and/or committee(s) Reporting line

Responsibility Coverage of

responsibility

Frequency of reporting to the board on

climate-related issues

Chief Executive Officer (CEO) <Not

Applicable>

Both assessing and managing climate-related

risks and opportunities

<Not Applicable> Quarterly

Chief Financial Officer (CFO) <Not

Applicable>

Both assessing and managing climate-related

risks and opportunities

<Not Applicable> Quarterly

Other C-Suite Officer, please specify (SVP & Chief Human Resources Officer)

<Not

Applicable>

Both assessing and managing climate-related

risks and opportunities

<Not Applicable> Quarterly

Other C-Suite Officer, please specify (SVP & General Counsel) <Not Applicable>

Both assessing and managing climate-related

risks and opportunities

<Not Applicable> Quarterly

Other, please specify (Global Lead ESG and DEI (Sr. Director, Diversity & Corporate Responsibility))

<Not

Applicable>

Both assessing and managing climate-related

risks and opportunities

<Not Applicable> Half-yearly

Other, please specify (VP of Merchandising and Supplier Management) <Not Applicable>

Both assessing and managing climate-related

risks and opportunities

<Not Applicable> Annually

Other, please specify (VP of Network Strategy & Transportation) <Not Applicable>

Both assessing and managing climate-related

risks and opportunities

<Not Applicable> Annually

CDP Page 3 of 64

C1.2a

(C1.2a) Describe where in the organizational structure this/these position(s) and/or committees lie, what their associated responsibilities are, and how climate- related issues are monitored (do not include the names of individuals). ESG Leadership Council: Each of the positions identified as having the highest management-level with responsibility for climate-related issues – Chief Executive Officer

(CEO), SVP & Chief Financial Officer (CFO), SVP & Chief Human Resources Officer (CHRO) and SVP & General (Counsel), VP Merchandising and Supplier Management, VP Network Strategy & Transportation, and Global Lead ESG and DEI (Sr. Director, Diversity & Corporate Responsibility)– constitute Grainger’s ESG Leadership Council. The Company’s ESG efforts are led by the Chairman and CEO who chairs management’s ESG Leadership Council. The ESG Leadership Council meets quarterly to discuss pertinent ESG issues and objectives. In addition to these regular meetings, various representatives from the ESG Leadership Council meet with the BANC annually to review the Company's promotion of ESG. The BANC also receives routine reports and updates from ESG Leadership Council members and senior management on ESG matters. Description of responsibilities: The key objectives of the ESG Leadership Council include identifying ways to incorporate the appropriate ESG initiatives into operations and strategy, overseeing the overall ESG program, overseeing the ESG materiality assessment, and making regular reports to the BANC and other Board committees. The ESG Leadership Council is supported by a cross-functional steering committee providing subject matter expertise, implementing day-to-day programs and driving progress toward the success of our strategy. Core initiatives relating to culture and talent, including human capital management and diversity, equity and inclusion, are led by the Grainger Human Resources team in coordination with the ESG Leadership Council. Titles: The titles of all members of the ESG Leadership Council members are: Chairman & CEO; SVP & CFO, SVP & CHRO, SVP & General Counsel; VP, Merchandising and Supplier Management; VP, Network Strategy & Transportation; Global Lead ESG and DEI (Sr. Director, Diversity & Corporate Responsibility). Overall ESG Governance: The Company integrates ESG initiatives into its strategy and daily operations at each level of its business. This begins with general ESG oversight by the Board Affairs and Nominating Committee (BANC), which is comprised of all independent Directors. The BANC annually reviews the Company’s ESG programs and reporting, including environmental and sustainability, social responsibility to its communities, governance, the Company’s culture, talent strategy, and diversity, equity and inclusion. In turn, the Compensation Committee oversees the Company’s programs and policies for human capital management and assists the BANC in its oversight of the Company’s programs and policies with respect to employee engagement and leadership effectiveness. The Board includes one Director with expertise in corporate sustainability and one Director with expertise in environmental matters.

C1.3

(C1.3) Do you provide incentives for the management of climate-related issues, including the attainment of targets? Provide

incentives for

the

management of

climate-related

issues

Comment

Row

1

No, not currently

but we plan to

introduce them in

the next two

years

As disclosed in our 2022 Proxy Statement, Grainger is assessing the potential impact of integrating ESG metrics into our executive compensation program. In partnership with the Compensation Committee’s independent compensation consultant and our ESG Leadership Council, during 2022 we are testing a notional compensation program designed to determine the ESG metrics and outcomes that would be appropriate components in our future compensation program. We will consider the outcomes of this notional program, along with feedback from our 2022 shareholder engagement sessions, to help us assess appropriate ways to integrate ESG into future executive compensation program design. C2. Risks and opportunities

C2.1

(C2.1) Does your organization have a process for identifying, assessing, and responding to climate-related risks and opportunities? Yes

C2.1a

(C2.1a) How does your organization define short-, medium- and long-term time horizons? From (years) To (years) Comment

Short-term 0 3 Short-term time horizon is defined as 0-3 years. Medium-term 3 10 Medium-term time horizon is defined as 3-10 years. Long-term 10 30 Long-term time horizon is defined as 10-30 years. C2.1b

CDP Page 4 of 64

(C2.1b) How does your organization define substantive financial or strategic impact on your business? Enterprise Risk Management Framework:

Grainger’s Enterprise Risk Management (ERM) team facilitates the use of the Company’s Enterprise Risk Management Framework (RMF) to define, measure, and monitor risk across the organization, including climate-related risks. The RMF establishes a common language and methodology to measure and prioritize risks and opportunities and define a process for monitoring of risk treatments. As part of this framework, there is an enterprise risk rating scale that provides guidelines for risk scoring/magnitude. The risk rating scale quantifies risk magnitude through consideration of Impact and Likelihood ratings. Applying ratings to each risk helps to commonly measure and prioritize them in a consistent matter.

In this process, the definition of substantive strategic/financial impact includes a risk that is assigned the following combinations of Impact and Likelihood ratings, with definitions and details of the ratings outlined below: 3 Impact rating & 5 Likelihood rating

4 Impact rating & 4 or above Likelihood rating

5 Impacting rating & 3 or above Likelihood rating

The Impact Ratings measure risk on a 1 (Incidental) to 5 (Severe) scale across four categories: Financial, Customer Experience, Team Member and Compliance. The Financial risk rating scale is aligned with the Company’s financial reporting materiality thresholds. 3 – Moderate - An event causing some disruption in production operations and/or having moderate impact on the ability to achieve business objectives 4 – Major - An event causing considerable disruptions in operations and/or causing substantial hardship and damage to the organization and members characterized by disruptions in critical services that result in the inability to meet service level commitments having a major impact on our ability to achieve business objectives. 5 – Severe - An event causing serious and extended disruptions in operations and/or causing severe hardship and damage to the organization and members, which may be characterized by the failure of critical services or prolonged disruptions, insufficient financial resources, or failure to operate in accordance with laws and regulations and has an extreme impact on our ability to achieve business objectives. The Likelihood Ratings measures and reasonably predicts the probability of a specific event occurring on a 1 (Frequent) to 5 (Rare) scale. Scores are reported on the same 1- 5 scale as the Impact Ratings.

C2.2

•

•

•

CDP Page 5 of 64

(C2.2) Describe your process(es) for identifying, assessing and responding to climate-related risks and opportunities. Value chain stage(s) covered

Direct operations

Upstream

Downstream

Risk management process

Integrated into multi-disciplinary company-wide risk management process Frequency of assessment

More than once a year

Time horizon(s) covered

Short-term

Medium-term

Long-term

Description of process

Overview: Grainger’s Enterprise Risk Management (ERM) team uses the Company’s Enterprise Risk Management Framework (RMF) to define, measure, and monitor risk across the organization, including climate-related risks. The Board has overall responsibility for risk oversight, with the Audit Committee assisting the Board in performing this function. The Board's role is to oversee the Company's ERM programs, including risk assessment and risk management processes and policies used by Grainger to identify, assess, monitor, and address potential financial compensation, operational, strategic, climate and legal risks on an enterprise-wide basis. Both the Board and the Audit Committee regularly review Grainger's risk assessment and management processes and policies, including receiving regular reports from the Company's Chief Information Security Officer, and members of Grainger's management who are responsible for the effectiveness of Grainger's ERM programs. Beginning April 2021, the Enterprise Risk Management team collaborated with business leaders to establish a quarterly metrics dashboard to assess and monitor Grainger’s top enterprise risks to clearly depict current state and inform Board oversight. Identification: Grainger uses external benchmarking to determine applicable short-term, medium-term, and long-term risks for the organization. Either once a risk is identified, or at least once every two years, the ERM team polls the Grainger Leadership Team and the Board to determine the organization’s top 8 risks from a list of risks applicable to the Grainger organization.

Assessment: Each identified top 8 risk has a Grainger executive leadership team member (direct CEO report) owner who is responsible for understanding the risk for the company, designing programs / objectives and mitigation strategies for those risks. Internal Audit does a periodic review/deep dive on select risks annually and provides an assessment to the applicable owner. The deep dives are a joint product between the identified risk owner (GLT member and appointed team members) and our ERM team. Each deep dive assessment includes a review of the risks, risk management activities, opportunities and metrics used to measure the current state of each area, along with sensitivity analysis to show financial magnitude when it can be estimated. Updates and deep dives on the top 8 identified risks occur throughout the year. Additionally, quarterly updates are provided by the Enterprise Risk Management team to the Board through a metrics dashboard that assess and monitors performance of Grainger's top enterprise risks.

Response to risk: Grainger executive leadership team members are assigned a top 8 risk and are responsible for designing programs, objectives, and mitigation strategies for those risks, which are presented to the Board. The Board has overall responsibility for risk oversight, with the Audit Committee assisting the Board in performing this function. The Board's role is to oversee the Company's ERM programs, including risk assessment and risk management processes and policies used by Grainger to identify, assess, monitor and address potential financial compensation, operational, strategic, climate and legal risks on an enterprise-wide basis. Both the Board and the Audit Committee regularly review Grainger's risk assessment and management processes and policies, including receiving regular reports from executive leadership team members assigned to program design and mitigation strategies of top risks. For example, the Board receives reports on cybersecurity preparedness from the Company's Chief Information Security Officer, and members of Grainger's management who are responsible for the effectiveness of Grainger's ERM programs. As part of its oversight responsibility, the Compensation Committee then assesses the relationship between potential risk created by Grainger's compensation programs and their impact on long- term shareholder value.

C2.2a

CDP Page 6 of 64

(C2.2a) Which risk types are considered in your organization's climate-related risk assessments? Relevance

&

inclusion

Please explain

Current

regulation

Relevant,

always

included

Current regulatory risks identified by Corporate Real Estate & Facilities in collaboration with other business departments as relevant, include those that support (or oppose) renewable energy, such as federal and state incentive programs or solar taxes, since the change in solar incentives due to regulation is a key component of our renewable energy strategy and GHG reduction targets. Investments are prioritized based on our findings and a decision may be made to move forward or not if the investment helps our organization achieve business and climate goals or not. For instance, Solar Energy Industries Association reports that, “There is a federal investment tax credit (ITC) for solar energy systems in place until December 31st, 2023. Our organization considers both the investment viability in addition to carbon reduction to prioritize initiative. The Corporate Real Estate & Facilities Team has built a viability scale for sustainability initiatives based on our Internal Return Rate (IRR). As federal and state incentives decline the investment viability is impacted, and lead to de-prioritization. Emerging

regulation

Relevant,

always

included

Legislative developments concerning new or more stringent environmental laws designed to address climate change such as stricter limits on greenhouse gas emissions or more prescriptive reporting of environmental, social and governance metrics are routinely monitored. Such legislation has the potential for impacting Grainger’s suppliers, product offering, operations, facilities and/or customers. Since there currently is a lack of consistent climate change legislation and standards, Grainger’s compliance approach is tailored to the particular event or matter sought to be addressed by the law and/or standard. Emerging regulatory risks identified by Corporate Real Estate & Facilities and Legal departments, in collaboration with other business departments as relevant, include those that would impact the price of materials utilized in the manufacturing process of goods purchased &/or sold, such as international trade tariffs on imported photovoltaic cells, as another key component of our renewable energy strategy and GHG reduction targets. Vetting these risks allows for the development of mitigation strategies should legislation pass.

Technology Relevant,

always

included

New technologies in terms of relevance in supporting our GHG reduction goals are consistently evaluated within Corporate Real Estate & Facilities, and in collaboration with other business departments as relevant. For example, low-cost buildings controls have, in the past, been too costly to implement, however, newer applications have contributed to Grainger's emissions reduction efforts. At times newly implemented technologies can impose unintended consequences to the building operations. Risk of component failure in advance systems can impact part or all of operations due to issues such as power quality, harmonics, increased humidity or condensation. Once implemented, some are assessed within the context of latest industry technological advancements and reported on back to leadership monthly. Legal Relevant,

always

included

Potential risks to Grainger's Environmentally Preferable Products (EPP) sold are assessed routinely at Grainger from an interdisciplinary group led by Merchandising and Supplier Management. This is a growing segment of Grainger’s business which represented $875 million in sales in 2021 and can contribute to GHG reductions in Scope 3 product use phase. Grainger reviews the specific set of EPP attributes as new sustainable products are introduced to the product portfolio, and all values are assessed for relevancy, annually. All EPP product claims are evaluated with an external partner, UL LLC, based on the Federal Trade Commission’s Guides for the Use of Environmental Marketing Claims ("Green Guides"). To guide customers toward more environmentally preferable solutions, each product in Grainger’s EPP portfolio is identified on Grainger.com® with a specific set of certificates, or attributes that are found in the technical specifications section for each product. These products are grouped together in a Green filter on the left-hand navigation bar of Grainger.com®. EPP products fall into two categories - those that are certified by independent organizations and those that have “green environmental attributes”. A certification acts as a stamp of approval and indicates that a product has met certain environmental standards. These are designated with a green leaf icon on Grainger.com® and explained in the compliance section for each product. Market Relevant,

always

included

Based on market assessments, Grainger has determined that a robust, environmentally preferred product portfolio is critical for meeting key customer needs. Providing environmentally preferable products is embedded in our strategy to provide solutions that keep our customer’s operations running sustainably, which enables Grainger to serve as a trusted advisor, particularly as it relates to helping achieve their sustainability goals.. Merchandising and Supplier Management works collaboratively with business units across Grainger to create a more sustainable workplace for our customers and our communities through our Environmentally Preferable Product (EPP) Portfolio, a key component of a growing sales segment for Grainger and potential to reduce our Scope 3 emissions. In 2021, the EPP Portfolio featured 100,000 items that help customers maintain sustainable facilities. Annual sales were $875 million, a 23% increase over 2020. We offer our customers a broad assortment of EPP products, to help customers select product that are third-party reviewed by UL LLC and are either certified or offer specific environmental features to reduce energy consumption, conserve water, reduce waste and improve indoor air quality. For climate change, examples of independently tested certifications include: Carbonfree® Certified, EnergyStar®, EnergyAware®, DLC® Approved, as well as verified Environmental Product Declarations (EPDs). In addition, customers may request reports to help them track, report and grow their green spend. Similarly, we equip our customer-facing team members with training, sales tools and marketing support so that they can help customers achieve meaningful progress towards their sustainability goals and initiatives. Reputation Relevant,

always

included

Grainger’s continued success is substantially dependent on positive perceptions of Grainger’s reputation. Grainger assesses reputation considerations through its ESG Governance structure and the ESG Leadership Council and ESG Steering Committee, which includes representatives from Corporate Real Estate & Facilities, Merchandising and Supplier Management, Human Resources, Risk Management, Offer Enablement, Finance, Global Ethics and Compliance, Legal, External Affairs and Community Engagement. Climate-related risks such as natural disasters and extreme weather could have an adverse impact on our supply chain, including difficulty in obtaining products from suppliers or in shipping products to customers, thereby potentially impacting our reputation. That said, Grainger’s commitments to sustainability and customer relationships ensure that we continue to enhance our reputation by providing environmentally preferable products and third-party provided sustainability services that enable our customers to address their own climate risks. Grainger is a leader in the MRO space. We were the first to set public targets such as a GHG reduction goal, first to build LEED certified facilities, first to become a EPA SmartWay Transport Partner. Acute

physical

Relevant,

always

included

An example of an identified acute physical risk would be disruptions in Grainger's supply chain, due to the increased severity of extreme weather, which could result in an adverse impact on results of operations. In 2019,

Contact this candidate