Report on Climate Policy
At Caterpillar’s 2022 Annual Meeting of Shareholders, our board of directors recommended a vote in favor of — and our shareholders approved — a shareholder proposal requesting a report on climate policy. (See Caterpillar’s 2022 Proxy, pages 52-54, to read the full proposal). Our company’s report is set forth below.
Caterpillar is committed and contributing to a reduced carbon future. We demonstrate our commitment in many ways, including through significant progress in reducing greenhouse gas emissions from our operations and by continuing to invest in new products, technologies and services to help our customers meet their climate-related objectives. We will continue to support our diverse range of global customers while executing our strategy for long-term profitable growth.
The opportunities presented by the energy transition and our work to help our customers achieve their climate-related objectives led us to include sustainability as a focus area of Caterpillar’s enterprise strategy. We are demonstrating shareholder responsiveness by making further enhancements to our climate disclosures. We continue to execute our strategy for the benefit of our customers, employees, shareholders and other stakeholders.
Caterpillar has been a technology leader for nearly a century, and over the past 20 years, we have invested more than $30 billion in R&D to deliver best-in-class innovation — and we will continue investing in innovative technologies and solutions for our customers. We are increasing our investments in autonomy, alternative fuels, connectivity and digital, and electrification (AACE). We will continue to invest more in AACE as we work with our customers to help them achieve their sustainability objectives.
Today, for example, all gas turbines offered by Caterpillar can operate on hydrogen blends and some of these turbines can operate on 100% hydrogen. We also offer reciprocating generator sets capable of operating on hydrogen blends and the Cat G3516H gas generator set can be configured to use 100% hydrogen. We continue to invest in power sources that offer lower emissions without sacrificing performance. Our products can use an increasingly wide range of fuels, including renewable fuels, biodiesels, biogas, hydrogen blends and hydrotreated vegetable oil.
Caterpillar is committed to delivering robust electrified products and solutions for our customers. Caterpillar demonstrated our first battery electric 793 large mining truck prototype, operated fully loaded at its rated capacity in a live demonstration with key mining customers in November of 2022. Our electric Cat R1700 XE offers 100% battery electric propulsion, producing zero-exhaust emissions for underground load, haul and dump mining operations. Our CI segment is expanding its product portfolio and displayed four battery-powered electric machines in October 2022. Our E&T segment has initiated numerous sustainability innovations covering a range of technologies through both organic and inorganic growth and development, including the acquisition of CarbonPoint Solutions, which provides customers access to carbon capture solutions. Caterpillar also offers the Cat Energy Storage System, or ESS, a rapidly deployable electric power solution to help customers integrate multiple power sources on a worksite. Cat ESS can provide grid stabilization, transient assist and renewable energy storage. Learn more about Caterpillar’s sustainability-related product innovations and solutions in this report.
In addition to our investments, we have also taken important actions to further strengthen our sustainability and climate-related efforts which are also responsive to shareholder feedback, including:
- Incorporating ESG performance into the 2022 incentive plan for executives;
- Releasing our first-ever disclosure of Scope 3 GHG emissions data in 2023;
- Publishing our first-ever TCFD report in 2023; and
- Creating an executive leadership position of CSO, reporting directly to the CEO.
Caterpillar sets and achieves meaningful ESG goals and part of our long-standing commitment to sustainability includes reducing our own GHG emissions. We announced our first sustainability goals in 2006 and refined them in 2013 to include a 50% reduction in Scope 1 and 2 (direct and indirect) GHG emissions intensity from 2006 to 2020. We actually achieved a 51% reduction against this goal. As part of our continuous sustainability journey, we disclosed a new goal in 2021 to further reduce absolute Scope 1 and 2 GHG emissions by 30% between 2018 and 2030. We’ve reduced those emissions by 33% since 2018 through improvements in operational efficiency, as well as implementing energy and GHG reduction initiatives at our facilities.
In 2021, we further emphasized our commitment to reducing product-related emissions by disclosing an additional new goal that 100% of our new products through 2030 will be more sustainable than the previous generation. All of the more than fifty new products introduced in 2022 fulfilled the goal criteria for reduced waste, improved design for rebuild/remanufacturing, improved efficiency and/or lower emissions. The Executive Summary of our Sustainability Report provides more information about Caterpillar’s 2030 goals and progress.
Our Path Ahead
Caterpillar recognizes shareholders’ interest in climate change and is increasing our disclosures in this area.
Caterpillar values shareholder feedback. Through regular shareholder engagement, we hear their interest in how Caterpillar is addressing and reporting on Caterpillar’s sustainability journey. We are continuing to demonstrate our commitment to shareholder responsiveness, including delivering important enhancements to climate disclosures in 2023. Caterpillar’s 2022 Sustainability Report includes — for the first time — the disclosure of our company’s estimated Scope 3 GHG emissions data and includes our first-ever TCFD report, which summarizes how we govern our strategy to address climate-related risks and opportunities and support customers in the energy transition. Our enhanced reporting also includes a description of how our company incorporated ESG into the 2022 incentive plan for executive officers.
The 2022 shareholder proposal — which Caterpillar supported — requests that our company publish a report disclosing GHG targets aligned with the Paris Agreement’s goal of limiting global temperate rise to 1.5 degrees Celsius for the full scope of the company’s operational and product-related emissions or rationale for any decision not to set these targets. Caterpillar reports progress annually against its Scope 1 and 2 GHG reduction goal. While we have not publicly reported or established a numeric reduction goal that encompasses Scope 3 GHG emissions, we have committed that 100% of our new products through 2030 will be more sustainable than the previous generation.
Disclosing our Scope 3 GHG data for Category 11 — use of sold products emissions — for the first time is an important step on our sustainability journey and demonstrates responsiveness to shareholder feedback. As a global industrial manufacturer with a diverse portfolio of products and solutions, Caterpillar’s business has a global scope, and is subject to variables such as long product life-span and many other data collection, calculation and verification complexities.
Read more about Caterpillar’s five-year trend of estimated Scope 3 GHG emissions, including information about the impact of macroeconomic conditions on product mix changes and unit volumes throughout that period, as well as the influence of customer demand and anticipated shifts in product mix for 2023.
Our company has not set a Scope 3 GHG emissions reduction goal as there are significant factors impacting Scope 3 GHG emissions reductions which Caterpillar cannot control and additional uncertainty continues to impact the path ahead. While our products are helping customers achieve their climate-related objectives, our ability to set specific GHG emissions reduction goals that include activities outside Caterpillar’s operations depends on various factors that are fluid and difficult to predict. These include the range of potential pathways for decarbonization; development, deployment and adoption of new technologies by Caterpillar, our suppliers and our customers; and the impacts of governmental regulations and policies around the world and other factors that could significantly alter customer adoption of new technologies. We have worked diligently to ensure that Caterpillar’s current ESG and GHG emissions goals are meaningful, credible and achievable.
Caterpillar is driven to help enable our customers’ success and doing so will require our company and our customers to address a vast array of complex engineering and technology challenges. We are committed to have lower-carbon products and solutions available for our customers, however, uncertainty exists regarding the rate of customer adoption in the near-, intermediate- and long-term horizons.
Caterpillar has a global customer base, and many of our customers are developing infrastructure to meet the basic needs of society such as shelter, clean water, transportation and reliable energy. For example, customers use our products to develop the infrastructure necessary for clean drinking water in remote areas of Africa. Additionally, current estimates suggest that less than half of the population of sub-Saharan Africa has access to reliable electricity. Without that access, battery-powered machines are not a viable option and diesel-powered machines are required to build critical infrastructure.
Caterpillar has a role to play in serving the diverse range of customer needs globally without the constraints of an emissions reduction imperative that is too narrow or doesn’t account for such differences.
The ongoing dialogue with our shareholders during our engagement process includes important input and feedback that also influences our path ahead. Throughout the last year, Caterpillar’s shareholders have expressed support for our progress and acknowledged the technical and other challenges and complexities associated with reducing Scope 3 GHG emissions — especially given our company’s diverse product portfolio serving a wide range of industries and customers — and they have expressed their desire for Caterpillar to strike the best balance between climate-related progress, together with financial performance and returns that are in the best interest of shareholders.
Despite the longer-term uncertainties, we are committed to continue reducing our own emissions and making progress toward the achievement of our 2030 sustainability goals, including our commitment that 100% of our new products through 2030 will be more sustainable than the previous generation. Caterpillar is also well-positioned to design, engineer and manufacture products; and to develop and deploy technology, services and solutions that will help our customers meet their climate-related objectives while also delivering long-term profitable growth and shareholder value creation.
While we recognize the complex challenges and evolving environment on the path ahead, Caterpillar’s long-standing commitment to sustainability will continue to inspire us to help our customers build a better, more sustainable world.