| a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term. |
In 2021 Carlisle completed a detailed assessment of climate-related risks and opportunities. Risks and opportunities were considered over short-term (0-18 months), medium-term (1.5 – 7 years), and long-term (7-10 years) time horizons. Physical risks from extreme weather effects including extreme temperature, water stress, storms, and flooding were assessed as relatively low. Medium-term transition risks and strategic opportunities were identified as follows:
Transition Risks
Climate-related policy and legal legislations: Changes in environmental and climate change laws or regulations, including laws relating to GHG emissions, could increase environmental compliance expenditures. Changes in climate change concerns, or in the regulation of such concerns, including GHG emissions, could subject Carlisle to additional costs and restrictions, including increased energy and raw material costs and other compliance requirements which could negatively impact Carlisle's reputation, business, capital expenditures, results of operations, and financial position.
Market leading to increased costs of raw materials: Carlisle utilizes petroleum-based products, steel and other commodities in its manufacturing processes. Raw materials, including inbound freight, accounted for approximately 78% of Carlisle's cost of goods sold in 2021. Significant increases in the costs of these materials may not be recovered through selling price increases and significant disruption to Carlisle's supply chains or significant shortages of materials could adversely affect Carlisle's business, financial condition, results of operations and cash flows. Changes in climate-related concerns, or in the regulation of such concerns, could further subject Carlisle to increases in cost of goods sold from raw materials.
Opportunities
Increased demand for low emissions goods and services: In the United States, residential and commercial buildings contribute nearly 40% of the total greenhouse gas emissions. The 1.5°C scenario calls for a 50% reduction in greenhouse gas emissions by 2030. To meet this target, building codes and regulations will require enhanced energy-efficiency standards. For example, the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) publishes the standard ASHRAE 90.1 standard, which outlines the minimum requirements for energy efficient designs, has been adopted by forty-two US States and has increased thermal insulation requirements over time. As ASHRAE 90.1 and similar standards continue to gain adoption and improve efficiency requirements, demand will increase for Carlisle’s thermal insulation and energy conserving systems leading to increased revenues.
Resource substitutes leading to resilience opportunity: Carlisle’s legacy of recycling and continuous improvement began over 100 years ago with the introduction of scrap rubber into the inner-tube production line. Today, millions of pounds of scrap material feed Carlisle’s production processes and provide as much as 96% post-consumer or production waste to a wide variety of products. Carlisle will continue this legacy by growing end-of-life programs. Recycled end-of-life materials can be used to supplement raw material purchases of carbon-intensive products.
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| b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning. |
Climate-related risks and opportunities have influenced Carlisle's businesses, strategy, and financial planning in the following areas:
Products and services: Risks and opportunities related to the growing demand for energy and carbon efficient products have influenced our product strategy. For example, in 2021 we announced plans to invest more than $60 million to build a state-of-the-art Leadership in Energy and Environmental Design ("LEED") certified facility in Sikeston, Missouri where CCM will manufacture energy-efficient Polyiso insulation.
Supply chain and/or value chain: Risks and opportunities related to carbon emissions from the production of our raw materials has influenced our engagement strategy with our supply chain. In 2021, we surveyed our key suppliers to understand the carbon emissions associated with the raw materials that we purchase. In addition, we have completed detailed life cycle analysis for many of our products. Life cycle analysis is a transparent, objective report that communicates what a product is made of and how it impacts the environment across its entire value-chain. These actions will allow for significant environmental impacts to be identified and addressed throughout our supply chain.
Investment in R&D: Innovation and driving organic growth is a key component of Carlisle’s business strategy, Vision 2025. Risks and opportunities related to climate-change are considered in Carlisle’s R&D investments as Carlisle aims to provide products with proven long-term performance, lasting energy efficiency, greater weather resistance, excellent heat and UV resistance, and industry leading resilience. This commitment is demonstrated by Carlisle’s $12 million investment into a 40,000 square-foot R&D technical center in Carlisle, PA. This investment will allow Carlisle to maintain its technological leadership position in the building and construction industry while meeting the demands of climate adaptation for buildings.
Operations: Risks and opportunities arising from scope 1 and 2 GHG emissions have influenced our operations strategy. Carlisle utilizes the Carlisle Operating System (COS) to drive operational excellence using principles of lean and six sigma. Through COS and as part of our Environmental Sustainability Policy, Carlisle continues to work toward our commitment to certify all of our manufacturing facilities to the ISO 14001 Environmental Management System by the end of 2025. In addition, we performed energy audits at our largest facilities during 2021. These audits informed us of opportunities and will serve as a roadmap for decision making around establishing actionable and achievable energy and greenhouse gas (GHG) reduction goals, including our approach to net-zero carbon in our operations.
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| c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario. |
As part of our climate-related risks and opportunities assessment, we completed a scenario analysis aligning to multiple climate scenarios. These include the Stated-Policies Scenario (2.5°C), the Sustainable Development Scenario (1.5°C), and a no mitigation scenario (4°C to 5°C). The results from this analysis show that without any action, climate change will affect Carlisle to a varying degree in terms of both transition and physical factors. The key climate-related challenges for Carlisle are likely to be transition risks, which vary significantly depending on the ambition and speed at which jurisdictions act to align to a 1.5°C trajectory.
While there are challenges ahead, Carlisle is uniquely positioned to meet them. With buildings nearly 40% of annual GHG emissions, it is extremely important for our teams to continue to focus on innovation and improving the energy efficiency of our building products. The recent announcement to realign our construction materials business into two segments organized around our products and applications for the Building Envelope (Carlisle Construction Materials and Carlisle Weatherproofing Technologies) will help us focus on delivering products for the sustainable building of the future. We are prepared to manufacture these products according to a lower carbon model as we plan to make a formal commitment to net-zero carbon emissions in the near future.
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