At ITW, our commitment to sustainability and our unwavering dedication to strong governance and the highest ethical conduct are long-standing and deeply rooted in our Core Values. Our robust governance practices guide our approach to sustainability and serve as the foundation for how we strive to make a meaningful difference for the environment, our people and our communities.
Fully aligned with the Next Phase of our Enterprise Strategy (2024 to 2030), our sustainability strategy is based on a holistic approach that fits our company and is consistent with our goal of being one of the world’s best performing, highest-quality and most respected industrial companies in the eyes of all key stakeholders.
We are fully committed to operating our businesses in a way that demonstrates our dedication to global environmental sustainability. Our strategic priorities in this area are not only balanced and fact-based, but also closely aligned with ITW’s reputation of being a “Do What We Say” company. Consistent with our decentralized, entrepreneurial culture, our sustainability strategy is operationalized by our ITW colleagues at the divisional level through clear frameworks.
ITW has a strong track record of setting and achieving increasingly ambitious goals for greenhouse gas (GHG) emissions reduction, and we are dedicated to transparent reporting on our progress, as evidenced by this, our 15th annual sustainability report.
In 2022, with guidance and oversight from our Board of Directors, we once again raised the bar by upping our GHG reduction target as we committed to achieving a 50% absolute reduction of Scope 1 and Scope 2 GHG emissions by 2030, compared with a 2021 baseline. We shifted to an absolute reduction target based on investor feedback and consistent with our focus on continuous improvement. Importantly, this new goal is based on a feasible path to achievement that includes: 1) reducing energy consumption and improving operational efficiency in our facilities, 2) expanding our purchase of energy from renewable sources, 3) pursuing viable solar projects and 4) electrifying the company’s fleet. We made meaningful progress in 2023, as our divisions began to operationalize our goal by employing a fact-based, data-driven sustainability framework and approach, achieving an approximate 30% reduction in GHG emissions versus our 2021 baseline. Because of our divisional colleagues’ focus and strong execution, ITW is firmly on track to meet our GHG target by 2030.
The central focus of the Next Phase of our Enterprise Strategy is to elevate high-quality, organic growth, fueled by Customer-Back Innovation, as a key differentiator for ITW on par with our best-in-class operational capabilities and financial performance. ITW’s Customer-Back Innovation process plays a central role in our growth and sustainability strategies and guides how we develop clean-tech products that address some of the world’s most important challenges and opportunities, including those related to the impacts of climate change. We strive to deliver value to our customers by closely partnering with them to reduce the environmental impact of their operations and end-use applications and help them pursue growth opportunities in the realm of sustainability, such as in the electric vehicle market. We view sustainability as an important growth opportunity for ITW, and we are pleased to report that ITW’s portfolio of clean-tech products now represents approximately 31% of ITW’s revenue, up from 22% in 2017.
Our continued advancement of ITW’s Enterprise Strategy and differentiated long-term performance relies on our continued ability to attract, develop and retain great ITW leaders and talent. In 2023, we rolled out a data-driven framework to help ensure a consistent employee experience across our global businesses. While our decentralized, entrepreneurial culture is the key to how we execute, the core commitments outlined in our framework serve as the foundation of our employee experience across all divisions and a guide toward our aspiration to be a great employer for all ITW colleagues. We also remain focused on cultivating a welcoming workplace to inspire our colleagues to do their best work. Our Inclusive Leader Initiative, seven highly-effective Employee Resource Groups and educational resources all support our commitment to build a global, diverse workforce and inclusive workplaces.
Given our leadership-centric business model, strategy and culture, diversity at ITW remains anchored in a very compelling business case. As our overall talent management system continues to mature, we regularly reassess how we can be most effective in leveraging our diversity and inclusion efforts and initiatives to achieve our long-term leadership talent needs. As an outcome of these efforts, we made additional progress on our diversity metrics in 2023 as evidenced by increases in both gender and racial/ethnic diversity among our top 1,000 leaders.
As part of ITW’s “Do More” agenda, we continue to strategically invest in the areas of education, workforce readiness and helping foster more inclusive economic growth for underserved segments of the population. These areas are closely aligned with our skill set and capabilities as a company and represent opportunities for ITW to have a meaningful impact.
Through United Way’s Commit to a Neighborhood initiative, ITW is investing approximately $40 million in buildings and property acquisition, capital improvements and workforce development to add well-paying manufacturing jobs and careers in an under-invested Chicago neighborhood. Together with our investment and commitment to the ITW David Speer Academy, ITW is helping to create promising futures for individuals in this long under-served community.
In closing, we offer our sincere gratitude to our 45,000 ITW colleagues around the world who contribute their ideas, actions and time in support of our sustainability efforts each and every day.
We also thank you, our key stakeholders, for your continued interest and support as we embark on the Next Phase of our sustainability journey.
Michael M. Larsen
Senior Vice President and Chief Financial Officer
March 2024
