Making the Grade in ESG

Many of us can remember the experience of preparing for a challenging exam, taking the test and then anticipating anxiously the grade we’d receive. That feeling is rarely replicated in the business world, where results are less clear-cut than a letter grade like an A, B or—shudder the thought—F.

An exception to that observation occurs with ESG. Numerous ratings agencies examine the Environmental, Social and Governance practices of major companies, providing numeric and letter grades to indicate their relative performance.

CDP is one of the most respected of these ESG ratings agencies. Once known as the Climate Disclosure Project, CDP rates companies on several environmental factors including climate and supplier engagement. Companies submit responses to extensive questionnaires in these areas (the exam part) and CDP provides letter grades based on two key factors—the company’s transparency and its performance.

Applied Materials was encouraged to learn, in the latest cycle of CDP grades, that our work on climate change had received a B- grade, a significant improvement over our prior year’s rating and ahead of the electronic equipment sector’s C average. What’s more, Applied’s supplier engagement grade had also improved to a B, representing another ratings jump for the company.

While Applied has long worked to improve our climate impacts and supplier engagement, 2020 marked a year where we significantly expanded our programs and commitments. In July, we outlined our efforts to decouple company growth from our carbon footprint, committing to 100% renewable energy sourcing by 2030 and to cut our carbon emissions by 50% over that time. We also committed to major transparency actions, including to set science-based targets for our entire carbon footprint over the next two years. These will bring us in line with the 2°C targets called for in the UN’s Paris Agreement.

In the supply chain, we also announced the creation of the SuCCESS2030 initiative. This calls for us to work closely with our suppliers on setting challenging standards for environmental and social impacts, improving handoffs to reduce waste in the fulfillment stream, and sharing insights and best practices in these areas. This program is all about engaging suppliers to build collaboration in environmental and social areas.

Clearly, these substantive strategic actions resonated with CDP and are reflected in their grades. These initiatives and commitments represent the great leadership and teamwork behind ESG here at Applied. However, like any good student, we’re not satisfied with a B- or even a B; indeed, we’re not satisfied with being better than average.

Our aspiration is to help drive the semiconductor industry into a leadership role on climate change and supplier engagement. With continued transparency and performance in these areas, Applied intends to build on our own journey and hopefully we can also continue to raise the ESG bar for our industry.

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