Corporate Sustainability: Strategy & Growth Annual Report

Introduction

Message from our President & CEO

David Cherechinsky

President & CEO

2023 was a pivotal year for our company as we embarked on an exciting rebranding journey. We unveiled a new logo that represents more than just a visual change; it embodies our vision to redefine DNOW both financially and culturally. Our rebranding is driven by our ethos to “inspire one another, delight our customers and fuel the future.” The new logo tells a story of growth, transformation, sustainability, which define the exciting future that lies ahead for DNOW.

Building on our rebranding momentum, I am pleased to share the highlights of our transformative year in this 2023 Sustainability Report. This past year has been marked by significant achievements and milestones that demonstrate our unwavering commitment to sustainability, growth and creating value for our shareholders. Sustainability remains at the core of our operations, driving both our environmental initiatives and our financial success. Our EcoVapor product continues to play a crucial role in the removal of methane and CO2 emissions by addressing gas contamination issues and minimizing the flaring of methane gas. This innovation not only supports our sustainability goals but also provides tangible benefits to our customers and the environment.

We remain committed to expanding our business while responsibly minimizing our environmental impact. As we continue to focus on Driving Sustainable Value, we are proud to report that in 2023, our total Scope 1 and 2 GHG emissions intensity metrics were the lowest in three years, illustrating a decrease of over 37% from 2021, a solid achievement considering our revenue and activity growth. In 2023, we realized a remarkable 9% year-over-year revenue growth and record earnings, reflecting our strategic focus and the robust demand for our innovative solutions. Additionally, our cash provided by operating activities was $188 million, underscoring our strong operational performance. In line with our commitment to delivering value to our shareholders, we returned cash through our share repurchase program, with $50 million in purchases completed in 2023. These financial accomplishments are a testament to the hard work and dedication of our entire team, all while maintaining our commitment to sustainability and long-term growth.

Furthermore, our dedication extends beyond financial and environmental achievements to fostering an exceptional workplace culture. I am proud of all our employee engagement initiatives and the culture we are building upon to ultimately provide world-class customer service to our customers. Our employee engagement survey results are a testament to what we have built, including higher scores in future outlook, manager effectiveness, diversity, equity and inclusion and team dynamics. We also continue to be a bright light in our communities. Complementing these internal achievements, our DNOW Lights initiative had a record year of events and volunteering, highlighting our commitment to giving back to the community and fostering a culture of service and engagement among our employees.

As we look forward to the future, we remain committed to our core values of innovation, sustainability and operational excellence. We will continue to seek opportunities to enhance our ESG performance and Drive Sustainable Value.

⁸Diverse indicates directors that are female and/or a member of an underrepresented racial/ethnic group. Board diversity is as of December 31, 2023.
⁹When performing a desk reassessment, we perform an offsite re-audit, whereby we review the manufacturers’ processes and documentation. Key suppliers are strategic partners that are in our approved manufacturers list with which we have top spend and other suppliers of products we deem critical.

DNOW’s Board of Directors and management acknowledge that a strong governance structure is foundational for fostering an accountable business culture, upholding high standards of ethical conduct and ensuring sustainable stakeholder value creation. Maintaining stakeholder trust and goodwill by upholding our ethical standards and adhering to high controls in both policies and performance remains a centralized focus of our company. We are committed to being responsive to and engaging with our stakeholders on operational, financial, governance, environmental, safety and social matters to create a layer of transparency which ensures consistency in our implementation and enforcement of our approach model to gain commitment and buy-in.

Our safety culture is a cornerstone of how we Drive Sustainable Value for our stakeholders. At DNOW, we integrate health, safety and environmental practices into our business model – from day-to-day operations to the integration of business acquisitions, as well as measuring and assessing results while continually improving processes. Our safety culture is instilled as a core value of our organization first and foremost at the leadership level, including engagement from executives, our Board and operational leaders. We take a proactive approach to safety and are continuously working to adapt our safety topics and priorities to the needs of specific business segments and regions.

Our goal is to assume a vital position and seamlessly integrate within our customers’ value chain while prioritizing our focus on environmental responsibility. We are actively working on our energy management, conservation initiatives, responsible water usage and recycling whenever applicable to reduce our operational footprint. This commitment is firmly established in our Environmental Policy Statement.

We prioritize addressing our customers’ unique energy evolution demands and risks while maximizing value in emerging markets. Our customers face increasing demands to minimize their environmental impact and rely on us for tailored products and process solutions that harmonize with their environmental initiatives and sustainability goals. This includes offering products and services that aid in curtailing environmental footprint, mitigating GHG emissions and fostering sustainable waste and water management practices.

About This Report

The information included in this report is subject to DNOW’s policies and requirements surrounding the disclosure of financial and non-financial data. The financial information included in this report was sourced from our Form 10-K filed with the SEC on February 15, 2024. All non-financial data included in this report was not subject to a third-party audit verification process.

Basis of Presentation for Emissions

DNOW has prepared our GHG emissions calculations for the year ended December 31, 2023 in accordance with the World Resources Institute and World Business Council for Sustainable Development’s Greenhouse Gas Protocol standards and guidance (collectively, the GHG Protocol):

Scope 1 emissions have been prepared in accordance with the GHG Protocol Corporate Accounting and Reporting Standard (revised edition)
Scope 2 emissions have been prepared in accordance with the GHG Protocol Scope 2 Guidance: An amendment to the GHG Protocol Corporate Standard

We present our emissions under the operational control approach, accounting for emissions from operations over which we have the full authority to introduce and implement our operating policies.

Use of Estimates and Estimation Uncertainties

The presentation of non-financial data within this report requires management to make estimates and assumptions that affect data reported within this report. DNOW bases our estimates and methodologies on historical experience and trends, available information and various other assumptions that we believe to be reasonable. Emissions data presented is subject to measurement and uncertainties resulting from limitations inherent in the nature and methods used for determining such data. The selection of different but acceptable measurement techniques can result in materially different measurements. The precision of different measurement techniques may also vary. DNOW nor their affiliates or representatives make any representation or warranty (express or implied) with respect to the information contained in this report (including, without limitation, information obtained from third parties) and each of DNOW and their respective affiliates and representatives expressly disclaim any and all liability based on or relating to the information contained in, or errors or omissions from this report, based on or relating to the reader of this report, or any other written or oral communications transmitted to the readers of this report.

Forward-Looking Statements

Certain information contained in this Sustainability Report may constitute forward-looking statements within the meaning of applicable securities laws, including, but not limited to, statements regarding our plans to: move forward with identified climate change opportunities, foster programs regarding diversity and inclusion and plans to seek opportunities to further integrate sustainability factors into investment decisions. Readers are cautioned not to place undue reliance on forward-looking statements, as they are subject to a number of assumptions and known and unknown risks and uncertainties that may cause the actual results, performance or achievements of DNOW to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements contained herein are made as of the date of this document. We also describe risks and uncertainties in our reports filed with the SEC, including our Form 10-K for the year-ended December 31, 2023 (under the headings “Risk Factors” and “Information Regarding Forward Looking Statements” and elsewhere) and our subsequent reports, which are available through the SEC’s EDGAR system at www.sec.gov, and on our website at www.dnow.com. DNOW assumes no obligation to update or otherwise revise these forward-looking statements, whether as a result of new information, future events or otherwise.

SASB Index

The Sustainability Accounting Standards Board (“SASB”) framework aims to provide a standard for companies to disclose financially-material and decision useful ESG information to investors and other stakeholders. The index below maps our performance under each of the suggested disclosure topics for the following two industries:

Oil & Gas Services (Code EM-SV)
Multiline and Specialty Retailers & Distributors (Code CG-MR)

According to SASB’s Sustainable Industry Classification System (SICS®), these two industry standards most accurately reflect our business operations. Other topics disclosed throughout this report beyond the scope of these standards are not reflected in this index.

Code	Accounting Metric	Unit of Measure	2023 Response	2022 Response	2021 Response
Greenhouse Gas Emissions
EM-SV-110a.1	Total fuel consumed	Gigajoules (GJ)	224,011	216,873	248,228
	Total fuel consumed	Metric tons carbon dioxide equivalent (MT CO₂e)	15,682	15,402	16,624
	Percentage renewable	Percentage (%)	0%	0%	0%
	Percentage used in on-road equipment and vehicles	Percentage (%)	99.9%	99.8%	99.8%
	Percentage used in off-road equipment	Percentage (%)	0.01%	0.2%	0.2%
EM-SV-110a.2	Discussion of strategy or plans to address air emissions-related risks, opportunities, and impacts	N/A	Pages 49	See 2022 Report	See 2021 Report
Energy Management
CG-MR-130a.1	Total electricity consumed	Gigajoules (GJ)	59,868	60,470	69,358
	Total electricity consumed	Metric tons carbon dioxide equivalent (MT CO₂e)	7,629	7,896	8,247
	Total natural gas consumed	Gigajoules (GJ)	76,194	74,891	112,104
	Total natural gas consumed	Metric tons carbon dioxide equivalent (MT CO₂e)	3,900	3,841	5,683
	Total energy consumed	Gigajoules (GJ)	136,062	135,361	181,462
	Percentage energy consumed that is grid electricity¹	Percentage (%)	44%	45%	38%
Employee Health & Safety
EM-SV-320a.1	Total recordable incident rate (TRIR)	Rate	0.81	0.94	0.92
	Fatality rate	Rate	0	0	0
	Near miss frequency rate (NMFR)	Rate	Not Disclosed	Not Disclosed	Not Disclosed
	Total vehicle incident rate (TVIR)	Rate	0.43	1.17	0.56
	Average hours of health, safety, and emergency response training for (a) full- time employees, (b) contract employees, and (c) short- service employees	Hours	Not available	Not available	Not available
EM-SV-320a.2	Description of management systems used to integrate a culture of safety throughout the value chain and project lifecycle	N/A	Pages 29	See 2022 Report	See 2021 Report
Labor Practices
CG-MR-310a.3	Total amount of monetary losses as a result of legal proceedings associated with labor law violations	Dollars ($)	$0	See 2022 Report	See 2021 Report
Employee Engagement, Diversity & Inclusion
CG-MR-330a.1	Percentage of gender and racial/ethnic group representation for (1) management and (2) all other employees	Percentage (%)	Page 36	See 2022 Report	See 2021 Report
CG-MR-330a.2	Total amount of monetary losses as a result of legal proceedings associated with employment discrimination	Dollars ($)	$0	See 2022 Report	See 2021 Report
Data Security
CG-MR-230a.1	Description of approach to identifying and addressing data security risks	N/A	Page 25	See 2022 Report	See 2021 Report
CG-MR-230a.2	Number of data breaches	Number	0	0	0
	Percentage involving personally identifiable information	Percentage (%)	0%	0%	0%
	Number of customers affected	Number	0	0	0
Business Ethics
EM-SV-510a.1	Amount of net revenue in countries that have the 20 lowest rankings in Transparency International’s Corruption Perception Index	Percentage (%) of Total Revenues	0.04%	0.23%	0.15%
EM-SV-510a.2	Description of the management system for prevention of corruption and bribery throughout the value chain	N/A	Page 20	See 2022 Report	See 2021 Report
Critical Incident Risk Management
EM-SV-540a.1	Description of management systems used to identify and mitigate catastrophic and tail-end risks	N/A	Page 16	See 2022 Report	See 2021 Report
Product Design & Lifecycle Management
CG-MR-410a.1	Revenue from products third-party certified to environmental and/or social sustainability standards	Dollars ($)	Not available	Not available	Not available
CG-MR-410a.3	Discussion of strategies to reduce the environmental impact of packaging	N/A	Pages 23	See 2022 Report	See 2021 Report
Management of the Legal & Regulatory Environment
EM-SV-530a.1	Discussion of corporate positions related to government regulations and/or policy proposals that address environmental and social factors affecting the industry	N/A	Pages 19	See 2022 Report	See 2021 Report
Activity Metrics
CG-MR-000.A	Number of retail locations	Number	155	170	180
CG-MR-000.A	Number of regional fulfillment centers	Number	10	9	8
CG-MR-000.B	Total area of retail space	Square meters (m²)	247,613	267,629	254,958
CG-MR-000.B	Total area of regional fulfillment centers	Square meters (m²)	95,169	91,552	87,836

1 Calculated as purchased grid electricity consumption divided by total energy consumption, which includes natural gas consumption.

Category	TCFD Recommendation	Supporting Recommended Disclosure	Location of Disclosure
Governance	Disclose the organization’s governance around climate-related risks and opportunities.	a) Describe the board’s oversight of climate-related risks and opportunities.	Corporate Governance Oversight, Page 13
Governance		b) Describe management’s role in assessing and managing climate-related risks and opportunities.	Corporate Governance Oversight, Page 13
Strategy	Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy and financial planning where such information is material.	a) Describe the climate-related risks and opportunities the organization has identified over the short-, medium- and long-term.	Managing Risks & Opportunities, Page 16 Management of the Legal & Regulatory Environment, Page 19
		b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy and financial planning.
		c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.	At this time, DNOW has not conducted a 2°C or lower scenario analysis. We are, however, committed to continuing to enhance our understanding of climate- related risks and opportunities and the ways in which they impact our business, strategy and financial planning, and will assess this initiative in the future.
Risk Management	Disclose how the organization identifies, assesses and manages climate-related risks.	a) Describe the board’s oversight of climate-related risks and opportunities.	Managing Risks & Opportunities, Page 16
		b) Describe the organization’s processes for managing climate-related risks.
		c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organization’s overall risk management.
Metrics & Targets	Disclose the metrics and targets used to assess and manage relevant climate- related risks and opportunities where such information is material.	a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.	SASB Index, Page 53
		b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 GHG emissions and the related risks.	SASB Index, Page 53
		c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.	We have not yet set climate-specific targets, as we’re focused on establishing our GHG emissions baseline and enhancing our approach to ESG data collection. We will continue to evaluate the feasibility and relevance of setting climate-specific targets in the future.

UN SDG	DNOW Goal Progress and Key Performance Indicators	Section, Page #
	Emphasizing health and safety at work and in the community through support of our robust management systems that prioritize safety at the center of our actions Ongoing safety performance evaluations, mandatory safety training for employees and regular safety meetings	Workforce Health & Safety, Page 29
	Focusing on employee growth through diverse training and development programs tailored to enhance skills and foster personal advancement	Employee Engagement & Development, Page 32
	Our Board prioritizes diversity through director nominations, aiming for a varied representation of backgrounds and experiences Embedding DEI initiatives across recruitment, talent development and succession planning, supported by ongoing DEI education that fosters awareness and education across all company locations through our Employee Resource Groups	Corporate Governance Oversight, Page 13 Workforce Diversity & Inclusion, Page 34
	Focus on high value-add solutions that advance our customers’ environmental goals Continuous monitoring and managing of our sustainability performance, including ongoing initiatives to modernize our fulfillment model and reduce our overall carbon footprint Actively minimizing packaging waste through recycling programs and participation in carbon neutral shipping programs Ensuring our products are sourced, manufactured and distributed in an ethical and sustainable manner through our commitment to supply chain stewardship	Supply Chain Stewardship, Page 21 Delivering Sustainable Energy, Page 42 DNOW Environmental Performance, Page 49 Managing Risks & Opportunities, Page 16
	Board oversight of sustainable growth plans and management of risks related to climate change and other ESG matters Robust internal policies and procedures to uphold high ethical standards and integrity, with employees undergoing regular ethics training	Corporate Governance Oversight, Page 13 Business Ethics & Payments Transparency, Page 20 Management of the Legal & Regulatory Environment, Page 19
	Alignment with UN SDGs most relevant to our sustainability strategy and continuous identification of opportunities where our improvement can contribute to the advancement of sustainable progress	Our Sustainability Reporting Framework, Page 9