At DNOW, we seek to drive sustainability throughout our business to deliver long-term, profitable growth to our shareholders, while also helping to fulfill the needs of our customers as we develop innovative and more sustainable ways to operate. We endeavor to create positive change globally and in our local communities by minimizing waste and pollution, supporting organizations that possess aligned sustainability goals and maintaining fair and honest business policies. We are committed to working to minimize our impact on the environment through energy management conservation initiatives, air quality improvements, responsible water conservation and recycling, where applicable. We also strive to invest in our employees, our communities and the industries in which we operate.
Message from our President & CEO
President & Chief Executive Officer (CEO)
The energy and industrial sectors have recently gone through significant change. I would like to thank our employees for their hard work, dedication and agility during these truly unprecedented times. I am proud our company has risen to the occasion to continue providing uninterrupted support for our customers. We are building a resilient model to drive long-term growth and fortify our upstream energy position while diversifying, expanding and investing in the midstream, downstream and industrial end markets. We are taking decisive measures by focusing on structural transformation and efficiencies and investing in digital disruption marketed under our digital tools platform DigitalNOW® to enrich the customer experience.
We have taken additional steps to identify the risks and opportunities of the sustainability issues most relevant to our business and the expectations of our key stakeholders. This work has guided us to define a clear and focused role in how we can reduce our environmental impact and how our products can better serve the sustainability goals of our customers. We undertook a detailed materiality analysis, assessed our strategy, set goals and developed a detailed road map to keep us moving forward, driving long-term value for our shareholders, our customers and our employees.
Our focus is on those environmental, social and governance (ESG”) metrics that have a significant impact to our core business strategy and drive for innovative ways for us to increase engagement of our products and services, while also contributing to the environmental and safety objectives of our customers. As we bring world-class supply chain management and other solutions to our customers, we will continue to identify products and services that help them achieve their sustainability targets.
This inaugural report, Unlocking Sustainable Value, represents our commitment towards increased transparency and a wider focus on sustainability to create a positive impact and a more sustainable future. It allows us to share our key performance data with our stakeholders as an integral part of our business strategy and is an important step in DistributionNOW’s sustainability reporting journey. We are excited about the road ahead and we embrace with enthusiasm and optimism the opportunity to unlock the change needed for a better future. We are proud to present our 2019 Sustainability Report and look forward to sharing our progress in the coming year.
Our Strategy to Unlock Sustainable Value
At DNOW, we know the management of environmental, social and governance (ESG) factors contributes to long-term financial stability, as they have the potential to affect our markets, profits, assets, liabilities and cost of capital. We have created a strategy to unlock value by marrying our geographical footprint, highly skilled people, strategic inventory positioning, relationships with key domestic and import manufacturers and product expertise with disruptive digital innovation. This powerful combination can drive performance, growth and sustainable margins. We believe this strategy is a solid foundation for long-term financial and operational results.
Our Sustainability Reporting Framework
In line with our sustainability strategy, we have identified a set of focus areas that are relevant to our business that guide our ESG initiatives and decisionmaking throughout our global operations. These focus areas are aligned with the general approach and guidance laid out by the Task Force on Financial Climate-related Disclosures (TCFD) and the topics recommended by the Sustainability Accounting Standards Board (SASB) Sustainable Industry Classification System® (SICS) for the Multiline Specialty Retailers & Distributors and the Oil & Gas Services industries.
Opportunities & Strategies
Enabling Customer Sustainability
Serving Renewable Energy Markets
Focusing on DNOW Supply Chain Sustainability
We are committed to and recognize the importance of good corporate governance and high ethical standards. DistributionNOW’s Code of Business Conduct and Ethical Standards enhances our relationships with key stakeholders, including our people, customers, suppliers, other business partners, shareholders and local communities around the world.
Corporate Governance Oversight
Strong corporate governance includes being responsive to the shareholders and other stakeholders of our company. We are accessible and willing to engage with our shareholders to discuss operational, financial, governance, environmental, safety and social issues. Maintaining shareholder trust and goodwill through our policies and performance and adhering to our values remain the primary objectives of our company.
DNOW’s Board of Directors and management recognize their responsibility and are committed to high standards of ethical conduct and corporate governance. Our Board’s core responsibilities are to foster our company’s long-term success, to oversee the business, supervise management and to act honestly, in good faith and in the best interests of our shareholders. In addition, our Board has oversight of certain categories of risk management.
In carrying out this mandate, our Board of Directors has appointed the following committees to assist in fulfilling its oversight responsibilities: the Audit Committee, the Nominating/Corporate Governance Committee and the Compensation Committee. The Nominating/Corporate Governance Committee assists our Board in fulfilling its oversight responsibilities of our efforts on ESG matters. All these committees play significant roles in carrying out the oversight functions in their areas of expertise and report back to our Board on a regular basis.
Board Oversight of Risk Management
With the oversight of our Board of Directors, management has a system in place designed to help monitor and assess various types of business risks and opportunities. We identify and evaluate risks and opportunities based on both actual and potential likelihood and significance.
We continuously improve and adjust our risk management system to address actual and potential risks and opportunities in the short-, medium- and long-term, and various levels of severity and frequency.
Proper and effective management of ESG matters is important to our success. Our Board of Directors understands the importance of proper management of ESG and has tasked our Nominating/Corporate Governance Committee with assisting our Board in its oversight of our company’s efforts on ESG matters.
As mentioned above, DNOW’s risk management function includes focus on health, safety, environmental and security risks. Management formed an ESG Committee in 2019 to oversee the identification, measurement and disclosure of sustainability performance data most relevant to our operations. With the oversight of the Nominating/Corporate Governance Committee of our Board of Directors, the committee ensures that our relevant sustainability metrics and disclosures align with our strategic plan and that the results are communicated to stakeholders.
This committee is comprised of representatives from various departments across our company and is overseen by the following members of the Executive management team: Chief Executive Officer, Chief Financial Officer, Vice President - Investor Relations, Chief Administrative and Information Officer, Senior Vice President - Operations and General Counsel. Meeting at least quarterly, this group facilitates collaboration across divisions and departments to increase understanding of consistent issues. Once issues are identified, the ESG Committee leads the effort in ensuring opportunities can be exploited or risks can be minimized and in determining how performance will be monitored.
Management of the Legal & Regulatory Environment
Our customers are being impacted by the shift towards a low carbon energy transition economy. This has the potential to impact our business from many directions, including the demand to diversify the energy supply to renewable energy and increased reliance on natural gas. Our business is also affected by changes in public policy and by the environmental, health and safety laws of the federal, state, local and foreign jurisdictions in which we and our customers operate. These laws, together with regulations and permitting requirements, influence the products and solutions our customers demand.
Changes in the legal and regulatory environment also yield opportunity for DNOW to seek new markets emerging from regulation or legislation applicable to our current customers around topics such as emissions reduction, air quality, fuels management, water management, chemicals management, ecological impact management, biodiversity and safety. In addition, rules and regulations to accelerate a low carbon energy transition may represent opportunities to serve new and existing customers.
The legal and regulatory landscape is ever changing; there is increased focus on greenhouse gases and regulations around emissions standards. While it is impossible to accurately predict the effect that changes in laws and regulations, or their interpretation or enforcement, may have on us, we approach business opportunities and risks in a highly disciplined manner. Our Board and management, in tandem with our Internal Audit department, Legal department, Compliance department, Finance/Accounting department and Information Technology department, stay abreast of the evolving legal and regulatory landscape.
Risks (including financial, market, political, compliance, operational, cybersecurity and reputational, among others) that inherently may affect our business are evaluated and addressed through strategic planning by various stakeholders within the organization with the chief aim of avoiding adverse impacts to our strategic objectives and remaining competitive in our industry and markets.
We acknowledge that environmental and social factors present market and reputational risks, including those related to climate change. The increasing attention to climate change has negatively impacted the reputation of the oil and gas industry because the industry is seen as a contributor to GHG. However, the industry is a significant provider of affordable energy to communities and individuals. As a distributor to the energy industry, we provide products that safeguard the environment from unintended leaks and spills of hydrocarbons. We are also capable of distributing a diverse product supply to our customers and other industries as the oil and gas industry evolves. Please refer to the risk factors included in our 2019 Form 10-K.
DNOW’s Board and management remain committed to actively monitoring developments within the legal and regulatory environment and stand ready to respond to risks and opportunities resulting from enacted changes to laws and regulations. Our social and environmental initiatives and results are discussed in subsequent sections of this report.
Business Ethics & Payments Transparency
DNOW is committed to and recognizes the importance of high ethical standards. Our Code of Business Conduct and Ethical Standards enhances our relationships with key stakeholders, including our people, customers, suppliers, other business partners, shareholders and local communities around the world.
We have incorporated the following Codes of Conduct and Ethics on our website to provide ways for investors to understand the foundation of our corporate governance:
- Governance Hotline
- The U.S. Export & Economic Sanctions Policy
- Policy on Insider Trading
- Code of Conduct
- Code of Conduct for Directors and Officers
- Anti-Corruption Anti-Bribery Policy
- Code of Ethics for Senior Financial Officers
Although we do not have a formal diversity policy in place for the director nomination process, our Board recognizes that diverse candidates with appropriate and relevant skills and experience contribute to the depth and diversity of perspective in the boardroom. An important factor in our Nominating/Corporate Governance Committee’s consideration and assessment of a director candidate is the diversity of background, viewpoints, professional experience, education, gender, age and culture – including nationality, race or ethnic background.
- Majority voting to elect board members
- Annual say on pay voting
- 1 of 8 Directors female
- Independent Chair of the Board
- Independent committee chairs
- Clawback policy to recover executive compensation
We strive to invest in our employees, our communities and the industries in which we operate. We engage and support many organizations and groups in the communities where we operate globally.