Culture of Governance

OUR 2024 Governance Highlights

Corporate Governance Oversight

• Annual Say-on-Pay voting (95% approval in 2024)
• Stock ownership guidelines for officers including expansive clawback policy to recover executive compensation

• Board engagement with CEO over management succession planning
• Annual Board and committee evaluations using a third-party facilitator
• Majority voting to elect Board members

• In-depth strategic review with senior management analyzing risks and opportunities
• 5X stock ownership requirement of annual retainer for non-employee directors

In 2019, Company management formed an internal employee-based ESG Committee to oversee the creation, identification, measurement and disclosure of sustainability performance data most relevant to the Company’s operations. This committee is comprised of representatives from various departments across the Company including members of the executive management team. Since the committee’s inception, the Company has published annual reports which build upon our commitment toward increased transparency and a wider focus on creating a positive global impact and reaffirming our focus on sustainable growth.

With the oversight of the Environmental, Social, Governance & Nominating Committee of the Board of Directors, the ESG Committee ensures that the relevant sustainability metrics and disclosures align with the Company’s strategic plan and that the results are communicated to stakeholders. This includes improving our data collection methodologies, expanding disclosures and looking at setting and achieving viable ESG target goals to further support our evolving ESG initiatives that align with the Sustainability Accounting Standards Board (“SASB”) reporting standards, Task Force on Climate-Related Financial Disclosures (“TCFD”) framework, and United Nations Sustainable Development Goals (“U.N. SDGs”).

We engage with our shareholders frequently to answer questions, address concerns and solicit feedback. We are committed to maintaining shareholder engagement programs that are true dialogues and prepare and approach them to provide candid and accurate information on relevant issues such as our corporate strategy and position within the market. Our shareholder engagement team consists of representatives leading matters on behalf of the Company in areas of investor relations, health, safety and environment, ESG initiatives, executive compensation, sustainability and corporate governance functions. The perspectives of our shareholders are brought back to our team for discussion and potential implementation as well as to the Board to assist with our strategic decision making.

In 2024, we reached out to our top institutional investors — representing over 70% of total ownership of the Company — to discuss our updates on Board composition and ESG-related matters and to receive any feedback on those items as well as executive compensation, amongst other items. As a result of this outreach, we had direct discussions with three of our top shareholders representing approximately 18% of our stock ownership and gained positive feedback from those conversations. We also engage with our shareholders by conducting periodic roadshows, participating at investor conferences, responding to individual investor inquiries and taking questions during our quarterly earnings calls and at our annual shareholders meeting. As a result of the incremental disclosures incorporated in last year’s proxy statement, we had a strong Say-on-Pay (95% in favor) vote.

RISK Management

The Board has ultimate authority and responsibility for overseeing DNOW’s risk management arising out of its operations and business strategy. This includes overseeing the Company’s enterprise-wide risk management framework, which establishes the Company’s overall risk management strategy and enables senior management to understand, manage and report on the risks faced by the Company.

DNOW seeks to implement and maintain practices that are ethical and reasonable. We believe that ethical and humane employee, customer and vendor treatment are top priorities. Guided by our executive leadership team, we balance a drive for financial results with responsibility toward ethical professionalism. DNOW has adopted a Code of Conduct and associated policies which govern the behavior of its employees and its partners. The Code and associated policies cover relevant areas and issues, which employees face on a day-to-day basis to guide behaviors representing DNOW’s expectations.

We provide every employee with a reliable and confidential Governance Hotline to report such issues as harassment, security violations, unfair labor practices, discrimination, threatening behavior, substance abuse, theft, fraud, compliance and regulatory violations or other workplace issues in a safe and convenient manner. This service is available 24/7 and employees are able to make reports anonymously, as the Company has a strict no-retaliation policy for reports made in good faith. The Company offers a third-party legal and ethics hotline and web intake options, tailored to comply with local laws and support language and country-specific requirements.

Our Board views management succession planning as a critical component of ensuring business continuity and performance. The Environmental, Social, Governance & Nominating Committee oversees our management succession planning, which includes input from executives to monitor and guide leadership development for our executive leadership team. The ability of the Company to attract, retain and develop high-performing employees and create a workplace where they can innovate and thrive is an integral party of the Company’s strategy to drive long-term value and mitigate risk. The Environmental, Social, Governance & Nominating Committee regularly engages with senior leadership on succession planning, retention and turnover and workplace culture, as well as proposed succession candidates in different forums such as industry conferences, board dinners and meeting presentations.

We believe that strong corporate governance and effective management of enterprise risk and social supply chain are crucial for the long-term success of our business and shareholders. Management regularly monitors and manages supply chain risks, while adhering to a business code of conduct for vendor selection. Vendors must comply with local laws and ethical business practices, which we assess through audits, contracts and terms and conditions on purchase orders. We seek long-term relationships with partners based on mutual trust, respect and cooperation. We are progressing towards a more inclusive and transparent centralized vendor selection process to ensure fairness and impartiality, while avoiding conflicts of interest. Our evaluation criteria will include ethical labor practices, community engagement and sustainability initiatives; we strive to collaborate with like-minded partners who share our values.

The ability of the Company to attract, retain and develop high-performing employees and create a workplace where they can innovate and thrive is an integral party of the Company’s strategy to drive long-term value and mitigate risk.

Climate-Related Risks & Opportunities

We recognize the inherent risks associated with climate change and the implications of the global shift toward a low-carbon economy, both for our Company and our customers. Our commitment is to tackle these risks and associated opportunities to effectively address this critical issue.

TYPE OF RISK	CLIMATE-RELATED RISKS	POTENTIAL FINANCIAL IMPACTS	MITIGATION STRATEGIES/OPPORTUNITIES
Transitional	Increasing consumer focus on lower emissions solutions, climate change, sustainability and energy transition matters	Decreased revenues due to reduced demand for products / services	Continuously monitor laws and regulations, including those related to climate change and the energy transition that impact our customers’ operations Regularly educate customers on the availability of lower emissions solutions Expand our product and service offerings, as well as our complementary suite of digital channels and solutions into emerging energy evolution markets, such as renewable energy and decarbonization
Regulatory	Legal, regulatory, policy and liability actions associated with climate change	Increased liabilities and compliance and operating costs	Actively monitor developments within the legal and regulatory environment (see Management of Legal & Regulatory Environment section of this report) Proactively pursue efforts to reduce our greenhouse gas (“GHG”) emissions and other environmental impacts across our value chain and improve operating efficiency Seek new markets emerging from regulation or legislation applicable to our current customers around topics such as: emissions capture and reduction, air quality, fuels management, water management, chemicals management, ecological impact management, biodiversity and safety
Physical	Adverse weather events or natural disasters	Increased capital expenditures and operating and insurance costs; Interruption of operations and damage to assets	Diversify suppliers and geographical areas Provide operational planning for facility interruptions and maintain adequate insurance protection for assets Ensure the establishment of robust emergency preparedness plans and procedures to effectively respond to unforeseen situations

Historically, the costs to comply with environmental and health and safety requirements have not been material to our financial position, results of operations or cash flows. We are not aware of any pending environmental compliance or remediation matters that, in the opinion of management, are reasonably likely to have a material effect on our business, financial position or results of operations or cash flows.

The shift towards a low-carbon economy is influencing our business through increased customer demand for renewable energy and cleaner energy sources. Additionally, changes in public policy, geopolitical tensions and the environmental, health and safety laws at the federal, state, local and foreign levels, both where we operate and where our customers operate, influence the products and solutions sought by our customers. These shifts create opportunities for DNOW to explore new markets and expand solutions to both current and potential customers. In a dynamic legal and regulatory environment, we navigate increased regulations and a heightened focus on emissions. While predicting the impact of legal changes (or their interpretation or enforcement) is challenging, we approach these business opportunities and risks in a highly disciplined manner.

Change in political controls, both domestic and internationally, could affect our business through the potential for reduced emissions targets and global climate change regulations on the oil and gas industry. Should environmental laws and regulations (or their interpretation or enforcement) become more stringent, our associated costs or the costs to our customers could increase.

Our Board, senior management and relevant departments stay informed of these evolving legal and regulatory landscapes. We address various inherent risks that may impact our business, including but not limited to, financial, market, political, climate, regulatory, compliance, operational, cybersecurity, safety and reputational, among others, through strategic planning. One of our primary goals is to maintain competitiveness in our industry and markets and meet our customers’ needs, while safeguarding our strategic objectives.

We acknowledge market and reputational risks posed by environmental and social factors, specifically the impact of climate change. Recognizing the geopolitical climate and heightened focus on climate change and adverse effect on the oil and gas industry’s reputation, we are adapting our business decisions to limit the environmental impact in the way we do business. As an energy industry distributor, our solutions aim to minimize environmental impact and control the emission of methane and CO₂ in our customers’ operations. For further information on how our solutions help our customers reduce their carbon footprint, see the Delivering Sustainable Energy section of this report.

• A Third-Party Representative Committee comprised of a cross-functional team of higher management, which reviews agent relationships and limited-scope opportunities to ensure a balanced approach in authorizing future business prospects;
• Annual DNOW Code of Conduct and Ethical Standards training courses featuring interactive scenario-based case studies that allow employees to better understand their obligations under the Company’s Code of Conduct and acceptable responses to ethical challenges;
• Mandatory annual workplace harassment and discrimination trainings for all DNOW employees;
• Anti-Corruption and Anti-Bribery (“ACAB”) training and certification incorporating case studies to support DNOW policy in an effort to expose employees to ethical decision-making in various environments, eliminating risk and ensuring compliance with ACAB laws in all countries where DNOW operates;
• Annual acknowledgment and acceptance of our ACAB policy by agents and logistics services providers; and
• Trade Compliance Due Diligence course for DNOW employees, managers and officers to identify red flags, boycott language and sanctioned or embargoed end users or destinations emphasizing the importance of reporting such due diligence risks to the proper internal Compliance representatives.

The Transparency International Corruption Perceptions Index (“TICPI”) scores and ranks countries and territories based on how corrupt a country’s public sector is perceived to be by experts and business executives. During the years ended 2024, 2023, 2022 and 2021 approximately 0.02%, 0.04%, 0.23% and 0.15% of our revenue, respectively, was derived from products sold directly to countries that have the 20 lowest rankings according to the TICPI for the applicable years.

Sustainable Distribution & Fulfillment

We are committed to Cultivating Sustainable Value and responsible supply chain management. We prioritize an efficient supply chain to minimize our carbon footprint in delivering products to our distribution centers, branches and ultimately, our customers. With a global network of strategic locations near customer operations, we continue to modernize our fulfillment model through further expansions in response to changing market cycles. Our initiatives to drive efficiencies include:

• Establishing regional distribution Supercenters and orbiting branches to regionalize fulfillment and deepen access to our customers, while optimizing resource use
• Facilitating direct shipments from manufacturers to end customers, reducing redundant supply chains and fuel consumption
• Aggregating larger domestic shipments on a weekly or bi-weekly basis and exploring daily aggregation opportunities
• Implementing recycling / reuse programs to minimize packaging waste, including cardboard, plastic, metal and wood used in packaging
• Recycling scrap metal and participating in paper and plastic recycling initiatives in relevant municipalities, whenever feasible
• Compacting waste through use of machinery, such as a “precrusher,” to reduce environmental impact and hauling costs
• Participating in select parcel carrier carbon neutral shipping and reporting programs to monitor and offset our carbon emissions

Assessment Process

• Evaluate and distribute questionnaire for ASL qualification
• Admit only market-share-leading companies with strong reputations for quality products and services, safety and environmental stewardship

Approved Suppliers List

• Evaluate approved suppliers continuously, including review of key quality, health, safety and environmental practices and relevant performance metrics
• Regularly stock prequalified products and offer services from ASL suppliers

Ongoing Supplier Monitoring

• Actively manage and monitor supplier performance and development
• Conduct on-site physical audits of supplier facilities
• Monitor and measure supplier quality continuously, including supplier performance reporting, laboratory tests and inspections/audits

DATA SECURITY

Our cybersecurity infrastructure is further enhanced through relationships with vendors that provide state-of-the-art systems and support. All corporate devices in the DNOW network are monitored 24/7 by remote infrastructure management system agents that block and shut down unauthorized attempts to access data. Our IT team consistently monitors our systems through a combination of tools and technologies to help protect our shareholders’ data. DNOW’s employees are responsible for complying with our data security standards and participating in regular testing exercises (phishing simulations) to prove skill in identifying potential threats. If an employee fails an exercise, they are assigned additional mandatory training. We also provide ongoing education to teach employees to recognize and report suspicious activity. Our IT leaders report on current trends and our cybersecurity infrastructure to the Audit Committee of the Board of Directors semi-annually.

We rely on third-party service providers to execute certain business processes, maintain information systems and infrastructure and evaluate our defenses. We periodically conduct external information security assessments to stay informed of emerging information security risks. Additionally, we maintain a supplier validation process that involves approval by our cybersecurity group for significant suppliers that will have access to our databases or technology. Our penetration testing continues to evolve to address potential new threats and has bolstered our ability to protect against vulnerabilities. Our data security and privacy practices are designed to support privacy rights and are based on industry standards.

In 2024, as in prior years, we did not experience a material compromise to any of our data systems and did not incur any material expenses resulting from information security breaches, related penalties or settlements. The Company is committed to disclosing and providing appropriate notices regarding any such data breach in compliance with relevant laws and regulations.