Strategy C - Resilience of the Organization's Strategy

A bespoke transition scenario was identified to assess what Milliken's climate-related risk profile would look like in the transition to an emissions-reduced future, and at a pace that would keep the global increase in temperature at or below 1.5 degrees Celsius before the end of the century. This corresponds to a significant global reduction of CO2e emissions. As this is the most aggressive transition plan, using this scenario serves as a stress test to identify the potential market, reputation, and regulatory risks with the potential to impact Milliken.

This analysis was both quantitative and qualitative. The measurable factors built into this scenario include Milliken's future growth rate, energy cost, carbon pricing pressure, and others. The scenario under consideration assumes sustainability-related policy becomes more stringent in a fairly short time horizon (1-3 years) and that carbon taxation is implemented unevenly across the globe and across sectors.

Other assumptions are Milliken-specific or are dictated by the publicly-available and proprietary tools used that align with IPCC-published climate records. This analysis covers Milliken global operations. Where relevant, projections were made up to the 2050 time horizon, which aligns with Milliken's strategic planning horizons and long-term Net-zero emission reduction target.

For the assessment of both transition and physical risks, scenarios were chosen that cover a range of projected temperature increase scenarios. For example, the transition risks scenario selected aligns with an emissions-reduced future (1.5 degrees Celsius) and the physical risk scenario aligns with very high global warming (RCP 8.5). The selection of these scenarios serves to stress test Milliken's risk exposure under different future outcomes to better understand the company's resiliency.

The results of the assessment reveal a need for additional product-related data to mitigate risks related to changing customer behavior and emerging regulation. Master database modification to increase supply chain transparency would also support risk mitigation. These variables were revealed as important for future decision-making and strategic guidance. Action is being taken on both fronts to ensure Milliken capitalizes on access to new and emerging markets related to the transition to a low-carbon economy, for example by conducting life cycle assessments and executing on a sustainability digital roadmap. The emergence of voluntary and mandatory reporting requirements related to carbon data was revealed to be a prominent developments with the potential to have an ability to shape future performance. Additionally, through scenario analysis, it is understood that certain of Milliken's sites in India, China, and Mexico may have a higher risk of business disruption in the future, which could shape future performance in those areas.

The results of this analysis have shown the potential for climate-related forces to shape future performance and have supported the need for Milliken to integrate climate risk, and more specifically the risk of climate inaction, into strategic decision-making at the business level.