125 2021 ESG Report Transparency Appendices Responsible supply chain Product impact Climate change Introduction Healthy workforce and communities Scenario analysis In 2019, responding to the need for strategic resilience in a time of rapid change, as well as a desire to assess and report to investors on climate risk in line with the TCFD Recommendations, BD undertook climate scenario analysis to better understand how climate-related risks and opportunities could impact the business. BD partnered with BSR , a global nonprofit organization of sustainable business experts that works with its global network of the world’s leading companies to build a just and sustainable world. BSR and BD collaboratively developed qualitative scenarios, augmented them with information from relevant climate projections and completed a climate scenario to analyze and assess the resilience of BD’s corporate strategy to climate-related risks and opportunities, in line with the TCFD Recommendations. Four scenarios were developed that corresponded to warming by 2100 allowing us to explore climate-related risks and opportunities, and other key uncertainties for our business. The time horizons covered included both the medium and the long-term (2030+). In order to incorporate information from climate projections into the scenarios, specific temperature increases and climate projections were assigned to each scenario. Two of the resulting scenarios were created based on the RCP 2.6 scenarios with the 1.5°C trajectory by 2100; the remaining two were created based on RCP 8.5, which is also the business-as-usual scenario. The areas that were considered as part of the scenario analysis include supply chain, business strategy, policy, market trends and technology. A cross-functional workshop was held, in order for participants to explore the strategic implications of the four future scenarios. The results were used to determine (1) issues that are likely to increase in importance, regardless of scenario, and (2) highly dynamic issues that are very responsive to different scenarios and therefore require close monitoring and a foresight-driven management approach. These insights were incorporated into the development of BD’s 2030+ commitments and goals, including the science-based target that was announced at the end of 2020. Under the business-as-usual scenarios, a number of issues increased in importance, including water and global systemic health challenges related to climate change. Under the remaining scenarios with the 1.5°C trajectory by 2100, energy and emissions from our operations; social impact and access for underserved populations; talent; diversity and inclusion; and global systemic health challenges related to climate change increased in importance. These issues are addressed under our 2030+ commitments. Further information about which of our ESG issues increased in importance and/or were dynamic can be found in the material ESG issues section . Risk management At a company level, climate-related risks are identified by the central S&EHS team. The process for identifying risks involves stakeholder engagement with our internal technical experts, customers, shareholders, BD associates, business partners (e.g., suppliers), communities, governments, international agencies and nongovernmental organizations. Climate-related risks are identified and evaluated by the S&EHS team through general sustainability materiality assessments and are informed by our ERM program and business continuity planning in areas such as disaster planning (including severe storms). Physical (operational) risks posed by climate change that could impact our direct operations and/or supply chain and result in disruption to business continuity are identified and evaluated via processes established within the ISC team. Risk teams within the ISC team partner with individual facilities, business teams and subject matter experts to identify and evaluate risks (which may include but are not confined to climate change impacts). The central Risk Management team is responsible for monitoring compliance to property protection standards through which longer-term systematic risks can be evaluated. The process includes, but is not limited to, aggregation of insurance reports, sustainability risk assessments and third-party tools, such as water risk assessments. Examples of these physical risks include damage to facility and/or product from severe weather (such as Hurricane Maria’s impact on our facilities in Puerto Rico) and upstream fluctuations in the availability of materials (such as hurricanes in Texas impacting refineries and, by extension, resins.). Transitional risks posed by climate change (financial, external, legal and compliance, and strategic) are evaluated by the central S&EHS team. Both physical and transitional risks posed by climate change may also be reviewed within the ERM program, based on risk assessment and other procedures performed to identify and assess risks against established guidelines. Though risks that are identified as part of our ERM program may be impacted by climate change (for example, supply chain disruption due to extreme weather), climate change may not be named as a specific individual risk. Any climate-related risks that may be captured within our ERM program will be managed in accordance with the ERM program governance. For further information regarding management and Board oversight or our ERM program, please refer to the ESG Governance section . Once risks and opportunities from climate change have been identified, they are evaluated and prioritized by the central S&EHS team. This includes assessing key risk areas, evaluating the likelihood and impact, and ranking these risks. Key prioritization components include the magnitude of the event should it occur (financial or reputational), the probability of such an event happening and our direct control to mitigate the risk. Climate-related risks (including GHG emissions and water scarcity) were also identified by the central S&EHS team as risks to the company as a part of the ESG issue materiality assessments .