2021 Owens Corning Sustainability Report | Our Approach | Risk Management | 61 SUMMARY OF KEY RISKS Owens Corning is subject to a diverse array of risks, which vary greatly in importance and likelihood. Some are directly related to the competitive nature of our business and our operations, while others are the result of external forces, including weather-related phenomena. Using correlation analysis, we assess the likelihood of an event occurring within a specific period, then prioritize and develop strategic plans accordingly. We apply this analysis to our key external business drivers, such as housing starts, hurricanes and other severe weather conditions, and wind-power growth rates. For example, our analysis indicates that the North American building insulation business is highly correlated to new home starts. Based on actual and forecasted home starts, the business develops its strategic plan and makes the appropriate tactical maneuvers to right-size our capacity and workforce. Additionally, energy, commodity, and foreign currency hedging programs are routinely evaluated to provide inputs into our correlation analysis. Sustainability Risks For purposes of this report, we recognize the need to highlight potential risks that are specific to our sustainability efforts. In addition, we believe it is important for investors to understand the emerging long-term risks that we may face in the future. Both the board of directors and its audit committee retain some oversight responsibility for environmental, health, and safety risks. In addition, directors are expected to provide oversight, guidance, and direction on sustainability issues and opportunities that have potential impact on our reputation and long-term economic viability. The following risks are also relevant to our sustainability efforts as outlined in this report: Emerging Risks Climate Change and Associated Weather Conditions While the science behind climate change has been clear for a long time, the gravity of the situation is becoming increasingly apparent. The world is recognizing the need to act quickly and decisively to mitigate the emerging risks that climate change poses for the safety, health, and economic well-being of people everywhere. Given our understanding of the physical risks associated with climate change, Owens Corning has set targets aligned with the latest findings from the Intergovernmental Panel on Climate Change (IPCC). To avoid the worst impacts of climate change, the IPCC urges that temperature rise should be held below 1.5° C. Informed by this latest climate science information, we seek to reduce our Scope 1 and Scope 2 greenhouse gas emissions by 50% by 2030, and our Scope 3 emissions by 30%. The Science Based Targets initiative has verified that Owens Corning’s greenhouse gas emissions reduction goals align to this standard. Owens Corning continues to assess all the potential risks associated with climate change to gain a fuller understanding of the many ways that climate-related risks can impact operations across our entire value chain. As weather conditions shift, severe storms can have a significant impact on the markets for residential and commercial construction, repair and improvement, as well as a material adverse impact on our results of operations. Among our customers, severe weather conditions could slow or limit residential or commercial construction activity, which in turn could adversely affect demand for our products. Within our own operations, extreme weather can lead to disruptions in our manufacturing capacities, as damages to our facilities may occur. In addition, as weather-based disruptions become more common, we could experience difficulties in obtaining affordable insurance. Adverse weather conditions can also have a negative impact on our suppliers, hindering our ability to obtain the materials needed to maintain our own operations. Climate Change and Associated Transitional Risks Owens Corning is subject to or has chosen to voluntarily participate in Emissions Trading Schemes (ETS) around the world, such as the Alberta Technology Innovation and Emissions Reduction, EU Emissions Trading System, California’s Cap-and-Trade system, the Canadian Federal Output-Based Pricing System, the Québec Cap-and-Trade system, and South Korea’s Emissions Trading Scheme. Expansions to these schemes could impact us by reducing our carbon allowances, thus increasing our operating costs in those countries. With the further reductions in allowances through Phase 4 of the European Union ETS, for example, we forecast that our allowances will be depleted after 2021, which will require us to begin purchasing credits. Phase 4 applies to the period 2021-2030. Volatility in carbon market pricing creates additional risk. Our course of action in managing these risks involves: interacting with the commission regarding the implementation of the EU Green Deal and Fit-for-55 package; pursuit of R&D initiatives involving a change in material composition or in manufacturing processes to enable emissions reductions; and implementation of energy and GHG reduction projects.