Climate Change Data

Environmental Metrics

ESG Focus Areas

• Stakeholder Engagement
• Innovation and Efficiency
• Environmental Responsibility
• Climate Change
• Occupational Health and Safety
• Talent Attraction and Retention
• Diversity and Inclusion
• Community Engagement and Investment
• Corporate Governance
• Ethics and Compliance

Environmental Achievements

• 65% reduction in water usage since 2020
• 10% improvement in energy usage intensity
• 17% more metals recycled in 2021 compared to 2020
• 68 tons of hazardous waste recycled in 2021
• More than 460 tons of waste diverted from landfills in 2021
• Tulsa facility is landfill-free
• 27% of AAON’s energy portfolio is currently derived from renewable sources
• Transitioned to a lower VOC paint for all units and products
• Eliminated the usage of R134A in the foaming process and switched to a non-fluorinated, non-ozone-depleting alternative with a global warming potential of 0

Social Achievements

• 69% diverse workforce enterprise-wide
• 28% women in the workforce
• 30% reduction in TRIR since 2020
• Launched an internal mentorship program
• Robust college and high school internship program
• Sponsors manufacturing classes at four different high schools
• Over 300 team members promoted internally annually
• More than $180,000 in matching gifts contributed in 2021
• 5,900+ volunteer hours served by team members in 2021
• AAON Wellness Club promotes fitness and covers costs of local competitions
• Partners with YMCA for discounted gym memberships
• Offers health fairs, yoga, meditation sessions, and health assessments

Governance Achievements

• 44% board diversity
• Increased Board size to nine, with the addition of two new independent directors
• Rebecca Thomason promoted to CFO (second female in company history to hold this role)
• Established a cross-functional ESG Committee to oversee progress toward ESG targets

Climate Goals & Targets

Environmental Challenges

• Supply chain disruptions
• Fluctuations in the commercial/industrial new construction market
• Changes in raw material and component prices
• Changes in interest rates
• General economic, market, or business conditions
• Meeting the increasing demand for building decarbonization in cold climates

Mitigation Strategies

• Emphasis on the replacement market when new construction is down
• Investment in research and development for new products and technologies
• Development of new zero-degree cold climate air-source heat pump packaged rooftop units
• Selection of R454B to replace R410A refrigerant
• Ongoing focus on reducing operational carbon footprint through energy efficiency and GHG reduction projects
• Support for charitable organizations and conservation efforts

Supply Chain Management

Climate-Related Risks & Opportunities

Opportunities

• Development of energy-efficient products

Reporting Standards

Frameworks Used: SASB Standards, GRI Standards

UN Sustainable Development Goals

• SDG 3
• SDG 6
• SDG 7
• SDG 8
• SDG 9
• SDG 11
• SDG 12
• SDG 13
• SDG 14
• SDG 15
• SDG 17

Sustainable Products & Innovation

• Zero Degree Cold Climate Air-Source Heat Pump packaged rooftop units
• Energy recovery wheel air handling units
• Packaged rooftop units with two-stage compressors

Awards & Recognition

• Consulting-Specifying Engineer Product of the Year (RZ-Series Rooftop Unit)
• Forbes America’s Best Employers for Diversity
• Forbes Best Mid-Cap Companies
• Mosaic Top Inclusive Workplace
• Certified Healthy Business
• Potts Family Foundation Family Positive Workplace
• Oklahoma Magazine Great Companies to Work For
• Oklahoma Magazine Best of the Best Industrial and Manufacturing Companies
• Sustainable Tulsa Scor3card Platinum Level
• Veteran Employer Champion
• YWCA Corporate Champion

Environmental Metrics

ESG Focus Areas

• Stakeholder Engagement
• Innovation and Efficiency
• Environmental Responsibility
• Climate Change
• Cybersecurity
• Occupational Health and Safety
• Talent Attraction and Retention
• Diversity and Inclusion
• Community Engagement and Investment
• Corporate Governance
• Ethics and Compliance

Environmental Achievements

• Recycled 8% more metals than in 2021
• Realized a 7% reduction in emissions for Tulsa and Longview facilities in 2022
• Recycled 54 tons of paint byproducts achieving 90% recycling of total paint waste in 2022
• Diverted over 668 tons of waste from landfills in 2022

Social Achievements

• 68% diverse total workforce
• Served 78 non-profits
• 65,310 hours of employee trainings
• 18% increase in career development program in 2022
• More than 20 interns hosted per year

Governance Achievements

• Strengthened board governance with new Independent Chairman and Vice Chair
• Adopted a code of ethics
• Provided training on topics ranging from Health and Safety policies to confidentiality and compliance procedures

Climate Goals & Targets

Environmental Challenges

• Maintaining high recycling rates with increased production
• Meeting increasing demand for energy-efficient equipment
• Managing risks associated with climate change
• Maintaining cybersecurity
• Attracting and retaining a diverse workforce
• Ensuring compliance with environmental regulations

Mitigation Strategies

• Investing in new energy-efficient equipment and building control systems
• Transitioning to a new refrigerant with lower global warming potential
• Implementing energy demand response programs
• Investing in cybersecurity measures
• Offering competitive wages and benefits
• Implementing robust training programs
• Partnering with organizations to support workforce readiness

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Supplier diversity and sustainability surveys

Climate-Related Risks & Opportunities

Physical Risks

• Natural disasters (tornadoes, ice storms, fires, wildfires)

Transition Risks

• Changes in environmental and energy efficiency standards and regulations
• Increased costs associated with refrigerant transition

Opportunities

• Development of energy-efficient products
• Increased market share due to higher energy efficiency standards

Reporting Standards

Frameworks Used: SASB Standards, GRI Standards, UN Sustainable Development Goals

Certifications: AHRI, ANSI, ASHRAE, AMCA, ISO

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Zero Degree Cold Climate Air-Source Heat Pumps
• High-efficiency data center cooling solutions
• Cleanroom systems
• Custom HVAC systems
• Modular solutions

Awards & Recognition

• 2022 ACHR News Dealer Design Award (Zero Degree Cold Climate Air-Source Heat Pump)
• America’s Best Midsize Employers by Forbes Magazine (2021 and 2022)
• Mosaic Top Inclusive Workplace by Tulsa Regional Chamber’s diversity business council

Environmental Metrics

ESG Focus Areas

• Stakeholder Engagement
• Innovation and Efficiency
• Environmental Responsibility
• Climate Change
• Cybersecurity
• Occupational Health and Safety
• Talent Attraction and Retention
• Diversity and Inclusion
• Community Engagement and Investment
• Corporate Governance
• Ethics and Compliance

Environmental Achievements

• 54% of units produced and 51% of sales were non-fossil fuel-consuming units in 2023
• Recycled 52 tons of paint byproducts in 2023, achieving 90% recycling of total paint waste
• Activated more than 400 solar panels on the roof of The Exploration Center, a net-zero facility

Social Achievements

• Highest level of team member engagement through AAON Serves program in 2023
• Contributed approximately $1.2 million in contributions to nonprofit organizations in 2023
• Team members volunteered more than 5,600 hours in 2023

Governance Achievements

• Board has adopted director independence standards that meet and/or exceed NASDAQ listing standards
• 6 of 8 directors (75%) are independent; 50% of directors are diverse
• Successfully carried out a comprehensive upgrade to the Tulsa firewalls

Climate Goals & Targets

Environmental Challenges

• Increased emissions in 2023 (6.43% increase over 2022)
• Supply chain disruptions due to price increases in components and raw materials
• Climate-related risks including stricter regulations on refrigerants, energy efficiency, and the use of fossil fuels

Mitigation Strategies

• Investing in operational efficiencies to reduce emissions
• Investing in manufacturing capacity to improve production output and normalize backlog
• Transitioning to lower GWP refrigerant R-454B
• Developing alternative sourcing strategies

Supply Chain Management

Responsible Procurement

• Multiple suppliers for raw materials and components
• Conflict Minerals Rule compliance

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather conditions
• Water shortages

Transition Risks

• Stricter regulations on refrigerants, energy efficiency, and the use of fossil fuels
• Increased price of electricity

Opportunities

• Development of energy-efficient products
• Growth in heat pump technology

Reporting Standards

Frameworks Used: SASB, GRI

Certifications: AMCA 210 (NAIC), AMCA 300 (NAIC)

Sustainable Products & Innovation

• Alpha Class heat pumps
• Zero Degree Cold Climate Air-Source Heat Pumps
• High-efficiency HVAC equipment

Awards & Recognition

• Manufacturer of the Year (AAON Longview)
• Scor3card - Platinum Level (AAON Tulsa)
• The Bellmon Award (AAON Tulsa)
• AMCA Accreditation (NAIC)
• Mentorship Matters Excellence Award
• BEST of the BEST (Oklahoma Magazine)
• Veteran Employer Champion