Ford Motor : CDP Climate Report

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Indicate whether you are able to provide a unique identifier for your organization

Provide your unique identifier

Yes, a Ticker symbol

F

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Position

Responsibilities for climate-related issues

of

individual

or

committee

Board-level

The Sustainability, Innovation and Policy Committee of the Board of Directors is comprised of 9 Directors (including our Executive Chair) and reports to the board on all climate-related issues. Its

committee

functions include:

• Reviewing and advising on the Company's pursuit of innovative policies and technologies that promote product safety, improve environmental and social sustainability, and seek to enrich our

customers' experiences, increase shareholder value, and lead to a better world;

• Assessing the Company's progress on strategic economic, product safety, environmental, and social issues, as well as the degree to which sustainability principles have been integrated into various

skill teams;

• Reviewing the Company's Integrated Sustainability and Financial Report Summary as well as any Company initiatives related to sustainability and innovation;

• Advising on the development of strategies, policies, and practices that assist the Company in addressing public sentiment and shaping policy in the areas of energy consumption, climate change,

greenhouse gas and other criteria pollutant emissions, waste disposal, and water use; and

• Advising management on maintaining and improving sustainability strategies to create value consistent with the long-term preservation and enhancement of shareholder value and social well-being

With the committee's guidance, Ford continued to meet the EU Non-Financial Reporting Directive in 2022 and is working towards meeting the mandatory 2025 UK climate risk Task Force on Climate-

related Financial Disclosures. The Committee receives updates and provides input on Ford's carbon neutrality strategies and our performance toward achieving key metrics with respect to Scope 1, 2

and 3 emissions on a regular basis. The Committee also provided advice and guidance on the Company's approval of science-based targets, adoption of a sustainability supplier code of conduct and

human rights due diligence procedures, and efforts to utilize ESG financing opportunities to access growing levels of capital dedicated to ESG leveraging Ford's capital markets platforms to advance

our core sustainability strategy. Examples of this kind of financing include Ford's second ESG bond, which was issued in 3Q 2022, and the renewal of Ford's sustainability-linked revolving credit

facilities in 2Q 2022.

Frequency

Governance

Scope of

Please explain

with which

mechanisms

board-

climate-

into which

level

related

climate-

oversight

issues are

related issues

a

are integrated

scheduled

agenda

item

Scheduled

Reviewing

<>

The Sustainability, Innovation & Policy Committee of the Board of Directors meets at least three times annually, to evaluate and advise on the Company's pursuit of

- some

innovation/R&D

Applicabl

innovative practices and technologies that promote product safety, improve environmental and social sustainability, and seek to enrich our customers' experiences,

meetings

priorities

e>

increase shareholder value, and lead to a better world. Their responsibilities include:

Reviewing and

(1) Discuss and advise management regarding the development of strategies, policies, and practices that assist the Company in addressing public sentiment and shaping

guiding

policy in the areas of energy consumption, climate change, greenhouse gas and other criteria pollutant emissions, waste disposal, and water use.

strategy

(2) Discuss and advise management on maintaining and improving sustainability strategies that create value consistent with the long-term preservation and enhancement

Overseeing

of shareholder value and social well-being, including human rights, working conditions, and responsible sourcing.

and guiding the

(3) Review the Integrated Sustainability and Financial Report Summary as well as any Company initiatives related to innovation.

development of

The Committee reports regularly to the Board (i) following meetings of the Committee, (ii) with respect to such other matters as are relevant to the Committee's discharge of

a transition

its responsibilities and (iii) with respect to such recommendations as the Committee may deem appropriate.

plan

The Committee performs a review and evaluation, at least annually, of the performance of the Committee and its members, including a review of adherence of the

Monitoring the

Committee to its Charter. In addition, the Committee reviews and reassesses, at least annually, the adequacy of its Charter and recommends to the Nominating and

implementation

Governance Committee any improvements to its Charter that the Committee considers necessary or appropriate.

of a transition

As a specific example, the Committee reviews Ford's carbon neutrality strategy and progress toward meeting our climate transition plans, including our Scope 1 and 2

plan

emissions target to reduce GHG emissions in our operations by 76% by 2035 from a 2017 baseline, which is aligned with the SBTi 1.5°C pathway. The Committee also

Overseeing the

reviews our Scope 3 target to reduce emissions from the use of sold products by 50% per vehicle kilometer by 2035 from a 2019 baseline, which is consistent with the well-

setting of

below 2°C path. Vehicle sector pathways for 1.5°C target setting have not yet been developed by SBTi but will be evaluated by Ford as soon as they are available.

corporate

Additionally, the full Board of Directors reviews and guides the Company's business plan and strategy, which incorporates the Company's commitment to reduce CO2

targets

through SBTi endorsed carbon reduction targets from operations, and the Compensation, Talent and Culture Committee of the Board of Directors approves performance

Monitoring

goals and objectives under our incentive plans that support the Company's business plan and strategy.

progress

towards

corporate

targets

Overseeing

and guiding

public policy

engagement

Overseeing

value chain

engagement

Reviewing and

guiding the risk

management

process

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Board

Criteria used to assess competence of board member(s) on climate-related issues

Primary reason for

Explain why your organization does not have at

member(s) have

no board-level

least one board member with competence on

competence on

competence on

climate-related issues and any plans to address

climate-related

climate-related

board-level competence in the future

issues

issues

Row

Yes

Members of the Sustainability, Innovation and Policy Committee of the Board of Directors have experience

1

advising the Company on the development of strategies, policies, and practices that assist the Company in

addressing public sentiment and shaping policy in the areas of energy consumption, climate change,

greenhouse gas and other criteria pollutant emissions, waste disposal, and water use.

Certain members also have experience serving on similar committees at other companies, overseeing

environmental policy initiatives, and championing environmental initiatives in various industries.

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Provide incentives for the

Comment

management of climate-related

issues

Row

Yes

The corporate performance goals for determining the cash awards for 2022 under the Company's Annual Performance Bonus Plan ("Plan") were designed to support the

1

Company's business plan and strategy, which incorporates our commitment to reduce CO2 through SBTi endorsed carbon reduction targets from operations and products.

Further, the individual performance factor that applies to awards under the Plan and to determining the size of equity awards is assessed on the individual's success in

driving and aligning with our Ford+ plan and corporate strategy, which can include efforts around sustainability, climate change, and other areas depending on each

individual's role.

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From

To

Comment

(years)

(years)

Short-

0

5

Short-term horizons are those situations or issues that need to be addressed immediately or in the short term. Examples include unexpected events such as changes in resource

term

availability, changes in exchange rates or tariffs, and facility shut-downs (such as due to a severe weather event).

Medium-

5

10

Medium-term horizons allow for a complete product cycle plan rotation where consumer preferences and regulatory requirements are known, and time is available to consider

term

alternatives for orderly implementation.

Long-

10

30

Long term horizons encompass long term strategic issues that require time to develop efficient and cost-effective solutions through research, technology development, and business

term

strategy restructuring.

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Relevance

Please explain

&

inclusion

Current

Relevant,

Climate-related current regulation risk is relevant because it is directly related to meeting product emission targets or sales volumes for environmentally friendly vehicles. We must comply

regulation

always

with global greenhouse gas, fuel economy, and zero emission vehicle regulations which require significant ongoing improvements to our vehicles and increasing volumes of zero emission

included

vehicles. We are subject to fines if we don't meet the regulatory standards. Ford's investment of more than $50 billion in EVs and batteries through 2026 will also support continued

regulatory compliance,

Example 1 : EU Regulation 2019/631 and UK Statutory Instrument (SI) 2021/1242 set CO2 emission performance standards for new passenger cars and new light commercial vehicles.

All manufacturers must ensure that the average CO2 emissions of their passenger car and light commercial vehicle fleets do not exceed the WLTP limits. Fords electrification

implementation plan is progressing well and created for 2021 a surplus on Ford credits which in an open pool with VW were transferred to enable VW to meet the EU&UK CO2 regulations

for the year 2021 to reach compliance. Not meeting the target would result in a fine for each gCO2/km beyond the limit, multiplied by the number of vehicles in the relevant year.

Example 2: The European Emission Trading Scheme (EU ETS) operates in 30 countries focusing on CO2 emissions from industrial sources. Ford is directly affected by the EU ETS and

the UK equivalent UK ETS in our plants in Dagenham, Dunton, Valencia, Cologne Vehicle Operations and Saarlouis powerplant, where we measure, report and verify our emissions in

accordance with the scheme rules. We established and maintain an accurate emission measurement and robust reporting procedure to ensure we have enough allowances to cover our

emissions and avoid costly purchases of additional allowances. Our energy efficiency improvements reduce the amount of allowances needed.

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Relevance

Please explain

&

inclusion

Emerging

Relevant,

In major markets where Ford conducts business (N. America, China, Europe, etc.), governments have vehicle fuel economy and/or greenhouse gas standards for both vehicles and

regulation

always

facilities and continue to set increasingly stringent standards. Therefore, it is always relevant to our business to evaluate proposed regulations to ensure our products and facilities will be

included

compliant, and that policies are in place to support the EV transition. In the following examples, our electrification strategy could be at risk for a successful transition if complementary

regulations are not set to support development of EV charging infrastructure, provide customer education and purchase incentives, and limit the CO2 emissions of the electric grid.

Ex. 1: California's Advanced Clean Truck Initiative seeks to electrify medium/heavy duty trucks. Depending on how these requirements are phased in they could result in multiple

investments in new vehicle programs each requiring tens to hundreds of millions of dollars depending on the degree of change required. In cases such as these Ford seeks requirements

be phased-in so that environmental goals are reached in an investment efficient way that aligns with product change cadences.

Ex. 2: The European Green Deal is a set of policy initiatives by the European Commission with the future vision to be climate neutral in 2050. For example, the regulators propose

passenger cars CO2 targets to be reduced by 100% by 2035 demanding a higher share of electrified vehicles. Not complying with future CO2 targets could lead to high financial penalties.

In Europe, Ford is targeting 100% BEV passenger vehicles by 2030 and is aiming to reach 100% ZEV for all light commercial vehicles by 2035. In Ford of Europe we have also an

accelerated carbon neutrality target of 2035 for our own manufacturing, our direct suppliers and logistics. Seven new all-electric,fully-connected Ford passenger and commercial vehicles

will be rolled out in Europe by 2024.

Ex. 3: The UK government's Net Zero Strategy will adopt a zero-emission vehicle (ZEV) mandate for its future regulatory CO2 regime. A ZEV mandate will require that a certain percentage

of manufacturer sales each year are zero emission, increasing from 2024 to 100% in 2035. Ford is targeting 100% BEV passenger vehicles already by 2030 and is aiming to reach 100%

ZEV for all commercial vehicles through 2035.

Technology

Relevant,

Technology is always included and relevant because hardware and software solutions need to be available in a timeframe that allow us to meet our CO2 reduction goals in a cost-effective

always

manner. As we make further CO2 reductions, it becomes increasingly more challenging and costly to continue making incremental improvements because the technology that is simplest

included

to implement has already been utilized. Additionally, technology may not be available to make the improvements at the rate required to meet regulatory or internal requirements.

Example 1: We are subject to the capacity of the battery production sector, which may not be advancing as quickly as demand from Ford and other OEMs. Battery technology risks include

not only the production infrastructure but the underlying global supply of raw materials such as lithium and cobalt. Any battery technology gap brings with it the risk that we might have to

limit EV sales, unable to meet market demand because the supply isn't in place. In 2021 we created Ford Ion Park, a global battery center of excellence that will allow Ford to quickly scale

breakthrough battery cell designs with novel materials once the company vertically integrates battery cells and batteries.

Example 2: The current charging infrastructure roll-out in Europe as well as the forecast for implementing additional charging infrastructure by 2030 is not sufficient to meet future demand.

Investment of all stakeholders is needed to develop a sustainable growing EV market and to reach the defined environmental goals.

Legal

Relevant,

Ford faces several sources of climate-change-related legal risk. As environmental laws requiring emissions reductions become stricter over time, Ford will manage risk of noncompliance

always

and potential for regulatory enforcement actions. Such actions can result in monetary fines, costly mitigation actions, and vehicle recalls. Moreover, corporations are facing growing

included

requirements regarding climate change in matters concerning corporate disclosures. Most notably, the United States Securities and Exchange Commission will soon expand existing

corporate disclosure requirements to include risks and actions related to climate change. Mitigation of enforcement risk can involve a number of potential strategies, including efforts to

reduce regulatory complexity, effective communications with regulators, and implementation of more robust planning and compliance processes. Additionally, corporations face some risk

from private causes of climate action, aimed at changing corporate practices; this requires diligent monitoring and Ford reduces this risk with pro-active efforts to implement best practices

and to engage stakeholders to address concerns before any litigation.

The voluntary California Framework Agreement represents an example of mitigating legal risk by reducing regulatory complexity. As it became clear that One National Program for fuel

economy and GHG standards was about to dissolve, we focused on the emerging risk of having to comply with two different sets of fleet average GHG standards. California and the states

adopting California's GHG standards would have one program, and other states would follow the Federal program. Having to meet different sets of GHG standards in different geographic

areas would increase Ford's planning and distribution complexity, giving rise to increased compliance risk. With competing regulatory and deregulatory efforts by different Administrations,

and legal challenges, there was uncertainty about what vehicle emission standards would apply where and when. Ford decided to address this risk proactively by pursuing and signing a

voluntary framework with California based on a nationwide fleet average structure. When California sued the federal government over its new rules, many other automakers joined the

litigation against California. Ford did not. Ford had reduced its regulatory complexity by entering into the voluntary framework agreement with California and did not need to rely on litigation

to resolve the regulatory issues.

Market

Relevant,

The risks and opportunities associated with climate change shape the way Ford does business, including our Ford+ plan for growth and value creation and our global carbon reduction

always

strategy focused on reducing emissions from our vehicles, operations, and supply chain no later than 2050, backed by interim science-based targets the company will achieve by 2035.

included

The electrification of our fleet is essential to reduce our vehicle emissions. Ford is investing more than $50 billion from 2022 through 2026 in EVs and battery components. We are on track

to deliver an annual run rate of 600,000 EVs globally by the end of this year and 2 million globally by the end of 2026. Demand for Ford's first-generation electric vehicles - Mustang Mach-

E, F-150 Lightning, and E-Transit - is strong and the company continues to expand production capacity.

Even so, market conditions impact Ford's ability to scale EVs, including lingering supply chain instability and reliance on critical minerals like lithium, cobalt, nickel, graphite and

manganese for EV batteries. The sustainable growth of EVs is also constrained by external factors like available and reliable public charging infrastructure, carbon-free electricity,

consumer education about the benefits of EVs and widening income inequality that limits access to clean transportation. Ford's strategy to overcome these market constraints include

directly sourcing raw materials at the mine level, building North America's largest public charging network, advocating for public policies that support the adoption of EVs and investing in

carbon-free electricity.

For example, in Michigan, Ford announced the largest renewable energy purchase through a utility in U.S. history, adding 650 megawatts of new solar energy in Michigan for Ford. The

agreement with DTE ensures that by 2025, every Ford vehicle manufactured in Michigan will be assembled with the equivalent of 100% carbon-free electricity, 10 years earlier than Ford's

global goal. In North America, Ford invested over $7.1 million in facility upgrades for energy efficiency and conservation. Globally, Ford incorporated 64.6% carbon-free electricity into its

manufacturing operations, including all purchased electricity for manufacturing in Europe and Mexico.

Reputation

Relevant,

Climate-related reputation risk is relevant as it is often tied to other risks such as reducing environmental, social and governance issues associated with accessing the battery raw materials

sometimes

needed to scale EVs. As the company transitions to a greater mix of EVs, we expect to increase our reliance on lithium, cobalt, nickel, graphite and manganese. The extractions of these

included

materials are at times criticized in terms of human rights as well as environmental aspects.

Ford's strategy to overcome these reputational impacts include working directly with mining companies to secure raw materials aligned with Ford's environmental, social and governance

policies, introducing new sustainability and human rights requirements into its sourcing agreements, conducting third-party audits and training its suppliers and investing in localized EV and

battery manufacturing.

Ford's Supply Chain Sustainability team conducts an annual risk assessment of nearly all of our approximately 4,500 Tier 1 supplier sites around the world. Based on this assessment, we

conduct audits on the highest risk suppliers. As a member of the Responsible Business Alliance (RBA), we use its Validated Audit Protocol (VAP) to assess labor, health and safety,

management systems, ethics and environmental issues in our supply chain. Additionally, we conduct site-level supplier Sustainability Self-Assessment Questionnaires (SAQs) aligned with

the Automotive Industry Guiding Principles. We use the SAQ to determine supplier policy gaps with our Supplier Code of Conduct. When gaps or corrective actions are identified in any of

our supplier audits or SAQ responses, we provide our suppliers with tools and training from the RBA to support their continual improvement. We also provide training locally to our suppliers

based in countries with higher risk of forced labor, to ensure they recruit ethically.

In 2021, Ford initiated EV and battery supply chain mapping and auditing to better understand the origins of raw materials in its EV supply chain, including nickel, lithium, cobalt and

graphite. To date, the project has conducted 30 supplier audits along these four critical mineral battery supply chains at all tiers to the mine site.

Acute

Relevant,

We consider acute physical risks as relevant in our climate change assessments. Evaluating this type of risk is dependent on the topic. For facilities that may be in zones with a higher risk

physical

sometimes

of water stress or floods from an analysis using the WRI Aqueduct data source, such as our manufacturing sites in Vietnam or Turkey, actions are taken to ensure continued availability of

included

water to minimize production disruptions.

Example of acute physical risk: Purchasing operations engages in an organization wide Supply Risk Management process that focuses on strategic and tactical planning to minimize

disruption for the Ford vehicle and component assembly plants due to supply chain events. We used these tools to understand the potential business disruption exposure of major

catastrophic weather events, such as typhoons hitting the Philippines, flooding in Germany, and ice storms in Texas. Disruption to the supply chain can result in significant production

losses at our vehicle assembly plants, as well as incremental costs to expedite shipping of components to our plants. We assess the risks each of our facilities faces based on continuously

updated data and consider the risk of exposure to hurricanes, tornadoes, other storms, flooding, heatwaves, water stress and wildfires. These potential disruptions to production include

climate change-induced weather events or other natural or man-made disasters. Our supply risk strategy has continued to evolve with the launch and development of new predictive tools

developed internally. Ford implemented an N-Tier Supply Mapping and Risk Sensing solution which provides a consolidated reporting view of Ford's multi-tier supplier network, supplier risk

scores, category risk scores and daily risk events in the form of user interactive visuals. In addition, a predictive tool is being developed the Ford Global Data Insight & Analytics team. This

system, named Supplier Performance and Risk (SPR), allows us to monitor a host of predictive data inputs to mitigate potential supply disruptions. Ford has made over $10 million in

research and capital investments since 2000 to implement the supply chain monitoring program and N-Tier assessment tools.

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Relevance

Please explain

&

inclusion

Chronic

Relevant,

Where appropriate, chronic physical risks are considered in our climate change assessments. Evaluating this type of risk is dependent on the topic.

physical

sometimes

included

We have also identified that approximately 21 percent of our global sites are at risk for water stress based on the WRI Aqueduct analysis. Water availability is a local issue, therefore, we

conducted our analysis using detailed watershed-level and consumption data. According to our analysis, about 21 percent of our operations are located in regions that are now or will be

considered to be at risk for water stress over the long term trend to 2050. To address this issue, Ford implemented a water reduction strategy to reduce water utilization at all manufacturing

facilities with special attention to prioritize reduction of potable water sources at our facilities at risk for water stress based on the WRI Aqueduct analysis. Ford also engages suppliers to

take similar actions at their facilities.

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