WHAT WE’VE BUILT.
WHAT WE’RE SOLVING.

2015 SUSTAINABILITY REPORT2015 SUSTAINABILITY REPORTCHAIRMAN’S 
MESSAGE...................................................... 2
APPROACH.................................................. 6
Vision, Mission, Strategy & Principles.........................................................7
Stakeholder Engagement.................................................................................8
Affiliations & Investments...............................................................................9
About this Report & Legal Statements........................................................10

FOCUS AREAS....................................... 11
Our People........................................................................................................13
Energy & Climate.............................................................................................18
Operational Impact.........................................................................................26
Product Stewardship......................................................................................35
An Integrated Value Chain.............................................................................46
Governance & Ethics......................................................................................51
Community Impact...........................................................................................56

GOALS & PROGRESS.................... 64
Operations........................................................................................................65
Product Stewardship......................................................................................69
Performance At-A-Glance.............................................................................711

2015 SUSTAINABILITY REPORTCHAIRMAN’SMESSAGEDOUG OBERHELMAN

What We’ve Built.
What We’re Solving.

Chairman & CEO, Caterpillar Inc.

Since our first days as a company, Caterpillar has designed and built the world’s most powerful, innovativeand durable machines and engines. Our customers put them to work on projects that help the world growand develop, supporting sustainable progress and improved living standards for people everywhere.
Sustainability doesn’t ever go out of style or focus at Caterpillar, even when we face difficult businessconditions. We know it’s essential for economic growth – and growth is essential to our business.
Whether we are in an up or a down cycle, we seize the opportunity to develop even more efficientsolutions for our customers and within our operations.

Watch thisvideo for more on
sustainability atCaterpillar fromDOUG OBERHELMAN

Although we can point to hundreds of examples in our 90-year history and in the global challenges we’re
helping to solve today, I will highlight only a few of them here.

What We’ve Built
Sustainable progress requires energy, but even today, 1.1 billion people in the world lack access to the benefits of reliable electricity.
As a global energy consumer and major manufacturer of energy conversion and power-generation products, Caterpillar is uniquely
positioned to leverage innovation to meet the world’s growing energy needs.
Our products bring traditional, renewable and alternative energy options to urban, rural and remote communities. We have hundredsof distributed power generation systems operating all over the world. These systems improve energy access while emitting fewer
greenhouse gases (GHG) than traditional power grid systems. We provide combined heat and power systems and combined-cycle
power systems that can double the efficiency of power generation when compared with conventional power grids.
Our energy solutions also include hydropower, methane from landfills, microgrid solutions and backup generators to supplement wind
power. Cat® products have helped construct hydropower dams in every region of the world, including the Hoover Dam in the UnitedStates, the Bhakra Dam in India, the Yacyreta Dam in Paraguay and Argentina and the Owens Falls Dam in Uganda – just to name a few.
In the world’s mining industry, Cat® machines dig, haul and transport the copper, iron ore, gold and other commodities necessary toconstruct the things that keep communities connected – from bridges to railways to smartphones. Our products and services also help
our mining customers to be more efficient and safer on their jobsite, reducing fuel consumption and identifying operator fatigue.
Cat machines create new and repair existing infrastructure, which improves access to energy, clean water, schools and hospitals.
Infrastructure also supports trade and makes it possible for a worker to get to their job. In the United States, Cat products have helped
build more than 77,000 miles of highways since 1944. Our machines helped widen the Panama Canal in the 1960s and are at work
widening the Canal again now. Cat machines helped construct the German Autobahn, the Kansai International Airport in Osaka,
Japan, and the BR 101, the major coastal highway that runs the length of Brazil and is part of the Pan-American Highway.

2

2015 SUSTAINABILITY REPORTCHAIRMAN’S SUSTAINABILITY AWARDSThe Chairman’s Sustainability Awards recognize team projects that demonstrate our mission of sustainable progress and assist us
in achieving our 2020 Sustainability Goals. Honors are bestowed in two areas. The Product/Service/Solution Sustainability Award
recognizes the project or solution that best delivers excellence in the three dimensions of sustainability – economic growth,environmental stewardship and social responsibility – for our business and our customers. The Process Sustainability Award
recognizes operational or business process excellence – including collaboration with dealers, customers and suppliers – that best
demonstrates pursuit of sustainability. In 2015, its fifth year, the awards program attracted 45 nominations from 16 different divisions
in more than a dozen countries.
In 2015, an Advanced Components & Systems Division team was awarded the Product/Service/Solution Sustainability Award for its‘Triple Threat: Increasing Customer and Caterpillar Value through Sustainable Solutions’ project. A team from the Wear, Components &Aftermarket Distribution Division was awarded the Process Sustainability Award for its project that not only delivers financial savingsand contributes to environmental benefits, but also builds engagement and awareness in sustainability and social responsibility
throughout the facility.

We have also built a valuable business, and contributed to resource conservation, since we began remanufacturing engines in 1973.
For more than 40 years, we have been a big part of what is now called the Circular Economy. Through remanufacturing we return our
products to same-as-when-new condition; this reduces the use of additional raw materials, ultimately enabling us to conserve precious
natural resources.
These are examples of the sustainable products and solutions we’ve brought to our customers. We also have many examples ofCaterpillar’s sustainability commitment to our people.
From 2014 to 2015, we continued to improve our trend toward world-class performance in safety with a 17 percent reduction in Recordable
Injury Frequency (RIF) and a 13 percent reduction in Lost-Time Case Frequency Rate (LTCFR). A safe work environment is our first priority
and over the last 15 years, we have improved RIF by about 90 percent. That is fantastic progress! But we know even one injury is one too
many – that’s why our goal is zero.
Caterpillar’s Diversity & Inclusion (D&I) progress has earned several accolades, and our Employee Resource Groups help drive innovation and an environment where every employee feels heard and valued. We’re committed to constant learning and improvement
and confident D&I strengthens our team.
In addition, Caterpillar employees contribute their time and resources to promote the health and welfare of communities where we workand live. Since 1952, the Caterpillar Foundation has invested hundreds of millions of dollars to transform lives through education,
environmental stewardship and emergency relief. Today, the Foundation invests in programs like microfinance and access to cleanwater and better sanitation, always focused on their mission: alleviating the root causes of poverty.

What We’re Solving
Of course, even with this incredible history, our work isn’t done. We’re still working to solve challenges facing the world’s people. We
believe it is possible to promote progress and balance economic growth with society’s needs and with less impact on the environment.
Finding that balance is fundamental to our sustainability commitment.
In 2015, we joined an effort to focus on restoring natural infrastructure – the forests, prairies, farmlands, wetlands and coastal landscapesthat play a vital role in supporting sustainable global development. Natural infrastructure improves resilience to natural disasters likestorms and floods, improves water quality and removes carbon from the atmosphere to return it to the soil, where it helps plants
grow. Cat® products have supported coal mine restoration projects and restored portions of the Florida Everglades.
We were also honored to receive the “Vision for America” Award from Keep America Beautiful – a prestigious recognition for our
corporate commitment to sustainability and significant progress toward achieving aggressive sustainability goals.
In 2015, Caterpillar entered a strategic alliance with solar industry leader First Solar to develop and distribute Cat-branded photovoltaic
modules for incorporation into microgrid systems that can be utilized anywhere from remote villages to mining operations. This innovativetechnology will help us provide power to remote places where, before now, it’s been either unavailable or unreliable.

3

2015 SUSTAINABILITY REPORT

We’re always innovating and improving to build products that areboth valuable to our customers and more sustainable. Examples
this year include an upgrade to the Cat® D6K2 grading tractor that
improved performance while also reducing fuel consumption, andimprovements to the transmission systems of our new generationof medium wheel loaders that result in large fuel savings and lessjobsite GHG emissions.

VISION FOR AMERICA AWARD RECIPIENTIn November 2015, Caterpillar Inc. was recognized by Keep
America Beautiful as the recipient of the national nonprofit’s
prestigious “Vision for America” Award. This national award
recognizes a U.S. company’s accomplishments in leading
sustainability initiatives in communities across the country.
Caterpillar was recognized for our corporate commitment
to sustainability and our significant progress toward
aggressive sustainability goals.

We’re applying advanced analytics and digital-driven technologies –like Cat® Connect and MineStar™ – to improve worksite efficiency.
This means less fuel used, increased productivity and a safer work
environment. We also offer our customers Job Site Solutions, atrue collaborative effort focused on improving job site efficiency.
Our solutions business model is designed to go “beyond the iron” to increase asset utilization, which is so important for ourcustomers’ sustainability goals.

The intersection of sustainability and innovation includes improving our internal operations. New process innovations – like using
combined heat and power for alternative energy – are reducing the environmental impact of our manufacturing facilities. For example,
as of 2015, Caterpillar has reduced GHG emissions intensity from our facilities by 32 percent compared with our 2006 base year.
From 2014 to 2015, our absolute GHG emissions have declined 7 percent. We’re constantly pushing to reduce water and resource usage
and minimize waste in every facility. Our achievements here are due to the ingenuity and dedication of the skilled men and women who
are on the front lines manufacturing our products.
I also believe one of the primary reasons Caterpillar has thrived for 90 years is because we are a company built on values, including
sustainability, the value highlighted in this report.
I’m incredibly proud of what we’ve built and what we’re solving. Neither our accomplishments nor our goals are small or inconsequential.
Given that we are Caterpillar, that shouldn’t surprise anyone.

DOUG OBERHELMAN
Chairman and CEO

4

2015 SUSTAINABILITY REPORT

WHAT WE’VE BUILT. WHAT WE’RE SOLVING.
For 90 years, we’ve been providing equipment and solutions to help make sustainable
progress possible.

1906 Holt Steam Traction Engine digs out 1906
San Francisco earthquake
1930 Caterpillar machines build canals to carrywater in South Africa

INFRASTRUCTURE
Our equipment helps
construct the infrastructure
our world needs: roads,
bridges, dams, railways,
hospitals and schools.

NATURALINFRASTRUCTURE
Cat® equipment helps restore
degraded forests, prairies,
agricultural lands, estuaries,
coastal landscapes
and wetlands.

ALTERNATIVE/
RENEWABLE ENERGY

1931 Caterpillar delivers world’s firstmass-produced diesel engine
GLOBAL TRADE
AND COMMERCE
From engines that powercargo ships to pavers that
construct highways, we help
connect the world tofacilitate global
commerce.

1944 Caterpillar machines start construction of
70,000+ miles of U.S. highways
1948 Caterpillar machines go to work on India’s
Bhakra Dam
1955 Caterpillar outfits U.S. government forOperation Deep Freeze
1960 Caterpillar machines help build Brazil’s
new capital, Brasilia
1961 500+ Cat® machines begin Mangla Dam

ENERGYEFFICIENCY
We continue to develop newtechnologies that increase
fuel economy and decrease
emissions in the operationof our equipment.

in Pakistan

1967 Cat machines begin work on Canada’s
Athabasca Oil Sands, which continues today
1969 Cat® engines supply power for Apollo
moon mission

1973 First Cat® Reman plant opens in
Bettendorf, Iowa

1983 In Paraguay and Argentina, Cat machines
help build Yacyreta Dam

From landfill methane togreenhouse exhaust, Cat®
generators help convertgas by-products into
renewable energy.

ENERGYACCESSECONOMICDEVELOPMENT

With distributed generation
solutions utilizing diesel andnatural gas engines, as well
as alternative fuels, wehelp get power where
it needs to be.

Our products and solutions
help bring power, water androads – the essentials ofa modern economy – tocommunities aroundthe world.

1937 Caterpillar machines work construction ofGolden Gate Bridge

1992 Caterpillar introduces SoLoNOx Technology
for gas turbines
1994 Cat machines work on Kansai International
Airport in Osaka, Japan
2001 Caterpillar introduces ACERT™ Technology
2004 Solar launched Mercury recuperated
gas turbine
2006 34 Cat machines help complete
Saemangeum Seawall in South Korea
2008 Caterpillar announces first electric drive
track-type tractor
2012 Caterpillar introduces Cat® 336E H Hybrid
Excavator, industry’s first hydraulic hybrid

2015 Caterpillar expands renewable power
generation offerings in conjunction with First Solar2015 SUSTAINABILITY REPORTAPPROACH

AT-A-GLANCE

3 Million+

Offices
Facilities *Products at Work
Around the World

59%

Sales and Revenues
Outside U.S.

105,700
Employees*Facilities include principal locations where manufacturing, parts distribution, rail and remanufacturing
work take place. In certain geographic areas, the facility symbol may represent multiple facilities.

Product Line

Construction

MiningEquipment

Diesel & Natural
Gas Engines
6

Industrial
Gas Turbines

Diesel-Electric
Locomotives

2015 SUSTAINABILITY REPORTAPPROACH

VISION, MISSION, STRATEGY& PRINCIPLES
VisionOur vision is a world in which all people’s basic needs – such as shelter, clean water,
sanitation, food and reliable power – are fulfilled in a sustainable way and a company that
improves the quality of the environment and the communities where we live and work.

MissionOur mission is to enable economic growth through infrastructure and energy development,
and to provide solutions that support communities and protect the planet.

Strategy
Our strategy is to provide work environments, products, services and solutions that makesafe, productive and efficient use of resources as we strive to achieve our vision. We apply
innovation and technology to improve the sustainability performance of Caterpillar’s products,
services, solutions and operations. We believe sustainable progress is made possible bydeveloping better systems that maximize life cycle benefits, while also minimizing the economic,
social and environmental costs of ownership, as reflected in our sustainability principles. We will
execute our strategy by working to meet our aspirational sustainability goals.

Sustainability Principles
Sustainability is part of who we are and what we do every single day. We recognize that progress involves a balance ofenvironmental stewardship, social responsibility and economic growth.
Caterpillar Sustainability Principles drive our commitment to make sustainable progress possible.

Prevent Waste (Improve Safety, Efficiency and Productivity):
By increasing the safety, efficiency and productivity of processes and products, wereduce cost and minimize the use of materials, energy, water and land. We provide
a safe work environment and the tools and training employees need to work safely.
We provide customers with products, services and solutions that improve thesustainability of their operations.

Prevent
Waste

Improve Quality (Team, Community, Environment
and Operations):
We focus on improving quality for our company, customers, communities, environment
and the quality of life for our employees. We use Lean and 6 Sigma to improve ouroperations and products. Our employees and their families experience a better qualityof life when the quality of our company, communities and the environment is maintained.
We attract and develop the best teams.

Develop
Better
Systems

Develop Better Systems (Innovate):
We leverage innovation and technology to maximize efficiency and productivity. We
remanufacture, rebuild and recycle to conserve resources for multiple life cycles. We
develop products that contribute to communities through infrastructure development
and energy access. We develop better systems throughout the value chain, “engineering
the whole chain, not just the links,” in order to maximize life cycle benefits.

7

Improve
Quality

2015 SUSTAINABILITY REPORTAPPROACH

STAKEHOLDER ENGAGEMENT
A key element of Caterpillar’s sustainability strategy is engagement with stakeholders. Caterpillar’sExternal Sustainability Advisory Board (Advisory Board) is composed of experts from academia,
industry and non-governmental organizations. The Advisory Board members are able to address
sustainability broadly and, more specifically, sustainability as it relates to topic areas identified
based on anticipated needs and benchmarking of other leading companies. The Advisory Board
provides input and counsel on enterprise sustainability strategy, opportunities and challenges,
emerging issues in sustainability, progress in implementation and public reporting.
In addition to providing feedback and counsel throughout the year on Caterpillar’s sustainability
strategy and initiatives, this council of experts provided their comments on Caterpillar’s sustainability report and progress. Inclusion below indicates the provision of feedback, not theendorsement of the contents of the report.
Stakeholder engagement is also managed through our various business units that are responsible
for each topic area. We include demonstrations of these engagements throughout the report. We
communicate with and obtain feedback from stakeholders through a variety of means including
surveys, in-person interactions, trade organizations and others. This feedback includes a variety
of topics and stakeholder groups from customer feedback to human rights considerations.
Internally, the Caterpillar Sustainability Steering Committee provides guidance and support forour sustainability initiatives. This group is comprised of leaders from a number of business
units, particularly focused on responsibilities that cross multiple divisions.

Caterpillar’s External Sustainability Advisory Board:
Aidan Davy

Thomas Lovejoy

Steve Skerlos

Deputy President and Senior
Program Director, International
Council on Mining & Metals

University Professor ofEnvironmental Scienceand Policy, George Mason
University; Senior Fellow,
The United Nations Foundation

Thurnau Professor of MechanicalEngineering, Director of
Sustainability Education Programs,
University of Michigan

Stuart L. Hart
S. C. Johnson Professor Emeritus,
Cornell University; President,
Enterprise for a Sustainable World;
Steven Grossman Chair in
Sustainable Business, Grossman
School of Business, Universityof Vermont

Kevin McKnight
Chief Sustainability Officer andVice President of EHS, Alcoa

William R. Moomaw
Professor, Center for International
Environment and Resource
Policy, The Fletcher School,
Tufts University

8

Leena Srivastava
Vice Chancellor,
TERI University

2015 SUSTAINABILITY REPORTAPPROACH

AFFILIATIONS & INVESTMENTS
Caterpillar Inc., our subsidiaries and the Caterpillar Foundation work with diverse organizations in order to advance economic, environmental
and social issues and share best practices across industries. Our affiliations and investments include:

Business Council for
Sustainable Energy
Solar Turbines is a member of the Boardof Directors of the Business Council for
Sustainable Energy, which promotes clean
energy technologies as solutions to economic,
environmental and energy security challenges.

Business Roundtable
Caterpillar is a member of the Business
Roundtable, which supports sustainable
development through its member companies
in addressing a vast range of environmental,social and economic issues to help ensurea sustainable future. Doug Oberhelman,
Caterpillar’s Chairman and CEO, is the current
Chairman of the Business Roundtable.

Canada’s Oil Sands Innovation Alliance
Caterpillar is an associate member of Canada’s
Oil Sands Innovation Alliance (COSIA), an
alliance of oil sands producers focused on
accelerating the pace of improvement inenvironmental performance in Canada’s
oil sands through collaborative action
and innovation.

Conflict Free Sourcing Initiative
Caterpillar is an active member of the Conflict
Free Sourcing Initiative (CFSI), which helps
companies make informed choices about
conflict minerals in their supply chains.

Energy Technologies Institute

U.S. Green Building Council

Caterpillar is a member of the Energy
Technologies Institute, a U.K.-based publicprivate organization focused on projects thatcreate affordable, reliable, clean energy forheat, power and transport.

Caterpillar is a corporate member of the U.S.
Green Building Council (USGBC), which
provides information, tools and training
on how to design, build and operate moresustainable buildings. Since 2007, Caterpillar
has maintained a policy to build and operate
corporate-owned facilities in a sustainable
manner.

Caterpillar is proud to be
included on the Dow Jones
Sustainability Index. We've
been included for 16 years;
as sector leader in 2006,
2007, 2008 and 2010; andas industry mover in 2015.
Remanufacturing
Industries Council
Caterpillar is one of the founding members
and current Chair of the Board of Directors of
the Remanufacturing Industries Council (RIC),
which endeavors to promote the growth ofremanufacturing. The RIC works across industry
sectors to support the entire remanufacturingindustry through a combination of collaboration, education, advocacy and research.

Woody Biomass Coalition
Caterpillar is a member of the Woody Biomass
Coalition, which provides advocacy, education,
information and outreach to public and private
entities to promote research, development
and funding for sustainable woody biomass
utilization and markets in the U.S.

World Resources Institute
Caterpillar is represented on the Board of
Directors of the World Resources Institute(WRI), an environmental organization that
goes beyond research to find practical ways
to protect the earth and improve people’s
lives. Caterpillar is also a member of WRI’s
Corporate Consultative Group. The Caterpillar
Foundation supports the WRI Ross Center for
Sustainable Cities, which aims to catalyze thedevelopment of smart cities, which promote
infrastructure development that is economically and environmentally efficient and serves
as a model for sustainable development.

Diesel Technology Forum
Caterpillar is a member of the Diesel Technology
Forum, a leading resource and educator on
the importance and unique value of diesel
engines, fuels, equipment and emissions
control technology.

The Caterpillar Foundation invests with these organizations, andothers, to support programs that alleviate poverty:
American Red Cross
charity: water
Feeding America
Global Poverty ProjectInternational Youth Foundation
Local Initiative Support Corporation

ONE Campaign
Opportunity International
The Nature Conservancy
United Nations Foundation
United Way
Water.org
LEARN MORE

9

2015 SUSTAINABILITY REPORTAPPROACH

ABOUT THIS REPORT &LEGAL STATEMENTS
About this Report
At Caterpillar, our sustainability practices are focused on ways to maximize the life cycle
benefits of our products while minimizing the economic, social and environmental costsof ownership for Caterpillar customers. Our most recent results are reflected in this 2015
Sustainability Report, and build on the themes and results described in our 2014 report.
In preparing the content for this report, Caterpillar consulted the Global Reporting Initiative G4reporting framework to serve as an informal guideline. The reporting period is the 2015 calendar
year, which is also Caterpillar’s fiscal year. Report content represents 100 percent of the products
and operations of Caterpillar Inc. and its subsidiaries where we have a controlling financial
interest. Where noted, Caterpillar’s independent dealer network and supplier network are also
represented. Caterpillar and subsidiary brands are listed here: http://www.caterpillar.com/brands.
Caterpillar’s environmental and safety metrics for operations are consolidated based on theGreenhouse Gas Protocol “operational control” approach. Caterpillar is headquartered in
Peoria, Illinois, USA. Contact us here.

Legal Statements© 2016 Caterpillar All Rights Reserved. CAT, CATERPILLAR, their respective logos, ACERT, BUILT FOR IT, MineStar, Product Link, Solar,
VisionLink, “Caterpillar Yellow,” the “Power Edge” trade dress as well as corporate and product identity used herein, are trademarksof Caterpillar Inc. or its subsidiaries and may not be used without permission.

Forward-Looking Statements Certain statements in this 2015 Sustainability Report relate to future events and expectations andare forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,”“estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “project,” “intend,” “could,” “should” or other similar words orexpressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking
statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. Thesestatements do not guarantee future performance, and we do not undertake to update our forward-looking statements.
Caterpillar’s actual results may differ materially from those described or implied in our forward-looking statements based on anumber of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries
we serve; (ii) government monetary or fiscal policies and infrastructure spending; (iii) commodity price changes, component priceincreases, fluctuations in demand for our products or significant shortages of component products; (iv) disruptions or volatility inglobal financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (v) political andeconomic risks, commercial instability and events beyond our control in the countries in which we operate; (vi) failure to maintain ourcredit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive
position and access to capital markets; (vii) our Financial Products segment’s risks associated with the financial services industry;(viii) changes in interest rates or market liquidity conditions; (ix) an increase in delinquencies, repossessions or net losses of Cat
Financial’s customers; (x) new regulations or changes in financial services regulations; (xi) a failure to realize, or a delay in realizing,
all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xii) international trade policies and their impact
on demand for our products and our competitive position; (xiii) our ability to develop, produce and market quality products thatmeet our customers’ needs; (xiv) the impact of the highly competitive environment in which we operate on our sales and pricing;(xv) failure to realize all of the anticipated benefits from initiatives to increase our productivity, efficiency and cash flow and to
reduce costs; (xvi) additional restructuring costs or a failure to realize anticipated savings or benefits from past or future cost
reduction actions; (xvii) inventory management decisions and sourcing practices of our dealers and our OEM customers;(xviii) compliance with environmental laws and regulations; (xix) alleged or actual violations of trade or anti-corruption laws andregulations; (xx) additional tax expense or exposure; (xxi) currency fluctuations; (xxii) our or Cat Financial’s compliance with financial
covenants; (xxiii) increased pension plan funding obligations; (xxiv) union disputes or other employee relations issues; (xxv) significant
legal proceedings, claims, lawsuits or government investigations; (xxvi) changes in accounting standards; (xxvii) failure or breach of
IT security; (xxviii) adverse effects of unexpected events including natural disasters; and (xxix) other factors described in more detailunder “Item 1A. Risk Factors” in our Form 10-K filed with the SEC on February 16, 2016 for the year ended December 31, 2015.

10

2015 SUSTAINABILITY REPORTFOCUS AREAS

Caterpillar currently operates in more than 180 countries worldwide and in 2015, generated more thanhalf its annual sales outside the United States. Operating on a global scale requires us to work within avariety of different cultures, governmental systems and economic environments. We acknowledge andrespect the diversity of cultures and customs wherever we operate, and maintain a flexible businessapproach to best serve our customers, dealers and suppliers, while always adhering to Our Values in
Action – Caterpillar’s Code of Conduct.

MATERIALITY ASSESSMENT
With the recognition of Sustainability as one of our core Values, we reviewed and updated our sustainability priorities and strategies
in 2014 through a “materiality assessment.” A total of 35 sustainability aspects were identified and defined, covering environmental,social and governance considerations. Sustainability aspects were selected based on our existing strategy and goals, peer reviews
and criteria in external indices and frameworks, such as the Dow Jones Sustainability Index and the Global Reporting Initiative.
As part of our work in sustainable development, we have identified a set of focus areas that intersect with our business on a daily basis
and that guide our thinking as we make day-to-day business decisions. Many of these areas are associated with our 2020 aspirational,
operational and product stewardship goals, while others represent areas impacting our business long term and that are important to ourvarious stakeholders. During 2014, these focus areas were validated as part of an assessment that we conducted with stakeholders. In
2015, this analysis was further refined to consider additional stakeholder input. Read more about the assessment below.

Assessment of Aspect Influence on Stakeholders and Business
The engagement process described below included a combination of surveys and a workshop to collect input from a wide range ofCaterpillar leaders as well as both internal and external stakeholders.
• An anonymous survey of our customers, employees, stockholders, dealers, suppliers, nongovernmental organizations, tradeorganizations and academia was conducted. Over 100 of our stakeholders participated, identifying the sustainability aspects
most influential to them in their decisions about Caterpillar.
• An anonymous survey was conducted of Caterpillar executive officers, vice presidents and other key directors and managers to
obtain insight from our strategic leaders as to the sustainability aspects most important to the success of our business.
• A matrix was developed that incorporated the information collected from both stakeholder surveys. The matrix provided a simple
means to compare the perspectives and priorities of Caterpillar leaders with other stakeholders. It also facilitated the identificationof aspects where the two groups were in agreement versus aspects where their opinions differed.

11

2015 SUSTAINABILITY REPORT

Evaluation of Assessment Results
Survey results were plotted on a matrix that was considered in a follow-up workshop to further inform our sustainability strategy andexternal reporting efforts. The workshop included our External Sustainability Advisory Board – a group representing NGOs, academics
and trade organizations that, throughout the year, provides valuable insight to Caterpillar on external sustainability trends, expertisefrom their respective areas and feedback on strategic initiatives. In addition, the workshop included several Caterpillar vice presidents,
selected Caterpillar leaders with sustainability responsibilities, our Sustainable Development team and our chairman and CEO. Insights
gained from the workshop were combined with the survey results and matrix and used to refine and prioritize Caterpillar’s “material”
aspects. These aspects will be used to inform and direct future activities for strategic improvements.

PRIORITIZATION OF FOCUS AREAS
While stakeholders universally agreed that all 35 aspects identified were important, the process enabled Caterpillar to identify somenew and emerging areas of interest to our stakeholders. Specifically, the identified aspects were business ethics and core values,
strategy, financial performance of the enterprise, product performance (customer safety, energy efficiency/greenhouse gas and otherair emissions, and development for the life cycle), dealer network, innovation management, and employee occupational health andsafety. In 2015, we reviewed the aspects identified in 2014 and considered additional feedback from stakeholders. Primarily, we reviewed
requests that were submitted to Caterpillar and rating systems such as the Dow Jones Sustainability Index requirements. These
stakeholder interactions identified expectations for our reporting that we are committed to reporting, such as inclusion of humanrights and the environmental impacts of our manufacturing operations. Although these focus areas are specifically identified in thisreport, we recognize that priorities will vary by business unit and by region.
FOCUS AREA

“MATERIAL” ASPECTS INCLUDED WITHIN THIS FOCUS AREA

Our People

Employee occupational health & safety

Energy & Climate

Energy and climate policy and programs

Operational Environmental Impact

Energy efficiency, greenhouse gas, water and waste management

Product Stewardship

Innovation management, customer safety, energy efficiency/GHG
and other air emissions and life cycle product development

Value Chain

Dealer network

Governance and Ethics

Business ethics and core values, business strategy and financial
performance of the enterprise

Community Impact

Human rights

122015 SUSTAINABILITY REPORTFOCUS AREAOUR PEOPLE
Our employees have always been the backbone of Caterpillar’s success. They provide the innovative and diverse thinking
we need to serve our customers. That is why we are committed to fostering a diverse, inclusive and safe environment where
everyone can thrive and be successful. By leveraging each individual’s unique skills, abilities, experiences and cultural
background, Caterpillar people can achieve superior business and personal results. When we seek out and are receptive todifferent points of view, we foster innovative solutions that can make us all more successful.
Quality is one of Caterpillar’s key sustainability principles. Traditionally, this applies to the quality of the processes, products, services,
solutions and safety practices throughout the enterprise. But our commitment to quality also applies to the quality of life of our employees
and members of the communities where we work.
Additionally, we promote the health and safety of our people with policies and proactive programs that help individuals stay safe,
personally and professionally. We develop our products, manufacturing processes, training programs and customer assistanceprograms to minimize safety risks because the safety of our operations and the unique capabilities of our employees ensure thelong-term success of our enterprise.
To continue fostering this environment, we start by leveraging our global reach and living our timeless values, which enable us tobuild a better world.

Our Global Reach
Achieving Caterpillar’s strategic vision requires building the best team by hiring and retaining the best people, which is why we are focusedon providing employees with significant and diverse career opportunities. Our global reach provides our people with the ability to move
between different locations, business units and product groups during the course of their careers at Caterpillar. These opportunities, alongwith career development resources, make it possible to have an exciting and meaningful experience with Caterpillar.

Our Timeless Values
In 1974, Caterpillar first published a Worldwide Code of Conduct. Now known as Our Values in Action – Caterpillar’s Code of Conduct –the document articulates our commitment to Integrity, Excellence, Teamwork, Commitment and Sustainability. We want to surroundourselves with talented people who love what they do and who want to help others succeed. In addition, Caterpillar strives for a diverse
and inclusive work culture that helps bring our best ideas to the forefront. The passion of our employees is infectious and inspiring, as
is their emphasis on teamwork. The people of Caterpillar are called to bring integrity, accountability and courtesy to every interaction
between our employees, independent dealer network, supply chain and our customers.

Building a Better World
Caterpillar provides the opportunity for employees to be a part of products, services and programs that are helping to build a betterworld each and every day. This makes a transformational, tangible impact – not only on their own communities, but also on communities
around the globe. Together, our employees, customers and products play a critical role in developing infrastructure and creating economic
growth throughout the world. Our contributions range from helping provide basic infrastructure like roads, sanitation, airports and power
to transforming societies.
13

2015 SUSTAINABILITY REPORTFOCUS AREAOUR PEOPLE
SafetyWe are dedicated to the safety of everyone at Caterpillar, including our extended team of contractors, dealers, suppliers and customers.
Our commitment to safety begins with the engineering of our products and manufacturing processes, and extends to operator training,job site solutions and the workplace cultures that guide the way we work.
Caterpillar’s Health & Safety professionals play a key role in providing expertise and support to Caterpillar operations around the world.
Caterpillar Safety Services supports enterprise facilities, dealers, suppliers and customers by leveraging cultural assessment tools,
guiding continuous improvement processes, providing technology to see and mitigate risk and sharing a wealth of free, industryspecific safety resources. The cat.com/safety site provides access to a wide range of interactive online training courses for safety,
health and the environment – in full support of our vision: Safely home. Everyone. Every day.™
From 2014 to 2015, we continued to build upon a trend toward world-class performance in safety with a 17 percent reduction in
Recordable Injury Frequency (RIF) and a 13 percent reduction in Lost-Time Case Frequency Rate (LTCFR).
Caterpillar’s risk assessment process brings a global focus to safety and ergonomic risk and has resulted in the reduction of risks forthousands of work elements further driving the reduction in ergonomic and other injuries. Initiatives at many of our locations continue
to drive our safety results.

RECORDABLE INJURY FREQUENCY (RIF)

LOST-TIME CASE FREQUENCY RATE (LTCFR)

Recordable injuries per 200,000 hours worked

Work-related injuries resulting in lost time per 200,000 hours worked

6.22

2.97

1.02

2003

2012

0.78

0.71

0.59

0.60

2013

2014

2015

2020 GOAL

2003

We have improved our Recordable Injury Frequency rateby 90.5 percent from our 2003 base year and 17 percent
from our last reporting period.

0.30

0.29

0.23

0.20

0.15

2012

2013

2014

2015

2020 GOAL

We have improved our Lost-Time Case Frequency Rate by
93 percent from our 2003 base year and 13 percent fromour last reporting period.

14

2015 SUSTAINABILITY REPORTSAFE WORKPLACE SOLUTIONREVITALIZING A CULTURE OF SAFETY
As we work to reduce our enterprise Recordable Injury Frequency(RIF), there are countless large and small steps we have taken as
demonstrated by our progress to date. But even the most dedicatedfacilities sometimes reach a “safety plateau,” where further
improvements become more difficult to achieve. When our
Mapleton, Illinois, Cast Metals Organization facility found theirsafety numbers plateauing at the end of 2012, they deployedfacility-wide initiatives to break through to the next level ofsafety excellence.

safety risk. The facility has implemented a full-time Safety
Champion position for each department, empowering employees toapply their specific knowledge of shop floor and safety practices towork with department heads to enact health and safety initiatives.
Because safety communication has been fundamental to thesuccess of Mapleton’s efforts, the safety team created a safety
improvement video, which is screened throughout the facility
and updated each month to reflect the process and facility safety
improvements that have been implemented. Often these videos
highlight innovative solutions developed and implemented by
the employees. Facility Manager Gary Bevilacqua attributes the
success of the videos to the fact that it is a communication methodthat allows a different type of dialogue. “People are starting totalk about safety more openly and listening to the messages on thevideos,” he said. “It’s generating awareness and more individuals
are coming forward with new ideas and aren’t afraid to discussthem with their teams.”

In 2015, Mapleton reduced its injury
rate by 18.3 percent over the previous
year, and injury rates have fallen by
66.3 percent since 2010.

The safety team, aided by the commitment of each of the nearly
600 employees on-site and the Caterpillar Safety Services Zero
Incident Performance (ZIP™) Process, undertook a cultural shift
in how they address safety, thinking of the program as ‘creating
the presence of safety’ rather than ‘the absence of injuries’. Partof this shift involved making the concept of safety personal. An
acronym like RIF is not easy to relate to daily work, but seeing
and discussing how each injury affects real people in their workand personal life truly drives home the importance of safety. The
safety team encouraged this viewpoint by dedicating all-employee
meetings to recent on-site injuries and dialogues about how
to make safety proactive instead of reactive. In 2015, Mapleton
reduced its injury rate by 18.3 percent over the previous year,
and injury rates have fallen by 66.3 percent since 2010.

Caterpillar Torreón Redesigns Tools
for Ergonomic Safety
Across our manufacturing operations, our employees
have developed unique processes to create Cat®
products. At Caterpillar Torreón, in the Mexican stateof Coahuila, our employees have custom-built dozensof hand tools to help them in their daily work. After
review by Torreón’s safety team, we determined thata number of those tools would benefit from ergonomic
improvements to make them more efficient and protect
our employees from injuries. Over the course of six
months, the Torreón environment, health and safety
team worked with facility employees to evaluate theirhand tools using the United States National Institutefor Occupational Safety and Health (NIOSH) hand toolchecklist, and then standardized and redesigned thetools to improve safety and ease of use. As a result of
these improvements, our people are safer and moreproductive. The Torreón team also estimates that thefacility will save more than $268,000 per year in losttime and workers’ compensation costs.

Many of the safety improvements that Mapleton has implemented
to break through its safety plateau have been generated by theemployees themselves using a “Green Card” program to document
and communicate when employees identify, and proactively fix, asafety risk. In 2015, Mapleton employees submitted nearly 5,000
Green Cards representing potential hazards or conditions thatthey worked on independently or with management to address,
and believed could be improved. The facility also uses a “StarGreen Card” system to allow department heads to further recognize
employees who have gone above and beyond to fix a potential

15

2015 SUSTAINABILITY REPORTFOCUS AREAOUR PEOPLE
Diversity and Inclusion
Diverse and inclusive work environments embrace the values and unique talents, experiences and viewpoints of employees.
This approach is aligned with our strategic goal of Best Team. To achieve the Best Team goal, our global Diversity and Inclusion
strategy includes:• Defining a clear set of roles, responsibilities and accountabilities for all employees• Holding management at all levels accountable for results through defined diversity and inclusion metrics• Building sustainability by embedding diversity and inclusion into key people processes
Caterpillar’s Diversity and Inclusion progress has earned Caterpillar several accolades. In 2015 alone:• DiversityInc magazine named Caterpillar to the “Top 25 Noteworthy Companies,” “Top 10 Companies for Global Diversity” and“Top 10 Companies for Employee Resource Groups.”• Designation as a “Military Friendly Employer” in the U.S.
• Placed on the Human Rights Campaign Foundation’s Corporate
Honoring our Diverse Employees
Equality Index• Received The Executive Leadership Council’s 2015 Corporate
In 2015, four of our employees won awards
Award recognizing Caterpillar’s journey and ongoing support
from diversity-focused groups recognizing theof diversity, inclusion and achievement in business.

Employee Resource Groups
Caterpillar Employee Resource Groups (ERGs) not only help drive
innovation, but also provide personal and professional development opportunities, help attract talent at recruiting events and help
retain this talent through mentoring and networking opportunities. In
addition, ERG members frequently reach out to serve the communities
where they live and work, demonstrating their support of learning
institutions, charitable organizations, crisis relief efforts and culturaland artistic programs, to name a few.
ERGs exist for an approved business purpose and are independent,
voluntary and nonprofit by nature. Membership in any ERG is open to
all Caterpillar employees interested in supporting the group’s statedmission and objectives. Members of an ERG help sustain an engaged
workforce at Caterpillar – as evidenced by members having consistently
higher responses on engagement surveys.

16

positive impacts they have had on Caterpillar
operations. In Little Rock, Arkansas, operations
manager Paul Rivera received the Society of
Hispanic Professional Engineers TechnicalAchievement Recognition Award for the safety,
quality, velocity, cost and engagement improvements that have been made there under his
leadership. Also in 2015, the Society of WomenEngineers recognized three Caterpillar employees –Margo Bubb, Stacey DelVecchio and Irma Khan –as exemplary members for their contributions to
the industry.

2015 SUSTAINABILITY REPORTFOCUS AREAOUR PEOPLE
Talent Development
As a company with hundreds of global locations that serves diverse industries as varied as transportation, construction, oil and gas, mining,
marine and forestry, we are in a unique position to offer opportunities and valuable rewards for all our employees. This includes learning
opportunities both inside and outside of Caterpillar, targeted leadership, skills or language training and formal benefits such as medical
plans that help promote the long-term health and wellness of our employees and their families.

Learning & Development
Caterpillar offers a variety of formal and informal opportunities for individuals toincrease skills and knowledge. Some of these opportunities include in-person training,e-learning and other tools so Caterpillar can help sharpen the skills of our employees,
dealers and suppliers. Whether an individual is interested in improving skills for a current
job, preparing for a future role, or having a long-range career plan in mind, Caterpillar
supports the learning journey recognizing the importance of on-the-job-experiences,coaching and feedback, along with formal training and learning.

Leadership Excellence in Accountability and Development
Leadership Excellence in Accountability and Development (L.E.A.D.) is a global
leadership program, designed by Caterpillar, for Caterpillar. This program offers acomprehensive leadership development experience focused on educating leaders
to effectively develop and guide individuals and teams to achieve business results.
The objective of the program is to ensure that leaders, at all levels, are ready to leadwith Our Values in Action and hold themselves and others accountable for results.

Freedom of Association andthe Right to Collective Bargaining
While we believe that fostering a direct
relationship with our employees is the mosteffective way to operate Caterpillar’s business, we acknowledge and respect the rightof our workers to choose whether or not
to join unions and bargain collectively,
or work through local works councils, inaccordance with applicable laws. In 2015,
Caterpillar had more than 130 labor contracts
with 50 different labor organizations representing employees in our global workforce.

For leaders with the potential to move to higher leadership levels within the organization, L.E.A.D. has offered additional programs.
The flagship program, Digging Deep, provides leaders an opportunity to travel to diverse markets such as China and Brazil, and go
beyond classroom learning through participation in action learning projects that address actual business challenges.

Learning Management System
The Caterpillar Learning Management System is a common, easy-to-use tool for employees seeking Caterpillar-provided learning
opportunities. The web-based program can be accessed through Caterpillar’s intranet and allows employees worldwide to browse
the online course catalog, register for information and courses in their local language, launch web-based training, track individual
learning history and review learning experiences with their supervisor.

17

2015 SUSTAINABILITY REPORTFOCUS AREA

ENERGY & CLIMATE
Energy is a key requirement for sustainable progress and development around the world. Energy consumption is rising
rapidly, driven by worldwide population growth, swiftly developing economies, improving global living standards andthe rapidly increasing use of ever more energy-dependent technologies. Global demand for energy is expected to increasesignificantly over the next 25 years, based on outlooks from the International Energy Agency.
As a global energy consumer and industrial manufacturer, and a major manufacturer of energy conversion and power-generation
products, Caterpillar has a fundamental interest in, and understanding of, energy needs around the world. We are providing productswith leading integrated technology to various energy markets and leveraging our technology and innovation to meet the world’s
growing energy needs.
Greenhouse gas (GHG) accumulation in the atmosphere is a major concern in both the public and private sectors because of
the potential for these gases to affect climate patterns. As a result, many governmental and intergovernmental organizations are
implementing mechanisms in an attempt to reduce GHG emissions. We support intelligent, responsible public policies addressing
climate and energy issues.
Additionally, we support the reduction of GHG accumulation through improved GHG management practices. Atmospheric GHG
accumulation can occur as a result of inefficient or excessive fossil fuel combustion, poor waste management practices or poor
land management practices. Caterpillar is a leader in the development and deployment of innovations and technologies that,through our products, assist in the mitigation of all three of these sources.
For our customers, job site fuel efficiency, which contributes to reductions of GHG emissions, is strongly considered in our new-productdevelopment efforts. As a result, breakthroughs have been achieved in the development and implementation of innovations such as
combined diesel and electric drives, hybrid systems, continuously variable transmissions, job site optimization technologies and services
and alternative fuel utilization.

18

2015 SUSTAINABILITY REPORTFOCUS AREA

ENERGY & CLIMATE
Energy Access
Energy is a key requirement for sustainable progress and development around the world. We believe:• Energy sources need to be developed and used in a sustainable manner.
• There is no one single solution to providing abundant, reliable, secure and reasonably priced energy on a global basis.
Political and industry leadership is required to forge consensus and a commitment to providing energy and related infrastructurethat address economic development, stability and environmental impacts.
• Market-based, cost-efficient energy solutions are the best way to help meet the world’s growing energy demands.
• Access to affordable and dependable energy resources is critical for energy security, economic prosperity and growing economies.
Caterpillar supports balanced and comprehensive energy policies for the responsible development and utilization of all energy
resources, including traditional sources of energy and expanded use of alternative energy technologies.
• When regulation is necessary, we support regulatory structures that provide a technology-neutral and level playing field thatembraces competition and in which Caterpillar, our independent dealers and our customers can operate.
• We support the development and use of strategies and technologies to increase energy efficiency and reduce emissions.

Our Products, Services and Solutions
Caterpillar collaborates with our independent dealers to deliver highly customized and site-specific solutions that result in optimized
use of our equipment, with the goal of an improved bottom line for our customers. We offer training to our customer operators on
how to use our products more efficiently.
Because energy is a key requirement for development, we focus our efforts on improving efficiency and reducing emissions while
increasing energy access. Caterpillar leverages technology to create more efficient power-generation solutions. With distributed
generation solutions utilizing diesel and natural gas engines, as well as alternative fuels, Caterpillar is well-positioned to get power
where it needs to be. Further, Cat® equipment helps meet the demands of themining and resources industries to get raw materials where they need to be tocreate increased access to power.
The Caterpillar Foundation is a proud
Caterpillar has implemented hundreds of distributed power generation systems
all over the world, which contribute to improving energy access in the developingworld while emitting fewer greenhouse gas (GHG) emissions compared with traditional power grid systems. We provide combined heat and power systems, andcombined-cycle power systems that can double the efficiency of power generation
when compared with the efficiency of conventional power grids. Additionally,
our power systems utilize fuels from diverse sources such as gas from landfills,
livestock operations, wastewater treatment operations, mine methane, flare gas,
syngas and biofuels. These systems provide energy diversity from plentiful (andin many cases, renewable) energy sources.

19

supporter of the ONE Campaign, an
organization that is achieving successin advocating for the bipartisan Electrify
Africa Act. This bill will help sub-SaharanAfrican countries modernize their power
infrastructure and increase their accessto electricity — saving lives, strengthening education, alleviating extreme
poverty and accelerating growthand development.

2015 SUSTAINABILITY REPORTFOCUS AREA

ENERGY & CLIMATE
Energy Access(continued)
Energy Poverty
One of the biggest differences between a developing nation and a developed nation is reliable access to energy. We support and arecommitted to increasing that access, helping economies grow and reducing energy poverty where it exists. According to the World Bank,an estimated 1.1 billion people globally do not have access to electricity. Lack of access to modern energy services hinders economic
and social development, making it more difficult to provide water purification, sanitation and education. Today, the technology andnatural resources exist to rapidly expand energy access, but the challenge is accomplishing this in an effective and efficient manner.
Energy diversification – such as coal in combination with carbon captureand storage, new nuclear buildouts, new natural gas reserves, plus
According to the World Bank, an
renewable energy sources like biogas, wind, photovoltaic or solar, tidal
estimated 1.1 billion people globallyand others – will contribute to an energy portfolio that helps eliminate
energy poverty, raises standards of living and propels economic growth
do not have access to electricity.
with less impact on the environment. Coal is abundantly available andhas the scale to meet the primary energy needs of the world’s rising
population and expected economic growth over the next several decades.
Also, according to BP, natural gas production has increased more than 15 percent from 2009 to 2014 and more than 1.5 percent from2013 to 2014, resulting in economic growth for many communities with recoverable reserves. Products capable of using alternativeor blended fuels are also increasingly available. Eliminating energy poverty is a vision that can be achieved. The manner in which
Caterpillar products and services provide solutions to energy access is broad, diverse and takes many forms as these examples
from 2015 demonstrate.

Turning Food Waste into Energy
Food waste is a major problem in the United States and around the world; recent research suggeststhat as much as one-third of all the food produced is spoiled or wasted instead of eaten. And food that
ends up in a landfill generates methane, a potent greenhouse gas. A new project, the Central Florida
Energy Garden in Orlando, Florida, turns the problem of wasted food into a three-pronged benefit.
Caterpillar’s customer Waltham, Massachusetts-based Harvest Power, couples an anaerobic digesterwith two Cat® generator sets to produce 5.4 megawatts of combined heat and power – enough energy
to power 2,000 homes per year. As this video shows, Harvest Power and its partners – including manyof Orlando’s theme parks, hotels and restaurants – are now taking 120,000 tons of organic waste every
year and turning it into energy, while also using some of the heat from the process to dry out the leftover organic material for use as fertilizer on local farms.

Reliable Power for Development
There is no more critical component to improving the economic standard of living in developing
economies than steady, reliable power. In Tanzania, only 11 percent of the population has access toreliable electricity, which has slowed economic development for decades. Today, however, there
are an increasing number of solutions, such as a Caterpillar project with the Wentworth Group in
Tanzania to build a gas-to-power project that brings 24/7 power to the people of Mnazi Bay and thecity of Mtwara. This video demonstrates how significantly access to energy can impact the social andeconomic growth of a community.

20

HARVEST
POWER

Turning food waste
into energy

Learnmore about

ENERGY ACCESS
and developing
economies

2015 SUSTAINABILITY REPORTRENEWABLE ENERGY SOLUTION

BRINGING RENEWABLE ENERGY TO
ANYWHERE IN THE WORLDand dealers while simultaneously providing cost and emission
reductions for the company. A prime example is the Caterpillar
Tucson Proving Ground facility located in Arizona. Caterpillar
performs validation testing of its mining equipment at this site,which is comprised of an office building, shop areas and large
open-air test areas. Existing Cat® C15 diesel generator sets operatecontinuously to provide approximately 400kW of electricity to thesite, consuming approximately 250,000 gallons of diesel fuel per
year. Extending the local utility grid to this remote location iscost-prohibitive, but microgrid technology is now a cost-effective
complement to diesel generators alone. We are installing 500kW ofsolar panels, 500kW of energy storage and a microgrid controller
to seamlessly integrate these sources with the existing diesel
generators. The system will carry the site load during daylight
hours, enabling the diesel generators to reduce power output
and shut down. Fuel consumption and exhaust emissions are
expected to be reduced by 33 percent and generator maintenanceis expected to be reduced by 25 percent, with the resulting cost
reductions providing an attractive return on the investment in
the microgrid. Real-time performance of the system will bemonitored remotely, and will be available for viewing online
by select Cat® dealers.

For example, microgrid technologies that couple renewableenergy generation with traditional generators and energy storage
systems can be deployed to places where the grid is weak, ordoes not reach. In 2015, Caterpillar entered a strategic alliancewith solar industry leader First Solar to develop and distribute
Cat branded photovoltaic modules for incorporation into microgrid systems that can be utilized anywhere from remote villages
to mining operations. Caterpillar will distribute this innovativetechnology through our global network of dealers, providing
value to our customers by integrating solar energy systems
with Caterpillar’s trusted expertise in distributed power
generation technologies.
Caterpillar is also leveraging the advanced thin film solar
panel technology for our traditional commercial and industrial
customer’s energy needs in more developed markets such as
the United States and China. The thin film solar panel technology
has higher energy capture characteristics than traditional solar
panels, yielding increased annual energy production for ourcustomers. Integration of these products with traditional standby
generator sets allows customers to leverage the benefits ofrenewable energy even if the grid goes down, providing aneven higher level of energy independence.

Moving forward, we intend to deploy similar microgrid systems,
solar panels and energy storage systems to customers throughout the world – whether in remote villages, mining sites, islands,
military installations, telecommunications facilities, or commercial/industrial facilities. By expanding Caterpillar’s broad power
generation portfolio and solutions, we are reducing customer
costs and site emissions, while expanding access to electricity
to those in the greatest need. Our goal is simple – to provide
our customers and the communities where they work and live abrighter future no matter where they are in the world.

Another important technology that is rapidly progressing is energy
storage systems, which allow customers to capture surplus renewable energy and store it for later use. Caterpillar, leveraging our
bi-directional inverter technology developed for mining trucks andhybrid tractors, offers a full range of energy storage technologies,
ranging from ultracapacitors for short duration storage to long
duration metal-air energy storage products. Recognizing the benefit
that energy storage technology can offer our customers, in 2015
Caterpillar invested in Fluidic Energy, the makers of metal-air
energy storage technologies. We chose Fluidic Energy for thisendeavor because the company’s technology offers potentiallysignificant advantages in terms of energy storage cost, depthof discharge, cycle life and safety over some traditional energy
storage products.

REMOTEMONITORING

HN

MICROGRIDSOLUTIONSEMERGING
MARKETSMINE SITESREMOTE AREASES
ENERGY
STORAGE

21

EW
A

Leading by example, Caterpillar is first deploying world-classmicrogrid technologies at some of its own facilities. Many Caterpillar
operations resemble the commercial/industrial operations of ourcustomers, so microgrid installations at Caterpillar facilities provide
a hands-on educational and training experience for customers

BLE
P

RE N

CONTROLS

RELIA

S
IO N
UT

ER

OLGY EN ABLE

OL

OW

DS

GENSETSCTECAT® MICROGRIDSOLUTIONS

Renewable energy technologies areshowing great promise to change how
energy is produced around the globe,
while addressing basic human needs.
In 2015, Caterpillar launched a numberof initiatives that will provide reliable,
cost-effective and sustainable energy
wherever it is needed.

O U RCES
BL

Learn more about

SOLAR PANELS& SYSTEMS

2015 SUSTAINABILITY REPORTFOCUS AREA

ENERGY & CLIMATE
Climate Policy
Caterpillar supports integrated carbon and climate policies that effectively balance environmental and economic considerations. We
understand that the most immediate and measureable benefits will occur through energy-efficiency improvements and corresponding
greenhouse gas (GHG) emissions reductions.
In responding to the challenge of reducing our GHG emissions, Caterpillar has formed cornerstone beliefs about carbon and energyefficiency issues. Caterpillar supports intelligent, responsible public policies addressing these issues. We are:• Setting aggressive energy efficiency and GHG reduction goals for our operations.
• Investing in energy-efficiency and emissions-reduction technologies for our products that are important to our stakeholders andrepresent significant areas of opportunity for our business.
• Committing to the development and deployment of advanced technologies that capture and store GHG emissions.
• Supporting policies and mechanisms that harness the marketplace to drive innovation, mobilize investment and facilitate sharing
these technologies.
• Encouraging the coordination of domestic and international programs that maximize the use of flexible, proven mechanisms tosequester carbon in soils, plants and ecosystems.

Operating in a Carbon-Constrained World
Despite the divergent proposals under discussion worldwide, Caterpillar believes that technology and innovation play a key role in any
successful strategic approach to emissions reduction. We believe that the private sector must take the lead in developing and deploying
technology solutions to reduce GHG emissions. Ideally, regulatory structures should provide a technology-neutral and level playing field
in which competitive solutions can be developed.
Caterpillar believes in the importance of providing energy-efficient products and technologies for our customers and our facilities,
and we advocate for policy solutions that balance environmental stewardship, social responsibility and economic growth. We workwith policymakers on developing economy-wide emissions-reduction programs in the United States that work in conjunction withinternational efforts to reduce GHG emissions.
Businesses will struggle to find solutions if vastly differing approaches to GHG reduction are implemented around the world.
That is why we will continue to advocate for a comprehensive, international approach that encompasses emissions-reduction
commitments from all major economies.

22

2015 SUSTAINABILITY REPORTFOCUS AREA

ENERGY & CLIMATE
Climate Policy(continued)
Caterpillar has advocated for a comprehensive international approach to
reducing GHG emissions for many years. In this context, the 2015 agreementin Paris within the United Nations Framework Convention on Climate Changeseeks a broad, harmonized approach to GHG emissions reduction. In addition
to our advocacy for a global approach, we advocate for GHG policy change at
local, regional and national levels through our Government Affairs teams
and our memberships in trade and lobbying associations. We encourage aconstructive dialogue and a proactive approach to providing energy safely,
efficiently and affordably to the billions of people who inhabit our planet.

Our Operations
Caterpillar has been a leader in setting aggressive GHG-reduction targets
for our operations since 2003. We have established an intensity-based
GHG-reduction goal that measures the efficiency of our growth. For
more details on our GHG reduction efforts, see the operational impact focus area of this report.

Our Products, Services and Solutions
Caterpillar is committed to the success of our customers. As customers increasingly demand greater fuel efficiency and technologythat helps them reduce GHG emissions, we are further motivated to help our customers achieve their emission-reduction goals. Theirneeds provide valuable business opportunities to Caterpillar.

In 2015, Solar Turbines received the San Diego
County Air Pollution Control District’s BlueSky Award in recognition of sustainability
improvements in its manufacturing operations
and product contributions to greenhouse gas
emission reductions.

We continue to invest in research and development aimed at productswith fewer direct emissions, improved efficiency and/or improved
productivity. In doing so, we help our customers improve theirown operations, while also driving our competitors to improve.
Job site fuel efficiency, which contributes to reductions of GHG
emissions, is strongly considered in our new product development
efforts. By developing products, services and solutions that increasecustomer efficiency, we are also reducing the emissions that would
otherwise have been generated from the use of less efficient
products or solutions.

Carbon Research Investments
We recognize the need to reduce GHG accumulation in the atmosphere and also believe carbon can offer productive uses in a variety
of applications. We are investing in research and advocating for policies that support these developments in diverse areas such as
improved land management, restoration of degraded lands, and carbon capture and storage technologies.
Caterpillar invests in research aimed at carbon capture and storage (CCS) with the U.K. Energy Technologies Institute (ETI). We are afounding member and co-funder of the ETI, a collaboration between industry and the U.K. government to accelerate the developmentof technologies that address the challenges of climate change and provide affordable energy access. The U.K. is a good base for thisprogram as it has been pursuing the target of an 80 percent CO2 reduction by 2050 for a number of years.
To accelerate the deployment of new, low-carbon energy technologies, ETI
has a budget of up to $75 million per year to fund a portfolio of technology
development and demonstration projects across a wide energy spectrum,including distributed energy; offshore wind power; marine power technologies; energy infrastructure; transport, including heavy-duty vehicles; CCS;
bio-energy and demand-side management for buildings. As part of its
program, ETI has created a suite of modeling tools to understand theelements of such a low carbon energy system and then optimize thesystem for robustness, lowest cost and other criteria. The modelingwork has also guided their strategic investment in critical low-carbon
technology development projects. These projects bridge the gap between
laboratory scale research and development and commercial deploymentof large-scale engineering projects.

23

In 2015, Caterpillar Oil & Gas accepted an award of
excellence from the World Bank Global Gas Flaring
Reduction Partnership on behalf of Hess Corporation
and GTUIT, a manufacturer of mobile gas treatment
systems in which Caterpillar has made an equity
investment. Hess is using 15 of GTUIT’s mobile gas
capture and natural gas extraction units at well sites
in North Dakota’s Bakken oilfield.

2015 SUSTAINABILITY REPORTFOCUS AREA

ENERGY & CLIMATE
Climate Policy(continued)
The use of CCS technologies has the potential to significantly reduce emissions from fossil fuel power stations if proven in industrial
applications. The ETI carbon capture and storage work includes research on power station-scale technology, evaluating a number oftechnologies that absorb CO2 from the power station flue gas and then desorb the CO2 to be piped to a storage reservoir. Design
guidelines for piping and pumping of CO2 and review of new CCS technologies are being evaluated as technology companies anduniversities develop them. In addition, Caterpillar supported ETI research to look at mineralization, although energy consumption ofthis technology is currently too high to justify its deployment in the short term.
Additionally, Caterpillar is a member of the project advisory group for the Midwest Geological Sequestration Consortium. In 2012,
the Consortium began a CO2 storage project in Decatur, Illinios, with a goal to successfully demonstrate large-scale, deep saline
geological storage of 1 million metric tons (1.1 million U.S. tons) of CO2.

24

2015 SUSTAINABILITY REPORT

NATURAL INFRASTRUCTURE SOLUTIONSHINING A LIGHT ON THE CLIMATE BENEFITSOF NATURAL INFRASTRUCTURE
Cat® products are used to support infrastructure projects aroundthe world, including natural infrastructure projects such as therestoration of forests, wetlands and other landscapes. We believethat Caterpillar’s expertise across industries puts us in a prime
position to drive the global discussion on the importance of natural
infrastructure and its restoration. Not only is sustainability one of
our Core Values, but over our 90-year history we have also built
relationships across a wide range of infrastructure businesses
that will be critical to restoring the world’s natural landscapes.
Already, Caterpillar has supported a number of major natural
infrastructure restoration projects, including Everglades restoration
projects in Florida, clean-up work in the wake of Hurricanes
Sandy and Katrina and remediating Superfund sites acrossthe United States.
Around the world, governments, industries and individuals aretalking about climate change, the threats it poses to our livelihoods
and the best ways to address it. The majority of the conversation
has focused on the role energy plays in our global carbon footprint. Natural infrastructure – forests, prairies, agricultural lands,
coastal landscapes, wetlands and other landscapes – also plays avital role in managing carbon and supporting global sustainability.
In 2015, to complement our existing initiatives focused on reductionof greenhouse gases, Caterpillar spearheaded an effort to raiseawareness of the benefits of natural infrastructure.

And yet, a recent United Nations report, the State of the World’s
Land and Water Resources for Food and Agriculture (SOLAW),
found 25 percent of the world’s lands are now considered “highly
degraded” as a result of poor management practices. This meansthat an area roughly the size of North America may suffer fromdeforestation, desertification, severe erosion and wetland
contamination. As a result, communities that depend on these lands
may experience less productive farmland, poorer water quality andlower storm resilience. According to Ohio State University’s Carbon
Management and Sequestration Center, restoring soils of degradedand desertified ecosystems has the potential to provide an additional 1 billion to 3 billion tons of in-soil carbon storage capacity
annually, equivalent to approximately 3.5 billion to 11 billion tonsof CO2 emissions.

Caterpillar has supported a number ofmajor natural infrastructure restoration
projects, including Everglades restoration
projects in Florida, clean-up work in thewake of Hurricanes Sandy and Katrina
and remediating Superfund sites acrossthe United States.

In November 2015, Caterpillar hosted the first major nationalsummit in the United States of diverse stakeholders who havea part to play in natural infrastructure restoration. The summit
brought together leaders from engineering, construction, finance,
governments, academia and non-governmental organizations toestablish a coordinated effort across these industries to develop
and deploy sustainable development solutions. Participants delved
into the scientific and business cases for natural infrastructure
restoration and brainstormed policies, business models andfinancing solutions needed to expand the world’s natural
infrastructure restoration efforts.

Natural infrastructure sequesters billions of tons of carbon
for productive use in plants and soils. Scientists say that morecarbon resides in soil than in the atmosphere and all plant lifecombined; there are 2,500 billion tons of carbon in soil, comparedwith 800 billion tons in the atmosphere and 560 billion tons inplant and animal life. The food, fiber and lumber produced fromnatural infrastructure provide our nourishment and much of the
raw materials for clothing and housing. With the earth’s population
expected to grow from 7 billion to more than 9 billion in the next
few decades, ensuring the health andproductivity of our natural infrastructure
will be integral to meet the growing need
WHAT WILL
for food and other basic human needs.

Following the summit, Caterpillar has published a comprehensive
white paper detailing the summit discussions. The paper highlights
the recommendations that businesses and governments may
consider to increase the effectiveness of efforts to restore natural
infrastructure and keep pace with our need for the critical services,
including carbon sequestration and resources, that natural ecosystems provide. Through the use of our products for natural
infrastructure restoration projects and continuing to increaseawareness, this is another way that Caterpillar can continue tobuild a more sustainable world.

WE BUILDTODAY?

25

2015 SUSTAINABILITY REPORTFOCUS AREA

OPERATIONAL IMPACT
Since 2006, our facilities have been working to minimize
the environmental impact of our operations.

GHG INTENSITY

ENERGY INTENSITYWATER CONSUMPTIONINTENSITY

ALTERNATIVE/RENEWABLE
ENERGY USE

32%

24%

30%

27.1%

WASTE INTENSITY

90%

4%

WASTE RECYCLED
IN 201526

2015 SUSTAINABILITY REPORTFOCUS AREA

OPERATIONAL IMPACT
Energy Conservation
As a manufacturer of heavy equipment, some of Caterpillar’s operations are extremely energy-intensive. But even in our mostenergy-dense environments, Caterpillar employees have found ways to implement innovative energy systems that reduce our energy
costs as well as our environmental impacts.
We have set targets for energy efficiency in our operations since 1998. We currently have a target for the use of alternative and renewableenergy in our operations, as well as a target for reducing our energy intensity in operations. Our enterprise energy management teamis instrumental in building awareness, encouraging action and developing projects in the areas of energy efficiency and alternative/
renewable power generation. Current uses of renewable energy sources were achieved through facilities’ installation of renewableenergy sources such as biogas and photovoltaics (PV), as well as their purchase of renewable energy certificates. Our largest contribution
to alternative energy consumption is the operation of combined heat and power (CHP) facilities to power several manufacturing facilities.
The energy management team is evaluating additional opportunities for replication of CHP at other locations.
Operational energy intensity decreased 24 percent from 2006 to 2015. In addition, our absolute energy consumption decreased 10 percent
from 2014 to 2015. This progress represents a continued commitment to investment in more energy-efficient equipment and processes,
as well as the implementation of best practices at our facilities around the world. In addition, we have further increased our use ofalternative electrical energy sources, namely CHP.
As we work to achieve our 2020 energy intensity goal, one important facetof our efforts is continually assessing and improving the efficiency of ouroperations. Systems and facilities that were state-of-the-art for energy
efficiency and performance when first installed can fairly quickly be
eclipsed by new technologies and best practices.

ENERGY INTENSITY
Absolute gigajoules energy use/million dollars of revenue

692
502
417

2006

2012

496

526
346

2013

2014

2015

2020 GOAL

When AsiaTrak (Tianjin) Ltd. (ATL), a Caterpillar manufacturing facility basedin Tianjin, China, assessed its energy use, facility leaders found that energy
costs at the 15-year-old facility represented almost 41 percent of total
variable costs burden. The company committed to a comprehensive
energy-management project for the plant that would reduce costs andencourage sustainability among its employees.
The project consisted of three main components. First, ATL project leaders
focused on technology innovation on energy saving. They retrofitted thebuilding to incorporate more natural light using skylights, allowing over
400 lamps to be turned off during daylight hours; replaced 1,200 incandescent27

2015 SUSTAINABILITY REPORTFOCUS AREA

OPERATIONAL IMPACT
Energy Conservation(continued)
light bulbs with light-emitting diode (LED) bulbs; and implemented a building energy management system that included automateddevices across the facility such as thermostats and steam valves. Finally, because technological improvements are only as good as thepeople operating the equipment, ATL worked to create a culture of energy efficiency among its employees by setting a facility-widetarget for energy saving, weekly energy audits and clearly defined roles and responsibilities for energy use at each workstation. By
encouraging every employee to suggest energy-efficiency improvements and creating an employee-recognition program, our AsiaTrak
facility has made saving energy everyone’s job.
The results speak for themselves: In 2015, ATL saved more than $616,000 in energy costs and avoided more than 6,900 metrictons of GHG emissions. ATL has also received awards and recognition from the local government as a result of its commitment
to sustainability performance.
Energy assessments are serving us well in our Advanced Components & Systems Division (ACSD), which employed 10,000 people infacilities around the world. In 2015, the group launched an Environmental Health Process to improve its environmental and healthperformance, following the successful creation of a broad Global Safety Process in 2012. Energy assessments were a key componentof this planned multi-year project. By conducting in-depth analyses of facilities – each one lasting two to three months – the energy
assessment teams have empowered leaders at each facility to set common team goals for energy-use improvements, implement lowor no-cost changes to improve energy use, evaluate and prioritize longer term projects and make energy audits an annual event tosustain the gains and drive additional improvement.
The energy assessments ACSD conducted in 2015 identified more than$650,000 in projected savings from low- or no-cost improvementsthat facilities plan to implement in the next two years; saved morethan $120,000 by fixing compressed air leaks; and saved $80,000
in electricity costs by making sure machines that are not being
used during off-shifts, weekends and holidays are shut down.
ACSD received more than $20,000 in incentives from internal andexternal energy-improvement programs in support of the changes
they have implemented.

By encouraging every employee tosuggest energy-efficiency improvements
and creating an employee recognition
program, our AsiaTrak facility has
made saving energy everyone’s job.

Employees at MecTrack, our manufacturing facility in Valsamoggia, Italy, also undertook a series of energy assessments guided by thephilosophy that any electricity used without creating value for the company must be eliminated or reduced, while identifying improvementsthat require minimal investment. By measuring energy consumption, interviewing their colleagues about best practices, conducting “energy
waste walks” and simulating suggested changes prior to implementation, the MecTrack team has been able to save $100,000 per year inelectricity costs by eliminating wasted energy. Encouraged by the success of this project, the team plans to undertake a second-generation
project in 2016 aimed at saving even more energy by focusing further efforts on compressed air systems.

28

2015 SUSTAINABILITY REPORTFOCUS AREA

OPERATIONAL IMPACT
Alternative and Renewable Energy
Across Caterpillar’s global operations, our employees are exploring ways to incorporate alternative and renewable energies to improve
our safety, efficiency and sustainability performance. In 2015, 27.1 percent of our electrical energy was from renewable or alternative
sources. This includes purchased and on-site generated alternative and renewable energy, as well as calculating the percentageof renewable energy from grid-purchased electricity using data obtained from the International Energy Agency.

ALTERNATIVE/RENEWABLE ENERGY1
Sum of alternative and renewable electricalenergy use/total electrical use x 100
Alternative

14.8%

2011

Renewable

18.2%

2012

28.0%

27.4%

9.4%

9.8%

9.9%

18.6%

17.6%

17.2%

2013

2014

2015

27.1%

Total includes purchased and on-site generated alternative andrenewable energy, as well as calculating the percentage of renewableenergy from grid purchased electricity using data obtained from theInternational Energy Agency.

1

In Mannheim, Germany, a team at our Caterpillar Energy Solutions facility –which has 140 years of experience in designing and manufacturing engines
and generator sets – has developed a sustainable way to power the facility
with heat and electricity that would otherwise be wasted. The goal was toreduce the electricity and heat purchased from the grid to zero by implementing a combined heat and power system. In addition, the existing test beds
were modified, by adding alternators, so that they convert the waste heat
into electricity. The facility is now able to use that generated electricity topower not only its operations, but also the test beds themselves, while still
generating enough surplus electricity to sell back to the electric grid. To
guarantee the smooth operation, an energy management system has been
implemented which proactively coordinates the test beds to ensure that nogaps in supply occur. In recognition of Caterpillar Energy Solutions´ successin reusing waste heat and generating energy, the facility earned an award
from the city of Mannheim in 2015 as one of the outstanding environmental
efforts by large enterprises operating in Mannheim. By selling this alternative
energy to the grid, Caterpillar Energy Solutions is also contributing to the
Mannheim city goals to increase energy awareness of citizens and improve
efficiency in energy provision. Caterpillar Energy Solutions has thus proventhat sustainability and productivity are complementary.

In 2015, 27.1 percent of our electricalenergy was from renewable
or alternative sources.

292015 SUSTAINABILITY REPORTFOCUS AREA

OPERATIONAL IMPACT
GHG Emissions Reduction
Through 2015, Caterpillar has reduced GHG emissions intensity from our facilities by
32 percent compared to our 2006 base year. From 2014 to 2015, our absolute GHG
emissions were reduced by 7 percent. In 2015, several facilities stood out for the
success of their efforts in reducing their GHG emissions year over year.
At our Grimbergen Distribution Center (GDC) in Belgium, a team of employees
undertook a number of improvements to reduce GHG emissions from the center’s
daily operations, which together cut GHG emissions by 577 metric tons. Amongthe solutions the team implemented were optimizing heating in the office andwarehouses, using solar panels that generate as much as 60 percent of the facility’selectricity needs and consolidating three warehouses into one facility to reduce
vehicle miles traveled by nearly 60,000 kilometers (37,300 miles) per year.
In Japan’s Sagami Province, a team at our Advanced Components & Systems Division
facility upgraded the 17-year-old steam boilers used to provide heat and power to thebuilding. During the upgrade to more efficient equipment, the team also right-sizedboilers to match the machines they power. They strategically located boilers as close to
the equipment as possible to reduce waste and used heat that would otherwise havebeen wasted to warm water at product testing areas. Altogether, these improvements
are expected to save more than 1,200 metric tons of GHG emissions annually.

GHG EMISSIONS INTENSITY1
Absolute metric tons of CO2e/million dollars of revenue

72.1

39.6

2006

2012

44.3

44.7

2013

2014

48.8
36.0

2015

2020 GOAL

1 GHG emissions intensity reduction goal is based on our combined
Scope 1 (direct) and Scope 2 (indirect, market-based) GHG emissions
using a 2006 baseline year. Likewise, total absolute GHG emissions
are a sum of Scope 1 and Scope 2 (market-based) emissions.

TOTAL ABSOLUTE GHG EMISSIONS
Million Metric Tons

● 0.89 million metric tons Scope 1 GHG
emissions (direct emissions)

Our Xuzhou, China (CXL) facility houses a number of shot blasting machines used
● 1.40 million metric tons market-based
to clean, polish and strengthen metal parts, which consume a great deal of energy. In
Scope 2 GHG emissions (indirect
2.29
order to meet engineering requirements, parts need to be processed twice, resulting
emissions from purchased electricity,in twice as much energy being used. To reduce the energy consumption of theheat or steam)machines, the facility made two key improvements, both requiring modifications
to the internal programming controller of the shot blasting machines. First, a pause
was enabled for positions which required additional shot blasting, thus allowing
1.45 million metric tons location-based Scope 2 GHG emissions2
the parts to be processed in one pass and meet the surface specifications needed
2 Location-based Scope 2 GHG emissions are provided in accordancefor painting. Second, the operation time of the motors was adjusted to allow variablewith the GHG Protocol updated Scope 2 guidance.
loading, thus saving power and reducing the consumption of steel shot. With thesemodifications, the time required for shot blasting parts is reduced from 25 minutes to 17.5 minutes. Further, over 560 Mwh of power is savedannually, equal to a reduction of over 400 metric tons of CO2 equivalent emissions in 2015. Based on this successful implementation, thefacility is seeking to replicate these improvements to additional shot blasting machines in 2016.
Finally, a team at our facility in Monterrey, Mexico, remodeled four buildings at the facility, adding skylights and translucent wall panels, tomaximize the natural light available to employees during the daytime, and to be able to turn off some of the 1,600 lights that previously
were required to operate 24 hours a day. After the remodel, electricity use at the four buildings dropped by nearly 50 percent and GHG
emissions fell by about 2,000 metric tons per year.
302015 SUSTAINABILITY REPORTFOCUS AREA

OPERATIONAL IMPACT
Water Management
The scarcity of water resources is an issue that crosses cultures, geographies and industries. Today, water scarcity affects around 700
million people, and current trends indicate the problem will escalate. By 2025, two-thirds of the world’s population could be living inwater-stressed regions. The implications are so significant that world leaders consistently rank water crises as one of the top risks facing
the global population. While our manufacturing operations are not as water-intensive as those of other industries, we nonethelessrecognize the far-reaching economic, social and environmental implications that water scarcity may have in the future – and havetaken steps to reduce our consumption.
We continue to implement conservation strategies that reduce water use
in our operations, explore water-treatment technologies, introduce waterrecycling processes at new and existing facilities and train employees aboutwater resources to raise their awareness of the issue. Through 2015, thesetypes of efforts have reduced water consumption intensity, the measureof water consumption normalized by revenue, at our facilities by a totalof 30 percent from our 2006 base year intensity. Our 2015 absolute water
consumption, including non-contact cooling water from foundry operations, was 3.82 billion gallons of water, a reduction of 12 percent fromthe previous year.
Around the world, Caterpillar facilities are taking water scarcity and water
management seriously, with results that highlight the scale of positive
impact that our sustainability work can have. In Illinois, for instance,
employees at our East Peoria campus were experiencing increased processequipment maintenance and water quality issues as a result of an aging
process water system that draws in water from the Illinois River. Whena team tackled the challenge of reengineering and optimization of theprocess water system, the campus was able to save nearly 100 million
gallons of water per year.

31

WATER CONSUMPTION INTENSITY1,2
Absolute thousand gallons of water/million dollars of revenue

76.3

45.6

2006

2012

48.9

50.5

53.6
38.2

2013

2014

2015

2020 GOAL

1 Data prior to 2015 has been restated due to data updates realized
from improved accuracy.
2 Water consumption intensity does not include non-contact coolingwater from foundry operations.

2015 SUSTAINABILITY REPORTFOCUS AREA

OPERATIONAL IMPACT
Water Management(continued)
Aligning with Caterpillar Vision 2020, our operations in Batam City, Indonesia,
implemented in 2015 a Zero Discharge process for treating and reusing allof the facility’s wastewater. After sending the facility’s wastewater throughsewage and effluent treatment plants on-site, as well as a reverse-osmosis
filtering system, the Caterpillar team is able to reuse the water for thecampus’s landscaping. In a region that is suffering from a prolonged
drought, Caterpillar Batam’s Zero Discharge success is saving more than
1 million gallons of water per year, enough to provide water for a local
family of four in Indonesia for 24 years.
Water scarcity is also a growing concern in India, with more than halfof the country already facing high to extremely high water stresses. At
Caterpillar India in Hosur, in the water-stressed state of Tamil Nadu, thefacility’s sustainable development council has concentrated on water
conservation and management for a number of years to keep our facility’s
demand in line with available resources. In 2015, a team in Hosur completed
a rainwater harvesting project to replenish the wells that supply the bulk of
the facility’s water. The eight rainwater collection tanks, located on roofs andin open yards in close proximity to the wells, have recharged and improved
the area’s groundwater supplies, allowing us to continue our operations
while also reusing some water for landscaping and reducing soil erosion.

TOTAL ABSOLUTE WATER CONSUMPTION
Billion Gallons● 1.30 billion gallons non-contact
cooling water from foundry operations

3.82● 2.52 billion gallons enterprise water
consumption excluding non-contact
cooling water from foundry operations

WATER SOURCES● 34% / non-contact cooling waterfrom foundry operations● 29% / municipal water● 22% / groundwater● 15% / surface water32

2015 SUSTAINABILITY REPORTFOCUS AREA

OPERATIONAL IMPACT
Waste Minimization
Minimizing waste is an important strategy for competing in today’s markets. Improving the efficiency of our processes not only reduces
costs, but also reduces our utilization of materials, energy, water and land. Our focus on recycling has enabled us to realize an enterprise recycling rate of 90 percent or greater since 2009. Two years ago, we transitioned from a focus on percent recycled to a new goalthat is focused on reducing all by-product materials to minimize waste.
By-product materials are generated as waste materials of our production processes. When materials are generated, we focus on
remanufacturing, rebuilding, reusing and recycling. The use of the term by-product materials in our 2020 aspirational goal reflects our
focus on minimizing waste and effectively managing all that remains. Accordingly, we focus on by-product material reduction strategies that are associatedwith improved efficiency and quality measures, as these offer the greatest
BY-PRODUCT MATERIALS INTENSITY
opportunity to enhance cost competitiveness and reduce the potential for
Absolute metric tons of by-product materials/million dollars of revenue
short- and long-term impacts.
In 2015, we generated a total of 676,000 metric tons of by-product materials,
with 90 percent of those materials recycled. Our by-product materials
intensity increased 4 percent from our 2006 base year to 2015. However,
we decreased our generation of total absolute by-product materials by
12 percent from 2014 to 2015.
By taking a critical look at every phase of our operations, teams have beenable to uncover unexpected and high-impact methods to reduce waste while
maintaining performance and customer satisfaction. Our undercarriage tracks,
for example, have traditionally included a primer coat of paint, followed by a
top coat of paint on the finished assembly. The top coat finish primarily serves
an aesthetic function – our customers expect that paint to wear off after
a period of intensive work-time. Our excavator and undercarriage teams
formed a cross-functional team from the U.S., China and Japan that set
out to provide a lower cost undercarriage paint solution with a lower
environmental impact.
The team conducted side-by-side tests to compare undercarriage tracks thatreceived only a primer coat of paint with tracks that received the primer coatand top coat of paint and found that the benefits of a top coat did not outweighthe costs and waste of providing it. The team then worked with the paintmanufacturer to formulate a primer paint that had the performance of a primer,along with the appearance of a top coat finish. By eliminating the application

33

13.8

13.2

12.5

14.0

14.4

6.9

2006

2012

2013

2014

2015

2020 GOAL

BY-PRODUCT MATERIALS
Thousand Metric Tons676

● 90% / recycled● 10% / disposed(sent to landfill or incinerated)2015 SUSTAINABILITY REPORTFOCUS AREA

OPERATIONAL IMPACT
Waste Minimization(continued)of that top coat of paint at our Xuzhou, China (CXL), and Japan (CJL), excavator facilities, the process will save Caterpillar an estimated$3.8 million per year while eliminating the use of tens of thousands of liters of paint – about 40 percent of which was wasted asoverspray. This measure also eliminates the need for facilities to dispose of the hazardous waste from paint overspray and waste paint.
Our team in Desford, England, identified and solved another wasteful aspect of the paint process: disposable plastic caps and tubes
used to keep paint out of equipment bores and threads. While EPDM, or synthetic, rubber was the most affordable material from a purecost perspective, it presented a number of waste and emissions challenges. As a single-use material, discarded EPDM waste averaged
35 metric tons to landfill each year. Additionally, the rubber was manufactured in China and shipped to England, with a correspondingly
high GHG impact. A team at Desford sought out more sustainable options and settled on silicon as a durable, reusable replacement.

Sourcing silicon from Germany
instead of EPDM from China
has cut shipping emissions
by 95 percent.

Despite requiring the creation of new systems, including sandblasting machines
to clean the silicon masking and automated systems to track usage and order
new masking when supplies are low, replacing EPDM rubber has had a significant impact on waste at the facility. Sourcing silicon from Germany instead of
EPDM from China has cut shipping emissions by 95 percent. In addition, using
each silicon masking set 30 times has reduced landfill waste from 34.8 metrictons per year to just 2.4 metric tons and cardboard needed to ship the masking
by 93 percent.

A similar mindset came into play in Hosur, India, where our team took Vision 2020 to heart when approaching shipping waste. The packaging for finished products out of our Advanced Components & Systems Division (ACSD) facility was traditionally non-reusable wooden crates and boxes – materials that contributed significantly to the environmental impact of the facility. A team explored the possibility of creating reusable steel packaging to replace single-use wood materials by using 3D modeling to optimize the space used by
the new packaging. After a successful pilot project shipping products from Hosur to North Carolina, our United Kingdom and Belgium facilities joined the initiative, and Hosur rolled out the new steel packaging on a large scale. In addition to eliminating 1,700
tons of wood use per year, the project is saving more than $900,000 per year in materials cost, and the design of the new steel packaging increases our shipping efficiency by more than 30 percent through better stacking and efficient sizing.
While the aforementioned examples illustrate how we address
reducing and reusing materials, a project completed this year in
Decatur, Illinois, showcases the power of recycling, and how starting
small can lead to bigger impacts. In late 2014, the facility rolled out arecycling plan to collect plastics, aluminum and paper on the shop
floor. Prior to creating this plan, recycling at this 2,100-employee
facility was not standardized and required employee volunteers tomonitor recycling bins and deliver materials to recycling pick-up
zones. After conducting a site survey and developing work andsafety plans, the facility gradually distributed recycling containers
across the facility’s buildings. After six months, the facility collected
almost 6,000 pounds of recyclables, including cans, papers, plastic
bottles and plastic zip-ties. The cash savings from landfill fees, aswell as rebates from recycling the materials, will be directed to the
Decatur facility’s charitable contribution fund.

34

Caterpillar’s Morton Parts Distribution
Center was a winner of the 2015 Illinois
Governor’s Sustainability Award. The
award recognized several energy, water
and waste reduction projects that had
been implemented at the Center.

2015 SUSTAINABILITY REPORTFOCUS AREA

PRODUCT STEWARDSHIPRESEARCH AND
DEVELOPMENT EXPENSES
Dollars in millions$2,2972011$2,466$2,04620122013$2,1352014$2,1652015

Product stewardship covers the full lifespan of our equipment from the supply
chain, to the customer’s job site, to remanufacturing. This means taking active
steps to reduce potential environmental, health and safety impacts, as well as
optimizing operational quality and efficiency throughout the life of the product.
We accomplish this in numerous ways, including engineering products to eliminate
hazardous substances, utilizing more sustainable energy sources and/or extending a product’s life through the use of remanufactured parts or rebuilt machines.
Caterpillar also works with customers and distributors to encourage the proper
disposal or recycling of end-of-life materials.
Wherever possible, we keep resources in the Caterpillar value chain through acircular flow of materials, energy and water. Our focus on developing better systems
optimizes our use of resources, maximizes the total life cycle value of our products andminimizes the cost of ownership for our customers. Viewing our equipment througha total life cycle lens allows us to make sustainable progress for communities, theenvironment and the economy.

Caterpillar makes management and technical expertise available toregulatory bodies in advisory roles and provides technical assistanceas new product standards are developed. These activities include
participation, membership and leadership roles in organizations suchas the International Organization for Standardization (ISO); industry
associations; membership in governmental and nongovernmental
delegations to international bodies such as the International Maritime
Organization; European Union industry expertise panels; and federal advisory committees chartered under the U.S. Environmental
Protection Agency.

Innovation Management
Our Technology Strategy establishes the foundation of Caterpillar’s
product development innovation. Our strategy includes four themes– Energy and Transportation, Machine and Machine Systems, Automation and Enterprise Solutions and Factory Technology Solutions. Eachtheme includes customer-focused goals that serve as targets against
which progress can be measured. This effort allows us to gain insights
into the voice of the customer for our products and assess trends and

35

Standards Harmonization
Industry consensus standards, including those forvisibility, rollover protection structures, braking
and sustainability, apply to earthmoving equipment. We are involved on an international level
to develop and update global standards throughthe International Standards Organization (ISO)and chair the technical committee for earthmoving
machines. Our global standards and regulations
team works closely with organizations like the
ISO to enhance machine safety standards worldwide. Caterpillar also provides input to regulatory
agencies to help ensure the smooth introductionof new technologies.

2015 SUSTAINABILITY REPORTFOCUS AREA

PRODUCT STEWARDSHIP(continued)
impacts they may have on our customers and business. Research activities currently underway within these areas include efforts to
reduce customer owning and operating costs, enhance safety, reduce greenhouse gas emissions, increase product reliability andimprove productivity.
The technology strategy is governed through a multi-tiered council composed of leaders from all areas of the business, from theexecutive office level to engineering and technical managers. One responsibility of the council is to ensure consistent and sufficientfunding of Caterpillar’s technology investments.
While it is important to innovate and explore many new ideas, our technology readiness level process, a consistent framework andlanguage for developing robust technologies, ensures that only those technologies that can be integrated into new products andprovide customer value move forward in each stage of the development process. Through ongoing execution using the technology
readiness level process in 2015, 33 technologies were transferred
In 2015, Caterpillar was awarded thefrom research into New Product Introduction programs.

Commercial Application of the Year, a Platts
Global Energy Award, recognizing theCaterpillar Propulsion Twin Fin technology
for increasing efficiency, businessadvantage and innovation.

We also encourage and recognize innovation through our Chairman’s
Award process, with recognitions focused on Emerging Innovations,
Delivered Innovations and Process/Business Innovations. Each project
recognizes teams for new product and process solutions that create asignificant positive impact on our customers and our business.

Virtual Bulldozer Testing for Faster, Smarter Innovation
The process of creating innovative products for our customers

often requires us to innovate our own practices. One of theforward-looking projects under development is the creation of
Semi-Autonomous Tractor Systems (SATS), which will enable
one operator to control multiple dozers simultaneously. With
more than 100 employees currently developing this system –including more than 30 in software development – access toour complete simulator (test bench) had become a bottleneckto progress on launching SATS. However, the primary option
we had for expanding our testing platform involved building
an additional full test bench, which includes a full suite of
networked computers, a full-time engineer to manage thecomputers, access to three Cat® D11 tractors in our Tucson
Proving Ground, and the associated fuel consumption,
maintenance and staff to manage those tractors. Such a significant expansion carried a high financial cost, required
machine and fuel usage and also provided more capacity than our team would need for the long term.
A team of engineers from our Advanced Components & Systems Division located in Mossville, Illinois, offered analternative: by creating a series of “lite” test benches, the SATS developers would be able to spend more time in thesoftware test environment using virtual tractors, while eliminating the need to create a full test bench. These benches aredifferent from most test benches in that they test systems that span multiple machines and site level controls. Eachbench cost about $30,000 to build, an attractive alternative to a traditional $500,000 full-scale bench. Although theteam was initially hesitant to commit to virtual testing, after the first “lite” test bench was completed, the original
benefits became clear – as well as a number of unanticipated benefits – and demand for lite benches quickly grew.
The SATS team now has access to seven lite test benches, which have lived up to the team’s expectations for low-cost,full-featured test environments. Additionally, our engineers found that the process of testing software on lite benches
helped to catch more errors during early testing, which makes the full test using live dozers significantly faster andmore efficient. The virtual testing benches have helped increase our software developers’ engagement by letting
them see more of the full life cycle of the product and being able to directly affect the end product through thedesign decisions they adopt early. All told, the lite test-bench project has saved an estimated $5.4 million in
expenditures and saved as much as 1,000 gallons of diesel fuel used per day of physical testing in Tucson.
36

2015 SUSTAINABILITY REPORTFOCUS AREA

PRODUCT STEWARDSHIP
Customer Safety
Caterpillar’s safety culture extends beyond our internal operations to include the safe operation of our products in the field, as wellas the safety and health of all individuals who come into contact with Cat® products. This commitment encompasses the design andengineering of our products and extends to operator training and certification, solutions for the job site and the tools and resources
to improve the workplace culture which are coordinated through Caterpillar Safety Services. For full details about how Caterpillar Safety
Services meets customers at any point of need, visit cat.com/safety.
The Caterpillar Zero-Incident Performance (ZIP™) Process is a program used internally and with customers to focus safety management
on leading indicator activities and incident prevention. With the ZIP Process, employees from all levels of an organization, from thefront line through management, are actively involved in and accountable for safety. It begins when leaders commit to making a culturechange, whereby safety becomes an organizational value equal to productivity, quality and customer service. Then employees leadthe transformation by improving or creating safety processes, clearly defining the role each employee will play in making the process
successful. Caterpillar has discovered that when the employees who are closest to job hazards have the opportunity to personallybuild workable safety processes – and are appropriately recognized for their efforts – a culture of safety excellence takes shape andincident rates go down.
Caterpillar’s commitment to product safety is embedded in our product development process. This safety commitment begins at thefirst stage of the new product introduction (NPI) process and involves such tasks as identifying opportunities to integrate new technology in order to enhance product safety. Potential product hazard identification is a critical element of each stage of the process, rightup to the disciplined product validation that is completed prior to market introduction.
Our decades of expertise in reducing the hazards posed by fatigue and distraction led to the development of in-cab and wearable
technology-enabled solutions that provide heavy equipment operators the power to see, mitigate and manage risk posed by fatigue
and distraction. These technologies are most effective when used as part of a robust Fatigue Risk Management System (FRMS) thatholistically incorporates a number of layers of protection against fatigue. This process engages our customers’ workforce and motivates
employees to embrace fatigue-minimizing changes in a way that boosts morale and provides metrics to measure continuous improvementin safety performance. The FRMS includes on-site fatigue assessments, employee training, technology change management, around-theclock monitoring, and analyzing and optimizing schedules and rosters to minimize safety risks.

37

2015 SUSTAINABILITY REPORTFOCUS AREA

PRODUCT STEWARDSHIP
Customer Safety(continued)
In 2015, Caterpillar Safety Services worked with the Vigo Coal Company to complete a trial of our Driver Safety System (DSS),
a technology-enabled fatigue and distraction monitoring solution for mining and construction applications. The DSS examines
the pervasiveness of operator fatigue in daily heavy equipment operations. By using in-cab technology for one week, we recorded
42 separate fatigue events, some of which involved operators falling asleep for five to six seconds at a time. Our team recommended
a number of tools to address these risks, including:• Cat® Smartband, a wrist-worn device that measures sleep quantity and quality;• Fatigue Avoidance Scheduling Tool (FAST), developed by the U.S. military, that helps supervisors model different shift schedules
to determine and avoid fatigue vulnerabilities;• In-cab cameras with patented eye and head tracking algorithms to detect operator fatigue and distraction in real-time.
These technologies are just one prong of our new solution that gives customers visibility to their safety risk exposure, which can vary
greatly based on a number of factors. Once customers are armed with the details and data these technologies provide, Caterpillar
consultants work with them to implement organizational changes needed to improve operators’ fitness for duty every time they climb
into a cab.

SMARTBAND

1
00

11

01

1
00

00

11

0
10

10
010

11

10

101

1
11

100

01

01

101

0

11
010

001

101

FATIGUE AVOIDANCESCHEDULING TOOL (FAST)

010

1
01
000
01 10101100101010001010100101101101100101010110011010
11
01
01
00
01
01
01
01
01
10
01
01
01
01
10
01
10
10
10
10
10

00

DRIVER SAFETY
SYSTEM (DSS)

10

00

10

1

1

10

10

01

01

00

10

SHIFT SCHEDULES& ROSTERS

10

01
01
10
01
01
01
01
01
10

EQUIPMENT
DATA

38

2015 SUSTAINABILITY REPORTFOCUS AREA

PRODUCT STEWARDSHIP
Circular Economy
Caterpillar strives to provide customers with quality equipment that provides the best economic proposition for their business. Our
remanufacturing (reman) and rebuild businesses provide customers not only with an immediate cost savings, but also help extend
life cycles and use materials more efficiently.

Remanufactured Products and Rebuilt Products
The Caterpillar Sustainable Solutions, Solar Turbines and Progress Rail Services remanufacturing programs provide customers withlower-cost products, shorter downtime and quick, dependable service options.

REMAN END-OF-LIFE“TAKE-BACK” BY WEIGHT1

15%

Millions of pounds of end-of-life material received

Change in Reman Businessfrom 2013 base year1

161

171

174

166

2012

2013

2014

154

REMAN END-OF-LIFE“TAKE-BACK” PERCENT1
Actual end-of-life returns/eligible returns x 100

95%

94%

93%

94%

2011

93%

3%

2011

2012

2013

2014

2015

Change in Rebuild Businessfrom 2013 base year2015

1 Data does not include Progress Rail, Electro-Motive or Solar Turbines.

39

2015 SUSTAINABILITY REPORTFOCUS AREA

PRODUCT STEWARDSHIP
Circular Economy(continued)
Rebuild programs increase the lifespan of equipment by providing customers with product updates for a fraction of the cost of buying
a new machine. Rebuild programs include Cat® Certified Rebuilds, component overhauls at Cat® dealers, Solar Turbines rebuilds andProgress Rail Services rebuilds. A complete Cat Certified Rebuild includes more than 350 tests and inspections, automatic replacementof approximately 7,000 parts and a like-new machine warranty. In addition, trained dealer service professionals perform this work
using genuine equipment and parts. Caterpillar provides information, data, training and service tools to help dealers make the mostappropriate decisions on which parts to reuse in order to achieve expected longevity of rebuilt components. Reuse of components
helps us use materials and energy more efficiently.
The remanufacturing and rebuild programs allow customers to maximize
the built-in value of their equipment by:• Ensuring maximum productivity• Increasing reliability and equipment uptime• Ensuring cost-effective performance• Receiving a like-new warranty• Increasing the customer’s return on their investment• Providing the customer with a variety of repair options to meet theirservice needs• Providing the customer with a higher resale value• Providing the lowest total owning and operating life cycle costs• Preserving the majority of energy and materials required to make theoriginal component or machine
Given the significant role that remanufacturing and rebuild operations
play in our sustainability initiatives, we created a new customer goal in2013 around this area of the business. Using 2013 as a base year, ourgoal is to grow remanufacturing and rebuild business sales by 20 percent
by 2020.

Recognizing Caterpillar’s Commitment
to the Circular Economy
Caterpillar has long been dedicated to themost efficient use and reuse of materials –what is sometimes referred to as “The Circular
Economy.” Because of that long commitment,
we are pleased to be recognized as runner-up
in the 2016 Circular Awards. Caterpillar was
nominated to receive the Accenture Award for
Circular Economy Multinational, in recognitionof how we have incorporated circular economy
principles across our value chain, including
product development, human resources,
supply chain, dealer network and customer
relationships. Our remanufacturing programin particular, was singled out as an innovative
implementation of circular-economy principles.

Increasing Global Access to Remanufactured Products

While global customers have driven demand for remanufactured products,
not all customers can benefit from the significant cost and efficiency savings that Cat® Reman products deliver due to import and export
challenges. Certain countries – mostly in developing markets – fail to recognize the value of remanufactured goods for the environment
and their national economies and place trade barriers around remanufactured products.
There are typically two types of trade barriers. A tariff barrier might include excessive fees or taxes levied by a certain country thatsignificantly increase the customer’s cost of choosing a viable remanufactured product. On the other hand, a nontariff barrier might
be customs officials categorizing remanufactured goods as “used” goods, which cannot be imported under any circumstance or can
only be imported after complying with special inspection, certification, licensing or other onerous requirements. Similar barriers areoften faced when customers seek to export their cores and return them to Caterpillar in exchange for a remanufactured engine orcomponent. With the durability, performance, quality and a warranty that is the same as all other Cat® engines and components, Cat
Reman products should not be treated as “used” goods. Indeed, this fact has been acknowledged in a number of free trade agreements
and other multinational statements such as the Asia-Pacific Economic Cooperation (APEC) Pathfinder Initiative. Countries participatingin the global economy should treat remanufactured products the same way new goods are treated.
Caterpillar continues to work with policymakers around the globe to open markets and expand remanufactured options for our global
customers, providing them with cost-effective, sustainable options for extending the life of their existing equipment. The company
informs and educates government regulators around the world on the sustainable benefits of Cat Reman products.

40

2015 SUSTAINABILITY REPORTMATERIAL RECOVERY SOLUTION

MATERIAL RECOVERY
Caterpillar encourages circular economy principles through ourremanufacturing and rebuild businesses. This starts with durable
products, many designed to be rebuilt multiple times. Through ourremanufacturing and rebuild programs, components and machines
are overhauled, rather than simply repaired or replaced. Reuse ofparts, still within factory specifications, reduces waste and minimizes
the need for additional raw materials necessary to produce newparts. This system is where Caterpillar is making some of its greatest
contributions to sustainable development – keeping nonrenewable
resources in circulation for multiple life cycles.
For more than 40 years, Caterpillar’s remanufactured products
have provided same-as-when-new performance, reliability andwarranty at fraction-of-new costs, as well as availability thatgives customers more options at repair and overhaul time.
An excellent example of how our reman programs deliver value
to customers can be found in the island nation of Dominica. There,
almost all energy is produced using a combination of gas, diesel
and fuel-oil generators. Rimco, the Cat® dealer in the Eastern
Caribbean, has put a priority on offering remanufactured partsand components to the local electricity companies and customers.
Remanufactured parts are more affordable, helping to manage
operating costs, and are more readily available on the market,
allowing faster turnaround time in the event of emergency repairs.

For instance, a local energy company uses 11 Cat® generators –primarily Cat® 3516, Cat® 3608 and Cat® 3612 engines – to supply
the majority of the island’s electricity. During 2015, two of the main
generators needed emergency replacement parts, reducing the
backup power available and increasing the risk to a disruption inenergy supply to the island. Rimco provided remanufactured parts
to the energy company, ensuring they could keep the power flowing
without interruption.

For more than 40 years, Caterpillar’s
remanufactured products have provided
same-as-when-new performance, reliability
and warranty at fraction-of-new costs, aswell as availability that gives customers
more options at repair and overhaul time.

In addition to giving our customers lower operations andmaintenance costs, using remanufactured equipment gives Cat®
dealers like Rimco a competitive advantage and has helped the
35-year-old company meet the needs of its customers across theEastern Caribbean efficiently and affordably.

41

2015 SUSTAINABILITY REPORTFOCUS AREA

PRODUCT STEWARDSHIP
Customer Sustainability
Caterpillar helps our customers improve their sustainability performance. As customers increasingly demand greater energy efficiency,
we are further motivated to help them reduce their energy use and, corresponding greenhouse gas (GHG) emissions. We collaborate
with customers to deliver customized solutions that help optimize energy use and provide training for customer operators on how to use
our equipment more efficiently.

18%2015 reported sales and revenue derived
from products, services and solutions that
demonstrate an improved sustainability
benefit over existing offerings.

Working with our customers to minimize their energy use and GHG
emissions increases the value that Caterpillar provides to our customers.
By building equipment and providing solutions that use less energy andenable more efficient operations, we lower the cost of operating andowning equipment that is vital to our customers’ businesses, boosting
profitability and performance.
Caterpillar provides our customers’ technology solutions and moresustainable products, helping our customers reduce their own emissions.

Technology Solutions
As the world becomes ever more connected, and our technologies more sophisticated, we are able to create solutions to help theworld operate in ways that would not have been conceivable even 15 years ago. One example of this is our ongoing partnership with
Uptake, a data-driven analytics and services firm. In 2015, Caterpillar completed a minority investment in Uptake to jointly develop an
end-to-end platform for predictive diagnostics to help our customers monitor and optimize their fleets more effectively. This investment
developed from early successes of a locomotive project between Uptake and Electro-Motive, a Caterpillar subsidiary.
Our IntelliTrain™ locomotive monitoring and prescriptive repair
platform is one of the first tools to emerge from this partnership.
Currently in the midst of pilot tests, IntelliTrain offers rail operators
instant, automatic monitoring of every one of its locomotives toprevent on-track failures by quickly and accurately diagnosing
malfunctions. IntelliTrain also gives rail operators the power tomaximize equipment utilization by identifying how much of theirrail fleets are in use or available for use. These tools combine
to make rail shipping and rail travel more economically andenvironmentally sustainable for our customers.

42

Caterpillar’s RemoteTask remotecontrol system for Cat® D Series skid
steer earned a 2015 Innovation IronAward from Compact Equipment.

2015 SUSTAINABILITY REPORTFOCUS AREA

PRODUCT STEWARDSHIP
Customer Sustainability(continued)
Watch a time

Railways are not the only application gaining efficiency thanks to Caterpillar technologies. In 2015, we demonstrated
lapse video
how Cat® Connect technology is transforming roadway construction. In a side-by-side study, we compared two distinctof roadroad-building processes – 1) traditional road building, most commonly used today, and 2) a technology-focused
construction
here
approach, using Cat Connect technology. Cat Connect technology includes on-machine hardware and software
along with off-machine solutions to automate and facilitate construction. Beginning with the use of an unmanned
aerial vehicle (a “UAV” or drone) for surveying and monitoring the project’s progress throughout the earthmoving,
grading and paving phases, Cat Connect dramatically reduces the costs and impacts of road building. A three-mile
stretch of road built with the help of Cat Connect technology requires 37 percent less fuel and takes 46 percent less time, all while
offering a safer working environment for the on-site workers. The fuel reductions also result in CO2 emission reductions, equivalent
to the carbon sequestered by about 12 acres of forest according to the U.S. Environmental Protection Agency. In short, Cat Connect
technology and services dramatically reduce the costs and impacts of road building. In fact, customers will typically expect to realize
their incremental investment in the technology payback in less than one year. Technology enables increased profitability, efficiency
and productivity. We are excited to enable Cat Connect technologies and services in order to better serve our customers.

Benefits demonstrated in this project:

31%
FEWER
OPERATOR
HOURS

34%
FEWER

46%
FEWER

EQUIPMENTHOURS

PROJECT
HOURS

37%
FEWER
FUEL

CONSUMPTION(gallons)

12
ACRES FORESTOF

ENVIRONMENTAL
BENEFITWe are bringing these same technological improvements to our mining customers,
improving their safety performance as well as their efficiency. In Western Australia,
the Fortescue Metals Group has become the first company to fully implement theCat® MineStar™ autonomous mining system in an effort to increase productivity
and improve safety at its Solomon mining operations. Fortescue is using Caterpillar
technology to help its mines manage everything from fleet assignment and condition monitoring to remote and autonomous control. Fortescue started with six
autonomous Cat® 793F hauling trucks in 2013 and as of year-end 2015 is now
running 41 autonomous trucks on-site, with a plan to move to 70 autonomous
trucks. At a recent Fortescue Investor Presentation day in 2015, they presented
results showing a 13 percent improvement in productivity for autonomous trucks
over their manned fleet.
The Florida Everglades offer another example of how Cat® equipment gives our customers a leg up on performance and sustainability.
Deep in the heart of Florida’s alligator country, highway contractor Dickerson Florida began work on stabilizing 12 miles of canal banks
that surround a reservoir providing water to more than 8 million Floridians. On its own, a slope-stabilization project might not havepresented many challenges to a seasoned company like Dickerson. But one-third of the project was completely submerged, requiring
excavators to be able to see underwater. Using Caterpillar’s GPS-powered AccuGrade™ technology, the excavator operators could
maintain consistent grading even when they were working below the waterline and could not see what they were doing. Not only did
AccuGrade™ help the project finish ahead of schedule by helping workers improve their accuracy, but it also minimized the amountof time inspectors had to be in the water to confirm the quality of the work.

43

2015 SUSTAINABILITY REPORTFOCUS AREA

PRODUCT STEWARDSHIP
Customer Sustainability(continued)
More Sustainable Products
We work to create innovative new Caterpillar products and solutions that enable
better business and sustainability performance; at the same time, we seek continuous improvement on our existing products to meet the same business demands.
In the San Diego headquarters of our Solar Turbines division, a team of engineerssought out a replacement material to use in turbines’ exhaust diffusers, and struck
gold when they discovered CA6NM, a stainless steel alloy originally developed by
the U.S. Navy. As a replacement to the high-nickel alloy that is traditionally usedin the diffusers, CA6NM is more readily available on the market, more resistant tocorrosion and cracking, and significantly easier to manufacture and repair, with alonger service life than existing products. After extensive testing, we began using
CA6NM diffusers in some of our Hot End Drive turbines during 2015. When all Solar™
products have shifted to the new diffusers, we will save an estimated $2.4 million
in production costs in addition to the benefit of reducing material usage.
Whether a small part of a turbine engine or an entire machine, our employees are committed to continually improve our equipment.
A case in point is the 2015 shipment of our first dual fuel engine for retrofit of Cat® 785C large mining trucks (LMTs). This new engine
system can be run on either liquefied natural gas (LNG) with a small amount of diesel fuel, or entirely on diesel, giving our customers
even more flexibility in determining which fuel better meets their current needs. Engineers across Caterpillar collaborated to develop
the engine powering the Cat 785C LMT as the lead platform to provide dual-fuel solutions to our mining customers. The mine
where the Cat 785C LMT is deployed, Simplot’s Smokey Canyon Mine in Eastern Idaho, is notable because it is the same mine thatfirst deployed the original diesel Cat® 785 mining truck just over 30 years ago – showing that neither Caterpillar nor our customers
ever stop innovating.
As with our mining truck, our Cat® D6K2 finish grading tractor received an upgrade in 2015 that improved performance, while reducing
fuel consumption at the same time. A global team from France, the United States, the United Kingdom and India were given the goal to
make a smaller engine work with the same performance at the machine level. Together, they developed a number of improvements to
the Cat D6K2’s powertrain and controls that dramatically cut the machine’s fuel requirements with no loss in productivity. The result of
all these improvements is that each new Cat D6K2 costs less to build, is 27 percent more fuel efficient in Eco Mode than the Tier3 Cat®
D6K model and 37 percent better than our closest competitor.

The result of all these improvements isthat each new Cat® D6K2 costs less tobuild, is 27 percent more fuel efficientin Eco Mode than the Tier3 Cat® D6K
model and 37 percent better thanour closest competitor.

Efficiency improvements were also the focus of a team in our Advanced
Components & Systems Division in 2015. The team worked with many
internal and external collaborators to improve the fuel efficiency of ourline of medium wheel loaders. The team focused on four main featuresof these machines’ transmission systems, including the lock-up clutch,
oil pump, main relief valve and the Advanced Productivity Electronic
Controls transmission control system. The overarching integration ofeach of these improvements combined to create huge fuel savings. Our
customers will save an average of $2,500 per year in fuel costs, averageannual productivity savings of $5,000, as well as a significant dropin GHG emissions – and Caterpillar is saving more than $5,500 per
year in total costs for each machine. This new generation of wheel
loaders is far ahead of our competitors in fuel efficiency, and is an
example of how Caterpillar is driving the industry forward in performance and sustainability.

44

2015 SUSTAINABILITY REPORTFOCUS AREA

PRODUCT STEWARDSHIPJob Site Efficiency
Caterpillar recognizes that our customers need to realize the full value of their assets. Our solutions business model is designed tomeet that need by going “beyond the iron” to increase asset utilization. Designed and delivered by the Caterpillar Job Site Solutions(JSS) team in partnership with Cat® dealers, these solutions help customers find new and innovative ways to improve their operations and be more competitive in the marketplace. JSS leverages Caterpillar’s financial, technological, application and management
expertise to tailor solutions based on the customer’s own needs, typically in the areas of safety, sustainability, equipment, productivity
and financials. As a result, every solution is different, scalable and can range from a short-term consulting engagement to a multiyear
fleet management and maintenance solution.
Our customers often approach us with a request to improve the financial performance ofa job site, but we consistently find that the cost savings unlocked by our solutions teamalso deliver additional sustainability benefits. For instance, optimizing fleet efficiency not
only reduces costs, but it also can determine the maintenance and component replacement needs of individual machines. Better maintenance leads can extend the life of amachine, which, in turn, improves fuel efficiency and avoids the manufacturing andresource-use impacts of purchasing an entirely new machine. The integration of these
services is showcasing the three dimensions of sustainability – economic growth,environmental stewardship and social responsibility – for our customers.
In 2015, a pilot program with a large aggregate producer is a prime example. Our
customers asked JSS to improve productivity on job sites at two of their mines. We
analyzed the job-site data provided by this customer to measure machine performance,material haulage efficiency and equipment life. We also compared performance variancefor day and night shift at one of the sites and determined operator productivity could
be improved through increased awareness and operator training. As a result, wewere able to improve productivity and significantly decrease fuel costs. At one site,
we uncovered savings worth more than $91,000 per year in fuel savings and increased
machine productivity by eliminating 69 hours of annual idle time, further saving fueland labor costs.

68%

Increase in fleet hours managed byCaterpillar Job Site Solutions(from 2013 base year)

91%

Increase in number of machines
covered by services agreementswith Caterpillar Job Site Solutions(from 2013 base year)

Some of those savings came from unexpected places: Reviewing the performance data for each machine on site, the JSS team found
two trucks were running at higher than optimal RPM, which through operator training would save nearly 5,000 gallons of diesel fueleach year, including more than 50 metric tons of embedded emissions. Coupled with rebuilding aging equipment and optimizing
fleet schedules, the JSS team achieved a 19 percent reduction in operating costs for these sites, including a 34 percent improvementin the fuel efficiency of the operation.

45

2015 SUSTAINABILITY REPORTFOCUS AREAAN INTEGRATED VALUE CHAIN

SUPPLIERS

CATERPILLAR

DEALERSCUSTOMERS

Provide product inputs
and materials

Manufactures equipment
and provides
technology solutions

Distribute our products
and solutions to
our customers

Use our products andsolutions on job sites andin energy applications

Caterpillar is building capability to deliver an integrated value chain. The company that connects its end-to-end business –from customer all the way back through its chain – will gain and maintain industry leadership.
To deliver an integrated value chain we must engineer our value chains just like we engineer our products. It’s an end-to-end approach,encompassing the customer, dealer, product design, logistics and our supply network. When synchronized, Caterpillar maximizes quality,
value and speed to the customer.

Our Customer Service Promise
An integrated value chain starts with the customer and it’s more than just gathering customer feedback. It is the deep understanding of
the specific features, performance and delivery expectations that are used by our customers in the decision to purchase a Cat productversus the competition. It’s also the first step of how we engineer a value chain.
In early 2014, four product teams piloted the work to redesign Caterpillar’s end-to-end business. By the end of 2015, more than 25 teams
have started the journey.
Each engineered value chain is different – just as the businesses they serve are different – but the purpose remains the same, design
our chain – like we design our products – end to end in order to maximize quality, value and speed to the customer.
When we apply focus on every aspect of our chain we stabilize our business through the cycles, strengthen our relationship withcustomers and dealers, increase profitability and ultimately win in the industry.
46

2015 SUSTAINABILITY REPORTFOCUS AREA

VALUE CHAIN
Supplier Network
We view our suppliers as an essential link within our value chain and an essential part of our commitment to quality. We look forsuppliers who demonstrate strong values and commit to the ethical principles outlined in our Supplier Code of Conduct. We expect
suppliers to comply with the sound business practices we embrace, follow the law and conduct activities in a manner that respects
human rights.
In 2015, Caterpillar refreshed its Supplier Code of Conduct to add several new provisions, including human rights, innovationand diversity and inclusion. Several other provisions were enhanced, including environmental responsibility and sustainability.
We have a risk management plan that outlines our response to certain risks identified in our supply network. To ensure our impacted
suppliers understand our expectations, we request that they respond to our supply network survey or complete a training program.
As issues arise, members of our senior management are apprised and suppliers are expected to implement corrective action plans
for mitigation or remediation. Any supplier’s failure to take corrective actions when required may lead to additional actions, up to andincluding the termination of our business relationship.
Caterpillar continues to expand the Assurance of Supply Center (ASC) to support our enterprise strategy to manage a world-class supply
network. The ASC is a network knowledge service organization and data platform that captures and transforms complex, supply network
data from dozens of systems into a suite of simple, but powerful business tools that can be used for every day decisions. Today, thousandsof global, internal and external users can monitor supply network performance, drill down to root causes, visualize facility inventory
real-time and monitor risks and defects with a few clicks on their tablets or desktops. The centralized visibility to data in the ASC has
streamlined communication between Caterpillar and our suppliers, resulting in a dramatic improvement to supplier performance andquality, as well as working relationships. ASC tools have also improved collaboration between work groups, such as logistics andprocurement, allowing teams to quickly work together to respond torisks and disruptions (labor disputes, natural disasters, etc.), thereby
reducing risk for Caterpillar and our suppliers. New ASC capabilities in
network modeling, including nine patent-pending algorithms, make itpossible to quickly identify optimal network designs that account for
projected geopolitical or economic changes, and then evaluate pros andcons prior to implementation. This technology enables an agile supply
network that delivers at the right time and right cost, while reducing
waste caused by trial and error or delayed decision making.
Another supply network consideration at Caterpillar is compliance withapplicable laws and regulations. Caterpillar works with its suppliers todetermine the content in each of the products Caterpillar manufactures
or contracts to manufacture. In some instances, Caterpillar is also
required to expand its due diligence to determine the origin of certain
components. A cross-functional business team develops systems and47

2015 SUSTAINABILITY REPORTFOCUS AREA

VALUE CHAIN
Supplier Network(continued)
processes for conducting such reviews. For example, systems have been
implemented to track the components used to assemble products in the
final bill of materials, make inquiries of suppliers and track their responses.
Caterpillar monitors metrics that could indicate risks in the supply network.
These efforts continue to be important in creating transparency in the
supply network.

Supplier Diversity
Diversity within our supply base is important to Caterpillar and we strive
to mirror the demographics of the varied markets in which we operate.
Our passion for continuous improvement is the driving spirit behind
our Supplier Diversity Initiative as we strategically position diverse
suppliers (minority-owned small businesses, veteran-owned small
businesses and many others) who can provide quality products andservices, innovation, cost competitiveness and volume flexibility insupport of our business goals.
Our goal is to provide sourcing opportunities to a wide range of diverse business types throughout our enterprise. Seamless integrationof these businesses allows for synergies as we assist them in growth and development. In 2015, Caterpillar was again recognized as oneof the “Best of the Best” for supplier diversity programs by Black EOE Journal.

A More Sustainable Logistics Network
The Global Supply Network Division (GSND) transportation team moves thousands of supplies and parts around the world to support
Caterpillar manufacturing and dealers. In 2015, the transportation team shipped 4.1 million metric tons of parts and machines, managed
690,000 ground shipments and ocean shipments totaling 136,000 twenty-foot equivalent units, and improved our overall on-time
delivery performance to over 91 percent across all ocean, air and ground movements. In 2015, transportation improved shipment
energy efficiency (GJ/ton-miles) by 12 percent and greenhouse gas emissions intensity (metric tons/ton-mile) by 43 percent, as
compared to 2013.
For transportation, sustainability has always been a focal point of how to design shipping networks, optimize transportation modes
and configure products for optimal shipping. The group seeks to identify the optimal schedules to increase truckload utilization,
which in turn reduces the number of trucks on the road.
Transportation works closely with the packaging teams to determine the best way to stack material on a single truck or in an oceancontainer. Higher utilization of a single vehicle reduces the number of shipments overall. In one example in 2015, the team reduced
53 metric tons of CO2 emissions, saved 778 GJ of energy and reduced $57,000 in cost by double-stacking frames for transport.

Going the Last Mile
The last mile of any project, race or journey is often times the most important. At Caterpillar, we’re passionate about the last mileand have developed a strategy to connect this link to the overall value chain.
The last mile is the final step of the journey moving our products from the plant, distribution center or port to the dealer. In the past,this critical process has been completed by our dealers using different transportation processes, vendors and cost structures. However,today we are leveraging the scale and expertise of Caterpillar’s supply network to help our dealers and customers receive their products
more efficiently.
Caterpillar now transports product from the production yard to the dealership. Dealers can collaborate with us on when andwhere they want a machine shipped, check the shipping status online and instantly get information on location and estimatedtime of arrival.
By including the last mile as part of our overall value chain design, we are delivering products with higher dealer satisfaction,
improved delivery performance, visibility and at lower cost.

48

2015 SUSTAINABILITY REPORTFOCUS AREA

VALUE CHAIN
Supplier Network(continued)
A New Approach to Streamlining in Brazil
A team based in our flagship Brazil facility in Piracicaba has begun a four-year effort to make one of our largest facilities more efficient.
Rather than following the traditional path of a department-by-department audit to determine savings opportunities, the Piracicaba
team mapped the end-to-end costs of operations, for instance measuring the logistics costs for a product that spans ocean shipping
through manufacturing, packaging, storing and shipping to customers. By conducting this exercise across the facility’s operations,the team has spawned a new mindset about weaving efficiency into every work stream. The project has already created more than
$27 million in savings, including environmental benefits from optimized shipping operations, and expects to increase that in the
coming years as the project scales up. The Piracicaba team is also benchmarking their performance with their sister facilities in
Brazil to compare and share results and impacts.

49

2015 SUSTAINABILITY REPORTFOCUS AREA

VALUE CHAIN
Dealer Network
Our independent dealers serve as a critical link between our company and our customers. We rely on them to collaborate with us
in building and maintaining the long-standing customer relationships that have made Caterpillar successful. We value their positive
contributions to our reputation and their deep commitment to the customers and communities they serve, and are proud of theoutstanding relationships that we maintain with suppliers and dealers through trust, communication and shared rewards.
Cat® branded products and services are distributed through a worldwide
network of Cat® dealers (the Cat dealer network), 48 of which are located in
the United States and 127 are located outside the United States. The large
majority of our worldwide dealers are independently owned and operated,and many of these businesses have been in families for multiple generations.
The Cat dealer network brings value to customers through unmatched
service, integrated solutions, after-sales support, fast and efficient partsfulfillment and world-class rebuild capabilities. We work with our dealers
to provide products, services and support solutions necessary to satisfy
customer needs worldwide. Other brands in our portfolio are distributed
through their respective channels that optimize customer value in accordance with their brand value propositions.

The Cat® dealer network brings value
to customers through unmatched
service, integrated solutions,after-sales support, fast andefficient parts fulfillment andworld-class rebuild capabilities.

Our distribution model, which has consistently delivered unmatched local support, is increasingly measured by global standards. The
Cat dealer network is one of our biggest competitive advantages, and we take great care to make sure that it continues to uniquely
position itself so that our customers succeed into the future. Caterpillar and Cat dealers worked together to define and lay the foundation
for a strategy that addresses our mutual challenges and builds the foundation for our next century of progress. This requires a thoughtfultransformation within our distribution model, without changing the principles that define our relationship. Together, we have mapped thepath forward to achieving the transformation we need around four objectives, collectively known as our “Across The Table” initiative:• Strengthening the Cat dealer model• Enhancing customer focus• Achieving superior economics for Caterpillar and the dealer• Seizing opportunities while mitigating risks
Our dealers worldwide have been working side-by-side with Caterpillar employees from every area of the company on projects focusedon such things as e-business, technology-enabled solutions, service strategy, rental and used equipment strategy and parts logistics.
A global team focused on one ideal – ensuring that our distribution network is built for our next century of progress.

50

2015 SUSTAINABILITY REPORTFOCUS AREA

GOVERNANCE & ETHICS
Caterpillar’s governance structure provides leadership, accountability and transparency to company business on behalf ofour employees and our stockholders. Our corporate governance framework serves the interests of stockholders with thehighest standards of responsibility, integrity and commitment. These standards are developed and implemented by our Boardof Directors and global management team, who oversee the company’s performance and governance policies.
Caterpillar’s Board of Directors currently has 12 members. This structure enables a diversity of experience without hindering effective
discussion or diminishing individual accountability. In 2013, Caterpillar amended its bylaws to require that each director be electedannually by a majority vote. There are currently three standing board committees: Audit, Compensation and Human Resources, andPublic Policy and Governance. Each committee, solely comprised of independent directors, has a written charter. Full details on the
Board and its committees can be found at http://www.caterpillar.com/en/company/governance.html.
Caterpillar has established several corporate governance policies that are intended to reflect Caterpillar’semphasis on good corporate governance. These include Guidelines on Corporate Governance Issues,
Caterpillar’s Code of Conduct, mandatory retirement ages for the Board of Directors and an officer compensation claw back policy. Caterpillar policy also requires 1) former employees of its independent auditors
who were senior managers or higher to wait a minimum of three years before becoming eligible forcertain management-level positions at Caterpillar, and 2) the rotation of independent audit partners
in compliance with the requirements of the 2002 Sarbanes-Oxley Act.

51

OUR
SUSTAINABILITY
VALUE

2015 SUSTAINABILITY REPORTFOCUS AREA

GOVERNANCE & ETHICS
Ethics and Compliance
Caterpillar’s reputation is something we value as much as our products and our customers. In 1974, we introduced our first Code of
Conduct. Caterpillar’s current Code of Conduct – Our Values in Action define what Caterpillar stands for and what we believe in, documenting the uncompromisingly high ethical standards that our company has upheld since its founding in 1925. The Code of Conduct
helps Caterpillar employees every day by providing detailed guidance on the behaviors that support Our Values in Action – Integrity,
Excellence, Teamwork, Commitment and Sustainability. Through our Code of Conduct, we envision a work environment all can takepride in, a company others respect and admire and a world made better by our actions.
Full details on the Caterpillar Code of Conduct can be found at http://www.caterpillar.com/en/company/code-of-conduct.html.

Fair Competition
Caterpillar believes that fair competition based on quality, innovation and overall value is fundamental to free enterprise and economic
growth. Bribery and corruption can have serious social, environmental and economic consequences – impeding trade, competition,
investment and economic growth; and limiting a nation’s ability to reduce poverty and improve standards of living. In some areas of theworld where Caterpillar does business, bribery and corruption are significant issues. To drive compliance, Caterpillar has implemented
policies and procedures specific to anti-corruption, including policies prohibiting improper payments, regulating the provision andreceipt of travel, gifts and entertainment and procedures governing third party due diligence, the provision of business courtesies togovernment officials and charitable contributions.
We firmly believe that fair competition is fundamental to free enterprise,and in that regard, also have a policy requiring our employees to comply
with antitrust laws and abide by our policies on issues regarding
competition, including how we interact with our competitors, dealersand suppliers.
We have made compliance with these policies and procedures partof Our Values in Action, and we reinforce these messages throughcommunication at all levels of the organization, and we deliver ongoing
employee training throughout our company through a combinationof online and in-person training, as appropriate by job function andleadership position in the organization.

52

Caterpillar was awarded the 2015
Most Responsible Enterprise Awardat the 11th Global Corporate Social
Responsibility Forum, honoring oursustainability commitments in China.

2015 SUSTAINABILITY REPORTFOCUS AREA

GOVERNANCE & ETHICS
Ethics and Compliance(continued)
Information Security
Information security risks in every business sector have significantly increased in the past
decade. At Caterpillar, our Information Security Strategy is built around an operating framework comprised of five factors: protect, detect, respond, educate and govern. Various specificbusiness outcomes guide all of our information security efforts, which center on protecting ourmost valuable information by making risk-based decisions and operating on a secure network.
We take a holistic approach to security and maintain information and physical security standards
that are current and risk-based. Greater security awareness across the enterprise is evidenced
in our employees’ ability to spot suspicious emails and report them to our help desks andsecurity incident response teams. This positive employee behavior, coupled with securetechnology and detection and response capabilities is helping to secure Caterpillar’s future.
Caterpillar has a dedicated focus on security and protection of our confidential information.

53

#28

Caterpillar rank in Fortune’s 2015
Most Admired Companies

2015 SUSTAINABILITY REPORTFOCUS AREA

GOVERNANCE & ETHICS
Risk Management
Risk is an inherent part of conducting business, especially for a company like Caterpillar which operates globally. Risk can stemfrom a variety of factors – from internal issues such as operational inefficiencies or personnel policies to external factors such as thecompetitive landscape, economic conditions or government regulation.
Caterpillar regularly identifies and monitors business risks through a robust internal management system, and engages in constructive
regulation and public policy discussions that benefit employees, customers and stockholders. We manage operational, strategic, financial
and compliance risk through two programs: the Business Risk Management (BRM) Program and Caterpillar’s Ethics and Compliance
Program. The BRM Program helps business units identify, track and mitigate multiple business risks.
Each year, we conduct a comprehensive Enterprise Risk Assessment by reviewing risk information from multiple sources, including
business units. To better inform our decision making, Caterpillar evaluates risks using three dimensions (significance, likelihood andvelocity) at the business unit and enterprise level.
The results of this BRM risk assessment are incorporated into future action plans to mitigate the identified risks. Compliance risks arealso reviewed as part of the BRM risk assessment process and are managed as part of Caterpillar’s Ethics and Compliance Program.
These risks cover a broad range of issues including legal and regulatory compliance, labor and health and safety.
Every risk identified under the Ethics and Compliance program has an Enterprise Risk Owner who is responsible for managing efforts
to mitigate the risk for Caterpillar. They help drive risk management through governance, evaluation, controls, communicationand training and compliance audits throughout the world. Through these programs, Caterpillar can better manage risk andgauge the potential impact of various outcomes on our ability to achieve strategic goals.

54

2015 SUSTAINABILITY REPORTFOCUS AREA

GOVERNANCE & ETHICS
Public Policy
Government decisions with regard to laws and regulations around the world can have a significant impact on our employees, customers
and stockholders. Within all applicable legal parameters, Caterpillar strives to constructively advocate for public policy outcomes that
help promote sustainable business conditions for our company, dealers, customers, suppliers and stockholders. The form of advocacy
Caterpillar uses may differ depending on the political system and local law.
We communicate the importance of key public policy issues to our employees and other stakeholders, including dealers, suppliers
and retirees. In some countries, we may encourage them to express their views to lawmakers – if this practice is consistent with local
custom and citizenship rights. Our leaders will also utilize opportunities to interact with government officials directly to advocate ourlegislative positions.
Finally, we support many organizations and associations that champion public policies that contribute to the success and growth of
the business community and manufacturing industry as a whole. We:• Advocate and seek implementation of policies and legislation that allow Caterpillar, our dealers and customers to succeed.
• Partner with elected officials and policymakers to ensure their understanding on the key public policy issues that impact ourbusiness, such as trade, tax, infrastructure and energy.
Where allowable by law, Caterpillar may make corporate contributions to campaigns, individual candidates or political action
committees that support public policies that we believe will have an impact on our business. As outlined in Our Values in Action,
all corporate contributions are approved by Caterpillar Government Affairs. Full details on these contributions can be found at
http://www.caterpillar.com/en/company/global-issues.html.
Caterpillar employees in the U.S. also fund and administer the Caterpillar Employee Political Action Committee (CATPAC). CATPAC
is funded through voluntary contributions by eligible employees. A Steering Committee comprised of Caterpillar non-officers who
represent a diverse mix of U.S. locations and business units oversees all donations made by CATPAC. CATPAC contributions go tofederal and state political campaigns and organizations.

55

2015 SUSTAINABILITY REPORTFOCUS AREACOMMUNITY IMPACT
Our success contributes to the social stability of regions around the world. Caterpillar and our employees focus oncontributing time and resources to promoting the health and welfare of communities in which we work and live. We
conduct our business in a manner that respects human rights. Individually, employees are encouraged to actively engage inactivities that contribute to the betterment of society through volunteering time and talents or investing monetary resourcesin worthwhile community projects and initiatives. In addition, Caterpillar supports the Caterpillar Foundation which has been
dedicated to transforming lives in the communities where we live and work around the world since 1952. The Foundation
champions programs that support education, environment and basic human needs.

56

2015 SUSTAINABILITY REPORTFOCUS AREACOMMUNITY IMPACT
Economic Development
The Caterpillar organization and our products support economic growth around the world, both in developed countries and emerging
markets. From growth economies, where new infrastructure is required, to developed areas where aging networks need improvement,
our products help ensure that investments in transportation, energy, telecommunications, waste and water infrastructure produce
maximum benefits. We support these investments as key enablers for sustainable development for local communities, economic
growth, competitiveness and long-term job creation.
In order to promote economic development, governments have a
responsibility to maintain appropriate levels of productive investment
in infrastructure while providing a level playing field for suppliers.
Leveraging private investment can bring additional sources of funding,provided that investment is supported by fair and predictable policies
to maximize the certainty and timeliness of financial returns.

We believe increased commercial
engagement leads to economic gains
that raise standards of living, improve
the quality of life and promotesustainable development.

Growth-enhancing infrastructure investments, however, cannot be fully
delegated to the private sector, and public financing should continue tocomprise the bulk of infrastructure investment. Governments can influence
the affordability of infrastructure through the facilitation of permitting, the reduction of administrative burden and the simplificationof related requirements. The role of government for infrastructure financing should be based on national needs, including urbanization,commerce and trade policy, transportation, disaster prevention and mitigation, defense and global competitiveness.

Promoting Development through Advocacy
Caterpillar believes that the best means of economic development and the efficient distribution of goods and services is the pursuitof business excellence in a climate of free enterprise, free trade and global competition. Further, such international exchange promotes
better understanding across borders and cultures, leading to a more peaceful world. These benefits have been demonstrated by theenormous rise in post-World War II gross domestic product and living standards in countries participating in international commerce.
By contrast, many isolated countries have frequently not experienced such advantages.
We believe increased commercial engagement leads to economic gains that raise standards of living, improve the quality of life andpromote sustainable development. More importantly, trade liberalization can promote peace and understanding and can be an important contributor to solving the global problems of hunger, poverty and disease. Economic growth through international trade is essential
for poverty reduction, but also comes with challenges. Chief among them is the need to balance economic, environmental and social
policies to achieve sustainable development. Balanced economic, environmental and social policies provide a common framework forallowing environmental and trade policymakers to engage stakeholders, analyze issues and evaluate policy more efficiently.

57

2015 SUSTAINABILITY REPORTFOCUS AREACOMMUNITY IMPACT
Economic Development(continued)
Caterpillar has a long history of advocating for free trade. Ourinterest comes not from the perspective of any one country, butfrom our global perspective and with the foundational belief thatcompanies compete best in a free trade environment. Free traderequires us to continually improve our global competitivenessand creates an environment that allows us to better respond to
our customers’ needs and to grow our business. It offers us theopportunity to source globally and thus compete effectively whileproviding maximum value to users. Our suppliers, in turn, also
have an easier time satisfying our global sourcing requirements.
Our employees around the world, and their respective communities, benefit from a higher standard of living, as they have accessto more product choices at lower prices. Free trade also allows us
to provide more and better job opportunities, because open markets
lead to improved competitiveness.

Cross-Department Cooperation to Speed
Access to the Indian Market
Where regulations slow the free movement of goods
and services, we look for ways to reduce trade barriers
and provide greater benefits to the markets we serve.
In India, where Caterpillar is working to expand its
operations, the number and stringency of pollution
control regulations for engine emissions are increasing. Engines cannot be sold in India until they haveundergone a certification process and have received
a type approval certificate from the Central Pollution
Control Board, a process which slows the delivery ofengines to our customers. Our new engines provide
many benefits over older models, and so obtaining
faster access to the Indian market became an
important priority.

Caterpillar will continue to support policies that enhance competitionin the global marketplace and reduce – or better yet, eliminate –trade and investment barriers. We believe that developed countries
should adopt policies that allow the benefits of the global economy
to be extended to developing countries. To this end, Caterpillar also
recognizes that humanitarian and developmental assistance isnecessary to fight disease, improve living conditions and combat
corruption – all of which can be barriers to free trade and economic
growth in the world’s poorest countries.

In 2015, Caterpillar’s Global Government & Corporate
Affairs and Legal Services teams sought an interpretation of the regulations from Indian government
authorities in order to streamline the process for
obtaining engine type approval. As a result of thissuccessful effort, the lead time required for filing
applications for certification was reduced, allowing
Caterpillar engines to reach the Indian market
more quickly.

Promoting Development through Employment

While 2015 was a challenging year for Caterpillar, our facilities inmore than 61 countries provided quality jobs and opportunities forthe people in those locations. At the end of 2015, Caterpillar had
about 105,700 employees, which accounts for only a fraction of
the jobs directly associated with Caterpillar, primarily represented
by our flexible workforce, extended dealer network and supply chain. In addition to the direct economic contributions to the local
economies associated with employee, dealer and supplier compensation, indirect contributions occur as a result of spendingby the employees, dealers, suppliers and customers who visit our facilities throughout the world.
The importance of manufacturing jobs to the economy – not just in
the United States, but worldwide – cannot be overstated. According
to the Bureau of Economic Analysis, manufacturing contributed$2.1 trillion to the United States economy in 2014, an increase fromthe year before. For every dollar spent in the manufacturing industry,
another $1.48 is added back into the economy – the highest such
multiplier for any economic sector that the Bureau tracks. The U.S.
Department of Commerce estimates that total hourly compensation for manufacturing workers is about 17 percent higher thanworkers in nonmanufacturing sectors. In addition, manufacturingjobs translate into additional jobs in other parts of the economy.

58

2015 SUSTAINABILITY REPORTFOCUS AREACOMMUNITY IMPACT
Economic Development(continued)
Promoting Development through Microfinancing
Another way that Caterpillar impacts economic development is throughinvestments in nonprofits by the Caterpillar Foundation. These grants aid
local economic development by providing funds to programs that work
to alleviate poverty at the root cause.
In 2015, the Caterpillar Foundation invested in Opportunity International(OI) to improve livelihoods and economic opportunity in three Africancountries and Colombia. The first set of grants support OI’s “Accelerating
Access to Quality Education” initiatives in Colombia, Ghana and Uganda.
Because lack of access to a high-quality education is a significant barrier
to a girl’s economic future and perpetuates a cycle of poverty among
women, we are supporting OI’s loans and training to school proprietors
aimed at expanding and improving schools by hiring teachers, buildingclassrooms, adding transportation and upgrading facilities.
As documented by Global Campaign for Education & Results Educational Fund, studies have found significant benefits to providing
education to girls and women, including that a single additional year of primary school boosts a girl’s eventual wages by 10 to 20 percent.
These benefits extend far beyond the individual student: The children of women who finish primary school are 40 percent less likely
to die before age five, and better-educated women are more likely to have fewer children and send their children to school as well.
Finally, educating young people brings a cascading improvement in development, as they use the knowledge and skills they haveacquired to expand sustainable development in their communities
to benefit future generations. Our support of OI will directly affect
167,000 people in Colombia, Ghana and Uganda, including 84,000
With our support, OI will provide
girls and women.

156,000 agriculture loans to smallholder
farmers in Ghana, Rwanda and Uganda,
and financial and educational training to
133,000 smallholder farmers.

Just as providing education to young people offers both immediateand long-term economic benefits, supporting agricultural loans in
Africa offers sustenance and livelihoods to smallholder farmers andtheir families while also building capacity to meet growing global fooddemand. In 2015, the Caterpillar Foundation invested in Opportunity
International’s work with smallholder farmers in Ghana, Rwanda
and Uganda. The funds are helping to address that fact that despite
hosting 25 percent of the world’s farmable land, Africa produces only 10 percent of the world’s food crops and farmers consistently
suffer from chronic poverty due to low production, low selling prices and financial management challenges.
OI provides African smallholder farmers with a full range of banking services, financial education and training in good agricultural
practices, while also connecting farmers to local crop markets and a safe place to save their hard-earned money. This holistic approachto agricultural support helps address productivity, selling prices and cash flow, putting smallholders on a more equal footing withlarger farms, resulting in farming households that are better positioned to educate their children, improve household nutrition andenjoy increased quality of life. With our support, OI will provide 156,000 agriculture loans to smallholder farmers in Ghana, Rwanda
and Uganda, and financial and educational training to 133,000 smallholder farmers.

59

2015 SUSTAINABILITY REPORTFOCUS AREACOMMUNITY IMPACT
Human Rights
Caterpillar has a long history of building products and equipment that advance sustainable global economic
development and improve standards of living in communities where we operate. Along with helping improve
the quality of life in communities around the world, Caterpillar is also committed to protecting and respecting
human rights, as articulated in Our Values in Action.

More on our
VISION AND
COMMITMENT TO
HUMAN RIGHTSOur Policies
In 2015, we created a new Human Rights Policy to further strengthen our efforts in this area. The policy is guided by the international
human rights principles described in the United Nations Declaration of Human Rights (UNDHR) and the International Labour Organization’s(ILO) Declaration on Fundamental Principles and Rights at Work. In drafting this policy, Caterpillar undertook a comprehensive process that
included cross-functional business input, feedback from external stakeholders and industry guidance, and review by the public policy andgovernance committee of Caterpillar’s Board of Directors.
In addition to creating a human rights policy, we aligned with the process outlined in the UN Guiding Principles on Business andHuman Rights by conducting a human rights impact assessment. Caterpillar worked with a third party to develop the human rights
impact assessment, which considered actual and potential human rights impacts in Caterpillar’s operations, our supply network,
our dealer network and our licensed products.

Our Governance and Implementation
The Human Rights Policy was approved by company executives in early 2015. These efforts led us to adjust a number of our enterprise-widebusiness practices in 2015. In addition, we established a new human rights governance committee that is chartered with the responsibility
to manage all human rights issues and requests across the company. The committee reports its metrics on a regular basis through theexisting Office of Business Practices process and the public policy and governance committee of the Board of Directors.
Our employees and partners play a key role in informing our strategy and implementation. In this regard, we have begun incorporating
human rights into our employee sustainability training — which we will roll out across the company in 2016. We have also incorporated
human rights criteria into our enterprise risk management and due diligence processes. We also integrated human rights into ourexisting grievance mechanism and reporting system.

Human Rights Grievances
In 2015, Caterpillar received 85 requests related
to human rights through our formal grievancemechanisms; 96 percent of those were addressed
before the end of the year.

In 2016 and beyond, Caterpillar will work to further embed this policy
across the enterprise, and continuously evaluate the program as it
matures. This work includes completing the remaining changes andadditions to our human rights processes, delivering training for
employees and reporting on the progress we have made on humanrights in our next sustainability report.

60

2015 SUSTAINABILITY REPORTFOCUS AREACOMMUNITY IMPACT
Philanthropy/Social Innovation
Through strategic investments and collaborations, we leverage our unique strengths to make contributions that support poverty alleviation.
We collaborate across our value chain to develop programs that provide job training and increase workplace safety. Globally, ouremployees generously volunteer their time, skills and talents to achieve significant community impact where they work and live.

The Caterpillar Foundation
Founded in 1952, Caterpillar has supported the philanthropic work of the Caterpillar Foundation, which has contributed more than$650 million to help make sustainable progress possible around the world. The Caterpillar Foundation’s mission is to eliminate poverty
by placing people on a path to prosperity. This builds strong economies and communities. We champion programs that support:• Environment: rebuilding natural infrastructure• Education: numeracy and literature, mentoring and leadership and workforce readiness (including Science, Technology,
Engineering and Math)• Basic Human Needs: energy access, food, shelter, water, disaster relief
When we look at places our philanthropy can make an environmental impact, we do not need to look much farther than the backyardof our Peoria, Illinois, headquarters. In recent decades, the Upper Mississippi River region has lost more than 75 percent of its wetlands,
which provide wildlife habitat, flood protection and water filtration – not to mention the associated economic and recreation activities topeople throughout the Mississippi River basin.
In 2015, the Caterpillar Foundation continued our support of Ducks Unlimited with a grant to support wetlands conservation efforts in
the Upper Mississippi River basin. With our support, Ducks Unlimited will be able to protect more than 17,000 acres of wetlands habitat, which will reduce flood damage costs to the region by $500,000, reduce sediments and agricultural runoff flowing into the riverand protect the commercial fishing operations and recreational opportunities that generate more than $1 billion in economic activity
in the region each year.

2015 CATERPILLAR FOUNDATION INVESTMENTS IN OUR COMMUNITIES$46.0 M

2015 AREAS OF INVESTMENT● 50% / United States & Canada● 24% / Europe, Africa and Middle East
● 14% / Asia Pacific● 12% / Latin America● 46% / Basic Human Needs● 30% / Education● 22% / Environment● 2% / Arts & Culture61

2015 SUSTAINABILITY REPORTFOCUS AREACOMMUNITY IMPACT
Philanthropy/Social Innovation(continued)
Global Employee Volunteerism & Engagement
The volunteer efforts of our employees distinguish our people and demonstrate they are leaders not only in the workplace, but also
in the community. We continuously strive for innovative ways to empower and support our employee volunteers, which is why weare expanding our focus on employee volunteerism and engagement. We are developing and launching new strategies to enable
employees across the globe to contribute to the well-being of their communities.
Caterpillar employees and retirees volunteer countless hours every year, contributing
selflessly to hundreds of nonprofit organizations across the globe.
In keeping with this focus on employee volunteerism and engagement, Caterpillar
piloted its first “Global Month of Service” in China in 2015. Employees from 16 divisions
located in eight cities across China participated in the pilot Global Month of Service.
Whether it was collecting trash, maintaining trees, drawing pictures for charity, providing
donations to support the migrant community, accompanying disabled children on a oneday outing or helping fulfill wishes of vulnerable families, Caterpillar employees and theirfamilies and friends generously gave back to their communities. The Global Month ofService model will continue to expand in 2016 and beyond, ultimately including all of Caterpillar’s global facilities.

Our Goal: Place 50 million
people on the path toprosperity by 2020.

In South Queensferry, Scotland, a small team of employees at our Progress Rail Services division translated their passion for wildlife
into a project that transformed our South Queensferry Foundry (SQF) into a habitat for wildlife, and redefines what is possible bywelcoming wildlife into an industrial site.
The foundry sits on the estuary of Scotland’s Forth River, and the region is home to a number of birds, mammals, reptiles and insects,
including species that are found on the Scottish biodiversity priority species list, such as the tree sparrow and the common toad. The
Progress Rail team led the project to build more than 40 nest boxes for birds, expand a wildflower meadow on site, restock the site’s
pond with native fish and aquatic plants and install cameras to record the wildlife that are drawn to the reinvigorated open spaces.
Through a multi-year partnership with the Scottish Wildlife Trust, of which SQF is a corporate member, our team is conducting an annual
census of wildlife and plant species found on the site; the first year’s census identified dozens of new flora as well as nine new bird
species on the site for the first time.
While the SQF biodiversity project is unlike any others that made our Environmental
Excellence list, it shows the impact that our dedicated and passionate employees
can bring to Caterpillar’s work. The SQF project has already raised the company’s
profile in Scotland and brought members of the community and regional dignitaries
to the site to witness the impacts we have had by welcoming wildlife into thefactory’s ecosystem.

Caterpillar supports a cultureof employee volunteerism
and engagement.

U.S. Voluntary Contributions
Our employees not only volunteer their time to worthy causes, they also contribute their financial resources. Caterpillar has joinedwith our employees to support giving in two ways – through our Caterpillar Employee United Way Appeal and through a Matching
Gifts Program managed and matched by the Caterpillar Foundation.
Since the 1950s, Caterpillar has had only one corporate solicitation to employees – the Caterpillar Employee United Way Appeal. All
employee contributions raised through this solicitation are distributed back to the United Way agencies of their choice, along with adollar-for-dollar match from the Caterpillar Foundation. Each local United Way then invests in programs in the community. This is agreat way for Caterpillar employees to invest in local charities, with each local United Way helping assess community needs, identifying
programs delivering measurable outcomes and working to eliminate future needs by creating long-term solutions. In 2015, a total ofmore than $13 million was donated to the United Way, a record amount composed of $6.5 million in employee contributions, and an
equal amount matched by the Caterpillar Foundation.
The Caterpillar Foundation is proud to offer the Matching Gifts Program to support the monetary contributions that U.S. employees,
retirees and directors make to worthy causes in the areas of arts and culture, two- and four-year colleges and universities, environment
and public policy. The program provides a dollar-for-dollar match on contributions between $50 and $2,000 per organization with nolimit to the number of organizations per person. Last year, the Foundation matched $3.2 million through this program. For more details
on the Matching Gifts Program, visit www.caterpillar.com/matching-gifts.

622015 SUSTAINABILITY REPORTSANITATION IMPROVEMENT SOLUTIONSUPPORTING GLOBAL SANITATION IMPROVEMENTS
When we seek to meet basic human needs around the world,
particularly those of women and girls, sanitation is a high-impact
area where we can focus our efforts. In 2015, the Caterpillar
Foundation continued our support of The Global Poverty Project(GPP) with an investment to support universal access to sanitation. The grant will help GPP advocate for policies around the worldthat enable entrepreneurship, especially for women, by removing
barriers caused by poor and inequitable access to sanitation –such as places to hand wash or use the toilet – and lack of accessto basic education. GPP estimates universal sanitation would
improve the entrepreneurial potential of women by freeing up
more than 200 million hours for women and girls each day,enabling them to achieve an education, have time for paid
employment or to run their own small enterprises. Combined,
these measures would return an estimated $220 billion to theglobal economy annually.
In 2015, the United Nations adopted the Sustainable Development
Goals (The Global Goals), a series of 17 goals with 169 targets tobe achieved by 2030. Included in these goals were two key aspectsof our policy partnership with GPP: the recognition of the needto ensure access to adequate sanitation and hygiene for all, anda commitment to end open defecation, especially for women,
girls and those in vulnerable situations. GPP will continue towork on other aspects of our sanitation-policy partnership,including securing a $10 million per year increase in Water,
Sanitation and Hygiene (WASH) aid from the United States
government, and urging four new governments or companies toallocate new, additional financial resources to sanitation efforts.

63

2015 SUSTAINABILITY REPORTGOALS & PROGRESS
Caterpillar has set aspirational, long-term goals for its operations
and product stewardship. We believe these standards affirm ourdetermination to lead our industry to a more sustainable future.

2020 GOALS

2020 GOALS FOR
PRODUCT STEWARDSHIP

2020 GOALS FOR OPERATIONSSAFETY
Reduce our recordable workplace
injury rate to 0.6 and lost-timecase rate due to injury to 0.15.

ENERGY
Reduce energy intensity by
50 percent from 2006.

ENERGYUse alternative/renewablesources to meet 20 percent of
our energy needs.

WATER

SAFETY

Reduce water consumption
intensity by 50 percent
from 2006.

BY-PRODUCT MATERIALSReduce by-product materials
intensity by 50 percent from2006.

Provide leadership in the safety ofpeople in, on and around our products.

PRODUCTS, SERVICES AND SOLUTIONS
Leverage technology and innovation to
improve sustainability of our products,
services and solutions for our customers.

SYSTEMS OPTIMIZATIONSUSTAINABLE
CONSTRUCTION
Design all new facility construction
to meet Leadership in Energy andEnvironmental Design (LEED) or
comparable green building criteria.

GHG EMISSIONS

Increase managed fleet hours by
100 percent from 2013.

REMAN AND REBUILDReduce greenhouse gas emissions
intensity by 50 percent from 2006.

Increase remanufactured and rebuild
business sales by 20 percent from 2013.

Caterpillar's progress in 2015 toward our 2020 goals is provided on the following pages. Intensity-based goals are measured
against company sales and revenues, and a decline in sales and revenues in 2015 directly affected our progress toward thesegoals. Nevertheless, we continued to focus on efficiency improvements and these efforts contributed to year-over-year
performance gains in these areas in 2015 when measured on an absolute basis.

64

2015 SUSTAINABILITY REPORTGOALS & PROGRESSOPERATIONS
SafetyReduce our recordable workplace injury rate to

GOAL: 0.6 and lost-time injury case rate to 0.15 by 2020.

0.59 RECORDABLE INJURY FREQUENCY (RIF)

0.20 LOST-TIME CASE FREQUENCY RATE (LTCFR)

Recordable injuries per 200,000 hours worked

Work-related injuries resulting in lost time per 200,000 hours worked

6.22

2.97

1.02

2003

2012

0.78

0.71

0.59

0.60

2013

2014

2015

2020 GOAL

2003

We have improved our Recordable Injury Frequency rateby 90.5 percent from our 2003 base year and 17 percent
from our last reporting period.

0.30

0.29

0.23

0.20

0.15

2012

2013

2014

2015

2020 GOAL

We have improved our Lost-Time Case Frequency Rate by
93 percent from our 2003 base year and 13 percent fromour last reporting period.

65

2015 SUSTAINABILITY REPORTGOALS & PROGRESSOPERATIONSEnergyGOAL:R educe energy intensity by
50 percent from 2006 to 2020.

GOAL:

526 ENERGY INTENSITY

27.1 ALTERNATIVE/RENEWABLE ENERGY

1Absolute gigajoules energy use/million dollars of revenue

Sum of alternative and renewable electrical energy use/total
electrical use x 100
Alternative

Renewable

692
502
417

2006

2012

496

526
14.8%

346

2013

U
 se alternative/renewablesources to meet 20 percent of
our energy needs by 2020.

2014

2015

2020 GOAL

2011

Operational energy intensity decreased 24 percent
from 2006 to 2015. In addition, our absolute energy
consumption decreased 10 percent from 2014 to 2015.

18.2%

2012

28.0%

27.4%

9.4%

9.8%

9.9%

18.6%

17.6%

17.2%

2013

2014

2015

27.1%

1 Total includes purchased and on-site generated alternative andrenewable energy, as well as calculating the percentage of renewableenergy from grid purchased electricity using data obtained from theInternational Energy Agency.

In 2015, 27.1 percent of our electrical energy was fromrenewable or alternative sources.
Renewable Energy: Caterpillar defines renewable energy as
energy resources that are naturally replenishing over a shortperiod of time and virtually inexhaustible. Power generation
examples include wind, solar, hydro, geothermal, tidal,
wave, biomass and biogas from anaerobic digestion.
Alternative Energy: Caterpillar defines alternative energy
as any source of usable energy that offers substantial
environmental benefits compared to the conventionalsources of energy that it replaces. Power generation
examples include renewable sources listed above, plus
landfill gas, coal mine and abandoned mine methane,combined heat and power (cogen, trigen and quadgen), coalwith carbon sequestration and localized power generation.
Transportation fuel examples include renewable sources
listed above, plus pure methanol, ethanol blends of 85
percent or more with gasoline, pure natural gas, natural
gas blends of 85 percent or more with diesel fuel, liquid
fuels domestically produced from natural gas (compressed
natural gas, liquefied natural gas and gas to liquid fuels),
propane, coal-derived liquid fuels, hydrogen and electricity.

66

2015 SUSTAINABILITY REPORTGOALS & PROGRESSOPERATIONS
continued

GHG Emissions
Reduce greenhouse gas emissions intensity

GOAL: by 50 percent from 2006 to 2020.

48.8 GHG EMISSIONS INTENSITY

2.29 TOTAL ABSOLUTE GHG EMISSIONS

1

Absolute metric tons of CO2e/million dollars of revenue

Million Metric Tons

72.1

39.6

2006

2012

44.3

2013

44.7

2014

● 0.89 million metric tons Scope 1 GHG
emissions (direct emissions)

48.8
36.0

2015

2.29

● 1.40 million metric tons market-based
Scope 2 GHG emissions (indirectemissions from purchased electricity,heat or steam)

1.45 million metric tons location-based Scope 2 GHG emissions22020 GOAL

2 Location-based Scope 2 GHG emissions are provided in accordancewith the GHG Protocol updated Scope 2 guidance.

1 GHG emissions intensity reduction goal is based on our combined
Scope 1 (direct) and Scope 2 (indirect, market-based) GHG emissions
using a 2006 baseline year. Likewise, total absolute GHG emissions
are a sum of Scope 1 and Scope 2 (market-based) emissions.

Through 2015, Caterpillar has reduced GHG emissions intensityfrom our facilities by 32 percent compared with our 2006 baseyear. From 2014 to 2015, our absolute GHG emissions werereduced by 7 percent.

In 2015, the GHG Protocol provided updated Scope 2 calculation
guidance. Our market-based Scope 2 emissions are calculatedusing the updated Scope 2 Quality Criteria. The following
instruments were used in calculating our market-based Scope
2 emissions: Renewable Energy Guarantees of Origin, energy
contracts, supplier specific emission rates, Caterpillar owned
combined heat and power cogeneration facilities, and, for theremainder of our facilities, grid average emission factors fromUSEPA’s eGRID and the International Energy Agency’s data. For2015 calculations, Caterpillar did not use residual mix factors.

Water
Reduce water consumption intensity

GOAL: by 50 percent from 2006 to 2020.

53.6 WATER CONSUMPTION INTENSITY

3.82 TOTAL ABSOLUTE WATER CONSUMPTION

1,2

Absolute thousand gallons of water/million dollars of revenue

Billion Gallons

76.3

45.6

2006

2012

48.9

50.5

● 1.30 billion gallons non-contact
cooling water from foundry operations

53.6
38.2

2013

2014

2015

3.82

2020 GOAL● 2.52 billion gallons enterprise water
consumption excluding non-contact
cooling water from foundry operations

WATER SOURCES

1 Data prior to 2015 has been restated due to data updates realized
from improved accuracy.
2 Water consumption intensity does not include non-contact coolingwater from foundry operations.

● 34% / non-contact cooling waterfrom foundry operations● 29% / municipal water● 22% / groundwater● 15% / surface water

Through 2015, we have reduced water consumption intensity
at our facilities by a total of 30 percent from our 2006 baseyear intensity. Our 2015 absolute water consumption, including
non-contact cooling water from foundry operations, was
3.82 billion gallons of water, a reduction of 12 percent fromthe previous year.
672015 SUSTAINABILITY REPORTGOALS & PROGRESSOPERATIONS
By-Product Materials
Reduce by-product materials intensity

GOAL: by 50 percent from 2006 to 2020.

14.4 BY-PRODUCT MATERIALS INTENSITY

Absolute metric tons of by-product materials/million dollars of revenue

13.8

13.2

12.5

14.0

676 BY-PRODUCT MATERIALS

14.4

6.9

2006

2012

2013

2014

Thousand Metric Tons

2015

676

● 90% / recycled● 10% / disposed(sent to landfill or incinerated)

2020 GOAL

In 2015, we generated a total of 676,000 metric tons of
by-product materials, with 90 percent of those materials
recycled. Our by-product materials intensity increased
4 percent from our 2006 base year to 2015. However, wedecreased our generation of total absolute by-productmaterials by 12 percent from 2014 to 2015.

Sustainable Construction
Design all new facility construction to meet Leadership in Energy and Environmental

GOAL: Design (LEED) or comparable green building criteria.

According to the U.S. Green Building Council, 88 percent of the Fortune 100 companies use LEED design andconstruction criteria. Facilities designed to the LEED criteria are more energy- and resource-efficient than traditional
construction. LEED facilities are also designed to create a healthier indoor environment for employees.
In 2015, the following Caterpillar facilities received certificationin accordance with the U.S. Green Building Council’s LEED BD+C
(Building Design and Construction) certification process orcomparable criteria:

LEED Silver• Advanced Components & Systems Division, Monterrey, Mexico

68

33% Facilities that completed

construction in 2015 that met
LEED or comparable green
building criteria

2015 SUSTAINABILITY REPORTGOALS & PROGRESSPRODUCT STEWARDSHIP
SafetyProvide leadership in the safety of people in,

GOAL: on
 and around our products.

Progress: See Customer Safety for examples of our progress.

Products, Services and Solutions
Leverage technology and innovation to improve sustainability of our products,

GOAL: services
and solutions for our customers.

Progress: In 2015, 18 percent of Caterpillar’s reported sales and revenues
was from products, services and solutions that demonstrated an improved
sustainability benefit over existing offerings. This includes remanufacturing, component overhauls at Cat® dealers, power generation using
alternative energy sources, customer job site optimization and innovative
new products. The components are evaluated each year to adjust
for acquisitions, divestitures, offerings that become standard andimprovements to data accuracy.

18% 2015 reported sales

and revenues derived fromproducts, services and solutions
that demonstrate an improved
sustainability benefit overexisting offerings.

Systems Optimization

GOAL: Increase managed fleet hours by 100 percent from 2013 to 2020.
Progress: Caterpillar Job Site Solutions (JSS) team was formed in 2005
and has grown significantly. JSS offers customers complete solutions
that are designed to improve performance on the job site and to increase
the sustainable benefits of the work performed.

68% Increase in fleet hours

managed by Caterpillar Job
Site Solutions (2013 to 2015)

91% Increase in number ofmachines covered by service
agreements with Caterpillar Job
Site Solutions (2013 to 2015)

69

2015 SUSTAINABILITY REPORTGOALS & PROGRESSPRODUCT STEWARDSHIP
Reman and Rebuild
Increase remanufactured and rebuild business sales

GOAL: by 20 percent from 2013 to 2020.

Progress: Our remanufacturing and rebuild businesses reduce waste and minimize the need for the raw materials
necessary to produce new parts. This system is where Caterpillar is making some of its greatest contributions tosustainable development — keeping nonrenewable resources in circulation for multiple life cycles. Our reman sales
decreased 15 percent from 2013 to 2015, while our rebuild sales decreased 3 percent during the same period.

93% REMAN END-OF-LIFE

154 REMAN END-OF-LIFE“TAKE-BACK” PERCENT1“TAKE-BACK” BY WEIGHT1

Actual end-of-life returns/eligible returns x 100

95%

94%

93%

94%

Millions of pounds of end-of-life material received

93%
161

2011

2012

2013

2014

2015

2011

1 Data does not include Progress Rail, Electro-Motive or
Solar Turbines.

171

174

166

2012

2013

2014

154

2015

1 Data does not include Progress Rail, Electro-Motive or
Solar Turbines.

70

2015 SUSTAINABILITY REPORTGOALS & PROGRESSPERFORMANCE AT-A-GLANCE

RECORDABLE INJURY FREQUENCY (RIF)

LOST-TIME CASE FREQUENCY RATE (LTCFR)

Recordable injuries per 200,000 hours worked

Work-related injuries resulting in lost time per 200,000 hours worked

6.22

2.97

1.02

2003

2012

0.78

0.71

0.59

0.60

2013

2014

2015

2020 GOAL

2003

0.30

0.29

0.23

0.20

0.15

2012

2013

2014

2015

2020 GOAL

ENERGY INTENSITYALTERNATIVE/RENEWABLE ENERGY1

Absolute gigajoules energy use/million dollars of revenue

Sum of alternative and renewable electrical energy
use/total electrical use x 100
Alternative

Renewable

692
502
417

2006

2012

2013

496

2014

526

2015

346

14.8%

2020 GOAL

2011

18.2%

2012

28.0%

27.4%

9.4%

9.8%

9.9%

18.6%

17.6%

17.2%

2013

2014

2015

27.1%

1	Total includes purchased and on-site generated alternative and renewable energy, as well as calculating the percentage of renewable energy fromgrid-purchased electricity using data obtained from the International Energy Agency.
2 Data prior to 2015 has been restated due to data updates realized from improved accuracy.
3 Water consumption intensity does not include non-contact cooling water from foundry operations.
4 Data does not include Progress Rail, Electro-Motive or Solar Turbines.

712015 SUSTAINABILITY REPORTGOALS & PROGRESSPERFORMANCE AT-A-GLANCE
continued

GHG EMISSIONS INTENSITYWATER CONSUMPTION INTENSITY2,3

Absolute metric tons of CO2e/million dollars of revenue

Absolute thousand gallons of water/million dollars of revenue

76.3

72.1

39.6

2006

2012

44.3

44.7

2013

2014

48.8

45.6

48.9

50.5

53.6
38.2

36.0

2015

2020 GOAL

2006

2012

2013

2014

2015

2020 GOAL

BY-PRODUCT MATERIALS INTENSITYREMAN END-OF-LIFE “TAKE-BACK” PERCENT4

Absolute metric tons of by-product materials/million dollars of revenue

Actual end-of-life returns/eligible returns x 100

13.8

13.2

12.5

14.0

14.4

95%

94%

93%

94%

93%

2011

2012

2013

2014

2015

6.9

2006

2012

2013

2014

2015

2020 GOAL

REMAN END-OF-LIFE “TAKE-BACK”
BY WEIGHT4
Millions of pounds of end-of-life material received

161

2011

171

174

166

2012

2013

2014

154

2015

1	Total includes purchased and on-site generated alternative and renewable energy, as well as calculating the percentage of renewable energy fromgrid-purchased electricity using data obtained from the International Energy Agency.
2 Data prior to 2015 has been restated due to data updates realized from improved accuracy.
3 Water consumption intensity does not include non-contact cooling water from foundry operations.
4 Data does not include Progress Rail, Electro-Motive or Solar Turbines.

72