2023 Sustainability Report Message

To All Stakeholders

Welcome to our annual Sustainability report. Here, you will find insights into our governance framework, the approach we use to identify, assess and monitor ESG risks/opportunities and the strategies we use to achieve our objectives. More than this, you will see practical examples of how we are positioning Toromont to be a responsible and capable contributor to our own sustainability journey and that of our customers as we embark together on a transition to a lower carbon economy. We summarize recent highlights below.

Toromont once again validated its ESG risk and opportunity focus areas.

As part of Connect26, our new three-year business plan, and in alignment with our Enterprise Risk Management approach and stakeholder engagement process, Toromont reaffirmed its key ESG focus areas (see page 10). Gathering the views and priorities of customers, employees, business partners, institutional shareholders, and regulators helped to inform
our actions.

We broadened our offerings to help customers meet their sustainability goals.

The greatest contribution Toromont makes to a sustainable world is providing customers with products, services and technology to improve productivity, efficiency and safety while lowering or eliminating carbon outputs. As customers navigate the complexities of lowering their carbon footprint and transitioning to the use of different forms of energy, they look to Toromont for assistance for several reasons. We represent Caterpillar, a world leader and continuous innovator in electric, alternative energy, fuel-flexible and autonomous machine development. We bring additional value by knowing how to match machine to application and by operating product support infrastructure to keep advanced equipment performing at peak levels. Through CIMCO, our thermal management solutions business, we enable customers to reduce their energy consumption and emissions and use natural refrigerants. Pages 17-21 describe our future-ready solutions. These include technology and services customers use to assess their total cost of equipment ownership (now including carbon taxes), track machine health, efficiency, and fuel consumption, model GHG emissions’ and, in the case of CIMCO, identify opportunities to qualify for clean-energy incentives and meet regulatory requirements.

We continued to invest in our resources to enhance Toromont’s sustainability, grow our contribution to the circular economy and reduce our energy use and emissions.

On pages 23-28, we report on Toromont’s annual investments in recruiting, training, developing, empowering and protecting our employees. Across various 2023 performance metrics, including workplace safety, Toromont made progress. On page 15, you will find details of Toromont’s $70 million investment in a new component Remanufacturing Centre that will open in the second quarter of 2024. It will expand our contribution to the circular economy and do so with capabilities designed to reduce our environmental impact.

Page 15 reports on the approaches used to reduce our own direct GHG footprint including through service vehicle fleet optimization and investments in energy conservation within branches, plants and stores. In 2023, we engaged with third-party experts in both areas to identify additional opportunities to reduce emissions and lower fuel and utility costs. In 2024 and beyond, we will use these insights to develop a comprehensive multi-year work plan to prioritize capital allocations.

We made preparations to meet future sustainability disclosure standards now under development by Canadian regulators.

With 2023 issuances of ISSB S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and ISSB S2 (Climate-Related Disclosures), the world is moving closer to implementing generally accepted ESG reporting standards. As regulatory bodies work to develop made-in-Canada SI and S2 standards that will provide clarity, consistency and confidence in public company reporting, Toromont is readying itself for compliance. To advance our program, we recently submitted Toromont’s GHG collection methodology and processes for expert third-party review. We expect to receive an analysis of our approach in 2024. This will help Toromont to confirm that its monitoring and reporting systems produce accurate and consistent GHG emissions data and prepare for anticipated regulatory standards. This is a methodical and diligent approach, which is both necessary and appropriate to ensure Toromont has control systems in place to achieve what our stakeholders expect.

We published our first Report on Modern Slavery.

To respond to Canada’s new Fighting Against Forced Labour and Child Labour in Supply Chains Act, and as a demonstration of our commitment to Human Rights, we issued our first annual Report on Modern Slavery. To support this report, we assessed our supply base enterprise-wide to identify core suppliers and evaluate their respective approaches to modern slavery, including within their supply chains.

Going forward

In 2024, our Connect26 business plan commits us to growth and improvement targets, including those related to environmental and social sustainability, that we will pursue vigorously but also pragmatically, in keeping with Toromont’s long-standing corporate values.

We look forward to equipping our customers, our employees and facilities with tools to build a more sustainable future and in so doing, deliver good results for our shareholders.

Yours sincerely,

Peter Blake
Chair, ESG Committee of the Board

Mike S.H. McMillan
President and Chief Executive Officer

About this report

This report covers Toromont’s financial year (12 months) ended December 31 2023, incorporates substantially all business lines in our two countries of operation (Canada and the United States), is based on management’s estimates and analysis and is unaudited. The report also contains forward-looking statements that are subject to risks and uncertainties. Please see Toromont’s caution regarding forward-looking information on page 34. All figures are in Canadian dollars and/or use the Canadian metric system unless otherwise noted. Product names referred to in this report, including those manufactured by Caterpillar, appear under license as registered trademarks.

Review and approval

Toromont’s sustainability initiatives, including the production of this report, are overseen by the Environmental, Social and Governance Committee of our Board of Directors. This report was reviewed and approved by the Board as a whole.