Corporate Sustainability: Strategy & Growth Annual Report

Message from our President & CEO

David Cherechinsky

President & CEO

2022 was a great year for DNOW, as we met the critical needs of our customers grappling with rising inflation and supply chain disruptions in the energy and industrial markets. I am proud that DNOW continues to thrive by remaining focused on our strategic objectives. We take pride in delighting our customers by providing quality products coupled with our unique solutions, deep supply chain expertise, superior customer service and our complementary suite of digital channels.

We align with our customers and deliver results that promote a winning partnership. Our customer-centric approach allows us to provide solutions to operational concerns, like product availability and quality assurance, as we help our customers meet their sustainability goals. Our team places a premium on delivering value to our customers by truly understanding their sustainability challenges and providing customer-specific tailored solutions, backed by technical expertise and supply chain proficiency.

To be a vital part of our customers’ sustainable supply chains, we are high-grading the products and services we offer to improve our customer service through smart planning and focus. In addition, we continue to enhance our geographic reach with deployment of a more efficient fulfillment model through our cohesive regional supercenter footprint.

We are actively pursuing strategic, inorganic investments through acquisitions to complement organic growth. Among the exciting acquisitions we made during 2022 is EcoVapor, whose products have the unique capability to significantly reduce oil and gas and renewable natural gas operators’ greenhouse gas emissions. For example, by using a single EcoVapor E300 oxygen elimination unit at full design capacity, operators have the capability to eliminate up to 16,000 annual metric tons of flared CO e emissions¹. Over the course of one year, the positive environmental impact is equivalent to approximately four wind turbines, approximately 3,500 fewer gasoline-powered passenger vehicles driven² or approximately the equivalent of 2,000 households’ energy use².

Going forward, we intend to play a more active role in energy evolution. We see additional opportunities to collaborate with our customers to help them meet their environmental goals by upgrading aging infrastructure, adoption of lower-emissions equipment, improved materials management, increased supply chain efficiencies and implementation of our digital offerings. We will continue to be an adaptable partner who prioritizes customer goals by coupling with wide-ranging solutions. With our strong track record of serving customers across the energy value chain through our global network, we are well-positioned to expand into emerging energy markets.

I am excited to present our 2022 annual sustainability report, Empowering Sustainable Progress, which showcases our progress in aligning our business strategy with ESG objectives, enhancing transparency, improving data collection and promoting sustainable growth and shared values. I am particularly proud of the progress by our employees and the achievements we are making by working with our customers and our suppliers, focusing on our employee engagement, diversity, equity, inclusion (“DEI”) and environmental performance.

Our Company

Headquartered in Houston, Texas, DNOW is a premier global provider of energy and industrial products, solutions and engineered equipment. With a rich legacy spanning 160 years, DNOW not only offers a vast range of products through its extensive network and DigitalNOW® platform, optimizing supply chains with procurement and inventory management solutions but also supports customers' sustainability ambitions by promoting carbon and GHG emissions reduction, responsible water use and disposal and engagement in the renewable energy sector.

Our Sustainability Strategy

Who We Are

Our Guiding Principles

Integrity: We hold ourselves to the highest ethical standards in all that we do.
Safety: We act with the highest priority on health and safety in our workplace and communities.
Teamwork: We collaborate with our suppliers, our customers and one another to optimize the sum of all individual efforts, while being active participants in the communities where we live and work.
Excellence: We are passionate about being the best in the industry, marking our customers priority one and creating long-term value for our stakeholders.

Our Core Values

We care: We act with compassion and honesty in all that we do. We respect one another, our customers and our communities.
We do what it takes: We approach every task with energy and passion to make sure the job is done right. We continuously challenge ourselves to provide the highest level of service to our stakeholders.
We are accountable: We take pride in our work and are responsible for our actions and the outcomes produced.

Our Ethos (Culture)

Delight The Customer: Be our customers' most trusted partner.
Inspire One Another: Foster an inclusive, people-first culture.
Fuel the Future: Win the market and pursue sustainable growth.

How We Empower Sustainable Progress

Our Strategic + ESG Priorities

Deliver Margin Discipline: High grade product and service offerings, diversified customer base through more balanced energy end-markets, including energy education opportunities in renewable energy, decarbonization and CCUS* projects, biofuels and RNG† and adjacent industrial markets.
Optimize Operations: Increase efficiency and productivity leveraging technology combined with the continuous optimization of our service network and fulfillment model.

Minimize our impact on the environment
Maximize Working Capital Velocity: Focus capital on high value-add solutions, including development of solutions to help our customers navigate the energy transition.
Drive Growth Through Acquisitions: Seek margin accretive companies that possess differentiated products and solutions to help our customers meet their net-zero targets.

Our ESG Topics

Environment: Emissions Reduction Services & Fuels Management, Energy Management, Delivering Sustainable Energy, Delivering Sustainable Solutions To Our Customers
Social: Employee Engagement & Development, Workforce Diversity & Inclusion, Workforce Health & Safety
Governance: Corporate Governance Oversight, Business Ethics & Payments Transparency, Supply Chain Stewardship, Management of the Legal & Regulatory Environment, Data Security

* Carbon capture, utilization and storage (CCUS).

† Renewable natural gas (RNG).

Download Our Sustainability Report to Learn More →

2022 GOVERNANCE HIGHLIGHTS

7/8

independent directors on our Board of Directors

2/8

diverse^* directors on our Board of Directors

manufacturing site audits and 41 desk reassessments of key suppliers conducted in 2022

data security breaches

* Diverse indicates directors that are female and/or a member of an underrepresented racial/ethnic group. Board diversity is as of December 31, 2022.

2022 SOCIAL HIGHLIGHTS

>1,650

volunteer hours for organizations our company and employees are passionate about

>95%

of employees participated in psychological safety DEI training

17%

higher communications employee engagement survey score compared to industry benchmark¹²

employee fatalities and TRIR lower than BLS industry averages

13%

higher team dynamics employee engagement survey score compared to industry benchmark¹²

352

Milestone Awards

* Benchmarks for the Transportation and Warehousing industry from third-party employee survey provider.

2022 ENVIRONMENT HIGHLIGHTS

>32%

decrease in our Scope 1 & 2 GHG emissions intensity from 2021

>11%

decrease in total Scope 1 & 2 GHG emissions from 2021

100%

carbon-neutral parcel shipments for two consecutive years
(see Page 21 for further details)

Acquired EcoVapor and its ZerO2^TM technology, which enables operators to reduce up to 16,000 annual metric tons of CO₂e emissions through the continual use of one E300 oxygen elimination unit yielding improved gas capture, where otherwise the gas would have been combusted and emitted to the atmosphere
(see Page 36 for further details)

About This Report

The information included in this report is subject to DNOW’s policies and requirements surrounding the disclosure of financial and non-financial data. The financial information included in this report was sourced from our Form 10-K filed with the SEC on February 16, 2023. All non-financial data included in this report was not subject to a third-party audit verification process.

DNOW 2022 Sustainability Report: 'Empowering Sustainable Progress' with DNOW's ESG focus objectives and promoting sustainable growth and shared values

Forward-Looking Statements

Certain information contained in this Sustainability Report may constitute forward-looking statements within the meaning of applicable securities laws, including, but not limited to, statements regarding our plans to: move forward with identified climate change opportunities, foster programs regarding diversity and inclusion and plans to seek opportunities to further integrate sustainability factors into investment decisions. Readers are cautioned not to place undue reliance on forward-looking statements, as they are subject to a number of assumptions and known and unknown risks and uncertainties that may cause the actual results, performance or achievements of DNOW to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements contained herein are made as of the date of this document. We also describe risks and uncertainties in our reports filed with the SEC, including our Form 10-K for the year-ended December 31, 2022 (under the headings “Risk Factors” and “Information Regarding Forward- Looking Statements” and elsewhere) and our subsequent reports, which are available through the SEC’s EDGAR system at www. sec.gov, and on our website at dnow.com. DNOW assumes no obligation to update or otherwise revise these forward-looking statements, whether as a result of new information, future events, or otherwise.

SASB Index

The Sustainability Accounting Standards Board (“SASB”) framework aims to provide a standard for companies to disclose financially-material and decision- useful ESG information to investors and other stakeholders. The index below maps our performance under each of the suggested disclosure topics for the following two industries:

Oil & Gas Services (Code EM-SV)
Multiline and Specialty Retailers & Distributors (Code CG-MR)

According to SASB’s Sustainable Industry Classification System (SICS®), these two industry standards most accurately reflect our business operations. Other topics disclosed throughout this report beyond the scope of these standards are not reflected in this index.

CODE	ACCOUNTING METRIC	UNIT OF MEASURE	2021 RESPONSE	2020 RESPONSE	2019 RESPONSE
Greenhouse Gas Emissions
EM-SV-110a.1	Total fuel consumed	Gigajoules (GJ)	216,873	248,228	286,930
	Total fuel consumed	Metric tons carbon dioxide equivalent (MT CO₂e)	15,402	16,623	20,444
	Percentage renewable	Percentage (%)	0%	0%	0%
	Percentage used in on-road equipment and vehicles	Percentage (%)	99.8%	99.8%	99.7%
	Percentage used in off-road equipment	Percentage (%)	0.2%	0.2%	0.3%
EM-SV-110a.2	Discussion of strategy or plans to address air emissions-related risks, opportunities, and impacts	N/A	Pages 35-42	See 2021 Report	See 2021 Report

CODE	ACCOUNTING METRIC	UNIT OF MEASURE	2021 RESPONSE	2020 RESPONSE	2019 RESPONSE
Energy Management
CG-MR-130a.1	Total electricity consumed	Gigajoules (GJ)	60,470	69,358	71,026
	Total electricity consumed	Metric tons carbon dioxide equivalent (MT CO₂e)	7,896	8,247	10,219
	Total natural gas consumed	Gigajoules (GJ)	74,891	112,104	82,081
	Total natural gas consumed	Metric tons carbon dioxide equivalent (MT CO₂e)	3,841	5,683	4,156
	Total energy consumed	Gigajoules (GJ)	135,361	181,462	153,107
	Percentage energy consumed that is grid electricity¹	Percentage (%)	45%	38%	46%
Employee Health & Safety
EM-SV-320a.1	Total recordable incident rate (TRIR)	Rate	0.94	0.92	0.91
	Fatality rate	Rate	0	0	0
	Near miss frequency rate (NMFR)	Rate	Not Disclosed	Not Disclosed	Not Disclosed
	Total vehicle incident rate (TVIR)	Rate	0.86	0.80	0.63
	Average hours of health, safety, and emergency response training for (a) full- time employees, (b) contract employees, and (c) short- service employees	Hours	Not available	Not available	Not available

1 Calculated as purchased grid electricity consumption divided by total energy consumption, which includes natural gas consumption.

CODE	ACCOUNTING METRIC	UNIT OF MEASURE	2021 RESPONSE	2020 RESPONSE	2019 RESPONSE
EM-SV-320a.2	Description of management systems used to integrate a culture of safety throughout the value chain and project lifecycle	N/A	Pages 26-27	See 2021 Report	See 2020 Report
Data Security
CG-MR-230a.1	Description of approach to identifying and addressing data security risks	N/A	Page 24	See 2021 Report	See 2020 Report
CG-MR-230a.2 CG-MR-230a.2	Number of data breaches	Number	0	0	0
	Percentage involving personally identifiable information	Percentage (%)	0%	0%	0%
	Number of customers affected	Number	0	0	0
Labor Practices
CG-MR-310a.3	Total amount of monetary losses as a result of legal proceedings associated with labor law violations	Dollars ($)	See note 2 below	See note 2 below	See note 2 below
Employee Engagement, Diversity & Inclusion
CG-MR-330a.1	Percentage of gender and racial/ethnic group representation for (1) management and (2) all other employees	Percentage (%)	Pages 32	See 2021 Report	See 2020 Report
CG-MR-330a.2	Total amount of monetary losses as a result of legal proceedings associated with employment discrimination	Dollars ($)	See note 2 below	See note 2 below	See note 2 below

2 Total monetary paid losses resulting from legal proceedings related to claims which contained allegations of employment discrimination or labor law violations for the year ending December 31, 2022 were less than $815K, or 0.22% of total warehousing, selling and administrative expenses.

CODE	ACCOUNTING METRIC	UNIT OF MEASURE	2021 RESPONSE	2020 RESPONSE	2019 RESPONSE
Business Ethics
EM-SV-510a.1	Amount of net revenue in countries that have the 20 lowest rankings in Transparency International’s Corruption Perception Index	Percentage (%) of Total Revenues	0.23%	0.15%	0.07%
EM-SV-510a.2	Description of the management system for prevention of corruption and bribery throughout the value chain	N/A	Pages 18	See 2021 Report	See 2020 Report
Critical Incident Risk Management
EM-SV-540a.1	Description of management systems used to identify and mitigate catastrophic and tail-end risks	N/A	Page 13, 15	See 2021 Report	See 2020 Report
Product Design & Lifecycle Management
CG-MR-410a.1	Revenue from products third-party certified to environmental and/or social sustainability standards	Dollars ($)	Not available	Not available	Not available
CG-MR-410a.3	Discussion of strategies to reduce the environmental impact of packaging	N/A	Pages 19-21	See 2021 Report	See 2020 Report
Management of the Legal & Regulatory Environment
EM-SV-530a.1	Discussion of corporate positions related to government regulations and/or policy proposals that address environmental and social factors affecting the industry	N/A	Pages 15-17	See 2021 Report	See 2020 Report

CODE	ACCOUNTING METRIC	UNIT OF MEASURE	2021 RESPONSE	2020 RESPONSE	2019 RESPONSE
CG-MR-000.A	Number of retail locations	Number	170	180	195
CG-MR-000.A	Number of regional fulfillment centers	Number	9	8	8
CG-MR-000.B	Total area of retail space	Square meters (m²)	267,629	254,958	321,759
CG-MR-000.B	Total area of regional fulfillment centers	Square meters (m²)	91,552	87,836	87,836

TCFD INDEX

We are committed to increasing transparency and alignment of our reporting with the recommendations established by the Task Force on Climate-Related Financial Disclosures ("TCFD"). The TCFD has developed voluntary, consistent climate-related financial risk disclosures for use in providing information to stakeholders. Below is a summary of these disclosures in this report.

CATEGORY	TCFD RECOMMENDATION	SUPPORTING RECOMMENDED DISCLOSURE	LOCATION OF DISCLOSURE
Governance	Disclose the organization's governance around climate-related risks and opportunities.	a) Describe the board's oversight of climate-related risks and opportunities.	Corporate Governance Oversight, Page 13
Governance		b) Describe management's role in assessing and managing climate-related risks and opportunities.	Corporate Governance Oversight, Page 13
Strategy	Disclose the actual and potential impacts of climate- related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.	a) Describe the climate-related risks and opportunities the organization has identified over the short-, medium-, and long-term.	Managing Risks & Opportunities, Page 15 Management of the Legal & Regulatory Environment, Page 17
		b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.
		c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.	At this time, DNOW has not conducted a 2°C or lower scenario analysis. We are, however, committed to continuing to enhance our understanding of climate-related risks and opportunities and the ways in which they impact our business, strategy, and financial planning, and will assess this initiative in the future.
Risk Management	Disclose how the organization identifies, assesses, and manages climate-related risks.	a) Describe the board’s oversight of climate- related risks and opportunities.	Managing Risks & Opportunities, Page 15
		b) Describe the organization’s processes for managing climate-related risks.	Management of the Legal & Regulatory Environment, Page 17
		c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.	Management of the Legal & Regulatory Environment, Page 17
Metrics & Targets	Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.	a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.	SASB Index. Page 44
		b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions, and the related risks.	SASB Index. Page 44
		c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.	We have not yet set climate-specific targets, as we’re focused on establishing our GHG emissions baseline and enhancing our approach to ESG data collection. We will continue to evaluate the feasibility and relevance of setting climate-specific targets in the future.

UN SDG Alignment

UN SDG Topic	UN Sustainable Development Goal	DNOW Goal Progress and Key Performance Indicators	Section, Page #
	Ensure healthy lives and promote well-being for all.	Prioritizing health and safety in our workplace and in our communities, including management systems to ensure safety is at the center of our actions. Continuously measuring and monitoring safety performance and regularly requiring employees to complete safety training and periodic safety meetings.	Workforce Health & Safety Page 26
	Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all.	Prioritizing employee growth and development and providing employees with a variety of training and development programs designed to develop relevant skills and help them grow professionally and advance in their careers.	Employee Engagement & Development Page 28
	Achieve gender equality and empower all women and girls.	Board considers diversity in identifying director nominees, seeking to achieve a mix of directors that represent diverse backgrounds and experiences, including with respect to gender. Programs and initiatives to create an inclusive environment and manage workplace equity, including embedding DEI into recruiting, talent development and succession planning processes and a continued focus on DEI education and awareness. Global DEI Council that promotes a culture of education and awareness in all of our locations around the world.	Corporate Governance Oversight Page 13 Workforce Diversity & Inclusion Page 30
	Ensure access to affordable, reliable, sustainable and modern energy for all.	Committed to sustainable growth and supply chain stewardship. Increasing operational efficiencies and continuing to modernize our fulfillment model, including further executing our hub-and-spoke distribution centers, which prevents each customer from separately creating duplicative supply chains, resulting in lower fuel and resource consumption. Actively minimizing packaging waste through recycling programs and partnering with shippers that allow our related carbon footprint to remain carbon neutral as well as participation in shipping carbon reporting programs. Supplying products and process solutions to aid our customers in executing their environmental strategies and achieving their sustainability goals, including products and services to support the energy transition, help reduce environmental impact, mitigate GHG emissions and enable sustainable waste and water management processes.	Supply Chain Stewardship Page 19 Delivering Sustainable Energy Page 36
	Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all	Board considers diversity in identifying director nominees, seeking to achieve a mix of directors that represent diverse backgrounds and experiences. Fostering an equitable, diverse and inclusive supply chain and taking efforts to support diversity within our supplier network, including initiatives to track related spending. Prioritizing health and safety in our workplace and in our communities, including management systems in place to ensure safety is at the center of our actions. Programs and initiatives to create an inclusive environment and manage workplace equity, including embedding DEI into recruiting, talent development and succession planning processes and a continued focus on DEI education and awareness. Global DEI Council that promotes a culture of education and awareness in all of our locations around the world.	Corporate Governance Oversight Page 13 Supply Chain Stewardship Page 19 Workforce Health & Safety Page 26 Workforce Diversity & Inclusion Page 30
	Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation.	Commitment to ensuring our supply chain operates responsibly and sustainably, including ensuring our business partners are highly regarded with strong reputations for good ESG- related business practices, including partnering with manufacturers using cutting edge technology to reduce environmental impact and recycled materials for production. Investing in high value-add solutions, including development of solutions to help our customers navigate the energy transition, such as with our acquisition of EcoVapor.	Supply Chain Stewardship Page 19 Delivering Sustainable Energy Page 36
	Ensure sustainable consumption and production patterns.	Committed to sustainable growth and supply chain stewardship. Increasing operational efficiencies and continuing to modernize our fulfillment model, including further executing our hub-and-spoke distribution centers, which prevents each customer from separately creating duplicative supply chains, resulting in lower fuel and resource consumption. Actively minimizing packaging waste through recycling programs and partnering with shippers that allow our related carbon footprint to remain carbon neutral as well as participation in shipping carbon reporting programs. Increasing operational efficiencies to reduce resources and resulting emissions, including continuously monitoring and managing our Scopes 1 and 2 GHG emissions.	Supply Chain Stewardship Page 19 DNOW Environmental Performance Page 41
	Take urgent action to combat climate change and its impacts.	ESG Committee ensures that the relevant sustainability metrics and disclosures align with our strategic plan, results are communicated to stakeholders and climate-related risks minimized and opportunities captured. Focus on products and services that advance our customers’ net-zero and other climate- related goals. Committed to supply chain stewardship and making our operations more efficient and work to reduce use of resources and resulting emissions, including continuously monitoring our Scopes 1 and 2 GHG emissions. Alignment of our reporting with the recommendations established by the TCFD.	Managing Risks & Opportunities Page 15 Supply Chain Stewardship Page 19 Delivering Sustainable Energy Page 36 DNOW Environmental Performance Page 41 TCFD Index Page 49
	Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.	Integrity and ethics are present and transparent throughout our business operations. Board provides oversight to foster sustainable growth for our business, including oversight of risks related to climate-change and other ESG-related matters, and ensures we always act honestly, in good faith and in the best interest of our shareholders. We hold ourselves accountable with the establishment of ESG performance metrics. Well-established internal policies and procedures to ensure high ethical standards and integrity are foundational to our daily business practices, including tracking revenues to countries with poor TICPI scores. Requiring employees to complete training on such policies and procedures regularly.	Corporate Governance Oversight Page 13 Business Ethics & Payments Transparency Page 18
	Strengthen the means of implementation and revitalize the global partnership for sustainable development.	DNOW has aligned the UN SDGs most relevant to our sustainability strategy and are continuously identifying opportunities where our improvement can contribute to the advancement of the UN SDGs.	Our Sustainability Reporting Framework Page 10 UN SDG Alignment Page 50

Message from our President & CEO

David Cherechinsky

President & CEO

Our Company