POWERING WHAT’S NEXT

SUSTAINABILITY PROGRESS REPORT 2016 ABOUT THIS

Corporate Responsibility REPORT Right Environment Safety Cummins’ 2016 Sustainability Progress Report reflects CUMMINS GRI DATA BOOK Diversity & Inclusion Workforce the company’s broad view of sustainability, including Cummins is again producing a separate data book, although the environment, corporate responsibility, diversity its name is changing slightly. This report is now called Cummins’ GRI Data Book reflecting our attempt to closely follow the CUMMINS & SUSTAINABILITY Financial Performance and inclusion, innovation and financial performance. Innovation format of the Global Reporting Initiative (GRI). Established by the POWERING Customers The company supports the United Nation’s 17 Sustainable Development United Nations, the GRI’s goal is to develop a consistent way for WHAT’S Governance Goals to “end poverty, protect the planet and ensure prosperity for all.” companies to report on their environmental, social and economic NEXT We hope you’ll see that the disclosures included in this report align with performance. This report will be posted by the end of June. those aspirations. We’ve made some changes in this year’s report. A lot of the feature stories SUSTAINABILITY OVERVIEW NOTABLE that formerly ran here regarding how our employees work towards those Cummins has also put together an eight-panel This report covers goals have been moved to Cummins’ social media site, The Block. sustainability brochure to give readers a very all of the calendar Our hope is that the Progress Report is a now easy-to-read summary year of 2016. All of the quick look at Cummins’ sustainability efforts. statistical material covers of the company’s sustainability performance in 2016. 2016, except when The overview is posted with our other reports. data is presented from This year’s report also includes a new section on serving our customers. previous years for the After going through our first formal materiality study in 2015, the report sake of comparison. team came to the conclusion that customers were a key stakeholder in THE POWER the company’s sustainability that weren’t adequately reflected in the pages OF CUMMINS of our report. We’re still working on what this content should look like in the future, but excited to be better representing this critical stakeholder. If you’re a visual learner, check out The Power of Cummins. This compelling video shows how Finally, some data and information that used to run in this report have Cummins is working around the world to build stronger been moved to Cummins’ GRI Data Book to try and improve the communities through its commitment to its customers, readability of the report. the environment and the communities where it does This report was posted in June 2016 and is Cummins’ 14th edition. business. The video was updated in 2016.

Blair Claflin, Director – Sustainability Communications

02 t ABOUT

Corporate Responsibility THE COVER Right Environment Safety Through the rolling hills of southern Indiana, railroad buffs Diversity & Inclusion Workforce watched as the distinctive red and black Cummins’ QSK95 locomotive pulled coal and mixed freight along the Indiana

Financial Performance Rail Road in 2016. But it might be what they didn’t see Innovation Customers that’s more impressive. Governance The Cummins locomotive recorded a 16 percent improvement in fuel economy compared to the engine it replaced, an 89 percent reduction in oxides of nitrogen and a 98 percent cut in particulate matter. NOTABLE Learn more about Cummins’ innovation The engine has already been selected to power efforts on page 47 of this report. Siemens’ ultra-low emission Charger Locomotive about to begin passenger service in several locations in the United States. Cummins re-powered a 40-year-old freight locomotive to show the QSK95 can haul freight, too.

Read about what some call the company’s “mobile locomotive testing lab.” It’s just one of the ways Cummins is working to innovate on behalf of its customers.

03 t TABLE OF

Corporate Responsibility CONTENTS Right Environment Safety Diversity & Inclusion Workforce INTRODUCTION ENVIRONMENT SOCIAL ECONOMIC

Financial Performance 02 ABOUT THIS REPORT 14 CUMMINS ESTABLISHES 33 COMMUNITY 45 CUMMINS WILL Innovation NEW GOALS TO IMPROVE IMPROVEMENT BE READY WHEN Customers 03 ABOUT THE COVER THE ENVIRONMENT IS A CORPORATE MARKETS RETURN RESPONSIBILITY Governance AT CUMMINS 05 KEY PERFORMANCE 15 OUR WATER JOURNEY 47 INNOVATION AT INDICATORS CUMMINS IS FUELED 18 THE IMPACT OF OUR GOAL 36 THE CUMMINS BY FORWARD THINKING FOUNDATION 06 A NOTE FROM THE CHAIRMAN 19 ENVIRONMENTAL 49 PRODUCTS GOALS UPDATE 37 CUMMINS FOUNDATION GRANTS SUPPORT 08 WHO WE ARE 53 IMPROVING CUSTOMER EMPLOYEES BUILDING 20 PRODUCT STEWARDSHIP LIVES IS CUMMINS STRONGER COMMUNITIES CONNECTED SOLUTIONS 09 HOW WE DO IT IS KEY TO SUSTAINABILITY AT CUMMINS MISSION 38 HEALTH & SAFETY TO 10 VISION, MISSION, FOCUS ON ‘FANTASTIC 25 CUMMINS TAKES STEPS TO 55 CUMMINS MAKES VALUES & PRINCIPLES FOUR’ IN 2017 IMPROVE ENVIRONMENTAL ETHICS A PRIORITY MANAGEMENT 11 OUR KEY TOOLS 41 AN UNWAVERING 57 BOARD REPRESENTS COMMITMENT TO 28 STRATEGIC ACTIONS INTERESTS OF 12 OUR 2016 RECOGNITION DIVERSITY AND INCLUSION AT A GLANCE SHAREHOLDERS

13 OUR HISTORY 43 DEVELOPING A TRULY 29 PARTNERING TO SOLVE 58 NEW COUNCIL DRIVES GLOBAL WORKFORCE COMPLEX PROBLEMS CULTURE OF RISK MANAGEMENT 44 BUILD A CAREER, 32 PARTNERING FOR A NOT JUST A STOP GLIMPSE OF WHAT 59 ENSURING CUMMINS ALONG THE WAY THE FUTURE HOLDS VOICE IS HEARD

04 t 2014 2015 2016 KEY PERFORMANCE ECONOMIC

Revenue $19.2 billion $19.1 billion $17.5 billion Corporate Responsibility INDICATORS Right Environment Net Income $1.65 billion $1.40 billion $1.39 billion Safety Cummins takes a broad view of sustainability, Diversity & Inclusion Workforce including the environment, corporate responsibility,

safety, diversity and inclusion, employee development 2014 2015 2016 Financial Performance and governance. The company tracks a number of ENVIRONMENTAL Innovation Customers key performance indicators. Here are just a few. GHG emissions (thousands of metric tons CO2e) 788 775 765 Governance Energy consumption1 (thousands of MMBtu) 12,739 12,928 12,921

Water use (millions of gallons) 972 947 934

Water intensity reduction2 (since 2010) 35% 41% 42%

Energy intensity reduction2,3 (since 2010) 19% 24% 24%

GHG intensity reduction2,3 (since 2010) 22% 29% 30%

Recycling rate 90% 90% 89%

Cummins believes in transparency. 2014 2015 2016 This icon identifies multi-year data SOCIAL that allows for comparisons. Major injury rate 0.043 0.044 0.041

Incidence rate 0.610 0.588 0.627

Women leaders in the workforce 20% 21% 21.80% 1 Primary energy excludes sold electricity and associated fuel usage 2 Intensity defined as adjusted for sales (energy / GHG) or hours worked (water) Every Employee Every Community (EEEC) participation rate 73% 80% 80% 3 Reduction includes consolidated entities only Number of Environmental Challenge participants 13,600 21,600 17,400

05 t A NOTE FROM

Corporate Responsibility THE CHAIRMAN Right Environment Safety Despite challenging market conditions, 2016 was a Diversity & Inclusion Workforce remarkable year for Cummins. We continued to focus on improving our company in every respect during the

Financial Performance tough times, while making strategic investments in new Innovation Customers technologies to ensure that we are better positioned than Governance anyone else when markets return. And we did this while maintaining our deep commitment to sustainability.

Here are just a few examples:

NOTABLE »» We launched the X15 heavy-duty, on-highway truck engine, offering Chairman and CEO Tom up to 20 percent better fuel economy and lower maintenance costs Linebarger also addresses sustainability at Cummins compared to Cummins’ 2010 ISX15 diesel engine. in an essay for the Business Roundtable on page 47 of »» Our QSK95 engines began powering the new diesel-electric Charger “Create, Grow, Sustain” locomotives built by Siemens. These ultra-low emission locomotives at sustainability.brt.org will be used by passenger rail systems across the United States.

»» Cummins partnered on a project to develop a Class 6 medium-duty, plug-in, hybrid-electric truck that can reduce fuel consumption by at least 50 percent. The project was awarded a $4.5 million research grant by the U.S. Department of Energy.

These achievements all resulted from Cummins’ continued spirit of innovation and our pledge that everything we do lead to a cleaner, healthier, safer environment.

06 t Linebarger has been working at Cummins Over the years, Cummins’ prosperity I am troubled, however, by two recent thousands of U.S. jobs. We need for more than 20 years. Here’s a quick look has become increasingly linked to our developments. more trade, not less to help our ability to produce the cleanest, most business and communities to grow. at his career at the Company. Support seems to be waning in some fuel-efficient engines, generators and places for enforcing and enacting I truly believe that a company is components in the world. We want CHAIRMAN AND CHIEF EXECUTIVE OFFICER standards to protect our natural only sustainable when it achieves Jan. 1, 2012, to present to provide customers with the power resources. Clean air and water are economic success while acting as they need, while helping them meet PRESIDENT AND CHIEF OPERATING OFFICER vital to creating healthy communities, social and environmental stewards. 2008-2011 their business and environmental which are critical to a vibrant It’s a goal I hope you’ll see reflected challenges wherever they operate. EXECUTIVE VICE PRESIDENT, PRESIDENT – business climate. The employees in the pages of this report. POWER GENERATION BUSINESS Cummins’ commitment to sustainability Cummins needs to succeed want 2005-2008 Thank you for your interest and innovation is why I am confident to live in healthy communities, and VICE PRESIDENT – POWER GENERATION in Cummins, we will emerge a stronger company healthy communities ultimately result 2003-2005 when markets return. We support tough, in stronger markets for our products. VICE PRESIDENT AND CHIEF FINANCIAL OFFICER but achievable, environmental standards It is important that we reduce or 2000-2003 and commit our people and technology remove unnecessary, overlapping VICE PRESIDENT – SUPPLY CHAIN MANAGEMENT investments to ensure that our or poorly written and enforced 1998-2000 Tom Linebarger customers win in the marketplace regulations that harm business Chairman and CEO MANAGING DIRECTOR – HOLSET ENGINEERING COMPANY in a sustainable way. growth and innovation. (A DIVISION OF CUMMINS) Cummins Inc. 1997-1998 At the same time, I’m also concerned We also make similar commitments about the increased apprehension SENIOR MANAGER – ENGINEERING OPERATIONS in our supply chains, our facilities AND TECHNICAL CENTER LEADER, HOLSET regarding global trade. The ability and our communities, relying on the 1996-1997 to grow and provide high quality capability and innovative nature of our ENGINE COMPANY ASSISTANT TO GROUP jobs is central to Cummins’ view of people to achieve amazing results – VICE PRESIDENT FOR WORLDWIDE OPERATIONS, sustainability. We exported more than PROGRAM MANAGER – ADVANCED FUEL SYSTEMS using less energy, water and other $2 billion worth of products from the 1994-1996 critical materials, while producing United States in 2016, supporting INTERNSHIP – ASSISTANT TO PLANT MANAGER more at lower costs. COLUMBUS MIDRANGE ENGINE PLANT 1992

077 t WORLD HEADQUARTERS WHO 500 Jackson St. WE ARE Columbus, IN 47201 EST.

Cummins Inc., a global power leader, is a corporation of complementary business units that www.cummins.com design, manufacture, distribute and service engines and related

technologies, including fuel systems, EMPLOYEES controls, air handling, filtration, 55,400 WORLDWIDE emission solutions and electrical CMI More than 50 percent of the company’s STOCK SYMBOL employees are located outside the United States. power generation systems. (New York Stock Exchange) (approximate employee total, as of December 2016)

CUSTOMERS FORTUNE 500 SALES / EARNINGS RANKING (2016) Cummins’ customers are located in approximately In 2016, Cummins earned 190 countries and territories that the company reaches through $1.39 billion on revenues of a network of more than 600 company-owned and independent distributor locations and approximately 7,400 dealer locations. 148 $17.5 billion

088 t HOW WE DO IT Cummins is organized into four business CUMMINS CUMMINS COMPONENTS CUMMINS segments. In 2016, the company went ENGINE POWER BUSINESS DISTRIBUTION through some restructuring designed BUSINESS SYSTEMS The Components segment is organized BUSINESS to help it innovate faster and bring The Engine Business segment In 2016, Cummins reorganized its around the following businesses: Cummins Distribution Business sells manufactures and markets diesel business, combining the company’s and services the full range of Cummins more value to customers. Cummins Emission Solutions and natural gas engines for on- and Power Generation segment and its designs and builds exhaust products for over 20 application off-highway use around the world. high-horsepower engine business aftertreatment solutions to segments in more than 190 countries Markets include heavy- and medium- to create a new Power Systems reduce emissions for light-, and territories around the world. duty trucks, buses, light-duty trucks segment. The segment is a global medium- and heavy-duty and and industrial uses in areas such as provider of power generation systems, high-horsepower engines. agriculture, construction and components, and services in standby Cummins Filtration designs and military equipment. power, distributed power generation, builds heavy-duty air, fuel, hydraulic as well as auxiliary power in mobile and lube filtration, and chemical and applications. The segment also exhaust system technology products. designs, manufactures, sells and supports diesel and natural gas high- Cummins Fuel Systems designs horsepower engines for a wide variety and manufactures fuel systems that of uses including power generation, maximize power and fuel economy marine, mining and rail. while helping to reduce emissions.

Cummins Turbo Technologies designs and builds turbochargers to maximize performance and reduce emissions and fuel consumption.

099 t CUMMINS’ STORY

Cummins’ previous mission, vision and values were WHY WE EXIST HOW WE WILL DO IT developed in 2002 when more than 90 percent of the company’s current MISSION VALUES LEADERSHIP employees were not here. Today’s business environment INTEGRITY CULTURE is different and Cummins has Doing what you say you will grown more than three times Making people’s lives Inspiring and encouraging do and doing what is right since 2002. all employees to achieve Our Story is the culmination DIVERSITY & their full potential of a year of work by the better by powering a INCLUSION company’s Leadership Team on Cummins’ mission, vision Valuing and including our BRAND and values and includes input more prosperous world differences in decision making from thousands of company is our competitive advantage PROMISE employees around the world. Powering our customers What readers will see in CARING WHAT WE WANT TO ACCOMPLISH through innovation Our Story are the critical Demonstrating awareness elements of Cummins culture and consideration for the and dependability that define who we are as a wellbeing of others company and will lead us into VISION the future. The Leadership STRATEGY Team prioritized this work EXCELLENCE because it believes who we Always delivering superior results Delivering value to are and how we act is as Innovating for our customers all stakeholders important as what we do. TEAMWORK Collaborating across teams, to power their success functions, businesses and borders to deliver the best work

10 t CUMMINS OUR KEY OPERATING SYSTEM Corporate Responsibility TOOLS The Cummins Operating System Right Environment Safety helps develop common practices Diversity & Inclusion SIX SIGMA AND and approaches to improve customer Workforce CONTINUOUS IMPROVEMENT satisfaction. The 10 practices are:

Cummins is a big proponent of Six Cummins also uses Six Sigma in its community work, helping its community »» Put the customer first and Financial Performance Sigma, using the business improvement partners address problems. Employees completed 74 Community Impact Innovation provide real value. Customers tool to save the company and its Six Sigma projects on behalf of their community partners in 2016. »» Synchronize flows (material, Governance customers billions of dollars. The impact of Six Sigma on the company goes beyond cost savings and physical and information). Six Sigma uses data-based analysis community engagement. It has provided Cummins with a common language »» Design quality in every step to identify defects and variation and a collective mindset that can be used to address a problem or challenge of the process. in a wide range of manufacturing almost anywhere in the world. NOTABLE and business situations. Since its »» Involve people and promote In 2016, the company announced some changes to its Six Sigma program, Learn how Cummins introduction at Cummins in 2000: team work. used Six Sigma to bringing in some additional improvement tools to the training. Now called improve customer care. »» Approximately 23,000 people have been trained on Six Sigma “Six Sigma and Continuous Improvement,” this new approach is designed »» Ensure equipment and tools tools at the company, including more than 11,700 current to keep projects targeted at Cummins’ most important business problems. are available and capable. professional employees. The company’s top leaders play a key role in determining Six Sigma priorities »» Create functional excellence. with a special focus on product quality, working capital, distributor synergies, »» Six Sigma projects have identified an estimated$6.65 billion »» Establish the right environment. in PBIT (Profit Before Interest and Tax) savings over the direct material cost reductions and telematics. tool’s 16-year history at Cummins. After 16 years as a key part of the company, Six Sigma has established itself »» Treat preferred suppliers as partners. »» Cummins Customers have saved an estimated $1.41 billion as the principal problem solving tool used at Cummins. through Six Sigma since the tool was first offered to them in 2005. »» Follow common problem solving techniques.

»» Use Six Sigma as the primary process improvement method.

11 t Cummins received a number of awards in 2016 OUR 2016 RECOGNITION that involved the sustainability of the company.

Corporate Responsibility Right Environment CORPORATE Safety RESPONSIBILITY / DIVERSITY / Diversity & Inclusion ETHICS ENVIRONMENT WORKPLACE BUSINESS / PRODUCT Workforce WORLD’S MOST 2016 DOW JONES TOP 50 COMPANIES TOP 25 EMPLOYERS BEST PICKUP FOR 2016 Financial Performance ETHICAL COMPANIES SUSTAINABILITY INDEX FOR DIVERSITY IN AMERICA The Cummins-powered 2016 Innovation Customers Cummins was named to Ethisphere’s Cummins was Forbes magazine named Cummins Nissan TITAN XD was named Governance 2016 list of the World’s Most Ethical named one of the one of its Top 25 Employers in Best Pickup truck for 2016 by Companies for a ninth consecutive Top 50 companies America in 2016. (Cummins was also Cars.com, PickupTrucks.com year. (Cummins was also named to Cummins was named to the 2016 for Diversity by named to the magazine’s 2017 list). and AutoGuide.com. Ethisphere's list in early 2017.) Dow Jones Sustainability Index for DiversityInc magazine North America. The index surveys for a 10th consecutive year in 2016 BEST COMPANIES TECHNICAL FOR WORKING AMERICA'S MOST companies on a wide range of (Cummins was also named to the ACHIEVEMENT AWARD JUST COMPANY WOMEN IN INDIA issues. Cummins has been on magazine's list in early 2017.) The Cummins X15 efficiency engine Cummins India was named to Cummins was the list since 2006. series was awarded the Truck recognized as 100% CORPORATE the 2016 Working Mother & Writers of North America's (TWNA) America’s most ENERGY MANAGEMENT EQUALITY INDEX AVTAR 100 Best Companies 2016 Technical Achievement Award. JUST company in AWARD OF EXCELLENCE Cummins for Women in India list based The engine won for its advanced the machinery sector in the inaugural received on a number of criteria including combustion design. JUST 100 list by JUST Capital and a perfect initiatives for women recruitment. Forbes Magazine. They ranked score for BEST ENGINE SUPPLIER MILITARY FRIENDLY companies based on six issues an 11th consecutive year in the EMPLOYER Cummins received the 2016 United including fair pay and creating jobs. Cummins in 2016 received the 2016 Corporate Equality Index States Overall Best Heavy Duty Truck Cummins was named a 2016 Clean Energy Ministerial’ s Award of from HRC, the largest U.S. civil Engine Supplier Product Leadership Military Friendly Employer by Excellence in Energy Management, rights organization for LGBT award by Frost & Sullivan based on the publisher of GI Jobs and one of only three ISO 50001-certified employees (The company also its survey of U.S. heavy duty fleet Military Spouse. organizations to be honored. made the list in 2017). service and safety managers.

12 t OUR HISTORY Cummins has a rich history, replete with examples of innovation, entrepreneurship and vision. Here’s a look at some highlights over the last 96 years:

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

13 t ENVIRONMENT // GOALS nvironmental Icons ENGINE FUEL RAW EFFICIENCY MATERIALS Here’s a progress report on a revised goal on World Water Day, March 22, 2017. each of the environmental goals CUMMINS ESTABLISHES RAW Cummins has established. LOGISTICS MATERIALS The revised 50 percent intensity

Corporate Responsibility NEW GOALS TO IMPROVE reduction goal represents a Right Environment PRODUCTS COMMUNICATIONS potential total waterIN USE savings of & MARKETING Safety WATER THE ENVIRONMENT more than 760 million gallons Diversity & Inclusion Goals: Workforce of water since 2010.SUPPLIER EMPLOYEE ENGAGEMENT ENGAGEMENT Cummins continued making progress on reducing its environmental impact in »» Reduce direct water

use across Cummins “Thanks to the hard work of our Financial Performance 2016, especially in water and energy. The company established new 2020 goals by 50 percent by 2020, employees aroundFACILITIES the & world, Innovation OPERATIONS in those areas, having reached previous targets. adjusted for hours worked. Customers we surpassed our initial target, Governance “The environmental teams around the globe worked hard on making progress on »» Achieve water neutrality but we know we should do more at 15 Cummins so we are raising the bar with our our established goals and setting two new aggressive ones,” said Mark Dhennin, manufacturing, technical, revised goal,” said Brian Mormino, and other larger sites Cummins’ Director of Energy Efficiency and Environment. Executive Director of Environmental NOTABLE located in regions where Strategy and Compliance. Cummins has been The progress came against a water is in short supply. working to reduce its backdrop of company growth. Baseline year: 2010 emissions of greenhouse The United Nations estimates that by gases from its facilities Since 2010, Cummins’ in-scope since 2006 when the 2025, 1.8 billion people will be living company joined the U.S. facilities increased by 250 sites to Cummins released its first water in countries or regions with absolute Environmental Protection more than 450 locations by the end Agency’s Climate Leaders conservation goal in 2014 as part of water scarcity and two-thirds of the program and set its first of 2016. The increase in footprint its 2020 Environmental Sustainability world’s population could be living goal for 2010. was due to the addition of new office Plan, pledging to reduce water use under water-stressed conditions. buildings, regional distribution centers intensity by 33 percent, adjusted by Projections show that by 2040, and the acquisition of the company’s labor hours. By the end of 2016, the all of the United States will be North American distributors. company's water efficiency efforts considered highly water stressed. had resulted in a 42 percent water Jamestown Engine Plant electrician “Businesses can’t operate, and Fred Gable inspects the solar panel intensity reduction or 18 percent on people can’t live, without water,” connections at Cummins’ roof-top solar an absolute basis. Because Cummins array at Jamestown, New York (U.S.A.). said Mormino. “We have a The plant is one of the locations where achieved its initial water goal ahead the company has added renewable responsibility to come together sources to its energy mix. of schedule, the company announced

14 t in collective action, and Cummins Cummins has made significant is committed to being part of OUR WATER JOURNEY progress on its water reduction efforts. the solution.” Here's a look at the company's journey.

Corporate Responsibility In 2016, Cummins used 934 million Right Environment gallons of water, a 13 million gallon 2011 2011 Safety A comprehensive water decrease from 2015. Since the goal’s Cummins becomes a Ceres Diversity & Inclusion Aqua Gauge pilot company to risk screen starts at all 2012 Workforce baseline year of 2010, direct water Cummins develops water strategy understand the unique strategic global company sites. use is down by 18 percent, while framework with four key elements. aspects of its water use. water use adjusted for hours worked Financial Performance Innovation is down by 42 percent despite an Customers increase in the number of in-scope Governance facilities during the period. 2014 Cummins announces Cummins’ water neutrality work is water conservation and water neutrality goals. also progressing well. Seven sites Company is named to CDP toward the company’s goal of NOTABLE water leadership group. 15 have now been validated as Cummins uses a tool that calculates the true water neutral, off-setting their water cost of water, including use with community improvements the cost associated with risk and energy needed that either conserve water or make 2015 to pump water. new sources available. Cummins develops water neutrality and water The company continues to engagement program. promote awareness about the connection between water use in its plants and community needs. Over the past year, Cummins’ 2017 Cummins announces efforts have been focused on revised 50 percent water validating calculation methodologies conservation goal by 2020. using site-implemented projects and defining project roadmaps leading to goal achievement.

15 t nvironmental Icons ENGINE FUEL RAW EFFICIENCY MATERIALS

RAW LOGISTICS MATERIALS

PRODUCTS COMMUNICATIONS IN USE & MARKETING

nvironmental Icons ENGINE FUEL RAW EFFICIENCY MATERIALS SUPPLIER EMPLOYEE In 2016, the company’s GHG The company continues to use The company ENGAGEMENTin 2016 recycled ENGAGEMENT

ENERGY emissions decreased by 11,600 tons a facility investment plan approach, WASTE 89 percent of the total waste RAW LOGISTICS MATERIALS FACILITIES & AND on an absolute basis and 2 percent with a focus on test cell energy generated overOPERATIONS the year, equivalent to GHGS adjusted for hours worked compared recovery and investments in Goals: approximately 169,000 tons of waste. Corporate Responsibility PRODUCTS COMMUNICATIONS »» Increase company to the prior year.IN USE Cummins had& MARKETING a on-site renewable projects to offset Right Environment Goal: recycling rate to Cummins’ sites in the United Safety number of challenges in maintaining electricity purchased from the grid. »» Achieve a 32 percent 95 percent by 2020. Kingdom have already achieved Diversity & Inclusion SUPPLIER EMPLOYEE progress on ENGAGEMENTthe goal, includingENGAGEMENT Workforce energy intensity reduction The company used tools and »» Reach “Zero Disposal” a collective 99.7 percent recycling several new buildings and distributor from company facilities resources available from programs status at 30 sites with rate. Since the baseline year of locations includedFACILITIES & in scope as part by 2020 and increase OPERATIONS 100 or more people by such as ISO 50001, the international 2010, Cummins’ total waste Financial Performance the portion of electricity of the Distribution Business’ North 2020 where 100 percent Innovation energy management system, and the disposed decreased by about Cummins uses derived American consolidation that resulted of waste is reused, Customers U.S. Department of Energy’s Superior 6 percent in absolute terms, while Governance from renewable sources. in increased emissions. recycled or recovered Baseline year: 2010 Energy Performance program to in a useful manner. experiencing a 34 percent reduction achieve its goal. Baseline year: 2010 in disposal adjusted for hours worked. Compared with 2015, Cummins in 2016 approved its third energy goal in 10 years after exceeding its second energy SEVEN ZERO and greenhouse gas (GHG) DISPOSAL SITES reduction goal in 2015. Darlington Engine Plant (and operations), U.K. Daventry Engine Plant (and operations), U.K. The current goal’s intensity factor Cummins Turbo Technologies, Huddersfield, U.K. Cummins Filtration, Quimper, France is based on hours worked, not Cummins Global Logistics, Rumst, Belgium Cummins Global Logistics, Singapore revenue as previously used. Olympia Testing Center, Columbus, Indiana (U.S.A.) All consolidated operations and joint ventures subscribing to SEVEN WATER Cummins’ Enterprise Environmental NEUTRAL SITES Management System are included. PHALTAN, INDIA “MEGASITE”: Tata Cummins Pvt Ltd 2 Cummins Technologies India Limited, High Horsepower Parts Distribution Center Cummins Shared Services PUNE, INDIA: Kothrud Engine Plant Cummins India Technical Center India Office Campus

16 t Cummins’ total waste disposed in improvement of 6.7 percent across all Cummins recorded a 3.7 percent WHAT IS 2016 increased by 2,600 tons or projects is larger than the company’s reduction of CO per kilogram of PRODUCTS 2 THE IMPACT? 14 percent on an absolute basis original projections of 2 to 5 percent. goods moved in 2016 towards IN USE Since 2010, Cummins and by 14 percent adjusted for its goal of a 10 percent reduction Goal: substantially reduced facility Corporate Responsibility Global fuel economy teams have hours worked. »» Partner with by 2020. Right Environment been building functional capability water and waste, adjusted Safety customers to The fives sites previously achieving via fuel economy forums, training In the U.S., which accounts for hours worked, and GHG Diversity & Inclusion improve the efficiency emissions, adjusted for sales. Workforce Zero Disposal status were recertified of our products innvironmental use, and tools. Icons for approximately half of the ENGINE FUEL RAW in 2016, and two new sites were reaching by 2020 an annual EFFICIENCYcompany’s transportation MATERIALS The company avoided validated, bringing the total number reduction of 3.5 million spending, three of four operational impacts equivalent to Financial Performance metric tons (MMT) of carbon these real-life examples. Innovation certified to seven. Cummins now has LOGISTICS areas are now managed through dioxide (CO ), saving Customers five Zero Disposal sites in Europe, 2 a single transportation system. Goal: Governance 350 million gallons of fuel. RAW one in North America and one in LOGISTICSTransportation leaders are analyzingMATERIALS EMISSIONS equal to taking Baseline year: 2014 »» Use the most the Asia-Pacific region. efficient method their use of third-party logistics and mode to providers and are moving towards Eighteen additional sites are move goods across implementing a transportation 68,400 Cummins’ fuel economy teams approaching Zero Disposal, but the Cummins network PRODUCTS COMMUNICATIONS data analytics system in 2017. passenger cars throughout the world have IN USE & MARKETING face challenges such as regulatory to reduce CO2 per kilogram off the road for a year implemented more than 200 projects barriers in India and China, and the of goods moved by In sites outsides the U.S., analysis since this goal was announced in 10 percent by 2020. absence of vendors to help handle is being done to determine the WATER for drinking, 2014. The result is that Cummins Baseline year: 2014 hard-to-recycle wastes. SUPPLIERbest region or country specificEMPLOYEE sanitation and hygiene for ENGAGEMENT has already achieved a 2.9 million ENGAGEMENT transportation solution that will Under Cummins’ definition of Zero metric ton annual run rate of CO 2 enable Cummins to meet its goal. Disposal, waste can only be burned reduction toward the company’s goal In meeting the company’s logistics 352,300 as a last resort to create energy and of a 3.5 million metric ton run rate. goal, Cummins aims to create and FACILITIES & people for a year OPERATIONS then only if there is a net energy gain, maintain an efficient transportation Global momentum with customers creating more energy than is needed network that reduces CO emissions has yielded new initiatives, and more 2 WASTE to fill merely to sustain combustion. by improved transport planning to power systems and distribution maximize loads, reduce miles when business projects were launched in trucks are empty and minimize 2016. The average fuel economy 4,200 distance traveled. garbage trucks

17 t THE IMPACT OF OUR GOAL Carbon sequestered by 4,392,244 ACRES Partner with customers to improve of forests efficiency of our products in use, resulting in an annual reduction of 3.5 MMT of CO2 by 2020, saving 350 million gallons of fuel 11.1 BILLION MILES of driving eliminated

Since 2014, Cummins fuel economy projects:

REDUCED fuel by 470 million gallons Removal of 980,124 CARS from the road for one year SAVED customers $1.9 billion (U.S.)

AVOIDED 4.64 million

metric tons of CO2

18 t nvironmental Icons ENGINE FUEL RAW EFFICIENCY MATERIALS

RAW LOGISTICS MATERIALS

nvironmental Icons ENGINE FUEL RAW PRODUCTS COMMUNICATIONS EFFICIENCY MATERIALS IN USE & MARKETING

SUPPLIER EMPLOYEE RAW INCREASE FACILITYENGAGEMENT RECYCLING RATEENGAGEMENT LOGISTICS MATERIALS 2020 GOAL 95 PERCENT ENVIRONMENTAL FACILITIES & 2016 PROGRESSPRODUCTSOPERATIONS • 89COMMUNICATIONS PERCENT IN USE & MARKETING

Corporate Responsibility GOALS UPDATE Right Environment ZERO DISPOSAL SUPPLIER EMPLOYEE nvironmental Icons ENGAGEMENT ENGAGEMENT Safety ENGINE FUEL RAW Here’s a look at Cummins’ progress toward its environmental goals. EFFICIENCY2020 GOALMATERIALS 30 SITES Diversity & Inclusion Workforce FACILITIES & OPERATIONS Environmental performance includes all consolidated RAW 2016 PROGRESS 7LOGISTICS SITES MATERIALS KEY operations and joint ventures subscribing to Cummins’ Financial Performance INDICATORS Enterprise Environmental Management System. REDUCE DIRECT WATER USE INTENSITY nvironmental Icons Innovation ENGINE FUEL RAW PRODUCTS COMMUNICATIONS 2020EFFICIENCY GOAL 50MATERIALS PERCENT Customers IN USE & MARKETING Governance ENVIRONMENTAL PERFORMANCE 2013 2014 2015 2016 2016 PROGRESS • 42 PERCENT SUPPLIER RAWEMPLOYEE 1 ENGAGEMENT Energy consumption (thousands of MMBtu) 12,080 12,739 12,928 12,921 LOGISTICS MATERIALSENGAGEMENT

WATER NEUTRALITY GHG emissions (thousands of metric tons CO2e) 750 788 775 765 FACILITIES & PRODUCTSOPERATIONS2020 GOALCOMMUNICATIONS 15 SITES Generated waste (thousands of metric tons) 177 183 191 190 IN USE & MARKETING Disposed waste (thousands of metric tons) 20 18 18 21 SUPPLIER EMPLOYEE 2016 PROGRESS 7ENGAGEMENT SITES ENGAGEMENT Recycled waste (thousands of metric tons) 157 166 173 169 nvironmental Icons ENGINE FUEL RAW EFFICIENCY MATERIALS REDUCE ENERGY USE INTENSITY IN FACILITIES Recycling rate (%) 89 90 90 89 FACILITIES & 2020OPERATIONS GOAL 32 PERCENT nvironmental Icons U.S. hazardous waste (metric tons) 85 92 78 63 RAW ENGINE FUEL2016 PROGRESSLOGISTICS RAW • 24MATERIALS PERCENT Water use (millions of gallons) 958 972 947 934 EFFICIENCY MATERIALS

2 Enterprise ISO 14001 certified entities 108 PRODUCTS COMMUNICATIONS IN USE & MARKETING REDUCE CO2 PER KG OF GOODS SHIPPED Manufacturing sites certified to ISO 14001 / OHSAS 18001 (%) 96 2020 GOALRAW 10 PERCENT LOGISTICS 3,4 SUPPLIER MATERIALS EMPLOYEE Energy intensity reduction since 2010 (%) 14 19 24 24 ENGAGEMENT ENGAGEMENT 2016 PROGRESS • 3.7 PERCENT GHG intensity reduction since 2010 (%) 3,4 17 22 29 30

FACILITIES & 3 OPERATIONS Water intensity reduction since 2010 (%) 28 35 41 42 2 REDUCEPRODUCTS CO FROM PRODUCTSCOMMUNICATIONS IN USE ANNUALLY IN USE & MARKETING Net sales (millions U.S. dollars) 17,301 19,221 19,110 17,509 GOAL 3.5 MILLION METRIC TONS (MMT)

1 Primary energy excludes sold electricity and associated fuel usage 2016 PROGRESS • 2.9 MMT 2 Representing 372 HSEMS sites / corporate offices 3 Intensity defined as adjusted for sales (energy / GHG) or hours worked (water) SUPPLIER EMPLOYEE 4 Energy and GHG intensity reduction includes consolidated entities only ENGAGEMENT ENGAGEMENT

19

FACILITIES &

OPERATIONS t ENVIRONMENT // PRODUCT STEWARDSHIP PRODUCT STEWARDSHIP IS KEY

Corporate Responsibility TO SUSTAINABILITY AT CUMMINS Right Environment Safety Cummins powers the interconnected world we live Envolve Cummins is the comprehensive lens through which Cummins Diversity & Inclusion views environmental sustainability, from design to manufacture to end Workforce in today with an eye on what’s ahead tomorrow. of life. Our environmental sustainability plan is the way we carry out From trucks delivering needed goods, to trains our priorities and goals and initiatives in our action areas. Financial Performance Innovation carrying passengers and freight, to generators Customers powering hospitals, schools and data centers, Governance Cummins works to make people’s lives better of the ENVIRONMENTAL IMPACTS of a product are with the least environmental impact possible. N IO T SOURCE determined in the design phase C A E E Y O The company’s product stewardship goal means working L P M E DESIGN

with an environmental mindset about product design, use,

remanufacture and end of life. Envolve Cummins (right) is of Cummins WATER USE MANUFACTURE is from raw material etraction the comprehensive lens through which the company views environmental sustainability. Cummins’ Environmental Sustainability Plan guides the company as it strives to meet goals in three action areas: Cummins of Cummins WASTE Making people’s lives better. comes from raw »» Reducing Cummins’ carbon footprint materials and processing TRANSPORT »» Using fewer natural resources »» Partnering to solve complex problems. of Cummins GHG FOOTPRINT from products in use REUSE USE 5 less ENERGY used by remanufacturing

20 t USING RESOURCES team is connecting with the PRODUCTS IN to improve the efficiency of the Over the next five years, Cummins RESPONSIBLY various functions in charge of USE EFFICIENCY company’s products in use. expects to work with 20 percent materials work at Cummins to of its customer base, touching One of Cummins goals (page 14) As the largest independent diesel elevate their importance. Greenhouse gas (GHG) emissions nearly 2 million engines as it tailors Corporate Responsibility is to partner with its customers to engine manufacturer in the world, from Cummins products in use are engine specifications to customer Right Environment Cummins has the means and the The goal is to use the right amount the company’s largest environmental improve the fuel efficiency of the Safety applications. The company wants of material in everything the company company’s products in use, and by Diversity & Inclusion commitment to reduce both the impact and represent an estimated to ensure customers have the latest Workforce makes to avoid unnecessary use extension reduce carbon dioxide resources it uses to build products 99 percent of Cummins’ GHG tools to improve fuel efficiency. of water and energy throughout a (CO ). The company wants to cut and the fuel burned to operate them. footprint due to fossil fuel use. 2 product’s lifecycle. That means using CO emissions by nearly 16 million Financial Performance Cummins’ biggest opportunity to 2 Seventy percent of a product’s Innovation material optimization tools to ensure expand its product stewardship metric tons, saving customers up Customers environmental footprint is determined structural integrity with minimized beyond the upfront design of its to $6.3 billion through greater fuel Governance during the earliest phases of the material and specifying that raw products is in working with customers efficiency, by the end of 2020. design process. The earlier the material is finished as close as company can incorporate innovative possible to the ending net shape design for the efficient use of fuel and of the component. raw materials, the greater its ability to reduce the environmental footprint Packaging leaders at Cummins of Cummins products both in their are working to better understand design and use. what metrics and actions will drive consistent and environmentally sound A Cummins team for material packaging decisions. Their goals efficiency is working now on ways to for sustainable packaging solutions make the company’s products more are to reduce packaging waste and eco-efficient in the future. increase reusable solutions as well as the use of recyclable material. Many of the concepts of the “circular economy” and its emphasis on re-use and recycling are not new, but this Cummins has its own supercomputer, Clessie 2.0, which powers sophisticated design programs. It plays a key role in Cummins’ efforts to reduce the amount of material it uses in its products without affecting robustness.

21 t REMANUFACTURING THE NUMBERS BEHIND REMANUFACTURING PRODUCT SAFETY The need for remanufacturing will increase in a resource constrained world. Product safety is a top priority at Remanufacturing, which Cummins has done for 60 years, requires far less Corporate Responsibility Cummins. The company’s Product less energy energy and natural resources to extend life than to build new products. Right Environment Safety Policy states: 85% is required Safety Diversity & Inclusion »» Cummins will design, manufacture, Remanufacturing maximizes benefits for customers and the environment. Workforce sell, distribute and service all products Cummins products are designed with this in mind, enabling them to have so that they are safe to use for the a long, and increasingly fuel-efficient, life. of an engine can be Financial Performance described and intended purpose. 85% reused Innovation Through the common application of salvage technology, component re-use Customers »» Cummins will provide its customers, guidelines and remanufacturing-specific policies and procedures, the company Governance its partners, the company’s employees has become increasingly sophisticated in what it can remanufacture and for engines sold and society with products that are safe how long it can extend a product’s life. 19,000 in 2016 to operate, maintain, adjust and repair when used as intended. In many cases, remanufactured products today are “upcycled” to include design, emissions, fuel economy and quality upgrades. »» Each Cummins employee will regard product safety as a top priority. REGULATIONS results, and later to any necessary »» Each Cummins employee is reporting and corrective action Cummins strives to have robust responsible for applying the policy processes if required. certification and compliance in his or her individual and collective processes, adhering to all emissions work activity. The company works collaboratively regulations worldwide, including with emission regulators globally Each Cummins employee is expected prohibiting the use of defeat devices to ensure emission standards are to adhere to the spirit as well as the in all of the company’s products. clear, appropriately stringent, and letter of the Product Safety Policy. enforceable, in an effort to ensure The company is transparent with all Cummins products deliver on the governing bodies in these processes, company’s commitments to its from disclosure of the design and customers and the environment operation of the emission control in real world use every day. system, to test processes and

22 t 85% less energy is required Cummins engines are subject MATERIAL while RoHS restricts the use of LIFECYCLE ANALYSIS EXTENDS to extensive statutory and COMPLIANCE certain hazardous substances in DEEPER INTO THE PRODUCT LINE regulatory requirements that directly electrical and electronic products. Cummins has continued its lifecycle analysis (LCA) work on several more or indirectly impose standards Material compliance is key to products in the past year to estimate their total environmental impact. Corporate Responsibility Compliance with the company’s governing emissions and noise. Cummins' product stewardship. Right Environment policies is designed into the materials While reducing products in-use fuel consumption has the greatest Safety The company has substantially The company maintains an internal Cummins uses and the company potential impact, the analyses revealed other interesting findings. Diversity & Inclusion increased its global environmental corporate policy regarding the use of Workforce partners with its suppliers to ensure compliance presence and expertise A team at Purdue University, for example, conducted an LCA on prohibited and restricted substances Cummins’ global compliance to understand and meet emerging a Cummins turbocharger, looking into its energy and water usage, in its products. Cummins’ policies requirements are met. The company Financial Performance product environmental regulations along with its greenhouse gas emissions. The team concluded Innovation also take into account key global maintains global policies to carry around the world. that use of recycled aluminum is key to reducing water and energy Customers environmental regulations as well out key processes such as the Governance consumption from “cradle-to-gate” stage and identified which The company’s ability to comply with as very specific ones driven by the Reasonable Country of Origin manufacturing processes had the greatest impact. these and future emission standards European Union such as Registration, Inquiry process, consistent with is an essential element in maintaining Evaluation, Authorization and the Organization for Economic In a project done by Montana State University students on a 455 kW Cummins’ leadership position in Restriction of Chemicals (REACH); Cooperation and Development Emergency Standby Power (ESP) diesel generator, the results revealed regulated markets. The company Restriction of Hazardous Substances (OECD) due diligence framework. that, similar to on-highway engines, diesel generators consumed the has made, and will continue to (RoHS), and End of Life Vehicle most energy (greater 95 percent of the entire life cycle) during the use make, significant capital and regulations for automotive products. phase, followed by materials, transportation, and then manufacturing. research expenditures to comply REACH addresses the production The company’s LCA work began in 2011 when Cummins partnered with with these standards. and use of chemical substances the Massachusetts Institute of Technology to conduct an analysis of the To see more, go to page 12 of and their potential impacts on both company’s flagship product, the ISX 15L engine. In addition to use-phase Cummins 2016 Annual Report human health and the environment, fuel consumption, metals and transportation combined accounted for on the 10K Form. about three-quarters of the embodied energy required to make an engine.

“Embodied energy” is a metric used to quantify all of the energy required to make a product and is a good proxy for environmental impacts broadly.

Cummins estimates the LCAs conducted so far cover about 70 percent of the company’s revenues.

23 t PARTNERING WITH CUSTOMERS FOR BETTER FUEL EFFICIENCY Cummins provides a complete set of collaborative solutions to help customers maximize their fuel efficiency and reduce greenhouse gas emissions. From the development of products that are optimized for specific market segments, to the use of software to assist in the truck specification process, to the ability to customize electronic engine settings and parameters. Cummins helps customers reduce their carbon footprint throughout the life of the product.

Click red circles in the photo for more detail.

24 t ENVIRONMENT // FACILITY STRATEGY CUMMINS TAKES STEPS TO IMPROVE

Corporate Responsibility ENVIRONMENTAL MANAGEMENT nvironmental Icons ENGINE FUEL RAW Right Environment EFFICIENCY MATERIALS RENEWABLE STRATEGY Safety Cummins improved the effectiveness of its facilities’ ENERGY reduce heat gain or loss. Heating, Diversity & Inclusion cooling and recirculation systemsRAW Cummins 2020 energy goal included LOGISTICS Workforce environmental management in 2016 by aligning strategies STRATEGY MATERIALS offer opportunities for efficiency a commitment to increase the and processes among key groups within the company Saving energy has both

as do boilersPRODUCTS and burners. COMMUNICATIONS amount of energy sourced from IN USE & MARKETING Financial Performance environmental and bottom-line so they can act faster and take better advantage of more renewable power. Innovation benefits. The company estimates Cummins has been working to broadly available tools, training and best practice sharing. SUPPLIER EMPLOYEE Customers ENGAGEMENT ENGAGEMENT savings of nearly $50 million per recover energy generated by The company is looking to expand Governance For example, the successful “The common approach to tools year from its energy efficiency engines and generators in its test onsite renewables where it makes FACILITIES & OPERATIONS Cummins Energy Champion for all three media makes it easier efforts. Cummins’ strategy cells by installing equipment that can sense and has committed up to program, created in 2009, evolved to teach, understand and support focuses on four key areas: capture that power for use by the $10 million for these projects, in 2016 into the Environmental all the material.” »» Saving and conserving energy plant or for sale to a local utility. Champion program. by improving existing facilities. The Energy Champion program Other components of the ISO 50001 PROGRESS “We wanted sites to have a holistic trained employees to look for »» Recovering energy from the company’s energy strategy, include: 1 Total percentage 40 sites view when reviewing facility projects, examples where energy was wasted. cells where engines are tested. of carbon footprint ISO 50001 SITE 32 sites Target not just look through the lens of one In 2016, five sessions with a total IMPLEMENTATION »» Building energy conservation Target media like energy,” said Nichole of 166 attendees representing a into new construction. Cummins plans to implement the Morris, Environmental Manager and good portion of the company’s »» Enhancing energy management. ISO 50001 international energy Cummins Water Program Leader. footprint attended the much broader 18 sites management system at 40 sites, Environmental Champion training. Ten years into its energy efficiency “This way, you look at the benefits or 90 percent of its carbon footprint The goal is to train champions to look journey, Cummins is still completing 9 sites and the disadvantages of a project by 2020. Here’s a look at the for a host of environmental problems projects with very good returns. with the media of water, waste and cumulative number facilities meeting at 50 priority sites for the company The average return on investment energy in mind – as you can have those standards by year and the total 3 sites comprising 90 percent of Cummins’ is 32 percent. High efficiency good energy projects with positive percentage of the company’s carbon environmental footprint. “smart” lighting and energy efficient or negative impacts,” she said. footprint they cover. windows, doors, walls and roofs

1 15 1 2017 2020

25 t nvironmental Icons ENGINE FUEL RAW EFFICIENCY MATERIALS

RAW LOGISTICS MATERIALS which could double Cummins’ »» Tangible: Generation and WATER assessment tools such as the projects, such as an alternative current onsite capacity. purchases must create Ceres Aqua GaugePRODUCTS (one of the COMMUNICATIONSfirst bio-tech system for producing STRATEGY IN USE & MARKETING environmental benefit, for companies to use this framework), high quality treated wastewater The company has eleven solar The company’s SUPPLIER EMPLOYEE Cummins, the community or both. a global water ENGAGEMENTrisk screen and theENGAGEMENT for process reuse at one of the Corporate Responsibility installations, the two most significant comprehensive water strategy “true cost of water” assessment that company’s engine plants. Right Environment »» Cost effective: Generation and being the 3.6 megawatt installation addresses both direct water use and Safety identifies waterFACILITIES costs & embedded in at the Beijing Foton Cummins purchase must be cost competitive OPERATIONS Cummins uses regenerative Diversity & Inclusion community engagement. Cummins activities such as pumping, electricity with traditional energy sources Workforce Engine Company Ltd. in China dynamometers (dynos) throughout has the opportunity through its more and chemical use. over the long term. and the 2 megawatt installation aggressive revised goal (page 14) to the company to capture the at the Jamestown Engine Plant in » Transparent: Cummins will be To achieve its 50 percent reduction, mechanical energy of engines in test Financial Performance » amplify water efficiency efforts, which Innovation Jamestown, New York. (U.S.A.). very transparent in its renewable is important for several reasons: to Cummins will expand the work it cells. The dynos also reduce cooling Customers accounting and in describing mitigate business risk; to be a good does with its sites in water program load, which allows cooling systems Governance Cummins is also exploring ways facility energy attributes. global citizen and to reduce costs management, including intensive to be smaller and use less water. to source even larger amounts of and compliance risk. engagement with higher water use renewable power off-site – up to Cummins’ strategy also identifies locations, water balance creation and 25 percent of the company’s total the critical role water plays in the In its water management program, sub-metering. The company also has power needs. The company has company’s supply chain. Almost the company uses innovative plans for high impact and showcase joined a power purchase consortium in China to explore opportunities there and has researched WATER RISKS opportunities in the U.S. A team is These are the five most water- working with a community group stressed river basins in the regions KRISHNA RIVER BASIN, INDIA HAI HO RIVER BASIN, CHINA in Columbus, Indiana (U.S.A.) on a where Cummins has operations. Phaltan Megasite – all facilities Beijing Foton Cummins Engine Co. Pune – Kothrud Engine Plant, Emission Solutions, distribution community solar project. To guide Each of these locations also falls Technical Center, India Office campus and logistics solutions the company’s decision making, within the company’s priority PANUCO RIVER BASIN, MEXICO 8.8% 3.3% Cummins created its own regions for achieving water San Luis Potosí – all facilities Renewable Energy Principles: neutrality. Overall, 45 percent 2.7% of Cummins’ water use is in »» Additional: Generation and water stressed areas. PARANA RIVER BASIN, LIMPOPO RIVER BASIN, purchases must have a net positive BRAZIL SOUTH AFRICA The size of the dot represents the size All Guarulhos operations Cummins South Africa distributor locations effect in the real world, increasing of the water basin in a particular region. and regional distribution center capacity of renewable power that The percentages refer to the amount of water 1.3% removed relative to Cummins’ total water use. <1% did not previously exist.

Cummins operations in waterstresse areas26 t nvironmental Icons ENGINE FUEL RAW EFFICIENCY MATERIALS

RAW LOGISTICS MATERIALS

PRODUCTS COMMUNICATIONS IN USE & MARKETING

SUPPLIER EMPLOYEE 90 percent of Cummins’ water WASTE finding an ENGAGEMENTalternative use ENGAGEMENTwithout HSE MANAGEMENT AUDITING footprint exists in the supply any reprocessing. Recovery and STRATEGY FACILITIES & SYSTEM AND DATA chain, mostly associated with the reuse of coolantsOPERATIONS and solvents is extraction and production of metals. The company follows another example. The recycling The company’s Enterprise CERTIFICATION Corporate Responsibility Environmental Management System waste management hierarchy of metals, paper or wood also Environmental goals are measured Right Environment A risk analysis and mapping exercise consistent with current industry (EMS), created in 2003, plays a through a structured audit process. Safety reduce the amount of waste that of the company’s top 200 suppliers critical role in Cummins’ global Diversity & Inclusion standards: avoid the generation has to be disposed. A third party auditor, Bureau Veritas environmental footprint reductions Workforce has been completed with Verisk of waste, reuse, recycle, and Certification (BVC), certifies the and other improvements. The Maplecroft to help Cummins better recover energy from waste. The company’s ultimate goal is HSEMS and the environmental understand water risk in its supply “Zero Disposal” (page 16) at company adopted a model that metrics Cummins collects. Financial Performance includes a common framework Innovation chain. The company is beginning Reducing packaging is one 30 Cummins facilities. Cummins to ensure a similar look, feel and Since 2011, BVC has also audited Customers to work with suppliers to help way Cummins tries to avoid the is also committed to avoiding the Governance fundamental approach throughout Cummins’ environmental footprint them develop less water generation of waste. Reusing waste generation of hazardous waste the organization. and the company’s data collection intensive techniques. might involve reusing pallets or and properly handling hazardous and verification processes. Cummins materials in the workplace. The EMS has the flexibility to allow supplements the audit sampling individual sites and businesses to conducted by BVC by conducting CUMMINS’ WASTE FOOTPRINT The definition for what constitutes NOTABLE address risks and opportunities its own annual audits using internally Iron and steel make up the largest component hazardous waste varies widely most important to them. Cummins In 2016, Cummins completed of Cummins’ waste footprint. trained HSE auditors. more than 185 packaging COMPOSTED by country. Cummins follows all has integrated health and safety 3 percent recycling and reduction projects appropriate local and regional Every site is audited on an annual globally – 14 projects saved RECYCLED PROCESS WASTE processes and procedures with 700 metric tons of wood, 1 percent OTHERS regulations. For U.S. sites that the environment since 2007, in basis. The company has developed 3 percent cardboard and plastic waste. an internal environmental auditor WASTE BURNED FOR produce hazardous waste, Cummins accordance with the international IRON & STEEL ENERGY RECOVERY 51 percent has a formal vendor pre-qualification standard OHSAS 18001 certification process, where 4 percent process to ensure the waste is Occupational Health & Safety employees complete a training LIQUIDS Management System, to create the course and then a series of 6 percent handled properly. company’s Enterprise Health, Safety audit levels. In 2016, more than CARDBOARD Cummins’ and Management System (HSEMS). 40 people were trained and there 9 percent waste footprint is a pool of 111 Health, Safety and The system has served as the Environment leaders certified as WASTE LANDFILLED / framework for driving continual INCINERATED WITHOUT HSE Lead Auditors. ENERGY RECOVERY improvement and efforts beyond 11 percent compliance at Cummins operations WOOD around the world. 14 percent

27 t STRATEGIC ACTIONS Here are some actions Cummins is taking to reach its goals in energy, waste and water. Corporate Responsibility AT A GLANCE Right Environment Safety Diversity & Inclusion Jamestown Engine Plant, in Jamestown, Workforce New York (U.S.A), is Cummins’ showcase project in the Department of Energy's Better Buildings Challenge. Financial Performance Innovation Customers Governance

REDUCE REUSE RECOVER RECYCLE REPLENISH Cummins’ building standards are Our facilities reuse 25 million We use 184 regenerative “Dumpster dives” are a Cummins Our definition of water neutrality based on international standards gallons of water each year. dynamometers in Cummins best practice to visibly show is that we offset the company’s (ASHRAE 189.1*) regarding the plants around the world to employees the trash that could own water use at a particular efficient use of energy and water. capture waste heat in engine have been recycled. location through conservation

*American Society of test cells and turn it into and/or restoration of available Heating, Refrigerating and productive energy. water sources. Air Conditioning Engineers

28 t ENVIRONMENT // PARTNERSHIPS & POLICY PARTNERING FOR CLEANER AIR, PARTNERING TO SOLVE ENVIRONMENTAL RESILIENCY Cummins is a corporate partner with Indiana University (IU) in its Prepared for Environmental Corporate Responsibility COMPLEX PROBLEMS Right Environment Change initiative, the second project funded Safety through IU’s Grand Challenges Program, Diversity & Inclusion Cummins’ partnerships and its policy which launched in 2015. Workforce IU will invest $55 million to help Indiana, advocacy efforts play key roles in the company’s Distinguished Professor of Biology Ellen Ketterson is Cummins' headquarters state in the U.S., Financial Performance leading IU’s effort. Innovation environmental strategy and performance. develop actionable solutions that prepare Customers businesses, communities and individuals They help Cummins meet product »» Support a balanced Agency (EPA) and the National Governance for the effects of ongoing environmental change. The initiative will create emission goals, use energy more global approach. Highway Traffic Safety Administration an Environmental Resilience Institute to better predict the impact of these efficiently and bring environmental Cummins has a long history of (NHTSA) finalized the second phase threats and facilitate collaboration between IU's faculty and Indiana solutions to the marketplace. demonstrating its leadership in of their national fuel efficiency and residents, businesses, nonprofits and the public sector. developing the technologies needed greenhouse gas (GHG) emission Four of the company’s Cummins is also working to reduce diesel black carbon emissions in to meet tough emissions standards regulations for medium- and 10 environmental sustainability partnership with the Heavy-Duty Diesel Vehicles and Engines Initiative (HDDI) and improve fuel efficiency that are heavy-duty commercial vehicles. principles focus on partnerships of the Climate and Clean Air Coalition, co-led by the governments of These regulations cover Cummins’ with legislative and regulatory the hallmarks of products across Canada, the United States and Switzerland alongside the International on-highway engines from 200 to entities to develop sound public the globe. Council on Clean Transportation (ICCT) and UN (United Nations) Environment. more than 600 horsepower output. policy that reduces Cummins’ For example, Cummins certified early Diesel engines today are responsible for about 19 percent of global black impact on the environment. The agencies released a final rule that to meet U.S. Phase 1 fuel efficiency carbon emissions, a short-lived climate pollutant that contributes to rapid They are: standards in 2013 and 2016 and sets new standards for engines, on- near-term climate change. The Soot-Free Urban Bus Fleets Project of the was part of a stakeholder group highway tractors, vocational vehicles, HDDI aims to secure commitments from 20 major cities around the world »» Help develop trailers and heavy-duty pickup trucks to shift all future bus procurement to soot-free engines that meet Euro VI responsible regulations. participating in a multi-year effort to advocate for the rule. and vans. The Phase 2 standards, emissions standards as a minimum. »» Promote technology development. intended to drive further reductions In August 2016, Cummins expressed Cummins is working in partnership with the ICCT and its implementing »» Advocate for incentives in fuel consumption and greenhouse partners to make available Cummins Euro VI technology to all OEM to accelerate progress. its readiness to provide fuel savings gas emissions, are an important step partners in target cities by 2018. and environmental benefits as the toward achieving national climate and U.S. Environmental Protection

29 t energy goals and delivering cost- Here’s a look at other ways saving benefits to owners. Cummins partnerships and policy PARTNERING FOR PROGRESS efforts related to the environment: The Phase 2 rule builds on the Cummins’ current public-private projects include (agency is the Department of Energy unless noted):

Corporate Responsibility Phase 1 regulatory framework Right Environment that recognizes the diversity and GOVERNMENT AGENCY PROJECT PARTNERS TECHNOLOGY OBJECTIVE Safety complexity of the commercial PARTNERSHIPS Sustained Low Johnson-Matthey, Low temp SCR catalyst & Sustained 90 percent NOx Reduction Diversity & Inclusion Temperature NOx Pacific Northwest system technologies at 150 degrees Celsius Workforce vehicle sector. Cummins’ longstanding partnerships Reduction National Laboratory (PNNL) with the U.S. Departments of Energy “The EPA and ARB (California 55% Brake thermal Cummins exclusive Multiple base engine and waste Demonstrate 55 percent BTE with Financial Performance (DOE), Defense (DOD) and other Air Resources Board) should work efficiency (BTE) diesel heat recovery technologies heavy duty diesel 15 liter engine Innovation federal and state agencies directly Customers collaboratively with the goal of support international and national SuperTruck II Peterbilt Motors, Advanced engine, drivetrain, 55 percent engine BTE with strong Governance maintaining a national, heavy-duty Eaton Corporation and vehicle technologies for focus on commercial viability; greater goals of reducing GHG emissions, Class 8 line-haul trucks than 125 percent freight efficiency NOx (oxides of nitrogen) and GHG improvement versus 2009 product petroleum consumption and program,” said Cummins Vice Advanced Research Cummins exclusive Advanced knock suppression Breakthrough high horsepower natural dependency, and ambient air President Srikanth Padmanabhan, Projects Agency – and efficiency enablement gas efficiency and power density levels quality non-attainment as well Energy (ARPA-E) high technologies President of the company’s Engine horsepower natural gas NOTABLE as enhanced military readiness. Business. “Cummins is committed Electric truck range Paccar, Argonne, Class 6 electric truck with Greater than 50 percent petroleum The company's recent to working with both agencies to extender engine National Renewable Range Extender Engine (diesel) reduction for 85 percent of Class 6 portfolio of government These partnerships help Energy Laboratory pickup and delivery applications co-funded technology determine the best path for achieving Cummins lead the United (NREL) , Ohio State development and system University (OSU) integration programs stands real-world reductions.” States and other markets in at $351.2 million in total Solid Oxide Fuel Cell Ceres, PNNL, University Solid oxide fuel cell technology 60 percent electrical efficiency for public / private research competitiveness, technology and of Connecticut operating on natural gas the off-grid data center market investment since 2010. customer success while continuing U.S. – China Clean Argonne, Oak Ridge, Medium duty electric truck with Cost-effective achievement of more to reduce criteria emissions Energy Research Center Purdue University, OSU, spark-ignited range extender than 50 percent freight efficiency –TRUCK University of Michigan, and other high efficiency vehicle improvement compared to today’s from global transportation and Freightliner Custom technologies medium-and heavy duty vehicles Chassis Corp. distributed power generation fleets. ARPA-E NextCar Purdue, Peloton, Multiple controls concepts Class 8 truck fuel savings exceeding Peterbilt, NREL, ZF capitalizing on information and 20 percent with technology costing connectivity technologies to less than $3,000 per truck save fuel

Department of Achates Power Advanced Combat Engine Demonstrate low heat rejection, Defense Advanced based on Opposed Piston, Two high power density, high efficiency Combat Engine Stroke Engine Technology technologies for future combat vehicles

30 t GOVERNMENT providing technology advice and for emissions regulations and a the environment, transportation RELATIONS thought leadership to the government nondiscriminatory certification/testing and trade issues impacting THE REST OF in preparation for the standard. mechanism for engines and vehicles. diesel technology. THE STORY The company’s Government The company has also brought »» The Health Effects Institute Cummins frequently posts stories on Corporate Responsibility Cummins has also actively Relations staff advocates globally together stakeholders from the U.S. its sustainability efforts on The Block, founded by the EPA and industry Right Environment supported the introduction of a the company’s social media channel. for policies, legislation, government Department of Energy and China’s Safety leaders including Cummins, Here are some stories on environmental Goods and Services Tax (GST) Diversity & Inclusion research funding and regulatory Ministry of Science and Technology to sustainability at Cummins you might be is a non-partisan organization interested in: Workforce by the Indian government, which guidelines that promote products develop a joint U.S. – China research committed to providing high- is on track to be introduced in and technologies that benefit program modeled after Read how SuperTruck quality, impartial, and relevant July 2017. The company continues Cummins in the Financial Performance the environment. with a goal to further improve engine science regarding the effects U.K. implemented Innovation to work with the government and and vehicle fuel efficiency and reduce a new program to Customers of air pollution on health. Efforts in the United States include industry associations to identify develop ideas that Governance greenhouse gases. could help the business meet the working with Congress, the White sectors in India that could make the »» BSR (Business for Social company’s environmental goals. House, state governments, trade country globally competitive in the Responsibility), which works associations and industry to support manufacturing sector. This work is BUSINESS with member companies to See how Cummins is working to become a the EPA in developing fuel efficiency part of the “Make in India” initiative COALITIONS develop sustainable business paperless company. regulations for heavy-duty vehicles, of Prime Minister Narendra Modi. AND COUNCILS strategies through research and to broadly educate policy makers and cross-sector collaboration. Learn about how the role of the Cummins is a member of several key company’s Energy Champions about how regulations, economic Cummins is also working with non-profit organizations that promote »» Rocky Mountain Institute evolved, making them development and competitiveness multiple stakeholders including the Environmental Champions. sustainability and responsible Business Renewables Center, can flourish if handled properly. government to help in cleaning the air technology, including: is a member-based platform that of Delhi under the “Cleaner Air Delhi” See how Cummins is partnering with Purdue University to reduce Outside the U.S., Cummins serves to streamline and accelerate initiative. This initiative will work on »» The Diesel Technology Forum, fuel consumption by trucks using corporate procurement of off-site, supported the Indian Government finding executable actions that can which is dedicated to raising online cloud technology. utility-scale wind and solar energy. in moving early to Euro IV emissions be taken in a scientific- and data- awareness about the importance of Read about the regulations. Following this diesel engines, fuel and technology. based manner to improve the The company also sits on the U.S. green features collaborative initiative, Cummins also quality of Delhi’s air. Since it was founded in 2000, of Cummins new EPA’s Clean Air Act Advisory Council Distribution Business supported the effort by the Indian the forum has emerged as a and the North American Council for Headquarters In China, Cummins is advocating for in Indianapolis, government to transition to Euro leading source of information on Freight Efficiency. Indiana (U.S.A.). an effective enforcement environment VI norms by 2020. This includes agriculture, economics, energy,

31 t The road to a low carbon future to look more than 30 years into the PARTNERING FOR A future to better understand the range is littered with questions. of global regulatory, technological and societal factors that could present Corporate Responsibility GLIMPSE OF WHAT Will there be major shifts in the transportation used to move risks as well as opportunities. Right Environment Safety people and freight? What about autonomous vehicles? How THE FUTURE HOLDS The goal of this effort is to ensure Diversity & Inclusion about fuel cells? Will there be more regulations to reduce air Workforce that Cummins’ business planning pollution and lower greenhouse gases? and investments are informed and contemplate all major scenarios Financial Performance These are not only interesting Consider one example of a Innovation that could impact the business questions, they are critical to technological transformation that Customers as the future unfolds. Governance Cummins’ long-term success Professors Sperling and Ogden laid and sustainability. out in regards to infrastructure: as Put simply, scenario planning is not use of alternative fuels expand and a prediction of the future, but a tool Two notable guests, distinguished diversify, the placement of fueling or to establish an internally consistent scholars Dan Sperling and Joan charging stations will be a significant view of what may lie ahead to NOTABLE Ogden from the Institute for challenge to support the range of inform planning. In 2016, Cummins Transportation Studies at the introduced a vision power sources represented on any University of California at Davis, “Humans are incredibly creative statement for new given stretch of highway. product design: met Cummins leaders and and inventive, but only when we Powering the future employees in Columbus, Indiana As GPS technology improves, focus on particular challenges – through product innovation that makes (U.S.A.) to discuss the future of however, the world may need fewer our resources, our intellectual people’s lives better and reduces our low carbon transportation. overall stations as people are better abilities, our R&D and our policies,” environmental footprint. able to anticipate their fueling needs Sperling said. “As we focus more “In many ways we are seeing more and plan their stops. on efficiency, lowering pollution change now and in the next few and sustainability, we will see an years than we’ve seen perhaps In preparation for this transformation accelerating rate of change in even since the Model T,” Sperling and many other uncertainties, our technologies and our told employees. Cummins leaders have been University of California at Davis Distinguished Professor Dan Sperling discusses the transportation systems.” future of low carbon transportation with top Cummins leaders. Sperling leads the conducting scenario planning over university’s Institute for Transportation Studies. the past year, meeting with experts

32 t SOCIAL // CORPORATE RESPONSIBILITY COMMUNITY

CORPORATE RESPONSIBILITY IMPROVEMENT Right Environment Safety IS A CORPORATE Diversity & Inclusion Workforce RESPONSIBILITY

Financial Performance Innovation AT CUMMINS Customers Governance Cummins employees worked to build stronger communities around the world in 2016, expanding opportunities for young people in technical fields, crafting innovative programs to improve the NOTABLE environment, and working with community leaders In 1954, then Cummins CEO J. Irwin Miller to help adults with challenges ranging from finding codified the company's values, beliefs and day care for their children to food insecurity. principles in the creation of the Cummins Foundation, one of the “We all lead such busy lives, balancing things at work and at home. world's first corporate And yet, year after year, our dedicated and inspired employees go philanthropic institutions. the extra mile to help people in our communities solve problems,” said Mary Chandler, Vice President of Corporate Responsibility and CEO of the Cummins Foundation.

A team of Cummins employees checks the water quality on a stream near Shangzhuang, China, a village near Beijing. The multi-faceted project was one of the winners in the company’s annual Environmental Challenge in 2016.

33 t Cummins’ Corporate KEY METRICS Cummins also operates several EVERY EMPLOYEE Responsibility function is not foundations to support its corporate In 2016, Cummins employees EVERY COMMUNITY only about employees working responsibility efforts. In 2016, the worked on community projects Here’s a look at participation in to improve their communities. company gave $13.9 million through the company’s Every Employee CORPORATE RESPONSIBILITY across the globe. For a third Every Community program. It’s also about creating the right grants and other strategic community Right Environment consecutive year, participation in Safety environment within the company investments to support employee led the company’s Every Employee Diversity & Inclusion for all employees to flourish as projects in more than 25 countries, Workforce Every Community (EEEC) program leaders, neighbors and engaged including four that received support exceeded the company’s goal of members of global communities. for the first time. (To learn more 70 percent. In 2016, more than Financial Performance about the company’s Community Innovation The company encourages employees 50,000 employees, joint venture Development Grants, see page 37.) Customers to focus their efforts on three areas employees and contractors Governance where it believes their work skills honored the company’s 2014 50,000 EMPLOYEES // 73% most align with community needs: Corporate Responsibility 2015 53,749 EMPLOYEES // 80% education, the environment and commitment by engaging in THE REST OF THE STORY 2016 52,577 EMPLOYEES // 80% social justice/equality of opportunity. community improvement efforts. Cummins frequently posts stories on its sustainability efforts on The Block, Cummins leaders also play Although the EEEC program the company’s social media channel. an important role in the company’s provides employees at least four Here are some stories on corporate ENVIRONMENTAL 100 responsibility you might be interested in: CHALLENGE corporate responsibility efforts, hours of work time annually to removing obstacles and focusing Read more about the Here’s a look at the number of projects devote to community improvement company’s Every Employee 80 in the company’s Environmental attention on areas most in need projects, many invest much more Every Community initiative. Challenge program since 2014. of help. than that with their supervisor’s Learn more about the company’s 60 approval. Employees reported Environmental Challenge. spending more than 400,000 hours See how the company’s on community initiatives in 2016. TEC: Technical Education 40 for Communities program is changing lives.

20 Learn more about Cummins’ 87 PROJECTS 62 PROJECTS 88 PROJECTS

corporate responsibility partnership with Komatsu.

0 2014 2015 2016

34 t BUILDING projects, many building on the In 2016, Komatsu Inc., one of ON SUCCESS success of previous years, were the world’s largest equipment MEET JUMBO INYANG completed in 2016, engaging manufacturers, agreed to partner Most community initiatives are 17,400 employees from 23 countries. with Cummins in several TEC CORPORATE RESPONSIBILITY organized by the company’s schools. The partnership is building Right Environment Community Involvement Teams (CITs). Although each Environmental Safety on the already strong business Challenge project had specific Diversity & Inclusion These teams are typically site-based relationship between Cummins Workforce strengths, 19 were determined to and structured around Cummins’ and Komatsu. three corporate responsibility be the most impactful, and were declared global Challenge winners. TEC now operates in 18 locations Financial Performance focus areas. Innovation Each global winner will receive around the world with more than Customers Once again in 2016, many CITs $10,000 to donate to a community 20 corporate partners. Governance competed in the company’s partner of its choice. Five additional Environmental Challenge. Now in projects were awarded $5,000 each, NOTABLE KEEPING OUR its eighth year, the Challenge is a also to be donated to a community The quickest way to grasp the impact of Cummins’ TEC: In 2016, Cummins COMMITMENT employees worked competition to produce the most partner. In the past, prize money Technical Education for Communities program is to listen on community STRONG improvement initiatives impactful service projects dealing has been used to scale projects in 59 different countries. to the students involved in the initiative. For many, access to a with the environment. Eighty-seven and further increase impact. In 2017, Cummins will build on technical education can be the catalyst needed to get a good the success of its community job that will support them and their families for years to come. The company’s TEC: Technical programs, always keeping in Education for Communities program mind the fundamental purpose For Jumbo Jeremiah Inyang, a 21-year-old living in Lagos, continued to grow and thrive in 2016. of corporate responsibility. Nigeria, TEC provided an opportunity to revitalize his education TEC works with schools and other after enrolling in the Electrotechnics program at the Institute for industry partners to teach students “What’s most important is how Industrial Technology, TEC’s partner school in Lagos, in 2014. the technical and life skills needed steadfast and committed we are Click here to see a video on Inyang’s experience. for a productive career. as a company to the people of our communities,” Chandler said. “Community involvement is as ingrained in the culture and heart of Cummins as the color red.” Cummins employees in South Africa engaged with a daycare center in 2016.

35 t THE CUMMINS The Cummins Foundation is governed by these individuals and committees: CORPORATE RESPONSIBILITY FOUNDATION Right Environment Safety Diversity & Inclusion Workforce BOARD OF FOUNDATION AUDIT INVESTMENT DIRECTORS OFFICERS COMMITTEE COMMITTEE

Financial Performance Innovation CHAIRMAN DIRECTOR CHIEF CHAIR CHAIR Customers TOM LINEBARGER TONY SATTERTHWAITE EXECUTIVE OFFICER CHRIS CLULOW GLORIA GRIESINGER Governance Chairman and CEO, Cummins Vice President – President, MARY CHANDLER Vice President – Controller, Assistant Treasurer, Cummins Cummins Distribution Business Vice President – Corporate Cummins DIRECTOR Responsibility, Cummins ADAM SCHUMM MARY CHANDLER DIRECTOR LUTHER PETERS Executive Director – Vice President – Corporate ANANT TALAULICAR TREASURER Vice President – Controller, Investor Relations, Cummins Responsibility, Cummins Vice President – Chairman, AARON KALUF Components Business, Cummins Cummins India Corporate Responsibility RAKESH GANGWANI DIRECTOR Finance Controller, Cummins MARK SMITH Senior Director – Corporate RICH FREELAND DIRECTOR Vice President – Financial Operations, Development, Cummins President and Chief PAT WARD SECRETARY Cummins Operating Officer, Cummins Vice President – Chief JULIE DEL GENIO Financial Officer, Cummins Director – Corporate Responsibility, DIRECTOR Cummins WILL MILLER DIRECTOR Member of the Cummins TRACY EMBREE Board of Directors Vice President – President, Components Business, Cummins DIRECTOR MARYA ROSE Vice President and Chief Administrative Officer, Cummins

36 t The CDG program funded The projects aligned both with the CUMMINS FOUNDATION GRANTS projects like Giqueaux’s in more company’s global priority areas of than 25 countries around the world education, environment and social in 2016, including four that received justice/equality of opportunity, as well CORPORATE RESPONSIBILITY SUPPORT EMPLOYEES BUILDING support for the first time. Grant as defined regional or site strategies Right Environment Safety STRONGER COMMUNITIES requests are made by Cummins for corporate responsibility. Diversity & Inclusion employees on behalf of a community Workforce Cummins’ leaders frequently play The Cummins employees partnered partner, providing opportunities for As a Human Resources Manager in Cummins’ Distribution an important role in CDG projects, with the nonprofit TECHO Argentina employees to engage in a more Financial Performance Business in Buenos Aires, Argentina, Natalia Giqueaux working with employees to set to help unemployed community meaningful way. Innovation knows how important proper job training can be for priorities and address obstacles. members receive job training Customers All CDG projects must be located For example, Pedro Zermeno, Governance succeeding in a career. So when she and her colleagues and other skills. With a $20,000 in communities where Cummins General Manager in the Latin saw people in their community struggling to get jobs, Community Development Grant employees live or work. The company America Distribution Business, (CDG) from the Cummins Foundation, they put their skills to work to make a difference. believes strongly that the grants was instrumental in the Cummins- the partnership reached some should support employee efforts TECHO project. 250 people with classes in areas to build stronger communities. such as electricity, plumbing Giqueaux said she felt tremendous and more. Cummins employees In 2016, Cummins gave satisfaction in addressing a participated in mock interviews and $13.9 million through CDGs community need in such a other activities to help participants and other strategic community meaningful way. prepare for the job market. investments to support employee- “TECHO provides educational led projects such as refugee language “I love encouraging young people to assistance, psychological support immersion, educational greenhouses, pursue their dreams, whatever those and job training programs, like our revitalizing food pantries, cleanup may be, and showing them how we Cummins job program,” she said. of polluted rivers, leadership training achieved ours," Giqueaux said. “Partnering with them meant we for children with disabilities and could help families get a home or much more. help community members gain access to water or other vital Cummins employee Natalia Giqueaux community services. That is teaches a job training class in Buenos Aires, Argentina. very rewarding to me.”

37 t SOCIAL // RIGHT ENVIRONMENT // SAFETY SAFETY HEALTH & SAFETY PERFORMANCE INDICATORS Corporate Responsibility TO FOCUS ON ‘FANTASTIC Here’s a look at key trends in health Actual RIGHT ENVIRONMENT Target SAFETY and safety at Cummins since 2006. FOUR’ IN 2017 eerit ase ate niator Diversity & Inclusion Workforce SEVERITY CASE RATE Cummins saw improvements in several key safety . Financial Performance Innovation performance metrics in 2016, including a 20 percent . Customers Governance increase in training hours for employees and an . improving trend in both Major Injuries and . Restricted Work Day cases.

. The company’s Distribution Business, Health & Safety function launched a While Cummins made important 1 11 1 13 1 1 1 meanwhile, achieved significant Global Action Plan program to deploy strides in strategic as well as tactical niene ate niator improvements in several areas across the company what it learned areas of health and safety, the INCIDENCE RATE including 20 fewer recordable injuries from its major injury investigations to company did miss some aggressive 1. in 2016 compared to 2015, resulting prevent recurrences. Health & Safety goals in 2016 and saw a 3.5 percent

in a record low Incidence Rate for also initiated multiple projects in increase in total recordable injuries 1. that business segment. 2016 to leverage leading indicators globally. Cummins leadership has

for performance measurement and demanded that targets for 2017 . Cummins sites also completed predictive analytics. remain aggressive, demonstrating a record number of ergonomic their commitment to protecting the assessments and the company’s . company’s most important asset,

its employees. . 1 11 1 13 1 1 1

The company’s Severity Case Rate is calculated based on the number of injuries and illnesses resulting in lost work days per 100 employees. Cummins Incidence Rate is the relative number of recordable injuries and illnesses per 100 employees.

38 t “The Fantastic Four initiatives have »» Restricted Work Day cases CUMMINS HEALTH & SAFETY TRENDS been identified as having the most fell dramatically in 2016, Cummins’ Health & Safety team tracks a number of key performance indicators significant impact on our combined down 26 percent compared to evaluate how the company is doing. Here are four of those indicators. health and safety performance,” to the year before. Restricted Corporate Responsibility said Michelle Garner-Janna, Work Days also fell but not as RIGHT ENVIRONMENT SAFETY Severity Case Rate Incidence Rate Major Injury Rate Ergo Incidence Rate Executive Director of Corporate dramatically, dropping 8 percent. Diversity & Inclusion Health and Safety. “Building and »» A renewed focus on major injury Workforce 2016 0.225 0.627 0.041 0.158 deploying robust processes and reduction was implemented, toolkits for these areas, and ensuring 2015 0.195 0.588 0.044 0.127 including the creation of a cross- Financial Performance sustainable systems, allows for both functional team to review incidents, Innovation short and long term risk reduction Customers 2014 0.187 0.610 0.043 0.149 identify key learnings and create Governance and continued improvement.” 2013 0.196 0.650 0.040 0.171 action plans to prevent future major injuries. This led to the launch of 2012 0.191 0.690 0.035 0.173 HIGHLIGHTS a preventive program known as Health and Safety highlights “Global Action Plans” to verify that *Because of changes made to improve the company’s Health & Safety data collection, data for 2015 appropriate preventive actions are was recalculated. The revised 2015 data is presented here. for 2016 included: deployed across the company. »» The Live It. Lead It. program »» The development and »» Incident investigation and was expanded to include a version ‘FANTASTIC FOUR’ implementation of an investigation root cause analysis not just for leaders but for all FOCUS AREAS and root cause analysis program »» Ergonomic injury prevention employees known as Passport Health & Safety leaders believe to help Health & Safety personnel to Safety. This training continues focusing on the “Fantastic Four,” systematically and thoroughly The Health & Safety function also to bolster Cummins’ culture of a group of key health and safety investigate incidents. By identifying has identified Health, Safety and interdependence in health and initiatives it has identified, will help the the true root causes of an Environmental Talent Management safety. More than 1.5 million hours company improve on its key metrics incident – for example, employee as a key strategic focus for 2017. were dedicated to safety training in 2017. The focus areas are: behaviors, uneven work surfaces, This cross-functional led initiative in 2016 compared to just or ergonomic risks – Cummins »» Strengthening the health is designed to attract, develop and under 1.3 million in 2015. can deploy adequate and safety culture retain high performing employees to meet the function’s strategic goals mitigation measures and »» Major injury reduction and objectives. prevent future incidents.

39 t »» The company continued its AREAS FOR LOOKING AHEAD focus on preventing ergonomic IMPROVEMENT In 2017, culture will continue to JAMESTOWN WINS ANOTHER ERGO CUP injuries, with more than be key as the company builds on 4,000 job assessments logged In 2016, Cummins Major Injury Rate Corporate Responsibility existing programs to invigorate in The HumanTech System – showed a 9 percent improvement as RIGHT ENVIRONMENT compared to 2015, but was still over employees’ dedication to health SAFETY Cummins’ ergonomic software. and safety. Diversity & Inclusion Significant focus has been the company’s goal. Workforce placed on reducing moderate The Severity Case Rate, the number “What matters most for Cummins to and high risks in the future. of injuries and illnesses resulting in achieve an injury free workplace is to Financial Performance »» The company’s Distribution continue to foster a culture of caring Innovation lost work days per 100 employees, Customers Business, which sells and missed its target as well. The rate along with a spirit of interdependence Governance services the full range of was 0.225 in 2016 compared to in which every employee looks out Cummins products, achieved 0.195 the previous year. not only for their own safety, but for a major turn-around in its safety the safety of their co-workers, family, In 2016, Health and Safety A team from Cummins’ Jamestown Engine Plant in Jamestown, metrics in 2016. Distribution friends and communities as well,” leaders also identified opportunities New York (U.S.A.) won the 5th-annual Cummins Ergo Cup implemented a campaign to Garner-Janna said. NOTABLE for improving the function’s global award for its innovative solution to an ergonomic challenge improve its safety culture and Cummins in 2016 reporting process. Data from 2015 “Our expectations are high for that all engine builders face: drive belt installation. conducted a Safety Pledge saw the segment’s Incidence Card campaign – the largest and 2016 were revised to reflect health and safety, our leadership is project of its kind to date Rate, which was four to five times The solution was designed and built entirely in house using this opportunity. fully committed to deliver and more at the company. Translated other areas of Cummins, fall pneumatics, 3D printing, and custom machined components to into 26 languages and importantly our employees and their completely eliminate the physical force involved with installation of shipped to more than roughly four-fold from its peak. And early in 2016, a workplace families fully deserve it,” she added. 200 global sites, the card the drive belt. This project contributed to $3.8 million in productivity was designed to foster violence event resulted in the death conversations about safety savings the company has recorded from Ergo Cup improvement of an employee. The company has between site leaders, projects over the past three years. managers and employees. taken several steps in the wake of

this incident including additional The winning team consisted of Greg Scott, Kendrick Knight, Nick employee training led by the Luther, Rory Hollabaugh, and Seth Primack. Knight is now a two-time company’s security function. winner of the cup, having won in 2014 for the Knight Knuckle, a tool to reduce the “kick” of torque that accompanies the use of high-torque tools to tighten screws and bolts.

40 t SOCIAL // RIGHT ENVIRONMENT // DIVERSITY & INCLUSION

AN UNWAVERING THE REST OF THE STORY Cummins frequently posts stories on Corporate Responsibility COMMITMENT TO its sustainability efforts on The Block, RIGHT ENVIRONMENT the company’s social media channel. Safety Here are some links to stories on diversity DIVERSITY AND and inclusion you might be interested in: DIVERSITY & INCLUSION Workforce See how Cummins celebrated INCLUSION Women’s History Month.

Financial Performance Learn more about Diversity Innovation While diversity and inclusion continue to make headlines Procurement’s big year in 2016. Customers Alexis M. Herman, Lead Director of the Cummins Board of Directors, talks about diversity around the world, Cummins took multiple steps in 2016 to and breaking down barriers in a 2016 speech to company employees in Columbus, Indiana Governance See an example of how Cummins (USA). Herman was the first African American to lead the U.S. Department of Labor. make sure its employees everywhere feel respected and honored Black History Month.

valued. This work was reflected in company-wide initiatives, equality as a human rights issue and Learn more about Cummins’ CELEBRATING decision to support the U.N. a new award and leadership messages. stresses the importance of men’s DIVERSITY Women’s Empowerment Principles. NOTABLE involvement in working toward a “When we make diversity and inclusion a priority, the company benefits,” said Cummins held its first gender-balanced world. The group For the first time in 2016, Women’s Conference Executive Director – Global Diversity and Right Environment Kelley Creveling. on March 11, 2016, generated interest in the initiative Cummins celebrated diversity with in hopes of increasing the gender in Columbus, Indiana “Our employees bring unique experiences, thoughts and perspectives at Cummins sites across the globe, the Chairman’s Diversity Award. diversity in the pool of candidates (U.S.A.). More than 250 from all over the world. It’s when we have those differences of thought, women leaders attended which developed their own events The award was created as an to convert to full-time employees. the day-long event, working together, that we’re most creative.” opportunity to recognize employees which was designed to to support the program. The team also analyzed exit data guide and inspire them. The company is committed to for their work in fostering diversity and noticed that a lot of women COMMITTING TO Cummins celebrated men and promoting gender equality in the and inclusion. The inaugural award were leaving the workforce to GENDER EQUALITY women champions for gender workplace, marketplace and in the winner was a team from India chosen pursue higher education. equality through a series of stories In 2016, Cummins joined thousands communities where it does business. for its dedication to promoting a running on the company’s internal In order to increase the likelihood of global companies who have signed gender-balanced workplace. website that profiled employees who these women would return to the U.N. Women’s Empowerment Led by the southern Indiana Women’s advocate for others. The champions The team created initiatives Cummins after their studies, the Principles. The seven principles Affinity Group, Cummins also described their motivation to be part focused on recruiting, developing team established a sabbatical emphasize the business case for launched the “HeForShe” campaign of HeForShe and their advice for and advancing women at the policy allowing for a two-year break promoting gender equality and in partnership with U.N. Women in empowering women. company. It set out with the goal in employment to pursue higher empowering women. early 2017. HeForShe sees gender of attracting more women interns education. During the sabbatical,

41 t female engineers could return to workplaces and communities. Their stand in the way of collaboration, Cummins to work as interns. stories were part of a series on the innovation, creativity and success. SPENDING ON The work that the India team did company’s internal website in which DIVERSE SUPPLIERS Embree addressed invisible diversity – continues to have a measurable leaders shared their thoughts on 2016 was a banner year for Cummins’ diversity procurement Corporate Responsibility how even unseen facets of diversity impact on women employees. diversity and inclusion with employees. team. The company was recognized by the National Business Inclusion RIGHT ENVIRONMENT such as personality and values need Safety Consortium in its inaugural 2016 NBIC Best-of-the Best Top 30 Rumsey’s story focused on to be embraced and celebrated if DIVERSITY & INCLUSION LEADING BY Corporations for Inclusion. The company was inducted into the Billion Workforce unconscious biases and the company employees want to work Dollar Roundtable, a prestigious advocate for best practices in corporate EXAMPLE importance of addressing biases together and deliver for customers. supplier diversity. Members must have exceeded $1 billion in annual Jennifer Rumsey, Vice President – before they become a problem She shared personal examples of the Financial Performance spending with diverse suppliers. Finally, Cummins was named Corporation Innovation Chief Technical Officer, and Tracy and cloud decision making and ways invisible diversity plays a large Customers of the Year in the Top Performers Category, its first national award from Embree, President – Components judgment. She shared a story when part in her team dynamic and how Governance the National Minority Supplier Development Council. Business, shared their diversity unconscious bias affected someone’s taking into consideration others’ work journeys with employees and behavior toward her and called upon styles and preferences has helped Here’s a look at the total amount of money Cummins spent in the U.S. challenged them to work toward more employees to acknowledge their her become a better leader. with diverse suppliers in eight categories*. inclusive environments in Cummins own biases and remove barriers that

1 $1.3 billion $1.2 billion MAINTAINING OUR CODE 1 $1.1 billion A key part of creating the right environment for success is the ability to investigate complaints made about employees’ $990 million treatment of each other. Cummins has Master Investigators around the world to investigate reported violations of the 1 company’s Code of Business Conduct. Here are some key indicators of that work. $810 million AREA 2014 2015 2016 $890 million Total cases 1,559 1,830 1,772 $545 million Cases outside U.S. 45 percent 43 percent 48.5 percent $433 million Cases inside U.S. 55 percent 57 percent 51.5 percent 1 11 1 13 1 1 1 Anonymous reports 33 percent 33 percent 33 percent *The eight categories are: Minority Business Enterprises, Women Business Enterprises, Cases substantiated 48 percent 53 percent 43 percent Veteran Owned Businesses, Service-Disabled Veterans; Lesbian, Gay, Bisexual and Transgender (LGBT) Suppliers; SBA Small Disadvantaged Businesses; HUBZone Small Business Concerns and Philanthropic Suppliers. Terminations of substantiated cases 29 percent 27 percent 37 percent

Average time to close 13 days 13 days 13 days

42 t AUSTRALIA 23.87% DEVELOPING A 3 percent

UNITED STATES BRAZIL 46 percent Corporate Responsibility TRULY GLOBAL 3 percent 25.80% RIGHT ENVIRONMENT WOMEN IN THE WORKFORCE Safety CHINA WORKFORCE 8 percent DIVERSITY & INCLUSION 2009 Workforce WORKFORCE Diversity and inclusion at Cummins has long been about more than BY LOCATION INDIA representation. But to be a truly global company, Cummins wants 12 percent More than half of WOMEN IN Financial Performance to develop a workforce that closely resembles the demographics Cummins’ workforce THE WORKFORCE Innovation Customers in the countries and markets where it does business. Company worked outside Governance leaders pay special attention to some key metrics of under- the United States 2016 MEXICO represented groups at Cummins such as women. An employee’s 10 percent in 2016. country of birth is another metric to ensure leadership isn’t limited to one country or a small group of counties. REST OF WORLD* 10 percent UNITED KINGDOM 8 percent

15.97% COUNTRY OF BIRTH FOR THE WORKFORCE COUNTRY OF BIRTH FOR LEADERS % 21.80% % WOMEN LEADERS IN THE WORKFORCE %

3% 2009 %

3% WOMEN LEADERS % IN THE WORKFORCE

REST OF WORLD* % 1% 2016 REST OF WORLD* 1% BRAZIL CHINA AUSTRALIA MEXICO BRAZIL AUSTRALIA CHINA INDIA MEXICO UK UNITED STATES % % INDIA UK UNITED STATES 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016

* Rest of world category includes countries with less than 1,000 Cummins employees.

43 t SOCIAL // WORKFORCE

INTRODUCTION ENVIRONMENT BUILD A CAREER, SOCIAL Corporate Responsibility NOT JUST A STOP RIGHT ENVIRONMENT WORKING OUTSIDE UNITED STATES Safety ALONG THE WAY 54 percent Diversity & Inclusion AT CUMMINS WORKFORCE Cummins provides employees with the tools and Cummins’ workforce of ECONOMIC feedback necessary to build a career at the company. 55,400 employees worldwide is Financial Performance More employees Innovation the company’s most important asset, live outside the Customers INSIDE providing the ingenuity and hard work UNITED Governance United States COMPENSATION 01 STATES that’s critical to Cummins’ success. Our compensation and benefits are designed to be 46 percent competitive within the markets where we do business. Here’s a quick look at who they are The company establishes wages independent of a and where they are. person’s gender or any other demographic trait. NOTABLE The company works 02 hard to develop leaders TRAINING AND FEEDBACK who have mastered key Cummins offers many opportunities to help skills, including: ENGINEERS employees master their current jobs and look ahead coaching and developing, 16 percent EMPLOYEES open communications, to their next positions. We provide the constructive REPRESENTED goal setting, and feedback necessary to advance through a web-based BY A UNION INFORMATION managing diversity. tool and meaningful one-on-one conversations 33 percent TECHNOLOGY About a third of 3 percent About a third the workforce is of professional FLEXIBILITY 03 represented by unions employees have Career flexibility is important at the company. ENGINEERING under agreements OR SCIENCE a background Employees can chart career paths interesting to them. expiring between DEGREES in STEM BUT NOT IN 2017 and 2021. ENGINEERING 04 LEADERSHIP JOBS NON-UNION Great leadership is especially critical. 13 percent EMPLOYEES We work hard to develop leaders who 67 percent have mastered key leadership skills.

44 t ECONOMIC // FINANCIAL PERFORMANCE CUMMINS WILL

Corporate Responsibility BE READY WHEN Right Environment Safety MARKETS RETURN Diversity & Inclusion Workforce Cummins continued to weather challenging markets by

FINANCIAL PERFORMANCE carefully managing costs to preserve profitability and Innovation provide strong returns to shareholders in 2016. Customers Governance “We made significant progress in a Earnings Before Interest and number of our key initiatives in 2016, Taxes (EBIT), meanwhile, were including executing our restructuring $2.0 billion in 2016 or 11.4 percent NOTABLE You can find extensive actions, completing the acquisition of sales, compared to $2.1 billion or financial information of our distributors in North America 10.9 percent of sales a year earlier. about Cummins by looking at the company’s and continuing to invest in new Revenues in North America Annual Report on products, all of which help position the 10K Form on the decreased 12 percent primarily company’s Investor the company for profitable growth Relations website. because of reduced demand in when markets improve,” said the on-highway and industrial oil Tom Linebarger, Chairman and CEO. and gas and construction markets. Revenues for 2016 were $17.5 billion, International sales decreased an 8 percent decline from the year 2 percent mainly due to foreign before, with net income attributable currency movements. Excluding to Cummins of $1.39 billion the impact of those movements, ($8.23 per diluted share). In 2015, Crews finish work on the new Cummins Distribution Business international revenues rose 2 percent the company recorded $19.1 billion headquarters in Indianapolis, Indiana (U.S.A.) in 2016. with growth in China and India offset in revenues and a net income of The company completed purchasing the remaining interest in by weaker demand in Latin America, $1.4 billion ($7.84 per diluted share). its last two partially owned North American distributors that the Middle East and Africa. year as part of a plan to work more closely with its customers.

45 t Approximately 46 percent of the repurchases. In December of 2016, growth when market conditions North American distributors. company’s net sales for 2016 the Board of Directors authorized improve. Chief among them, the In 2013, the company announced THE REST OF were attributable to customers the company to repurchase up company reorganized its business its intention to acquire the equity it THE STORY outside the U.S. compared to to $1 billion in shares of common to combine the Power Generation did not already own in the company’s Cummins posts many stories dealing with Corporate Responsibility 44 percent in 2015. stock upon completion of its 2015 segment and the high horsepower partially owned U.S. and Canadian the company’s sustainability on The Block on Right Environment cummins.com, the company’s social media Safety $1 billion share repurchase program. engine business to create the new distributors. The move is part of channel. Here are some stories on Cummins’ Cummins returned 75 percent of its Diversity & Inclusion Power Systems segment. Cummins’ Cummins’ effort to more closely finances you might be interested in: Workforce Operating Cash Flow to shareholders Cummins took a number of steps reportable operating segments partner with its customers to help Learn more about in the form of dividends and share during the year to position itself for the company’s new now consist of Engine, Distribution, them succeed. X15 engine platform. FINANCIAL PERFORMANCE Components and Power Systems. Innovation The company invested $636 million FINANCIAL PERFORMANCE AT A GLANCE Read about Customers NET INCOME The change is designed to streamline into Research and Development in Cummins’ new Governance Distribution YEAR SALES attributable to Cummins the business and technical processes 2016, bringing its total investment Business 2016 $17.5 billion $1.39 billion to accelerate innovation, grow in R&D since 2014 to more than Headquarters. market share and more efficiently $2 billion to improve core products See an update on Cummins’ financial manage Cummins’ supply chain such as diesel engines, develop 2015 $19.1 billion $1.40 billion picture, including the company’s promising 1st quarter results in 2017. NOTABLE 2014 $19.2 billion $1.65 billion and manufacturing operations. new features such as remote Cummins has major monitoring systems that improve manufacturing sites During 2016, the company also paid Learn more about the company’s customer uptime, and explore in Australia, Brazil, 2013 $17.3 billion $1.48 billion $109 million to acquire the remaining new joint venture with the Eaton Corp. France, Germany, alternative solutions for improving to produce automated transmissions India, Mexico, Nigeria, interest in its last two partially owned for heavy-duty and medium-duty Romania, South Africa, 2012 $17.3 billion $1.65 billion powertrain performance. commercial vehicles. South Korea, Turkey, the United Kingdom With all of its 2017 on-highway and Indiana, Minnesota, New Mexico, New York, EXTERNAL SALES BY MARKET engines certified by the U.S. North Carolina, South Environmental Protection Agency Carolina, Tennessee BUSINESS UNIT 2016 2015 2014 and Wisconsin in the and the California Air Resources United States. Engine $5.77 billion $6.73 billion $7.46 billion Board, fewer single source suppliers in its supply chain, and Distribution $6.16 billion $6.20 billion $5.14 billion promising new products like the Components $3.51 billion $3.75 billion $3.79 billion X15 engine series, Cummins is poised for better times ahead. Power Systems $2.06 billion $2.43 billion $2.83 billion

46 t ECONOMIC // INNOVATION

INTRODUCTION 7 WAYS CUMMINS IS A HIGH TECH BUSINESS ENVIRONMENT INNOVATION AT In many ways our products are SOCIAL more complex than your smart Corporate Responsibility CUMMINS IS FUELED phone. Here are seven ways Right Environment Cummins goes high-tech: Safety BY FORWARD THINKING Diversity & Inclusion Workforce 1 SUPER COMPUTERS ECONOMIC Cummins is preparing for a Our own super computer, Clessie II, powers sophisticated design programs. Financial Performance INNOVATION future beyond diesel engines with 2 Customers CONNECTIVITY Governance We develop web-based tools technologies such as electrified to “talk” to our products.

powertrains, alternative fuels 3 3-D PRINTING Our printers make test parts and telematic systems. to develop great ideas faster. NOTABLE In April of 2016, “The work of the entire Cummins technical organization over the next 15 years 4 VIRTUAL REALITY Cummins was awarded will be defined by leading the company through this next technology change, Enables our engineers to “see” their a $4.5 million grant from ideas before prototypes are built. the U.S. Department of which in many markets will include a shift away from diesel,” said Jennifer Energy to develop a Class 6 commercial plug-in hybrid Rumsey, Cummins Vice President and Chief Technical Officer. 5 ELECTRIFICATION electric vehicle that can Our teams work on electrification reduce fuel consumption Even diesel engines today are moving in exciting new directions, and other energy alternatives. by at least 50 percent over conventional combining with new technologies to better serve customers. Class 6 vehicles. 6 ELECTRON Rumsey and other Cummins leaders, for example, attended IAA MICROSCOPES in September 2016, the major truck and bus trade show held every Powerful microscopes help our researchers work in the realm of atoms. two years in Germany. At the show, exhibit hall after exhibit hall was At the Cummins’ Materials Science filled Cummins customers and competitors, both major players in the Laboratory in the Cummins Technical 7 OUR PEOPLE industry and others that are emerging. Only about 25 “loose” diesel Center in Columbus, Indiana (U.S.A), A third of our professional staff has engines – engines that were not integrated in a chassis – were on display employees use sophisticated tools degrees in STEM fields. Many at our throughout the entire show. In 2014, there were twice that number. to work in the realm of atoms. tech centers have PhDs.

47 t Many of the show’s headlines part of Cummins’ work to develop In addition to investing in the focused on electrified powertrains a portfolio of hybrid and electric RESEARCH AND development of new power sources, DEVELOPMENT THE REST OF with a huge emphasis on hybrid and solutions for customers around Cummins has global teams finding THE STORY electric concept vehicles and models the world. solutions that go beyond the physical YEAR R&D SPENDING Cummins frequently posts stories on Corporate Responsibility in production. It can be difficult to product, such as data-enabled its sustainability efforts on The Block, Right Environment Exploring these new technologies 2016 $636 million the company’s social media channel. Safety distinguish the hyperbole from the technologies that make it possible Here are some stories on innovation while also creating the best diesel Diversity & Inclusion reality, but it was clear the world is to update calibrations over-the-air at Cummins you might be interested in: Workforce products in the marketplace is the 2015 $735 million changing. Cummins is ready. for a single engine or an entire fleet. See how Cummins is responsibility of Rumsey and the working with Purdue 2014 $754 million University and others Cummins has a long history, technical organization. The shift The company is looking both Financial Performance to significantly INNOVATION beginning in the early 1990s, with to something new won’t happen 2013 $713 million at what’s ahead tomorrow and reduce fuel Customers consumption through hybrid powertrains and the company overnight. Diesel is expected to for years to come. It's part of automated systems Governance continues to innovate in this area. For continue dominating most 2012 $728 million the company’s commitment to that interconnect trucks and transportation using example, a Cummins team is working markets in the coming years. 2011 $629 million powering the future through product sensors and online cloud technology. on a pioneering project in Quebec, innovation that makes people's lives Because they offer an Canada, that is delivering range better and reduces the company's Read about how unmatched combination of Cummins is extender electric powertrains for the Over the next several years, major environmental footprint. partnering again efficiency, performance, power with Peterbilt Motors, local bus authority. This project is markets around the world such density, durability and reliability – “Cummins will be ready to provide a division of PACCAR, as China, India, Mexico and Brazil to develop and coupled with near zero emissions leading products and support across demonstrate new technologies will advance to Euro 6 emission as part of the Department of PATENTS thanks to recent innovations – the entire globe because we look standards. As the leading diesel Energy’s SuperTruck II program. It can take three-to-four years diesel engines will likely be the ahead, anticipate customers’ needs, to obtain a patent in the United engine provider in the world, 233 technology of choice to power and ensure that our products are Learn how Cummins States and longer outside the Cummins has a full range of U.S., so it’s hard to make year uses 3D printing to the majority of commercial trucks tested and ready for new regulations to year comparisons. But it’s 216 products across all applications to help develop great 2015 safe to say patent activity at the 206 and buses well into the future. before our customers need them,” ideas faster. company is on the upswing in meet these standards and provide 2016 said Cummins Chairman and CEO recent years. customers with leading performance 2014 Tom Linebarger. and quality at affordable costs.

169 Cummins had a record 233 patents in 2015, a 57 2012 148 percent increase over the patents earned in 2013.

2013

48 t ECONOMIC // INNOVATION PRODUCTS

Cummins introduced more than two-dozen Corporate Responsibility Right Environment new products or product updates in 2016,

Safety a natural outgrowth of the company’s Diversity & Inclusion Workforce emphasis on innovation. Many involved helping customers meet their own environmental goals, Financial Performance either through reducing emissions or achieving INNOVATION Customers greater fuel efficiency. Reliability is also critically Governance important. The company must deliver products customers can count on.

Cummins believes it has a distinct advantage over its competitors when it comes to meeting customer needs. As the only independent diesel engine manufacturer in the world, the company has the in-house capability to produce all the critical subsystems required to build an engine or generator.

Here are some of the products or product developments that made news at Cummins in 2016. You can learn more by visiting the websites managed by each product group and links are provided to specific articles with more information about each product mentioned.

City residents and Cummins employees celebrate the launch of the X15 engine in August 2016. The engine gets up to 20 percent better fuel economy compared to the 2010 ISX15 engine.

49 t ENGINE BUSINESS NEW CRATE ENGINE PROGRAM PROVIDES CUMMINSENGINES.COM GREENER OPTION FOR ENTHUSIASTS The Cummins Engine business produces the cleanest, most efficient engines in the world, providing the power customers need to succeed while Corporate Responsibility Right Environment helping them reach their own sustainability goals. Cummins offers diesel, natural gas and hybrid solutions depending on a customer’s particular Cummins’ new crate engine program, Safety needs. Here’s a look at a few of the products and product developments that made news in 2016: Cummins Repower, will not only give Diversity & Inclusion truck enthusiasts a powerful alternative Workforce for their older iconic or sentimental CUMMINS ANNOUNCES GRANT TO FUND CUMMINS INTRODUCES IMPROVING projects, but a cleaner and more PLAN TO IMPROVE DEVELOPMENT INLINE 7 TO IMPROVE OFF-HIGHWAY fuel efficient option, too. Financial Performance ENGINE EFFICIENCY, OF HYBRID CONNECTIVITY ENGINE DIAGNOSIS INNOVATION Redefining Connectivity. The first Cummins Repower offering will Customers UPTIME ELECTRIC TRUCK FebruaryEasier. 2016 Faster. April 2016 Governance be the R2.8 Turbo Diesel. During initial February 2016 April 2016

The INLINE 7 data link adapter communicates testing, the R2.8 recorded significant Cummins Engines unveiled its Cummins announced it would be part with your PC using a Universal Serial Bus (USB) through a standard USB connector as well gains in fuel economy and emissions SmartEfficiency initiative, featuring of a project awarded a $4.5 million as through WiFi or Bluetooth. INLINE 7 is fully compliant with the Technology and Maintenance reduction compared to an 18-year-old product improvement plans focused grant from the U.S. Department Council’s RP1210 standard and supports three simultaneous CumminsCAN connections andEngines offers baud introduced test vehicle’s original gasoline engine. on improved fuel efficiency, lower of Energy to develop a Class 6 rates of 250k, 500k and 1 megabaud. INLINE 7 NOTABLE supports several other protocols such as J1708, J1587, ISO 15765,Connected ISO 9141 (K and DiagnosticsL line). to the off- A lot of research and development total cost of ownership and improved commercial plug-in hybrid electric The Engine Business Cummins INLINE™ 7 Data Link Adapter. Industrial-Strengthhighway Design. engine market. Connected work took place in 2016. Full production was the second largest uptime. Over the next 12 months, vehicle capable of reducing energy It’s like adding a turbocharger to Electronic Control Cummins Engines released its Cummins INLINE 7 Data Link Adapter is anticipated in the fall of 2017. business segment at Module downloads and uploads. Cummins new incorporates strainDiagnostics relief secure cables provides for a a lifeline for INLINE 7 Data Link Adapter has a faster processor, Cummins in 2016, the company laid out improvements consumption by at least 50 percent new INLINE 7, a wired and wirelessrobust connection. The rugged carrying case more robust algorithms, larger memory buffers and provides extracustomers protection for the most to demandingthe company through responsible for 33 percent more sophisticated filtering than previous models service environments. The main unit comes with An Ames, Iowa company has seen including optimized calibrations, over conventional Class 6 vehicles. datalinkwhile simultaneously adapter accessing offering multiple vehicle Wi-Fi of that year's revenue. a full one-yearan warranty active against telematicssoftware and connection. data channels. INLINE 7 supports USB, WiFi and hardware malfunction. significant fuel efficiency gains using product tailoring with improved Typical examples of Class 6 vehicles andBluetooth Bluetooth technologies in wireless a single device. connectivity INLINE 7 the R2.8 Turbo Diesel to repower communicates with your PC and is designed for future Cummins-powered equipment Every Detail. Covered. classic Scouts. power and torque, mild-hybrid include school buses or single axle whilecapability also with mobile providing products. traditional wired Everything youcan need fromwirelessly locking USB cable,connect the engine One Adapter. Many Applications. technologies, integrated work trucks. Cummins is working functionality via USB. The INLINE 7 6-Pin, and 9-Pin Deutsch Wye adapter with The INLINE 7 Data Link Adapter is designed to security chip, toand ruggedthe companystorage case is for immediate included in the complete INLINE 7 kit. powertrains and an expanded with PACCAR on the project and function with a wide array of Cummins, OEM and hasthird-party a faster service and processor, information tools, includingmore the robust For system requirementsassessment and complete of an engine system following: lineup of alternative-energy products. representatives from The Ohio State algorithms, larger memory buffers specifications, please visit: „„Cummins INSITE™ www.cumminsengines.com/inlinefault alert and have valuable „„Cummins PowerSpec University, the National Renewable and more sophisticated filtering thanINLINE 7 (PN 5299899) is now available through „„Detroit Diesel Diagnostic Link information delivered to the customer „„CAT Electronic Technician (On-Highway only) your Cummins Distributor. To find a location Energy Laboratory and the Argonne previous„„Navistar® -ServiceMaxxmodels andFleet Pro is a key enablernear you, visit cumminsengines.com or call „„Volvo PTT 1-800-DIESELSwithin (1-800-343-7357). seconds. Cummins Expert „„VCAD Elite Mack/Volvo This device is FCC and CE certified for North America and Europe and is National Laboratory. for improvements in productivity intended for use only in those regions. Certification for other countries will „„V-Mac Service Tools begin in 2016. Diagnostics System can instantly „„Allison DOC® For PC Service Tool ® and„„Allison efficiency DOC for Fleets of (1000/2000/3000/4000)service events Cummins Inc. Box 3005search for similar fault code events „„Eaton ServiceRanger Columbus, IN 47202-3005 U.S.A. „„Bendix ACom for a shop operations initiative Phone: 1-800-433-9341 Fax: 1-800-232-6393across the engine model and identify „„WABCO Toolbox Internet: cumminsengines.com „„Freightliner ServiceLink Twitter.com/CumminsEngines YouTube.com/CumminsEngines announced„„International DLB, in Intune,early and 2017. IPC v2.02 Bulletinthe 2878923 Printedmost in U.S.A. 02/16 probable root causes. ©2016 Cummins Inc.

360834_Cummins_Flyer.indd 2 3/1/16 8:08 AM 50 t CUMMINS LAUNCHES CUMMINS EURO 6 CUMMINS POWER SYSTEMS ULTRA-EFFICIENT ENGINES COMPATIBLE POWER.CUMMINS.COM ENGINE LINE WITH RENEWABLE Cummins Power Systems is committed to developing products that minimize their impact on the environment July 2016 FUELS Corporate Responsibility while meeting customers’ power needs. The business is developing cleaner combustion techniques with Cummins Engines launched its September 2016 Right Environment natural gas and diesel engine generators, plus factory-integrated exhaust aftertreatment that allows these Safety X15 heavy-duty engine, ready to Cummins Engines announced products to meet stringent global emissions standards. Here’s a look at a few of the products and product Diversity & Inclusion meet U.S. Environmental Protection Euro 6 engine compatibility for the Workforce developments that made news in 2016: Agency standards for greenhouse use of hydro-treated vegetable gas (GHG) and fuel efficiency. oil (HVO) renewable diesel and Financial Performance Available in two configurations, other EN 15940 paraffinic fuels in NEW GENERATOR DELIVERS USING POWER SYSTEMS INNOVATION the X15 Efficiency Series and the Cummins-powered bus, truck and LESS FUEL, SMALLER FOOTPRINT AND THE INTERNET Customers OF THINGS Governance X15 Performance Series, this new coach fleets operating in Europe. September 2016 platform carries forward the best Compared with conventional Cummins Power Systems demonstrated its new world-class C2750 D5B October 2016 attributes of the ISX15. When fossil-based diesel, HVO offers generator set to leading European engineering consultants and customers. integrated with the Cummins and the potential to reduce GHG The generator is designed for large manufacturing facilities, retail outlets and Eaton SmartAdvantage Powertrain, emissions by 40 to 90 percent mission critical applications like medical facilities and data centers in global NOTABLE it delivers improved fuel economy over the total life cycle of the markets. It delivers 2750 kVA of power with less fuel, a smaller footprint Cummins Power Cummins Power Systems turned to Systems accounted by precisely adjusting to grade, fuel, depending on the level of and greater power density thanks to its fuel-efficient 60-litre QSK60 engine. for 12 percent of the vehicle weight and driver input sustainable feedstock used in the Microsoft Cloud and the Internet company's revenue of Things to bring about the next in 2016, the fourth via throttle position. the production process. largest segment. generation of remote monitoring: the PowerCommand Cloud. This cloud- based remote monitoring solution is built on the Microsoft Azure IoT Suite. PowerCommand enables customers to connect to their emergency power system at any time, from anywhere – remotely managing their system from any computer or mobile device. Homeowners and facility managers can share access with their service provider, saving time and money.

51 t CUMMINS COMPONENTS BUSINESS The four businesses within the Cummins Components segment CUMMINS TURBO TECHNOLOGIES CUMMINS FILTRATION play a key role at the company. Cummins Emission Solutions, CUMMINSTURBOTECHNOLOGIES.COM CUMMINSFILTRATION.COM

Corporate Responsibility Cummins Turbo Technologies, Cummins Filtration and Cummins Right Environment Fuel Systems manufacture technology critical to the company, NEW TURBOCHARGER OFFERS FILTER ENHANCES Safety RELIABILITY AND FUEL ECONOMY MARINE PERFORMANCE Diversity & Inclusion producing the cleanest, most fuel efficient engines and generators Workforce in the world. Here’s a look at a few of the products and product April 2016 March 2016 developments that made news in 2016: Cummins Turbo Technologies introduced its HE250WG turbocharger

Financial Performance for off-highway engines, designed to improve fuel economy by INNOVATION CUMMINS EMISSION SOLUTIONS up to 2 percent. The turbocharger offers both durability and reliability Customers CUMMINSEMISSIONSOLUTIONS.COM in a compact, module design. Features include an optimized bearing Governance design, which reduces sensitivity to contamination while maintaining SINGLE MODULE SYSTEM AVAILABLE excellent rotor system stability to help minimize down-time. ON STAGE V MIDRANGE ENGINES

January 2016 NOTABLE Cummins Emission Solutions announced the use of the Single Module Cummins Components aftertreatment system for midrange off-highway engine customers looking Cummins Filtration launched the Business was the company’s third largest to meet Stage V European emissions regulations. Compared to current product Fleetguard Sea Pro FH240 Series, segment in 2016, offerings in this market, this new innovation delivers an aftertreatment solution its latest release in state-of-the-art generating 20 percent of the company’s revenue. that offers up to a 30 percent reduction in weight and up to a 50 percent fuel filter/water separator technology reduction in size. Technology enhancements allow for further reduction for marine diesel engines 19 liters of both particulate matter (PM) and oxides of nitrogen (NOx) compared and larger. As engine fuel systems to Stage IV solutions. The diesel particulate filter’s passive become increasingly sophisticated, regeneration minimizes the need for preventative cleaning the removal of water and other and maintenance. contaminants has never been more critical. The Sea Pro FH240 series is designed to reduce marine engine maintenance costs, improve the efficiency of fuel systems and maximize uptime.

52 t ECONOMIC // CUSTOMERS IMPROVING CUSTOMER LIVES IS

Corporate Responsibility CUMMINS CONNECTED SOLUTIONS MISSION Right Environment Safety Time is money for Cummins customers whether they provide valuable information with an Diversity & Inclusion estimated timeframe so customers Workforce are hauling goods down a highway, moving material in a can resolve potential equipment mine or using our products in any number of other ways. issues before they happen. Financial Performance Keeping them on the job and out of the repair shop is a Innovation key focus for Cummins and critical to its sustainability. CUSTOMERS CUSTOMER AND Governance The company’s Connected Solutions MAKING SERVICE SUPPORT business is an important interface CONNECTIONS In June 2016, Cummins released an with customers and service providers, integrated service experience with an A key focus in 2016 was preparation alike. It offers a variety of tools application to guide repair technicians for the early 2017 release of the ranging from sophisticated software through a service event in real time. Connected Software Update, and telematics, which allows the The application integrates Cummins the first system that updates remote transfer of information, to many individual systems that provide engine calibrations on the road providing solutions over the phone service tool capabilities such as through a fleet’s existing telematics. to solve customer problems. diagnostics, procedures, diagrams, With this technology, the customer’s etc., effectively providing technicians “Making service provider lives engine software stays up-to-date with access to all repair related needs easier makes customer lives better,” with minimal time and effort. in one place. said Lori Cobb, Vice President of Cummins also prepared for its

Cummins Connected Solutions. launch of Connected Advisor, This system will be enhanced over “Connected Solutions is dedicated which interprets and prioritizes time to include all aspects of the Cummins spent much of 2016 to using our vast product knowledge engine fault codes – signals that Guidanz, which was released in early service event, such as creating repair preparing for the launch of its to innovate new solutions for the engine may have a problem. plans, ordering parts, filing warranty 2017. Guidanz enables both service Guidanz mobile app in early 2017. The app allows both service providers customer success.” claims, and more. This new service providers and customers to quickly and customers to quickly get information For each actionable fault code, about potential engine problems so provider experience will be available assess engine problems so repairs Connected Advisor reports they can get back to work faster. through the mobile app Cummins can be completed faster.

53 t Over the course of 2016, Cummins DATA ANALYTICS POWERING also consolidated its support into one THE REST Cummins Care team and acquired At the 2016 MINExpo, Cummins OF THE STORY the phone number 1-800-CUMMINS YOUR LIFE unveiled its Data Enabled Mining Cummins posts many stories dealing with Corporate Responsibility to eventually replace the company’s the company’s sustainability on The Block on Right Environment Cummins works to make people's lives better Solution. Experts in the company’s cummins.com, the company’s social media Safety all day, every day. And we try to do it with the more than 20 legacy support lines. solutions center monitor customer channel. Here’s a story you might want to Diversity & Inclusion check out regarding customer service: 1-800-CUMMINS is currently engines, delivering accurate, Workforce least environmental impact possible. available to all service providers, real-time operating information. See how Cummins’ 7a including dealers and distributors, Guidanz app Using data analytics, the solution is helping reduce Financial Performance PASSENGER TRAINS and customers. ultimately reduces customer costs the time needed Innovation We power trains around the world that move 8a to assess an engine people to work, school and other activities. by extending engine life, preventing CUSTOMERS Cummins Care goes beyond problem from hours to mere minutes. Governance catastrophic failures and decreasing COMPUTER SERVERS support by helping to prevent issues, 9a unplanned maintenance expenses. Our generators provide dependable providing answers quickly and backup power to the computer servers you rely on at work, school and home. 10a reimbursing fairly. Cummins Care engages in social media as well, WARRANTY HOSPITALS & SCHOOLS Cummins began the Simplified 11a We also provide backup power to schools, with employees dedicated to listening hospitals and any facility that must remain and responding to issues raised via Claims Management initiative in online in an emergency. HOW IT WORKS 12p Cummins social media channels. North America in 2016, reducing The new mobile app for Cummins TUG BOATS & the administrative burden associated Connected Diagnostics™ takes engine connectivity to the next level.

1p OTHER VESSELS with processing claims and You can learn more by watching a Our marine engines power the tug boats that short video on the feature connecting improving claim approval cycle time. help get ships carrying a host of goods into port. customers to Cummins, regardless of 2p The initiative is expected to show where they are. SCHOOL BUSES a 40 percent reduction of claim Our diesel and natural gas engines 3p power school buses that move millions recycles/refiles/reworks for of children across the United States. Cummins Sales and Service. 4p MUNICIPAL BUSES They also power buses in cities around the

5p world from Washington, D.C. to Beijing, China. GENERATORS 6p Cummins also makes home and light commercial generators that provide power when you need it most. 7p

54 t ECONOMIC // GOVERNANCE // ETHICS & COMPLIANCE CUMMINS CODE OF CUMMINS MAKES BUSINESS CONDUCT Cummins Code of Business Conduct is built around 10 Ethical Principles Corporate Responsibility ETHICS A PRIORITY to help make Cummins a sustainable company and a great place to work: Right Environment Safety 01 WE WILL FOLLOW the law everywhere. Diversity & Inclusion The Cummins Ethics and Compliance function built on Workforce its solid foundation in 2016 by updating the company’s 02 WE WILL EMBRACE diverse perspectives and backgrounds and treat all people Financial Performance Innovation Code of Business Conduct, creating a new policy with dignity and respect. Customers GOVERNANCE for third parties doing business on Cummins’ behalf 03 WE WILL COMPETE fairly and honestly.

04 WE WILL AVOID conflicts of interest. ETHICS HELP LINE and upgrading training initiatives around the world.

Cummins employees can “We continue to work The Cummins Code of Business the examples it includes to help 05 WE WILL DEMAND that everything we report ethical concerns at ethics.cummins.com or on instilling a culture of Conduct is the backbone of employees are meaningful. do leads to a cleaner, healthier and by calling the Ethics Help safer environment. Line. In the United States ethics and compliance company's commitment to ethical Ethics and Compliance has and Canada, that phone in all of our regions,” behavior. It guides all employees in number is 1-800-671-9600. also been focused on the risk 06 WE WILL PROTECT our technology, our The phone numbers for said Mark J. Sifferlen, the decisions they make and the posed to Cummins by third parties information and our intellectual property. other countries are available Vice President – Ethics actions they take. The code’s at ethics.cummins.com. doing business on the company’s Employees can report and Compliance and 10 principles remain unchanged 07 WE WILL DEMAND that our financial records matters anonymously behalf, especially in areas such if they wish where Corporate Secretary. but language in the document as bribery and conflicts of are accurate and that our reporting permitted by law. “No company can truly was updated to keep it relevant. interest. About 90 percent of the processes are clear and understandable. be sustainable until this MASTER INVESTIGATORS Nearly half of Cummins’ employees enforcement actions brought by culture is embraced 08 WE WILL STRIVE to improve our communities. Cummins has a team of have been at the company less than the U.S. government for alleged Master Investigators to by every one of its five years. Ethics and Compliance bribery involve third parties. 09 WE WILL COMMUNICATE honestly and with integrity. look into reported violations employees and anyone of the company's Code updates the document about every of Business Conduct. conducting business 10 WE WILL CREATE a culture where all employees To learn more about two to three years to ensure that on its behalf.” their work, go to page 42. take responsibility for ethical behavior.

55 t COMPLIANCE TRAINING Cummins adopted a Sales Agents Ethics and Compliance has also CUMMINS and Third Party Intermediaries encouraged leaders from around SUPPLIER Thousands of employees receive ethics and compliance training Policy in 2016. This internal policy the world to communicate with every year at Cummins. These figures are accumulated enrollments provides guidance on how to their employees about ethics and CODE OF of active employees since 2005, when the oldest courses were appropriately engage a sales agent compliance, frequently in their CONDUCT and includes the company’s ethical employees’ native languages. first offered. The completion rates reflect the number of The Supplier Code of Conduct and legal requirements for third helps the company ensure that it’s completions by the end of the first quarter of 2017. “We worked with our business party intermediaries. doing business with other companies leaders in Brazil, Mexico, Russia, around the world sharing Cummins’ PERCENT Training for employees, independent Singapore and Africa to deliver TRAINING ENROLLED COMPLETED COMPLETED values for sustainable practices. distributors and third parties also written reminders to employees in The Supplier Code of Conduct Anti-Bribery 27,776 27,137 98 percent remains a priority for Ethics and those regions about the importance is built around seven principles: Anti-Bribery Refresher 25,791 24,508 95 percent Compliance. The majority of the of ethics and compliance,” Sifferlen company’s training in areas like said. “We want this message to 01 Suppliers must follow the law. Careful Communications 27,776 27,143 98 percent fair competition and anti-bribery is be delivered by multiple people, in 02 Suppliers must treat all people Code of Business Conduct Refresher 2017 29,446 22,072 75 percent conducted online. A key input from multiple ways. It’s just that important.” with dignity and respect. regional leaders was the need to 03 Suppliers must do business Conflicts of Interest 656 582 89 percent conduct more face-to-face training on fairly and honestly and avoid Data Privacy 7,206 6,529 91 percent both the Cummins Code of Business conflicts of interest. Doing Business Ethically 27,776 27,098 98 percent Conduct and major risk areas. THE REST OF 04 Suppliers must protect THE STORY the environment. Export Compliance 2016 26,177 22,300 85 percent Ethics and Compliance has been A Cummins employee is taking 05 Suppliers must provide focused on increasing face-to- Treatment of Each Other at Work (Refresher) 21,914 20,866 95 percent a lead in the fight against corruption a safe and healthy and human trafficking. face training in high risk countries. working environment. Fair Labor Standards 695 684 98 percent In 2016, more than 1,400 people 06 Suppliers must protect attended face-to-face training Code of Business Conduct – New Hire 51,342 48,815 95 percent Cummins technology, sessions across Cummins. information and Treatment of Each Other at Work – New Hire 51,342 48,809 95 percent intellectual property.

Fair Competition 2016 26,938 17,903 66 percent 07 Suppliers must assist Cummins in enforcing the code.

56 t ECONOMIC // GOVERNANCE // BOARD OF DIRECTORS CUMMINS BOARD BOARD REPRESENTS OF DIRECTORS

Corporate Responsibility INTERESTS OF Right Environment Safety SHAREHOLDERS ALEXIS M. Diversity & Inclusion HERMAN Workforce Chairman and CEO of New The Board of Directors represents and protects the interests of Ventures, LLC, a consulting company. She joined the the company’s shareholders, exercising sound and independent board in 2001 and serves as its lead director. Financial Performance judgment on significant issues at cummins. Innovation ROBERT J. RICH J. WILLIAM I. Customers It includes nine independent directors Cummins’ board has six BERNHARD FREELAND MILLER GOVERNANCE Vice President for President and Chief Operating President of the New York- consistent with the definition standing committees: Research and Professor BRUNO V. Officer of Cummins Inc. based Wallace Foundation of Engineering at the He joined the board in 2017. focused on K-12 education established by the U.S. Securities DI LEO »» Governance and Nominating University of Notre Dame. and the arts. He joined the He joined the Board in 2008. Board in 1989. and Exchange Commission, and Senior Vice President, Global PROXY IMPROVEMENTS Markets, IBM Corporation, »» Audit a global technology and Cummins implemented Chairman and CEO Tom Linebarger consulting company. several improvements to as well as President and COO »» Compensation He joined the board in 2015. its 2017 Proxy Statement, making the document more Rich Freeland, the only Cummins »» Executive N. THOMAS user friendly for its Annual LINEBARGER employees on the board. Meeting on May 9, 2017. »» Finance Chairman and CEO of Cummins Inc. He joined The document now includes All directors are elected annually. the board in 2009. a highlights box (page 2), »» Safety, Environment briefly explaining everything The board has the freedom to and Technology from board member ROBERT K. accountability to clawback determine the chairman and chief DR. HERDMAN GEORGIA R. Directors may not sit on more than FRANKLIN R. and anti-hedging policies. executive officer (CEO) based solely Managing Director of NELSON There’s an expanded CHANG DIAZ Kalorama Partners, LLC, four other public company boards President and CEO of statement on diversity on what it believes is in the best a consulting company. PTI Resources, LLC, an Chairman and CEO of STEPHEN B. He joined the board in 2008. (page 7) and you can learn in addition to the Cummins board. Ad Astra Rocket Company, independent consulting firm. DOBBS She joined the Board in 2004. more about the current interests of the company and its a U.S. spaceflight engineering company. Retired Senior Group board’s qualifications and shareholders. Currently, the board The Vice President – Internal He joined the board in 2009. President of Fluor Corporation, experience as well as a which offers engineering, summary of the unique believes those interests are best Audit reports to the board’s Audit construction and project contributions each member management services. served by combining the roles of He joined the board in 2010. THOMAS J. makes (starting on page 10). Committee. In 2016, the Internal LYNCH chairman and CEO. The board Audit group published 74 audit Executive Chairman, reviews this decision annually. TE Connectivity, a global reports and memos. provider of connectivity and sensor solutions. He joined the Board in 2015.

57 t

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NOTABLE

Governance

Customers

Innovation Innovation

Financial Performance Financial

Workforce

Inclusion & Diversity

Safety

Right Environment Environment Right Corporate Responsibility Corporate ECONOMIC // GOVERNANCE // RISK SECURITY SECURITY NEW COUNCIL DRIVES CULTURE PART OF NEW

Corporate Responsibility DEPARTMENT OF RISK MANAGEMENT Right Environment Cummins global security Safety Diversity & Inclusion function in 2016 was Cummins continued a multi-year transformation of its Workforce combined with hospitality and aviation services in a risk management function in 2016, establishing an

Financial Performance move designed to increase Innovation the effectiveness of all Enterprise Risk Council made up of the company’s Customers three groups. GOVERNANCE top leaders who will manage oversight of risk and Global Integrated Services provide direction on risk-related matters. will still handle operations designed to keep employees The new council is part of a develop plans to deal with The Enterprise Risk Management safe and secure through NOTABLE framework designed to drive a culture them. Not all risks are bad. team also helped oversee more Cummins reports a number programs such as the of continuous improvement in risk Some offer opportunity. involved stress tests administered of risks potentially facing the Crisis Action Management management at Cummins, where by a third party at some of the company in its 2016 Annual While establishment of the Report on the 10-K Form. Program and the Cummins risk is recognized and responded company’s 74 sites deemed most That section can be found council was a major initiative in Response Center. to appropriately. As part of the critical to Cummins’ operations. starting on page 17 of the 2016, it was far from the only thing document. transformation, each company leader The aviation function Enterprise Risk Management tackled. Each of the 74 sites is expected has taken ownership of an individual operates shuttle flights to go through a stress test at least risk that could have potential impact The function continued to help to various locations in the once every four years. Enterprise on the company’s growth plans or sites within Cummins develop U.S. and Mexico. Hospitality Risk Management works with long term sustainability. Business Continuity Plans, outlining manages a variety of food Risk Insurance and Global how they would operate when and event planning services. Bindu Yadlapalli, Director – Risk Integrated Services (formerly facing an emergency. More than Management, said the new council Global Security) on the tests. 600 locations now have plans and should help the company identify many conducted table-top exercises risks, determine those that present to test their effectiveness. the greatest potential impact, and

59 t ECONOMIC // GOVERNANCE // GOVERNMENT RELATIONS MEMBERSHIPS ENSURING CUMMINS VOICE IS HEARD Cummins belongs to a number of trade organizations to further its Cummins’ Government Relations employees work around the world on issues that business interests. Corporate Responsibility Right Environment significantly impact the company or the communities where it does business. While the company might not agree Safety with these associations on every issue, Diversity & Inclusion The team helps ensure Cummins’ CORPORATE POLITICAL ACTION »» Employees will not be Workforce Cummins believes they help ensure voice is heard by government pressured to contribute to CONTRIBUTIONS COMMITTEE government leaders know where the policymakers on issues such as CIPAC or make any other Cummins bans contributions In the U.S., political contributions company stands on key matters. Financial Performance the promotion, protection and personal political contribution. Innovation using corporate funds to are made by the Cummins Inc. Here’s a list of U.S. trade organizations enforcement of global » Failure to contribute to CIPAC Customers candidates, political parties and Political Action Committee (CIPAC), » Cummins paid dues in excess of GOVERNANCE emission standards; efforts to independent expenditures, including funded solely by voluntary employee shall not disadvantage an $50,000 during calendar year 2016, establish greenhouse gas and advertisements that support or contributions. CIPAC makes employee’s career in any way. as well as the U.S. Chamber of fuel consumption regulations for Commerce, which fell below the oppose individual candidates. contributions to federal and state commercial vehicles, and expanding CIPAC contributions are based $50,000 threshold. Listed with each The company also will not use candidates on a bipartisan basis access to quality education and on the following criteria: entity is Cummins’ estimation of the corporate funds to contribute to after review and approval by CIPAC’s portion of these dues used for lobbying training. The team has also worked »» Public integrity of the candidate. 501 (c) (4) and 527 tax-exempt Executive Committee and according or other political expenditures: to oppose legislation negatively groups in the United States that are to federal and state election law. »» Representation of a Cummins impacting diversity and fair engaged in political activity or make facility or employees. treatment for all employees. A complete list of the political payments to influence ballot issues »» Support for issues of action committee’s contributions Government Relations is also unless the issues are directly tied importance to Cummins. to candidates is available here. committed to fostering greater to the company’s core values and »» Timely and effective international cooperation and business interests. CIPAC is governed by corporate constituent service. understanding among the various policies and bylaws that state: In those cases, Cummins is »» Political leadership or organization. countries where the company committed to publicly disclosing »» All CIPAC contributions are operates, frequently hosting »» Support for the company’s values. any payments including recipient strictly voluntary. international visitors at various names and amounts. The company »» The company will not reimburse All of CIPAC’s activities are disclosed Cummins sites. made no such payments in this employees directly or indirectly to the Cummins Board of Directors in $40,429.50 The National Association of Manufacturers The American Trucking Association $13.428.24 The American Trucking $9,592 The Engine Manufacturers Association reporting cycle. for political contributions. an annual political contribution report. $8,750 U.S. Chamber of Commerce

$115,150.00 The Business Roundtable Forum $127 The Diesel Technology

60 t CONTRIBUTORS TO THIS REPORT CONTACTS

Cory Brandt, Kevin Brittain, Kelley Creveling, Laurie Counsel, Sarah Dibble, CAROLE CASTO Kevin Graham, Michelle Garner-Jana, Sheah Hilton, Rebecca Hewitt, Vice President – Corporate Communications Michael Hughes, Laurel Judkins, Aaron Kaluf, Lauren Kastner, Brijesh Krishnan, 301 E. Market St. Ramona Kudla, Gwen Langley, Monalisa Majumdar, Paul Miller, Jon Mills, Indianapolis, IN 46204 Nichole Morris, Leslie Nix, Pramod Palat, Katie Pavlica, Grant Russo, MARY CHANDLER Mario Sanchez, Meredith Sanders, Steve Sanders, Chris Shieldsmith, Mark Sifferlen, Anna Smith, Michelle Taylor, Kimberly Trubiro, Danielle Vetter, Vice President – Corporate Responsibility Erica Viar, Katherine Vujovich, Erica White, Jordan Winkler, Bindu Yadlapalli, Chief Executive Officer – The Cummins Foundation Molly Yedinak, and Katie Zarich. 301 E. Market St. Indianapolis, IN 46204

BRIAN MORMINO

Executive Director – Worldwide Environmental Strategy and Compliance 500 Jackson St. Cummins Inc. Columbus, IN 47201 Box 3005 Columbus, Indiana CATHERINE VAN WAY 47202-3005 U.S.A. Head of Government Relations 601 Pennsylvania Ave., Suite 1100 cummins.com Washington, D.C. 20004 ©2017 Cummins Inc. BLAIR CLAFLIN (EDITOR)

Products mentioned in this report Director – Sustainability Communications are covered by copyright and 301 E. Market St. trademark protections. Indianapolis, IN 46204

[email protected] t