At Shepherd Chemical, our work is guided by a simple but enduring purpose: To Create Value that Brightens Lives. This core purpose shapes how we think about our customers, our team members, our communities, and the long-term health of the world we share. Sustainability is one of the tangible ways this purpose is demonstrated — in the choices we make, the investments we prioritize, and the discipline required to balance progress today with responsibility for tomorrow.

Over the past twelve months, some of our sustainability metrics have not improved as much as we would have liked. Lower sales volumes have influenced several of our intensity-based measures, and as a result, certain trends have moved off their intended paths. Here’s how we are responding.

This report covers the actions within our control that, we believe, will matter most over the long term. We have made targeted investments in utility and infrastructure upgrades — including boilers, air compressors, lighting systems, and electrical metering — to ensure that we are decreasing our energy intensity and deriving more value from the energy we do consume. In addition, we have formed a dedicated utility conservation team with clear goals and targets focused on improving behaviors, identifying opportunities, and recommending improvements across our operations.

Safety continues to be foundational to Creating Value that Brightens Lives. Over the past year, we have strengthened our SafeStart practice and re-focused our training programs. These efforts reflect an increased emphasis on leadership engagement, knowledge sharing, and consistent practices across our facilities, all aimed at building a safer and more resilient organization.

Sustainability progress is rarely linear. It requires persistence, learning, and a willingness to adjust when conditions change. While this report reflects some challenges, it also reflects momentum — new programs, sharper focus, and a clear commitment to improvement. We remain confident in our direction and committed to the work ahead, with the goal of being more sustainable tomorrow than we are today while continuing to create lasting value that brightens lives.

Water intake at Shepherd Chemical has steadily decreased over the last 9 years. Several factors have contributed to this decline, including variation in production mix and volumes, and projects intended to reduce unnecessary water consumption. Water intake has reduced 27% from a 2017–2019 three-year average baseline to the most recent 2023–2025 three-year average. Efforts are underway in early 2026 to complete Water Body Risk Assessments for US sites to increase understanding of the impacts of our operations on water bodies.

Energy consumption remains relatively stable at Shepherd Chemical US. There is a notable decrease in natural gas consumption levels in 2022 and 2023, primarily attributed to measurement error by the utility provider that has since been corrected. Shepherd’s utility conservation team is actively working to identify and implement projects to reduce unnecessary electricity, gas, and water consumption in our operations.

Shepherd has a rich history filled with stories of delivering innovative solutions to customers. The R&D team is the catalyst and driving force behind these innovative outcomes. Our New Product Development (NPD) process is an iterative and collaborative process to develop new products that are tailored to meet customers’ needs. The NPD process stage-gates ensure that the environmental and sustainability impacts of each project are analyzed. This includes safer chemistry reviews, circularity assessments, greenhouse gas (GHG) emission calculations, and identification of opportunities to reduce waste.

Across our operations, opportunities are identified and acted on to recycle packaging, equipment, and waste streams. One of our significant waste reduction activities is the reclamation of metals through wastewater treatment. Removing these materials from wastewater while simultaneously innovating to reduce waste from process units supports compliance efforts, reduces costs, and drives sustainability.

Shepherd always considers the risks of its products in the intended and designed application of their use. The company works to understand and communicate the hazards, risks, and appropriate risk controls to relevant stakeholders. The team at Shepherd continually monitors changes in regulations and available information on hazards and risks.

We are passionately focused on reducing safety, quality, and process safety incidents in our operations. One program we developed for this purpose is our Near Miss reporting tool, which allows any team member to report a near miss. We believe that learning from close calls and getting the entire workforce involved in safety programs will help reduce incidents. In 2025, we saw a record level of near misses reported (leading indicator), as well as an increase in injuries (lagging indicator). Heading into 2026, we continue to focus on equipping our entire team to assess the risk of job tasks, share learnings cross-functionally, and take action to reduce risk.

SafeStart is a training program used to reduce incidents by decreasing the frequency of common states and human errors that increase the likelihood of such incidents.

At Shepherd, SafeStart has been baked into the culture for over a decade. The program includes regular company-wide training, sharing experiences, and competency checks through interactive team engagement. SafeStart provides a framework for reflection and self-awareness that can be used to reduce errors both at work and at home.

As the electrical grid becomes more sustainable, Shepherd will see decreased emissions associated with its electricity consumption relative to production levels.

Shepherd’s Greenhouse Gas (GHG) emission physical intensity has increased over the last two years, despite goals to reduce it further. This increase has been driven by steady energy consumption and variation in production output. It is typical to see variation in production levels and product mixes each year. As noted in the Conserve – Energy section, there were errors in measuring natural gas consumption levels in 2022 and 2023 that led to lower than typical values. Other factors that can contribute to the increase include energy demand for heating, ventilation, and air conditioning, equipment usage, and the fraction of green energy available on the electrical grid. Shepherd continues to anticipate increased supply of green energy on the electrical grid to support these GHG intensity reduction targets over the next decade.

The growth of the natural gas industry has motivated significant advances in energy independence and commodity manufacturing (steel, ammonia, etc.) in the United States in the last 20 years. Natural gas, which is primarily methane, has transportation and emissions advantages compared to other energy and chemical feedstock sources. The U.S. has become a net exporter of energy and some commodity chemicals, despite being reliant on overseas sources just a short time ago. However, every advancement comes at a price, and there are opportunities to further reduce climate impacts.

Methane is a potent greenhouse gas, and its combustion generates CO₂, another greenhouse gas. Shepherd Chemical is pursuing two technologies that make long-lasting materials central to the U.S. economy, along with hydrogen, which has many uses in the chemical, steel, and agriculture industries. Hydrogen is also a potential “energy of the future” that generates water as the only combustion product.

First, methane dehydroaromatization is the process of making benzene from methane in one unit operation. Benzene is a precursor to durable polymeric materials used in consumer and building products. There is a supply deficit of related precursors in North America, and this process would provide consistent, high-value use of methane which might otherwise become waste. Shepherd Chemical is working with Virginia Tech and others to develop and commercialize this technology. [5]

Second, catalytic methane decomposition makes solid carbon and hydrogen from natural gas. In another project with Virginia Tech, Shepherd is developing implementations of this approach to make high-value carbon for advanced applications that are currently imported to the U.S. This approach can also help unlock the potential value of hydrogen as a process input or fuel source. Both of these early-stage projects convert a waste stream into valuable materials while simultaneously decreasing the GHG emissions associated with alternative material sources. [6]

The largest recall in history was of automobile airbag modules that could inflate much more energetically than designed. Beginning in 2013, nearly 100 million airbags were recalled due to this problem. It was found that water and oxygen intrusion was causing degradation of the active ingredient resulting in the observed product defect.[7] Starting in the 1990s, Shepherd Chemical has been co-developing, manufacturing, and improving upon a safer alternative technology. This chemistry relies on a highly stable copper compound that both allows the airbag to inflate quickly yet also stop inflating at the “just right” time.

Especially in hot and humid regions, small amounts of water make it through the protective housing of the airbag propellant. In defective airbags, this water partially dissolved the explosive ingredient that it contained. When the active ingredient would resolidify, it no longer had the same particle shapes or sizes as when it was first manufactured. The change in morphology resulted in a material that burned all at once, instead of the expected controlled rate. This seemingly small change was enough to make the explosion happen much more rapidly than the airbag system was designed to handle, leading to broken pieces of the housing ejecting with the bag at the time of deployment. Shepherd Chemical’s basic

copper nitrate (BCN) is inherently safer due to the fact that it is almost totally insoluble in water. Research studies and modeling demonstrate that Shepherd’s product would take thousands of years to degrade in the same way as the alternative material that caused the recall.

Due to the life-critical application of airbags, consistency and purity are paramount in manufacturing BCN. Shepherd’s products are rigorously tested and subject to several processing steps to ensure they are free from contamination. Any product that does not pass testing does not ship to customers and can be reworked into the process. Shepherd consistently achieves 98% and higher first-run capability and on time shipment due to its well-designed process and dedicated employees.

Customers estimate that during Shepherd’s time as a supplier of BCN, the technology has saved tens of thousands of lives. Shepherd is proud to make products that help sustain what matters most: human life and health.

Committed to making a positive difference in our communities and society, The Shepherd Chemical Company proudly supports the Toys for Tots program each holiday season by collecting new, unwrapped toys for children in need.

This annual initiative reflects Shepherd Chemical’s dedication to giving back and making a meaningful difference in the lives of families during the holidays.

Toys for Tots is a nationally recognized nonprofit organization run by the U.S. Marine Corps Reserve, with a mission to ensure that every child experiences the joy and excitement of Christmas. The program distributes toys to less fortunate children and works year-round to inspire hope and promote goodwill within communities.

For the past three years, Mark Naber, Shepherd’s Quality Control Supervisor, has spearheaded Shepherd’s Toys for Tots collection efforts. Through his leadership, employees across the company have come together to support this important cause, helping extend the spirit of generosity beyond our workplace.

Mark’s passion for Toys for Tots comes from his long-standing involvement with the organization. As he explains:

Shepherd Chemical is grateful to Mark for his dedication and to all team members who participate in the toy drive each year. Together, we are proud to help brighten the holidays for children and families while reinforcing our shared commitment to community support and social responsibility.

Shepherd’s involvement in the community is a priority, and the Mirecourt team remains committed to supporting local schools and organizations through high quality engagement, mentorship, and educational outreach. Reflecting this commitment, the Shepherd Mirecourt site hosted two visits—welcoming students from Mirecourt High School as well as undergraduate students and faculty from the University of Nancy.

During these visits, students toured the site, received safety briefings, and engaged with Shepherd professionals across key functions, gaining insight into real world STEM careers. University of Nancy students also participated in focused discussions, including a career presentation from the site’s Laboratory Manager that highlighted pathways from academic study to industry.

These engagements provided valuable real world exposure while reinforcing Shepherd’s commitment to workforce development and inspiring the next generation of STEM professionals.

Disclaimer: The information contained in this report is for informational purposes only and does not create any legal rights or obligations. Readers are cautioned not to place undue reliance on past performance or forward-looking statements. Forward-looking statements are based on current assumptions and expectations, which are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Inclusion of information in this report does not necessarily mean it is material to the company’s financial performance. Non-financial data included in this report is based on estimates and assumptions. This data is not subject to the same level of scrutiny as financial data and should be interpreted accordingly.

Scope: The Shepherd Chemical Company (“Shepherd”), a private company headquartered in Norwood, Ohio, U.S., prepared this sustainability report on a consolidated basis for U.S. operations, except where otherwise noted, which may include global operations. For Greenhouse Gas (GHG) emissions, Scope 3 is excluded.

Reporting Period: The report covers the 2025 calendar year, unless otherwise noted.

Trademarks, Trade Names, and Logos: All trademarks, trade names, and logos mentioned or used in this report are
the property of their respective owners.

Changes, Uncertainty, and Verification: While we strive to ensure the accuracy and completeness of the information in this report, it is subject to change and may not be exhaustive. We do not assume any liability for any errors or omissions. Changes to the scope of this report, corrections, base year changes, mergers, acquisitions, and divestitures, or significant methodology changes will be reported in the next edition of the sustainability report. An uncertainty analysis is currently not performed on the data included in this report. Data included in this report is currently not third-party assured or verified.

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