Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Reduced CO2 emissions by 15% from 2007 through 2011 (target)
• Implemented environmental management system in 43 plants (2006: 15)
• ISO 14001 certification at additional 4 plants (77% of production value by Jan 2008)

Social Achievements

• Developed a point-based method for gauging social standards of suppliers, resulting in major improvements in India
• Improved working conditions for sub-supplier workforces in India and China
• Reviewed employment policies at sales companies in 48 countries to include guidelines for ethical behavior

Governance Achievements

• Developed a web-based reporting system to identify employees who breach Business Principles
• Established processes to manage social and ethical dilemmas in the supplier chain
• Implemented “Pure Performance” program to adjust core values to cope with new requirements

Climate Goals & Targets

Environmental Challenges

• High carbon dioxide emissions from transport (almost 50% of total emissions)
• Improving working conditions for sub-supplier workforces in developing countries
• Ethical risks in the supplier chain

Mitigation Strategies

• Categorized transport companies based on environmental performance and set goals for reduction
• Implemented repeated inspections, training, and commercial pressure on suppliers
• Conducted conferences for purchasing managers in China to address ethical risks

Supply Chain Management

Responsible Procurement

• Detailed selection process for suppliers including questionnaires on commercial, technical, and ethical requirements

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: UN Global Compact

Certifications: ISO 14001

Sustainable Products & Innovation

• Compabloc plate heat exchangers (energy savings up to 25%)
• AlfaCond condensers (recycling of 95% of condensed water)
• Alfa Nova heat exchangers (using natural cooling agents)

Environmental Metrics

ESG Focus Areas

• Environmental impact reduction
• Social responsibility (supplier conditions)
• Ethical behavior and transparency

Environmental Achievements

• Reduced carbon dioxide emissions by 5% (excluding acquisitions), aiming for 15% reduction from 2007 to 2011. Total emissions were 92,000 tons in 2008.
• Implemented lifecycle assessment (LCA) for 20 new products, with 10 replacements showing >20% average environmental impact reduction.
• Shifted from air freight to sea freight for several product lines to reduce environmental impact.
• Installed 120 solar panels at Pune, India factory, saving >100,000 kWh/year.
• Eliminated product washing at Alonte, Italy factory, saving approximately 100 m³ of water, 80 MWh of electricity, and 8 tons of solvent annually.

Social Achievements

• Conducted over 150 social audits of suppliers in India, China, Mexico, and Eastern Europe.
• Showed significant improvement in supplier conditions in India, with 88% of those audited in 2007 showing improvement in 2008.
• Improved health and safety conditions at supplier sites, including provision of personal protective equipment and training.

Governance Achievements

• Implemented ethical behavior guidelines for employees, addressing conflicts of interest, political contributions, bribes, and corruption.
• Established a whistle-blowing mechanism for reporting suspected violations of business principles.
• Provided ethics and business integrity training to line managers.

Climate Goals & Targets

Environmental Challenges

• Reducing greenhouse gas emissions from transportation (42% of total emissions)
• Improving environmental management systems among suppliers
• Managing increased business travel leading to higher GHG emissions from employee transportation.

Mitigation Strategies

• Implementing projects to shift from air freight to surface transportation.
• Surveying suppliers on environmental management systems and setting targets for GHG emission reductions.
• Changing car-leasing policy to limit vehicle choices to those with better environmental performance.

Supply Chain Management

Supplier Audits: Over 150 in 2008

Responsible Procurement

• Risk-based assessment of suppliers; audits covering health and safety, working conditions, and housekeeping standards.

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Increased demand for energy-saving products.

Reporting Standards

Frameworks Used: UN Global Compact

Certifications: ISO 14001 (18 plants certified)

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Energy-saving products (e.g., compact heat exchangers).

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Energy consumption
• Greenhouse gas emissions
• Environmental reporting
• Lifecycle assessments
• Supplier development
• Fair competition
• Health and safety

Environmental Achievements

• Reduced greenhouse gas emissions from transportation of goods by 20% (from 39,000 tons to 31,000 tons), with an additional 10.5% reduction if 2008 goods volume had been maintained.
• Reduced energy consumption in manufacturing and service sites by 10%.
• Extended environmental reporting system to 78 sites (from 71).
• 19 new products assessed using LCA, with 10 replacements showing a 9-60% smaller environmental impact.
• 7 new energy reduction projects initiated, bringing the total to 57 (30 completed).

Social Achievements

• Expanded supplier development process to over 200 suppliers in India, China, Mexico, and Eastern Europe, with over 150 social inspections carried out.
• Introduced a new Fair Competition Policy with training for over 90 managing directors and global business managers.
• Launched a new Health and Safety policy and developed a new reporting system for implementation in 2010.

Governance Achievements

• Introduced a new Fair Competition Policy and provided anti-trust training.

Climate Goals & Targets

Environmental Challenges

• High greenhouse gas emissions from transportation.
• Need to reduce energy consumption.
• Maintaining short lead times, low inventory costs, and favorable flexibility while reducing transport emissions.

Mitigation Strategies

• Initiated projects to reduce air transport of goods to the US facility, achieving a 70% reduction in CO2 emissions and 40% reduction in transport costs in a trial period.
• Implemented energy-saving projects in plants.
• Improved transport logistics.

Supply Chain Management

Supplier Audits: Over 150 social inspections

Responsible Procurement

• Supplier development process aimed at improving health, safety, and working conditions in developing economies.

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Development of energy-efficient products and clean-tech applications.

Reporting Standards

Frameworks Used: GRI, UN Global Compact

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• PureBallast
• Compabloc heat exchanger

Awards & Recognition

• Honorable mention in Canada’s “Natural Resources Energy Efficiency Award Program” (for Compabloc heat exchanger)

Environmental Metrics

ESG Focus Areas

• Energy
• Environment
• Food
• Sustainability
• Health and Safety
• Business Ethics
• Transparency
• Human Rights

Environmental Achievements

• Completed 44 energy-saving projects at production sites, saving an estimated 4% of energy consumption since 2007.
• Reduced CO2 emissions from the company car fleet to an average of 175 g/km (compared to 186 g/km in 2007).
• Lifecycle assessments of 23 new products, with 18 showing a smaller environmental impact than the products they replaced.

Social Achievements

• Continued supplier development process to improve health, safety, and working conditions in developing economies; social inspections carried out on over 130 suppliers.
• Introduced a new Health and Safety policy and reporting system.
• Launched a Group-wide employee survey (Compass) with a 91% response rate.

Governance Achievements

• Continued training of management in the Fair Competition Policy.
• Improved whistle-blower process leading to training and new internal controls.

Climate Goals & Targets

Environmental Challenges

• Increased greenhouse gas emissions from goods transportation (42,000 tons vs 31,000 tons in 2009), partly due to increased air freight.
• Increased employee travel, negatively impacting emissions.
• Ethical non-compliances identified in one Asian country.

Mitigation Strategies

• Ongoing energy-saving projects.
• Shifting towards more environmentally friendly company cars.
• Lifecycle assessments of new products.
• Supplier development program.
• New Health and Safety policy and reporting system.
• Employee training on Business Principles, with a focus on business integrity.
• Introduction of new internal controls.

Supply Chain Management

Supplier Audits: More than 130 social inspections

Responsible Procurement

• Supplier development process focusing on health, safety, and environmental conditions.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: Global Reporting Initiative Guidelines

Certifications: ISO 14001

Sustainable Products & Innovation

• Energy-efficient heat exchangers
• PureBallast ballast water treatment system
• ALDEC G3 decanter centrifuge
• High pressure spiral heat exchanger (HPSHE)
• Alfa Laval rotary jet mixer

Awards & Recognition

• Alfa Laval China selected as one of China’s 50 greenest companies.

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Business Ethics
• Transparency

Environmental Achievements

• Reduced annual GHG emissions from factories by over 10% through energy efficiency improvements.
• Reduced annual GHG emissions from goods transportation by 5% (though this was partially offset by increased air freight in 2010).
• Reduced emissions from car fleet by 10% through fuel-efficient models.
• Reduced total water consumption in production processes by more than 10% through new recycling systems.
• Eliminated over 25,000 kg of blacklisted chemicals.
• Increased volume of purchases from suppliers with ISO 14001 certification to over 65%.

Social Achievements

• Reduced accident frequency rate from 11.11 to 9.93 accidents per million working hours.
• Achieved less than 2% lost working time due to illness.
• Implemented an open recruitment policy to increase career opportunities for all employees.
• Improved working conditions of high-risk suppliers in India and China through regular inspections and termination of non-compliant suppliers (over 750 inspections between 2004 and 2011).

Governance Achievements

• Conducted central training and ethical risk assessment for over 100 top managers.
• Strengthened corporate governance processes with yearly policy sign-off by top managers.
• Introduced a new Fair Competition Policy and Business Ethics Policy with manager training.
• Implemented a whistleblower process.

Climate Goals & Targets

Environmental Challenges

• Failure to achieve the overall target of 15% reduction in GHG emissions between 2007 and 2011 due to underestimation of energy-saving projects needed and increased air freight in 2010.
• Inability to find alternatives for some essential blacklisted chemicals despite their hazardous nature.
• Need for more focused education and training for suppliers in health and safety.

Mitigation Strategies

• Focusing on energy-saving initiatives in areas other than energy-intensive production processes.
• Investing in new recycling systems to reduce water consumption.
• Increasing the percentage of purchases from ISO 14001 certified suppliers.
• Regular inspections and termination of non-compliant suppliers.

Supply Chain Management

Supplier Audits: Over 750 inspections between 2004 and 2011

Responsible Procurement

• Increased purchases from ISO 14001 certified suppliers
• Regular inspections of high-risk suppliers

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI

Certifications: ISO 14001

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Reduced water consumption by 10% in production processes compared to 2011.
• Reduced emissions per tonne of shipped weight per kilometer travelled from 115.8 g/tonnekm in 2007 to 108.2 g/tonnekm in 2012.
• Approximately 69% of purchased value was from suppliers with ISO14001 certification (or equivalent).

Social Achievements

• Group Management participated in an awareness exercise on the “Protect, Respect and Remedy” concept.
• Reduced total number of reportable accidents from 237 in 2011 to 205 in 2012.
• Joined the Swedish Network for Business and Human Rights.

Governance Achievements

• Formation of a new Commercial Ethics Council headed by the CEO to oversee anti-bribery and anti-corruption activities.

Climate Goals & Targets

Environmental Challenges

• Slow progress in improving health and safety, labor conditions, and working environment of suppliers, particularly in China.
• Difficulty in influencing suppliers with less than 15% of their business from Alfa Laval to improve working conditions.
• Ineffective regulatory authorities in enforcing labor laws in some countries.

Mitigation Strategies

• Review of the approach to suppliers’ compliance with Business Principles in 2013.
• Revised Social Business Principles to spur greater action.
• Increased focus on near misses to prevent accidents.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• ISO14001 certification (or equivalent) for suppliers

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: GRI (Global Reporting Initiative), UN Global Compact

Certifications: ISO14001

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• CB110 heat exchanger (30% lower environmental impact than predecessor)

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Human rights
• Ethical standards
• Optimizing the use of natural resources
• Transparency

Environmental Achievements

• Reduced CO2 emissions by 140 tons per year at the Lund facility through waste heat recovery.
• 80% of heating requirements met using recovered heat at the Lund facility.

Social Achievements

• Implemented mentor program for female employees.
• Launched a 12-day training program for young employees.
• Named one of the ten most attractive employers in Sweden.

Governance Achievements

• Improved ABAC processes, including e-learning modules.
• Annual evaluation of the Board's work.
• Board training program including field trips.

Climate Goals & Targets

Environmental Challenges

• Weaker than anticipated global economic upturn requiring cost adjustments.
• Need to enhance R&D process efficiency and consolidate production units.
• Supply chain disruptions (implied by the need for mitigation strategies).

Mitigation Strategies

• Launched an action program to achieve SEK 300 million in annual savings by year-end 2015.
• Improved ABAC processes.
• Developed a new platform for supplier audits.

Supply Chain Management

Supplier Audits: New global standard platform implemented

Responsible Procurement

• Compliance with Alfa Laval's business principles regarding safety, health, environment, and ethics.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI, UN Global Compact

Certifications: ISO 14001

Sustainable Products & Innovation

• PureSOx 2.0
• Tantalum-treated heat exchangers
• AQUA Blue freshwater generator

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance
• Transparency

Environmental Achievements

• Improved product designs resulting in up to 42% reduction in environmental impact compared to previous products.
• Reduced greenhouse gas emissions from goods transportation.

Social Achievements

• Established a new process to ensure supplier continuous improvement in line with business principles.
• Developed a new safety manual and tools to reduce health and safety risks in service centers and among field engineers.

Governance Achievements

• Rolled out improved anti-bribery and anti-corruption (ABAC) processes, including e-learning modules.
• Launched a mandatory anti-corruption training program for procurement employees.

Climate Goals & Targets

Environmental Challenges

• Human rights violations in high-risk supplier countries with ineffective enforcement of national employment legislation and international human rights standards.
• Health, safety, or environmental risks inherent in the operations of some suppliers (e.g., metal polishing and foundry work).

Mitigation Strategies

• Mapping out suppliers and their processes to identify risks.
• Working with high-risk suppliers to prepare and follow up on improvement plans.
• Phasing out suppliers with serious breaches after a period of non-improvement.
• Providing training to employees in procurement and high-risk suppliers on business principles.

Supply Chain Management

Responsible Procurement

• Risk assessments and risk reduction measures.
• Continuous improvement process for suppliers.
• Training for procurement employees and high-risk suppliers.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: UN Guiding Principles on Business and Human Rights, OECD Guidelines for Multinational Enterprises, UN Global Compact

UN Sustainable Development Goals

• Goal 2
• Goal 6
• Goal 7
• Goal 11
• Goal 13
• Goal 14

Alfa Laval products and solutions contribute to achieving these goals through improved energy efficiency, resource optimization, and sustainable solutions in various sectors.

Sustainable Products & Innovation

• Products designed to reduce energy consumption and optimize resource use.

Environmental Metrics

ESG Focus Areas

• Energy efficiency
• Greenhouse gas emissions
• Water consumption
• Chemicals
• Waste
• Supply chain sustainability
• Health and safety
• Anti-corruption
• Human rights

Environmental Achievements

• Achieved goals with respect to energy, CO2 emissions, and water consumption from the previous environmental strategy (2015).

Social Achievements

• Improved working conditions of high-risk suppliers.
• Reduced frequency and severity of workplace accidents.

Governance Achievements

• Provided anti-corruption training for most employees involved in sales and procurement.
• Implemented a new reporting system for higher quality environmental data.

Climate Goals & Targets

Environmental Challenges

• Ineffective enforcement of national employment legislation and international human rights standards in some supplier countries.
• Inherent health, safety, or environmental risks in some supplier manufacturing processes (e.g., metal polishing and foundry work).

Mitigation Strategies

• Worked with high-risk suppliers to prepare and follow up on improvement plans.
• Phased out suppliers with serious breaches after a given timeframe.
• Conducted initiatives to increase supplier understanding of business principles in high-risk countries (China and India).
• Implemented a more cohesive decision-making process for handling non-compliant suppliers.
• Rolled out the '3PR' project to focus on employee behavior and attitude toward risk reduction.

Supply Chain Management

Responsible Procurement

• Review of suppliers, manufacturing processes, and geographic location.
• Improvement plans for high-risk suppliers.
• Supplier training on business principles.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI

UN Sustainable Development Goals

• SDG 14: Life Below Water

Alfa Laval PureBallast system helps the marine sector meet ballast water treatment requirements.

Sustainable Products & Innovation

• Alfa Laval PureBallast

Awards & Recognition

• Named “preferred supplier” by IMPA

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Employees
• Human rights
• Anti-corruption

Environmental Achievements

• Reduced the use of chemicals listed as banned by 30% compared to 2016 (mainly due to a change of paint removal method in service centers).
• Recycled more than 70% of waste.
• Implemented specific measures to reduce energy consumption and carbon emissions in all manufacturing sites.
• New factory in Kunshan, China, equipped with solar panels.

Social Achievements

• Launched an anti-bribery and anti-corruption training program (to be launched in 2018, mandatory for all white-collar employees).
• Improved supplier understanding of Business Principles through workshops in China and India.
• Conducted a global employee survey with positive results regarding employee engagement.

Governance Achievements

• Implemented an escalation process to phase out suppliers who continuously fail to improve according to agreed action plans.
• Included the concept of Modern Slavery in internal and supplier training, monitoring, auditing, and follow-up activities.

Climate Goals & Targets

Environmental Challenges

• Energy consumption increased by 2.5% compared to 2015 (mainly due to increased production).
• Carbon emissions increased by 5.5% compared to 2015 (influenced by increased manufacturing in China).
• Water consumption increased by 7.8% compared to 2015 (due to increased testing and refurbishments in India).
• Goods transportation emissions per tonne-kilometre increased compared to 2015 (due to increased transport need and higher use of air freight).

Mitigation Strategies

• Implemented specific measures to reduce energy consumption and carbon emissions in all manufacturing sites.
• Company-wide project to switch to LED lighting (starting 2018).
• Cross-company energy group to share best practices.
• Strategic plan to increase the proportion of renewable electricity used.
• Analysis of financial and environmental impacts of installing on-site solar power for new sites.
• Goal to annually reduce water use by 2%, focusing on sites in India, China, and certain areas of the USA.
• Projects to reduce air transport for each product group.

Supply Chain Management

Supplier Audits: 97 supplier audits in 2017

Responsible Procurement

• Alfa Laval Business Principles
• Anti-bribery and anti-corruption training for procurement employees
• Supplier scorecards (including KPIs on compliance with anti-bribery and anti-corruption practices, Black and Grey list, and Environmental Management System).

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Increase in cost of energy or carbon emissions due to climate legislation.

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: GRI Standards, UN Global Compact

Certifications: ISO 14001 (95% of production value sites)

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Goal 2
• Goal 3
• Goal 6
• Goal 7
• Goal 9
• Goal 11
• Goal 12
• Goal 13
• Goal 14
• Goal 17

Alfa Laval's products and solutions contribute to these goals through improved shelf life, reduced waste, hygienic food production, clean water technologies, energy efficiency improvements, sustainable cities, responsible consumption and production, reduced carbon emissions, protection of marine ecosystems, and commitment to the UN Global Compact.

Sustainable Products & Innovation

• Alfa Laval PureBallast, PureSOx, and PureBilge (for marine industry).
• Gasketed plate heat exchangers (higher energy efficiency, reliability, and serviceability).

Awards & Recognition

• Voted one of Sweden’s best companies to work for (five years in a row).
• Rated 4th best employer among mechanical and engineering companies in Italy.

Environmental Metrics

ESG Focus Areas

• Sustainability
• Environmental impact reduction
• Energy efficiency
• Water consumption reduction
• Greenhouse gas emissions reduction
• Human rights
• Ethical standards
• Social responsibility
• Transparency

Environmental Achievements

• Reduced water and energy consumption at production units despite increased production
• Increased share of renewable energy used in production facilities to around 70%
• Products enabling water and energy savings and increased yield from natural resources
• Heat exchangers improving energy efficiency in customers’ processes, reducing the need for fossil fuels and helping to lower CO2 emissions

Social Achievements

• Implemented a health and safety program with clear guidelines focusing on leadership, training, and communication
• Employees of about 100 different nationalities
• Focus on diversity and inclusion
• Open internal recruiting process
• Mentor program for women with capacity to become future leaders

Governance Achievements

• Continued focus on initiatives implemented within the framework of the company’s profitability and organic growth strategies
• Strengthened internal control function and formalized procedures
• Implemented a whistle-blowing system
• Established a Conflict Minerals Policy
• Implemented a Fair Competition Policy
• Established an Export Control Policy
• Alfa Laval Anti-Bribery and Anti-Corruption Policy applicable to all employees

Climate Goals & Targets

Environmental Challenges

• Fluctuations in major currencies and the business cycle
• Price development of metals
• Uncertainty regarding the price delta between different fuels (marine industry)
• Concerns regarding the macro economy and global trade disputes (marine industry)
• Lower demand for PureSOx and pumping systems (marine industry)
• Bottlenecks in infrastructure in the North American gas market and lower drilling activity (Energy Division)
• US/China trade conflict impacting the North America ethanol industry (Food & Water Division)
• Weak demand in Marine and unfavorable macro and political environment (Latin America)
• Lower demand for PureSOx and pumping systems (Asia)
• Risk for technically related damages (high-speed separators)
• Risk connected to attracting and retaining talents
• Business interruption risks (strikes, natural catastrophes, computer access violations, supplier problems)
• Political risk
• Asbestos-related lawsuits

Mitigation Strategies

• Exchange rate hedging and distribution of financial debts
• Continuous ramp-up of production capacity
• Investments in increased capacity in existing production units
• New production capacity for brazed heat exchangers, separators, and gasketed heat exchangers
• E-commerce and online advisory services
• Long-term supply commitments and fixed prices from suppliers
• Metal futures to secure the price on strategic metals
• Customer price on titanium products linked to Alfa Laval’s procurement costs
• Policies, procedures, and training programs to ensure compliance with laws and regulations
• Whistle-blowing system
• Due diligence in the supply chain to minimize the risk that minerals originate from conflict areas
• Supplier Risk & Compliance unit to identify risks and monitor high-risk suppliers
• Alfa Laval Regulatory Operations unit to monitor emerging legislation
• Fair Competition Policy
• Alfa Laval Export Control Policy
• Alfa Laval Anti-Bribery and Anti-Corruption Policy
• Extensive tests at manufacturing and customer sites
• Product liability insurance
• ISO certified quality assurance
• Alfa Laval Occupational Health & Safety (OHS) Policy and OHS Manual
• Environmental Management Systems and ISO 14001 certification
• Alfa Laval Group Black and Grey Chemicals List
• Targets to increase energy efficiency and reduce carbon emissions
• Compulsory trainings on information security awareness
• Policies describing confidential information and its classification
• Information Security components in IT agreements
• Monitoring information security in project models
• Offering interesting positions, personal and professional development, a good working environment, and competitive compensation and benefits
• Active preventive work at each site
• Using several suppliers of input goods
• HPR classification for key production facilities
• Loss prevention visits
• Maintaining adequate insurance coverage
• Captive insurance company
• Proactive measures to minimize risks

Supply Chain Management

Responsible Procurement

• Alfa Laval Business Principles concerning the environment, health and safety
• Suppliers sign contracts agreeing to abide by Alfa Laval Business Principles
• High-risk suppliers are regularly audited

Climate-Related Risks & Opportunities

Physical Risks

• Climate change could lead to increased costs and constrain production
• Water scarcity in the supply chain or at our sites can constrain production

Transition Risks

• Cost of energy or carbon emissions can increase due to climate legislation

Opportunities

• Products and solutions that can optimize our customers’ use of natural resources

Reporting Standards

Frameworks Used: GRI, UN Global Compact

Certifications: ISO 14001

UN Sustainable Development Goals

• 2
• 3
• 6
• 7
• 9
• 11
• 12
• 13
• 14
• 15

Alfa Laval supports 15 of the 17 UN Sustainable Development Goals through its products and solutions that improve energy efficiency, reduce emissions, purify water, minimize waste, and lead to the efficient use of raw materials.

Sustainable Products & Innovation

• PureBallast (ballast water treatment)
• PureSOx (exhaust gas scrubber)
• Products enabling water and energy savings and increased yield from natural resources

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Business Integrity
• Transparency

Environmental Achievements

• Reduced carbon emissions from energy consumption by 54% compared to 2015.
• 78% of electricity came from renewable sources in 2020 (compared to 27% in 2015).
• Reduced water consumption by 14% compared to 2015.
• Recycled 83% of waste (aiming for 85%).
• Reduced goods transport emissions by 7% compared to 2015.

Social Achievements

• Reduced Lost Time Injuries by 51% compared with 2017 (exceeding the 30% target).
• Increased proportion of women in the company to 20.9% (from 20.3%), and 18.8% in management (from 18%).
• 42% of new hires in 2020 were women.
• 82% of employees felt engaged (14 percentage points higher than the industry benchmark).

Governance Achievements

• 100% of employees trained in anti-bribery and anti-corruption.
• No public legal cases regarding corruption.

Climate Goals & Targets

Environmental Challenges

• Increased use of hazardous chemicals due to a specific type of paint (mitigated by finding a substitute).
• Scope 3 emissions represent a significant portion of total emissions.
• Covid-19 pandemic impacted operations and data collection.

Mitigation Strategies

• Developed a substitute for hazardous paint.
• Initiated analysis of scope 3 emissions across the value chain.
• Implemented crisis management measures to mitigate Covid-19 impact.

Supply Chain Management

Supplier Audits: 40 audits in China in 2020

Responsible Procurement

• Business Principles for Suppliers
• Supplier code of conduct
• Supplier risk assessment
• Supplier development programs
• Supplier packaging guideline

Climate-Related Risks & Opportunities

Physical Risks

• Changes in weather patterns posing physical risks to operational units or suppliers.

Transition Risks

• Changes in regulation, availability of resources, changing customer behavior, increased energy prices and taxes, regulations related to CO2 emissions.

Opportunities

• Energy efficiency as a main way to mitigate climate risks and a business opportunity.

Reporting Standards

Frameworks Used: GRI Standards: Core option

Certifications: ISO 5001 (San Bonifacio plant)

UN Sustainable Development Goals

• SDG 2
• SDG 3
• SDG 4
• SDG 5
• SDG 6
• SDG 7
• SDG 8
• SDG 9
• SDG 11
• SDG 12
• SDG 13
• SDG 14
• SDG 15
• SDG 16
• SDG 17

Alfa Laval's products and solutions contribute to various SDGs through improved energy efficiency, water treatment, waste reduction, food safety, and ethical business practices.

Sustainable Products & Innovation

• Alfa Laval PureCool (reduces methane slip in LNG applications)
• Heat exchangers for waste heat recovery in data centers

Environmental Metrics

ESG Focus Areas

• Climate
• Circularity
• Caring
• Committed

Environmental Achievements

• Reduced scope 1 and 2 emissions by 46% compared to 2020.
• 93% of electricity from renewable sources in 2022 (80% in 2020).
• Reduced water consumption in water-stressed areas by 11%.

Social Achievements

• Launched extensive safety program resulting in positive trend in Lost Time Injury Frequency Rate and Minor Injuries.
• 34% of new white-collar hires were women in 2022.
• 86% of employees completed the VOICE employee engagement survey.

Governance Achievements

• Updated Health & Safety Policy and Manual.
• Reinforced and continued development of a compliance and ethics program.
• Further developed work with the EU whistleblower directive.

Climate Goals & Targets

Environmental Challenges

• Supply chain disruptions.
• Geopolitical and economic pressures (including the war in Ukraine and sanctions against Russia).
• High inflation and increased raw material costs.
• Capacity constraints.

Mitigation Strategies

• Early steps in price management.
• Increased volumes.
• Build-up of inventory levels.
• Restructuring program to address capacity imbalances (SEK 367 million cost).

Supply Chain Management

Supplier Audits: 74 Business Principles audits in 2022

Responsible Procurement

• Alfa Laval Business Principles for Suppliers Policy
• Supplier agreements
• Supplier risk assessment
• Supplier development program
• Supplier sustainability award

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Regulatory changes
• Market shifts

Opportunities

• Development of energy-efficient products
• Growth in renewable energy markets (hydrogen, biofuels).

Reporting Standards

Frameworks Used: GRI Standards 2021, EU Taxonomy

Certifications: ISO 14001

Third-party Assurance: Ernst & Young AB (Limited Assurance)

UN Sustainable Development Goals

• Goal 2 (Zero hunger)
• Goal 3 (Good health and well-being)
• Goal 6 (Clean water and sanitation)
• Goal 7 (Affordable and clean energy)
• Goal 8 (Decent work and economic growth)
• Goal 9 (Industry, innovation and infrastructure)
• Goal 11 (Sustainable cities and communities)
• Goal 12 (Responsible consumption and production)
• Goal 13 (Climate action)
• Goal 14 (Life below water)
• Goal 15 (Life on land)
• Goal 17 (Partnerships for the goals)

Alfa Laval's products and initiatives contribute to these goals through various means, as detailed in the report.

Sustainable Products & Innovation

• E-motion separators
• E-PowerPack
• Air Lubrication system
• Heat exchangers made using fossil-free steel

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Climate
• Circularity
• Caring
• Committed

Environmental Achievements

• Reduced Scope 1 emissions from 21,612 tons CO2e in 2020 to 16,282 tons CO2e in 2023
• Reduced Scope 2 (market-based) emissions from 23,027 tons CO2e in 2020 to 5,082 tons CO2e in 2023
• 67% of waste diverted from disposal in 2023

Social Achievements

• New employee hires: 3,156 (29% women)
• Employee turnover rate: 14%
• Average training hours per employee: 10.70

Governance Achievements

• Annual enterprise risk assessment including corruption risks; no significant risks identified.
• All new suppliers in identified risk countries screened using environmental and social criteria.

Climate Goals & Targets

Environmental Challenges

• Data limitations and exclusions (see DataCoverageAndAssumptions)
• Water scarcity in some operational areas

Mitigation Strategies

• Actively working on decreasing water withdrawals and increasing water efficiency
• Setting short- and long-term targets to minimize water withdrawals in water-stressed areas
• Supplier assessments for environmental and social risks

Supply Chain Management

Supplier Audits: All new suppliers in identified risk countries screened

Responsible Procurement

• Business Principles audits highlight six critical areas: child labor, young labor, forced labor, freedom of association, health and safety, fire protection and environment

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: GRI Standards

Certifications: ISO 14001 (most major operation sites)

Third-party Assurance: Ernst & Young

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Products contributing to reduced water use and environmental impact of customers’ industrial processes

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Safety
• Carbon Neutrality
• Circular Economy
• Energy Transition

Environmental Achievements

• Reduced carbon emissions in scope 1 and 2, aligned with targets. Ongoing phase out of fuel oil and LPG, lower district heating consumption, and conversion to renewable electricity sources.
• Extended agreement with Stena Recycling for metal recycling in Nordic countries.
• Partnership with Aperam to enable global recycling of metals from disc-stack centrifuges (starting in Europe in 2024).

Social Achievements

• Implemented safety stand-downs in 16 factories to improve safety culture and behavior, resulting in local plans with clear commitments and responsibilities.
• Improved Lost Time Injury Frequency Rate (LTIFR) despite a slight increase in Lost Time Injuries.

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• Increased project costs due to inflation and higher interest rates leading to project delays, especially in cleantech.
• Lower demand for heat pumps due to policy changes in the European energy market and uncertainty in the construction sector.
• Slow investment decisions for large projects, most notably in the US.
• Lower order intake for Desmet in the Food & Water division.
• Lower demand for ballast water treatment systems as the retrofit market shrinks.
• Lower offshore orders due to constrained supply chains.

Mitigation Strategies

• Developed alternative sourcing strategies (carbon-neutral metals sourcing program, expected ramp-up in 2026-27).
• Investing in energy efficiency measures and replacing gas in operations (included in medium-term capex plan).
• Addressing imbalances between actual demand and manufacturing capacity.
• Increased sales activities and addressing inflationary pressure.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Sourcing program for carbon-neutral metals

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Development of energy-efficient products

Reporting Standards

Frameworks Used: Null

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Alfa Laval PureBallast 3 Ultra
• Framo Submerged Liquefied Gas pump
• Alfa Laval Hygienic line H5 gasketed plate heat exchanger
• Alfa Laval SE 43 brazed plate heat exchanger

Awards & Recognition

• Not disclosed