Alfa Laval : Sustainability notes 2022

Sustainability notes, GRI and Taxonomy

Sustainability notes, GRI Content Index and Taxonomy reporting

Alfa Laval's sustainability reporting for 2022 consists of sustainability disclosures in the Annual Report 2022 and supplementary information in the below Sustainability Notes. Alfa Laval reports in accordance with the GRI Standards 2021 and the GRI statement of use and content index are found on page 10-13 in this document.

Sustainability notes

The sustainability notes consist of sustainability information that supplements the disclosures in the Annual Report. The aim of these notes is to ensure complete sustainability reporting according to the GRI Standards 2021.

The supplementary information regarding material aspects is structured according to Alfa Laval's sustainability target areas - climate, circularity, caring and committed - and divided into topics according to the GRI. Please note that not all target areas and corresponding material topics have supplementary information in these notes, some are fully reported in the Annual Report. Also note, that some of the GRI general disclosures and one other material topic (economic performance) have supplementary information in this document.

Environmental data disclosed in the annual report (AR) and in Sustainability notes (SN) (these notes), such as waste, water and energy are reported at the site level and collected through Alfa Laval's sustainability data reporting tool. Data was consolidated based on operational control. The data has been compiled based on invoices or physical meters following the financial year. All operations and service centres are required to report environmental data. Only Alfa Laval offices with more than 25 employees are required to report environmental data.

In these notes, on p. 14-16 you will also find complementary information to the taxonomy reporting.

Note 1. General disclosures

1.1 Entities included in the organization's sustainability reporting according to GRI 2-2.

a) Alfa Laval's sustainability reporting for 2022 provided in the Annual Report and in the Sustainability notes on alfalaval.com covers the parent company (Alfa Laval AB) and its subsidiaries which constitutes the Alfa Laval Group with the exceptions listed below.

b) In the sustainability report, the included companies have been restricted to:

• • All operation and service centre sites must report energy, waste, chemicals, water and health & safety data.

• • Large offices (> 25 employees) must report energy, waste, chemicals, water and health & safety data.

• • Field-service sites must report health & safety data but do not have to report any other type of data.

• • Non-Alfa Laval brands are currently not included in employee diversity disclosures.

c, ii) In 2022 year's report, Desmet, Scanjet, Bunker Metrics are excluded. These are new acquisitions 2022 and will be added in the sustainability reporting latest within three years.

1.2 Reporting period, frequency and contact point according to GRI 2-3.

Reporting period: January 1 to December 31, 2022. Sustainability reporting is made annually.

1.3 Restatements of information according to GRI 2-4.

a) Scope 3, category 2, Capital goods: From 2022 adding our machinery, equipment and vehicles using average spend-based methods and spend emission factors from GHG protocol, p. 35.

Scope 3, category 3, Fuel and energy related activites: Calculated using Quantis estimation from Scope 1 and 2 size.

Scope 3, category 7, Employee commuting: Using 1.3 CO2 ton per employee per year. Estimation based on a number of surveys.

a, i) This information was not calculated previous year as the largest categories were prioritized. For this year, they have been included in the reporting.

a, ii) The effect is that the scope 3 calculation is more correct although the added categories do account for less than 0.1% of the total footprint.

1.4 External assurance reporting according to GRI 2-5.

It is Alfa Laval's Board of Directors and the Executive Management who are responsible for the preparation of the Sustainability Report including the Statutory Sustainability Report. Alfa Laval seeks external assurance of the Sustainability Report including the Statutory Sustainability Report. The assur-ance provider is the company's external auditors EY, elected at the Annual General Meeting. The Auditor's Limited Assurance Report is published in the Annual Report.

1.5 Activities, value chain and other business relationships according to GRI 2-6.

d) No significant changes compared to the previous reporting period.

1.6 Employees according to GRI 2-7.

Central &
Eastern	Latin	North	Western
Asia	Europe	America	Nordic	America	Europe	Other	Total
Number of employees (headcount)*	5,246	713	625	6,029	1,255	2,502	136	16,506
Number of temporary employees (headcount)	1,524	4	39	465	10	146	4	2,192
Number of permanent employees (headcount)	3,722	709	586	5,564	1,245	2,356	132	14,314
Number of full time employees (headcount)	5,241	701	587	5,756	1,241	2,334	134	15,994
Number of part-time employees (headcount)	5	12	38	273	14	168	2	512
*Figures include Alfa Laval branded entities only.

c, ii) All numbers are calculated at the end of the reporting period (31st of December 2022).

d) Alfa Laval employees the vast majority of its workers on permanent and full-time basis due to the high skill nature of work in most parts of the com-pany. Temporary employments are applied in some countries during proba-tion period, for leave coverage and in fewer instances as the position is only required in a specific time limited capacity. Many of these employments are part of our Nordic operation. Furthermore, in China the distinction between permanent and temporary are not as clear as in other regions and for report-ing reasons are indexed as temporary although having a long-lasting employment relationship with the company.

Part-time employment is offered to employees where this is a wish the company can accommodate or where this is a statutory right. In some instances, roles not required in full time effect. This is not a desired situation.

e) Reported numbers for 2021 were not in the same format, however the numbers show that there were no significant fluctuations in the number of employees between 2021 and 2022.

1.7 Governance structure and composition according to GRI 2-9. c, iv) A policy on Inclusion & Diversity is in place, for the Board to ensure a diverse composition.

1.8 Nomination and selection of the highest governance body according to GRI 2-10.

b, i) Shareholders can propose candidates for the board. The composition of the nominating committee is announced in a press release and in the Q3 report.

b, ii) Gender balance is prioritized during the coming years. See Work of the Nominating Committee ahead of the 2022 Annual General Meeting., p. 93: Nominating Committee applies paragraph 4.1 Diversity policy of the Swedish Corporate Governance Code in its work.

b, iii) Independence is taken into considerations, see example on choice of chairman for the Nominating Committee ahead of the 2022 Annual General Meeting (Finn Rausing) also a board member - a deviation from the code.

1.9 Delegation of responsibility for managing impacts according to GRI 2-13.

a, ii) Group Management coordinates and different forums work with focus areas from the sustainability strategy.

1.10 Communication of critical concerns according to GRI 2-16. a) Critical concerns are raised to the Risk and Compliance Board (RCB) where members of Group Management are present. At times between RCB meetings, Senior Vice President & Chief Legal Officer represents the RCB. Senior Vice President & Chief Legal Officer is also a member of the Group Management. Group Management decides if the concern is to be raised to the board or not.

b) The number of critical concerns communicated to the highest governance body during the reporting period was one (1). The nature of the concern is not disclosed due to confidentiality constraints.

1.11 Collective knowledge of the highest governance body according to GRI 2-17.

a) The highest governance body gets information from internal experts in the field, make site visits and attend external meetings and conferences on the subject. For example, the board gets an annual summary of sustainability in February. The board approves of sustainability strategy and goals.

1.12 Evaluation of the performance of the highest governance body according to GRI 2-18.

a) The board evaluates its work through a yearly survey. In the survey perfor-mance regarding sustainability including environmental and social aspects are included. Safety and anti-corruption are other examples on what is included in the evaluation.

c) In response to the yearly survey (see 2-18 a) answers from previous years, on how the company works with risks (including crisis management and whistle blowing) has been lifted to the board.

1.13 Annual total compensation ratio according to GRI 2-21.

a) This information will be disclosed in the executive remuneration report published on the AlfaLaval.com

1.14 Policy commitments according to GRI 2-23.

a, i and b, i) The Alfa Laval Business Principles were first published in 2003 and revised in 2012 to incorporate the 2011 "Protect, Respect and Remedy" concept of the United Nations Guiding Principles on Business and Human Rights, and the 2011 revision of the OECD Guidelines for multi-national enter-prises. The revision made in 2017 incorporated the concepts in the 2015 UK Modern Slavery Act. The Business Principles are approved by the Alfa Laval Board. Business Principles also described in AR 2022, p. 15 and 77.

a, iii) Applying the precautionary principle is part of what the Business Principles stipulates (see p. 77). By educating in the Business Principles, we also ensure precautionary measures. The environmental policy stipulates that a precautionary approach should be taken to environmental challenges. All major sites are working in accordance with ISO 14001 which requires a pre-cautionary approach to environmental management.

a, iv, and b) The Business Principles stipulate respecting human rights: "We have a firm commitment to act responsibly and respect human rights."

(Tom Erixon, CEO).

b, ii) Our Business Principles audits highlights six critical areas: child labor, young labor, forced labor, freedom of association, health and safety, fire pro-tection and environment. We consider all stakeholders are equally important with regards to respecting human rights.

c) Our policy commitments can be found here: alfalaval.com/about-us/sustainability/a-matter-of-trust/

1.15 Embedding policy commitments according to GRI 2-24.

a i, ii) The accountability to implement the commitments lays in the respec-tive Business Unit. Group Sustainability leads and facilitates.

iii) How Alfa Laval implements its commitments is described in the Business Principles. For instance, as an employee, you should "Apply these Business Principles in the daily work and take personal responsibility for complying with them." As a manager, you should: "Lead by example" and "Ensure that your team is trained regularly".

a, iv) Through training in the Business Principles and information on the intranet.

1.16 Processes to remediate negative impacts according to GRI 2-25. a) It is always possible to communicate grievances through contact informa-tion on alfalaval.com and to local sites. When larger changes of facilities and/ or operations are planned, communication with local and other stakeholders is ensured through standardized processes required by national laws and local authorities.

All major operation sites are certified according to ISO 14001, thus have processes in place to comply with the ISO 14001 requirements 7.4 about communication where it is described that received information that are com-plaints should be answered "prompt and clear" and that these "provide an

Note 2. Economic performance

2.1 Direct economic value (MSEK) generated and distributed according to GRI 201-1.

Economic value distributed:

Employee (salaries & remunerations)

Suppliers (purchases)

2022

13,126 22,443

Investments

Acquisition of businesses

Shareholders (dividends)

Public Sector (taxes)

Payments to providers of capital

1,853 3,685 2,480 1,834

290

45,711

opportunity for improvement for the environmental management system", and requirement 9.3 f Management review, including "relevant communica-tion(s) from interested parties, including complaints" .

1.17 Compliance with laws and regulations according to GRI 2-27. a) Legislative compliance ensures our business legitimacy. No significant fines or non-monetary sanctions regarding environmental or socioeconomic performance have come to Alfa Laval's attention during 2022.

1.18 Membership associations according to GRI 2-28.

Alfa Laval is a member of Teknikföretagen (the Association of Swedish Engineering Industries), International Chamber of Commerce (ICC) Business Sweden, Long Duration Energy Storage Council, Hydrogen Council.

1.19 Collective bargaining agreements according to GRI 2-30.

a) Our Business Principles stipulate that all employees shall be free to form and to join trade unions or similar external representative organizations and to bar-gain collectively. The coverage varies from country to country. Globally, approx-imately 53% of employees are covered by collective bargaining agreements.

%

28.7% 49.1%

4.1% 8.1% 5.4% 4.0% 0.6%

210

100.0%

2021

10,776 17,858

1,229 3,828 2,309 1,599

37,809

%

28.5% 47.2%

3.3% 10.1%

6.1% 4.2% 0.6%

100.0%

2020

10,419 16,820

1,232

70

0

1,537

260

30,338

%

34.3% 55.4%

4.1% 0.2% 0.0% 5.1% 0.9%

100.0%Direct economic value generatedEconomic value distributedEconomic value retained:

52,135 -45,711

6,424

40,911 -37,809

3,102

Explanation: Economic value retained: 'direct economic value generated' less 'economic value distributed'

Net salesNumber of employees at year endTotal assetsR&D costsOperating incomeNet income

52,135 20,300 81,249 -1,356 6,519 4,569

40,911 17,883 64,361

-1,159 6,126 4,801

41,468

-30,338

11,130

41,468 16,882 60,860 -1,039 5,580 3,580

Note 3. Climate

3.1 Carbon emissions according to GRI 305-1, 305-2, 305-3

CO2 emissions (metric tonnes CO2e)

Total

Scope 3 emissions by category

Scope 3

1) No gases other than CO2 were included in the calculations, as CH4, N2O, HFCs, PFCs, SF6, NF3 are either negligible or lacking.

• 2) Alfa Laval does not generate biogenic emissions.

• 3) 2020 has been chosen as base year, as 2020 is the first year of Alfa Laval's new sustainability target period- 2020-2023. The previous target period was 2015-2020. No significant changes in emissions have triggered recalculations of the base year emissions.

4) Emission factors used come from databases such as EIA and Defra, national residual mix, from specific electricity suppliers and specific district heating suppliers. 5) Data was consolidated based on operation control. For information on the data consolidation approach please see page 1.

6) Roughly 13% of the CO2 emissions from company cars (Scope 1) consist of estimated data.

Emission

508,636

Method description

Included and estimated to 1% of total footprint. Calculated using average data method.

30,867

Currently deemed as too low, will in the future use accounting for capital investments in a year, using supplier estimated inherit footprint from operations. Emission factors from Defra were used in these calculations.

5,426

Calculated using Quantis estimation from scope 1 and 2 size.

52,012

Reported from Global Transport using forwarder reports.

1,806 9,137

Reported based on Alfa Laval's travel management system.

Calculated using reported waste numbers.

24,703

Calculated using 1.3 CO2 ton per employee. Estimation based on a number of surveys.

EXCLUDEDCompany cars are included in scope 1, no other leased assets upstream. Leased facilities are included in our scope 1 and 2.

10,402

Estimated as 20% of Category 4.

EXCLUDED 30,897,198

Gross life cycle energy consumption of sold products in fiscal year using the hybrid method. Emission factors from the IEA and Defra were used in these calculations.

N/A in our business model.

4,867

Using sourced weight as basis. Split between incineration, recycled and landfill.

EXCLUDEDN/A in our business model.

EXCLUDEDN/A in our business model.

EXCLUDEDInventory on our minority ownerships is negligible.