AQ : Sustainability Report 2023

AQ Group Sustainability Report 2023

AQ was founded in Sweden in 1994 and consists today of about 8,000 employees, with a large share working in emerging countries outside Sweden. We are a global manufacturer of components and systems for industrial custo-mers with high demands around the world. This Sustainability Report covers all AQ companies within the Group.

AQ consists of seven business areas which are Electric cabinets, Wiring systems, Precision stamping and In-jection molding, Sheet metal processing, System pro-ducts, Inductive components and Special technologies and Engineering. We take pride in being a reliable supplier by producing products with high quality, delive-red on time in a sustainable way. AQ has been an active member of the UN Global Compact since 2012.

AQ has set 10 principles and goals for our sustaina-bility work. The principles correspond to the principles set forth by the UN Global Compact framework. In our sustainability report we will present the principles, how they are implemented and a presentation of goals and results.

Assessment, policy and goals

AQ's goal is for all our employees and business part-ners to live up to the Universal Declaration of Human Rights. The goal is to have zero human rights violations reported.

Our core values and code of conduct outlines the- sibility to report instances of human rights violations. The Code of Conduct is communicated to all employ-ees within the company.

Also, our immediate supply chain should adhere to the same principles. The principles are clearly stated in the AQ Supplier Code of Conduct.

Implementation

AQ works continously with implementation and monito-ring of our core values, which were established in early 2012. One of the cornerstones of the core values is "Courage and Respect" including the principles, "Every employee has the same status" and "We treat others as we like to be treated ourselves". All AQ employees have received a booklet with AQ's values in their local langu-age and we arrange workshops to strengthen under-standing of our values throughout the company. This together with the AQ Code of Conduct gives guidance how to act within AQ.

Suppliers are regularly audited using a standard template which contains a section on human rights and that they are required to adhere to the AQ´s Supplier Code of Conduct. Suppliers who have questionable ethics are not approved as an AQ supplier.

All employees and external stakeholders can report violations directly by sending a message [e-mail] there are any violations against human rights.

Measurement of outcomes

In AQ there has been no reported incidents of human rights abuses during the year. If any issues should occur in the future they will be recorded and brought to the at-tention of group management and the relevant authori-ties. AQ is fully committed to handle any such occurren-

we have had zero human rights violation reports in AQ.

LABOUR PRINCIPLES

Principle 3: Uphold the freedom of association and

collective bargaining

Principle 4: Uphold the elimination of all forms of forced and compulsory labour

labour

Principle 6: The elimination of discrimination in respect of employment and occupation

Source: UN Global Compact

AQ hires and treats its employees in a manner that does not discriminate regarding sex, transgender iden-tity or expression, ethnicity, religion or other belief, disa-bility, sexual orientation, age, political opinion, social origin, HIV/AIDS status or trade union membership. Di-versity in the workplace is encouraged at all levels.

Assessment, Policy and Goals

Our Code of Conduct shows employee rights and re-sponsibilities. All employees work here willingly, and no employee is forced to work overtime unless it is ordered legally and according to contract. In AQ we have a non discrimination policy that take stand against all kind of discriminations and this is stated clearly in our code of conduct. We uphold the law and our ethical responsibi-lity by only employing people of a legal working age.

The AQ goal for Labor Principles is to have an aver-age self-assessment score higher than 3.5 and that no subsidiary should score below 3 in our yearly self-as-sessment where the lowest score is 1 and highest is 4.

Implementation

The labor unions in AQ are working well. AQ applies col-lective agreements that are negotiated by the parties and follow laws and regulations in the countries where we operate. With regards to the safety of our employees we evaluate, and audit working conditions and make sure that the correct protective clothing and equipment are used. We fully commit to providing a safe working en-vironment. New employees receive relevant training to carry out their tasks safely and existing employees recei-ve continuous training at various intervals based on their need to be able to perform their respective tasks.

Continuous work with health and safety is something that helps us becoming a more attractive employer as well as creates a better functioning business. Special focus has been put on working with identifying risks and le-adership to getting more people involved with safety rela-ted work.

Measurement of outcomes

The Board of Directors of AQ Group AB consists of four men and two women. In AQ group management team se-ven are men (including the CEO) and three are women. Within the entire AQ, we have an even gender distribution with 47% women and 53% men.

AQ has since 2015 implemented a company self-as-sessment that is done by the management of every subsi-diary within the group. This gives the group management a good understanding of how well the principles in UN Global Compact are adhered to. The results from the sur-vey 2023 show high scores on average. An action plan is made to strengthen the subsidiaries where the score is considered low.

In 2023 the score for Labor principles was on average 3.73 on a scale from 1 to 4 where 4 is highest. No subsi-diary within the group has scored lower than 3.

AQ´s subsidiaries are continuously being audited by our customers. During 2023, several customers, such as Volvo, Scania, ABB, Hitachi, Alstom and Getinge, perfor-med audits on our production sites. These companies fo-cus strongly on corporate social responsibility and work environment which helps us to comply with Labor Princip-les.

ENVIRONMENTAL PRINCIPLES

Principle 7: Support a precautionary approach to environmental challenges

Principle 8: Undertake initiatives to promote greater environmental responsibility

Principle 9: Encourage the development of environmentally friendly technologies

Assessment, Policy and Goals

Source: UN Global Compact

In our environmental policy on our website, we explain AQ's view on how we will improve the environment. " Our business and processes are designed in such a way that rest products are minimized over the life cycle of our pro-ducts". We shall follow rules and legislation and constant-ly work on improvements to reduce or prevent our en-vironmental impact, from design to delivery. A key environmental goal for AQ is that all production sites shall result than 3 on our annual self-assessment.

During the past years it has been clear both within the Group, from shareholders and from other stakeholders that we need to do more to reduce carbon dioxide emis-sion. Within AQ we have chosen to act through our en-vironmental management system, where there are con-crete goals and actions to reduce carbon dioxide emissions in all companies.

In 2021, we also set the goal of reducing our carbon dioxide emissions in relation to our turnover by 2% for 2022 and by 4% for 2023.

Implementation

Environmental concerns and improvements are part of our daily work and continuously discussed during regular follow-up meetings in our subsidiaries. We conduct risk analysis when necessary and work according to our ma-nagement systems. We work according to the precautio-nary principle by avoiding materials and methods related to possible environmental and health risks when other al-ternatives are available.

We also share best practices between our sites through our CEO´s weekly newsletter. One example of this is the widespread implementation of LED lighting in most of theconsumption. Another example is the use of heat ex-changers in our plants to reuse excess heat from produc-tion processes.

A major environmental impact is the truck transports that takes place between our suppliers, our factories and our customers. We work to reduce our truck transports- countries close to customers and suppliers. Furthermore, we participate as a supplier in the transportation industry's transition to new fuels and technologies

Measurement of outcomes

All AQ units ensure that national environmental laws are complied with. This is ensured at Group management le-vel through AQ's self-assessment and the external ISO audits that are carried out. The result of the self-assess-ment with respect to the environment in 2023 was 3.74 on a scale between 1 and 4.

For the third year, we have also compiled our carbon dioxide emissions according to scope 1 and 2, i.e. emis-sions from our own operations and control. In total, our carbon dioxide emissions according to scope 1 and 2 amount to 25,348 tons in 2023, which corresponds to a reduction of 12% in relation to our net sales compared to previous year. The plan for 2024 is to continue to identify possible renewable energy sources and to start mea-suring scope 3, i.e. the carbon dioxide emissions of the entire value chain.

AQ is convinced that continuous improvement through- veness. We have processes in place to identify and follow up on changes in our purchasing, production and delivery processes that contribute to improving the environment. Some of the concrete measures that have been taken in this regard are:

The Covid-19 pandemic has led to a reduction of busi-ness trips and a widespread use of digital meeting tech-nology

Many of the AQ factories have implemented LED ligh-ting and motion sensors to reduce energy consumptionAQ has four production sites that have installed solar-

panels or solar heating devices

All AQ's facilities in Sweden are powered with 100% re-newable energy

Many of AQ's production facilities reuse the heat gene-rated from production processes to heat the factory

Many companies have installed so called BMS systems to better control and monitor their consumption of ener-gy for heat, cooling and ventilation

AQ is as a supplier actively taking part in the conversion from conventional to electric commercial vehicles

We work to reduce scrap percentage from the material we use. This is for example done by improved program-ming in sheet metal working machines and by adapting the design together with our customers.

We continue the work to increase the recycling of rest products from the injection molding process. We grind it and reuse it in our production

We continuously reduce hazardous chemicals in co-operation with our customers

We implement a process to reuse packing material in cooperation with our customers

Assessment, Policy and Goals

AQ Group puts great emphasis on building trust and long-lasting relations with our employees, customers and suppliers. It lies in our business ethics to always follow laws and regulations as a minimum requirement in all

countries we operate.

We do not, under any circumstances, accept bribery, extortion or any other kind of corrupt activities. It is stated in our code of conduct that we shall always conduct good- suppliers or authority representatives.

Every employee that is involved in business transac-tions receive training on our code of conduct and our supplier code of conduct which clearly indicates our stan-

an illegitimate commission, or any other form of personal payment, it must not be accepted."

A preliminary evaluation of the risk of corruption has been made. The biggest risks come in the form of gifts and bribes from suppliers. Therefore, we have introduced a special Code of Conduct for suppliers where we have made it clear that it is strictly forbidden to give personal gifts to our employees.

The AQ Goal for anti-corruption is to have zero repor-ted corruption cases. We also stimulate a culture where you should raise your hand and advice your manager and colleagues if you are not sure what to do. This way we can advise and support the right behavior according to our Code of Conduct.

Implementation

It is all managers' responsibility to inform employees about our anti-corruption policy and code of conduct. All managers shall furthermore encourage employees to re-port on indications of any type of violation regarding these policies. Such reports can be done anonymously to [e-mail] accordance with our Whistleblower Policy

actions:

Implementation of a rigorous procurement process in-cluding cross functional approval of suppliers

All suppliers shall read and commit to AQ Supplier Code of Conduct

Periodic market research of prices of key materials to be compared against existing purchasing pricesReviews of personal expense claims

The UN Global Compact logo is inserted into our com-pany presentation to our supply chain partners and customers

When integrating new AQ companies in the Group we perform a workshop and work through AQ´s Core Values and Code of Conduct

Measurement of outcomes

We make it clear to our employees and supply chain part-ners that we will not accept corrupt behavior. If it were to happen in AQ, the relevant disciplinary and/or legal ac-tions would be taken against the guilty parties.

Audits from senior management take place at various intervals to check that standard procedures are being fol-lowed. And to cement these principles the management of each subsidiary need to commit to our principles in our yearly self-assessment. The score from the 2023 selfas-sessment was 3.90 on a 4-grade scale.

WHISTLEBLOWER FUNKTION

AQ has a global whistleblower policy where internal and external stakeholders can report violations.

In 2023 we have received three reported cases. AQ has analyzed them and taken actions in line with the pro-cess.

SUSTAINABILITY ASSESSMENT

AQ Group has a process where the group and each sub-sidiary of the group makes an annual self-assessment. This is the foundation for our sustainability risk assess-

the company.

Finally, AQ then assesses how environmentally sustai-nable our operation is based on the technical decision criteria found in the Commission´s delegated act on the EU´s climate taxonomy.

Risks related to Human rights, Anti-corruption and Labor principles

There is a potential risk that violations of our principles may occur if AQ does not ensure that every employee un-derstands and follows our Code of Conduct. In Sweden, acceptance of the Code of Conduct and AQ's Core Values are part of the employment contract.

AQ is doing its upmost to control that the full AQ supply chain respects and follows the rules set forth in the AQ Group Supplier Code of Conduct. We perform regular supplier audits and our suppliers should respect our code of conduct. It is a risk that our suppliers willfully or by lack of knowledge break our rules. AQ is committed to mitigate this risk by constant monitoring of the supply chain.

Risks to the Environment

operations. An accident at a surface treatment facility can current and previous activities may have resulted in con-tamination of land where the activities have taken place from time to time. AQ Group is constantly monitoring the impact its operations have on the environment through the ISO 14001 management system approved produc-tions sites. This mitigates most of the risks for that our operations may harm the environment.

Sustainability assessment according to EU´s taxonomy/Taxonomy Report

As described by the European Commission, the EU's tax-environmentally sustainable economic activities and sets "environmentally sustainable". The purpose is to promote- tivities. AQ is covered by EU directives and must state the extent to which the activities conducted meet the criteria in the EU taxonomy. AQ has assessed whether the activi-limiting and adapting to climate change) according to the Commission's delegated acts. This year further environ-metal objectives, 3-6, have been added to EU´s taxonomy reporting requirements. The assessment is based on thefact that AQ is a component manufacturer for large global OEM customers and AQ thus do not own and develop products under our own brand. Component manufacturing is not clearly described in the taxonomy, which is why we have assessed that a very limited part of AQ's activities is included among the activities covered by the taxonomy.

A complete assessment of taxonomy alignment has not yet been concluded. AQ is also dependent on third parties and has not yet received complete information on environmental objectives within the taxonomy. Regarding the reporting requirements for nuclear energy and fossil gas-related activities, AQ is investigating in order to be able to provide a more detailed report in the coming years. The EU taxonomy framework is still under development and therefore the content and format of the taxonomy re-port will develop over time in parallel with the progress of the EU taxonomy.

AQ is deemed to be covered by the economic activity 7.7in line with the environmental objectivecon-cerning purchases of taxonomy-related goods and servi-for new and leased premises and operating expenditure for maintenance and repairs of these premises.

Further, AQ is deemed to be covered by the economic activity 6.5in line with the environmental objectiveconcerning purchas-es of taxonomy-related goods and services.

for leases of passenger cars and company cars and ope-rating expenditure for maintenance and repairs of these cars.

The share of the business that is environmentally sus-tainable is to be reported in accordance with the taxo-each of the EU:s six environmental objectives. AQ only discloses in accordance with one environmental objecti-ve,.

Total turnover includes the Group's total external net sa-les for the year (see consolidated income statement page

45). See Note 6 for accounting principles for the Group's revenue. No turnover from AQ's economic activities eli-gible to the Taxonomy Regulation.

Total capital expenditures refer to investments for the are presented in Note 17-19, Other intangible assets, Right-of-use assets and Tangible assets. Goodwill is not included. Capital expenditures eligible to the Taxonomy Regulation consist of the portion of the year's investments used for economic activities eligible to the Taxonomy Re-gulation.

of-use assets for premises and vehicles.

Total operating expenditures include costs for renova-tion of buildings, maintenance/repairs and service requi-equipment.

Operating expenses that are eligible to the Taxonomy Regulation consist of operating expenses that are attribu-to the Taxonomy Regulation.

- tions during the year. The outcome for the year is basical-ly unchanged compared to the previous year. In 2023 (previous year's share in brackets), the share of eligible turnover was 0% (0), the share of eligible CapEx was 41% (40) and the share of eligible OpEx was 52% (52). For the taxonomy regulation, see tables on the following pa-ges 26-28.

References

There is more information on AQ's website for how AQ works with sustainability:

AQ's Core Values, Code of Conduct and Supplier Code of Conduct:www.aqgroup.com/en/core-values

AQ's sustainability guideline:www.aqgroup.com/en/aq-group/sustainability

AQ's Policies:www.aqgroup.com/en/aq-group/policies

AQ Whistleblower.

Please contact us [e-mail] you would like to report a viola-tion of the AQ Code of Conduct or national laws and legislation. Your identity will be protected.

Auditor's report on the statutory sustainability statement

To the general meeting of the shareholders of AQ Group AB (publ), corporate identity number 556281-8830

Engagement and responsibility

It is the Board of Directors who is responsible for the statutory sustainability statement for the year 2023 on pages 21-28 and that it has been prepared in accordance with the An-nual Accounts Act.

The scope of the audit

Our examination has been conducted in accordance with FAR's auditing standard RevR 12. This means that

Opinion

A statutory sustainability statement has been prepared.

Stockholm March 25, 2024

Ernst & Young AB

Jennifer Rock-Baley Authorized Public Accountant

Turnover

Financial year 2023 2023	Substantial contribution criteria
Economic activities CodeTurnoverProportion of Turnover, year 2023	Climate Change MitigationClimate Change Adapta-tion WaterPollutionCircular EconomyBio-diversity	Climate Change MitigationClimate Change Adapta-tion WaterPollutionCircular EconomyBio-diversity	Proportion of Taxo-nomy aligned (A.1) or -eligible (A.2)Minimum Safeguards turnover, year 2022 Category enabling activityCategory transitio-nal activity

Y; N; N/EL

A. TAXONOMY-ELIGIBLE ACTIVITIES

SEKm

A.1. Environmentally sustainable activities (Taxonomy-aligned)

Turnover of environmentally sustainable activities

(Taxonomy-aligned) (A.1)

%

%; Y; N;

N/ELY; N; N/EL

- -

0

N/ELN/ELN/EL

A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)

Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-alignedactivities) (A.2)

A. Turnover of Taxonomy-eligible activities (A.1+A.2)

-

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

Turnover of Taxonomy-non-eligible activities

TOTAL

Y; N; N/ELY; N; N/ELY; N; N/ELY/NY/NY/NY/N

Y/N

Y/N

Y/N

%

E

T

-

-

0

0

N/ELN/EL

N/EL

8,968

100

8,968

100

CapEx

Financial year 2023 2023	Substantial contribution criteria
Economic activities CodeCapExProportion of CapEx, year 2023	Climate Change MitigationClimate Change Adapta-tion WaterPollutionCircular EconomyBio-diversity	Climate Change MitigationClimate Change Adapta-tion WaterPollutionCircular EconomyBio-diversity	Proportion of Taxo-nomy aligned (A.1) or -eligible (A.2)Minimum Safeguards CapEx, year 2022 Category enabling activityCategory transitio-nal activity

Y; N; N/EL

A. TAXONOMY-ELIGIBLE ACTIVITIES

SEKm

A.1. Environmentally sustainable activities (Taxonomy-aligned)

CapEx of environmentally sustai-nable activities

(Taxonomy-aligned) (A.1)

%

%; Y; N;

N/ELY; N; N/ELY; N; N/EL

- -

0

N/ELN/ELN/EL

A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)

Acquisition and ownership of

buildingsTransportation by motorbikes, pas-senger cars and light commercial vehicles

Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)

A. CapEx of Taxonomy-eligible activities (A.1+A.2)

7.7

6.5

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

CapEx of Taxonomy-non-eligible activities

TOTAL

Y; N; N/ELY; N; N/ELY/NY/NY/NY/N

Y/N

Y/N

Y/N

%

E

T

144

136 39

144

9

41

41

2

N/ELN/ELN/EL

207

59

351

100

OpEx

Financial year 2023 2023	Substantial contribution criteria
Economic activities CodeOpExProportion of OpEx, year 2023	Climate Change MitigationClimate Change Adapta-tion WaterPollutionCircular EconomyBio-diversity	Climate Change MitigationClimate Change Adapta-tion WaterPollutionCircular EconomyBio-diversity	Proportion of Taxonomy aligned (A.1) or -eligibleMinimum Safeguards (A.2) OEx, year 2022 Category enabling activityCategory transitio-nal activity

Y; N; N/EL

A. TAXONOMY-ELIGIBLE ACTIVITIES

SEKm

A.1. Environmentally sustainable activities (Taxonomy-aligned)

OpEx of environmentally sustai-nable activities

(Taxonomy-aligned) (A.1)

%

%; Y; N;

N/ELY; N; N/ELY; N; N/EL

- -

0

N/ELN/ELN/EL

A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)

Acquisition and ownership of

buildingsTransportation by motorbikes, pas-senger cars and light commercial vehicles

OpEx of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)

A. OpEx of Taxonomy-eligible activities (A.1+A.2)

7.7

6.5

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

OpEx of Taxonomy-non-eligible activities

TOTAL

Y; N; N/ELY; N; N/ELY/NY/NY/NY/N

Y/N

Y/N

Y/N

%

E

T

35 48

38

38

3

52

52

4

N/ELN/ELN/EL

35

48

73

100