Sustainability risks

Significant new legislation or regulations that could have an impact on the Sandvik business.

The inability to quickly respond to new regulations leading to higher costs, fines or the inability to continue manufacturing of certain products. Can also have a negative reputational impact if not managed effectively.

All parts of Sandvik work with the monitoring of different initiatives and continually evaluate their impact on our business. We are active in business associations and other organizations, such as Jernkontoret and the Confederation of Swedish Enterprises (Svenskt Näringsliv), to monitor regulatory development to benefit long-term sustainable business.

Risks of not keeping up with and/or meeting the increasing legal requirements and stakeholder expectations in the area of sustainability reporting, sustainable supply chain, and with requirements on more non-financial data and increased customer demands for more sustainable products and services.

Slower than the competition with regards to new business models built on sustainability. Negative reputational impact and not being able to meet customer expectations which could lead to a loss of business. Negative impact on the share's attraction as an investment as well as on the attraction and retention of future or current employees.

Further clarify the process (including roles, responsibilities and timeline) and the content in the delivery on the Sustainable Business strategy. Ensure training and awarenessraising activities throughout the organization.

Risks that legal and regulatory requirements are not met.

Worst-case scenarios show high financial impact due to fines in multiple markets. Can have a major negative reputational impact if risk was to materialize.

The Group has an established governance framework, The Sandvik Way, which includes Group policies, Group procedures and other steering documentation. The scope of the governance framework, including controls implemented, is based on legal requirements and risk exposure. Sandvik's formal compliance programs on anti-bribery and anticorruption, competition law, customs and export controls and data privacy are managed by the business with oversight through a Compliance Functional Council. GDPR (General Data Protection Regulation) program being rolled out globally.

Risk connected to health and safety procedures being non-existent or not adhered to, causing injuries, increased sick leave, or even fatalities. Also including health and safety requirements set by our customers or suppliers.

Business risk that our safety records don't meet the customer requirements, resulting in loss of business. Reputational risk if poor safety conditions exist in the company, resulting in brand damage. Risk that employees find the work environment unsatisfactory, resulting in difficulties to retain and recruit.

Build a strong EHS culture and effective EHS Management Systems. Major production, distribution and service sites are certified to ISO 45001. All other sites are required to have an effective EHS management system.

Increased need for digital and innovative business development competence. Increased need for specialist/expert competence in R&D and other niche areas. Inability to attract new talents in certain highly competitive markets.

A general risk of losing competitiveness and business position on the market with a special risk focus of not being able to take a strong position in the digital area fast enough.

Sandvik has, across the business areas, focused on developing the Sandvik employer brand. One key area is to use new, digital channels to attract and recruit competence for the future. Succession planning has been strengthened for top management positions.

Managing increased demand of more environmentally conscious products and services by our customers. Increased demand to understand climate change effect on both internal operations and other stakeholders, such as suppliers, customers and society.

Risk of losing customers and market shares due to:

• Changes in the demand of products and services
• Not being able to meet customer expectations on our internal operations and/or products and services with regards to environmental performance, including mitigation of climate change impact
• Tarnished reputation
• Not being able to comply with new or changed legislation.

Keep high awareness in the organization regarding market demands, customer expectations, business development and legislation. Follow the development in society and the market to be able to adapt products and services according to changed preconditions. Focus on improved efficiency to minimize environmental impact in our own operations, including in the supply chain.

Non-compliance with Sandvik's Code of Conduct. Risks connected to lack of understanding of the core values or the Code of Conduct.

Internal risks, such as breaches of law and regulations that can have severe consequences for Sandvik. Unethical behavior leading to unhealthy or unsafe work environment. Difficulties to attract new employees. External risks such as reputational damage and fines.

Ensure that all employees, including long-term contractors, are trained in Sandvik's Code of Conduct. Compliance with the Code of Conduct is a requirement in employment contracts for new hires. Ensure that breaches of the Code of Conduct are reported and properly investigated.

Risk of not managing contractors sufficiently. Outsourcing activities to contractors may for example result in the contractors not acting within the intended limits of their authority or not performing in a manner consistent with agreed requirements, including Sandvik's Supplier Code of Conduct.

General risk to tarnish our reputation, weaken our financial position, lose customers and market share, face disruptions in our activities.

Contractors are included in the supplier group. Strengthen the implementation of our Procurement Policy and related processes. Further integrate sustainability into procurement processes. Increase awareness and competences, leverage technology to drive process efficiency. Strengthen overall control activities and performance management. Further align procurement targets and sustainable supplier management.

Risk of not managing partners/agents/distributor relationships sufficiently. Outsourcing activities to a third party may for example result in the third party not acting within the intended limits of their authority or not performing in a manner consistent with agreed requirements, including ethical requirement.

General risk of tarnished reputation. Failure to meet customer, investor and regulator expectations and requirements. Breach of ethical standards or breach of law.

Conduct partner/agent/distributor due diligence to establish the level and scope of risks, nominate specific mitigations and monitor compliance. Agents and distributors are included in the supplier group (see B37).

Risks connected with doing business in unstable conflict-affected regions. Can be related to transportation of goods or people. Could lead to increased security risks or threats for employees, injuries or even fatalities. Included in this category are risks related to travel.

Safety risks for employees traveling. If our processes have weaknesses, the risk of incidents occurring could be higher and proper handling if they do occur could be weaker. Apart from the negative impact for the employee, it could potentially implicate a risk from an employer branding perspective, as well as a risk of damaging the Sandvik reputation and brand.

Strengthening processes in relation to travel safety and security by ensuring that robust processes are in place and by ensuring good cooperation with external experts in the area.

All risks related to the management of and partnership with suppliers and products/services that we purchase.

General risk to tarnish our reputation, weaken our financial position, lose customers and market share, a higher cost for capital and financing, face disruptions in the supply chain, lose partnership opportunities for innovations and green solutions with our suppliers.

Strengthen the Sustainable Supplier Management governance (including a Group oversight) and the implementation of the Procurement Policy and develop and implement supporting processes. Further integrate sustainability in procurement processes. Increase awareness and competences and leverage technology to drive process efficiency. Strengthen the overall control activities and performance management. Further align procurement targets and sustainable supplier management.