Lecture 6 - Ambition Level Setting Incl Benchmarking+KPIs

Session 6 –
Ambition Level
Setting incl
Benchmarking+KPIs
September 2023
Recap | A proven approach to ESG strategy: Six steps to ESG leadership
Today we will deep-dive into Measures & prioritization and Flagship initiatives
1 ESG vision and ambition

Validate/update sustainability vision and ambition, and take
stock of existing efforts
2 Materiality 3 Measures and prioritization 5 Org, focus KPIs,

assessment Develop sustainability strategy for highest-impact governance
issues—derive quantifiable targets and define initiatives
Identify/confirm highest incl. business cases to achieve developed strategy Outline lean & efficient organization
Copyright © 2021 by Boston Consulting Group. All rights reserved.

impact ESG topics—by relevance and define focus KPIs for performance
to business success and importance assessment, review sustainability skills,
to stakeholders—and discuss RWE resources, and systems
starting point vs. peers
4 Flagship initiatives
Define flagship initiatives with high influence on
target achievement and proven business case
to support ESG narrative
6 ESG reporting and eco-system management

Provide transparency, generate buy-in from all stakeholders inside and outside of the company and actively
shape the ecosystem—develop and execute ESG communication strategy
Source: BCG 1
Recap | Starting point: materiality matrix with prioritization of topics
Case study: engineered products
Materiality assessment is generally the primary starting point as these are
the prime drivers for success in context to our goals in sustainabiloity
GHG emissions in product lifecycle (scope III) Key observations

High
E1
Employee dev., cond. & retention
Innovation and research S1 • GHG emissions, circularity, SC
SC sustainability & responsible procurement
Importance for stakeholders
Selling practices & labelling

S3 G2 G1 E2 Circular product design sustainability and employee
Transparency, accountability, & report. E3 development deemed significant
Corporate gov. & control Resource management
Diversity and inclusion important for both internal &
Data gov. & privacy S2 external stakeholders
Product quality and safety GHG emissions in Danfoss’ ops (Scope I)

Waste mgmt. & recycling S4 • Innovation & research and
Human rights Health and safety selling practices particularly
E4
important for customers
Systematic risk management Pollutant emissions Community engagement & impact
Corporate philanthropy • Biodiversity and water
Water management Regulatory compliance
management deemed less
GHG emissions from procured energy (Scope II) important by both internal and
Protecting biodiversity external stakeholders
Low
Low Relevance for long-term business success High

Environmental Social Governance
Note: Stakeholder importance only result of customer input thus far

Source: Company annual sustainability reports & websites; BCG analysis 2
Current ambition
Current performance
Agenda Ambition setting
Comply, compete, lead

Business case
Example of final ambitions
3
Ambition (I/II) | In terms of publicly stated targets, Siemens with highest
ambitions across dimensions
Different companies have different definiations of their goals and
ambitions, these sentences, goals or objectives must be clearly defined
Only considering publicly stated targets
Ambition
Material topics Competitive landscape target range Low Medium High
• Danfoss: No target for scope III

GHG emissions in
• Alfa Laval & Siemens: Pathway and mid-term targets established to reduce emissions
E1 lifecycle (Scope III) through collaboration with the supply chain
Environment
• Danfoss: No target set, but rolling in product chemical-compliance system as part of

E2 Circular product design & Group ERP

resource mgmt. • ABB: By '30, >80% of products & solutions covered by circularity approach
E3
• Danfoss: Committed to SBTi and ambition to be carbon neutral by 2030

E4 Internal GHG emissions
• Alfa Laval & Bosch-Rexroth: Targets aligned with SBTi, ambition for carbon neutrality
(Scope I+II) and ambitious mid-term targets
1. LTI = Lost Time Injuries Parker Emerson ABB Danfoss Eaton Alfa laval Bosch Rexroth Siemens
Note: Bosch-Rexroth targets are based on Bosch sustainability report. Only peers with targets are shown KPIs/Targets not directly comparable 4
Source: Company sustainability reports; Company websites; CPD; BCG analysis
No targets, but strong position
Ambition (II/II) | In terms of publicly stated targets, on the social dimension
broad range of ambition levels

LTIF- Lost time incident frequency
Ambition
Material topics Competitive landscape target range Low Medium High

• Danfoss: Targeting 25% female leaders in 2022, 30% in 2025
• Bosch-Rexroth, Eaton, ABB: Ambitious targets, e.g., maximum homogeneity in highest level
S2 Diversity & Inclusion position, disclosing minority pay equity assurance results and gender targets across
different mgmt. levels
• Danfoss: Not targets set, but committed to a continuous push of people development
Employee development &
S1 boundaries
retention • Eaton: >12 hours of training and development per employee each year
Social

• Danfoss: Several targets; 1.6 LTIF per million hours worked & mitigation of ergonomic
Health & Safety hazards
• Eaton: Several targets; Achieve best-in-class safety performance;0.15 Days-Away-Case Rate
S4 Community engagement • Danfoss: 250K hours of employee volunteer time each year
& impact • ABB: Provide impactful support for community-building initiatives
SC sustainability & • Danfoss: Implement processes to avoid forced labor in recruitment of temporary
Gov.
G1 • ABB: >80% supply spend in focus countries covered by a supplier sustainability framework
responsible sourcing
More like a yes or no proposition, do we do this or not for GOV
LTIF = Lost Time Incident Frequency Parker Emerson ABB Danfoss Eaton Alfa laval Bosch Rexroth Siemens
Note: Bosch-Rexroth targets are based on Bosch sustainability report. Only peers with targets are shown KPIs/Targets not directly comparable 5
Source: Company sustainability reports; Company websites; CPD; BCG analysis
No targets, but strong position
Targets deep-dive | Level of GHG ambition varies across peers
Base Level of ambition High

Clear and short-term Carbon neutral target for 2050
time-bound emission targets and ambitious mid-term targets
Type of
Absolute Intensity Absolute Absolute Intensity Absolute Absolute Absolute
target
cet-
SBT set
certified
Scope 1 2 1 2 1 2 3 1 2 1 2 1 2 3 1 2 3 1 2 3

Baseline year 2018 2018 2019 2019 2019 2019 2020 - 2019 2019 2018 2018
3% Climate
(by 2019, expired neutral
50%
(by 2023)
since 2020
2025
20%
(by 2028) Carbon Carbon Carbon neutral across
2030 80% 15% the value chain
50% 15% 85% 15%
Neutral neutral Carbon
neutral by
2030
Emission-free
2050 supply chain
Note: Bosch-Rexroth targets are based on Bosch sustainability report SBT: Science-based target Note: Absolute target (GHG emissions), Intensity target (ton SBTi targets set
CO2/ sales). Source: Company websites and reports, SBTi website and CDP Climate Change 2020, BCG SBTi committed 6
Current ambition
Current performance

Business case
7
Performance (I/II) | Most companies in a close range in environment
Comparison with other competitors , most competitors
are closely pooled due to cyompetitive dynamics
Performance
Sub-categories Rationale behind leading peers Low Medium High
E1 Danfoss ranked best-in-class for energy and climate, e.g., participation in UNGC
GHG emissions business leaders, We Mean Business coalition, and standing out with pedge to double
E4
(all scopes) & climate energy productivity by 20301
Siemens, ABB and Alfa Laval with less strong participation in key coalitions
Environment
Siemens best-in-class for circularity with C- score for Better World product rating and
E2 Circularity & resource high rating on EIRIS, Ideal Ratings, ISS, MSCI, Trucost

E3 management Danfoss with medium performance, e.g., less high ratings compared to Siemens,
though high rating on Covalence ESG ratings on resources, effluents & waste
Alfa-Laval best-in-class, e.g., adhering to GRI in Reporting, Top 10 member of FTSE

Environmental Opportunities & OMX Ethical Index
Environment policy
Danfoss with medium to high performance, e.g., highly rated on Covalence ESG
& reporting ratings, but not reporting on GRI and not a member of FTSE Environmental
Opportunity idx (Other top 10's; 3M, Siemens, Tesla)
Parker Emerson ABB Danfoss Eaton Alfa laval Bosch Ltd. Siemens 8
1. Compared to baseline of 2007, Note: Parker NA on En & CC
Source: CSRHub ESG data scores extracted 22Jun21 (1-100, 100=best). Performance scores are ratings following CSRHub methodology.
Performance (II/II) | Similar picture in social and governance
Performance
Sub-categories Rationale behind leading peers Low Medium High
Siemens with strong performance, e.g., high on corporate equality index '20 &
S2 Diversity & inclusion Universum Most Attractive Employers 2020
Danfoss best-in-class with strong Glassdoor ratings, e.g., "recommend to friend" (3.8,
S1 Employee development Emerson 3.5), "work-life-balance" (3.9, Emerson 3.6)
Social
ABB ranking high on several indices, e.g., World's Most Sustainably Managed
Health & safety Companies by WSJ, OMX CRD Global Sustainability Index
Community development Bosch best-in-class, e.g., scoring number 9 at Global RepTrak 2020, Danfoss with
S4 & philanthropy important memberships, e.g., WEF, but limited scoring

S3 Product quality, safety Bosch with A+ score on Brand Finance 2020-21 BSI/Brand rating
& innovation Danfoss with high Covalence ESG Ratings on env. impact of product
•
Supply chain & human Siemens among best-in-class receiving Silver recognition level for EcoVadis, Danfoss
G1
rights aligning to key coalitions but limited recognitions
Governance
Emerson, ABB, Parker all with 3+ rating on 5050Women on Board and Emerson &
Board Parker w. >27% gender diversity, Danfoss not rated
Emerson excels in governance, e.g., 3BL Media 100 Best Corporate Citizens '20, 5050
Leadership ethics Women on Boards Rating (3+)
Danfoss best-in-class with high Covalence ESG ratings on mgmt., share-holders,
G2 Transparency & reporting sustainable strategy, and only 1 violation on Good Jobs First1
Parker Emerson ABB Danfoss Eaton Alfa laval Bosch Ltd. Siemens 9
1. Doos Jobs First Violation Tracker, Note: Parker NA on En & CC
Source: CSRHub ESG data scores extracted 22Jun21 (1-100, 100=best). Performance scores are ratings following CSRHub methodology.
CSR HUB combines all the information which comes from all the other CSR reports and provides a set score
Benchmark source | CSRHub generates scores to create a performance ranking
1 CSRHub pulls data from >600 data sources on Corporate Social Responsibility …
• Sources cover all aspects of CSR: Ratings, rankings and reports
• Sources each have own rating and measurement methodology e.g.,
numerical score (0.00-1.00), signs (“+” or “-”), rankings (“Top 50” or
“Best Performing”), ratings (AAA-DDD)
• Each source tracks different universe of companies, e.g., specific
industries, region, single country (none of the sources offer data on >~ 605+ corporate
60% of companies covered) social
• Company performance changes over time: Many sources update responsibility
information once per year; if controversy arises re. particular company, sources
it may take 2 years for its effect to be reflected in sources
• Some sources rate company subsidiaries or individual products:
Ratings are given at parent level of a company

2 … to map, convert, normalize, aggregate and trim it
• Map to central schema of twelve subcategories, which roll up to four cate- Ratings on 17,490 companies—data on another 13,419
gories; in addition special issue topics to fit beyond twelve subcategories Aggregate Patented and patent pending process
• Convert to a numeric scale: Each source is converted into rating on 0 to 605 data Aggregate
100 scale (100 = positive rating) sources 175 Convert Map
Norma-
• Normalize: Adjust all scores from a source based upon bias detection to 10 leading million 7K to 12
lize
Weight 56
create more consistent rating ESG data metrics areas
• Aggregate: Each source is weighted based on estimate of credibility and analyst points
value; all available data is then combined as base rating on subcategory datasets
level to roll up on category level Drive changes in performance and reporting
• Trim: Ratings are dropped, when not enough information is available
10
These are the general KPIS which we can use in context to our businesses to
monitor and track the ambition and performance of our companies
‘As-is’ benchmarking: Company XX with robust starting point
compared to its peers Helpsend
identify our position - because
goal is industry leader Case study: building materials
Metric Unit XX performance relative to peers
worst best
Resp. products Sustainable products % of revenue 9.0 46.0
Innovation & re. R&D spending % of revenue 0.7 2.9
CO2 emissions scope 1 + 2 intensity t/$ m revenue 4,475 60 MBCC Group data incomplete 1.2
CO2 emissions scope 3 intensity t/$ m revenue 1,375 10 MBCC Group data not available 1.7
E Climate &
emissions Total energy intensity GJ/$ m revenue 23,125 840 MBCC Group data incomplete 19.1
Renewable energy use % of renew. energy 3.3 MBCC Group data not available 20.5
Total waste intensity t/$ m revenue 75 MBCC Group data incomplete 6.4
Waste & water
Total water intensity m3/$ m revenue 10,021 1200 MBCC Group data incomplete 2.7
Injuries to million hours # injuries/m h worked 6.5 MBCC Group data not available, but LTIR at 0.2 vs. industry at 0.7 1.2
Health & safety

Total fatalities Total fatalities1 14 0
S SC sustainab. Supplier ESG training Yes or No No Yes
Board Cultural Diversity % with diverse backg3 0 ~30% if including ExCom 66.7
Diversity & Incl.
Female managers2 % 9.7 MBCC Group data incomplete 26.3
Business ethics Average training hours h/FTE 11.1 MBCC
MBCC data
Groupnot
data
yetincomplete
available 34.0
Certifications (ISO 9001/ISO 140001) % of sites 26 MBCC Group data incomplete 100
G Regulatory
compliance & CSR/Sustainability comp incentives Yes or No No Yes
reform
CSR/Sustainability committee Yes or No No Yes
= XX = Sika = MAPEI = RPM = Chryso = GCP = St. Gobain = Heidelberg Cement = CRH = Lafarge = Sto = Akzo = PPG = Sherwin
1. Includes employees and contractor fatalities 2. Includes only top and senior mgmt level for MBCC Group 3. Board members that have a cultural background different from the location of
the corporate headquarters
Note: Scale from lowest peer score to highest peer score; based on the latest available data for each respective peer (2019 or 2020); excludes 900 FTE of MBCC Group
Source: Refinitiv, BCG analysis 11
The previous slides benchmarked us XX company with context to our competitors, using direct KPIS whichb were quantitative as
well as score qualitative by CSR HUB, then on the basis of our amitions we define our goals and our targets which define our new
position were we want to be in contest to our ambitions, KPIS chosen and benchmarked agaisnt our competitors
Core peers except Sika & Sto with low or no ambitions, extended
peers with generally higher ambitions Case study: building materials
Relevant targets of peers No Target Comply Compete Lead
• Sika: All new product developments with 'Sustainable Solutions' by 2023

Sustainable
• Heidelberg Cement: Carbon-neutral concrete portfolio by 2050
products • Akzo: 50% recycled content in plastic packaging and >50% revenues from sustainable solutions by 2030
• Sika: 25% of sales with products released in the past five years
Innovation &
• Heidelberg Cement: Innovation in the areas of low-carbon concretes and cements
research • Akzo: Exploring resins from bio-based materials
E • Sika: -12% CO2 emissions per ton sold and -15% energy consumption per ton sold by 2025
Climate &
• Lafarge: Aiming at 19% net CO2/t cement, -65% Scope 2 (among other) by 2030
emissions • Akzo: Carbon neutral company by 2050
• Sika: -15% waste generation and water consumption per ton sold by 2025
Waste & water • Lafarge: -30% freshwater withdrawal and 100 Mt recycled waste and by-products by 2030
• Akzo: Zero waste by 2030 from own operations;
• Sika: -50% accidents vs. 2019 and 0 fatalities by 2023 Relative from current
Health & safety • CRH: Zero fatalities in any year ambition
• Akzo and PPG ambitioning zero injuries and fatalities position & asbolute targets

• CRH: 100% relevant suppliers compliant with the supplier code of conduct
S Supply chain • Lafarge: 2022/2030—Suppliers with supplier code of conduct as part of contractual agreement
sustainability • PGG: 100% response on EcoVadis scores from top 100 suppliers by 2021
• CRH: 33% female senior leadership
Diversity & Incl. • Heidelberg Cement: 15% female in 1st and 2nd level below ExCom
• Akzo: >30% female executive
• Sika: Launch of anti-fraud online training, in close collaboration with corporate finance by 2021
Business ethics • CRH: 95% of employees receiving code of business conduct & advanced compliance training
• Akzo: Compliance and Integrity quarterly updates; PGG: Global Ethics and Compliance Committee chaired by CEO
G • Sika: Endorses TCFD and policies companies going beyond regulation requirements
Regulatory com-
• CRH: Will review climate lobbying practices and related disclosure
pliance & reform • PPG: Dedicated Government Affairs department focusing on energy efficiency & clean energy generation regulation
= XX = Sika = MAPEI = RPM = Chryso = GCP = St. Gobain = Heidelberg Cement = CRH = Lafarge = Sto = Akzo = PPG = Sherwin = XX Group targets as backed by Scenario 2
G- governance is most difficult to define in Quantitative terms , because as indicated before most of the spects in
context to G are a Yes or No proposition, they are therefore generally hard to define via numbers
Source: ESG project team; Company webpages; JP Morgan Europe Equity Research 05 May 2021; BCG analysis 12
Text
Current ambition
Current performance

Business case
13
Larget market premium belongs to
the leaders, the multiplier is the
higheest for the leader
Current ambition
Current performance
Leading sets you apart-

main goal is to LEAD
Business case
Leading - indsutry leading position, therefore without

benchamrking it is unkmow what is leading
14
Comply - existing
Build Ambition
While building that identify KPIS
Benchmark your existing performance
Build targets in context to benchmarks & KPIS
Establish a new goal, in context to your ambitions LEAD
Also establish if the future position is relavent to the future, AND SHAPE THE
INDUSTRY
As a next step, the COMPETE
company need to WITH START OF
SELECTED PROJECTS
• Ambitious goals &
industry leader
consider where to COMPLY • Willingness to invest
Comply, Compete, AND DECLARE
• Clear positioning
beyond compliance
• Sustainability as
business opportunity
INTENSIONS
and Lead on • Sustainability as

business opportunity
material topics • Focus on legal
compliance
• Little competitive
edge
• Sustainability mainly
as cost
Source: BCG 15
Concept | 5 ESG strategic logic archetypes to guide the ambition setting across
materiality topics (not comprehensive)
ESG basics Best Future-proof Environmental Strongly

in place employer but balanced lead differentiating
Description Focus on compliance Strategically setting Setting equally balanced Strategically choosing Setting a unique ESG
everywhere, but only positions to drive comply, compete, lead positions to drive position clearly
having lead positions employee positions to cover environmental lead distinguished against
where commercially engagement and talent ESG broadly building on positions peers
attractive attraction Danfoss' current strengths
What needs ✓ Emphasizing on ✓ Roughly equal split ✓ Differentiating from

✓ Focusing on comply
social topics of positions between ✓ Prioritizing topics Western and Chinese
to be true positions
E, S & G aiming to lower peers' ESG positions
✓ Topics outside of environmental
✓ Building on current
Social still driving ✓ Considering footprint ✓ Aiming for lead
strengths – especially
employee strengths (efforts positions in topics
within GHG scope I+II
engagement and required to reach ✓ Building on current with less focus from
emiison
talent attraction via lead position vs efforts within the competition /
'compete' positions competition) Environmental topic expected to be more
important
in the future
16
Concept | Each archetype with varying match with strategic selection criteria
Example
ESG basics Best Future-proof Environmental Strongly

in place employer but balanced lead differentiating
Description Focus on compliance Strategically setting Setting equally balanced Strategically choosing Setting a unique ESG
everywhere, but only positions to drive comply, compete, lead positions to drive position clearly
having lead positions employee positions to cover environmental lead distinguished against
where commercially engagement and talent ESG broadly building on positions peers
attractive attraction Danfoss' current strengths
Selection criteria
Leveraging medium Leveraging current Not in focus
Company's Potential roll-back Leveraging current
performance within strengths in [Potential roll-back
starting point on select topics strengths

'Social' Environmental on select topics]
Company's ~3 lead and ~3 ~3 lead and ~3 ~4 lead and ~3 ~4 lead and ~3 ~3 lead and ~4
ESG ambition compete positions compete positions compete positions compete positions compete positions
Future-proofing in Future-proofing in
Future-proofing
The future of ESG Not in focus Not in focus circular, circular and
Danfoss in circular
innovation & talent innovation
Focus on resource
Competitors' Focus on circular, Distinct focus on
Not in focus Not in focus mgmt., product
position D&I, supply chain Environment
quality, circular
17
80/20% RULE, Compete and allocate resources whereever it is
most relevent for presnet and the future
Concept| How does this translate to the ambition level by topic
Example
Differenciating can mean
Materiality topics ESG Best Future-proof Environmental Strongly
Basics in place employer but balanced lead
many things, differciating
differentiating
sets you appart.
Circular product design E1 Comply Comply Lead Lead Lead
Resource management E2 Comply Comply Comply Compete Lead

E
GHG scope I+II emissions E3 Lead Compete Compete Lead Compete
GHG scope III emissions E4 Compete Comply Lead Lead Compete
Diversity & inclusion S1 Compete Lead Lead Comply Comply

Employee development,
conditions, & retention
S2 Comply Lead Compete Comply Comply
S
Innovation & research S3 Compete Lead Compete Compete Lead
Product quality & safety S4 Lead Compete Comply Comply Compete
Supply chain sustainability &

responsible procurement
G1 Comply Comply Lead Lead Compete
G
Transparency, accountability
& reporting
G2 Lead Compete Comply Compete Comply
18
Target ambitions and initiatives | Directional ambitions for each material topic
to be set
For discussion: Discuss the target ambitions for each material topic and the potential initiatives required to reach the target
ambitions
Company to select target ambitions & supporting initiatives to reach ambitions across all material topics. Initiatives may include
flagships, enabling initiatives and low hanging fruits, flagships targeting where largest acceleration is needed to achieve 'lead'
ambitions
On Environment, to reach a 'Lead' ambition on circular product design and GHG scope III acceleration is needed
• Circular product design: Leading peers have targets upwards of ~80% of all products circular by 2030 and deploy a circular

framework across the company and scale through a series of development pilots
• GHG Scope III: Leading peers commit to 1.5 degrees Science Based Targets across scopes with underlying initiatives to increase
product efficiency and communicate strategically on avoided emissions
On Social, to reach a 'Lead' ambition in Diversity and Inclusion leading peers set targets and initiate programs beyond gender (e.g.,
minorities) and significantly strengthen recruiting and retention efforts to reach 30% female leaders
On Governance, to reach a 'Lead' ambition in Supply Chain, leading peers deploy ESG collaboration programs with top suppliers and
take a data driven approach to deploy extensive supplier screenings on ESG
19
Overview| Company to select ambitions & initiatives to reach ambitions
Materiality topics Potential future targets Examples of potential initiatives

Comply Compete Lead
• 100% of new products circ. '26 • Dev. best-in-class circularity approach

Circular product design • 80% of all products circ. '30 • Collabs with core customers on new bus. models
• Full material and emissions • Build and implement data foundation for
Resource management transparency for products material and emission transparency for products
under circularity approach • Initiate replacement of virgin materials
E
• Carbon-neutral by '30 (current • Keep current initiatives
GHG scope I+II emissions target) • Strengthen governance and create masterplan
• Task force to reduce emissions from use of
• TBD – awaiting SBTi
GHG scope III emissions calculations
products by empowering teams to incr. EE and
sales of energy-optimizing solutions
• 30% women managers by '25/'30 • Global D&I strategy going beyond gender incl.
Diversity & inclusion • 20% minority managers by '25/'30 employee resource groups & inclusion councils

Employee development, • Employee engagement score ~80 • Establish global development program
conditions, & retention • 90% of employees with IDP1 (70/20/10) incl. Talent Accelerator initiative
S • 35% of new products sustainable '25
• Establish Sustainable Product Innovation Fund
Innovation & research • 35% of innovation spend on
• Launch sustainability innovation challenge
sustainable products by '25
• Customer DPPM <550 by '22 • IATF /QEHS mgmt. system roll-out to Eaton
Product quality & safety • CLI>50% by '22 • Data mgmt. system and digital tools
• 100% direct & 25-50% indirect
Supply chain sustainability & • Supplier collaboration program on ESG
suppliers with performance
responsible procurement • Advanced data-driven supplier assessment
driving company targets
G
Transparency, accountability & • 100% and timely compliance • Reinforce reporting for future regulatory needs
reporting with reporting regulations • Enhance customer compliance request process
20
Deep dives on the next pages Current targets Current performance Initial view on ambition Gap Potential Lead topics
E
Environment | Circular product design 1/2: Company current state vs peers

Topic definition: Consideration of environmental footprint of materials used by Company (not water or energy), and thinking sustainability into the early
design process of new products ensuring that products no longer have a usual lifecycle and that products are designed with the end of their life in mind
Peer examples
Comply Compete Lead

• Clear targets for green revenue and/or
• Limited current regulation on circularity but
• Targets and approaches for part of business, circularity approach
Regulation & upcoming EU taxonomy on 'green' products
but not with targets for the entire business • Schneider: 80% green revenue in 2025
peers' current and need for further reporting1
• No peers in the compete zone, but many • Siemens: 100% product families covered by
• Increasing demands for improved
targets comply peers are expected to move towards eco-design criteria in 2030
transparency by third-party auditors
compete • ABB: >80% of products covered by circularity
• Peers: No targets beyond compliance
criteria by 2030
• 'Competing' peers are in the process of • 'Leading' peers have developed

developing circularity approaches (e.g., with comprehensive circularity schemes, applied
• 'Complying' peers have no structured
pilot projects ongoing) across a wide range of product lines
Peers' current circularity approach

• ABB: Dismantling guidelines for close to all • Schneider: 77% sales under Green Premium
performance • Peers include Alfa Laval, IMI, Rockwell,
products and circularity competence team • Bosch: 50% of sales under Life Cycle Ass.
Emerson, Sanhua, Hengli, & Inovance
formed within ABB's Distribution Solutions • Eaton: 47% revenues from "positive impact
division portfolio"
Company
• No specific targets • N/A • N/A
current targets
Company • Company pilots in DCS & DDS in '21 on LCA2

current • N/A • N/A
and EPD3, wider roll-out planned for '22
performance
Company
benchmark
1. Especially driven by the EU Taxonomy Climate Delegated Act and EU's Corporate Sustainability Reporting Directive 21
2. Life Cycle Assessment. 3. Environmental Product Declaration Company current targets vs peers Company current performance vs peers
E
Environment | Circular product design 2/2: Company options
Comply Compete Lead

Potential Circularity collaborations will actively be Circularity must be the default when
Circularity will be expanded new requirements
business pursued, but targeted select segments and developing products, selling products and
from regulation and customers arise
rationale product families building new business models
• Make sure products meet necessary universal • 50% of newly dev. prod. in '24; 100% in '26.
Company • Continue to meet regulatory requirements
standards within circularity • Prod. covered by circ. approach 30% in '25;
potential and basic customer demand (e.g., bill of
• Build 2-3 additional pilots, incl. DPS 80% in '30. Top-25 customer collabs: 3 cust.
future targets materials for components)
• 2 pilot collaborations with top-customers '23; 50% '25; 80% in '30
Potential • Meet new regulatory requirements • Develop circularity pilot with customers • Develop best-in-class "Company Circularity"
initiatives – Follow suit with legislation setting standards across (e.g., Schneider) (e.g., ABB)
markets and comply to new requirements – Trial circularity collaboration with a few customers – Build ambitious Company approach to circularity,
(particularly EU Circular Economy Action Plan and to make their products more circular setting Company aside from peers and beyond 'just'

subsequent changes to EU's Ecodesign Directive) • Experiment with new business models meeting standards
– Follow standards from bodies verifying LCAs1 and – Start with pilots, but aim for roll-out across all
– Select a few products / product families where
EPDs2 to make sure to meet customer demands segments
circular business models have a high feasibility
• Improve data foundation to meet customer – Selected cases should be with clear financial benefit – Anchor across product development, sourcing, sales
requests in early stages and business models
– Ease the process of meeting customer requests • Optimize sales of green products (e.g., • Leverage new business models (e.g., Bosch)
within materials used and carbon emitted in Eaton) – Be ambitious and target circularity as a big new
Company components revenue stream for Company towards 2030
– Following new EU taxonomy for green products,
identify all products complying to requirements to • Include almost all major customers
increase performance – Include most of top-customers in circularity
– Identify all products close to compliance, improve collaborations around their products and mutual
products to optimize sales of green products circular business models
– Ignore rest of product portfolio • Boost % of green products
– Aim to have most of Company' products defined as
green towards 2030
1. Life Cycle Assessments. 2. Environmental Product Declerations 22

Company 2025
E
Environment | Resource mgmt. 1/2: Company current state vs peers

Topic definition: Sustainable usage of raw materials and packaging materials, and creating value-chain transparency of Company' products environmental
footprint
Peer examples
Comply Compete Lead

• Comply to regulation for hazardous materials
• Large scale initiatives covering entire
and substances1 • Some efforts, but often limited to a smaller
Regulation & business, focusing on both input for
• Expanding EPR2 regulation, standardizing scope or pilots for a few sites
peers' current components and packaging
sustainability requirements for packaging, • Siemens: Increase use of secondary materials
• Schneider: By 2025, 50% green materials in
targets batteries, electronics, cars, etc. by '23 and reduce critical materials in line
products and 100% packaging using recycled
• Water reuse regulation increasing3 with EU's critical raw materials initiative4
cardboard and free of single-use plastic
• Most peers: No targets beyond complying
• Eaton: Innovative packaging at EMEA sites • Bosch: eXchange program remanufacturing

• No reporting beyond complying to regulation:
Peers' current • Alfa Laval: Supplier packaging guidelines products (reducing material use by 90%)

Parker, Emerson, Rockwell, IMI, Hengli,
performance • Siemens: "reThink plastic" initiative • Schneider: 99% cardboard and pallets from
Inovance, Sanhua
• ABB: Initiative to recover and reuse copper recycled materials
• Limited targets, mainly compliance and

Company
admin systems within chemical compliance • N/A • N/A
current targets and recycling
Company • Alignment with EU Circular Economy Action
Plan
performance
Company
benchmark
1. Driven by numerous EU directives and local regulations, e.g., EU's REACH directive. EU Circular Economy Action 23
Plan largest current driver of expanding regulation. 2. EPR = Extended producer responsibility. 3. EU Water Reuse Company current targets vs peers Company current performance vs peers
regulation coming into force in '23. 4. Initiative to reduce EU dependency on 30 raw materials
E
Environment | Resource mgmt. 2/2: Company options
Comply Compete Lead

Comply to regulation and see resource
Potential Actively focus on material footprint by reducing Exchange close to all virgin materials, source
management as enabler for other green
business use of virgin materials, avoid worst materials only sustainably safe materials and use only
initiatives (e.g., circularity or reducing scope III
rationale and put focus on packaging reusable packaging
emissions)
• Full transparency of materials and emissions

Company
for purchased goods (enabler for circularity) • 50% recycled materials across all materials • >90% recycled materials across all materials
potential
• Low target for recycled materials (potential • Take back solutions of some packaging • Take back program for all packaging
future targets target still TBD1)
Potential • Demand transparency for purchased goods • Set supplier packaging guidelines (e.g., Alfa • Only use reusable packaging
initiatives – Create full transparency for materials used and Laval) – Design reusable packaging and develop take back
emissions emitted while producing raw materials and – Set criteria for the packaging from suppliers in terms programs for all Company products
components of material content, e.g. sustainably produced – Build reversed logistics to return reusable packaging

– Requires closer collaboration and new requirements pallets when delivering purchased goods to Company to all Company sites (to replace current supply of
to suppliers • Take back packaging pilots packaging materials)
• Build data foundation for materials – Take back packaging within certain product lines • Strive towards only using recycled
– Build data foundation where input data can be easily – Requires reversed logistics and should hence be materials
accessed by entire Company org. (from product aimed at suitable usecases – Exchange virgin materials almost completely by
development to sales team) • Set ambitious targets for virgin materials recycled content
– Data foundation is a core enabler for circularity – Only use virgin materials where properties of
initiatives (e.g., Schneider)
recycled content cannot be mitigated through
– Set ambitious targets for replacing virgin materials
• Put focus on virgin materials with recycled materials
product design changes
– Set the baseline for use of virgin materials • Expand "no-go list" of materials (e.g.,
– Set low targets for replacement of virgin materials Siemens)
with recycled materials
– Go beyond regulation for "no-go" materials and
expand based on criteria beyond regulations, e.g.,
poor towards biodiversity
– Starting point could be EU's Critical raw materials
initiative (list 30 critical raw materials)
Company
2025 24
1. Unclear baseline for Company currently due to poor data quality, being investigated
E
Environment | GHG scope I & II 1/2: Company current state vs peers

Topic definition: Scope I: Carbon emissions produced as a direct result of Company' activities at our sites, such as fuel combustion and vehicle-usage;
Scope II: Carbon emissions from the use of purchased electricity, heating and cooling
Peer examples
Comply Compete Lead

• Emissions schemes currently setting basic • Clear carbon neutrality targets
requirements on emissions, however • Rockwell, Siemens, Schneider, Eaton:
Regulation & • Clear targets set, but not net-zero
expected to increase in years to come1 Neutrality in 2030 (Eaton w/ high offsetting)
peers' current • ABB: -80% in 2030
• Peers often with limited or no targets within • Rexroth: -95% in 2030
• IMI: -50% factory intensity in 2030
targets scope I+II • Outside industry: Few players beginning to
• Alfa Laval: -50% in 2023
• Emerson: -20% in 2028 set net-negative ambitions, e.g., Velux
• No targets: Hengli, Inovance, Sanhua aiming to offset life-time emissions by '41
• No reporting or above 35 tons CO2e/mUSD

• Peers: Eaton (50 tons CO2e/mUSD), Parker • Alfa Laval: 2.5 tons CO2e/mUSD
• Rockwell: 17.4 tons CO2e/mUSD
Peers' current (36 tons CO2e/mUSD), Emerson (36.6 tons • Siemens: 10.5 tons CO2e/mUSD

• ABB: 21 tons CO2e/mUSD
performance CO2e/mUSD), IMI (38 tons CO2e/mUSD), • Bosch: 11 tons CO2e/mUSD
• Inovance: 23 tons CO2e/mUSD
Eaton (50 tons CO2e/mUSD) • Schneider: 11.4 tons CO2e/mUSD
• No reporting for Hengli and Sanhua
Company
• N/A • N/A • CO2 neutrality latest by 2030
current targets
Company
current • N/A • 33 tons CO2e/mUSD • N/A
performance
Company
benchmark
1. In EU, driven by The European Green Deal umbrella of different action plans and directives 25
Company current targets vs peers Company current performance vs peers
E
Environment | GHG scope I & II 2/2: Company options
Comply Compete Lead

Potential Aim is to go beyond neutrality by taking
GHG emissions will be reduced in compliance Aim is to take responsibility for own emissions
business responsibility for past GHG emissions by
with local regulations by achieving GHG neutrality by 2030
rationale becoming net-negative emitter
Company • Carbon neutral '30

• Local targets matching requirements of • Carbon neutral '30 (keeping existing target)
potential • Carbon negative by '35
climate legislation • To consider: Internal carbon tax by '25
future targets • Internal carbon tax by '25
Potential • Reduce in compliance with regulation • Carbon neutral on scope I+II (E.g., • Go beyond neutrality and become a net-
initiatives – Follow regulations and reduce emissions in Company, Rockwell, Siemens, Schneider) negative emitter after '30
accordance with mandatory targets – Keep current Company targets for scope I+II – Go beyond GHG neutrality as carbon neutrality by
– Tailor emission reductions to local regulations emissions and achieve neutrality by '30 '30 ambitions are being adopted by many other

instead of having overall group targets – Build on current initiatives within green power, companies
• Reduce where CO2 taxation is introduced green heat, green fleet, etc. – Aim for becoming a net-negative emitter post-2030
– Reduce emissions where CO2 taxation is introduced • Strengthen governance of ambitions – Utilize both CCS and GHG certificates to reach
and make reductions financially attractive – Strengthen governance of current initiatives to target
ensure progress towards '30 • Off-set life-time emissions
– Develop overall masterplan to make sure – Calculate Company emissions through entire
responsibilities and financing need is clear company life-time
– Set sub-targets to keep the organization focused – Set targets for offsetting life-time emissions, e.g.,
year to year by '45 (done by Velux aiming to be life-time offset
• Develop internal carbon taxation (TBD) by '41)
– Consider to develop internal carbon taxation to
nurture behavioral change
– Must include scope III (except use of products) to
have balanced decisions making in terms of
insourcing/outsourcing tasks (e.g., in-house vs
external logistics providers)
26
Company 2025
E
Environment | GHG scope III 1/2: Company current state vs peers

Topic definition: Other emissions (not scope I & II) within Company' supply chain e.g., from raw materials, business travel, logistics and use of products
Peer examples
Comply Compete Lead

• SBT and targets set with specific initiatives.
Potentially calculate avoided emissions as
Regulation & • No scope III regulation as of now
• SBT set well
peers' current • Peers without disclosure and targets: Parker,
• Targets set but with limited initiatives • Schneider: -35% by '30 and top-1000
Emerson, Rockwell, Hengli, Inovance,
targets • Rexroth, ABB and Eaton: -15% in '30 suppliers to reduce emissions -50% by '25
Sanhua
• Siemens: -15% by '30 and emissions free
supply chain by '50
• Eaton: 1331 tons CO2e/mUSD

Peers' current • Schneider: 2236 tons CO2e/mUSD • Siemens: 153 tons CO2e/mUSD • IMI: Below 100 tons CO2e/mUSD

performance • No scope III disclosure: Parker, Emerson, • ABB: 515 tons CO2e/mUSD • Alfa Laval: Below 100 tons CO2e/mUSD
Rockwell, Hengli, Inovance, Sanhua
Company • Only targets for business travel

• N/A • N/A
current targets • SBTi targets in progress
Company • SBTi baseline being recalculated. Company

performance expected sub-par vs peers
performance
Company
benchmark
27
E
Environment | GHG scope III 2/2: Company options
Comply Compete Lead

Potential Low targets for scope III will be set, but without Scope III is also our responsibility, hence specific
Scope III emissions occur outside our scope,
business specifying initiatives or only focusing on lower targets and concrete initiatives will be
hence no actions will be taken to reduce them
rationale hanging fruits established to reduce them
Company
• Awaiting SBTi calculations before setting • Awaiting SBTi calculations before setting • Awaiting SBTi calculations before setting
potential
Company' future targets Company' future targets Company' future targets
future targets
Potential • N/A (No scope III initiatives) • Set SBT baseline and targets (E.g., Eaton, • Task force for use of sold products
initiatives Siemens, Bosch, ABB, Schneider) – Build task force with the aim of identifying
– Calculate scope III opportunities to reduce emissions from sold products
– Submit SBT baseline and targets – Task force to exist of two sets of experts: 1) Experts

• Reduce emissions from minor categories within EE to optimize most energy-consuming
products, 2) Cross-functional experts to educate
– Focus on minor categories within scope III emissions,
local sales teams in sales of energy-optimizing
e.g., upstream and downstream logistics and
solutions
business travel
• Build supply chain collaborations to reduce • Decarbonizing supply chain (e.g., Siemens,
scope III Schneider)
– Set targets for supply chain emissions
– Trial collaborations with suppliers to reduce scope III
– Build collaborations with (close to) all suppliers and
emissions from purchased goods
set target for them
– Focus on biggest emitters amongst suppliers to
– Stop collaborations with suppliers not meeting
optimize impact
necessary requirements
• Calculate avoided emissions (e.g.,
Schneider)
– To complement scope III emissions, calculate
avoided emissions from sold products to provide full
picture of emissions
28
Company 2025
S
Social | Diversity & Inclusion 1/2: Company current state vs peers

Topic definition: Protecting and promoting diversity, equal opportunities and inclusion in the organizational workforce
Peer examples
Comply Compete Lead

• Disclose on degree of equal opportunities,
provide "workplace for all" Targets focused on gender diversity • Schneider : 50%/40%/30% women share in
Regulation & • EU proposal for CSRD (2021)1– if implemented • ABB: 25% women in senior mgmt. by '30 hiring, front-line mgrs. & leadership; 2x no.
peers' current it would be relevant for reporting by 2024 • Alfa Laval: 35% women workforce, 25% in of opportunities for interns, apprentices,
targets • Peers with no communicated targets; leading positions by '25 fresh graduates by '25
Sanhua, IMI (compete performance), Hengli • Siemens: 20% women in 2nd level by '21 • Eaton: Disclose US minority & pay gap by '30
(lead performance)
• ABB: 13.5% women senior mgmt.; 30% women • Eaton: 33% women board & 21% directors;
of early talent hires reports on women & minority representation
• Siemens: 18.4% women leadership (+2 ppt. • Schneider: 46.7% women board, 73% of board
Peers' current • Sanhua: 0% women leadership, 11% women

from '17); 30% female board members with different nationality vs.
performance board composition
• Alfa Laval: 31% women board composition headquarters, 24% women managers (+2 ppt.
• IMI: 18% of senior managers are women and from '18)
19% of managers (no communicated targets): • Hengli: 28% women leaders (no com. target)
Ambitious targets (to be considered)
Company
• N/A • N/A • 25% women leader by '22
current targets • 30% women leaders by '25
Company • 20% women leaders
• 25% women board members
performance
Company
benchmark
1. Corporate Sustainability Reporting Directive proposal for increased reporting on equal opportunities, 29
the proposal is still in a preliminary phase, but if it is passed it will increase reporting requirements on Diversity and Inclusion Company current targets vs peers Company current performance vs peers
S
Social | Diversity & inclusion 2/2: Company options
Comply Compete Lead

Potential A diverse and inclusive workplace is pursued in Diversity and inclusion is deeply embedded in
Aim to offer equal opportunities for all but
business which all employees feel included, but with the organization ensuring sense of belonging for
without specific gender or minority targets
rationale main focus on gender all minority groups
Company • Women representation by '30

• Reduce/remove current Company target on • Slightly reduce current Company target on (e.g., 50% hiring/ 40% employees/ 30% mgr./40% board)
potential women women • Minority representation by '30
future targets (e.g., >20% women managers by 2025) (e.g., 25% women managers by 2025) (e.g., 40% hiring/ 30% employees/ 20% mgr./30% board)
Potential • Meet regulatory requirements • Establish they key pillars of a global D&I • Broaden the D&I strategy to focus on
initiatives – Set up a working group to get an overview of strategy diversity across dimensions (gender,
upcoming and overarching regulatory requirements – Formulate an overarching strategy that sets a clear generation, ethnicity, etc.) (e.g., ABB)
in terms of diversity reporting direction for the entire organization, with primary

– On top of overarching strategy, set up a governance
– Necessary enabler of understanding what is legal to focus on gender diversity model with employee resource groups based on key
report in terms of minority groups – Continue and expand current mentoring programs diversity needs across the organization as well as
• D&I analytics – Increase bias training to include all salary employees regional inclusion councils
– Set up a process to collect required data for – Upskill HR and leadership through training initiatives – Establish focused recruiting and branding efforts to
reporting on D&I metrics and KPIs and ensure to become change an agents that apply D&I attract and increase diverse candidates
visibility on D&I throughout the employee experience and embed in – Remove biases through training in Recruiting and
leaders' competence model (add 4th key behaviour) Advancement decisions to secure a fair selection
– Hire a Global Head of D&I with the overarching process and ensure diverse hiring boards
responsibility of implementing the D&I strategy in • Ability-at-Company (e.g., Siemens)
the entire organization
– A network that promotes the integration of people
• Set up LGBTQ+ network (e.g., Siemens and with disabilities in the organization
ABB) • Commit to UN Women HeForShe and UN
– Create a network to ensure inclusion of LGBTQ+ Free & Equal (e.g. Schneider)
employees
– Committed to UN Free and equal that tackles
discrimination against LGBTQ+
– Committed to UN HeForShe to report on pay gap
30
Company 2025
S
Social | Employee dev., cond. & retention 1/2: Company current state vs peers
Topic definition: Ensuring that employees get the best opportunities and support to develop their career, and have work-life balance and personal
development
Peer examples
Comply Compete Lead

• Disclose on working conditions, work-life • Schneider: Target of 3x the number of
balance and safe work environment employee-driven development interactions
Regulation & • EU proposal for CSRD (2021)1 – if • Eaton: Maintain 80% engagement score or on the Open Talent market (Compete
peers' current implemented relevant for reporting by 2024 higher by '30 and 12 hours of training per performance)
targets • Peers with no targets; Hengli, Sanhua, IMI, employee • Siemens: € 100 investment to ensure
Emerson; Parker & Rockwell (Compete employability
perf.); Alfa Laval & Inovance (Lead perf.)
• Schneider: 70% employee engagement score,

15 hours of training for 90% of employees
• Alfa Laval: 82% engagement score (no target)
• Hengli and Sanhua have no reporting (Lead target)
Peers' current • Inovance: 20 average training hours (no

• IMI: 73% employee engagement score • Eaton: 8 average trainings hours but high
performance target)
• Emerson: 2.7 average training hours engagement score of 81%
• Siemens: 17 average trainings hours
• Parker: 75% employee eng. score (no target)
• Rockwell: 80% eng. score (no target)
• Ambition to safeguard employees' mental and
Company
• N/A physical wellbeing, and continuously push the • N/A
current targets boundaries of people development
Company • 80% engagement score
• 7.8 average training hours
performance
Company
benchmark
31
1. Corporate Sustainability Reporting Directive proposal for increased reporting on employee conditions,
the proposal is still in a preliminary phase, but if it is passed it will increase reporting requirements to e.g., wages, maternity
S
Social | Employee dev., cond. & retention 2/2: Company options
Comply Compete Lead

Potential Pursuing employee development to enforce and Driving employee development to accelerate
Focus on providing good working conditions for
business employees and ensure well-being to ensure a grow employees and ensuring leadership their growth along with mentoring and training
rationale capabilities to lead the way to retain the best talent
healthy work force
Company • Employee engagement survey score ~80%

• Employee engagement >75% • Employee engagement survey score >80% for
• 90% salary workers with IDP2 and majority
potential • Average training hours >5 hours per employee all segments
satisfied with the plan
future targets / year • Avg. training hours >15 per employee / year
• Avg. training hours >10 per employee /year
Potential • Well-being at work • Employee development program • Employee development program incl.
initiatives – Systematic approach to ensure well-being by – Establish an employee development program in Talent Accelerator
safeguarding against stress and burn-out through which employees within the organization receives – Establish an employee development program that
improving psychological work environment training and guidance through individual has a clear talent strategy embedded with a Talent

• Talent Management processes development plans (IDPs) focusing on (70/20/10)1 Accelerator program that includes training, specific
– Establish core processes to enable tracking of talents – Expand on Company' current Talent community to development programs and mentors for high-
within the organization foster talent development withing the organization potential employees
– Expand on Company Leadership Success Model – Strategic workforce planning for mapping of
which leaders are measured upon by adding employees' current capabilities and future
additional dimension of "inclusive" behavior to development areas
support leading ambitions in D&I • Global Develop. Platform (e.g., Schneider)
• Global Mentoring Program – AI-driven program that matches internal talent to
– Expand existing program in which executives mentor projects, jobs and mentors throughout the
talents within the business organization
• Educational seminars and events (e.g., • Future Fund for Employee Development
Parker) (e.g., Siemens)
– Host regular recruiting events and educational – A Future Fund promotes development programs that
seminars to interact with and attract potential give employees new guidance in an employment
future talent environment that is constantly changing
1. 70% on the job experience, 20% informal learning & 10% formal 32
2. Individual Development Plan Company 2025
S
Social | Innovation & Research 1/2: Company current state vs peers

Topic definition: Embedding sustainability into innovation and research processes to create energy efficient products, technologies and services and closer
engage with customers on product development processes to shift focus to more climate friendly solutions and less waste
Peer examples
Comply Compete Lead

• Most peers (Sanhua, IMI, Rockwell) with no
communicated targets on R&D spend or other
• Eaton: Commitment of spending $3 billion in
Regulation & targets related to Innovation & Research
• No regulatory requirements sustainable R&D by 2030 - ~6x more than
peers' current • Schneider: Ambition to continuously invest in
• Hengli, Parker, Alfa Laval, Emerson: Peers overall R&D spend 2020 (Current performance
and develop innovative solutions that deliver
targets with no communicated targets
immediate and lasting decarbonization
considered "comply")
• ABB, Inovance, Siemens: No comm. targets
• Bosch: Ambition to pursue responsible
digitalization (w/ lead performance)
• Hengli: 0.5% R&D intensity • Siemens: 8.1% R&D intensity

• Sanhua: 4.2% R&D intensity
• Parker: 2.2% R&D intensity • Bosch 8.3% R&D intensity; 73,000 employees
Peers' current • IMI: 4.4% R&D intensity

• Alfa Laval: 2.5% R&D intensity associated in Research & development
performance • Schneider: 5.6% R&D intensity
• Emerson: 2.6% R&D intensity • Inovance: 8.9% R&D intensity
• Rockwell: 6.2% R&D intensity
• Eaton: 3.1% R&D intensity (with lead targets) • ABB: 10% R&D intensity
Company • No communicated target relative to

• N/A • N/A
current targets sustainable product development / ESG
Company
current • N/A • R&D intensity of 4.6% • N/A
performance
Company
benchmark
33
S
Social | Innovation & Research 2/2: Company options
Comply Compete Lead

Sustainability strongly linked into our innovation Sustainable innovation leveraged as a
Potential Innovation & research efforts focused on
processes & prioritized competitive advantage with our customers,
business products / services based on their overall
supporting lead ambitions in environment & where we put effort into collaborating with
rationale business case and risk profile
circular economy them to optimize on sustainability
Company • R&D spend 4-6% of revenues by '25 • R&D spend >6% of revenues by '25
potential • R&D spend <4% of revenues by '25 • % of new product classified as sustainable • % of new product classified as sustainable
future targets ~35% by '25 >50% by '25
Potential • N/A as Innovation & Research with no hard • Establish a Sustainable product / service • Set up Application Development Center to
initiatives regulatory requirements Innovation Fund (e.g. Cambell) accelerate sustainable pipeline
– Redirect R&D intensity increase to reserve funds – Together with customer develop pipeline to drive
that will enable us to accelerate innovation pipeline innovation of sustainable products downstream

of sustainable products • Set up virtual ADCs with customers
• Launch internal "Man on the moon" – Virtual application calculations to demonstrate joint
sustainability challenge (e.g. Bosch) impact with customers on scope III usage
– Engage employees in innovation in the daily business • Business model transformation
combining impact, innovation & sustainability – Develop new spare parts business with ADM &
– Focus on ideas that drive business value and improve logistics partners designed to be E2E low-carbon
Company' contribution to the environment with • Set up Meet-Listen-Innovate
short-term implementation period (6m) – Meet the customer, listen to their ideas and
• Roll-out DBS Cost down & low carbon / innovate together on sustainable solutions
recycle initiative to segment • Establish an innovation strategy optimizing
– Drive innovation upstream to accelerate % of current for sustainability (e.g. Eaton)
products that are sustainable – Innovation strategy in place to advance cleaner and
• Expand targets for current initiatives lower carbon solutions
– ADM1 , M&S2, IP3 , tech. scouting and incubation to
provide enabling competences to support roadmaps
1. Additive Design Manufacturing 2. Modeling & Simulation 34

3. Intellectual Property Company 2025
S
Social | Product Quality & Safety 1/2: Company current state vs peers
Topic definition: Ensuring high quality of products and services provided, incl. longevity and functionality, that meet customers' requirements and minimize
safety risks to customers
Comply Compete Lead

• Implement certified Quality Management
• Parker: Strives to avoid using materials
systems1 to prevent product defects and
which are harmful to the environment across
Regulation & reduction of variation and waste
all its manufacturing operations (Comply • Schneider: Guarantee highest safety
peers' current • Adhere to overall product regulations2 incl.
performance) standards and halve the weight of safety
maintaining a Negative list that bans use of
targets • Afla Laval: Target of having no hazardous units recalled (Compete performance)
hazardous chemicals in productions
substances in use by '23 (Comply
• Peers with no targets: Siemens, ABB, IMI,
performance)
Bosch; Rockwell (Compete perf.)
• Rockwell: 13 potential non-safety issues /
• Siemens, ABB, IMI, Bosch, Alfa Laval,
reliability concerns in 2020, but 0 units
Parker: No reporting on recalls or quality /
recalled (no target) • Eaton: 0 recalls, no monetary loss for
Peers' current

safety of products but quality management
• Schneider: 12 products recalled in 2020; product quality and 22k employees trained in
performance systems in place
Offer Safety Alert process in place to quality
• ABB: Digitalization procedures in place to
minimize safety risks to customers (Lead
increase system reliability and quality
target)
• Update negative list by 2021 banning use of
Company
• N/A hazardous chemicals • N/A
current targets • Targets of CLI >50% and DPPM = 551
Company • No reporting on recalls or dedicated training
current • N/A • But internal metrics in place; CLI >50% and • N/A
performance DPPM = 551 with high customer reputation
Company
benchmark
35
1. ISO and IATF certifications 2. REACH, RoHS, WEE, CE marking etc.
S
Social | Product Quality & Safety 2/2: Company options
Comply Compete Lead

Pro-active approach applied when it comes to
Quality mgmt. systems in place to prevent Product quality and safety as a competitive
Potential banning hazardous chemicals in production and
product defects and avoid use of hazardous advantage where Company dedicates time to
business an extensive negative list applied to all
chemicals in production to ensure high quality and meet and listen to customers and commit to
rationale Company with high-quality mgmt. systems in
safety of products / services acting on their feedback within 100 days
place
Company • Customer DPPM <550 for group by '22 • Zero defects

• Customer DPPM <500 for group by '22
potential • Customer Loyalty Index >50% by '22 • Zero recalls
• Customer Loyalty Index >60% by '22
future targets • Report on cost of Poor Quality • Zero hazardous chemicals used
Potential • Roll-out IATF / QEHS mgmt. system to Eaton • Establish a system architecture and • Meet-Listen-Act
initiatives – Integrate Eaton Hydraulics into Company IATF governance for quality software – Engage with customers by setting up a program
compliance standards – Set up IT system architecture and governance to where employees meet the customer, listen to their
• Set up a data management system and ensure the required standard and protocols are in expectation on products and safety and act in 100

digital tools place to ensure product safety and security for days to improve customer perception
– Set up a data management system and tools focusing connected products • Define aligned quality approach
on digitalizing the manual processes currently in • Perform internal audit for DPP and PDP – Set up one Company end-to-end quality approach
place (e.g. maintenance of a negative list) basics towards conformity, robustness, reliability and
services and ensure customer's point-of-view is
– Audit Company Productivity Program (DPP) and
listened to
Product Development Program (PDP) to assess and
ensure alignment with core tools • Operation assessment process (e.g., IMI)
• Set up a Product Safety and Security Office – Embed lean assessment improvement program,
Obeya reviews and advanced product quality process
(e.g. Rockwell) in operational platform to ensure quality
– Establish a formal Product Safety and Security management systems are up to standard
Officer that reports to the CTO and reviews all
product safety-related incidents, monitors how they
are managed and ensures best-practice sharing
across the organization
36
Company 2025
G
Governance | Supply Chain 1/2: Company current state vs peers

Topic definition: Choosing, monitoring, auditing and collaborating with suppliers based on organization's sustainability standards
Peer examples
Comply Compete Lead

• EU rules aiming to protect the environment
and public health, e.g., Restriction of • Schneider: Reduce top 1000 suppliers'
Regulation & • Eaton: 100% of suppliers affirm to Code of
Chemicals (REACH) and Restriction of operations' CO2 footprint 50% by '25 and
peers' current Conduct by '30
Hazardous Substances in Electrical and carbon neutral supply chain by '50
• ABB: 80% of spend covered by supplier
targets Electronic Equipment (RoHS) • Schneider: 100% of suppliers providing
sustainability framework by '30
• Rest of peers with no publicly-stated targets decent work to employees by '25
beyond compliance with regulation
• Schneider: 91% of Top 1000 suppliers signed

• Eaton: Share of spend under compliance 90%
up to reduce footprint
• ABB: No performance corresponding to target
• ESG supplier collaboration programs involving
Peers' current • All peers with policies on supply chain ethics

• All peers with conflict materials policies training, sharing of tools and best practices
performance and human rights
by Siemens, Schneider, ABB
• Majority of peers using codes of conduct for
• Siemens with advanced data-driven approach
supplier conformation
to supplier screening using AI
• 95% of direct supplier spend compliant
Company
• Processes to avoid forced labor of temporary
current targets workers by '21
Company • Negative List for chemical compliance and • 95% of direct supplier spend compliant
• No ESG supplier collaboration programs
current • No advanced data-driven approach to
Conflict Minerals for 3TG compliance • Process for assessment of high-risk suppliers
performance supplier screening
Company
benchmark
37
G
Governance | Supply Chain 2/2: Company options
Comply Compete Lead

Supplier compliance enforced via code of Best-in-class supplier collaboration programs
Potential Adhere to current regulation and proactively
conduct and on-site & third-party audits, though and advanced data-driven screening methods to
business monitor and address new regulation to maintain
limited proactive initiatives to increase supplier drive supplier ESG performance in line with
rationale license to operate
ESG performance Company
Company • Derive implication of proposed ESG Due • 100% of direct suppliers and 25-50% of
• Code on Conduct compliance on 100% direct
potential Diligence Law regarding ESG compliance indirect suppliers with performance
suppliers and 25-50% indirect suppliers
future targets across value chain positively contributing to Company targets
Potential • Supply chain compliant according to new • Data-driven supplier ESG assessments • Supplier ESG collaboration program
initiatives regulatory demands – Data-driven platform to collect and manage – Partner with key suppliers (representing high share
– Established formalized process for monitoring supply Company and external third-party data on supplier of Company Scope III emissions) and share tools,
chain regulatory developments and maintaining ESG performance, visualize and assess on refined resources, best practices to drive ESG performance

Company' standards Company ESG criteria to enhance supplier selection in line with Company' updated ESG standards (e.g.,
• Systematic process for DNL1 compliance • Audits of indirect suppliers ABB, Schneider)
– Formalized processes and IT system to efficiently – Third-party audits for indirect suppliers in high-risk • AI-enhanced supplier ESG assessments
manage materials prohibitions and restrictions (e.g., countries, following Company '21 campaign with – Bolster data-driven supplier assessments with
Bosch) suppliers in high-risk categories supplier ERP data and deploy advanced AI solutions
to further support supplier selection (e.g., Siemens)
• Supplier program for CO2 reduction
– Optimize supply chain geographical footprint to
drive CO2 reduction and cost compression on high
volume, high value parts
• Code of Conduct with Company ESG targets
– Stronger CoC to enforce supplier compliance towards
Company' updated ESG standards e.g., Scope III
target
Company
2025 38
1. Company Negative List
G
Governance | Transparency, Reporting 1/2 : Company current state vs peers

Topic definition: Company providing relevant and transparent information to stakeholders about the organization and its performance
Peer examples
Comply Compete Lead

• Peers targeting commitment to SDGs, UN
• Schneider: Targeting commitment to full
Global Compact and
Regulation & disclosure on ESG performance
• Regulatory proposals for greater disclosure, • Siemens: More than half of shareholder
peers' current • Eaton: Doing business right with
governance requirements incl. Corporate representatives independent of Company and
transparency; disclosing ESG performance
targets Sustainability Reporting Directive; Managing Board (executive)
using rigorous and credible global standards
Sustainable Finance Disclosure; Sustainable
• Rockwell: Report aligned with the GRI by '21
Corporate Governance; Due Diligence Law
• Bosch, Siemen, Schneider with sustainability • Schneider, Bosch, Eaton, ABB report to GRI;
committees overseeing ESG strategy IMI to TCFD; Emersen to SASB and TCFD
• Majority peers are UNGC signatories and
• ABB with external panel advising on ESG • Bosch, Alfa, ABB reports externally-audited
Peers' current committed to SDGs

• Siemens with 8 independent board of 20 • Alfa Laval, ABB with fully independent board;
performance • Majority of peers with established ethics and
• Schneider, Bosch, Eaton, ABB, Siemens using IMI and Rockwell with 10/11 independent
whistleblowing systems
SBTi methodology • Siemens, ABB, Alfa Laval, IMI, Eaton and
• All peers with published Scope I+II targets Schneider with published Scope III targets
Company • Pilot LCAs1 and EPDs2 in DDS and DCS in '23

current targets with wider organizational roll-out '22
Company • External ESG initiatives, principles incl. • In the process of implementing SBTi • ESG report not integrated with annual report,
current UNGC, 1.5°C pledge and UN SDGs • 6/12 independent board members audited, aligned with recognised reporting
performance • Whistleblower function (external assessment) • No Sustainability committee guidelines (e.g., GRI, TCFD)
Company
benchmark
1. Life Cycle Assessment 2. Environmental Product Declarations 39
G
Governance | Transparency, Report., Account. 2/2: Company options
Comply Compete Lead

Capabilities enhanced with sustainability Leading capabilities with integrated and
Potential Reporting to current regulations and
committee and strategic engagement with externally-verified report, demonstrating
business expanded for upcoming regulatory demands
rating agencies, while not seeking advantage ESG value drivers and mitigation of risks,
rationale where applicable to Company
among stakeholders creating advantage vs. peers
• 100% transparency on emissions baseline

Company • Ensure 100% and timely compliance with • Publishing of ESG targets and reporting of
• Reinforce accountability of ESG through
potential regulations e.g., integrate relevant ESG performance 100% in accordance with
strengthened governance structure
future targets requirements from EU taxonomy recognized guidelines & externally verifiable
• Drive sustainable uptick in ESG ratings
Potential • Reporting according to new regulatory • SBTi baseline • Advanced ESG targets incl. Scope III
initiatives requirements – Publish updated SBTi baseline (in progress) – Publish targets for and report progress towards
– Meet increased reporting requirements from • ESG IT system and processes advanced areas of ESG incl. Scope III (e.g., Siemens,
upcoming regulation applicable to Company; include – Advance Company ESG IT systems and processes Schneider, Eaton, ABB)

materiality assessment enabling ESG target setting and performance • Externally-audited ESG report
• Customer compliance request management reporting on e.g., emissions footprint at Group, – Sustainability report integrated with annual report,
– Optimize resource allocation to customer segment, region and product level compliant with internally-recognised standards (e.g.,
compliance requires via automation; set KPIs and • Sustainability committee GRI, TCFD) and audited to best demonstrate ESG
collect data to understand performance – Establish sustainability committee at board or exec. value drivers to stakeholders (e.g., Bosch)
• ESG advancement with peers level accountable for Company ESG strategy (e.g., • Customer product footprint disclosure
– Regular dialogue with peers to create platform to Bosch, Siemens, Schneider) – Provide customers with carbon and environmental
raise and address ESG issues in great depth (e.g., • Strategic approach to rating agencies footprint on product level driving increased
Siemens engaging with peers on human rights) – Strategically engage relevant rating agencies and transparency (e.g., Schneider's MySchneiderApp)
customer assessments to bolster rating in eyes of • Increased Board independence
important stakeholders – Restructure Company board for more independent
• Report on local economic and social impact board members, allowing for heightened
– Measure and demonstrate Company' value accountability and external perspectives on ESG
contribution to societal sustainable development (e.g., ABB with fully-independent board)
(e.g., Siemens' Business to Society®)
Company
2025 40
1. E.g., CSRD, GRI, elements of TCFD if applicable to Company
Ambition setting should be guided by a comprehensive peer benchmarking to
map their targets Example Energy
Competitive environment target range Comply Compete Lead

• RWE and EDF: -50% scope 1-2 until 2030 (vs. '19/'17 resp.), committed to SBTi at well-below 2°C
Environmental
GHG emissions from own

• Enel and Iberdrola with slightly higher ambitions in line with 1.5 path
operations • Ørsted and Fortum with similar ambitions, but no SBTi certification
• RWE, EDF and Enel: -30%, -28% (vs. '19) and -16% (vs. '17) resp. scope 3 until 2030
GHG emissions and env. • Ørsted with highest ambition of -50% (vs. '18) until 2032
standards in supply chain • Iberdrola, Fortum with goal of carbon neutrality by 2050
• Iberdrola: Specific quantitative target of water use/production intensity reduction by 50% until 2030
Water usage • RWE, Enel, Fortum and EDF with ambition statements and/or specific water reduction measures
• Ørsted with waste and water management policies in place
• Ørsted, Fortum and Iberdrola with specific quantitative targets (e.g. injury frequency <1 by '25)
Health & safety • Enel and RWE with well being initiatives in place

• EDF without specific targets or initiatives
Social
• RWE, Iberdrola and Ørsted: targets of 30%, 25% and 22% resp. of female senior management by 2022
Diversity • EDF target of 30% female executives by 2030, Enel with targets for middle management only
• Fortum with target of 25% female top executives by 2022 for Uniper subsidiary only
• Enel and Iberdrola: 80% (by '23) and 70% (by '22) of suppliers to have standard sustainability policies
Social standards in supply • RWE, Ørsted and Fortum with supplier qualification processes in place
chain • EDF less transparent on supplier standards
• EDF with executive compensation and up to 40% of manager salary linked to CO 2 emissions
Governance
Compensation • Ørsted with short-term cash-based schemes with 60% weight of ESG
• Enel, RWE, Iberdrola, Fortum with ESG criteria linked to executive and/or manager compensation
• All peers have reporting standards in accordance with GRI, SDG and TCFD in place as well as engage
Transparency & reporting with rating agencies
• Ørsted includes only 6 rating agencies in their report, which is below average of peer group
RWE Fortum Ørsted Enel EDF Iberdrola

Note: KPIs/Targets not directly comparable
Source: Company sustainability and annual reports; Company websites; BCG analysis 41
Backup: Maturity level definitions per category Example Energy
GHG emissions from own operations Maturity level definition Diversity Maturity level definition
Comply • No climate targets in place Comply • Scattered initiatives across diversity topics
• Scattered/local initiatives • No targets set
• No explicit alignment with international standards as TCFD
Compete • Diversity targets set at Executive level and above
Compete • Reduction targets in place, with transparency on baselines & interim targets • Diversity, equity & inclusion initiatives mainly focused on gender
• Aligns to TCFD or another intl. standard
Lead • Diversity reported at different mgmt. levels
Lead • Climate neutrality commitment • Gender targets high in the short terms (e.g. +30% female at leadership
• Aligns with Paris Agreements objectives and targets verified by SBTi scenarios positions before 2025)
GHG emissions and env. standards in SC1 Maturity level definition Social standards in SC1 Maturity level definition
Comply • No targets for value chain emissions Comply • Generic narrative on compliance in supply chain
• Scope 3 reporting at a nascent stage • Code of Conduct for Suppliers
• Initiative oriented approach (not systematical)
Compete • No quantitative targets set
Compete • Reports Scope 3 emissions, but no target setting • Collaboration with suppliers on developing compliance aspects
• Actions programmed in the short time (next 2 years) around reporting and
collaborations Lead • Targets set on suppliers assessed on compliance and/or supplier to achieve
certain sustainability targets
Lead • Aims for climate neutrality incl. Scope 3
• High level of reporting and strategic approach to Scope 3 reduction
Compensation Maturity level definition

Water usage Maturity level definition Comply • Compensation not linked to ESG performance
Comply • No targets set with boilerplate narrative about water management

Compete • Compensation not linked to ESG or linked with no clarity on weighting
Compete • No targets set, however, actions depicted, and water considered material
topic
Lead • Compensation linked to ESG with clear weighting
Lead • Set water reduction/generation ambition
Transparency & reporting Maturity level definition

Health & safety Maturity level definition
Comply • Basic sustainability report
Comply • No safety targets clearly set • No reference to disclosure guidelines (UN GC, GRI…)
• Employees' wellbeing acknowledged but no specific initiatives
Compete • Reporting aligned to GRI and SDG and/or Climate risk based on TCFD
Compete • Qualitative targets set around safety within a defined time horizon recommendations
• Wellbeing initiatives in place for employees • Disclosure of max. 6 ESG raters
Lead • Set quantitative target to reduce injury rates (occasionally in addition to zero Lead • Reporting aligned to GRI and SDG and engaging rating agencies, and Climate
fatalities goal) risk based on TCFD recommendations
• Wellbeing incorporated into health & safety framework • Among top performers across ESG Raters
1. Supply chain
Source: Company sustainability and annual reports; Company websites; BCG analysis Environmental Social Governance 42
Current ambition
Current performance

Business case
43
Depending on decisions for
Comply, Compete, Lead,
various scenarios are defined
Estimates are made for the
ESG rating impact for key
Before making a final initiatives (e.g. CO2 reduction,

female mgmt share)
recommendation on In summary, each scenario will

show a total ESG improvement
ambition level: depending on the chosen
targets for initiatives
Business case to be
developed as reality
check to find right

trade-off between For scenarios as defined
above, financial impacts
financial and ESG are estimated (Capex need,
EBIT(DA) impact, payback
performance period, etc.)
Trade-off between financial
and ESG impact is analyzed
and discussed to find right
balance between likely
financial impact and
estimated ESG improvement
Source: BCG case experience 44

Case example | Defined three scenarios for future ESG impact and payback
Sanitized case example
Increase in EV/EBITDA multiple by +0.35x

leads to c. €100M valuation upside potential1 Illustrative
Scenario 3:
Scenario 1 | Commercial focus
ESG impact
(Rating & Multiple) ESG leadership • ESG initiatives only considered if stand-alone
financially attractive (i.e., payback
period ~3 years)
Scenario 2:
Scenario 2 | Balanced approach
Balanced approach
• Achieve “~80% ESG impact” with broader

Recommended
Scenario 1: set of initiatives; ESG impact considered
Commercial focus in selection
Baseline:
Starting point Scenario 3 | ESG leadership
• Position asset as sustainability leader
amongst peers; accept significant mid-term
Cashflow impact CF impact
(Capex & Payback period)
Source: BCG case experience 45

Case example | Based on range of scenarios, we selected the optimal scenario
for ESG impact Sanitized case example
Illustrative
Recommended
Baseline: Scenario 1: Scenario 2: Scenario 3:
Starting point Commercial focus Balanced approach ESG leadership
Engage with multiple rating
Caters to importance R agencies (significant effort)
of Social & Governance
in ESG ratings
G
Actively drive Sustainalytics Limited changes vs.
R rating & sign UN GC1 scenario 2
S
G Set competitive targets, e.g.
• Global roll-out of NPS

• 25% female managers by
S 2025
R Increased transparency
G Limited changes vs.
S scenario 1 E
Governance E
First public targets, e.g. Set ambitious targets, e.g. Set leading targets, e.g.
Social E • ~14% CO2 reduction by • ~27.5% CO2-reduction • ~40% CO2-reduction by
2025 by 2030 2030
Environment
Meeting legal ESG requirements

1. UN Global Compact
Source: ESG Project Team 46
Current ambition
Current performance

Business case
47
Case study: building materials
Proposed targets enable strong ESG positioning vs. peers
Double Continue/
Comply Compete Compete down1 commit2 Target reached with 'Scenario 2 | Balanced approach'
Sustainable
products
Lead: 45% of sales from products that are sustainably advanced by 2025
Innovation & Lead: >50% of new products sustainably advanced & >40% of R&D budget for
research sustainable products by 2023
E
Climate &
emissions
Compete: 15% CO2 reduction/t sold by 2025
Waste & water Compete: 15% waste and wastewater reduction/t sold by 2025
Lead: Zero fatalities and an industry leading LTIR3 of <= 0,51 (equiv. top 25% in
Health & safety
chemicals) by 2025

S SC sustainab. Compete: Binding supplier code of conduct
Compete: 35% women in external hires by 2025 and a talent pool that reflects
Diversity & Incl.
MBCC Group diversity (beyond gender)
Lead: Fully trained workforce supported by a 100% corrective actions principle

Business ethics
and safe ways to report issues through whistleblowing program
G
Compete: UNGC signatory and actively engaging in building a sustainable
Business ethics
construction industry
Initial view on ambition Current positioning = Sika communicated target = Heidelberg Cement communicated target
1. Strengthen commitment and focus on selected topics 2. Continue commitment on selected topics 3. Lost time injury rate
Source: ESG project team; Company webpages; JP Morgan Europe Equity Research 05 May 2021; BCG analysis 48
'Scenario 2 | Balanced approach' creates commercial value at a payback period
of ~3 years; ~€6.4M ESG CAPEX required
CAPEX figures not incremental to baseline, but actual proposals per scenario
Recommended
Scenario 1 Scenario 2 Scenario 3
Commercial focus Balanced approach ESG leadership
Focus on environmental aspects Competitive targets across all three More ambitious, especially for
High level with stand-alone short payback ESG dimensions balancing high ESG environmental aspects to position
description period / low effort impact with investment needs company as sustainability leader
Rating upside Limited High Very high
~€-0.7M ~€+0.2M ~€-5.6M

2022 ~€0.0M ~€3.2M ~€5.5M
EBITDA ~€+1.3M ~€+3.7M ~€-0.9M

2023
upside ~€0.0M ~€1.5M ~€3.9M
CAPEX ~€+4.5M ~€+10.9M ~€+6.3M

2024
requirements ~€0.0M ~€1.1M ~€2.9M
~€+6.6M ~€+16.2M ~€+12.0M

2025 ~€0.0M ~€0.0M ~€0.0M
Overall pay-back
~2 years ~3 years ~4-5 years
period
Source: ESG project team 49

EBITDA upside in mid- and long-term with limited CAPEX invest
Based on 'scenario 2 | balanced approach'
CAPEX CAPEX requirements reduced – further reduction or spread

(€M) will have influence on EBITDA upside Key remarks
CAPEX requirements (2022) of ~€3.2M
include e.g.
• Return pallet system: ~€1.6M initial
~3.2 investment for purchase of reusable
~0.6 ~1.5 ~1.1 ~0.0 ~0.0 pallets to enable return pallet system
Σ ~€6.4M
(beyond run rate)
• Powder reuse: ~€1.1M for the planning
EBITDA Full topline impact by 2025 depends on 2022 CAPEX investment – permission and construction of additional
(run rate, €M) delay possible powder silos

~16.2 ~16.2 • Energy efficiency: ~€0.4M for replacement
of pumps, lights, ACs, etc.
~10.9
Main EBITDA drivers (2025)
~3.7
• ~€13.8M/y EBITDA impact from shifting sales
~0.2
Σ ~€111.4M to sustainable products
-~0.6 • Return pallet system & IBC: €2.1M/y upside
2021 2022 2023 2024 2025 … 2030 by re-using containers and pallets
• Photovoltaics: Full ~€1.2M/y savings from
Initial OPEX increase before topline benefits materialize, reduced electricity cost trough PV
e.g., marketing built up (~€3M), S&G initiatives, etc.

Sustainable products and waste initiatives key EBITDA drivers –
90-95% of upside – cross-financing other levers with rating effect
Based on 'Scenario 2 | Balanced approach'
EBITDA remarks
Sustainable products
CAPEX ~3.2 • Sales push: Topline upside gradually
(€M) ~0.6 ~1.5 ~1.1
~2.7 ~0.0 ~0.0 materializing to ~€14.6M EBITDA in 2025 –
~1.1 ~1.1 Σ ~€6.4M
50% upside overlap with Endeavor; marketing
spend €2.7M/y as of 2022
Sust. Prod. and Waste & Water
>90% of EBITDA upside in 2030
• Contribution to upside 85%-70% depending on
counting of overlap
~16.2-9.3 ~16.2-9.3 <50% overlap with Waste & Water
other projects • Return pallet system & IBC: €2.1M upside as
~10.9-6.5 ~6.9 ~6.9 of 2022
• Powder re-use: Full €1.0M upside as of 2025

~4.4 Climate & Emissions
Photovoltaics contributing
~3.7-2.6 ~6.6 ~6.7 ~7% to topline but cross • Photovoltaics: Full ~€1.2M upside from 2024
~4.1
EBITDA ~0.7-0.2 ~2.4
financing green electricity • Energy efficiency: Full ~€0.2M upside from
(run rate, ~2.6 ~2.8 ~3.1 ~3.1 2024
~0.5 ~0.5 ~0.5 • Green electricity: €0.9M OPEX from 2022
€M) Σ ~€65.2M-
-~0.6 Other
~€111.4M • Social and Governance initiatives with non-
2021 2022 2023 2024 2025 … 2030 positive EBITDA run rate
Sustainable Products Innovation & Research Climate & Emissions Waste & Water Diversity & Inclusion Business ethics Regulatory compliance
Approx. overlap with other ongoing projects

'Scenario 2 | Balanced approach': Sustainable products most significant lever
across all three scenarios
Recommended
Scenario 1: Scenario 2: Scenario 3:
Commercial focus Balanced approach ESG Leadership
Aggregated
Aggregated Aggregated EBITDA in € ~ 6y payback;~-0.8% CO2
EBITDA in € EBITDA in € ~3M Energy efficiency
~2M Energy efficiency <5y payback; ~-0.4% CO2
~9M Photovoltaics Conservative case with ~14M Waste reduction Incl. wastewater treatment;
decreased marketing spend ~7M Waste reduction <6y payback; ~-15% waste ~8y payback;
~19M up to -50% waste
Sustainable products & supporting initiatives3 ~20M Re-use pallets & containers ~20M Re-use pallets & containers
~17M
Only if identical cost; 0~-1%
- Green electricity CO2 ~9M Photovoltaics ~9M Photovoltaics
-1 Zero incidence program1
-2 Supplier sustainability ~45M
~45M
Sustainable products & supporting initiatives3 Sustainable products & supporting initiatives3
~44M
~44M

0
Max. 0.05 €/kwH 0
~(8M) Green electricity increase; Green electricity in all
~-12% CO2 ~(21M) Green electricity locations; ~-17% CO2
~(2M) Sust. materials & partnerships
-1 Zero incidence program Sust. materials & 10% PEGs biobased (€3.8M
-2 Supplier sustainability ~(36M) additional OPEX/y)
partnerships
~(1M) Diversity initiatives
-1 Zero incidence program
~(3M) Business ethics package -2 Supplier sustainability
~(2M) Reporting ~(2M) Diversity initiatives
-1 Active lobbying ~(0.2M) Wellbeing No measurable ESG impact
~(3M) Business ethics package
Approx. overlap with other projects
~(2M) Reporting
Environmental Social Governance Difference in aggregated EBITDA between scenario 2 and 3 -1 Active lobbying
1. Already fully budgeted & started, no additional cost; suggest not to cancel 2. Rollout until 2023 can be handled via existing processes 3. Includes the following initiatives: EEA,
Certificate overview & database, marketing strategy, Triple S processes & new method, partnerships (partnerships excluded not in commercial focus) | Note: All values shown are aggregate
2021-2030; Based on 2019 Scope 1+2 emissions baseline of approx. 200kt CO2 and waste baseline of 47kt
Source: ESG project team, REHSA data 52
Overview of proposed targets across E dimension (1/2)
Potential initiative Overview of proposed targets Scenario Synthesis

• 5% of sales made based on optimized mix design by 2025
1 EEA - OneClick LCA • >45% sales from products that are sustainably advanced by 2025
1 2 3
Lead: >40% of
Certificates overview & • 100% of core portfolio (sustainable products) has relevant certificates (EPDs, VOC, HPDs…) sales from
2 database • >45% sales from products that are sustainably advanced by 2025
1 2 3
Sustainable products that are
products Including part-time option • To be set based on agreed sustainable products target and strategy sustainably
3 in job advertisement 1 2 3
• >45% sales from products that are sustainably advanced by 2025 advanced by
Triple S process & new • >50% of new products classified as sustainably advanced by 2025 2025
4 method • 45% of sales from products that are sustainably advanced by 2025
1 2 3
Triple S process & new • >50% of new products classified as sustainably advanced by 2025
5 method • 45% of sales from products that are sustainably advanced by 2025
1 2 3 Lead: >50% of
new products
Drive sustainable • >50% of new products classified as sustainably advanced by 2025
E Innovation
6 product share in R&D • 35% of R&D budget for sustainable products by 2023
1 2 3 sustainably

advanced & >35%
& research
7 Alternative raw materials • > 50% of new products sustainably advanced 2 3 of R&D budget
for sustainable
8 Partnerships • 5% of sales made based on optimized mix design by 2025 2 3 products by 2023
• ~2% of electricity usage reduced by 2025
9 Energy efficiency • ~1% of green house gas emission reduced (Scope 1+2) by 2025
2 3
Compete: 15%
Climate & • ~12% of electricity from solar energy by 2025
10 Solar energy 1 2 3 CO2 reduction/t
emissions • ~3% of green house gas emission reduced (Scope 2) by 2025
sold by 2025
• ~60% of green electricity used in operations by 2025
11 Green power purchase • ~15% of green house gas emission reduced (Scope 2) by 2025
2 3
Relevant for Sustainalytics rating # Initiative fully considered (ESG impact, financial impact, etc.) # Initiative partly considered (ESG impact, financial impact, etc.)

Overview of proposed targets across E dimension (2/2)

• ~75% powder waste repurposed by 2025
12 Powder re-use • ~15% total waste reduced by 2025
2 3
Compete: 15%
• ~75% of treated water from admixture productions re-used by 2025
13 Wastewater treatment • ~40% total waste reduced by 2025
3 waste and
Waste &
E water • >60% of all pallets used across MBCC Group are reused
wastewater
14 Return pallet system • Return pallet system is introduced in 90% of countries, where pallet pools are operating
2 3 reduction/t sold
by 2025
Re-use intermediate
15 bulk containers • 22.000 pc. new IBCs should be exchanged by rebottled IBCs in Europe 2 3


Overview of proposed targets across S dimension

Zero incident Lead: Zero fatalities
16 program • LTIR of <= 0,51 by 2025 (equiv. top 25% in chemicals) 1 2 3 & an ind. leading
Health & LTIR of <= 0,51
Safety (equiv. top 25% in
17 Wellbeing program • LTIR of <= 0,51 by 2025 (equiv. top 25% in chemicals) 3
chemicals)
• 100% relevant2 suppliers compliant with the supplier code of conduct
Supplier code of Compete: Binding
SC2 sust. 18 conduct • 100% of new contracts closed with supplier code of conduct as part of contractual 1 2 3
agreement supplier CoC3
Including part-time
19 option in job • >100% job advertisements marked with the relevant note by 2022 2 3
advertisement
S D&I community • Talent pool reflects overall diversity along main D&I charactistics by 2025
20 network 2 3 Compete: Talent
• Monthly D&I newsletter

pool reflects
20b Diversity index • All diversity characteristics for index in system and trackable by 2022 2 3 overall MBCC
Diversity & diversity along
Inclusion Unconscious bias • 100% Hiring Managers, Recruiters and HRBP's receives a training on diversity topics by main D&I charact.
21 training 2 3
2023 by 2025, 35%
Female women in external
• Every hiring team with at least one female by 2022
22 representation 2 3 hires by 2025
in hiring team • 35% women in external hires by 2025
Talent pool
23 reflecting workforce • Talent pool reflects overall diversity along main D&I charact. by 2025 2 3
1. Supply Chain 2.. Relevant is currently defined by a minimum spend and a contract duration relevant for the timeline of the initiative 3. Code of Conduct
Overview of proposed targets across G dimension

Business ethics & • > 95% of 'target' employees have access, receive and complete ethics & compliance trainings Lead: Fully trained
24 compliance trainings • Regular (once every quarter) newsletter to inform on progress and new training modules 2 3
workforce supported
by a 100% corrective
25 “Speak-Up” • 100% of customer and suppliers have access to company's Group’s Speak Up program 2 3 actions principle
Business
and safe ways to
ethics MBCC Group's Code of report issues for all
26 Conduct • Published Group Code of Conduct as of May 20 th 2021 1 2 3
through a compre-
• 100% corrective compliance action on reported infringements against defined set of standards hensive whistle-
G 27 100% compliance action • Newsletter to inform on compliance action program and annual public reporting (high-level) 2 3 blowing prgm.
UN Global Compete: UNGC
28 Compact Signatory • 100 Points for UN Global Compact Signatory in Sustainalytics rating score in 2022 2 3
signatory and
Regulatory actively engaging in
Lobbying to drive • Full transparency on relevant lobby activities by March 2022
compliance 29 enabling regulation • Strategy to address most pressing roadblocks by July 2022
2 3 building a

& reform sustainable
construction
30 Reporting • Public sustainability report from 2022 onwards 2 3
industry

Recap | A proven approach to ESG strategy: Six steps to ESG leadership
1 ESG vision and ambition

Validate/update sustainability vision and ambition, and take
stock of existing efforts
2 Materiality 3 Measures and prioritization 5 Org, focus KPIs,

assessment Develop sustainability strategy for highest-impact governance
issues—derive quantifiable targets and define initiatives
Identify/confirm highest incl. business cases to achieve developed strategy Outline lean & efficient organization
impact ESG topics—by relevance and define focus KPIs for performance

to business success and importance assessment, review sustainability skills,
to stakeholders—and discuss RWE resources, and systems
starting point vs. peers
4 Flagship initiatives
Define flagship initiatives with high influence on
target achievement and proven business case
to support ESG narrative
6 ESG reporting and eco-system management

Provide transparency, generate buy-in from all stakeholders inside and outside of the company and actively
shape the ecosystem—develop and execute ESG communication strategy
Source: BCG 57
Flagship initiatives | We see four types of initiatives, with flagships
being a few selected key initiatives
1 Flagships 2 Operative measures 3 Low-hanging fruits 4 Core enablers

Usually a maximum of 4–6 flagship Other key (non-flagship) initiatives Various quick wins identified Some enabler initiatives necessary:
initiatives distributed throughout the as operative measures: Implemen- in initiative discussion: Implemen- Often to be rolled-out across entire
organization1 tation driven centrally or decentrally tation driven centrally or decentrally organization to enable ESG initiatives
Used for most material topics with Used for other relevant topics with Used often for lower ambition level Used to enable other ESG
high ambition level and high impor- moderate ambition level to anchor topics and/or for “Walk the talk: initiatives, yet enabler often with no
tance for external communication ESG in operations Making ESG-related changes visible direct ESG ambition level or purpose

Resulting in large-scale change, thus Resulting in considerable changes, Resulting in comparably short Differing levels of changes, depending
often longer implementation time and with varying implementation time implementation time, mostly with on enabler; however, implementation
potentially significant budget needs and budget needs smaller budget needs key to get ESG agenda going
Typical ambition level
Lead
Compete
Comply
1. E.g. each OpCo with one flagship initiative
Source: BCG 58
Implications per type of initiatives: Flagships with need for thorough planning
2 Oper. measures
Activities per type of initiative 1 Flagships 3 & low-hang. fruits 4 Core enablers
Develop a detailed roadmap going forward with a clear timeline
Define key milestones going forward
Capture all key KPIs in performance reporting1
Share (and develop) core programs and policies for rating process
Include in (potential future) external communications2

Assess and capture status quo (incl. gathering of anecdotal evidence3)
4
Set quantitative target
Set qualitative ambition
Identify pilot OpCo and/or Function
Detail resource needs/business case
1. Incl. e.g. Sustainailytics 2. e.g., ESG reports 3. As relevant 4. For some initiatives
Source: BCG 59
The lighthouse/step-change initiatives should …
Deliver quick value proofs to drive momentum in

the organization
The Ideally be initiated with segment pilots to 'Get going'

lighthouse/flagship and later scaled to 'Going great'
initiatives follow
five selection- Be inspired by initiatives of leading competitors and
designed to build upon strengths

criteria
Supported by the segments to ensure buy-in and
ownership from start
Have a positive value case in the long term
60
Example| Key initiatives will enable a step-change in ambitions
Decarbonization Circularity People & diversity
Step- We pioneer solutions for customers to We innovate best-in-class circular We offer the strongest employee
changes enable decarbonization in an intelligent, products as the default when experience that attracts & retains
cost-optimal manner and ensure carbon developing, sourcing, & selling to diverse top talent and fosters an
neutrality in our own operations deliver new value propositions inclusive culture
Potential Future-proof Scope I+II Ambition D&I Foundation & Diagnostics

To secure progress towards 2030 ambition Circularity framework & roll-out To create transparency & cultural & mindset shift
initiatives To size and frame the opportunity and run the
Addressing Scope III – Use of sold prod. first pilots to define the program D&I-focused Recruiting & Targeting

To optimize emissions from "use of sold products" To increase awareness & talent attraction
Commercializing Avoided Emissions D&I Upskilling: Training & Mentoring

To make avoided emissions part of value prop. To foster dev. & retention of diverse talent
ESG-specific Supplier Diagnostics and Collaboration Program D&I ERGs1 & Inclusion councils
To enable upstream scope III emissions reductions and secure purchased goods ready for circularity To ensure D&I is well-anchored in org
Increase Strategic Communication on ESG

To capture additional value from new ESG Strategy e.g., via strategic use of ESG ratings
Data Foundation and Transparency

To ensure data foundation in place to increase internal and external transparency and enable step-change initiatives
1. ERGs = Employee Resource Groups

Source: Project team; BCG Legend Comply Compete Lead 61
Initiative executive summary | Guidance on how to read these pages
Description Key people
• Short explanation providing a solid understanding of the initiative and the key • Suggestion for key persons involved
elements of the initiative
Rationale and outcomes Summary financials

Description of why the initiative is relevant for Danfoss to pursue in regards to the • Revenue and cost drivers
ESG ambition and description of initiative outcomes • First estimate of financials
Segment / regional distinctions Resources & governance

• Description of segment starting point or characteristics to be considered • Estimated resources required at Group
level or in segments
Key questions to solve for as part of next steps Targets & KPIs
1. Key questions to solve as part of next steps • First view on potential targets and KPIs
62
Example
Initiative executive summary | Future-proof Scope I+II Ambition

Description Proposed key people
• Continue strong work across EE1 of facilities, green power and EVs2 • Reviewers: xxx
• Develop plan to engage segments deeper in EE1 optimization of production lines • Main author: xxx
• Investigate update to 2030 ambition ("net zero em." instead of "carbon neutral")4 • Potential future owner: xxx
• Potential GET sponsor: xxx
Rationale & outcomes Summary financials

Carbon neutrality ambition supported by several initiatives (incl EE1 of facilities, • OPEX of ~450-500k EUR p.a. for FTE costs
green power & EVs2). However, deeper involvement of segments (particularly on • Financials and business cases will be assessed
production equipment) required to future-proof ambition, complement existing efforts continuously towards '30 as initiatives mature
& facilitate LCA3 work5. Further, updating the 2030 ambition should be investigated

• Div A: No distinctions • Total FTEs required: ~1.5 FTEs (0.5 per
• Div B: No distinctions, but use and leaks of refrigerants must be further segment)
investigated in relation to update of 2030 ambition • Core to anchor efforts at Group level, but
• Div C: Eaton sites and current emissions must be investigated. Some green power with stronger representation of segments
agreements exist for legacy EH locations6
1. How do we secure best governance around abatement plans? • Scope I carbon neutrality by 2030
2. How do we best engage segments to enable CO2 measuring and abatement of • Scope II carbon neutrality by 2030
plant equipment? • Potentially change to "net zero emissions
3. Do we have the right "zero" definition?4 for both scope I+II emissions
1. Energy efficiency; 2. Electric vehicles; 3. Life cycle assessment; 4. See back-up on difference between "carbon neutral" and "net zero emissions" in appendix; 5. This 63
transparency also helps ensure ISO14001 compliance; 6. Details on these, along with more energy & emissions data, available in Enel X energy management tool
Example
Initiative executive summary | Circularity framework & roll-out

Description Key people
Create a comprehensive, best-in-class circularity framework that: • Reviewers: xxx
• Takes responsibility for the entire lifetime of company's products • Main author: xxx
• Covers entire value chain & incorporates circularity in all relevant processes • Potential future owner: xxx
• Is owned by and tailored to the segments, supported centrally and backed by data • Potential GET sponsor: xxx
Rationale & outcomes Summary financials

Increasing circularity of products & business models is a strategic move that • OPEX of ~1.5m EUR p.a. driven by FTEs and
1) addresses changing demand from both customers and regulators, verification fees5 (excl. Group Sust. FTE)
2) represents an attractive financial case • Uplift: Significant potential uplift (5-10%) from
3) yields several non-financial gains (e.g., branding, talent attraction, ESG ratings) premiums, new bus. mod. and customer ret.

• Div A: Multiple current circularity projects, incl. LCA1 & EPD2 pilot • Total FTEs required: ~97 FTEs
• Div B: Multiple current circularity projects, incl. LCA1 & EPD2 pilot & ongoing low- • Group Sust.: 1 FTE overall circularity lead
carbon products project3 • Segments: ~9 FTEs (2 FTEs for RD&E6 and 1
• Div C: No full pilots, but ongoing FMD4 and EPD2 prep. To be involved in defining customer-facing FTE per segment focused on
approach but slightly later roll-out than other segments business model development)7
• Regions: Roll-out starting in Western markets (Europe & NA)
1. How do we integrate circularity into the value case towards customers? • Develop & implement framework by '22
2. How do we test, adjust and scale the circularity framework? • 40-60% of newly launched products
3. What are the supply-chain implications of the framework? covered in '24; 90-100% in '26
1. Life Cycle Assessment; 2. Environmental product declarations; 3. Focused on reducing upstream emissions of five selected • 20-40% of products sold under framework
products; 4. Full material declarations; 5. <10k EUR in EPD verification fees; 6. Of these two, one FTE will focus on existing
product portfolio, and one will focus on new products; 7. Circularity FTEs work closely together with FTEs from 'Addressing in '25; 70-90% in '30 (measured by rev.) 64
scope III and use of sold products', 'Commercializing avoided emissions', and 'supply-chain diagnostics & collaboration' initiatives
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Lecture 6 - Ambition Level Setting Incl Benchmarking+KPIs

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Session 6 –

1 ESG vision and ambition

2 Materiality 3 Measures and prioritization 5 Org, focus KPIs,

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6 ESG reporting and eco-system management

GHG emissions in product lifecycle (scope III) Key observations

Selling practices & labelling

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Low Relevance for long-term business success High

Note: Stakeholder importance only result of customer input thus far

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Material topics Competitive landscape target range Low Medium High

• Danfoss: No target for scope III

• Danfoss: No target set, but rolling in product chemical-compliance system as part of

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• Danfoss: Committed to SBTi and ambition to be carbon neutral by 2030

Only considering publicly stated targets

Material topics Competitive landscape target range Low Medium High

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Base Level of ambition High

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Alfa-Laval best-in-class, e.g., adhering to GRI in Reporting, Top 10 member of FTSE

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Relevant targets of peers No Target Comply Compete Lead

• Sika: All new product developments with 'Sustainable Solutions' by 2023

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Leading - indsutry leading position, therefore without

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ESG basics Best Future-proof Environmental Strongly

What needs ✓ Emphasizing on ✓ Roughly equal split ✓ Differentiating from

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ESG basics Best Future-proof Environmental Strongly

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Resource management E2 Comply Comply Comply Compete Lead

GHG scope III emissions E4 Compete Comply Lead Lead Compete

Diversity & inclusion S1 Compete Lead Lead Comply Comply

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Product quality & safety S4 Lead Compete Comply Comply Compete

Supply chain sustainability &

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Materiality topics Potential future targets Examples of potential initiatives

• 100% of new products circ. '26 • Dev. best-in-class circularity approach

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Environment | Circular product design 1/2: Company current state vs peers

Comply Compete Lead

• 'Competing' peers are in the process of • 'Leading' peers have developed

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Company • Company pilots in DCS & DDS in '21 on LCA2

Environment | Circular product design 2/2: Company options

Comply Compete Lead

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1. Life Cycle Assessments. 2. Environmental Product Declerations 22

Environment | Resource mgmt. 1/2: Company current state vs peers

Comply Compete Lead

• Eaton: Innovative packaging at EMEA sites • Bosch: eXchange program remanufacturing

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• Limited targets, mainly compliance and