ESRS 2 Impact, risk and opportunity management

Sandvik impacts, risks and opportunities across the value chain

The table below provides a consolidated list of all our material impacts, risks, and opportunities, identified in our DMA 2025, and whether the IRO is connected to our strategy, focus areas, and business model. The list is structured according to the ESRS and does not reflect significance of the impact, risk, and opportunity.

IRO-1 Description of the processes to identify and assess material impacts, risks, and opportunities

In the Double Materiality Assessment (DMA), Sandvik considered the topics included in the Corporate Sustainability Reporting Directive (CSRD) and dependencies on natural, social, and human resources. The Sandvik risk management process, Enterprise Risk Management (ERM), risk profile, and existing due diligence processes were used as an input to the assessment. Further information on how sustainability is integrated in our processes is found under GOV-1 and GOV-2.

The impact materiality considered all time horizons, however the scoring was mainly done in the short-term perspective. The medium and long-term perspectives were discussed and, when deemed likely to affect the outcome of the materiality analysis, included in the assessment. Some topics, such as climate change, were considered to have an increasingly negative environmental impact long-term. Since the medium and long-term perspectives are based on assumptions, it was however decided to focus on the short-term perspective. Adjusting the outcome of the DMA for environmental impacts based on the long-term was not deemed necessary since these impacts already were considered material in the shorter time horizons.

The impact assessment evaluated positive, negative, actual, and potential impacts. The assessment started in the value chains where impacts are likely to occur. In line with the Organization for Economic Cooperation and Development (OECD) due diligence framework, this allows for prioritization and focus on value chains where impacts are likely to materialize. Initially, all value chains were considered, of which some were deemed less likely to have material impacts than others. This conclusion was based on stakeholder engagement, both internal expertise and the use of proxies. Upstream value chain included transportation of products and sourcing of minerals and metals from high-risk countries, as well as sourcing of conflict minerals and cobalt. Downstream, the focus was on transportation of products and people, mining sites in high-risk areas, and end-of-life of all our business areas’ products.

The process started with reviewing the CSRD list of topics on a sub-sub level where available, and mapping these against the identified scoping of the value chains. Impacts were evaluated using scale, scope, and irremediable character, determining the severity of an impact as well as likelihood for potential impacts.

The evaluation relied on internal expertise from various areas, such as supplier management, environment, human resources, health and safety, community involvement and legal. Participants from different business areas, functions, and geographies within Sandvik brought diverse perspectives and experience on Environmental, Social, and Governance (ESG) topics in the value chain. The assessment also considered external reports, legislation, and frameworks. These sources included the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, the OECD Due Diligence Guidance for Responsible Mineral Supply Chains, as well as supplier risk screening through EcoVadis and supplier audits, and were used when engaging directly with affected stakeholders was not possible or not appropriate.

In the financial materiality assessment, risks and opportunities were assessed by the magnitude of the financial consequence as well as likelihood. The financial materiality assessment considered the short-term perspective, which highlighted the most urgent topics, as well as the medium and long-term perspectives that highlight risks and opportunities that may materialize in the longer term. It was concluded that most risks and opportunities were very unlikely to materialize within the short to medium-term. Based on the input collected, a threshold for the topics was defined, above which the topics were deemed material and as such a basis for our reporting.

Climate change

When conducting our DMA, we considered several input sources such as energy and greenhouse gas (GHG) data, environmental permits, audits, insurance data, ISO certificates, and local significant environmental aspects. For the mapping and understanding of Impacts, Risks, and Opportunities (IROs) we used credible proxies and relevant reports, frameworks and media. Engagement with local community is first and foremost managed locally and occurs when applicable to meet laws and regulations.

Based on our GHG inventory of scope 1, 2, and 3 we have screened our activities to assess where our emissions are most significant, both current and potential future emissions. Scope 1 and 2 emissions from our own operations are not a significant part of our total emissions, however material since all emissions contribute to global warming and need to be considered as contributing to climate change. Our scope 1 and 2 emissions mainly relate to fossil energy consumption. Sandvik is actively working to ensure that each division has an action plan in place to enhance energy efficiency and reduce GHG emissions.

Since 2023, our GHG reduction targets have been validated by the Science Based Targets initiative (SBTi), confirming their alignment with the latest climate science and adherence to the objectives of the Paris Climate Agreement. We have committed to reaching net-zero greenhouse gas (GHG) emissions by 2050 at the latest, reducing absolute emissions from our own operations (scope 1 and 2) by 50 percent by 2030 and 90 percent by 2040. We will also reduce absolute emissions from customers, suppliers, and transport (scope 3) by 30 percent by 2030. We have not identified activities or assets that poses a significant risk for us not to reach our GHG emission reduction targets as outlined under locked-in emissions. Further details on our transition plan and targets are found under disclosure requirement E1-1.

Climate-related physical risks

The assessment of climate-related physical risks for our own operations involved assessing climate-related hazards on our 130 most important sites based on total insured value. The analysis was performed during 2025. A software tool that uses the geo-coordinates of the sites was utilized to assess their exposure levels to both acute and chronic climate-related physical risks. The assessment tool addressed several climate hazard perils, including flood, precipitation, heatwave, drought, cold wave, hail, sea level rise, wildfire, wind and tornado. The Intergovernmental Panel on Climate Change (IPCC) Shared Socioeconomic Pathway SSP5-8.5 was applied for the scenario analysis, representing a fossil-fueled development and high-emission scenario. It predicts global warming of 3.3–5.7°C at the end of the 21st century, therefore plausibly reflecting the maximum expected risk exposure in terms of severity and likelihood. The time horizons used were 2030 and 2060. The goal with the assessment was to provide an overview of the physical climate risks facing the portfolio of sites at different time horizons and under different climate change scenarios, and to establish a ranking of locations from high to low climate risk based on climate data and insured values. The assessment is used to support the identification and prioritization of management actions within the loss prevention program, which may include in-depth assessments of sites and investments in resilience measures, as upcoming steps in the Sandvik climate resilience journey.

As a response to the physical risks to our assets, all major locations are part of Sandvik loss prevention program, entailing an assessment of climate change related exposure. In addition, we conduct risk engineering reports for selected exposed assets that inform mitigation actions at site level.

Transition risks

Possible climate-related transition risks were identified and assessed through scenario analysis, considering a pathway aligned with limiting global warming to 1.5°C, with no or limited overshoot. This scenario is suitable for estimating the maximum intensity and speed of transition events, as well as the highest risk exposure. The analysis considered IPCC’s low emissions scenario, Shared Socioeconomic Pathways 1 (SSP1), that assumes a future characterized by high electrification rates across sectors, high technology advancement in biofuels, stricter regulations on emitting GHGs, and increased costs associated with fossil fuel consumption.

We have assessed transition events within the categories policy and regulation, technology, market and reputation, where policy and regulation was most prominent from a transition risk perspective. Transition aligned with the Paris Agreement carries minimal risk if implemented globally in a structured manner where long-term clarity and consistent policies are essential for a successful transition. A structured transition becomes an opportunity as Sandvik is well-positioned with solutions for a low carbon economy. In the short to medium-term, rising demand and limited availability of fossil-free energy is expected to increase overall energy costs. Availability of fossil-free electricity will be critical in minimizing the magnitude and duration of associated transition risks.

At present, transition risks have not been identified as a material financial risk for Sandvik. We have adopted net zero targets which are integrated into our strategy and product development processes. Emerging transition risks are incorporated into our Enterprise Risk Management process, where they are monitored as the landscape continues to evolve.

Pollution

We have screened our assets and activities in order to identify the actual and potential pollution-related Impacts, Risks, and Opportunities (IROs) in own operations, upstream and downstream value chain. In our DMA, we considered several input sources such as energy and pollution data, environmental permits, audits, insurance data, ISO certificates and local significant environmental aspects. For the mapping and understanding of IROs we focus on the use of credible proxies and relevant reports, frameworks and media. Engagement with the local community is primarily managed at the local level and occurs mainly in connection with environmental permit processes.

Sandvik has identified material impacts related to pollution throughout our value chain. In our own operation, emissions of nitrogen oxides (NO_x) and sulfur oxides (SO_x) from consumption of fossil fuels related to the transport of products and people have been assessed as material. The release of NO_x and SO_x are interlinked to our climate targets and actions. Downstream, the potential pollution of air, water, and soil from mining activities is material, which we are linked to through our business relationships.

Water

We have screened our assets and activities in order to identify actual and potential water and marine resources-related Impacts, Risks, and Opportunities (IROs) in our value chain. For the mapping and understanding of IROs, Sandvik focuses on the use of credible proxies and relevant reports, frameworks and media. In our Double Materiality Assessment (DMA), we considered several input sources such as water data, environmental permits, audits, insurance data, ISO certificates and local significant environmental aspects. Engagement with the local community is primarily managed at the local level and occurs mainly in connection with environmental permit processes.

Biodiversity and Ecosystems

In the DMA related to biodiversity and ecosystems, we considered all our global assets and operations — and their associated dependencies, impacts, risks, and opportunities.

We have screened our assets and activities in order to identify the actual and potential biodiversity and ecosystems-related impacts, risks, and opportunities in our value chain. For the mapping and understanding of IROs, Sandvik focuses on the use of credible proxies and relevant reports, frameworks and media is considered. We have not engaged in consultations directly with affected communities regarding biodiversity and ecosystems. Negative impacts on biodiversity and ecosystems were identified in our upstream and downstream value chain, mainly related to mining activities and their effect on land use change, pollution and GHG emissions. Disruptions in ecosystems and decreasing biodiversity affect all living beings, both people and environment negatively.

While we acknowledge the significance of biodiversity and ecosystems, our direct dependency on ecosystem services and conversion of natural ecosystems remains limited within our own operations. Investigations on the site’s localization, including ecosystems-related aspects, are generally part of the environmental impact assessment when applying for permits. Our sites are predominantly situated in urban industrial areas, minimizing the impact on biodiversity-sensitive areas. Our own mining operation in Austria is located adjacent to an area protected by the Salzburg Nature Conservation Act. The operation has been assessed as having no direct negative impact on biodiversity. We have not identified any sites in our own operations that have activities negatively affecting biodiversity sensitive areas or that affect threatened species. We have not identified material negative impacts with regard to land degradation, desertification or soil sealing.

Resource use and circular economy

Sandvik has identified several impacts related to resource and circular economy where we have an actual or potential material impact on people and environment, either from our own operations or other parts of the value chain. We have also identified opportunities linked to circularity that may have a significant impact on the financial position. Circularity is an integrated part of the Sandvik strategy. In each of our businesses and value chains, we have the opportunity to enable the transformation to a circular economy through innovative sustainable solutions and collaboration with our customers and suppliers.

When conducting our Double Materiality Assessment we considered several input sources such as waste data, environmental permits, audits, ISO certificates and local significant environmental aspects. For the mapping and understanding of impacts, risks, and opportunities we focus on the use of credible proxies and relevant reports, frameworks and media. Engagement with the local community is primarily managed at the local level and occurs mainly in connection with environmental permit processes.

Business conduct

Sandvik operates in countries and industries with elevated corruption and sanctions risks, both directly and indirectly through business relationships. Business conduct as a risk may generate a financial effect in different ways, such as influence on our financial position, financial performance, cash flows, access to finance or cost of capital over the short, medium or long-term. Risks include increased regulatory requirements, third-party risks, stricter financing requirements and trade sanctions.

IRO-2 Disclosure requirements in ESRS covered by the undertaking’s sustainability statement

List of included disclosure requirements can be found under Sustainability appendix.