Ericsson
Annual Report
2021
ericsson.com
Contents
Financial
report
Corporate
Governance
report
CEO comment
Business in 2021
Letter from the Chair of the Board
Board of Directors´ report
Consolidated financial statements and notes
2
4
11
12
28
Regulation and compliance
Governance structure
General Meetings of shareholders
Nomination Committee
Board of Directors
Parent Company financial statements and notes 81
Committees of the Board of Directors
Risk factors
Auditor’s report
Five-year summaries
Alternative performance measures
The Ericsson share
Remuneration
report
Statement from the Chair of the
Remuneration Committee
Introduction
Remuneration 2021 at a glance
Total remuneration to the President
and CEO and Executive Vice Presidents
Variable remuneration
Comparative information on the change of
remuneration and Company performance
99
113
117
119
124
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2
3
5
6
12
Remuneration to Board members
Members of the Board of Directors
Management
Members of the Executive Team
Auditor
Internal control over financial reporting
Auditor’s report on the
Corporate Governance report
Sustainability
and Corporate
Responsibility
report
Sustainability creates value
Sustainability performance summary
Sustainability approach and governance
Our people
Environmental sustainability
Digital inclusion
Corporate citizenship
Responsible business
Consolidated sustainability notes
Auditor’s Assurance Report
Glossary
2
4
5
6
6
9
11
12
16
20
24
24
27
1
2
6
8
10
16
17
18
28
37
38
Ericsson Annual Report 2021
Our legal annual report consists of four parts published as one pdf. The four parts can also be downloaded separately:
• The Financial report, including CEO comment, business strategy, the consolidated financial statements and notes of the Company
• The Corporate Governance report
• The Remuneration report
• The Sustainability and Corporate Responsibility report
The Company’s annual accounts and consolidated accounts are included on pages 12–112 in the Financial report and are reported
on by Deloitte in the auditor’s report. The Corporate Governance report, the Remuneration report and the Sustainability and Corporate
Responsibility report have also been subject to assurance procedures by Deloitte. We also file an Annual Report on Form 20-F with
the U.S. Securities and Exchange Commission (SEC). All parts of the legal annual report are available on Ericsson’s website. The report
Ericsson 2021 in review, published on Ericsson’s website, describes the Company, its strategy and organization.
Financial
report
Part of
Ericsson
Annual Report
2021
Annual Report 2021
Financial
report
Corporate
Governance
report
Remuneration
report
Sustainability
and Corporate
Responsibility
report
ericsson.com
Contents
Financial report 2021
This is Ericsson
CEO comment
Business strategy – Creating long-term value
Business model – Customer focus and technology
leadership
Letter from the Chair of the Board
Board of Directors’ report
Board Assurance
Consolidated financial statements
Notes to the consolidated financial statements
Parent Company financial statements
Notes to the Parent Company financial statements
Risk factors
Auditor’s report
Forward-looking statements
Five-year summary – Financial information
Five-year summary – Non-financial information
Alternative performance measures
The Ericsson share
Shareholder information
Financial terminology
Glossary
1
2
4
8
11
12
27
28
35
81
86
99
113
116
117
118
119
124
128
129
130
This is Ericsson
1
This is Ericsson
Ericsson is a leading provider of mobile connectivity
solutions to telecom operators and to enterprise customers
in various sectors. Our portfolio spans Networks, Digital
Services, Managed Services, and Emerging Business and
Other and is designed to help customers digitalize, increase
efficiency, find new revenue streams and create new user
experiences.
The core of Ericsson’s strategy is technology leadership.
This also provides the foundation to expand into enterprise.
Conditional to closing, the intended acquisition of Vonage
aims to enable Ericsson’s creation of a global cloud-based
platform for open network innovation, in the longer term.
Ericsson’s business is divided into five geographical market
areas: North America, Europe and Latin America, Middle
East and Africa, South East Asia, Oceania and India, and
North East Asia. The Company has approximately 100,000
employees, and customers in more than 180 countries.
Ericsson is headquartered in Stockholm, Sweden. The
Ericsson share is listed on Nasdaq Stockholm and the
Ericsson ADS is traded on NASDAQ New York.
Financial report 2021 2
CEO comment
Strengthening a foundation
for future growth
Fulfilling our purpose of
creating connections that
make the unimaginable
possible is based on our
leading technology position.
During 2021, we capitalized
on the strength of our core
infrastructure business and
continued to build a foundation
for growth that takes
advantage of new opportunities
in enterprise digitalization.
I’m excited about what lies ahead for Ericsson.
Our core business is strong and growing.
During 2021 we delivered on our strategy of
technology leadership in mobile infrastructure
by expanding our market share and improving
gross margins.
A decade ago, 4G digitalized the consumers’
world. With 5G, we now have a platform that is
revolutionizing enterprises, anything from how
first responders work to new types of applica-
tions available to consumers. We believe that
addressing these additional segments offers
the wireless infrastructure market solid long-
term growth prospects.
In addition to growing in our core business,
we are also pursuing opportunities in the enter-
prise space – leveraging the strength of our
mobile technology.
As enterprises increasingly choose wireless
as their primary source of connectivity, we
continue to provide pre-packaged solutions for
wireless enterprise networking. These include
dedicated networks, wireless WAN and IoT con-
nectivity. We see strong future growth potential
in this area and are increasing our investments
to capture this opportunity.
Going forward, the capabilities of 4G and
5G networks will increasingly be accessed
through open cloud interfaces. To address this,
we will build a global network platform for
open innovation. A market for 4G application
development already exists but with 5G, the
capa bilities and opportunities are markedly
greater.
In 2021, we took a significant step by
announcing our ambition to acquire Vonage,
a global provider of cloud-based communica-
tions with over 120,000 enterprise customers
and more than one million registered devel-
opers. Through Vonage, we intend to also offer
unified communication and contact center
platforms to our existing customer base. Longer
term we will expose 5G capabilities through a
global network platform to stimulate innovation
on top of the network.
We plan to run Vonage as a new business
area and will invest in growing its business.
This follows the same integration approach
taken with Cradlepoint, which is performing
well, in line with our acquisition plans, despite
a delayed uptake of 5G devices.
Business performance
In 2021, we continued our strategy execution
and cemented a position as a global 5G leader.
Our strong product portfolio and deep R&D
capabilities supported market share gains
despite considerably lower sales volumes
in Mainland China. By year-end, Ericsson
supplied 108 out of 200 live 5G networks. More
importantly, our solutions performed well in the
field, earning top honors in multiple third-party
benchmarks of network performance.
In line with sales growth, we strengthened
our profitability, underscored by a strong
reported gross margin of 43.4% and a reported
EBIT margin of 13.7%. Our cash generation
reached new records for the business, with
free cash flow before M&A of SEK 32.1 billion.
In 2021, we increased the number of
employees in R&D by 1,210 and invested a total
of SEK 42.1 billion in this area – an increase
from SEK 39.7 billion in 2020. We will continue
to increase investments in our 5G portfolio,
including in our orchestration offerings, to
further position us in a future world of open
standards and technologies.
5G market
5G isn’t just a new generation of mobile
technology, it’s transforming our world. For
consumers, higher bandwidth, lower latency
and more security and reliability are supporting
new use cases such as e-health, connected
vehicles and immersive cloud gaming. 5G fixed
wireless access is also gaining momentum as
many countries look to rapidly build out high-
capacity broadband and close the digital divide.
For enterprises, 5G is enabling organizations to
optimize value chains and minimize costs and
emissions related to operations and logistics.
Worldwide, there were estimated to be
660 million 5G subscriptions at the end of 2021,
making 5G the fastest deployed mobile genera-
tion ever. It is clear that the pandemic acceler-
ated digitalization, confirmed the criticality
of digital infrastructure and further redefined
our relationship to work, education and one
another. During 2021, governments around the
world continued to make wireless infrastructure
the cornerstone of their pandemic recovery and
economic growth plans.
Innovation and openness
Ericsson continues to stand up for free and open
markets. We are part of a thriving ecosystem of
innovators that provides others with access to
our technology. Our patent portfolio is world
Financial report 2021 leading with more than 60,000 granted patents.
Through this portfolio, we continue to push
the boundaries of what our industry can deliver
to customers, consumers and enterprises.
Open innovation and collaboration has
always benefited our industry. However, current
geopolitical tensions threaten to splinter an
ecosystem that took decades to establish.
A fractured ecosystem would impact everyone,
but higher prices and fewer choices would
disproportionately impact developing nations.
I hope the current protectionist discourse gives
way to a more open and productive policy
climate, that recognizes the benefits and
gains of global cooperation, free trade and
open markets.
Purpose and Vision
We are entering a new era of digitaliza-
tion, unleashing a level of innovation never
seen before. During 2021, we renewed our
company’s purpose to articulate our role in this
development. “Creating connections that make
the unimaginable possible” recognizes the core
of what we do: building network infrastructure
that connects billions of people and that will
soon connect nearly everything.
These networks are a platform for innova-
tion that is powering digitalization in every
corner of the globe. Technologies such as 5G,
AI, IoT and the cloud, are offering enterprises
and society greater visibility and control and the
opportunity to create new value by addressing
growing demands and delivering superior
customer experiences.
Connectivity is a powerful catalyst for trans-
formation and sustainable development, one
that will touch all parts of modern life. Achieving
our ambitious vision is going to require a con-
certed effort between partners from across and
beyond the ICT ecosystem.
People and culture
Companies are only as good as their people,
and I am confident that we have the best peo-
ple in the industry. The Ericsson team strives to
be truly world class by championing our values
of respect, professionalism, perseverance and
integrity. The turnaround of our fortunes would
not have been possible without the great talent
in the Company.
However, I am deeply saddened to report a
sharp decline in our safety performance during
2021. Tragically, there were still individuals
losing their lives during the year in preventable
incidents and accidents while working for
Ericsson. This is unacceptable and I have com-
mitted to taking urgent steps to alter this trend
in 2022. Our goal is that no harm should come
to any of our colleagues or contractors and that
everyone should return home to their families,
safely, every day.
Over the last few years, we have invested
significant resources to strengthen our ethics
and compliance efforts. This work takes time
and includes putting strong systems and
controls in place to prevent and detect wrong-
doings. These investments have also allowed us
to identify many wrongdoings that date back a
decade. Confronting these past wrongdoings is
critical to strengthening our compliance culture.
An important part of these efforts is creat-
ing a culture that promotes the right behavior
while encouraging speaking up. During 2021,
we made good progress embedding integrity,
our new core value, and speaking up in our
culture. This is evidenced by the continuous and
increasing engagement of our employees over
the recent years in raising compliance ques-
tions as well as potential concerns to ensure
we conduct business with integrity. We saw
an increase in reported potential compliance
concerns by 10 percent. We feel this reflects
confidence by employees and third parties in
the integrity of our allegation management
and investigation processes and that we
take serious measures when we learn of any
potential misconduct. We continue to invest
heavily in improving our Ethics and Compliance
(E&C) Program in accordance with our strategy
and objectives, to remediate historical issues,
including gaps in our compliance processes and
internal controls, and to strengthen our internal
investigations team.
Our cultural transformation and E&C Program
deliver enormous value to the Company’s
employees and stakeholders through responsi-
ble and sustainable business practices.
Sustainability and corporate responsibility
Sustainability is an integral part of Ericsson’s
strategy. In 2021, we set a long-term ambition
for Ericsson to be Net Zero in carbon emissions
across our value chain by 2040. During the
year we also incorporated sustainability KPIs
into our renewed credit facility. These activities
underscore how sustainability is embedded
throughout our operations. We continue to
make progress on our portfolio and supply
chain targets to halve our emissions by 2030
and to be Net Zero in our own activities at the
same time.
We are committed to working with our
customers to reduce energy consumption,
emissions and costs from the operation of their
networks. During 2021, we launched a series
of ultra-light Massive MIMO radios that are up
to 20% more energy efficient than the previous
generation. Additionally, by applying connectiv-
ity solutions across other industry sectors, like
transport and manufacturing, there is a poten-
tial to achieve a 15% reduction of global carbon
emissions by 2030.
Our smart 5G factory in the U.S. highlights
the sustainability gains possible through invest-
ments in connectivity. Using our own 5G solu-
tions, our factory in Texas, USA, is designed to
consume 24% less energy, 75% less water and
is powered entirely by renewable electricity.
CEO comment
3
With around 2.9 billion people without inter-
net connections, the digital divide continues to
be a key challenge to global economic develop-
ment. To address this issue, we have partnered
with UNICEF in support of the Giga initiative
which aims to connect every school to the
internet by 2030. Through this effort, Ericsson
is helping to tackle the challenge of mapping
schools and assessing their connec tivity in 35
countries by the end of 2023.
It is also crucial that young people have the
right skills to contribute to a digital economy.
Therefore, as part of the World Economic
Forum Edison Alliance, Ericsson has committed
to provide 1 million children and youths with
access to digital learning and skill development
programs by 2025.
These initiatives are underpinned by a
strong focus on responsible business across
the value chain, and Ericsson continues its
long-standing commitment to the UN Global
Compact’s ten guiding principles.
Concluding remarks
The pandemic continues to shape our daily
lives and has accelerated digitalization by
years. At the start of the pandemic, 80% of our
people moved to working from home with very
limited disruption to our business. Digitalization
represents a tremendous opportunity, includ-
ing helping to solve what I believe is the most
urgent issue we face: the climate crisis.
Over the next decade we also expect mobile
networks to be a revolutionizing force for indus-
try. We envision that limitless connectivity will
redefine business and empower enterprises to
become entirely agile with fully connected and
constantly optimized value chains.
Our ambition is to continue to grow and
develop our core mobile infrastructure business
based on market growth and market share
gains. With the investments we make in
enterprise, through our pre-packaged wireless
solutions and global network platform, we
are putting our company on a higher growth
trajectory. Even though investments outside
our core business may hurt profitability short
term, we see that we can accelerate the pace
towards reaching our long-term target of an
EBITA margin (excluding restructuring charges)
of 15–18%. After delivering an EBITA margin
(excluding restructuring charges) of 14.6% in
2021, our ambition is to reach the long-term
target no later than in 2 to 3 years.
I am excited about the future and the
opportunity to imagine possible together with
the incredible team at Ericsson. Our people
are going to be pivotal in the realization of our
vision: a world where limitless connectivity
improves lives, redefines business and pioneers
a sustainable future.
Börje Ekholm
President and CEO
Financial report 2021 4
Business strategy
Business strategy
Creating long-term value
Ericsson’s strategy is to create long-term value through technology leadership. The Company
aims to address long-term opportunities that present clear advantages of scale and new
profitable revenue streams. Ericsson’s ambition is to grow faster than the market through
organic growth and acquisitions, with a focused approach based on the following criteria:
Selective
Product-led growth aligned with our
streamlined portfolio and focusing on
existing and targeted customers
Disciplined
Commercial and financial discipline and
excellence in contract execution
Profitable
Growth is managed for value creation
to support Group financial targets
A customer-centric
strategy
There are four key areas in which we can
support our customers’ success:
• Capture new revenue streams and new
opportunities made possible by 5G and
Internet of Things (IoT).
• Improve end-customer experience and
network performance – the main differ-
entiators among telecom operators.
• Provide our enterprise customers with
pre-packaged solutions, bringing best
security, reliability and ease of operation.
• Relentless efficiency improvements to
lower the cost of delivering increased
traffic in the networks.
By the end of 2021, there were 108 live 5G Networks supplied by Ericsson.
Financial report 2021 Business strategy
5
Ericsson business strategy
Extending leadership in
mobile networks
Enterprise
wireless networks
Focused
expansion
into
enterprise
Global network platform
• Grow the communication platform business, through the intended acquisition
of Vonage
• Platform for open innovation, ensuring monetization and creating new
experiences made possible by 5G, benefitting the full ecosystem
Extending leadership in
mobile networks
Technology leadership
Investments in technology leadership for cost
and performance allow us to bring innovative
solutions to the market ahead of competitors,
giving our customers an advantage. Ericsson
has a strong commitment to R&D, with
substantial contributions to cutting-edge
standards and technologies. The Company
capitalizes on its R&D investments by creating,
securing, protecting and licensing a portfolio
of patents in support of the overall business
goals. Ericsson’s patent portfolio comprised
more than 60,000 granted patents by the end
of 2021.
Cost leadership
A cost-efficient base is essential for Ericsson’s
business. Investments in R&D enable not only
technology leadership but also cost leadership.
At year-end 2021, there were 108 live 5G
Networks supplied by Ericsson. 5G is signifi-
cantly more power efficient than previous
generations, thereby reducing costs, while also
supporting climate targets.
Efficient operations
Network complexity is rapidly increasing
with 5G, Cloud, IoT and new technologies.
Efficiently operating a 5G network, is only
possible when AI, automation and data
analytics are applied to manage “data-driven
operations”.
Growth, in a disciplined way
The combination of our global presence,
our expertise, and close interaction with our
customers, enables us to be competitive, grow
and achieve economies of scale. We regard
the skills and expertise of our people as a key
asset.
Focused expansion into enterprise
With 5G our industry is moving beyond con-
necting people to also connecting machines
and things. 5G is a powerful platform for
innovation, which opens up new revenue and
monetization opportunities for telecom opera-
tors in both the consumer segment and the
enterprise segment. 5G supports telecom opera-
tors to deliver new, differentiating consumer
services with potential for increased revenues.
Enterprise wireless networks
There is significant revenue potential for telecom
operators in delivering new 5G enterprise
services. Our studies show that, globally,
telecom operators could see an additional
revenue opportunity of some USD 700 billion
by 2030, driven by industry sectors such as
healthcare, manufacturing and automotive.
We address these opportunities through
focused expansion into Enterprise by leverag-
ing our wireless strengths. Our ambition is to
support our customers by developing com-
petitive industrial solutions that are secure,
reliable and easy to scale, such as Cradlepoint
solutions, Dedicated Networks and our global
IoT platform. We see acquisitions as enablers
for future growth.
Global network platform
As 5G is creating a large, global innovation
platform, we aim to create an open 5G eco-
system, enabling developers and enterprises
to access network capabilities for the devel-
opment of completely new and improved
services. We believe that this will support
monetization for players in the ecosystem,
including our telecom operator customers.
The intended acquisition of Vonage will give
Ericsson a platform to help our customers
monetize their network investments, opti-
mize the user experiences and to stimulate
additional growth opportunities. In the longer
term, Ericsson intends to add value to the full
ecosystem – telecom operators, developers,
and businesses – by creating a global network
platform for open innovation.
• Investments in technology leadership for cost and performance• Strong product portfolio enabling growth through market share gains• Best security, reliability, operations and pre-packaged solutions• Wireless WAN edge solutions, through Cradlepoint Solutions, IoT and dedicated/Mission Critical mobile networks• Enterprise wireless networks expected to grow 20–30% annuallyFinancial report 2021 6
Business strategy
Corporate Responsibility & Business Integrity
Sustainability and responsible business prac-
tices are fundamental to Ericsson’s culture and
its commitment to drive business transforma-
tion, engage employees and create long-term
value for stakeholders. A substantial part of
this value is derived from the Company’s focus
on sustainability in its operations and portfolio
as well as how its technology is applied across
sectors of society.
Ericsson strives to minimize the negative
impact of its own operations and has made
significant investments to improve the energy
performance of its portfolio in order to reduce
the environmental impact of the ICT industry
and across other sectors.
Ericsson is committed to conducting busi-
ness responsibly and remains steadfast in its
efforts to foster a culture of integrity and a
speak-up environment.
The Company drives a responsible business
agenda that extends beyond legal compliance
by proactively mitigating and addressing risks.
Ericsson’s Code of Business Ethics, revised and
updated in 2021, defines both the Company’s
ethical principles and its expectations of
responsibility across the value chain. The
Company works continuously to strengthen
and enhance both its Ethics and Compliance
Program and practices with a focus on build-
ing and maintaining trust and transparency.
Transparent and standardized sustainability
reporting is the foundation for comparability,
decision-making, accountability and risk
identification.
”
Sustainability
and responsible
business practices
are fundamental to
Ericsson’s culture.”
Ericsson’s AIR 3227 radio, enabling 5G midband spectrum on Vodafone’s central London Office building.
Financial report 2021 Driving the business through four segments and five market areas
Our business is divided into four segments. The segments are:
Business strategy
7
Networks
Digital Services
Managed Services
Emerging Business
and Other
In Networks we provide hardware,
software and services for our
customers to build and evolve
their mobile networks.
Digital Services is a software-
led business supporting our
customers as they move to a cloud
native environment, providing
solutions for our customers to
operate, control and monetize
their mobile networks.
With our Managed Services
offering we operate our customers’
networks. Our AI and data-driven
Managed Services offering,
proactively manages telecom
operator networks.
In Emerging Business and Other
we explore how our customers can
leverage connectivity in order to
create new revenue streams and
new types of businesses within
the enterprise segment.
Five market areas
Our market is divided into
five geographical market
areas. The market areas
are responsible for selling
and delivering products
and solutions that are
developed in our segments.
Close cooperation with our
customers is key. In line with
the strategy, the market areas
have responsibility to ensure
that we stay close to our
customers while maintaining
central guidelines and
governance structures.
Financial report 2021 8
Business model
Business model
Customer focus and technology
leadership
Our business model aims to manage changing market requirements and to capture new
business opportunities. Customer focus and motivated employees are key to driving our
business, creating stakeholder value and building a stronger company long term.
Customer focus
Motivated employees
We develop innovative and cost efficient
solutions for our customers.
Engaged and talented employees drive our business.
Fundamentals
Our business and operations
Purpose
To create connections that make
the unimaginable possible
Segment responsibility
Market area responsibility
Develop competitive global
business solutions
Sell and deliver
customer solutions
Foundation and key assets
Technology
leadership
Cost efficiency
Data-driven
operations
Global scale
and skill
Sustainability and responsible
business practices embedded across
the value chain
• Customers in more than 180 countries
• Established relationship with world-
leading telecom operators
Core values
• Professionalism
• Respect
• Perseverance
• Integrity
Vision
A world where limitless
connectivity improves lives,
redefines business and
pioneers a sustainable future
Strategy
Built on our customers’ needs:
• New revenue streams
• End-customer experience
• Relentless efficiency
improvements
• Extend leadership in mobile
networks and expand into
enterprise
Financial report 2021 Business model
9
Stakeholder value
We create value for our stakeholders by building a stronger company long term.
Key stakeholders, our focus and value creation
Customers
Society
Enable our customers to capture the full value of connect ivity
in an intelligent and sustainable way
Be a responsible and relevant driver of positive change
Employees
Shareholders
Attract, develop, engage and retain talented employees
Creating shareholder value by growing profitability, cash flow
and dividend
Group financial targets 2022
Group financial targets long term
• EBIT margin 12–14% excluding restructuring charges
• Strong free cash flow (before M&A)
• Sales: exceeding market growth
• EBITA margin 15–18% excluding restructuring charges
• Free cash flow (before M&A) 9–12% of sales
Group sustainability targets 1)
Climate action
Ethics and compliance
• Reduce CO2e emissions from Ericsson’s own activities by
35% by 2022 (baseline 2016) 2)
• Achieve Net Zero emissions in Ericsson’s own activities by
Strengthen and enhance Ericsson’s Ethics and Compliance
Program to ensure an effective and sustainable anti-bribery and
-corruption program by 2022
2030 3)
Network energy performance
Health, safety and well-being
Achieve 35% energy saving in Ericsson Radio System
com pared with the legacy portfolio by 2022 (baseline 2016) 2)
Zero fatalities and lost workday incidents by 2025
1) The full list of Group sustainability targets can be found on pages 2–5 in the Sustainability and Corporate Responsibility report 2021.
2) A science-based target (SBT).
3) Ericsson has set an ambition to reach Net Zero carbon emissions across its value chain by 2040.
Financial report 2021 10
Business model
The four segments
Networks
Offering
Business model
Networks offers a multi-technology capable
Radio Access Network (RAN) solution for all
network spectrum bands, including integrated
high- performing hardware and software. The
offering also includes a cloud-native RAN portfolio,
a transport portfolio, passive and active antenna
solutions and a complete service portfolio covering
network deployment and support.
Networks business is primarily based on a trans-
actional model, where Ericsson develops, sells,
licenses and delivers hardware, software and
services. Networks business also includes recurring
revenue streams such as customer support and
certain software revenues.
Digital Services
Offering
Business model
Digital Services provides software-based solutions
for business support (BSS), operational support
(OSS), communication services, core networks,
and cloud infrastructure. The focus is on cloud-
native and automation solutions supporting our
customers’ 4G and growing 5G consumer and
enterprise business.
Digital Services develops, sells, and delivers
solutions, based on software and services.
The contracts are typically software license
and systems integration based. Digital Services
business includes recurring revenue from
software licenses and support.
Managed Services
Offering
Business model
Managed Services provides Networks and
IT Managed Services, Network Design and
Optimization, and Application Development
and Maintenance to telecom operators. These
are delivered through the AI-driven Ericsson
Operations Engine, a set of capabilities that
transform operations to enhance customer
experience, drive agile service creation and
optimize costs in multi-vendor environments.
Ericsson Operations Engine Base Pack contracts
are typically multi-year outsourcing agreements.
Value Pack contracts are part of an outsourcing
agreement or sold stand-alone to telecom opera-
tors. Software is sold either as a license or aaS
(as-a-Service).
Emerging Business
and Other
Offering
Business model
Emerging Business and Other supports enterprises
by providing reliable and secure cellular solutions
that are easy to use, adopt and scale for global and
local needs.
Emerging Business and Other is mainly a platform
business with aaS (as-a-Service) as the business
model.
Financial report 2021 Letter from the Chair of the Board
Letter from the Chair of the Board
11
Dear shareholders,
2021 was marked by global challenges, includ-
ing geopolitical ones, which required a lot
from the Ericsson organization. We also saw
a continuation of the pandemic and the dif-
ficulties it caused, such as global supply chain
issues and economic disruptions. Once again,
Ericsson demonstrated its ability to adapt to
demanding realities by strengthening supply
chain resilience and by working remotely.
This was the year when Ericsson clearly
demonstrated its technology leadership as
well as its strength and leading position in 5G.
By leveraging its competitive 5G portfolio,
Ericsson continued to build on the strong
foundation of its core business and increased
its overall footprint across the market, despite
a major drawback in Mainland China. The
Company showed an organic sales growth
of 4% and with an EBIT margin, excluding
restructuring charges, of 13.9% we were able
to reach our 2022 financial target one year
ahead of plan. The Company generated a free
cash flow (before M&A) of SEK 32.1 (22.3)
billion for full-year 2021, further strengthening
the net cash position to SEK 65.8 (41.9) billion.
I think that this reflects the value of Ericsson’s
technology leadership, and the focused
execution of its strategy. For this achievement
and for all your efforts, I would like to direct
a sincere thank you to all employees. Your
motivation, skills and engagement are critical
for Ericsson’s success. Focusing on talent man-
agement and leadership is critical to delivering
long-term growth and it is therefore a key
priority for the Board that Ericsson can con-
tinue to retain, motivate and attract talented
employees.
To realize the potential of the innovation-
based value creation that the Ericsson organi-
zation possesses, the Board of Directors works
with management to optimize resource alloca-
tion, review the business model and strategy,
and explore both risks and opportunities.
For the Board, governance and compli-
ance are a top priority. The Board oversees
Ericsson’s continued strengthening of its Ethics
and Compliance Program to ensure that it lives
up to its ambitious standards. The Company
is committed to continuously developing and
improving its internal processes and internal
anti-corruption controls in the years to come.
The Code of Business Ethics outlines the
fundamental ethical principles and expecta-
tions for making business decisions with integ-
rity. The Board together with management,
added the value of “integrity” to the Company’s
core values of respect, professionalism, and
perseverance, as it clearly strengthens the
Company’s ongoing cultural transformation
and reflects Ericsson’s strong ambition to build
an integrity-based speak-up culture.
Ericsson is in its second year of a three-year
independent compliance monitorship that
started as part of the Deferred Prosecution
Agreement (DPA) with the U.S. Department
of Justice (DOJ). The Board has an ongoing
and transparent communication with the
monitor and continues to be impressed by his
level of expertise and constructive approach.
In October 2021, the DOJ advised that it
has determined that Ericsson breached its
obligations under the DPA by failing to provide
certain documents and factual information.
The Company is committed to cooperating
openly and fully with the DOJ and its monitor,
consistent with all terms set out in the DPA.
During 2021, Ericsson increased its invest-
ments in R&D for technology and cost leader-
ship. The Board views these efforts in com-
bination with a strong customer focus as key
for long-term value creation. The only way for
the Company to deliver long-term value is to
develop products and solutions that add cus-
tomer value. Ericsson’s technology leadership
is based on innovation efforts that respond to
customer needs and in turn, make our custom-
ers more successful. In 2021, this technology
leadership was demonstrated by Ericsson’s
ability to continue to gain 5G footprint through
its customer-centric competitive offering. The
strategic focus on customer needs in the areas
of efficiency, data-driven operations and new
revenue streams also continued to contribute
to the strengthening of the Company’s leading
position. With a strategy based on the needs
of its customers and by creating value for its
customers, the Board’s view is that Ericsson is
well positioned to deliver long-term value.
Sustainability and corporate responsibility
are an integral part of Ericsson’s strategy and
are embedded across all operations to drive
business transformation and to create value for
our customers and other stakeholders. Ericsson
is fully committed to creating a positive societal
impact through its technology leadership and
expertise. While Ericsson’s sustainability-driven
solutions are intricately linked to creating cus-
tomer value, they also create value for society
by reducing emissions and energy dependence.
Hence, a fast deployment of 5G globally and a
rapid implementation of new technologies and
continuous innovation could reduce emissions
not only for the ICT industry – but for other
industries and society at large as well.
The telecom networks are transforming
into powerful platforms for open innovation,
opening up for new revenue opportunities for
our customers in both the consumer and the
enterprise segment. Enterprise applications
leveraging on speed, latency and security and
other characteristics of 5G are expected to
provide many new opportunities for Ericsson’s
customers to capture growth. In line with our
strategy to extend our leadership position in
mobile networks and execute a focused expan-
sion into enterprise, we entered into an agree-
ment to acquire Vonage. Through the intended
acquisition of Vonage, Ericsson is executing on
its strategy to grow the communication plat-
form business and to expand the Company’s
presence in wireless enterprise. The closing of
this USD 6.2 billion cash offer is expected in
the first half of 2022. The intended acquisition
of Vonage builds on the swift integration of
Cradlepoint, which clearly demonstrates the
capabilities of Ericsson’s management and
leadership in successfully managing acquisi-
tions. Cradlepoint has continued to develop
strongly under Ericsson’s ownership.
The Board monitors Ericsson’s capital
structure with the aim to retain a strong balance
sheet and a positive free cash flow. Despite the
USD 6.2 billion cash offer on Vonage, which
would affect free cash flow (after M&A) in 2022,
the Board‘s view is that the Company’s cash flow
generation will strengthen the balance sheet in
the long term. Ericsson continues to execute on
its focused strategy aiming at building a stronger
Ericsson beyond 2022, with continued sales
growth and improved returns. The Board will
propose a dividend for 2021 of SEK 2.50 (2.00)
per share to the Annual General Meeting.
Finally, and once again, on behalf of all
members of the Board, I want to thank Börje
Ekholm, and all employees at Ericsson, for your
efforts in 2021. With confidence, we look for-
ward to seeing what we will achieve in 2022.
Ronnie Leten
Chair of the Board
Financial report 2021 12
Board of Directors’ report
Contents
12 Business in 2021
13 Financial highlights
16 Business results – Segments
18 Business results – Market areas
19 Corporate Governance
19 Material contracts
19 Risk management
19 Sourcing and supply
20 Sustainability and
Corporate Responsibility
20 Security and Privacy
20 US FCPA settlement
20 Legal proceedings
21 Parent Company
21 Share information
21 Proposed disposition of earnings
22 Guidelines for Remuneration
to Group Management
27 Board assurance
Net sales
SEK billion
250
200
150
100
50
0
227.2
232.4
232.3
2019
2020
2021
Net sales
EBIT and EBIT margin
SEK billion
35
30
25
20
15
10
5
0
13.7%
31.8
12.0%
27.8
4.6%
10.6
2019
2020
2021
%
14
12
10
8
6
4
2
0
EBIT
EBIT margin
Board of Directors’ report
2021 highlights
– Group organic sales grew by 4%, with an increase in Networks organic sales of 7%. Reported
sales were stable at SEK 232.3 billion. The loss of market share in Mainland China impacted
sales by SEK −7.7 billion. and the growth rate by −3 percentage points, meaning that excluding
Mainland China organic sales growth was 8%.
– Reported gross margin was 43.4% (40.3%), driven primarily by strengthened operational
leverage in Networks.
– Reported EBIT margin improved to 13.7% (12.0%).
– EBIT margin excluding restructuring charges improved to 13.9% (12.5%), reaching the 2022
group target already in 2021.
– Reported net income was SEK 23.0 (17.6) billion. Earnings per share (EPS) diluted was
SEK 6.81 (5.26).
– Free cash flow before M&A amounted to SEK 32.1 (22.3) billion. Net cash was SEK 65.8 (41.9)
billion on December 31, 2021.
– The Board of Directors proposes a dividend for 2021 of SEK 2.50 (2.00) per share to the AGM.
Business in 2021
In 2021, reported sales were stable at
SEK 232.3 billion. A stronger Swedish krona
(SEK) had a negative impact on reported sales
in all segments. Sales growth adjusted for
comparable units and currency was 4%, mainly
driven by growth in Networks, where reported
sales grew by 1% while organic sales increased
by 7%, primarily supported by increased prod-
uct sales as a result of continued market share
gains. From a geographical point of view, sales
growth was primarily underpinned by North
America, Europe and Latin America as well as
in some North East Asia markets. The sales in
Mainland China declined by SEK −7.7 billion,
due to reduced market share, impacting Group
organic growth rate by −3 percentage points.
Reported sales decreased in Digital Services
by −3%, while organic sales grew by 1%.
Managed Services sales declined by −10%
reported and −6% organically, mainly due to
reduced variable sales in a large contract in
North America, post the merger between two
operators. Contract rescoping and planned
exits also contributed to the sales decline.
IPR licensing revenues decreased to
SEK 8.1 (10.0) billion mainly due to lower
volumes with one licensee.
Services gross margin declined somewhat due
to impact from restructuring charges, while
gross margin remained stable at 42.0% exclud-
ing restructuring charges. Managed Services
gross margin improved mainly as an effect of
efficiency gains. Gross margin in Emerging
Business and Other increased driven by the
acquired Cradlepoint business.
Operating expenses increased to SEK −69.1
(−66.3) billion. Research and development
(R&D) expenses increased in Networks, Digital
Services and Emerging Business and Other.
Selling and administrative (SG&A) expenses
increased to SEK −27.0 (−26.7) billion through
investments in the acquired Cradlepoint
business.
Restructuring charges decreased to
SEK −0.5 (−1.3) billion. The restructuring
charges in 2021 were mainly related to
Mainland China.
EBIT was SEK 31.8 (27.8) billion. The
improvement was driven by improved gross
income in segment Networks.
The number of employees increased to
101,322 (100,824). The increase is mainly
to be found in Research and Development,
which increased by 1,210 employees.
Reported gross margin improved to 43.4%
Free cash flow before M&A amounted to
(40.3%) driven primarily by strengthened
operational leverage in Networks. A higher
share of product revenues in the sales mix had
a positive impact on the gross margin. Digital
SEK 32.1 (22.3) billion.
The improvement in cash flow was
driven by improved profitability. Net cash at
December 31 was SEK 65.8 (41.9) billion.
Financial report 2021
IPR licensing revenues
SEK billion
12
10
8
6
4
2
0
9.6
10.0
8.1
2019
2020
2021
IPR revenues
Software, hardware and
services: share of total sales
%
100
80
60
40
20
0
21%
22%
20%
38%
41%
46%
41%
37%
34%
2019
2020
2021
Software
Hardware
Services
Gross margin and restructuring
charges
SEK billion
10
%
50
43.5%
43.4%
8
6
4
2
0
37.5%
37.3%
40.6%
40.3%
30.0
0.3
2019
0.7
2020
0.3
2021
Restructuring charges in cost of sales
Gross margin as reported
Gross margin excl. restructuring charges
40
30
20
10
0
Board of Directors’ report
13
Financial highlights
Net sales
Reported sales were stable at SEK 232.3
(232.4) billion. Sales in Mainland China
declined by SEK −7.7 billion, impacting Group
growth rate adjusted for comparable units and
currency by −3 percentage points.
Networks sales increased by SEK 1.9 billion
or 1% to SEK 167.8 billion, with a negative
impact of SEK −6.4 billion from reduced market
share in Mainland China. Digital Services
sales decreased by SEK −1.2 billion or −3% to
SEK 36.2 billion, with an impact of SEK −1.3
billion due to the reduced market share in
Mainland China. Managed Services sales
decreased by SEK −2.2 billion or −10% to
SEK 20.4 billion. Emerging Business and Oher
sales increased by SEK 1.5 billion or 22% to
SEK 7.9 billion, driven mainly by Cradlepoint.
Group sales adjusted for comparable units
and currency increased by 4% while excluding
Mainland China, organic sales growth was 8%.
IPR licensing revenues declined to SEK 8.1
(10.0) billion mainly due to lower volumes with
one licensee.
Research and development (R&D) expenses
Reported R&D expenses increased to
SEK −42.1 (−39.7) billion. R&D expenses
increased in Networks and Digital Services
due to increased investments in the segments’
5G portfolios and in Emerging Business and
Other as a result of the acquired Cradlepoint
business.
Selling and administrative (SG&A) expenses
SG&A expenses increased to SEK −27.0
(−26.7) billion. Selling expenses increased
through investments in expanding the sales
force in the acquired Cradlepoint business.
Revaluation of customer financing was
SEK 0.4 (−0.3) billion.
Impairment losses on trade receivables
Reversal of impairment losses on trade
receivables was SEK 0.0 (0.1) billion.
Other operating income and expenses
Other operating income and expenses was
SEK 0.4 (0.7) billion.
Networks sales adjusted for comparable
Share in earnings of JVs and associated
units and currency increased by 7%. Sales
growth was driven primarily by North
America, Europe and Latin America. Networks
accounted for 72% (71%) of Group sales.
Digital Services sales adjusted for com-
parable units and currency increased by 1%.
Sales increased in Europe and Latin America
and in Middle East and Africa. Digital Services
accounted for 16% (16%) of Group sales.
Managed Services sales adjusted for com-
parable units and currency declined by −6%,
mainly due to reduced variable sales in a large
contract in North America, post the merger
between two operators. Contract rescoping
and planned exits also contributed to the sales
decline. Managed Services accounted for 9%
(10%) of Group sales.
Emerging Business and Other sales
adjusted for comparable units and currency
grew by 11% with improvements in Emerging
Businesses. Emerging Business and Other
accounted for 3% (3%) of Group sales.
In the market area dimension, sales growth
was driven by North America and Europe and
Latin America.
The sales mix by commodity was: hardware
46% (41%), software 20% (22%) and services
34% (37%).
Gross margin
Reported gross margin increased to 43.4%
(40.3%). Gross margin excluding restructuring
charges improved to 43.5% (40.6%) driven
primarily by strengthened operational leverage
in Networks.
companies was SEK −0.3 (−0.3) billion.
Restructuring charges
Restructuring charges decreased to SEK −0.5
(−1.3) billion. Restructuring charges in 2021
were mainly related to Mainland China.
Earning before financial items and income
taxes (EBIT)
Reported EBIT improved to SEK 31.8 (27.8)
billion. EBIT excluding restructuring charges
improved to SEK 32.3 (29.1) billion with an
EBIT margin excluding restructuring charges
of 13.9% (12.5%). The improvement was
driven by improved gross income in segment
Networks.
EBITA
EBITA improved to SEK 33.3 (29.0) billion.
EBITA excluding restructuring charges
increased to SEK 33.8 (30.3) billion cor-
responding to an EBITA margin excluding
restructuring charges of 14.6% (13.1%).
Financial income and expenses, net
Financial net declined to SEK −2.5 (−0.6) bil-
lion, mainly due to impact from the currency
hedge. The currency hedge effect impacted
financial net by SEK −0.8 (1.0) billion. The
USD strengthened against the SEK between
December 31, 2020 (SEK/USD rate 8.19) and
December 31, 2021 (SEK/USD rate 9.05).
Financial report 2021
14
Board of Directors’ report
Net income and EPS diluted
SEK billion
SEK
25
20
15
10
5
0
23.0
6.81
17.6
5.26
1.8
0.67
2019
2020
2021
8
6
4
2
0
Net income
EPS diluted
Free cash flow
SEK billion
35
30
25
20
15
10
5
0
−5
−10
32.1
22.3
7.6
−1.5
0.1
−9.6
2019
2020
2021
Free cash flow before M&A
M&A
Working capital days
Days
100
90
80
70
60
50
75
65
65
2019
2020
2021
Working capital days
Days sales outstanding
(target is less than 90 days)
Inventory days
(target is less than 65 days)
Payable days
(target is more than 60 days)
Cash flow from investing activities
Reported cash flow from investing activities
was SEK −19.9 (−15.2) billion as a result of
purchases of interest-bearing securities.
Cash flow from financing activities
Reported cash flow from financing activities
was SEK −9.3 (−12.5) billion including repay-
ment of lease liabilities. During the year, divi-
dends of SEK −6.9 (−6.0) billion were paid to
shareholders and the net impact on cash flow
from issuance and repayment of long-term
debt was SEK 2.1 billion.
Financial position
Gross cash was SEK 97.6 (72.0) billion as
a result of the positive free cash flow and
a SEK 2.6 billion loan with the European
Investment Bank (EIB), partly offset by
SEK −6.9 billion of dividends paid to share-
holders. Net cash was SEK 65.8 (41.9) billion.
Liabilities for post-employment benefits
decreased to SEK 36.1 (37.4) billion, primarily
due to positive asset returns. The Swedish
defined benefit obligation (DBO) was calcu-
lated using a discount rate based on the yields
of Swedish government bonds. If the discount
rate had been based on Swedish covered mort-
gage bonds, the liability for post-employment
benefits would have been approximately
SEK 17.3 billion (SEK 18.8 billion lower than
current DBO).
The average maturity of long-term borrow-
ings was 3.5 years as of December 31, 2021,
an increase from 2.7 years 12 months earlier.
In March 2021, Ericsson repaid its EUR −0.5
billion (SEK −5.1 billion) bond and in May
2021, Ericsson issued a EUR 0.5 billion
(SEK 5.0 billion) senior unsecured 8-year bond.
In September 2021, Ericsson renewed its
existing USD 2.0 billion revolving credit facility,
linked to two of Ericsson’s long-term sustain-
ability goals. The facility has a five-year tenure
with two one-year extension options and is
undrawn.
Standard & Poor’s and Fitch have a long-
term BBB- rating on Ericsson with stable
outlook. Moody’s has a Ba1 rating with stable
outlook.
The capital turnover decreased to 1.3
(1.4) times, while Return on capital employed
(ROCE) improved to 18.4% (17.0%) driven by
improved EBIT.
Taxes
Taxes were SEK −6.3 (−9.6) billion, positively
impacted by utilization of impaired withhold-
ing tax assets in Sweden. The effective tax rate
in 2021 was 21%, while the effective 2020 tax
rate was approximately 35%. Effective tax rate
excluding utilization of impaired withholding
tax assets in Sweden would have been 25%.
Net income
Net income improved to SEK 23.0 (17.6)
billion, driven by improved EBIT and lower
reported taxes. Earnings per share (EPS)
diluted was SEK 6.81 (5.26) and Adjusted
EPS was SEK 7.26 (5.83).
Employees
The number of employees on December 31,
2021, was 101,322, a total increase of 498
employees compared with December 31,
2020. In Research and Development, the
number of employees increased by 1,210.
Cash flow
Cash flow from operating activities
Reported cash flow from operating activities
was SEK 39.1 (28.9) billion. The improve-
ment was attributed to both improved EBIT
and decreased operating net assets. Cash
flow from operating activities in 2020 was
impacted by payments of SEK −3.0 billion
into the Swedish Pension Trust. Operating
net assets decreased for the full year with a
positive impact on cash flow of SEK 4.0 billion.
Key movements include a negative impact
of SEK −5.6 billion related to an increase in
inventory, mainly driven by the decision to
strengthen the supply chain resilience within
Networks. The negative impact was partly
offset by a positive impact of SEK 1.4 billion
from increase in trade payables. Cash flow was
also positively impacted by SEK 4.0 billion from
an increase in contract liabilities. Provisions
of SEK 4.2 (4.0) billion were utilized, of which
SEK 0.8 (0.8) billion related to restructuring
charges. Taxes paid were SEK −4.1 billion.
Accounts receivable days of sales outstand-
ing increased to 71 (69) days and working
capital days was stable at 65 (65) days.
Free cash flow
Free cash flow before M&A was SEK 32.1
(22.3) billion or 13.8% (9.6%) in relation to
sales, compared with the long-term target of
9−12%. Capex net and other investing activi-
ties was SEK −4.6 (−4.3) billion. Repayment
of lease liabilities was SEK −2.4 (−2.4) billion.
There were few M&A transactions settled
in 2021 and free cash flow after M&A was
SEK 32.1 (12.7) billion.
Financial report 2021
Board of Directors’ report
15
Capital expenditures
For 2021, capital expenditure was SEK 3.7
(4.5) billion, representing 1.6% of sales.
Expenditures are largely related to test sites
and equipment for R&D, network opera-
tion centers and manufacturing and repair
operations.
Annual capital expenditures are normally
around 2% of sales. This corresponds to the
needs for keeping and maintaining the cur-
rent capacity level. The Board of Directors
reviews the Company’s investment plans and
proposals. As of December 31, 2021, no mate-
rial land, buildings, machinery or equipment
were pledged as collateral for outstanding
indebtedness.
Capital expenditures 2019–2021
SEK billion
2021
2020
2019
Capital expenditures
Of which in Sweden
3.7
1.5
4.5
1.9
5.1
2.0
Share of
annual sales
1.6%
1.9%
2.3%
Capitalized development expenses
Capitalized development expenses increased
to SEK −1.0 (−0.8) billion due to 5G develop-
ment projects. The net effect on operating
income of capitalized and amortized develop-
ment expenses was SEK −0.1 (0.2) billion.
Research and development, patents and
licensing
In 2021, R&D expenses amounted to
SEK −42.1 (−39.7) billion. R&D expenses
were impacted by SEK -0.1 (-0.4) billion of
restructuring charges. The number of R&D
resources increased to 27,379 (26,169) and
the number of patents continued to increase
and amounted to more than 60,000 (57,000)
granted patents by end of 2021.
Seasonality
The Company’s sales, income and cash flow
from operations vary between quarters, and
are generally lowest in the first quarter of the
year and highest in the fourth quarter. This
is mainly a result of the seasonal purchase
patterns of telecom operators.
Most recent three-year average seasonality
Sequential
change, sales
Share of
annual sales
First
quarter
Second
quarter
Third
quarter
Fourth
quarter
−26%
11%
3%
21%
21%
24%
25%
30%
Off-balance sheet arrangements
There are currently no material off-balance
sheet arrangements that have, or would
be reasonably likely to have, a current or
anticipated material effect on the Company’s
financial condition, revenues, expenses, result
of operations, liquidity, capital expenditures or
capital resources.
Return on capital employed
SEK billion
250
200
150
100
50
0
17.0%
18.4%
184.3
165.3
162.0
6.7%
2019
2020
2021
Capital employed end of period
Return on capital employed
%
20
16
12
8
4
0
Cash position
SEK billion
100
97.6
65.8
72.2
72.0
34.5
41.9
80
60
40
20
0
−20
−40
−35.8
2019
−37.4
2020
−36.1
2021
Gross cash
Net cash
Liability for post employment benefits
Debt maturity, Parent Company
SEK billion
10
9.0
8
6
4
2
0
2.6
5.1
1.4
2.8
2.0
5.1
1.4
1.8
2022
2023
2024
2025
2028
2029
2030
Notes & bonds
Nordic Investment Bank
European Investment Bank
Swedish Export Credit Corporation
Financial report 2021
16
Board of Directors’ report
Sales split per segment
Business results – Segments
Networks
Networks represented 72% (71%) of Group
net sales in 2021. Networks offers a multi-
technology capable Radio Access Network
(RAN) solution for all network spectrum bands,
including integrated high-performing hard-
ware and software. The offering also includes
a cloud-native RAN portfolio, a transport port-
folio, passive and active antenna solutions and
a complete service portfolio covering network
deployment and support.
Net sales
Reported sales increased by 1% in 2021 to
SEK 167.8 (166.0) billion. Growth was driven
primarily by increased product sales as a
result of continued market share gains. Sales
adjusted for comparable units and currency
increased by 7%. Sales growth was under-
pinned by increased sales in North America
and in Europe and Latin America as well as in
some North East Asian markets. Sales declined
by SEK −6.4 billion YoY in Mainland China,
impacting the growth rate adjusted for com-
parable units and currency by −4 percentage
points.
Gross margin
Reported gross margin increased to 47.0%
(43.6%), as a result of continued strengthening
of operational leverage and a higher share of
product revenues in the sales mix.
EBIT
Reported EBIT increased to SEK 37.3 (30.9)
billion with an increase in EBIT margin to
22.2% (18.6%). EBIT excluding restructuring
charges improved to SEK 37.5 (31.6) billion
with an EBIT margin excluding restructuring
charges of 22.4% (19.0%) driven by sales
growth and improved gross margin.
Operating expenses remained stable at
SEK −41.9 billion. R&D investments in the 5G
portfolio increased during the year, while sell-
ing and administrative expenses decreased.
Digital Services
Digital Services represented 16% (16%) of
Group net sales in 2021. The segment pro-
vides software-based solutions for business
support (BSS), operational support (OSS),
communication services, core networks, and
cloud infrastructure. The focus is on cloud
native and automation solutions supporting
our customers’ 4G and growing 5G consumer
and enterprise business.
Net sales
Reported sales decreased by −3% to SEK 36.2
billion in 2021. Sales adjusted for comparable
units and currency increased by 1%, supported
by sales growth in North America and in
Europe and Latin America. Sales in Mainland
China decreased by SEK −1.3 billion YoY,
impacting the growth rate adjusted for com-
parable units and currency by −3 percentage
points.
Important 5G Core contracts have been
signed with several tier-1 operators in 2021
and are expected to generate increased
revenues in 2022 and beyond.
Sales in the 5G Core portfolio gradually
increased during 2021 and this portfolio is
expected to generate growing sales during
2022 as 5G networks are commissioned and
traffic grows.
Gross margin
Reported gross margin was stable at 41.7%
(41.9%), while gross margin excluding
restructuring charges was stable at 42.0%.
The margin was negatively impacted by ini-
tial 5G Core deployment costs.
EBIT (loss)
Reported EBIT (loss) was SEK −3.6 (−2.2)
billion. EBIT excluding restructuring charges
was SEK −3.5 (−2.2) billion.
Operating expenses increased by SEK −0.9
billion to SEK −18.8 billion mainly due to accel-
eration of R&D investments in the cloud native
5G portfolio. The lower sales volume and
consequently lower gross income impacted
EBIT by SEK −0.5 billion.
Networks
Digital Services
Managed Services
Emerging Business and Other
72%
16%
9%
3%
200
150
100
50
0
Networks
SEK billion
166.0
167.8
155.0
%
32
24
22.2%
18.6%
30.9
37.3
16.0%
24.8
2019
2020
2021
Net sales
EBIT
EBIT margin
Digital Services
SEK billion
50
40
30
20
10
0
−10
39.9
37.3
36.2
−10.1%
−5.9%
−10.0%
−4.0
−2.2
−3.6
2019
2020
2021
Net sales
EBIT
EBIT margin
16
8
0
%
20
10
0
−10
−20
−30
−40
Financial report 2021
Board of Directors’ report
17
Business results – Segments, cont’d.
Managed Services
Managed Services represented 9% (10%) of
Group net sales in 2021. Managed Services
provides Networks and IT Managed Services,
Network Design and Optimization, and
Application Development and Maintenance to
telecom operators. These are delivered through
the AI-driven Ericsson Operations Engine, a
set of capabilities that transform operations
to enhance customer experience, drive agile
service creation and optimize costs in multi-
vendor environments.
Emerging Business and Other
Segment Emerging Business and Other rep-
resented 3% (3%) of Group net sales in 2021.
Emerging Business and Other supports enter-
prises by providing reliable and secure cellular
solutions that are easy to use, adopt and scale
for global and local needs.
The segment includes:
– Emerging Business, including IoT, iconectiv,
Cradlepoint and New businesses
– Media businesses, including Red Bee Media
and a 49% ownership of MediaKind.
Net sales
Sales adjusted for comparable units and cur-
rency decreased by −6% in 2021, mainly due
to reduced variable sales in a large contract in
North America, post the merger between two
operators. Contract rescoping and planned
exits also contributed to the sales decline.
Sales in Network Optimization showed growth.
Reported sales declined by −10%.
Gross margin
Reported gross margin increased to 18.8%
(17.8%). Gross margin excluding restructuring
charges increased to 19.4% (18.9%), mainly
as a result of efficiency gains, partly offset by
lower sales.
EBIT
Reported EBIT was SEK 1.5 (1.6) billion. EBIT
excluding restructuring charges was SEK 1.6
(1.8) billion with a stable EBIT margin of 7.8%
(8.1%), despite the sales decline.
Net sales
Sales adjusted for comparable units and cur-
rency increased by 11% in 2021, with improve-
ments in Emerging Businesses. Reported
sales increased by 22%, driven by the acquired
Cradlepoint business.
Cradlepoint saw increasing demand for the
5G portfolio during the year. Reported sales
and margins for Cradlepoint were in line with
the acquisition plan.
Gross margin
Reported gross margin increased to 37.2%
(25.6%), driven by Cradlepoint.
EBIT (loss)
Reported EBIT (loss) was SEK −3.4 (−2.4)
billion driven by Cradlepoint, the Nokia settle-
ment related to the 2019 resolution with the
U.S authorities and impairment write-off.
In 2021 EBIT was positively impacted by
SEK 1.0 billion through a positive revaluation
of Ericsson Ventures investments and a data
center divestment.
In 2020 EBIT was positively impacted by
SEK 0.3 billion from a provision release related
to compliance monitor costs.
Sales in Emerging Businesses grew, with
improved gross margin.
Managed Services
SEK billion
30
25
20
15
10
5
0
25.6
9.0%
22.6
20.4
6.9%
7.2%
2.3
1.6
1.5
2019
2020
2021
Net sales
EBIT
EBIT margin
%
12
10
8
6
4
2
0
Emerging Business and Other
SEK billion
%
50
0
−42.2%
−50
−100
6.8
6.5
7.9
−37.0%
−2.4
−3.4
−150
−184.0%
−12.5
2019
2020
2021
−200
−250
15
10
5
0
−5
−10
−15
Net sales
EBIT
EBIT margin
Breakdown of EBIT in segment
Emerging Business and Other
SEK billion
Segment EBIT
of which Emerging
Business, iconective,
media businesses,
Cradlepoint and
common costs
of which SEC and DOJ
resolution costs
of which costs for
ST-Ericsson wind-down
of which a refund of social
security costs in Sweden
of which a Nokia
settlement related to
the 2019 resolution with
SEC and DOJ
of which revaluation
of Ericsson Ventures
investments, a data
center divestment and
an impairment write-off
Full year
2021
Full year
2020
−3.4
−2.4
−3.4
−2.6
0.0
0.0
0.0
0.3
−0.1
0.0
−0.8
0.0
0.8
0.0
Financial report 2021
18
Board of Directors’ report
Sales split per market area
Business results – Market areas
North America
33%
Europe and Latin America
26%
Middle East and Africa
9%
South East Asia, Oceania and India 12%
North East Asia
13%
Other
7%
South East Asia, Oceania and India
Currency adjusted sales declined by −1%.
Networks sales declined marginally due to
timing of orders and project milestones, while
Digital Services sales were stable. Sales in
Managed Services grew as a result of a new
contract signed in 2020 and timing of variable
sales. Reported sales decreased by −4%.
North East Asia
Currency adjusted sales declined by −8%.
Sales declined in Networks and Digital Services
due to market share loss in Mainland China.
Markets outside of Mainland China grew
by 19% mainly through acceleration of 5G
deployments. Reported sales declined by −13%.
Other
IPR licensing revenues declined to SEK 8.1
(10.0) billion mainly due to lower volumes with
one licensee.
North America
Currency adjusted sales increased by 12%
driven primarily by Networks 5G deployments,
and by growth in 5G Core and cloud native
solutions. Managed Services sales decreased
after the merger between two operators.
Reported sales increased by 5%.
Europe and Latin America
Currency adjusted sales increased by 12%,
with 11% growth in Europe and 19% in Latin
America. Sales in both Networks and Digital
Services continued to grow as a result of
market share gains, while sales decreased in
Managed Services YoY due to earlier decisions
on contract exits and rescoping of contracts.
Reported sales increased by 8%.
Middle East and Africa
Currency adjusted sales declined by −7%.
Sales decreased in Networks primarily due to
timing of 5G investments. Continued growth
in Africa and strong software upgrades con-
tributed to growth in Digital Services. Managed
Services sales decreased due to contractual
renegotiations in certain markets. Reported
sales declined by −11%.
Reported sales per market area – 2021 compared with 2020
SEK
232.4
billion
−13%
SEK
232.3
billion
+8%
−11%
+5%
−4%
−2%
2020
North
East Asia
Middle East
and Africa
South
East Asia,
Oceania
and India
Other
North
America
Europe and
Latin America
2021
Financial report 2021
Corporate Governance
In accordance with the Swedish Annual
Accounts Act and the Swedish Corporate
Governance Code (the Code), a separate
Corporate Governance Report, including an
internal control section, has been prepared
and appended to this Financial Report.
Continued compliance with the Swedish
Corporate Governance Code
Ericsson is committed to complying with
best-practice corporate governance standards
on a global level wherever possible. For 2021,
Ericsson does not report any deviations from
the Code.
Business integrity
Ericsson’s Code of Business Ethics (COBE)
outlines the fundamental ethical principles
and expectations that guide Ericsson’s deci-
sions and is designed to ensure that Ericsson
pursues business with a strong sense of integ-
rity. It reflects the Company’s commitment to
conducting business responsibly, consistent
with all internationally recognized human
rights principles and the applicable laws and
regulations where Ericsson operates.
Ericsson reviews and updates COBE’s
content periodically, and runs an acknowl-
edgment process regularly to ensure that
everyone working for Ericsson has read and
understood it. New employees and individuals
starting work for Ericsson are also required to
acknowledge their understanding of COBE
upon their recruitment or on the first day of
their assignment.
Board of Directors
At the Annual General Meeting, held on
March 30, 2021, Ronnie Leten was re-elected
Chair of the Board, and Jon Fredrik Baksaas,
Jan Carlson, Nora Denzel, Börje Ekholm,
Eric A. Elzvik, Kurt Jofs, Kristin S. Rinne,
Helena Stjernholm and Jacob Wallenberg
were re-elected members of the Board. As
of March 30, 2021, Torbjörn Nyman, Anders
Ripa and Kjell-Åke Soting were appointed
employee representatives by the unions,
with Ulf Rosberg, Loredana Roslund and Per
Holmberg as deputies. Per Holmberg resigned
as deputy employee representative as of
November 3, 2021.
Management
Since 2017 Börje Ekholm is the President and
CEO of the Group. The President and CEO is
supported by the Group management, consist-
ing of the Executive Team.
Ericsson has a global management system,
the Ericsson group Management System
(EGMS). EGMS aims to ensure that Ericsson’s
business is well managed and has the ability
to fulfil the objectives of major stakeholders
within established risk limits and with reliable
internal control. EGMS also aims to ensure
compliance with applicable laws, listing
requirements, governance codes and corpo-
rate responsibilities.
Remuneration
Remuneration to the members of the Board
of Directors and to Group management are
reported in note G2, “Information regarding
members of the Board of Directors and the
Group management.” Further information
about remuneration to the President and CEO
and the Executive Vice Presidents is included
in the “Remuneration report” appended to this
Financial Report.
Guidelines for remuneration to Group
management
The Board of Directors does not propose any
changes to the Guidelines for remuneration to
Group management resolved by the Annual
General Meeting 2020, which are intended
to remain in place for four years until the
Annual General Meeting of shareholders
2024. The current Guidelines are included
on pages 22–26.
Long-Term Variable Compensation
Program 2021 (LTV 2021) for the
Executive Team
Ericsson has share-based Long-Term Variable
Compensation Programs in place for the Exec-
utive Team. LTV 2021 for the Executive Team
was approved by the Annual General Meeting
2021. Details of LTV 2021 are explained in
note G3, “Share-based compensation.”
Material contracts
Material contractual obligations are outlined
in note D4, “Contractual obligations.” These
are primarily related to leases of office and
production facilities, purchase con tracts for
outsourced manufacturing, R&D and IT opera-
tions as well as the purchase of components
for the Company’s own manufacturing.
The Company is party to certain agree-
ments, which include provisions that may
take effect or be altered or invalidated by a
change in control of the Company as a result
of a public takeover offer. Such provisions are
not unusual for certain types of agreements,
such as for example financing agreements
and certain license agreements. However,
considering among other things the Com-
pany’s strong financial position, the Company
believes that none of the agreements currently
in effect would in and of itself entail any mate-
rial consequence for Ericsson due to a change
in control of the Company.
Board of Directors’ report
19
Risk management
Ericsson’s Enterprise Risk Management
(ERM) framework is an integrated part of
the EGMS. The aim of the ERM framework
is to strengthen the Group’s governance by
integrating risk management with strategy-
setting and execution. The ERM framework is
designed to establish an adequate and effec-
tive management of risk, i.e. the uncertainty
in achieving the strategic objectives of the
Company. The framework provides methods
to identify, assess and treat the risks, and to
agree on and stay within the Company’s risk
appetite.
Each manager is responsible for handling
the risks that emerges from their respective
area of responsibility. The responsibility
for identified prime risks of the Company
is always allocated to an Executive Team
member. The Group Risk Management func-
tion is responsible for driving the ERM strategy
execution and the ERM operations on Group
level. The head of each group function, market
area and business area, is accountable for
appointing one or several risk manager(s) to
drive risk management within the unit’s area
of responsibility, and for overseeing the ERM in
the respective unit. The Chief Financial Officer
is accountable for performing oversight of
ERM, and the Board of Directors and the Audit
and Compliance Committee are responsible
for reviewing the effectiveness and appropri-
ateness of ERM.
For information on risks that could impact
the fulfilment of objectives, and form the
basis for mitigating activities, see the other
sections of the Board of Directors’ report,
notes A2 “Critical accounting estimates and
judgments,” F4 “Interest-bearing liabilities,”
F1 “Financial risk management” and the
chapter Risk factors.
Sourcing and supply
Ericsson’s hardware largely consists of
electronics. For manufacturing, the Company
purchases customized and standardized
components and services from global, regional
and local suppliers.
The Company negotiates global supply
agreements with its primary suppliers. In
general, Ericsson endeavours to have alterna-
tive supply sources and seeks to avoid single
source supply situations.
The production of electronic modules
and sub-assemblies is mostly outsourced to
manufacturing services companies. Ericsson
is focusing internal manufacturing on new
product introductions and new technologies.
The majority of the matured portfolio is out-
sourced through production partners. Ericsson
has internal production sites in USA, Estonia,
China and Brazil.
Financial report 2021 20
Board of Directors’ report
The Company requires its suppliers to
comply with principles set forth in the Code
of Conduct for Business Partners. The Code
of Conduct sets forth standards on environ-
mental management, human and labor rights,
occupational health and safety and business
ethics and anti-corruption as fundamental
parts of Ericsson’s responsible business.
Business Partners are required to have
an environmental management system and
to be aware of and comply with applicable
environmental legislation, permits and report-
ing requirements. Where the requirements
in the Ericsson Code of Conduct for Business
Partners are higher than local standards and
laws, the requirements of the Code should be
applied.
Ericsson works to reduce environmental
impacts and emissions in the product portfolio
and supply chain. Ericsson has set an ambi-
tion that a certain number of high emitting
and strategic suppliers should have their own
1.5°C aligned climate targets.
Ericsson’s approach to environmental
sustainability is through a circular approach,
where the Company continuously strives to
minimize the negative impacts of its opera-
tions, and to improve the environmental and
energy performance of its products. Minimiz-
ing waste is key to a circular economy and
high reuse and recycling rates form part of
the standard requirements for the Company´s
smart product design.
Sustainability and Corporate
Responsibility
Ericsson’s approach to sustainability and
corporate responsibility is an integral part of
the Company’s strategy and culture and is
embedded across its operations to drive busi-
ness transformation and create value for its
stakeholders.
Ericsson is committed to creating positive
sustainability impacts and reducing risks to
the Company and its stakeholders through
its technology, solutions, operations, and the
expertise of its employees.
Ericsson has prepared a separate sustain-
ability report, in accordance with the Swedish
Annual Accounts Act, named the Sustainabil-
ity and Corporate Responsibility Report 2021,
appended to this Financial Report.
Security and Privacy
Security and Privacy are highly prioritized
areas for Ericsson. As the value of information
and the capabilities of threat actors increase
so must the Company’s and its products’ resil-
ience. Enterprise security and privacy is gov-
erned through the Chief Security Officer Secu-
rity Board and Ericsson’s Group Enterprise
Security and Privacy Board, while the Product
and Technology Security Board governs
product security. The Audit and Compliance
Committee and the Technology and Science
Committee of the Board of Directors receives
regular updates on security and privacy.
Policies, directives and frameworks estab-
lish the security requirements across Ericsson.
The security and privacy frameworks cover
product security, information security, privacy,
IT-security, risk management, sourcing and
third parties, incident management, insider
threat prevention, business continuity, physi-
cal security, security in high-risk areas, and
travel and event security to secure all areas
of Ericsson’s business processes and ensure
the delivery of resilient products. Frameworks
are developed in accordance with applicable
regulations, international standards and best-
practices. For example, Ericsson’s Information
Security Management System is globally
certified to ISO/IEC 27001 and the Ericsson
Security Reliability Model detailing the security
requirements for Ericsson’s products is aligned
with GSMA NESAS and NIST Cyber Security
Framework.
Ericsson is committed to continuously
assess and adjust its capabilities, controls and
processes and develop its portfolio in order
to secure the Company’s and its customers
assets in relation to evolving threats, risks and
legal requirements.
For further information on Security and
Privacy and risks relating thereto see the
chapter Risk factors in the Financial Report
and the section Security and Privacy in the
Sustainability and Corporate responsibility
report.
US FCPA settlement
Since December 2019, Ericsson has been
under a Deferred Prosecution Agreement
(DPA) with the US Department of Justice
(DOJ) to resolve criminal US Foreign Corrupt
Practices Act (FCPA) charges and a consent
judgment with the Securities and Exchange
Commission (SEC) to resolve related civil
claims. Ericsson entered into the DPA and the
consent judgment, and agreed to engage an
independent compliance monitor, for a period
of three years as part of the resolution of the
investigations conducted by the DOJ and the
SEC since 2015 and 2013 respectively. In June
2020, Ericsson announced the appointment of
its monitor, marking the start of the three-year
term of the monitorship. The monitor’s main
responsibilities include reviewing and evaluat-
ing the Company’s progress in updating and
operating its Ethics & Compliance Program
and accompanying controls, consistent with
the terms of the DPA, and providing recom-
mendations for improvements.
On October 21, 2021 Ericsson received
correspondence from the DOJ stating its deter-
mination that the Company had breached its
obligations under the DPA by failing to provide
certain documents and factual information. At
this time the Company cannot provide further
details about the determination by the DOJ or
predict the outcome of the resolution of this
matter. Ericsson has taken steps to avoid a
recurrence of the issues that led to the breach
determination and is committed to cooperat-
ing openly and fully with the DOJ and its
Independent Compliance Monitor consistent
with all terms set out in the DPA.
Legal proceedings
On May 7, 2021, Ericsson and Samsung
reached a multi-year agreement on global
patent licenses between the two companies,
including patents relating to all cellular tech-
nologies. The cross license agreement covers
sales of network infrastructure and handsets
from January 1, 2021. Furthermore, Ericsson
and Samsung agreed on technology coopera-
tion projects to advance the mobile industry
in open standardization and create valuable
solutions for consumers and enterprises. The
settlement ended complaints filed by both
companies before the U.S. International Trade
Commission (ITC) as well as lawsuits in sev-
eral countries.
On October 4, 2021, Ericsson asked the
U.S. District Court for the Eastern District of
Texas for a declaration that Ericsson has, in
its negotiations with Apple, complied with its
FRAND commitment and all other applicable
laws and policies that would affect the terms
of Ericsson’s and Apple’s prospective license.
On December 17, 2021, Apple filed a respon-
sive case against Ericsson in the U.S. District
Court for the Eastern District of Texas alleging,
among other things, that Ericsson breached
obligations associated with the licensing of
its standard essential patents under FRAND
terms. The filing of lawsuits, complaints
and other proceedings, when parties take
legal action over a patent license agreement
renewal, is standard and consequently addi-
tional lawsuits, complaints and other proceed-
ings, may follow.
As part of its defense to a now settled
patent infringement lawsuit filed by Ericsson
in 2013 in the Delhi High Court against Indian
handset company Micromax, Micromax
filed a complaint against Ericsson with the
Competition Commission of India (CCI). The
CCI decided to refer the case to the Director
General’s Office for an in-depth investigation.
The CCI opened similar investigations against
Ericsson in January 2014 based on claims
made by Intex Technologies (India) Limited
and, in 2015, based on a now settled claim
Financial report 2021 Board of Directors’ report
21
Company’s and the Group’s need for financial
resources as well as the Parent Company’s
and the Group’s liquidity, financial position in
other respects and long-term ability to meet
their commitments. The Group reports an
equity ratio of 35.0% (31.4%) and a net cash
amount of SEK 65.8 (41.9) billion.
The Parent Company’s equity would have
been SEK 1.3 billion lower if assets and liabili-
ties had not been valued at fair value pursuant
to Chapter 4, Section 14a of the Swedish
Annual Accounts Act.
The Board of Directors has also considered
the Parent Company’s result and financial
position and the Group’s position in general. In
this respect, the Board of Directors has taken
into account known commitments that may
have an impact on the financial positions of
the Parent Company and its subsidiaries.
The proposed dividend does not limit the
Group’s ability to make investments or raise
funds, and it is the Board of Directors’ assess-
ment that the proposed dividend is well bal-
anced considering the nature, scope and risks
of the business activities as well as the capital
requirements for the Parent Company and the
Group in addition to coming years’ business
plans and economic development.
from iBall. Ericsson has challenged CCI’s
jurisdiction in these cases before the Delhi
High Court and is awaiting final appellate
decision by the Supreme Court of India.
In April 2019, Ericsson was informed
by China’s State Administration for Market
Regulation (SAMR) Anti-monopoly bureau
that SAMR has initiated an investigation into
Ericsson’s patent licensing practices in China.
Ericsson is cooperating with the investiga-
tion, which is still in a fact-finding phase. The
next steps include continued fact finding and
meetings with SAMR in order to facilitate the
authority’s assessments and conclusions.
In addition to the proceedings discussed
above, the Company is, and in the future may
be, involved in various other lawsuits, claims
and proceedings incidental to the ordinary
course of business. For information on risks
e.g. relating to lawsuits, claims and proceed-
ings, see the chapter Risk Factor.
Parent Company
Telefonaktiebolaget LM Ericsson (the Parent
Company) business consists mainly of cor-
porate management, holding company func-
tions, internal banking activities and customer
credit management. As of 31 December 2021
(2020) the Parent Company had 3 (3) branch
offices. In total, the Group has 74 (77) branch
and representative offices.
Financial information
Income after financial items was SEK 9.3 (8.3)
billion. The Parent Company had no sales
in 2021 or 2020 to subsidiaries, while 34%
(36%) of total purchases of goods and services
were from subsidiaries.
Major changes in the Parent Company’s
financial position for the year included:
– Increased current and non-current liabili-
ties to subsidiaries of SEK 22.1 billion.
– Decreased current and non-current receiv-
ables from subsidiaries of SEK 0.7 billion.
– Shareholder contributions to subsidiaries of
SEK 6.4 billion.
– Impairment of investments in subsidiaries
of SEK 1.3 billion.
– Increased gross cash of SEK 23.5 billion.
At the end of the year, gross cash: cash,
cash equivalents, short-term investments
(”Interest-bearing securities, current” in
Group’s definition), and interest-bearing
securities non-current amounted to SEK 80.5
(57.0) billion.
At the end of the year, non-restricted equity
amounted to SEK 35.0 (33.9) billion and total
equity amounted to SEK 83.1 (82.1) billion.
Share information
As of December 31, 2021, the total number
of shares in issue was 3,334,151,735 of
which 261,755,983 were Class A shares,
each carrying one vote, and 3,072,395,752
were Class B shares, each carrying one tenth
of one vote. Both classes of shares have the
same rights of participation in the net assets
and earnings. The largest shareholders of the
Parent Company at year-end were Investor
AB with approximately 23.79% of the votes
(8.00% of the shares), AB Industrivärden with
approximately 15.14% of the votes (2.61% of
the shares) and AMF Tjänstepension & AMF
Fonder with approximately 4.36% of the votes
(1.87% of the shares).
In accordance with the conditions of the
Long-Term Variable Compensation Program
(LTV) for Ericsson employees, 2,034,654
treasury shares were distributed to employees
or sold in 2021. The quotient value of these
shares was SEK 5.00 per share, totaling
SEK 10 million, representing less than 1% of
capital stock, and compensation received for
shares sold and distributed shares amounted
to SEK 41.7 million.
The holding of treasury stock at December
31, 2021 was 4,009,306 Class B shares. The
quotient value of these shares is SEK 5.00,
totaling SEK 20 million, representing 0.1% of
capital stock, and the purchase price amounts
to SEK 29.1 million.
Proposed disposition of earnings
The Board of Directors proposes a dividend
SEK 2.50 (2.00) per share, and that the
Parent Company shall retain the remaining
part of non-restricted equity. The dividend is
proposed to be paid in two equal installments,
SEK 1.25 per share with the record date
March 31, 2022, and SEK 1.25 per share with
the record date September 30, 2022.
The Class B treasury shares held by the
Parent Company are not entitled to receive
dividend. Assuming that no treasury shares
remain on the record date, the Board of Direc-
tors proposes that earnings be distributed as
follows:
Amount to be paid to
the shareholders
Amount to be retained by the
Parent Company
Total non-restricted equity of
the Parent Company
SEK 8,335,379,338
SEK 26,649,074,267
SEK 34,984,453, 605
As a basis for its dividend proposal, the
Board of Directors has made an assessment
in accordance with Chapter 18, Section 4 of
the Swedish Companies Act of the Parent
Financial report 2021 22
Board of Directors’ report
Guidelines for Remuneration
to Group Management approved
by the Annual General Meeting of
shareholders 2020
Guidelines for Remuneration
to Group Management
Introduction
These Guidelines for Remuneration to Group
Management (the “Guidelines”) apply to
the Executive Team of Telefonaktiebolaget
LM Ericsson (the “Company” or “Ericsson”),
including the President and Chief Executive
Officer (the “President and CEO”) (“Group
Management”). These Guidelines apply to
remuneration agreed and changes to previously
agreed remuneration after the date of approval
of the Guidelines and are intended to remain
in place for four years until the Annual General
Meeting of shareholders 2024. For employ-
ments outside of Sweden, due adaptations may
be made to comply with mandatory local rules
or established local practices. In such cases,
the overall purpose of these Guidelines shall be
accommodated to the largest extent possible.
These Guidelines do not cover remuneration
resolved by the general meeting of sharehold-
ers, such as long-term variable compensation
programs (“LTV”).
Objective
These Guidelines aim to ensure alignment with
the current remuneration philosophy and prac-
tices applicable for the Company’s employees
based on the principles of competitiveness,
fairness, transparency and performance. In
particular to:
– attract and retain highly competent, perform-
ing and motivated people that have the
ability, experience and skill to deliver on the
Ericsson strategy,
– encourage behavior consistent with
Ericsson’s culture and core values,
– ensure fairness in reward by delivering total
remuneration that is appropriate but not
excessive, and clearly explained,
– have a total compensation mix of fixed pay,
variable pay and benefits that is competitive
where Ericsson competes for talent, and
– encourage variable remuneration which
aligns employees with clear and relevant
targets, reinforces their performance and
enables flexible remuneration costs.
The Guidelines and the Company’s strategy
and sustainable long-term interest
A successful implementation of the Company’s
strategy and sustainable long-term interests
requires that the Company can attract, retain
and motivate the right talent and can offer
them competitive remuneration. These Guide-
lines aim to allow the Company to offer the
members of the Group Management attractive
and competitive total remuneration. Variable
compensation covered by these guidelines shall
be awarded against specific pre-defined and
measurable business targets derived from the
long-term business plan approved by the Board
of Directors. Targets may include financial
targets at either Group, Business Area or Market
Area level, strategic targets, operational targets,
employee engagement targets, customer sat-
isfaction targets, sustainability and corporate
responsibility targets or other lead indicator
targets.
The Company operates long-term variable
compensation programs for the Group Man-
agement. These have been approved by the
Annual General Meeting (“AGM”) and as a
result are not covered by these Guidelines.
Details of Ericsson’s current remuneration policy
and how we deliver on our policy and guidelines
and information on previously decided long-
term variable compensation programs that
have not yet become due for payment, including
applicable performance criteria, can be found
in the Remuneration Report and in note G2,
“Information regarding members of the Board
of Directors, the Group management” and note
G3, “Share-based compensation” in the annual
report 2019.1)
Governance of remuneration
to Group Management
The Board has established a Remuneration
Committee (the “Committee”) to handle com-
pensation policies and principles and matters
concerning remuneration to Group Manage-
ment. The Board has authorized the Committee
to determine and handle certain issues in
specific areas. The Board may also on occasion
provide extended authorization for the Commit-
tee to determine specific matters.
The Committee is authorized to review and
prepare for resolution by the Board salary and
other remuneration for the President and CEO.
Further, the Committee shall prepare for resolu-
tion by the Board proposals to the AGM on
Guidelines for Remuneration to Group Manage-
ment at least every fourth year and on LTV and
similar equity arrangements.
The Committee has the mandate to resolve
salary and other remuneration for the other
members of Group Management except for
the President and CEO, including targets for
short-term variable compensation (“STV”),
and payout of STV based on achievements
and performance.
In order to conduct its responsibilities, the
Committee considers trends in remuneration,
legislative changes, disclosure rules and the
general global executive remuneration environ-
ment. It reviews salary survey data, Company
results and individual performance before
preparing salary adjustment recommendations
for the President and CEO for resolution by
the Board and before approving any salary
adjustments for the other members of Group
Management. In order to avoid conflict of
interests, no employee is present at the Commit-
tee’s meetings when issues relating to their own
remuneration are being discussed. The President
and CEO is not present at Board meetings when
issues relating to the President and CEO’s own
remuneration are being discussed. The Commit-
tee may appoint independent expert advisors to
assist and advise in its work.
The Chair of the Remuneration Committee
along with the Chair of the Board work together
with Ericsson’s Investor Relations team, striving
to ensure that healthy contact is maintained as
necessary and appropriate with shareholders
regarding remuneration to Group Management.
Overview of remuneration package covered
by these Guidelines
For Group Management the remuneration
package may consist of fixed salary, short-term
and long-term variable compensation (STV and
LTV), pension and other benefits.
The table below sets out the key components
of remuneration of Group Management covered
by these Guidelines, including why they are
used, their operation, opportunity levels and the
related performance measures. In addition, the
AGM has resolved and may in the future decide
to implement LTV for Group Management. The
ongoing share-based LTV programs resolved
by the AGM have been designed to provide
long-term incentives for the members of Group
Management and to incentivize the Company’s
performance creating long-term value. The aim
is to attract, retain and motivate executives in
a competitive market through performance-
based share related incentives and to encour-
age the build-up of significant equity holdings
to align the interests of the members of Group
Management with those of shareholders. The
vesting period under the ongoing share-based
LTV programs resolved by the shareholders
is three years and vesting is subject to the
satisfaction of identified performance criteria.
Although LTV is an important component of
the remuneration of Group Management, it is
not covered by these Guidelines, because these
programs are separately resolved by the AGM.
1) Information for 2021 can be found in the Remuneration
report and in note G2, “Information regarding members of
the Board of Directors and Group management” and note
G3, “Share-based compensation” in the Financial report.
Financial report 2021 Element and purpose
Operation
Opportunity
Performance measures
Board of Directors’ report
23
Fixed salary
Fixed compensation paid at set times.
Purpose:
– attract and retain the executive talent
required to implement Ericsson’s
strategy,
– deliver part of the annual compensa-
tion in a predictable format.
Short-term variable
compensation (STV)
STV is a variable compensation plan
that shall be measured and paid over
a single year.
Purpose:
– align members of Group
Management with clear and relevant
targets to Ericsson’s strategy and
sustainable long-term interests,
– provide individuals an earning oppor-
tunity for performance at flexible cost
to the Company.
There is no maximum salary level; how-
ever, salary increases (as a % of existing
salary) for most Group Management
members would normally be in line
with the external market practices,
employees in relevant locations and
performance of the individual.
There are circumstances where higher
salary increases could be awarded. For
example, where:
– a new Group Management member
has been appointed at a below-
market salary, in which case larger
increases may be awarded in follow-
ing years, subject to strong individual
performance,
– the Group Management member
has been promoted or has had an
increase in responsibilities,
– an individual’s salary has fallen
significantly behind market practice.
Target pay-out opportunity for any
financial year may be up to 150% of
annual fixed salary of the individual.
This shall normally be determined in
line with the external market practices
of the country of employment.
Maximum pay-out shall be up to two
times the target pay-out opportunity
(i.e. 300% of annual fixed salary).1) 2)
This element of the package does not
require achievement of any specific
performance targets.
However, individual performance and
capability shall be taken into account
along with business performance when
determining fixed salary levels and any
salary increases.
The STV shall be based on measures
linked to the annual business plan
which in itself is linked to Ericsson’s
long-term strategy and sustainability.
Measures shall include financial targets
at Group, Business Area or Market
Area level (for relevant members of
Group Management). Other potential
measures may include strategic targets,
operational targets, employee engage-
ment targets, customer satisfaction
targets, sustainability and corporate
responsibility targets or other lead
indicator targets.
A maximum of four STV targets shall
be assigned to an individual in total for
a financial year. Financial targets shall
comprise at least 75% of the target
bonus opportunity with a minimum of
40% being defined at Group level. The
minimum weighting for an STV target
shall be 20%.
Performance of all STV targets shall
be tested over a one-year performance
period (financial year).
The STV measures and targets shall be
determined by the Committee for the
members of Group Management other
than the President and CEO.
The Board has the mandate to define
STV measures and targets for the
President and CEO, should STV be
introduced for the President and CEO.
Salaries shall normally be reviewed
annually in January.
Salaries shall be set taking into account:
– Ericsson’s overall business
performance,
– business performance of the Unit
that the individual leads,
– year-on-year performance of
the individual,
– external economic environment,
– size and complexity of the position,
– external market data,
– pay and conditions for other employees
based in locations considered to be
relevant to the role.
When setting fixed salaries, the impact
on total remuneration, including
pensions and associated costs, shall
be taken into consideration.
The STV shall be paid in cash every year
after the Committee and, as applicable,
the Board have reviewed and approved
performance against targets which
are normally determined at the start of
each year for each member of Group
Management.
The Board and the Committee reserve
the right to:
– revise any or all of the STV targets at
any time,
– adjust the STV targets retroactively
under extraordinary circumstances,
– reduce or cancel STV if Ericsson
faces severe economic difficulties, for
instance in circumstances as serious
as no dividend being paid,
– adjust STV in the event that the
results of the STV targets are
not a true reflection of business
performance,
– reduce or cancel STV for individuals
either whose performance evaluation
or whose documented performance
feedback is below an acceptable
level or who are on performance
counselling.
Malus and clawback
The Board and the Committee shall
have the right in their discretion to:
– deny, in whole or in part, the entitle-
ment of an individual to the STV
payout in case an individual has
acted in breach of Ericsson’s Code
of Business Ethics.
– claim repayment in whole or in part
the STV paid in case an individual has
acted in breach of Ericsson’s Code of
Business Ethics.
– reclaim STV paid to an individual on
incorrect grounds such as restate-
ment of financial results due to
incorrect financial reporting, non-
compliance with a financial reporting
requirement etc.
Financial report 2021 24
Board of Directors’ report
Element and purpose
Operation
Opportunity
Performance measures
Pension
Contributions paid towards retirement
fund.
Purpose:
– attract and retain the executive talent
required to implement Ericsson’s
strategy,
– facilitate planning for retirement by
way of providing competitive retire-
ment arrangements in line with local
market practices.
The operation of the pension plan
shall follow competitive practice in the
individual’s home country and may
contain various supplementary plans
in addition to any national system for
social security.
Pension plans should be defined con-
tribution plans unless the individual
concerned is subject to defined benefit
pension plan under mandatory collective
agreement provisions or mandatory
local regulations.
In some special circumstances where
individuals cannot participate in the
local pension plans of their home
countries of employment:
– cash equivalent to pension may be
provided as a taxable benefit, or
– contributions may be made to an
international pension fund on behalf
of the individual on a cost-neutral
basis.
Other benefits
Additional tangible or intangible
compensation paid annually which do
not fall under fixed salary, short-term
and long-term variable compensation
or pension.
Purpose:
– attract and retain the executive talent
required to implement Ericsson’s
strategy,
– deliver part of the annual compen-
sation in a predictable format.
Benefits offered shall take into account
the competitive practices in the
individual’s country of employment and
should be in line with what is offered
to other senior employees in the same
country and may evolve year on year.
Benefits may for example include
company phones, company cars,
medical and other insurance benefits,
tax support, travel, Company gifts and
any international relocation and/or
commuting benefits if the individual is
required to relocate and/or commute
internationally to execute the require-
ments of the role.
None
None
Since 2011, members of Group
Management in Sweden participate
in the defined contribution plan (ITP1)
which applies for the wider workforce in
Sweden. The pension contribution for
ITP1 is capped at 30% of pensionable
salary which includes fixed salary and
STV paid in cash.
According to the local collective
bargaining agreement in Sweden, the
members of Group Management are
also entitled to an additional pension
contribution for part-time retirement
for which the cap is determined during
the union negotiations for all the local
employees.
Members of Group Management
employed outside of Sweden may
participate in the local market competi-
tive pension arrangements that apply
in their home countries in line with what
is offered to other employees in the
same country.
In all cases the annual pension
contributions shall be capped at 70% of
annual fixed salary.3)
Benefit opportunities shall be set in
line with competitive market practices
and shall reflect what is offered to other
senior employees in the individual’s
country of employment.
The levels of benefits provided may
vary year on year depending on the
cost of the provision of benefits to the
Company.
Other benefits shall be capped at 10%
of annual fixed salary for members of
Group Management located in Sweden.
Additional benefits and allowances for
members of Group Management who
are commuters into Sweden or who
are on long-term assignment (“LTA”)
in countries other than their home
countries of employment, shall be
determined in line with the Company’s
international mobility policy which
may include (but is not limited to)
commuting or relocation costs; cost of
living adjustment, housing, home travel
or education allowance; tax and social
security equalization assistance.
1) For most of the current members of Group Management, the current STV target opportunity is below 50% of the annual fixed salary.
2) At present the President & CEO does not participate in STV. The Board has the mandate to decide to include the President and CEO in STV in the future. In doing so the Board shall:
– determine the STV opportunity for the President and CEO within the ranges mentioned above and in line with the external market practices of the country of employment, keeping
the STV opportunity of the other members of Group Management under consideration,
– reduce the LTV opportunity in relation to the STV opportunity, keeping the total target cash compensation consisting of fixed salary, STV and LTV unchanged.
Should the Board decide to introduce STV for the President and CEO, the details will be disclosed in the Remuneration Report for the relevant year.
3) Since most of the current members of Group Management are currently under ITP1 coverage, their pension contributions are currently capped at 30% of pensionable salary and the
additional pension contribution for part-time retirement mandated by the local collective bargaining agreement in Sweden.
Financial report 2021 Board of Directors’ report
25
Alignment of short-term variable com-
pensation with the Company’s strategy
and criteria for payment
These Guidelines for Remuneration to Group
Management have been developed to support
alignment of Ericsson’s business strategy
and long-term interests of members of Group
Management with that of shareholders, in
particular:
– The targets for the STV shall be set each
year either by the Board or the Committee
as appropriate for the members of the Group
Management. In determining the targets,
the Board and the Committee shall take into
account Ericsson’s focused business strategy,
which is built on technology leadership,
product-led solutions and global scale, along
with internal annual and long-term business
plans. Therefore, all members of Group
Management shall have one or more Group
financial targets derived from the long-term
financial targets which amount to at least
40% of the target STV opportunity. At least
75% of the target STV opportunity shall
be linked to financial measures. The Board
and the Committee, as applicable, may also
choose to include other operational, strategic,
employee engagement, customer satisfac-
tion or sustainability and corporate respon-
sibility or other lead indicator measures to
support the delivery of the business plan. For
certain roles such targets may be supple-
mented by targets for the relevant Business
Area, Market Area or Group Function.
– Maximum pay-out shall be achievable for
truly outstanding performance and excep-
tional value creation.
– At the end of the performance period for each
STV cycle, the Board and the Committee shall
assess performance versus the measures
and determine the formula-based outcome
using the financial information made public
by the Company for the financial targets. The
Board has the discretion to adjust targets
and the subsequent outcome in the event
that they cease to be relevant or stretching or
to enhance shareholder value. Adjustments
shall normally only occur in the event of a
major change (e.g. an acquisition or divest-
ment) and shall be on the basis that the
new target shall be no more or less difficult
to achieve.
Consideration of remuneration offered
to the Company’s employees
When developing these Guidelines, the Board
and the Committee have considered the total
remuneration and employment conditions of
the Company’s employees by reviewing the
application of Ericsson’s remuneration policy
for the wider employee population to ensure
consistency.
There is clear alignment in the remunera-
tion components for the members of Group
Management and the Company’s employees
in the way that remuneration policy is applied
as well as the methods followed in determin-
ing fixed salaries, short-term and long-term
variable compensation, pension and benefits,
which are to be applied broadly and consistently
throughout the Company. The targets under
short-term variable compensation are similar
and the performance measures under long-
term variable compensation program are the
same for the members of Group Management
and other eligible employees of the Company.
However, the proportion of pay that is linked
to performance is typically higher for Group
Management in line with market practice.
Employment contracts and termination
of employment
The members of Group Management are
employed on permanent rolling contracts.
The maximum mutual notice period is no more
than 12 months. In case of termination by
the employee, the employee has no right to
severance pay.
the arbitrators and all of its own litigation costs
(including attorney’s fees), except in the event
the arbitration proceedings were initiated by the
employee without reasonable cause.
Recruitment policy for new members of
Group Management
In determining the remuneration of a new
member of Group Management, the Board and
the Committee shall take into consideration all
relevant factors to ensure that arrangements
are in the best interests of the Company and its
shareholders. These factors include:
– The role being taken on.
– The level and type of remuneration opportu-
nity received at a previous employer.
– The geography in which the candidate
is being recruited from and whether any
relocation allowance is required.
– The skills, experience and caliber of the
candidate.
– The circumstances of the candidate.
– The current external market and salary
In any case, the fixed salary paid during the
practice.
notice period plus any severance pay payable
will not together exceed an amount equivalent
to the individual’s 24 months fixed salary.
The employee may be entitled to severance
pay up until the agreed retirement age or, if a
retirement age has not been agreed, until the
month when the employee turns 65. In a case
where the employee is entitled to severance
pay from a date later than 12 months prior to
retirement, the severance pay shall be reduced
in proportion to the time remaining and cal-
culated only for the time as of the date when
the employee’s employment ceases (i.e. the
end of the period of notice) and until the time
of retirement.
Severance pay shall be reduced by 50% of
the remuneration or equivalent compensation
the employee receives, or has become entitled
to, from any other employer or from his/her own
or other activities during the period that sever-
ance is paid to the employee by the Company.
The Company shall have the right to ter-
minate the employment contract and dismiss
the employee with immediate effect, without
giving any advance notice and entitlement
to severance pay, if the employee commits a
serious breach of his/her obligations towards
the Company.
Normally disputes regarding employment
agreements or any other agreements concern-
ing the employment of the members of Group
Management, the way such agreements have
been arrived at, interpreted or applied, as well as
any other litigation proceedings from legal rela-
tions based on such agreements, shall be settled
by arbitration by three arbitrators in accordance
with the Rules of the Arbitration Institute of the
Stockholm Chamber of Commerce. Irrespective
of the outcome of any arbitral award, the
Company may, in the relation between the
parties, carry all fees and expenses charged by
– Internal relativities.
Additional arrangements
By way of exception, additional arrangements
can be made when deemed appropriate and
necessary to recruit or retain an individual. Such
arrangement could be in the form of short-term
or long-term variable compensation or fixed
component and can be renewed, but each such
arrangement shall be limited in time and shall
not exceed a period of 36 months and twice the
annual fixed salary that the individual would
have received if no additional arrangements
were made. In addition, if appropriate, different
measures and targets may be applied to the
new appointment’s incentives in the first year.
In addition, it may on a case by case basis
be decided by the Board and the Committee
respectively to compensate an individual
for remuneration forfeited from a previous
employer during recruitment. The Board and
the Committee will consider on a case by case
basis if all or some of the remuneration includ-
ing incentives forfeited need to be ’bought-out’.
If there is a buy-out of forfeited incentives, this
will take into account relevant factors including
the form they were granted (cash vs. shares),
performance conditions attached to these
awards and the time they would have vested/
paid. Generally, buy-out awards will be made on
a comparable basis to those forfeited.
In the event of an internal candidate being
promoted to Group Management, legacy terms
and conditions may be honored, including
pension and benefit entitlements and any
outstanding incentive awards. If a Group
Management member is appointed following a
merger or acquisition with/of another company,
legacy terms and conditions may also be
honored for a maximum period of 36 months.
Financial report 2021 26
Board of Directors’ report
Board of Directors’ discretions
The Board upon recommendation from the
Committee may in a specific case decide to
temporarily deviate from these Guidelines in
whole or in part based on its full discretion in
unusual circumstances such as:
– upon change of the President and CEO in
accordance with recruitment policy for new
members of Group Management,
– upon material changes in the Company struc-
ture, organization, ownership and business
(for example takeover, acquisition, merger,
demerger etc.) which may require adjust-
ments in STV and LTV or other elements to
ensure continuity of Group Management, and
– in any other circumstances, provided that the
deviation is required to serve the long-term
interests and sustainability of the Company
or to assure its financial viability.
The Committee is responsible for preparing
matters for resolution by the Board, and this
includes matters relating to deviations from
these Guidelines. Any such deviation will be
disclosed in the Remuneration Report for the
relevant year.
Events after the reporting period
Legal proceedings
Ericsson and Apple were not able to renew
the now expired patent license agreement
between the parties in a timely manner.
On January 18, 2022 Ericsson filed three
complaints with the U.S. International Trade
Commission (ITC) alleging infringement of
12 patents by certain Apple products. In addi-
tion, Ericsson filed companion lawsuits in the
Western District of Texas alleging infringement
of the same 12 patents. Also, in January 2022
Ericsson filed complaints in several jurisdic-
tions in Europe (Germany, Netherlands, Bel-
gium) and South America (Brazil, Colombia)
alleging that certain Apple products infringe
Ericsson patents. On January 19, 2022 Apple
filed a complaint against Ericsson in the ITC
alleging infringement of three Apple patents
by certain Ericsson products. Apple also filed
a complaint in Germany at the District court of
Düsseldorf alleging infringement of a German
utility model and another complaint at the
District court of Mannheim alleging infringe-
ment of an Apple patent by certain Ericsson
products. The filing of lawsuits, complaints
and other proceedings, when parties take
legal action over a patent license agreement
renewal, is standard and consequently addi-
tional lawsuits, complaints and other proceed-
ings, may follow.
Euro Medium Term Note program
On February 8, 2022, the Company issued new
EUR 750 million notes under the Euro Medium
Term Note (EMTN) program, with maturity in
February 2027.
Vonage
In November, 2021, Ericsson announced
the entering into of an agreement to acquire
Vonage Holdings Corp. for a total acquisition
price of approximately USD 6.2 billion. It was
stated in the announcement that completion
of the transaction was expected in the first
half of 2022, subject to Vonage shareholder
approval, regulatory approvals, and other
customary conditions. Since then, Vonage
shareholder approval has been obtained and
all requisite foreign and U.S. regulatory require-
ments for closing have been satisfied, except
certain clearance from the Committee on
Foreign Investment in the United States. If the
agreement were to terminate under specified
circumstances where we have failed to obtain
such clearance, we may have to pay a USD 200
million termination fee to Vonage. Ericsson still
expects the closing of the transaction to occur
in the first half of 2022.
Update on Deferred Prosecution Agreement
On December 6, 2019, Ericsson entered into a
Deferred Prosecution Agreement (DPA) with
the United States Department of Justice (DOJ).
On March 1, 2022, the DOJ informed Ericsson
that the disclosure made by the Company prior
to the DPA about its internal investigation into
conduct in Iraq in the period 2011 until 2019
was insufficient. Furthermore, it determined
that the Company breached the DPA by failing
to make subsequent disclosure related to the
investigation post-DPA. The Company is in
communication with the DOJ regarding the
facts and circumstances of the breach determi-
nation and is committed to co-operating with
the DOJ to resolve the matter.
At this stage it is premature to predict the
outcome of this matter. DOJ has sole discretion
under the DPA to determine whether a breach
has occurred.
Financial report 2021 Board of Directors’ report
27
Board assurance
The Board of Directors and the President
declare that the consolidated financial state-
ments have been prepared in accordance with
IFRS, as issued by the IASB, and as adopted
by the EU, and give a fair view of the Group’s
financial position and results of operations.
The financial statements of the Parent
Company have been prepared in accordance
with generally accepted accounting principles
in Sweden and give a fair view of the Parent
Company’s financial position and results of
operations. The Board of Directors’ Report for
the Ericsson Group and the Parent Company
provides a fair view of the development of the
Group’s and the Parent Company’s operations,
financial position and results of operations
and describes material risks and uncertainties
facing the Parent Company and the compa-
nies included in the Group.
Stockholm, March 3, 2022
Telefonaktiebolaget LM Ericsson (publ)
Org. no. 556016-0680
Ronnie Leten
Chair of the Board
Helena Stjernholm
Deputy Chair of the Board
Jacob Wallenberg
Deputy Chair of the Board
Jon Fredrik Baksaas
Member of the Board
Jan Carlson
Member of the Board
Nora Denzel
Member of the Board
Börje Ekholm
President, CEO and
Member of the Board
Eric A. Elzvik
Member of the Board
Kurt Jofs
Member of the Board
Kristin S. Rinne
Member of the Board
Torbjörn Nyman
Member of the Board
Anders Ripa
Member of the Board
Kjell-Åke Soting
Member of the Board
Our audit report has been submitted on March 3, 2022
Deloitte AB
Thomas Strömberg
Authorized Public Accountant
Financial report 2021 28
Consolidated financial statements with notes
Consolidated financial statements with notes
Contents
Consolidated financial statements
29
29
30
31
32
Consolidated income statement
Consolidated statement of comprehensive
income (loss)
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
35
35
42
45
45
48
48
48
A
A1
A2
B
B1
B2
B3
B4
Basis of presentation
Significant accounting policies
Critical accounting estimates
and judgments
Business and operations
Segment information
Net sales
Expenses by nature
Other operating income and
expenses
48
48
49
49
49
49
49
51
52
53
53
54
54
54
55
55
56
57
B5
B6
B7
B8
B9
C
C1
C2
C3
D
D1
D2
D3
D4
E
E1
E2
E3
Inventories
Customer contract related
balances
Other current receivables
Trade payables
Other current liabilities
Long-term assets
Intangible assets
Property, plant and equipment
Leases
Obligations
Provisions
Contingent liabilities
Assets pledged as collateral
Contractual obligations
Group structure
Equity
Business combinations
Associated companies
58
58
63
63
64
65
65
69
71
76
77
77
78
78
79
79
79
F
F1
F2
F3
F4
G
G1
G2
G3
G4
H
H1
H2
H3
H4
H5
H6
Financial instruments
Financial risk management
Financial income and expenses
Financial assets, non-current
Interest-bearing liabilities
Employee related
Post-employment benefits
Information regarding members
of the Board of Directors and
Group management
Share-based compensation
Employee information
Other
Taxes
Earnings per share
Statement of cash flows
Related party transactions
Fees to auditors
Events after the reporting period
Financial report 2021 Consolidated financial statements
Notes
B1, B2
F1
B4
B4
B1, E3
B1
F2
H1
H2
H2
H2
Consolidated income statement
January–December, SEK million
Net sales
Cost of sales
Gross income
Research and development expenses
Selling and administrative expenses
Impairment losses on trade receivables
Operating expenses
Other operating income
Other operating expenses
Share in earnings of joint ventures and associated companies
Earnings before financial items and income tax (EBIT)
Financial income and expenses, net
Income after financial items
Income tax
Net income
Net income (loss) attributable to:
Owners of the Parent Company
Non-controlling interests
Other information
Average number of shares, basic (million)
Earnings per share attributable to owners of the Parent Company, basic (SEK) 1)
Earnings per share attributable to owners of the Parent Company, diluted (SEK) 1)
1) Based on net income attributable to owners of the Parent Company.
Consolidated statement of comprehensive income (loss)
January–December, SEK million
Net income
Other comprehensive income (loss)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit pension plans including asset ceiling
Revaluation of borrowings due to change in credit risk
Tax on items that will not be reclassified to profit or loss
Items that have been or may be reclassified to profit or loss
Cash flow hedge reserve
Gains/losses arising during the period
Reclassification adjustments on gains/losses included in profit or loss
Translation reserves
Changes in translation reserves
Reclassification to profit and loss
Share of other comprehensive income of JV and associated companies
Tax on items that have been or may be reclassified to profit or loss
Other comprehensive income (loss), net of tax
Total comprehensive income (loss)
Total comprehensive income (loss) attributable to:
Owners of the Parent Company
Non-controlling interests
Consolidated financial statements
29
2021
232,314
–131,565
100,749
–42,074
–26,957
–40
–69,071
1,526
–1,164
–260
31,780
–2,530
29,250
–6,270
22,980
22,694
286
3,329
6.82
6.81
2020
232,390
–138,666
93,724
–39,714
–26,684
118
–66,280
1,161
–499
–298
27,808
–596
27,212
–9,589
17,623
17,483
140
3,323
5.26
5.26
2019
227,216
–142,392
84,824
–38,815
–26,137
737
–64,215
2,350
–12,060
–335
10,564
–1,802
8,762
–6,922
1,840
2,223
–383
3,306
0.67
0.67
2021
22,980
2020
17,623
2019
1,840
3,537
31
–682
–542
–96
–4,618
99
880
136
281
3,342
–5,376
46
28
126
5,790
28,770
28,694
76
124
–81
–86
–8,641
8,982
8,787
195
–6,182
–651
1,363
–290
—
1,925
54
131
60
–3,590
–1,750
–1,403
–347
Financial report 2021
30
Consolidated financial statements
Consolidated balance sheet
SEK million
Assets
Non-current assets
Intangible assets
Capitalized development expenses
Goodwill
Intellectual property rights, brands and other intangible assets
Property, plant and equipment
Right-of-use assets
Financial assets
Equity in joint ventures and associated companies
Other investments in shares and participations
Customer finance, non-current
Interest-bearing securities, non-current
Other financial assets, non-current
Deferred tax assets
Current assets
Inventories
Contract assets
Trade receivables
Customer finance, current
Current tax assets
Other current receivables
Interest-bearing securities, current
Cash and cash equivalents
Total assets
Equity and liabilities
Equity
Capital stock
Additional paid in capital
Other reserves
Retained earnings
Equity attributable to owners of the Parent Company
Non-controlling interests
Non-current liabilities
Post-employment benefits
Provisions, non-current
Deferred tax liabilities
Borrowings, non-current
Lease liabilities, non-current
Other non-current liabilities
Current liabilities
Provisions, current
Borrowings, current
Lease liabilities, current
Contract liabilities
Trade payables
Current tax liabilities
Other current liabilities
Total equity and liabilities
Notes
C1
C2
C3
E3
F3
B6, F1
F1, F3
F3
H1
B5
B6, F1
B6, F1
B6, F1
B7
F1
H3
E1
E1
E1
E1
E1
E1
G1
D1
H1
F4
C3
D1
F4
C3
B6
B8
B9
Dec 31
2021
Dec 31
2020
3,528
38,204
3,830
13,580
7,948
941
2,258
568
30,626
6,217
23,109
3,857
34,945
4,805
13,383
7,980
1,274
1,519
1,221
21,613
4,842
26,296
130,809
121,735
35,164
10,506
45,399
2,719
6,379
7,656
12,932
54,050
174,805
305,614
16,672
24,731
454
66,918
108,775
–1,676
107,099
36,050
3,722
884
22,241
7,079
1,587
71,563
5,782
9,590
2,224
32,834
35,684
2,917
37,921
126,952
305,614
28,097
11,273
42,063
1,916
7,304
8,710
6,820
43,612
149,795
271,530
16,672
24,731
–2,689
47,960
86,674
–1,497
85,177
37,353
2,886
1,089
22,218
7,104
1,383
72,033
7,580
7,942
2,196
26,440
31,988
4,486
33,688
114,320
271,530
Financial report 2021
Consolidated financial statements
31
Notes
2021
2020
2019
H3
C2
H3, E2
H3, E2
C1
F4
F4
F4
H3
22,980
17,143
40,123
–5,565
34
1,551
1,385
–118
4,014
2,701
4,002
8
–974
–4,094
39,065
–3,663
115
–389
448
–962
–35,415
20,114
–131
–19,883
7,882
–5,791
42
–6,889
–2,368
–2,183
–9,307
563
10,438
43,612
54,050
17,623
19,931
37,554
384
370
–3,185
4,303
–2,669
–560
–2,280
–3,637
763
–1,434
–4,313
28,933
–4,493
254
–9,657
59
–817
–13,637
12,289
801
–15,201
3,219
–9,031
163
–5,996
–2,417
1,570
–12,492
–2,707
–1,467
45,079
43,612
1,840
17,832
19,672
261
–858
10,995
–372
–3,729
–1,579
–1,517
3,201
1,037
–1,819
–5,218
16,873
–5,118
744
–1,753
248
–1,545
–12,507
16,721
–331
–3,541
5,050
–4,134
197
–4,450
–2,990
–573
–6,900
258
6,690
38,389
45,079
Consolidated statement of cash flows
January–December, SEK million
Operating activities
Net income
Adjustments to reconcile net income to cash
Changes in operating net assets
Inventories
Customer finance, current and non-current
Trade receivables and contract assets
Trade payables
Provisions and post-employment benefits
Contract liabilities
Other operating assets and liabilities, net
Interest received
Interest paid
Taxes paid
Cash flow from operating activities
Investing activities
Investments in property, plant and equipment
Sales of property, plant and equipment
Acquisitions of subsidiaries and other operations
Divestments of subsidiaries and other operations
Product development
Purchase of interest-bearing securities
Sale of interest-bearing securities
Other investing activities
Cash flow from investing activities
Financing activities
Proceeds from issuance of borrowings
Repayment of borrowings
Sale of own shares
Dividends paid
Repayment of lease liabilities
Other financing activities
Cash flow from financing activities
Effect of exchange rate changes on cash
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Financial report 2021
32
Consolidated financial statements
Consolidated statement of changes in equity
Equity and Other comprehensive income (loss) 2021
SEK million
January 1, 2021
Net income
Other comprehensive income (loss)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit pension plans
including asset ceiling
Revaluation of borrowings due to change in credit risk
Tax on items that will not be reclassified to profit or loss
Items that have been or may be reclassified
to profit or loss
Cash flow hedge reserve
Gains/losses arising during the period
Reclassification to profit and loss
Translation reserves 1)
Changes in translation reserves
Reclassification to profit and loss
Share of other comprehensive income of JV
and associated companies
Tax on items that have been or may be reclassified
to profit or loss
Other comprehensive income (loss), net of tax
Total comprehensive income (loss)
Transactions with owners
Sale of own shares
Long-term variable compensation plans
Dividends paid 2)
Transactions with non-controlling interest
December 31, 2021
Capital
stock
16,672
—
Additional
paid in
capital
Other
reserves
Retained
earnings
Stockholders’
equity
Non-controlling
interests
24,731
–2,689
—
—
47,960
22,694
86,674
22,694
–1,497
286
Total equity
85,177
22,980
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
31
–6
3,532
—
–675
3,532
31
–681
5
—
–1
3,537
31
–682
–542
–96
3,556
46
28
126
3,143
3,143
—
—
—
—
—
—
—
—
—
—
2,857
25,551
42
93
–6,658
–70
66,918
–542
–96
3,556
46
28
126
6,000
28,694
42
93
–6,658
–70
—
—
–214
—
—
—
–210
76
—
—
–231
–24
–542
–96
3,342
46
28
126
5,790
28,770
42
93
–6,889
–94
108,775
–1,676
107,099
1) Changes in cumulative translation adjustments include changes regarding revaluation of goodwill in local currency of SEK 2,646 million (SEK –3,359 million in 2020 and SEK 966 million in 2019), and realized
gain/losses net from divested/liquidated companies, SEK 46 million (SEK 124 million in 2020 and SEK 54 million in 2019).
2) Dividends paid per share amounted to SEK 2.00 (SEK 1.50 in 2020 and SEK 1.00 in 2019).
16,672
24,731
454
Financial report 2021
Consolidated financial statements
33
Capital
stock
16,672
—
Additional
paid in
capital
24,731
—
Other
reserves
2,292
—
Retained
earnings
Stockholders’
equity
Non-controlling
interests
38,864
17,483
82,559
17,483
–681
140
Total equity
81,878
17,623
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
99
–20
–4,614
—
899
–4,614
99
879
–4
—
1
–4,618
99
880
136
281
–5,434
124
–81
–86
–4,981
–4,981
—
—
—
—
—
—
—
—
—
–3,715
13,768
163
150
–4,985
47,960
136
281
–5,434
124
–81
–86
–8,696
8,787
163
150
–4,985
86,674
—
—
58
—
—
—
55
195
—
—
–1,011
–1,497
136
281
–5,376
124
–81
–86
–8,641
8,982
163
150
–5,996
85,177
16,672
24,731
–2,689
Equity and Other comprehensive income (loss) 2020
SEK million
January 1, 2020
Net income
Other comprehensive income (loss)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit pension plans
including asset ceiling
Revaluation of borrowings due to change in credit risk
Tax on items that will not be reclassified to profit or loss
Items that have been or may be reclassified
to profit or loss
Cash flow hedge reserve
Gains/losses arising during the period
Reclassification to profit and loss
Translation reserves
Changes in translation reserves
Reclassification to profit and loss
Share of other comprehensive income of JV
and associated companies
Tax on items that have been or may be reclassified
to profit or loss
Other comprehensive income (loss), net of tax
Total comprehensive income (loss)
Transactions with owners
Sale of own shares
Long-term variable compensation plans
Dividends paid
December 31, 2020
Financial report 2021
34
Consolidated financial statements
Equity and Other comprehensive income (loss) 2019
SEK million
January 1, 2019
Opening balance adjustment due to IFRS 16
January 1, 2019, adjusted
Net income (loss)
Other comprehensive income (loss)
Items that will not be reclassified to profit or loss
Remasurements of defined benefit pension plans
including asset ceiling
Revaluation of borrowings due to change in credit risk
Tax on items that will not be reclassified to profit or loss
Items that have been or may be reclassified
to profit or loss
Cash flow hedge reserve
Gains/losses arising during the period
Translation reserves
Changes in translation reserves
Reclassification to profit and loss
Share of other comprehensive income of JV
and associated companies
Tax on items that have been or may be reclassified
to profit or loss
Other comprehensive income (loss), net of tax
Total comprehensive income (loss)
Transactions with owners
Sale of own shares
Long-term variable compensation plans
Dividends paid
Transactions with non-controlling interests
December 31, 2019
Other
reserves
Retained
earnings
Stockholders’
equity
Non-controlling
interests
Total equity
Capital
stock
16,672
—
Additional
paid in
capital
24,731
—
16,672
24,731
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
965
—
965
—
—
–651
134
–290
1,889
54
131
60
1,327
1,327
—
—
—
—
16,672
24,731
2,292
44,610
–249
44,361
2,223
86,978
–249
86,729
2,223
792
—
792
–383
87,770
–249
87,521
1,840
–6,182
—
1,229
–6,182
–651
1,363
—
—
—
—
—
–4,953
–2,730
197
377
–3,301
–40
38,864
–290
1,889
54
131
60
–3,626
–1,403
197
377
–3,301
–40
82,559
—
—
—
—
36
—
—
—
36
–347
—
—
–1,149
23
–681
–6,182
–651
1,363
–290
1,925
54
131
60
–3,590
–1,750
197
377
–4,450
–17
81,878
Financial report 2021
Notes to the consolidated financial statements
Notes to the consolidated financial statements
35
Section A – Basis of presentation
A1 Significant accounting policies
Basis of presentation
Introduction
The consolidated financial statements comprise Telefonaktiebolaget LM
Ericsson, the Parent Company, and its subsidiaries (“the Company”) and
the Company’s interests in joint ventures and associated companies. The
Parent Company is domiciled in Sweden at Torshamnsgatan 21, SE-164 83
Stockholm. Ericsson supplies communication infrastructure, services and
software to the telecom industry and other sectors.
The consolidated financial statements for the year ended December 31,
2021 have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the IASB, and as endorsed by the
EU and RFR 1 “Additional rules for Group Accounting,” related interpretations
issued by the Swedish Financial Reporting Board (Rådet för finansiell rap-
portering), and the Swedish Annual Accounts Act. For the financial reporting
of 2021, the Company has applied IFRS as issued by the IASB (IFRS effective
as per December 31, 2021). There is no difference between IFRS effective as
per December 31, 2021, and IFRS as endorsed by the EU, nor is RFR 1 related
interpretations issued by the Swedish Financial Reporting Board (Rådet för
finansiell rapportering) or the Swedish Annual Accounts Act in conflict with
IFRS, for all periods presented.
The financial statements were approved by the Board of Directors on
March 3, 2022. The financial statements are subject to approval by the Annual
General Meeting of shareholders.
Disclosure about new standards and amendments applied as from
January 1, 2021, can be found in the end of this note.
The preparations for the adoption of new standards and interpretations not
adopted in 2021 are disclosed at the end of this note, see heading Other.
Basis of presentation
The financial statements are presented in millions of Swedish Krona (SEK).
They are prepared on a going concern and historical cost basis, except for
certain financial assets and liabilities that are stated at fair value: financial
instruments classified as fair value through profit and loss (FVTPL), financial
instruments classified as fair value through other comprehensive income
(FVOCI) and plan assets related to defined benefit pension plans. Assets
acquired under business combinations are fair valued at initial recognition.
Financial information in the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of cash flows
and the consolidated statement of changes in equity with related notes are
presented with two comparison years. For the consolidated balance sheet,
financial information with related notes is presented with one comparison year.
Changes to the presentation in the financial statements
Operating income has been renamed as EBIT (Earnings before financial items
and income tax) and Operating margin as EBIT margin. The definitions of
EBIT and EBIT margin remains unchanged.
From 2021 current tax assets and current tax liabilities are presented as
separate line items in the consolidated balance sheet. Previously current tax
assets were included in other current receivables and current tax liabilities were
included in other current liabilities. Prior year have been represented.
The following changes were made to the presentation of the Consolidated
statement of cash flows in 2021:
– Interests and tax cash flows are presented as separate line items within
the “Cash flow from operating activities.” Previously, interests and tax cash
flows were subsumed within various lines in the sections “Adjustments to
reconcile net income to cash” and “Changes in operating net assets,” and
only disclosed in note H3 “Statement of cash flow.” Prior years have been
represented and there is no impact on cash flows from operating activities.
– Net movements in cash collaterals received and bank borrowings less than
3 months (used for short term liquidity purposes) are presented within
“Other financing activities” since these balances fluctuate over a short
duration, therefore it is neither practical nor useful to present their gross
movements on the cash flow statement. Cash flow from financing activities
in prior years have been restated accordingly, resulting in a reclassification
between the lines “Proceeds from issuance of borrowings,” “Repayment of
borrowings” and “Other financing activities,” with no net effect on total cash
flow from financing activities.
– Purchases and sales of interest-bearing securities are presented on a gross
basis to improve the visibility of cash flows. Cash flow from investing activi-
ties in prior years have been restated accordingly, resulting in new lines
for “Purchase of interest-bearing securities” and “Sale of interest-bearing
securities”.
Basis of consolidation and composition of the Group
The consolidated financial statements are prepared in accordance with the
purchase method. Accordingly, consolidated stockholders’ equity includes
equity in subsidiaries, joint ventures and associated companies earned only
after their acquisition.
Subsidiaries are all companies for which Telefonaktiebolaget LM
Ericsson, directly or indirectly, is the parent. To be classified as a parent,
Telefonaktiebolaget LM Ericsson, directly or indirectly, must control another
company which requires that the Parent Company has power over that other
company, is exposed to variable returns from its involvement and has the
ability to use its power over that other company. The financial statements of
subsidiaries are included in the consolidated financial statements from the
date that control commences until the date that such control ceases.
Intra-group balances and any unrealized income and expense arising from
intra-group transactions are fully eliminated in preparing the consolidated
financial statements. Unrealized losses are eliminated in the same way as
unrealized gains, but only to the extent that there is no evidence of impairment.
The Company is composed of the parent company, Telefonaktiebolaget
LM Ericsson, with generally fully-owned subsidiaries in many countries of the
world. The largest operating subsidiaries are the fully-owned telecom vendor
companies Ericsson AB, incorporated in Sweden and Ericsson Inc., incorpo-
rated in the US.
Foreign currency remeasurement and translation
Items included in the financial statements of each entity of the Company are
measured using the currency of the primary economic environment in which
the entity operates (“the functional currency”). The consolidated financial
statements are presented in Swedish Krona (SEK), which is the Parent
Company’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of each respective transactions.
Foreign exchange gains and losses resulting from the settlement of such trans-
actions and from the translation at period-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognized in the
income statement. An exception applies to intercompany loans regarded as part
of net investment in foreign operations, whereby the foreign exchange gains
and losses on translation shall be recognised in Other Comprehensive Income
(OCI) on consolidation until the intercompany loan repaid or written off, at
which time the cumulative OCI amount is reclassified to the income statement.
Financial report 2021 36
Notes to the consolidated financial statements
Note A1, cont’d.
Changes in the fair value of monetary securities denominated in foreign
currency classified as fair value through other comprehensive income (FVOCI)
are allocated between translation differences resulting from changes in the
amortized cost of the security and other changes in the carrying amount of
the security. Translation differences related to changes in the amortized cost
are recognized in profit or loss, and other changes in the carrying amount are
recognized in Other Comprehensive Income (OCI).
Foreign exchange effect is presented as a net item within Financial income
and expenses, reported separately from other financial income and expenses
items as this reflects the way the Company manages its foreign exchange risks
on a net basis.
Group companies
The results and financial position of all the group entities that have a func-
tional currency different from the presentation currency are translated into the
presentation currency as follows:
Assets and liabilities for each balance sheet presented are translated at the
closing rate at the date of that balance sheet.
Period income and expenses for each income statement are translated at
period average exchange rates.
All resulting net exchange differences are recognized as a separate compo-
nent of Other comprehensive income (OCI).
On consolidation, exchange differences arising from the translation of the
net investment in foreign operations, and of borrowings and other currency
instruments designated as hedges of such investments, are accounted for in
OCI. When a foreign operation is disposed of or sold, exchange differences that
were recorded in OCI are recognized in the income statement as part of the
gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and are trans-
lated at the closing rate.
The Company is continuously monitoring the economies with high infla-
tion, the risk of hyperinflation and potential impact on the Company. There is
no significant impact due to any currency translation of a hyper-inflationary
economy.
Business and operations
For further disclosure, see the notes under section B.
Revenue recognition
IFRS 15, “Revenue from Contracts with Customers” is a principle-based model
of recognizing revenue from customer contracts. It has a five-step model that
requires revenue to be recognized when control over goods and services are
transferred to the customer.
The following paragraphs describes the types of contracts, when perfor-
mance obligations are satisfied, and the timing of revenue recognition. They
also describe the normal payment terms associated with such contracts and
the resulting impact on the balance sheet over the duration of the contracts.
The vast majority of Ericsson’s business is for the sale of standard products and
services.
Standard products and services
Products and services are classified as standard solutions if they do not require
significant installation and integration services to be delivered. Installation and
integration services are generally completed within a short period of time, from
the delivery of the related products. These products and services are viewed
as separate distinct performance obligations. This type of customer contract is
usually signed as a frame agreement and the customer issues individual pur-
chase orders to commit to purchases of products and services over the duration
of the agreement.
Revenue for standard products is recognized when control over the equip-
ment is transferred to the customer at a point in time. This assessment shall be
viewed from a customer’s perspective considering indicators such as transfer
of titles and risks, customer acceptance, physical possession, and billing
rights. For hardware sales, transfer of control is usually deemed to occur when
the equipment arrives at the customer site and for software sales, when the
licenses are made available to the customer. Software licenses may be pro-
vided to the customer at a point in time, activated or ready to be activated by
the customer at a later stage, therefore revenue is recognized when customer
obtains control of the software. Contractual terms vary, therefore judgment
will be applied when assessing the indicators of transfer of control for both
hardware and software sales. Software licenses are also sold on a when-and-if
available basis or delivered to the customer network over a period of time.
In such cases, the customer is billed on a subscription basis, and revenue is
recognized over time. For software revenue based on usage the revenue is
recognized upon usage measurement and right to invoice. Revenue for instal-
lation and integration services is recognized upon completion of the service.
Costs incurred in delivering standard products and services are recognized as
costs of sales when the related revenue is recognized in the Income statement.
Costs incurred relating to performance obligations not yet fully delivered are
recognized as Inventories.
Transaction prices under these contracts are usually fixed, and mostly billed
upon delivery of the hardware or software, or completion of installation ser-
vices. A proportion of the transaction price may be billed upon formal accept-
ance of the related installation services, which will result in a contract asset
for the proportion of the transaction price that is not yet billed. Amounts billed
are normally subject to payments terms within 60 days from invoice date.
Customer finance agreements may be agreed separately with some customers
where payment terms exceed 179 days.
Revenue for recurring services such as customer support and managed
services is recognized as the services are delivered, generally pro-rata over
time. Costs incurred in delivering recurring services are recognized as cost
of sales as they are incurred. Transaction prices under these contracts are
billed over time, often on a quarterly basis. Transaction price for managed
services contract may include variable consideration that is estimated based
on performance and prior experience with the customer. Amounts billed are
normally subject to payments terms within 60 days from invoice date. Contract
liabilities or receivables may arise depending on whether the quarterly billing is
in advance or in arrears. Contracts for standard products and services apply to
business in all segments.
Customized solution
Some products and services are sold together as part of a customized solution
to the customer. This type of contract requires significant installation and
integration services to be delivered within the solution, normally over a period
of more than one year. These products and services are viewed together as a
combined performance obligation. This type of contract is usually sold as a
firm contract in which the scope of the solution and obligations of both parties
are clearly defined for the duration of the contract. Customized solution does
not have any alternative use to the Company as it cannot be sold to or used by
other customers.
Revenue for the combined performance obligation shall be recognized over
time if progress of completion can be reliably measured and enforceable right
to payment exists over the duration of the contract. The progress of completion
is estimated by reference to the output delivered such as achievement of con-
tract milestones and customer acceptance. This method determines revenue
milestones over the duration of the contract, and it is considered appropriate
as it reflects the nature of the customized solution and how integration service
is delivered in these projects. If the criteria above are not met, then all revenue
shall be recognized upon the completion of the customized solution, when
final acceptance is provided by the customer. Costs incurred in delivering
customized solutions are recognized as costs of sales when the related rev-
enue milestone is recognized in the Income statement. Costs incurred relating
to future revenue milestones are recognized as Inventories and assessed for
recoverability on a regular basis.
Transaction price under these contracts is usually a fixed fee, split into a
number of progress payments or billing milestones as defined in the contract.
In most cases, revenue recognized is limited to the progress payments or
unconditional billing milestones over the duration of the contract, therefore no
contract asset or contract liability arises on these contracts. In some contracts,
revenue may be recognized in advance of billing milestones if enforceable
payment rights exist at all times over the contract duration. This will result in an
unbilled receivable balance until billing milestones are reached. Amounts billed
are normally subject to payments terms within 60 days from invoice date.
Customer finance agreements may be agreed separately with some customers
where payment terms exceed 179 days.
Financial report 2021 Note A1, cont’d.
Contract for customized solution applies to the Business Support Systems
(BSS) business within the segment Digital Services.
Intellectual Property Rights (IPR)
This type of contract relates to the patent and licensing business. The
Company has assessed that the nature of its IPR contracts is such that they
provide customers a license with the right to access the Company intellectual
properties over time, therefore revenue shall be recognized over the duration of
the contract. Royalty revenue based on sales or usage is recognized when the
sales and usage occur.
The transaction price on these contracts is usually structured as a royalty fee
based on sales or usage over the period, measured on a quarterly basis. This
results in a receivable balance if the billing is performed the following quarter
after measurement. Some contracts include lump sum amounts, payable either
up front at commencement or on an annual basis. This results in a contract
liability balance if payment is in advance of revenue, as revenue is recognized
over time. Amounts billed are normally subject to payments terms within
60 days from invoice date.
As described in note B1 “Segment Information”, revenue from IPR licensing
contracts are allocated to the segments Networks and Digital Services.
Customer contract related balances
Trade receivables include amounts that are billed in accordance with customer
contract terms and amounts that the Company has an unconditional right to,
with only passage of time before the amounts can be billed in accordance with
the customer contract terms.
Customer finance credits arise from credit terms exceeding 179 days in
the customer contract or a separate financing agreement signed with the
customer. Customer finance is a class of financial assets that is managed
separately from receivables. See note F1 “Financial risk management,” for
further information on credit risk management of trade receivables and
customer finance credits.
In accordance with IFRS 15, where significant financing is provided to the
customer, revenue is adjusted to reflect the impact of the financing transaction.
These transactions could arise from the customer finance credits above if the
contracted interest rate is below the market rate or through implied financing
transactions due to payment terms of more than one year from the date of
transfer of control. The Company has elected to use the practical expedient
not to adjust revenue for transactions with payment terms, measured from the
date of transfer of control, of one year or less.
Contract asset is unbilled sales amount relating to performance obligation
that has been satisfied under customer contract but is conditional on terms
other than only the passage of time before payment of the consideration is due.
Contract liability relates to amounts that are paid by or due from custom-
ers for which performance obligations are unsatisfied or partially satisfied.
Advances from customers are also included in the contract liability balance.
Segment reporting
An operating segment is a component of a company whose operating results
are regularly reviewed by the Company’s chief operating decision maker
(CODM), to make decisions about resources to be allocated to the segment and
assess its performance. The President and the CEO is defined as the CODM
function in the Company.
The segment presentation, as per each segment, is based on the Company’s
accounting policies as disclosed in this note.
The Company generally has one subsidiary for each jurisdiction and within
each of the subsidiaries, each financial statement item is defined and allocated
to each of the different segments.
The Company’s segment disclosure about geographical areas is based on
the country in which transfer of risks and rewards occur.
For further information, see note B1 “Segment information.”
Inventories
Inventories are measured at the lower of cost or net realizable value on a
first-in, first-out (FIFO) basis.
Risks of obsolescence have been measured by estimating market value
based on future customer demand and changes in technology and customer
acceptance of new products.
Notes to the consolidated financial statements
37
A significant part of Inventories is Contract work in progress (CWIP).
Recognition and derecognition of CWIP relates to the Company’s revenue
recognition principles meaning that costs incurred under a customer contract
are initially recognized as CWIP (see Revenue recognition policy). When the
related revenue is recognized, CWIP is derecognized and is instead recognized
as Cost of sales.
In note A2, “Critical accounting estimates and judgments,” further disclosure
is presented in relation to (i) key sources of estimation uncertainty and (ii) the
decision made in relation to accounting policies applied.
Trade payables
See accounting policies under the subheading for Financial instruments and
risk management.
Long-term assets
For further disclosure, see the notes under section C.
Goodwill
As from the acquisition date, goodwill acquired in a business combination is
allocated to each cash-generating unit (CGU) of the Company expected to
benefit from the synergies of the combination.
An annual impairment test for the CGUs to which goodwill has been
allocated is performed in the fourth quarter, or when there is an indication of
impairment. An impairment loss is recognized if the carrying amount of an
asset or its cash-generating unit exceeds its recoverable amount. The recover-
able amount is the higher of the value in use and the fair value less costs of
disposal. In assessing value in use, the estimated future cash flows after tax
are discounted to their present value using an after-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. Application of after-tax amounts in calculation, both in
relation to cash flows and discount rate is applied due to that available models
for calculating discount rate include a tax component. The effect of after-tax
discount rate applied by the Company is not materially different from a dis-
counting based on before-tax future cash flows and before-tax discount rates,
as required by IFRS. An impairment loss in respect of goodwill is not reversed.
Write-downs of goodwill are reported under other operating expenses.
Additional disclosure is required in relation to goodwill impairment test-
ing: see note A2 “Critical accounting estimates and judgments” and note C1
“Intangible assets.”
Intangible assets other than goodwill
Intangible assets other than goodwill comprise intangible assets acquired
through business combinations, such as patents, customer relations,
trademarks and software, as well as capitalized development expenses and
separately acquired intangible assets, mainly consisting of software. At initial
recognition, acquired intangible assets relating to business combinations are
stated at fair value and capitalized development expenses and software are
stated at cost. Subsequent to initial recognition, these intangible assets are
stated at the initially recognized amounts less accumulated amortization
and any impairment. Amortization and any impairment losses are included
in Research and development expenses, which mainly consists of capital-
ized development expenses and technology; in Selling and administrative
expenses, which mainly consists of expenses relating to customer relations
and brands; and in Cost of sales.
Costs incurred for the development of products to be sold, leased, or other-
wise marketed or intended for internal use are capitalized as from when tech-
nological and economic feasibility has been established until the product is
available for sale or use. Research and development expenses directly related
to orders from customers are accounted for as a part of Cost of sales. Other
research and development expenses are charged to the income statement as
incurred. Amortization of acquired intangible assets, such as patents, customer
relations, trademarks, and software, is made according to the straight-line
method over their estimated useful lives, not exceeding ten years. Amortization
of capitalized development expenses is made according to the straight-line
method over their useful lives normally three years.
The Company has not recognized any intangible assets with indefinite
useful life other than goodwill.
Financial report 2021 38
Notes to the consolidated financial statements
Note A1, cont’d.
Impairment tests are performed whenever there is an indication of
impairment. Tests are performed in the same way as for goodwill, see above.
However, intangible assets not yet available for use are tested annually.
Corporate assets have been allocated to cash-generating units in relation
to each unit’s proportion of total net sales. The amount related to corporate
assets is not significant. Impairment losses recognized in prior periods are
assessed at each reporting date for any indications that the loss has decreased
or no longer exists.
In note A2, “Critical accounting estimates and judgments,” further disclosure
is presented in relation to (i) key sources of estimation uncertainty and (ii) the
decision made in relation to accounting policies applied.
Property, plant, and equipment
Property, plant, and equipment consist of real estate, machinery and other
technical assets, other equipment, tools and installations, and construction
in progress. They are stated at cost less accumulated depreciation and any
impairment losses.
Depreciation is charged to the income statement, on a straight-line basis,
over the estimated useful life of each component of an item of property, plant,
and equipment, including buildings. Estimated useful lives are, in general,
25–50 years for real estate and 3–10 years for machinery and equipment.
Depreciation and any impairment charges are included in Cost of sales,
Research and development or Selling and administrative expenses.
The Company recognizes in the carrying amount of an item of property,
plant, and equipment the cost of replacing a component and derecognizes the
residual value of the replaced component.
Impairment testing as well as recognition or reversal of impairment of
property, plant and equipment is performed in the same manner as for intangi-
ble assets other than goodwill, see description under “Intangible assets other
than goodwill” above.
Gains and losses on disposals are determined by comparing the proceeds
any lease payments made at or before the commencement date less any lease
incentives received plus any initial direct costs and restoration costs.
After commencement date the right-of-use assets are measured at cost
less accumulated depreciation and impairment losses and adjusted for any
remeasurements of the lease liabilities. The right-of-use asset is depreciated
over the lease term straight-line. Impairment of right-of-use assets follows IAS
36 “Impairment of Assets.” When there is impairment the asset value shall be
written down to its recoverable amount.
The Company applies the recognition exemption for short-term leases and
leases for which the underlying asset is of low value and recognizes the lease
payments for those leases as an expense on a straight-line basis over the
lease term. The interest expense on lease liabilities in the income statement
is presented as a component of finance costs separate from the depreciation
charges for right-of-use assets. In the statement of cash flows, cash payments
related to the amortization of the lease liabilities are reported within financing
activities. Interest payments, payments for short-term leases, low-value assets
and variable lease expenses not included in the measurement of the lease
liability are reported within operating activities. For more information regard-
ing leases, see note C3 “Leases.”
Leases when the Company is the lessor
Lease contracts with the Company as lessor are classified as finance leases
when substantially all of risks and rewards are transferred to the lessee,
and otherwise as operating leases. Under a finance lease, a receivable is
recognized at an amount equal to the net investment in the lease and revenue
is recognized in accordance with the revenue recognition principles. Under
operating leases revenue as well as depreciation is recognized on a straight-
line basis over the lease term. When the Company acts as a lessor it is mainly
in relation to real estate sublease, financing and operating.
less cost to sell with the carrying amount and are recognized within Other
operating income and expenses in the income statement.
Obligations
For further disclosure, see the notes under section D.
Leases
The main types of assets leased by the Company are, in the order of material-
ity, real estate, IT-equipment and vehicles. Vehicles are mainly used under
service contracts.
Leases when the Company is the lessee
The Company recognizes right-of-use assets and lease liabilities arising from
all leases in the balance sheet, with some exceptions of low value assets. This
model reflects that, at the start of a lease, the lessee always obtains the right to
control an asset for a period of time and has an obligation to pay for that right.
In the assessment of a lease contract the lease components are separated
from non-lease components. The lease term is defined based on the contract
lease term and when reasonably certain estimated extension or termina-
tion options are included. The average remaining lease term for real estate
contracts is around five years. For lease extensions not included in the lease
liability there can be multiple options for different periods (overlapping) and
they can have stipulations for options to be valid (limitations on size/scope)
that must be maintained for extension. As a result, the future payments for
these lease extensions are not known.
At commencement date the lease liabilities are measured at the present
value of the lease payments not paid at the commencement date, discounted
using the Company’s incremental borrowing rate. The incremental borrowing
rate is calculated considering interest swap rates, the creditworthiness of the
entity that signs the lease and an adjustment for the asset being collateralized.
Lease payments included in the liability are fixed payments, variable payments
depending on an index or rate and penalties for termination of contracts.
After the commencement date, the amount of lease liabilities is measured
on an amortized cost basis using the effective interest method where the
lease liabilities increase related to the accrued interest and decrease due to
lease payments made. In addition, the lease liability is remeasured if there
is a modification, a change in the lease term or a change in the future lease
payments resulting from a change in an index or rate used to determine such
lease payments.
Provisions
Provisions are made when there are legal or constructive obligations as a result
of past events and when it is probable that an outflow of resources will be
required to settle the obligations and the amounts can be reliably estimated.
When the effect of the time value of money is material, the estimated cash
flows are discounted to present value. However, the actual outflows as a result
of the obligations may differ from such estimates.
Provisions mainly relate to restructuring, customer and supplier-related
provisions, warranty commitments and other obligations, cash-settled share-
based payments, claims or obligations as a result of patent infringement, and
other litigations.
A restructuring obligation is considered to have arisen when the Company
has a detailed formal plan for the restructuring (approved by management),
which has been communicated in such a way that a valid expectation has been
raised among those affected. Provision for restructuring is recorded when the
Company can reliably estimate the liabilities relating to the obligation. The
estimate is based on the Company’s expected expenditure to settle the obliga-
tion and is adjusted when changes to the expenditure is known.
Customer-related provisions mainly consist of estimated losses on onerous
contracts. For losses on customer contracts, a provision equal to the total
estimated loss is recorded immediately when a loss from a contract is probable
and can be estimated reliably. These contract loss estimates may include
penalties under a loss contract.
Supplier-related provisions consist of guarantees or claims by suppliers. A
provision equal to the best estimate of the expected expenditure to settle the
obligation is raised when the Company can reliably estimate the obligation
and it is probable that there will be an outflow of resources required to settle
the obligation.
Product warranty commitments consider probabilities of all material quality
issues based on historical performance for established products and expected
performance for new products, estimates of repair cost per unit, and volumes
sold still under warranty up to the reporting date.
Share-based payment provision relates to cash-settled share-based
At commencement date the right-of-use assets are measured at cost, which
programs. Refer to the accounting policy under “Cash-settled plans.”
equals the amount of the initial measurement of lease liability adjusted for
Financial report 2021 Note A1, cont’d.
Other provisions relate mainly to litigations. The Company provides for
estimated future settlements related to patent infringements based on the
probable outcome of each infringement. The actual outcome or actual cost
of settling an individual infringement may vary from the Company’s estimate.
The Company estimates the outcome of any potential patent infringement
made known to the Company through assertion and the Company’s monitor-
ing of patent-related cases in the relevant legal systems. To the extent that the
Company makes the judgment that an identified potential infringement will
more likely than not result in an outflow of resources, the Company records a
provision based on the Company’s best estimate of the expenditure required
to settle with the counterpart.
In the ordinary course of business, the Company is subject to proceedings,
lawsuits, and other unresolved claims, including proceedings under laws and
government regulations and other matters. These matters are often resolved
over a long period of time. The Company regularly assesses the likelihood of
any adverse judgments in or outcomes of these matters, as well as potential
ranges of possible losses. Provisions are recognized when it is probable that
an obligation has arisen, and the amount can be reasonably estimated based
on a detailed analysis of each individual issue.
Contingent liabilities
Certain present obligations are not recognized as provisions as it is not prob-
able that an economic outflow will be required to settle the obligations or the
amount of the obligation cannot be measured with sufficient reliability, or
there is a possible obligation arising from a past event, which will be confirmed
by the occurrence or non-occurrence of a future uncertain event, not within the
control of the Company. Such obligations are reported as contingent liabilities.
For further detailed information, see note D2 “Contingent liabilities.” In note A2
“Critical accounting estimates and judgments,” further disclosure is presented
in relation to (i) key sources of estimation uncertainty and (ii) the decision
made in relation to accounting policies applied.
Group structure
For further disclosure, see the notes under section E.
Business combinations
At the acquisition of a business, the cost of the acquisition, being the purchase
price, is measured as the fair value of the assets given, and liabilities incurred
or assumed at the date of exchange, including any cost related to contingent
consideration. Transaction costs attributable to the acquisition are expensed
as incurred. The acquisition cost is allocated to acquired assets, liabilities, and
contingent liabilities based upon appraisals made, including assets and liabili-
ties that were not recognized on the acquired entity’s balance sheet, for exam-
ple, intangible assets such as customer relations, brands, patents, and financial
liabilities. Goodwill arises when the purchase price exceeds the fair value of
recognizable acquired net assets. In acquisitions with non-controlling interests
full or partial goodwill can be recognized. Final amounts are established within
one year after the transaction date at the latest.
In case there is a put option for a non-controlling interest in a subsidiary a
corresponding financial liability is recognized.
Non-controlling interests
The Company treats transactions with non-controlling interests as transac-
tions with equity owners of the Company. For purchases from non-controlling
interests, the difference between any consideration paid and the relevant
share acquired of the carrying value of net assets of the subsidiary is recorded
in equity. Gains or losses on disposals to non-controlling interests are also
recorded in equity.
At acquisition, there is a choice on an acquisition-by-acquisition basis to
measure the non-controlling interest in the acquiree either at fair value or at
the non-controlling interest’s proportionate share of the acquiree’s net assets.
Joint ventures and associated companies
When the Company ceases to have control, any retained interest in the entity
is remeasured to its fair value, with the change in carrying amount recognized
in profit or loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest in an associate or financial
asset. In addition, any amounts previously recognized in Other comprehensive
Notes to the consolidated financial statements
39
income in respect of that entity are accounted for as if the Company had
directly disposed of the related assets or liabilities. This may mean that
amounts previously recognized in Other comprehensive income are reclassi-
fied to profit or loss.
Joint ventures and associated companies are accounted for in accordance
with the equity method. Under the equity method, the investment in the joint
venture or associate is initially recognized at cost and the carrying amount
is increased or decreased to recognize the investor’s share of the profit or
loss of the investee after the date of acquisition. If the Company’s interest in
an associated company is nil, the Company shall not, as prescribed in IFRS,
recognize its part of any future losses. Provisions related to obligations for such
an interest shall, however, be recognized in relation to such an interest.
Investments in associated companies is when the Company has significant
influence and the power to participate in the financial and operating policy
decisions of the associated company but is not in control or joint control over
those policies. Normally, this is the case in voting stock interest, including effec-
tive potential voting rights, which stand at least at 20% but not more than 50%.
The Company’s share of income before taxes is reported in item “Share in
earnings of joint ventures and associated companies,” included in EBIT. This
reflects the fact that these interests are held for operating rather than investing
or financial purposes. Ericsson’s share of income taxes related to associ-
ated companies is reported under the line item “Income tax,” in the income
statement.
Unrealized gains on transactions between the Company and its joint ven-
tures and associated companies are eliminated to the extent of the Company’s
interest in these entities. Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred.
Shares in earnings of joint ventures and associated companies are included in
consolidated equity since they are undistributed. They are reported in retained
earnings in the balance sheet.
Impairment testing, as well as recognition or reversal of impairment of
investments in each joint venture and associated company, is performed in the
same manner as for intangible assets other than goodwill. The entire carrying
value of each investment, including goodwill, is tested as a single asset. See
also description under “Intangible assets other than goodwill” below.
If the ownership interest in an associate is reduced but significant influence
is retained, only a proportionate share of the amounts previously recognized
in Other comprehensive income are reclassified to profit or loss where
appropriate.
In note A2, “Critical Accounting Estimates and Judgments,” further disclo-
sure is presented in relation to (i) key sources of estimation uncertainty and (ii)
the decision made in relation to accounting policies applied.
Financial instruments and risk management
For further disclosure, see the notes under section F. Plan assets under IAS 19
are excluded from the financial risk management policy and financial instru-
ments disclosures in section F.
Financial assets
Financial assets are recognized when the Company becomes a party to the
contractual provisions of the instrument. Regular purchases and sales of
financial securities are recognized on the settlement date. Financial assets
are derecognized when the rights to receive cash flows from the assets have
expired or have been transferred and the Company has transferred substan-
tially all risks and rewards of ownership. Separate assets or liabilities are recog-
nized if any rights and obligations are created or retained in the transfer.
The Company classifies its financial assets in the following categories: at
amortized cost, at fair value through other comprehensive income (FVOCI),
and at fair value through profit or loss (FVTPL). The classification depends on
the cash flow characteristics of the asset and the business model in which it is
held.
Financial assets are initially recognized at fair value plus transaction costs
for all financial assets not carried at fair value through profit or loss. Financial
assets carried at fair value through profit or loss are initially recognized at fair
value, and transaction costs are expensed in the income statement.
The fair values of quoted financial investments and derivatives are based on
quoted market prices or rates. If official rates or market prices are not available,
fair values are calculated by discounting the expected future cash flows at
Financial report 2021 40
Notes to the consolidated financial statements
Note A1, cont’d.
prevailing interest rates. Valuations of foreign exchange options and Interest
Rate Guarantees (IRG) are made by using the Black-Scholes formula. Inputs
to the valuations are market prices for implied volatility, foreign exchange and
interest rates.
Financial assets at amortized cost
Financial assets are classified as amortized cost if the contractual terms give
rise to payments that are solely payments of principal and interest on the
principal amount outstanding and the financial asset is held in a business
model whose objective is to hold financial assets in order to collect contractual
cash flows. These assets are subsequently measured at amortized cost using
the effective interest method, minus impairment allowances. Interest income
and gains and losses from financial assets at amortized cost are recognized in
financial income.
Financial assets at fair value through other comprehensive income
(FVOCI)
Assets are classified as FVOCI if the contractual terms give rise to payments
that are solely payments of principal and interest on the principal amount
outstanding and the financial asset is held in a business model whose objec-
tive is achieved by both collecting contractual cash flows and selling financial
assets. These assets are subsequently measured at fair value with changes in
fair value recognized in other comprehensive income (OCI), except for effective
interest, impairment gains and losses and foreign exchange gains and losses
which are recognized in the income statement. Upon derecognition, the cumu-
lative gain or loss in OCI is reclassified to the income statement.
Financial assets at fair value through profit or loss (FVTPL)
All financial assets that are not classified as either amortized cost or FVOCI are
classified as FVTPL. Derivatives are classified as FVTPL, unless they are desig-
nated as hedging instruments for the purpose of hedge accounting. Derivatives
assets and liabilities are offset where there is legally enforceable right to set-
off, and the Company settles on a net basis with the counterparties. Derivatives
assets and liabilities (after offset) are presented as current assets and current
liabilities, respectively. Interest-bearing securities classified as FVTPL, but not
expected to be realized within 12 months, are classified on the balance sheet
based on their maturity date (i.e., those with a maturity longer than one year
are classified as non-current). Investments in shares and participations are
classified as FVTPL and classified as non-current financial assets.
Gains or losses arising from changes in the fair values of investment in
shares and participations are presented in the income statement within other
operating income. Gains and losses on derivatives are presented in the income
statement as follows. Gains and losses on derivatives used to hedge foreign
exchange risks are presented within net foreign exchange gains and losses.
Gains and losses on interest rate derivatives used to hedge financial assets and
liabilities are presented in financial income and financial expense, respectively.
Gains and losses on revaluation of customer financing receivables are pre-
sented in the income statement as selling expenses. Gains and losses arising
from changes in the fair values of all other assets in the FVTPL category are
presented in the income statement within financial income.
Dividends on equity instruments are recognized in the income statement
as part of financial income when the Company’s right to receive payments is
established.
Impairment in relation to financial assets
At each balance sheet date, financial assets classified as either amortized cost
or FVOCI and contract assets are assessed for impairment based on Expected
Credit Losses (ECL). ECLs are the differences between all contractual cash
flows that are due in accordance with the contract and all the cash flows that
the Company expects to receive, discounted at the original effective interest
rate. The Company adopts a simplified approach for trade receivables and
contract assets whereby allowances are always equal to lifetime ECL. The
Company has established a provision matrix based on historical credit loss
experience, which has been adjusted for current conditions and expecta-
tions of future economic conditions. The losses are recognized in the income
statement. When there is no reasonable expectation of collection, the asset
is written off.
Other amortized costs assets are mainly investment grade assets deemed
to be low risk hence credit risk is assumed not to have increased significantly
since initial recognition. Default is deemed if the asset is more than 90 days
past due, after which lifetime ECL is used to calculate allowance on the asset.
Financial liabilities
Financial liabilities are recognized when the Company becomes bound to the
contractual obligations of the instrument.
Financial liabilities are derecognized when they are extinguished, i.e., when
the obligation specified in the contract is discharged, cancelled or expired.
Borrowings
Borrowings issued by the Parent Company are designated FVTPL because
they are managed on a fair value basis. Changes in fair value are recognized in
financial expense, except for changes in fair value due to changes in credit risk
which are recognized in other comprehensive income.
Borrowings not issued by the Parent Company are classified as amortized
cost liabilities. They are initially recognized at fair value, net of transaction
costs incurred. These borrowings are subsequently measured at amortized
cost; any difference between the proceeds (net of transaction costs) and the
redemption value is recognized in the income statement over the period of the
borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Company has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
Trade payables
Trade payables are recognized initially at fair value and subsequently meas-
ured at amortized cost using the effective interest method.
Cash flow hedge accounting
The Company identified certain customer contracts where a fluctuation in the
USD/SEK foreign exchange (FX) rate would significantly impact net sales and
EBIT recorded from the contracts. These contracts are multi-year contracts
denominated in USD with highly probable payments at fixed points in time.
The Company enters into FX forward contracts that match the terms of the
foreign exchange exposure as closely as possible and designates these as
hedging instruments.
At inception, the Company documents the economic relationship between
the hedged item and hedging instrument. For FX hedges, the hedge ratio is
usually 1:1. The Company designates changes in forward rates as the hedged
risk. When applying hedge accounting, the effective portion of changes in the
fair value of derivatives that is designated and qualifies as cash flow hedges is
recognized in OCI. The gain or loss relating to an ineffective portion is recog-
nized immediately in Financial income and expenses, net. Upon recognition
of the hedged net sales, the cumulative amount in cash flow hedge reserve
is released in the OCI as a reclassification adjustment and recognized in net
sales.
Cash flow hedge is also designated for certain highly probable acquisi-
tion expected to be transacted in foreign currencies. FX derivatives are used
as hedging instruments, at a hedge ratio of 1:1. The Company designates
changes in forward rates as the hedged risks. The accounting is similar to that
described for the cash flow hedge above, except that upon recognition of the
hedged acquisition, the cumulative amount in the cash flow hedge reserve is
released and recognized as a basis adjustment to the goodwill.
Employee related
For further disclosure, see the notes under section G.
Post-employment benefits
Pensions and other post-employment benefits are classified as either defined
contribution plans or defined benefit plans. Under a defined contribution plan,
the Company’s only obligation is to pay a fixed amount to a separate entity
(a pension trust fund) with no obligation to pay further contributions if the
fund does not hold sufficient assets to pay all employee benefits. The related
actuarial and investment risks fall on the employee. The expenditures for
defined contribution plans are recognized as expenses during the period when
the employee provides service.
Under a defined benefit plan, it is the Company’s obligation to provide
agreed benefits to current and former employees. The related actuarial and
investment risks fall on the Company.
Financial report 2021 Note A1, cont’d.
The present value of the defined benefit obligations for current and former
employees is calculated using the Projected Unit Credit Method. The discount
rate for each country is determined by reference to market yields on high-
quality corporate bonds that have maturity dates approximating the terms
of the Company’s obligations. In countries where there is no deep market in
such bonds, the market yields on government bonds are used. The calculations
are based upon actuarial assumptions that are updated annually. Actuarial
assumptions are the Company’s best estimate of the variables that determine
the cost of providing the benefits. When using actuarial assumptions, it is
possible that the actual results will differ from the estimated results or that the
actuarial assumptions will change from one period to another. These differ-
ences are reported as actuarial gains and losses. They are, for example, caused
by unexpectedly high or low rates of employee turnover, changed life expec-
tancy, salary changes and changes in the discount rate. Actuarial gains and
losses and gains and losses from remeasurement of plan assets are recognized
in OCI in the period in which they occur. The Company’s net liability for each
defined benefit plan consists of the present value of pension commitments
less the fair value of plan assets and is recognized net on the balance sheet.
When the result is a net benefit to the Company, the recognized asset is limited
to the present value of any future refunds from the plan or reductions in future
contributions to the plan, referred to as ‘asset ceiling’.
Interest cost on the defined benefit obligation and interest income on plan
assets is calculated as a net interest amount by applying the discount rate
to the net defined benefit liability. Current service cost relating to employee
service is recognised in the profit and loss in the period. Past service cost relat-
ing to plan amendments or curtailment is recognized immediately in the period
it occurs. Swedish special payroll tax is accounted for as a part of the pension
cost and the pension liability respectively.
Payroll taxes related to actuarial gains and losses are included in determin-
ing actuarial gains and losses, reported under OCI.
In note A2, “Critical accounting estimates and judgments” further disclosure
is presented in relation to key sources of estimation uncertainty.
Share-based compensation to employees and the Board of Directors
Share-based compensation is related to remuneration to employees, including
key management personnel and the Board of Directors and could be settled
either in shares or cash.
Under IFRS, a company shall recognize compensation costs for share-based
compensation programs based on a measure of the value to the company of
services received under the plans. For share-settled plans, a corresponding
increase in equity shall be recognized.
As from 2017 the granted share-based programs are cash-settled, except
for programs for the Executive Team. Those programs are share-settled.
Share-settled plans
Compensation costs are recognized during the vesting period, based on the
fair value of the Ericsson share at the grant date, as well as considering perfor-
mance – and market conditions. Examples of performance conditions could be
revenue and profit targets while market conditions relate to the development
of the Parent Company’s share price in relation to a group of reference shares.
All plans have service conditions and some of them have performance or
market conditions.
For share-settled plans, a corresponding increase in equity shall be rec-
ognized. The reason for this IFRS accounting principle is that compensation
cost for a share-settled program is a cost with no direct cash flow impact.
Notes to the consolidated financial statements
41
shareholders a right to receive part of their remuneration as a future payment
of an amount which corresponds to the market value of a share of class B in
the Parent Company at the time of payment, as further disclosed in note G3,
“Share-based compensation.” The cost for cash-settlements is measured and
recognized based on the estimated costs for the program on a pro-rata basis
during the service period, being one year. The estimated costs are remeasured
during and at the end of the service period.
Other
For further disclosure, see the notes under section H.
Income taxes
Income taxes in the consolidated financial statements include both current
and deferred taxes. Income taxes are reported in the income statement unless
the underlying item is reported directly in equity or OCI. For those items, the
related income tax is also reported directly in equity or OCI. A current tax liabil-
ity or asset is recognized for the estimated taxes payable or refundable for the
current year or prior years.
Current income tax is measured at the tax rate that is expected to be applied
based on the tax laws that have been substantially enacted for the reporting
period in the corresponding jurisdiction.
Deferred tax is recognized for temporary differences between the book val-
ues of assets and liabilities and their tax values and for tax loss carry-forwards.
A deferred tax asset is recognized only to the extent that it is probable that
future taxable profits will be available against which the deductible temporary
differences and tax loss carry-forwards can be utilized. In the recognition of
income taxes, the Company offsets current tax receivables against current tax
liabilities and deferred tax assets against deferred tax liabilities in the balance
sheet, when the Company has a legal right to offset these items and the
intention to do so. Deferred tax is not recognized for the following temporary
differences: goodwill not deductible for tax purposes, for the initial recognition
of assets or liabilities that affect neither accounting nor taxable profit and for
differences related to investments in subsidiaries when it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax is measured at the tax rate that is expected to be applied to
the temporary differences when they reverse, based on the tax laws that have
been enacted or substantively enacted by the reporting date. An adjustment
of deferred tax asset/liability balances due to a change in the tax rate is
recognized in the income statement, unless it relates to a temporary difference
earlier recognized directly in equity or OCI, in which case the adjustment is also
recognized in equity or OCI. As prescribed in IFRIC 23, uncertainty over income
tax treatment is considered if and when recognizing and measuring income
tax items in the financial statements.
As a result of applying IFRS 16 “Leases,” the Company has not reported
deferred tax on initial recognition. The exemption in IAS 12 is applied i.e. no
deferred tax is reported for the initial recognition of a right-of-use asset and
a lease liability. Subsequently, analysis will be made of temporary differences
to determine if changes are related to initial recognition or if new temporary
differences have arisen and if deferred tax should be reported.
The measurement of deferred tax assets involves judgment regarding
the deductibility of costs not yet subject to taxation and estimates regarding
sufficient future taxable income to enable utilization of unused tax losses in
different tax jurisdictions. All deferred tax assets are subject to annual review
of probable utilization.
For further detailed information, see note G3 “Share-based compensation.”
In note A2, “Critical accounting estimates and judgments,” further disclosure
Cash-settled plans
The total compensation expense for a cash-settled plan is equal to the pay-
ments made to the employees at the date of the end of the service period.
The fair value of the synthetic shares, being the cash equivalents of shares, is
therefore reassessed and amended during the service period, and accounted
for as a provision. Otherwise the accounting is similar to a share-settled plan.
For further detailed information, see note G3 “Share-based compensation.”
Compensation to the Board of Directors
Since 2008, the annual general shareholders meeting of the Parent Company
has each year resolved that the Board members shall be able to choose to
receive part of the Board remuneration in the form of synthetic shares. The
program gives non-employee Directors elected by the General Meeting of
is presented in relation to (i) key sources of estimation uncertainty and (ii) the
decision made in relation to accounting policies applied.
Earnings per share
Basic earnings per share are calculated by dividing net income attributable
to owners of the Parent Company by the weighted average number of shares
outstanding (total number of shares less treasury shares) during the year.
Diluted earnings per share are calculated by dividing net income attributable
to owners of the Parent Company, when appropriately adjusted by the sum
of the weighted average number of ordinary shares outstanding and dilutive
potential ordinary shares. Potential ordinary shares are treated as dilutive
when, and only when, their conversion to ordinary shares would decrease
earnings per share.
Financial report 2021 42
Notes to the consolidated financial statements
Note A1, cont’d.
Rights to matching shares are considered dilutive when the actual fulfilment
of any performance conditions as of the reporting date would give a right to
ordinary shares.
Statement of cash flows
The statement of cash flows is prepared in accordance with the indirect
method. Cash flows in foreign subsidiaries are translated at the average
exchange rate during the period. Payments for subsidiaries acquired or
divested are reported as cash flow from investing activities, net of cash and
cash equivalents acquired or disposed of respectively.
Cash and cash equivalents consist of cash, bank, and interest-bearing
securities that are highly liquid monetary financial instruments with a remain-
ing maturity of three months or less at the date of acquisition.
New accounting standards and interpretations
On January 1, 2021, the following amendments issued by the IASB were
adopted with no material impact on the result and financial position of the
Company.
– Interest Rate Benchmark Reform Phase 2, Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16 (the Phase 2 Amendments)
– Amendments to IFRS 16 Leases: COVID-19-related rent concessions
beyond 30 June 2021
– Amendments to IFRS 4 Insurance Contracts: Extension of the Temporary
Exemption from Applying IFRS 9
A number of new standards, amendments to standards and interpretations
are not yet effective for the year ended December 31, 2021, and have not been
applied in preparing these consolidated financial statements.
The IASB has issued the following Amendments with effective date
January 1, 2022:
– Amendments to “IFRS 3 Business Combinations” – Reference to the
Conceptual Framework.
that asset to the location and condition necessary for it to be capable of
operating in the manner intended by management. Instead, an entity recog-
nizes the proceeds from selling such items, and the costs of producing those
items, in profit or loss.
– Amendments to “IAS 37 Provisions, Contingent Liabilities and Contingent
Assets” to specify which costs an entity needs to include when assessing
whether a contract is onerous or loss-making. The amendments apply a
“directly related cost approach.” The costs that relate directly to a contract to
provide goods or services include both incremental costs and an allocation
of costs directly related to contract activities. General and administrative
costs do not relate directly to a contract and are excluded unless they are
explicitly chargeable to the counterparty under the contract.
– Annual improvements to IFRS 2018–2020.
The Company has finalized the evaluation of any impact on financial result
or position from these amendments and concluded that they will not have a
significant impact.
The IASB has issued the following new standard with effective date
January 1, 2023:
– The “IFRS 17 Insurance contracts” which establishes principles for the rec-
ognition, measurements, presentation and disclosure of insurance contracts.
The Company has finalized its evaluation and concluded that the impact on
financial result or position from adopting IFRS 17 is immaterial.
The IASB has also issued the following Amendments with effective date
January 1, 2023:
– Presentation of Financial Statements: Classification of Liabilities as Current
or Non-current
– Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2: Disclosure of Accounting policies.
– Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates
– Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and
– “IAS 16 Property, Plant and Equipment – Proceeds before Intended Use”,
Liabilities arising from a Single Transaction.
which prohibits entities deducting from the cost of an item of property, plant
and equipment, any proceeds from selling items produced while bringing
The Company has not yet finalized the evaluation of any impact on financial
result or position from these amendments.
A2 Critical accounting estimates and judgments
The preparation of financial statements and application of accounting
standards often involve management’s judgment and the use of estimates and
assumptions deemed to be reasonable at the time they are made. However,
other results may be derived with different judgments or using different
assumptions or estimates, and events may occur that could require a material
adjustment to the carrying amount of the asset or liability affected. Examples
of this could occur at change of strategy or restructuring. Judgments for
accounting policies to be applied as well as estimates may also be impacted
due to this. Following are the most important accounting policies subject
to such judgments and the key sources of estimation uncertainty that the
Company believes could have the most significant impact on the reported
results and financial position.
based on historical experience with the type of business and customer. This
includes assessment of price concession based on latest available information
on contract negotiations that could have retrospective impact on prices for
products and services already ordered or delivered.
IFRS 15 also requires revenue to be allocated to each performance obliga-
tions by reference to their standalone selling prices. The Company considers
that an adjusted market assessment approach should be used to estimate
stand-alone selling prices for its products and services for the purposes of
allocating transaction price. These estimates comprised of prices set for similar
customer and circumstances, adjusted to reflect appropriate profit margins for
the market. Estimates are used to determine discounts that relate specifically
to each performance obligation, thus impacting the stand-alone selling price.
The information in this note is grouped as per:
– Key sources of estimation uncertainty
– Judgments management has made in the process of applying the
Company’s accounting policies.
Revenue recognition
Key sources of estimation uncertainty
The Company uses estimates and judgments in determining the amount and
timing of revenue under IFRS 15, “Revenue from Contracts with Customers,”
particularly when determining the transaction price and its allocation to per-
formance obligations identified under the contract.
Transaction price may consist of variable elements such as discounts,
performance related price and contract penalties. Transaction price, including
variable considerations, is estimated at the commencement of the contract
(and periodically thereafter). Judgment is used in the estimation process
Judgments made in relation to accounting policies applied
Management applies judgment when assessing the customer’s ability and
intention to pay in a contract. The assessment is based on the latest customer
credit standing and the customer’s past payment history. This assessment may
change during the contract execution, and if there is evidence of deterioration
in the customer’s ability or intention to pay, then under IFRS 15 no further
revenue shall be recognized until the collectability criteria is met. Conversely,
this assessment may also change favorably over time, upon which revenue
shall now be recognized on a contract that did not initially meet the collect-
ability criteria.
Management also applies judgment in assessing criteria for contract combi-
nation. Master purchase agreement can cover a number of different businesses
with the same customer and judgment is applied to assess if prices relating to
the different businesses are highly dependent, in which case, contracts relating
to such businesses shall be combined and the total transaction price allocated
Financial report 2021 Note A2, cont’d.
to each performance obligation based on estimated stand-alone selling
prices. Judgment can also be applied on contract amendments related to prior
performance obligations, in which case, the judgment is related to assess if
part of the transaction price shall be applied retrospectively.
Revenue for standard products shall be recognized when control over the
equipment is transferred to the customer at a point in time. This assessment
shall be viewed from a customer’s perspective considering indicators such as
transfer of titles and risks, customer acceptance, physical possession, and bill-
ing rights. Judgment may be applied in determining whether risk and rewards
have been transferred to the customer and whether the customer has accepted
the products. Often all indicators of transfer of control are assessed together
and an overall judgment formed as to when transfer of control has occurred in
a customer contract.
Revenue for customized solutions shall be recognized over time if progress
of completion can be reliably measured and enforceable right to payment
exists over the duration of the contract. The progress of completion is esti-
mated by reference to the output delivered such as achievement of contract
milestones and customer acceptance. Judgments are applied when deter-
mining the appropriate revenue milestones that best reflect the progress of
completion and are aligned with key acceptance stages within the contract.
Impairment allowance on receivables and contract assets
Key sources of estimation uncertainty
The Company monitors the financial stability of its customers, the environ-
ments in which they operate and historical credit losses. This is combined
with expectations of future economic conditions to calculate expected credit
losses (ECLs). ECLs on trade receivables and contract assets are assessed
using a provision matrix based on days past due for groupings of customers
that have historically had similar loss patterns. The amount of ECLs is sensitive
to changes in the circumstances of our customers and the environments in
which they operate as well as management’s expectations of future economic
conditions. Actual credit losses may be higher or lower than expected, therefore
are regularly monitored to ensure the provision matrix is updated if required.
Management review of current and future conditions is based on latest observ-
able economic updates and our internal assessment of the potential impact
on our customers. Total allowances for expected credit losses as of December
31, 2021 were SEK 2.4 (2.5) billion or 4% (5%) of gross trade receivables and
contract assets. For further detailed information see note F1 “Financial risk
management”.
Customer financing receivables are valued at fair value on an individual
basis. When market pricing is not available, an internal valuation model is
applied considering external credit rating, political and commercial risks and
bank pricing. Regular monitoring of customer behavior is also a part of the
internal assessment.
Inventory valuation
Key sources of estimation uncertainty
Inventories are valued at the lower of cost and net realizable value. Estimates
are required in relation to forecasted sales volumes and inventory balances.
In situations where excess inventory balances are identified, estimates of net
realizable values for the excess volumes are made. Inventory allowances for
estimated losses as of December 31, 2021, amounted to SEK 3.6 (3.6) billion
or 9% (11%) of gross inventory. For further detailed information, see note B5
“Inventories.”
Classification in relation to companies owned by less than 100%
Judgments made in relation to accounting policies applied
Judgment in relation to the classification of ownership that is less than
100% requires the Company to judge if the ownership shall be classified as a
sub sidiary, joint venture, associated company, or financial asset. See “Basis
of consolidation and composition of the Group” as well as “Joint ventures
and associated companies” under note A1 “Significant accounting policies”
for a background. Financial assets refer to the ownerships that neither are
sub sidiaries nor JV/associated companies.
Acquired intellectual property rights and other intangible assets,
including goodwill
Key sources of estimation uncertainty
At initial recognition, future cash flows are estimated, to ensure that the initial
carrying values do not exceed the expected discounted cash flows for the items
Notes to the consolidated financial statements
43
of this type of assets. After initial recognition, impairment testing is performed
whenever there is an indication of impairment, in addition, goodwill impair-
ment testing is performed once per year. Negative deviations in actual cash
flows compared to estimated cash flows as well as new estimates that indicate
lower future cash flows might result in recognition of impairment charges.
Impairment losses for intangible assets and goodwill amounted to SEK –0.3
(–0.1) billion for 2021.
At December 31, 2021, the carrying amount of acquired intellectual property
rights and other intangible assets amounted to SEK 42.0 (39.8) billion, includ-
ing goodwill of SEK 38.2 (34.9) billion.
For further discussion on goodwill, see note A1 “Significant accounting
policies.” Estimates related to acquired intangible assets are based on similar
assumptions and risks as for goodwill. For more information, see note C1
“Intangible assets.”
Judgments made in relation to accounting policies applied
At initial recognition and subsequent remeasurement, management judg-
ments are made, both for key assumptions and regarding impairment indica-
tors. In the purchase price allocation made for each acquisition, the purchase
price is assigned to the identifiable assets, liabilities, and contingent liabilities
based on fair values for these assets. Any remaining excess value is reported as
goodwill.
This allocation requires management judgment as well as the definition of
cash-generating units for impairment testing purposes. Other judgments might
result in significantly different results and financial position in the future.
Leases
Key sources of estimation uncertainty
At initial recognition and subsequent remeasurement, management estimates
are made for the term applied in a lease contract. The outcome of these
estimates may turn out not to match the actual outcome of the lease and may
have an adverse effect on the right-of-use assets. For more information, see
note C3 “Leases.”
Judgments made in relation to accounting policies applied
Lease contracts may give the lessee the right to shorten or extend a contract.
Under such contracts management judgement of the lease term is required.
The Group estimates its incremental borrowing rate to measure lease liabilities
at the present value of lease payments as the interest rate implicit in the
lease is not readily determinable. An incremental borrowing rate is used in
discounting of the lease liabilities and requires judgement to reflect the rate
of interest that would have to be paid to borrow over a similar term, and with
a similar security, the funds necessary to obtain an asset of a similar value
to the right-of-use asset in a similar economic environment. This estimated
rate determines the discounting of lease liabilities and right-of use assets
recognized in the statement of financial position. As well as the split between
interest expense and depreciation recognized in the income statement over
the lease term.
Provisions
Key sources of estimation uncertainty
Provisions mainly related to estimates for onerous contracts with customers
and suppliers. Onerous customer contract provision includes estimates of costs
to be incurred based on the latest conditions and progress on the contract.
Assumptions on the probable outcomes of revenue and costs, which may
include costs of potential compensation or penalties on exit, are revised regu-
larly based on the latest available information, and the provision is remeasured
accordingly. Other sources for estimation uncertainty are restructuring
program execution (cost and timing), and outcomes relating to patent and
other litigation. Litigations and disputes may continue over several years and
therefore there is uncertainty in the final outcome and expected settlement.
Provisions are regularly reassessed based on the latest information available
and are adjusted to reflect the Company’s best estimate of the eventual out-
come. This means there may be changes to the provision values over time.
At December 31, 2021, provisions amounted to SEK 9.5 (10.5) billion. For
further detailed information, see note D1 “Provisions.”
Judgments made in relation to accounting policies applied
Whether a present obligation is probable or not requires judgment. The nature
and type of risks for these provisions differ and management’s judgment is
Financial report 2021 44
Notes to the consolidated financial statements
Note A2, cont’d.
applied regarding the nature and extent of obligations in deciding if an outflow
of resources is probable or not. Further judgment is required in determining the
value of the obligation as this is based on the Company’s best estimate as to
the expected future expenditure required to settle the obligation.
Supplier payments program
Judgments made in relation to accounting policies applied
With the aim of increasing working capital efficiency, Ericsson continuously
renegotiates payment days with suppliers. The negotiations with suppliers
for payment days is an integral part of the procurement activities. Some sup-
pliers sell their Ericsson receivables to banks and Ericsson can if requested
introduce a bank interested in purchasing such receivables. Ericsson does not
pay or receive a fee, nor provide additional security under the program. This
arrangement does not lead to any significant change in the nature or function
of Ericsson’s liabilities because the supplier invoices are considered part of
working capital used in Ericsson’s normal operating cycle. The maximum credit
period agreed with any supplier does not exceed six months. Therefore, these
liabilities remain classified as trade payables with separate disclosure in the
notes, see note B8 “Trade payables.”
Contingent liabilities
Key sources of estimation uncertainty
As disclosed under ‘Provisions’ the same type of uncertainty exists for contin-
gent liabilities, specifically relating to the valuation of the possible obligations.
Contingent liabilities mainly relate to estimates for litigation, tax litigation,
and pension guarantees. As the contingent liabilities will only be confirmed
in the future based on the resolution of the litigation or dispute, management
is required to estimate the possibility of an adverse outcome occurring and
potential settlement value. Given that there are a number of potential obliga-
tions, a contingent liability may arise and/or expense (provision) may have to
be recognized at a later stage.
Judgments made in relation to accounting policies applied
As disclosed under note A1, “Significant accounting policies” a present
obligation that is not likely to result in an economic outflow or a possible
obligation which will be confirmed by the occurrence or non-occurrence of an
uncertain future event are classified as contingent liabilities, with no impact
on the Company’s financial statements. However, should an obligation in a
later period be deemed to be probable, then a provision shall be recognized,
impacting the financial statements.
Pensions and other post-employment benefits
Key sources of estimation uncertainty
Accounting for the costs of defined benefit pension plans and other applicable
post-employment benefits is based on actuarial valuations, relying on key
estimates for discount rates, future salary increases, employee turnover rates
and mortality tables. The discount rate assumptions are based on rates for
high-quality fixed-income investments with durations as close as possible to
the Company’s pension plans. In countries where there is not a deep market in
high-quality corporate bonds, the market yields on government bonds shall be
applied. Judgment is applied in determining the deepness of the high-quality
corporate bond market in each country. The impact of applying an alternative
discount rate based on Swedish covered bonds is disclosed in note G1, “Post-
employment benefits.” At December 31, 2021, defined benefit obligations
for pensions and other post-employment benefits amounted to SEK 113.5
(108.2) billion and fair value of plan assets to SEK 81.4 (73.6) billion. For more
information on estimates and assumptions, see note G1 “Post-employment
benefits.”
Deferred taxes
Key sources of estimation uncertainty
Deferred tax assets and liabilities are recognized for temporary differences and
for tax loss carry-forwards. The valuation of temporary differences and tax loss
carry-forwards is based on management’s estimates of future taxable profits
in different tax jurisdictions against which the temporary differences and loss
carry-forwards may be utilized. These estimates are primarily based on busi-
ness plans for the Company´s estimated outcome of deductibility in relation to
larger provisions. As prescribed in IFRIC 23 estimates are made in relation to
uncertain tax positions in a limited number of countries. Estimates are made
for any expected changes in tax legislation with a potential material impact.
The largest amounts of tax loss carry-forwards are reported in Sweden, with
an indefinite period of utilization (i.e. with no expiry date), except for with-
holding taxes that expire after five years. For further information, see note H1
“Taxes.”
At December 31, 2021, the value of deferred tax assets amounted to
SEK 23.1 (26.3) billion. The deferred tax assets related to loss carry-forwards
are reported as non-current assets.
Accounting for income tax, value added tax, and other taxes
Key sources of estimation uncertainty
Accounting for these items is based upon evaluation of taxable income, value
added and other tax rules in all jurisdictions where the profits arise. The total
complexity of rules related to taxes and the accounting for these require man-
agement’s involvement in judgments regarding classification of transactions
and in estimates of probable outcomes of claimed deductions and/or disputes.
COVID-19 impacts on the financial statements
The COVID-19 pandemic has impacted certain lines within our financial
statements in 2020, especially market assumptions used in the valuation
of pension liabilities. In 2021, government bond yields and corporate bond
yields have largely returned to levels observed before the pandemic. As the
global economy continues to recover from the effects of the pandemic, market
conditions and asset prices (equity and bonds) remain volatile. Increases in
inflation rates are also observed in many countries, especially Sweden and the
UK. All these factors have been incorporated into the assumptions used in the
valuation of pension liabilities at year end, although the Company believes it is
difficult to attribute any specific change in market condition to the COVID-19
effect alone.
The Company continually assesses the business performance and profit-
ability for changes in expected future cash flows which could impact recover-
ability of assets such as deferred tax assets and intangible assets. As with
prior year, the Company concluded there is no evidence of material changes
to recoverability risk of business assets as a direct effect of COVID-19. The
uncertainty on the economic recovery from the pandemic resulted in the
Company having additional contractual obligation with suppliers, although
this is also attributable to the general supply constraint in the global electronic
components market.
Comments on areas of financial statements affected are in the following
notes: C1 “Intangible assets,” “D4 Contractual obligations,” F1 “Financial Risk
Management,” and H1 “Taxes.”
Financial report 2021 Notes to the consolidated financial statements
45
Section B – Business and operations
B1 Segment information
Operating segments
When determining Ericsson’s operating segments, consideration has been
given to the financial reporting reviewed by the Chief Operating Decision
Maker (CODM). Markets and what type of customers the products and services
aim to attract has been considered, as well as the distribution channels they
are sold through. Commonality regarding technology, research and develop-
ment has also been taken into account. To best reflect the business focus and
to facilitate comparability with peers, four operating segments are reported;
– Networks
– Digital Services
– Managed Services
– Emerging Business and Other.
Segment Networks offers a multi-technology capable Radio Access Network
(RAN) solution for all network spectrum bands, including integrated high-
performing hardware and software. The offering also includes a transport
portfolio through own solutions and partnering, an integrated antenna solu-
tion and a complete service portfolio covering network deployment and sup-
port. 82% (82% in 2020 and 2019 respectively) of the IPR licensing revenues
are reported as part of segment Networks.
Segment Digital Services provides software-based solutions for business sup-
port (BSS), operational support (OSS) communication services, core networks,
and cloud infrastructure. The focus is on cloud native and automation solutions
supporting our customers’ 4G and growing 5G consumer and enterprise busi-
ness. 18% (18% in 2020 and 2019 respectively) of the IPR licensing revenues
are reported as part of segment Digital Services.
Segment Managed Services provides Networks and IT Managed Services,
Network Design and Optimization, and Application Development and
Maintenance to telecom operators.
Segment Emerging Business and Other supports enterprises by providing
reliable and secure cellular solutions that are easy to use, adopt and scale for
global and local needs. The segment includes:
– Emerging Business, including IoT, iconectiv, Cradlepoint and New
businesses
– Media businesses, including Red Bee Media and a 49% ownership
of MediaKind.
Market areas
The market areas are the Company’s primary sales channel with the responsi-
bility to sell and deliver customer solutions.
The Company operates worldwide and reports its operations divided into
five geographical market areas:
– Europe and Latin America
– Middle East and Africa
– North America
– North East Asia
– South East Asia, Oceania and India.
In addition, IPR licensing revenues and the majority of segment Emerging
Business and Other are externally reported as market area Other.
Major customers
The Company derives most of its sales from large, multi-year agreements with
a limited number of significant customers. Out of a customer base of more
than 500 customers, mainly consisting of network operators, the ten largest
customers accounted for 49% (50% in 2020 and 49% in 2019) of net sales.
The largest customer accounted for approximately 13% (13% in 2020 and
10% in 2019) and the second largest customer accounted for 9% (10% in
2020 and 8% in 2019) of net sales in 2021. These customers were reported
under segment Networks, Digital Services and Managed Services.
Operating segments 2021
Segment sales
Net sales
Gross income
Gross margin (%)
Earnings (loss) before financial items and income tax (EBIT)
EBIT margin (%)
Financial income and expenses, net
Income after financial items
Income tax
Net income
Other segment items
Share in earnings of JV and associated companies
Amortizations
Depreciations
Impairment losses
Restructuring charges
Gains/losses on investments and sale of operations
Networks
167,838
167,838
78,869
47.0%
37,266
22.2%
Digital
Services
36,151
36,151
15,092
41.7%
–3,604
–10.0%
Managed
Services
20,379
20,379
3,835
18.8%
1,468
7.2%
Emerging
Business
and Other
7,946
7,946
2,953
37.2%
–3,350
–42.2%
Total
Segments
232,314
232,314
100,749
43.4%
31,780
13.7%
40
–1,169
–3,764
–127
–262
14
29
–490
–1,194
–177
–130
—
43
–18
–377
–8
–124
–50
–372
–830
–616
–199
–33
997
–260
–2,507
–5,951
–511
–549
961
Group
232,314
232,314
100,749
43.4%
31,780
13.7%
–2,530
29,250
–6,270
22,980
–260
–2,507
–5,951
–511
–549
961
Financial report 2021
46
Notes to the consolidated financial statements
Note B1, cont’d.
Operating segments 2020
Segment sales
Net sales
Gross income
Gross margin (%)
Earnings (loss) before financial items and income tax (EBIT)
EBIT margin (%)
Financial income and expenses, net
Income after financial items
Income tax
Net income
Other segment items
Share in earnings of JV and associated companies
Amortizations
Depreciations
Impairment losses
Restructuring charges
Gains/losses on investments and sale of operations
Operating segments 2019
Segment sales
Net sales
Gross income
Gross margin (%)
Earnings (loss) before financial items and income tax (EBIT) 1)
EBIT margin (%)
Financial income and expenses, net
Income after financial items
Income tax
Net income
Other segment items
Share in earnings of JV and associated companies
Amortizations
Depreciations
Impairment losses
Restructuring charges
Gains/losses on investments and sale of operations
Networks
165,978
165,978
72,413
43.6%
30,851
18.6%
37
–775
–3,764
–494
–746
–129
Networks
155,009
155,009
64,717
41.8%
24,767
16.0%
Digital
Services
37,324
37,324
15,637
41.9%
–2,206
–5.9%
28
–607
–1,252
–119
–19
12
Digital
Services
39,857
39,857
14,836
37.2%
–4,027
–10.1%
Managed
Services
22,600
22,600
4,012
17.8%
1,563
6.9%
5
–5
–386
–25
–258
5
Managed
Services
25,565
25,565
3,990
15.6%
2,309
9.0%
Emerging
Business
and Other
6,488
6,488
1,662
25.6%
–2,400
–37.0%
–368
–602
–587
–58
–283
–29
Emerging
Business
and Other
6,785
6,785
1,281
18.9%
–12,485
–184.0%
Total
Segments
232,390
232,390
93,724
40.3%
27,808
12.0%
–298
–1,989
–5,989
–696
–1,306
–141
Total
Segments
227,216
227,216
84,824
37.3%
10,564
4.6%
26
–517
–3,604
–295
–68
–225
41
–1,413
–1,478
–128
–614
–2
3
–5
–413
–24
–45
–12
–405
–603
–566
–43
–71
936
–335
–2,538
–6,061
–490
–798
697
Group
232,390
232,390
93,724
40.3%
27,808
12.0%
–596
27,212
–9,589
17,623
–298
–1,989
–5,989
–696
–1,306
–141
Group
227,216
227,216
84,824
37.3%
10,564
4.6%
–1,802
8,762
–6,922
1,840
–335
–2,538
–6,061
–490
–798
697
1) Includes costs of SEK –10.7 billion in 2019 related to the resolution of the US SEC and DOJ resolution.
Products and Services by Segments
2021
Products
Services
Total
2020
Products
Services
Total
2019
Products
Services
Total
Networks
Digital
Services
Managed
Services
Emerging
Business
and Other
Total
Segments
128,951
38,887
167,838
122,229
43,749
165,978
109,122
45,887
155,009
19,328
16,823
36,151
20,447
16,877
37,324
21,480
18,377
39,857
132
20,247
20,379
81
22,519
22,600
11
25,554
25,565
3,786
4,160
7,946
3,429
3,059
6,488
3,553
3,232
6,785
152,197
80,117
232,314
146,186
86,204
232,390
134,166
93,050
227,216
Financial report 2021
Note B1, cont’d.
Market area 2021
South East Asia, Oceania and India
North East Asia 3)
North America 2)
Europe and Latin America 1)
Middle East and Africa
Other 1) 2) 3) 5)
Total
1) Of which in EU 5)
Of which in Sweden 5)
2) Of which in the United States 5)
3) Of which in Japan 5)
3) Of which in China 5)
Notes to the consolidated financial statements
47
Net sales
Managed
Services
4,258
800
2,925
8,804
3,592
—
20,379
Digital
Services
4,235
3,605
7,988
12,381
6,436
1,506
36,151
Emerging
Business
and Other
37
252
79
416
14
7,148
7,946
Networks
20,299
24,464
66,464
38,671
10,743
7,197
167,838
Non-current
assets 4)
Total
1,010
2,700
11,971
52,141
209
—
68,031
50,428
45,997
10,749
261
2,202
Total
28,829
29,121
77,456
60,272
20,785
15,851
232,314
31,307
2,349
79,896
13,678
10,078
4) Total non-current assets excluding financial instruments, deferred tax assets, and post-employment benefit assets.
5) Including IPR licencing revenue reported under Other Market area which is allocated based on the country location of the customer. Other sales are attributed to countries based on the destination of products or
services delivered.
Market area 2020
South East Asia, Oceania and India
North East Asia 3)
North America 2)
Europe and Latin America 1)
Middle East and Africa
Other 1) 2) 3) 5)
Total
1) Of which in EU 5)
Of which in Sweden 5)
2) Of which in the United States 5)
3) Of which in Japan 5)
3) Of which in China 5)
Net sales
Managed
Services
4,219
831
3,529
10,167
3,854
—
22,600
Digital
Services
4,329
5,124
7,979
11,954
6,144
1,794
37,324
Emerging
Business
and Other
36
259
68
367
19
5,739
6,488
Networks
21,464
27,120
62,199
33,257
13,281
8,657
165,978
Non-current
assets 4)
Total
812
2,648
12,749
49,895
140
—
66,244
48,133
43,627
11,533
272
2,136
Total
30,048
33,334
73,775
55,745
23,298
16,190
232,390
29,501
1,123
77,835
12,150
18,745
4) Total non-current assets excluding financial instruments, deferred tax assets, and post-employment benefit assets.
5) Including IPR licencing revenue reported under Other Market area which is allocated based on the country location of the customer. Other sales are attributed to countries based on the destination of products or
services delivered.
Market area 2019
South East Asia, Oceania and India
North East Asia 3)
North America 2)
Europe and Latin America 1)
Middle East and Africa
Other 1) 2) 3) 5)
Total
1) Of which in EU 5)
Of which in Sweden 5)
2) Of which in the United States 5)
3) Of which in Japan 5)
3) Of which in China 5)
Net sales
Managed
Services
3,836
1,026
4,673
12,149
3,881
—
25,565
Digital
Services
4,033
4,857
9,646
12,571
7,015
1,735
39,857
Emerging
Business
and Other
57
178
96
402
25
6,027
6,785
Networks
21,850
20,339
55,808
33,884
14,604
8,524
155,009
Non-current
assets 4)
Total
1,199
2,881
11,570
45,832
151
—
61,633
44,306
38,313
10,176
184
2,402
Total
29,776
26,400
70,223
59,006
25,525
16,286
227,216
35,729
589
73,279
8,890
15,860
4) Total non-current assets excluding financial instruments, deferred tax assets, and post-employment benefit assets.
5) Including IPR licencing revenue reported under Other Market area which is allocated based on the country location of the customer. Other sales are attributed to countries based on the destination of products or
services delivered.
Financial report 2021
48
Notes to the consolidated financial statements
B2 Net sales
Net sales
Hardware
Software
Services
Net sales
Of which IPR licensing revenues
Of which export sales from Sweden
B3 Expenses by nature
Expenses by nature
Goods and services
Employee remuneration
Amortizations and depreciations
Impairments, obsolescence allowances
and revaluation
Inventory increase, net
Additions to capitalized development
Expenses charged to cost of sales and
operating expenses
2021
106,399
45,798
80,117
232,314
8,134
140,898
2020
96,294
49,892
86,204
232,390
9,975
132,269
2019
86,130
48,036
93,050
227,216
9,631
120,822
2021
119,787
77,462
8,458
1,456
–5,565
–962
2020
120,102
74,645
7,978
3,082
–44
–817
2019
123,488
72,663
8,599
4,106
–704
–1,545
B5 Inventories
Inventories
Raw materials, components, consumables
and manufacturing work in progress
Finished products
Contract work in progress
Inventories, net
2021
2020
11,584
11,207
12,373
35,164
9,510
8,709
9,878
28,097
The amount of inventories recognized as expense and included in Cost of sales
was SEK 60,362 (61,647) million.
Contract work in progress consists of costs incurred to date on standard
and customised solutions where the performance obligations are yet to be
fully delivered. These costs will be recognized as cost of sales when the related
revenue is recognized in the income statement.
Reported amounts are net of obsolescence allowances of SEK 3,676 (3,627)
million.
Movements in obsolescence allowances
Opening balance
Additions, net
Utilization
Translation differences
200,636
204,946
206,607
Closing balance
Total restructuring charges in 2021 were SEK 0.5 (1.3) billion. Restructuring
charges are included in the expenses presented above.
Restructuring charges by function
Cost of sales
R&D expenses
Selling and administrative expenses
Total restructuring charges
2021
2020
2019
273
137
139
549
725
411
170
1,306
337
344
117
798
Customer finance credits
Trade receivables
Contract assets
Contract liabilities
B6 Customer contract related balances
Trade receivables, customer finance, contract assets and contract liabilities
B4 Other operating income and expenses
Other operating income and expenses
Other operating income
Gains on sales of intangible assets
and PP&E
Gains on investments and sale
of operations 1)
Other operating income
Total other operating income
Other operating expenses
Losses on sales of intangible assets
and PP&E
Losses on investments and sale
of operations 1)
Impairment of goodwill 2)
Other operating expenses 3)
Total other operating expenses
2021
2020
2019
13
64
115
1,199
314
1,526
347
750
1,161
1,119
1,116
2,350
–238
–112
–811
– 1,164
–488
—
–11
–499
–422
—
–11,638
–12,060
1) Includes revaluation gains of Ericsson Ventures investments of SEK 1.0 billion in 2021. Information
about divestments is presented in note E2 “Business combinations.”
2) For more information about the impairment of goodwill, see note C1 “Intangible assets.”
3) Includes cost of SEK –0.8 billion in 2021 as a result of the Nokia settlement related to the 2019
resolutions with SEC and DOJ, and cost of SEK–10.7 billion in 2019 related to the resolution of the
US SEC and DOJ resolution.
.
Of the total Customer finance credits balance SEK 2,719 (1,916) million is
current.
Revenue recognized in the period
Revenue recognized in the year relating to the opening
contract liability balance
Revenue recognized relating to performance obligations
satisfied, or partially satisfied, in prior reporting periods
2021
2020
19,745
20,563
– 186
458
Revenue recognized relating to performance obligations satisfied, or partially
satisfied, in prior reporting periods is a net adjustment that relates to contract
modifications, retrospective price adjustments, settlement and adjustments to
variable consideration based on actual measurements concluded in the year.
Aggregate amount of transaction price allocated
to unsatisfied, or partially unsatisfied, performance
obligations
2021
2020
138,234
93,934
The company expects that the transaction price allocated to the remaining
performance obligations will be converted into revenue in accordance with the
following approximation: 70% in 2022, 20% in 2023 and remaining 10% in
2024 and beyond.
For information about credit risk and impairment of customer contract
related balances, see note F1 “Financial risk management.”
–3
—
—
Transaction price allocated to the remaining performance obligations
2021
3,627
1,378
–1,457
128
3,676
2020
3,386
2,266
–1,781
–244
3,627
2021
3,287
45,399
10,506
32,834
2020
3,137
42,063
11,273
26,440
Financial report 2021
B7 Other current receivables
B9 Other current liabilities
Notes to the consolidated financial statements
49
Other current liabilities
Accrued interest
Accrued expenses
Of which employee-related
Of which supplier-related
Of which other 1)
Derivative liabilities 2)
Other 3) 4)
Total
2021
2020
177
30,837
15,380
9,100
6,357
762
6,145
37,921
181
28,895
15,182
7,823
5,890
234
4,378
33,688
1) Major balance relates to accrued expenses for customer projects.
2) See also note F1 “Financial risk management.”
3) Includes items such as VAT and other payroll deductions.
4) As of 2021, current tax liabilities are presented as a separate line item on the balance sheet and are
no longer included in “Other” in the table above. The comparison year has been updated accordingly.
Other current receivables
Prepaid expenses
Advance payments to suppliers
Derivative assets 1)
Other taxes 2)
Other
Total
2021
2,290
426
317
3,022
1,601
7,656
2020
1,857
468
1,510
3,535
1,340
8,710
1) See also note F1 “Financial risk management.”
2) As of 2021, current tax assets are presented as a separate line item in the balance sheet and are no
longer included in “Other taxes” in the table above. The comparison year has been updated accord-
ingly. Other taxes mainly includes VAT receivables.
B8 Trade payables
Trade payables
Trade payables to associated companies and
joint ventures
Trade payables, excluding associated companies
and joint ventures 1)
Total
2021
2020
115
81
35,569
35,684
31,907
31,988
1) Of the trade payable amount SEK 8.3 (8.6) billion relates to supplier invoices under Ericsson’s supplier
payments program.
Section C – Long-term assets
C1 Intangible assets
Intangible assets
Cost
Opening balance
Acquisitions/capitalization
Balances regarding acquired/divested
business 2)
Sales/disposals
Translation differences
Closing balance
Accumulated amortizations
Opening balance
Amortizations
Balances regarding divested
business 2)
Sales/disposals
Translation differences
Closing balance
Accumulated impairment losses
Opening balance
Impairment losses
Translation differences
Closing balance
Net carrying value
Capitalized
development
expenses
18,049
962
—
—
147
19,158
–10,447
–1,343
—
—
–95
–11,885
–3,745
—
—
–3,745
3,528
2021
Goodwill
41,592
—
725
—
2,646
44,963
—
—
—
—
—
—
–6,647
–112
—
–6,759
38,204
IPR1),
brands and other
intangible assets
Capitalized
development
expenses
53,913
131
–95
–18
2,005
55,936
–41,721
–1,164
—
18
–1,589
–44,456
–7,387
–201
–62
–7,650
3,830
18,681
817
—
–1,256
–193
18,049
–10,896
–906
—
1,256
99
–10,447
–3,745
—
—
–3,745
3,857
2020
Goodwill
37,847
—
7,104
—
–3,359
41,592
—
—
—
—
—
—
–6,647
—
—
–6,647
34,945
IPR1),
brands and other
intangible assets
52,912
396
3,500
–48
–2,847
53,913
–43,018
–1,083
35
48
2,297
–41,721
–7,403
–137
153
–7,387
4,805
1) Intellectual property rights.
2) For more information on acquired/divested businesses, see note E2 “Business combinations.”
Financial report 2021
50
Notes to the consolidated financial statements
Note C1, cont’d.
The total goodwill for the Company is SEK 38.2 (34.9) billion and is allocated
to the operating segments Networks, with SEK 25.8 (24.1) billion, Digital
Services, with SEK 3.2 (3.0) billion and segment Emerging Business and Other,
with SEK 9.2 (7.8) billion, of which Cradlepoint SEK 7.9 (6.5) billion. Segment
Managed Services does not carry goodwill. More information is disclosed in
note B1 “Segment information.”
Impairment losses
In Segment Emerging Business and Other within the CGU iconectiv there was
an impairment loss of SEK 176 million during 2021 due to a strategic decision
to discontinue a business operation. Intangibles of SEK 64 million is mainly
reported on line item Selling and administrative expenses and goodwill of
SEK 112 million reported on line item Other operating expenses in the income
statement.
The assumptions are also based upon information gathered in the Company’s
long-term strategy process, including assessments of new technology, the
Company’s competitive position and new types of business and customers,
driven by the continued integration of telecom and data.
The business plans for all CGUs, except Cradlepoint and Emodo are based
on specific estimates for the five-year forecast period, 2022–2026.
The CGUs Cradlepoint and Emodo use a ten-year forecast period 2022–2031.
Cradlepoint is operating in a rapidly expanding market with forecasted growth
above 25% per year for the next five years. Market maturity and market growth
at long-term sustainable levels is not expected to be reached until well beyond
2025, with Cradlepoint forecasting top-line growth above 10% beyond 2030.
Emodo applies a 10-year time horizon, taking into consideration the fast-
growing AdTech sector and the rapid growth of Emodo within that sector.
All CGUs use a nominal annual growth rate of 1.5% (1.0%) per year after the
In Digital Services there was an impairment loss of intangibles of SEK 137
forecast period.
million during 2021 due to product strategy changes, reported on line item
Research and development expenses.
The impairment losses for 2019 and 2020 is considered immaterial.
An after-tax discount rate has been applied for the discounting of projected
after-tax cash flows. Rate per CGU:
Post-tax discount rates (%)
CGU
Networks
Digital Services
Managed Services
Cradlepoint
iconectiv
Emodo
Red Bee Media
2021
2020
7.5
8.0
8.0
10.0
9.0
12.0
9.5
8.0
8.0
8.0
N/A
8.0
12.0
8.0
There are no reasonably possible change in key assumptions from our sensi-
tivity analysis that would lead to an impairment.
The Company’s discounting is based on after-tax future cash flows and
after-tax discount rates. This discounting is not materially different from a
discounting based on before-tax future cash flows and before-tax discount
rates, as required by IFRS. In note A1 “Significant accounting policies,” and
note A2 “Critical accounting estimates and judgments,” further disclosures are
given regarding goodwill impairment testing. The assumptions for 2020 are
disclosed in note C1 “Intangible assets” in the Annual Report of 2020.
The Company has considered the effect of the COVID-19 pandemic in
the impairment tests and currently expect no material changes to expected
future cash flows which could impact recoverability of intangible assets. Risk
assessment on the business plans is carried out on a regular basis and an
impairment review will be performed if conditions suggest that such assets
may be impaired.
Goodwill allocation
The goodwill allocation has not changed since last year. Goodwill from acquisi-
tions during the year has been allocated to segments Emerging Business and
Other in CGUs Cradlepoint and Emodo.
Impairment tests
Each operating segment is a CGU, except for segment Emerging Business and
Other which consists of several CGUs. The value in use method has been used
for goodwill impairment testing, which means that the recoverable amounts
for CGUs are established as the present value of expected future cash flows
based on business plans approved by management.
Estimation of future cash flows includes assumptions mainly for the follow-
ing key financial parameters:
– Sales growth
– Development of EBIT (based on EBIT margin or cost of goods sold and
operating expenses relative to sales)
– Related development of working capital and capital expenditure
requirements.
The assumptions regarding industry-specific market drivers and market
growth are based on industry sources as input to the projections made within
the Company for the development 2022–2026 for key industry parameters:
– By 2026, about 35 years after the introduction of digital mobile technology,
it is predicted that there will be 8.8 billion mobile subscriptions (excl. Cellular
IoT).
– The number of mobile subscriptions is estimated to grow from around
8.3 billion by the end of 2022 to around 8.8 billion by the end of 2026. Out
of all mobile subscriptions, 7.7 billion will be associated with a smartphone.
– The number of 5G subscriptions is forecasted to reach 3.7 billion
(excl. Cellular IoT) by the end of 2026.
– By 2026, about 39 billion connected devices are forecasted, of which
over 27 billion will be related to Internet of Things, IoT. Connected IoT
devices including connected cars, machines, meters, sensors, point-of-sale
terminals, consumer electronics and wearables.
– Cellular IoT is predicted to grow from 2.4 billion devices in 2022 to 4.8 billion
devices in 2026.
– Mobile data traffic volume is estimated to increase by around three times
in the period 2022–2026. The mobile traffic is driven by smartphone users
and video traffic. Smartphone traffic will grow by around three times, and
mobile video traffic is forecasted to grow by around 30% annually through
2026 to account for approximately 75% of all mobile data traffic.
Financial report 2021 Notes to the consolidated financial statements
51
C2 Property, plant and equipment
Property, plant and equipment 2021
Real estate
Machinery and other
technical assets
Other equipment, tools
and installations
Construction in progress
and advance payments
Cost
Opening balance
Additions
Balances regarding acquired/divested business
Sales/disposals
Reclassifications
Translation differences
Closing balance
Accumulated depreciations
Opening balance
Depreciations
Balances regarding divested business
Sales/disposals
Reclassifications
Translation differences
Closing balance
Accumulated impairment losses
Opening balance
Impairment losses
Sales/disposals
Translation differences
Closing balance
Net carrying value
6,503
54
—
–348
356
381
6,946
–3,405
–441
—
315
1
–211
–3,741
–275
–22
29
–15
–283
2,922
3,030
207
—
–135
270
177
3,549
–2,393
–286
—
136
2
–137
–2,678
–75
–30
5
–4
–104
767
32,890
2,215
–75
–2,145
813
1,311
35,009
–22,863
–2,947
50
1,956
–3
–962
–24,769
–1,024
–146
176
–60
–1,054
9,186
995
1,187
—
–94
–1,439
56
705
—
—
—
—
—
—
—
—
—
—
—
—
705
Contractual commitments for the acquisition of property, plant and equipment as per December 31, 2021, amounted to SEK 477 (499) million.
Property, plant and equipment 2020
Cost
Opening balance
Additions
Balances regarding acquired/divested business
Sales/disposals
Reclassifications
Translation differences
Closing balance
Accumulated depreciation
Opening balance
Depreciations
Balances regarding divested business
Sales/disposals
Reclassification
Translation differences
Closing balance
Accumulated impairment losses
Opening balance
Impairment losses
Sales/disposals
Translation differences
Closing balance
Net carrying value
Real estate
Machinery and other
technical assets
Other equipment, tools
and installations
Construction in progress
and advance payments
6,755
78
2
–567
720
–485
6,503
–3,745
–425
—
537
1
227
–3,405
–295
–11
9
22
–275
2,823
3,512
163
4
–475
92
–266
3,030
–2,843
–241
—
470
11
210
–2,393
–43
–65
28
5
–75
562
33,790
2,184
59
–2,534
1,009
–1,618
32,890
–23,291
–2,936
1
2,165
–12
1,210
–22,863
–1,005
–434
348
67
–1,024
9,003
1,015
2,068
–10
–173
–1,821
–84
995
—
—
—
—
—
—
—
—
–2
2
—
—
995
Total
43,418
3,663
–75
–2,722
—
1,925
46,209
–28,661
–3,674
50
2,407
—
–1,310
–31,188
–1,374
–198
210
–79
–1,441
13,580
Total
45,072
4,493
55
–3,749
—
–2,453
43,418
–29,879
–3,602
1
3,172
—
1,647
–28,661
–1,343
–512
387
94
–1,374
13,383
Financial report 2021
52
Notes to the consolidated financial statements
C3 Leases
Leases with the Company as lessee
Right-of-use assets
Cost
Opening balance
Additions
Balances regarding acquired/divested business
Terminations
Translation differences
Closing balance
Accumulated depreciations
Opening balance
Depreciations
Balances regarding divested business
Terminations
Translation differences
Closing balance
Accumulated impairment losses
Opening balance
Impairment losses
Terminations
Translation differences
Closing balance
Financial sublease
Opening balance
Derecognition
Translation differences
Closing balance
Real estate
Vehicles
Other
Total
Real estate
Vehicles
Other
Total
2021
2020
11,784
1,759
–10
–395
618
13,756
–3,700
–2,002
8
233
–226
–5,687
–340
—
63
–26
–303
–313
—
–32
–345
823
258
–11
–180
40
930
–390
–251
6
158
–18
–495
—
—
—
—
—
—
—
—
—
171
—
—
—
—
171
–55
–24
—
—
—
–79
—
—
—
—
—
—
—
—
—
12,778
2,017
–21
–575
658
14,857
–4,145
–2,277
14
391
–244
–6,261
–340
—
63
–26
–303
–313
—
–32
–345
11,263
2,220
126
–926
–899
11,784
–2,126
–2,082
1
238
269
–3,700
–872
–47
553
26
–340
–314
–42
43
–313
698
339
—
–130
–84
823
–260
–277
—
109
38
–390
—
—
—
—
—
—
—
—
—
126
45
—
—
—
171
–28
–28
—
—
1
–55
—
—
—
—
—
—
—
—
—
12,087
2,604
126
–1,056
–983
12,778
–2,414
–2,387
1
347
308
–4,145
–872
–47
553
26
–340
–314
–42
43
–313
Net carrying value
7,421
435
92
7,948
7,431
433
116
7,980
Lease liabilities
The lease liabilities amounted to SEK 9,303 (9,300) million, of which
SEK 2,224 (2,196) million is classified as current. The remaining contractual
maturities as of December 31, 2021, is shown in note D4 “Contractual
obligations.”
Lease cost
The total lease cost amounted to SEK 3,375 (3,704) million, of which deprecia-
tion SEK 2,277 (2,387) million, impairment losses SEK 0 (47) million, lease
expense relating to low-value assets SEK 434 (516) million, interest expense
SEK 426 (490) million and variable lease expense SEK 238 (264) million.
Variable lease expense consists mainly of property tax.
Future cash outflow
Future cash outflows from leases not yet commenced in 2021 to which
Ericsson as the lessee is committed is SEK 157 (104) million.
Leases with the Company as lessor
Lessor leases relate to subleases of real estate. These lease contracts vary in
length from 1 to 11 years.
Receivables related to subleases in 2021 amounted for operating leases
to SEK 70 (75) million and for financial leases to SEK 64 (56) million. Interest
income from financial subleases was SEK 9 (11) million.
At December 31, 2021, future minimum payment receivables were distrib-
uted as follows:
Cash payments
Cash payments
Repayments of the lease liabilities 1)
Interest expense of the lease liabilities
Low-value asset not included in the measurement
of the liabilities
Variable lease payments not included in
the measurement of the lease liabilities
Total cash outflow
1) Including advance payments.
Future minimum payment receivables
2021
–2,368
–426
2020
–2,417
–490
–434
–516
–238
–3,466
–264
–3,687
2022
2023
2024
2025
2026
2027 and later
Total
Financial leases
Operating leases
66
67
69
12
—
—
214
47
22
9
3
1
2
84
Financial report 2021
Notes to the consolidated financial statements
53
Section D – Obligations
D1 Provisions
Provisions
2021
Opening balance
Additions
Reversal of excess amounts
Charged to income statement
Utilization
Reclassifications
Translation differences
Closing balance
Of which current provisions
Of which non-current provisions
2020
Opening balance
Additions
Reversal of excess amounts
Charged to income statement
Utilization
Reclassifications
Translation differences
Closing balance
Of which current provisions
Of which non-current provisions
Restructuring
Customer
related
Supplier
related
Warranty
Share-based
payments
Other
Total
1,200
303
–98
–785
–1
20
639
411
228
1,095
1,144
–149
–815
9
–84
1,200
1,157
43
3,850
795
–491
–841
104
23
3,440
1,488
1,952
3,738
1,108
–83
–766
–4
–143
3,850
1,716
2,134
791
1,020
–228
–175
–179
2
1,231
1,231
—
1,309
535
–438
–595
–14
–6
791
791
—
987
455
–153
–109
–107
1
1,074
320
754
941
248
–99
–105
3
–1
987
987
—
2,107
1,367
–122
–1,837
—
76
1,591
915
676
1,941
1,563
–69
–1,195
–1
–132
2,107
1,420
687
1,531
483
–86
–462
39
24
1,529
1,417
112
1,899
649
–323
–499
–20
–175
1,531
1,509
22
10,466
4,423
–1,178
3,245
–4,209
–144
146
9,504
5,782
3,722
10,923
5,247
–1,161
4,086
–3,975
–27
–541
10,466
7,580
2,886
Provisions will fluctuate over time depending on the business mix, market mix
and, technology shifts. Risk assessment in the ongoing business is performed
monthly to identify the need for new additions and reversals. Management
uses its best judgment to estimate provisions based on this assessment. Under
certain circumstances, provisions are no longer required due to outcomes
being more favourable than anticipated, which affect the provision balance as
a reversal. In other cases, the outcome can be negative, and if so, a charge is
recorded in the income statement.
For 2021, the total provision value is SEK 9.5 (10.5) billion, of which SEK 3.7
customer contract. If the exit penalty is lower than the estimated costs to fulfil
the contract, then the provision value is limited to the exit penalty value. The
unavoidable costs to fulfil the contract sometimes differ from management’s
estimates. Provisions raised for loss-making customer contracts are therefore
regularly reviewed and adjusted based on the latest information available
considering the realization of the costs estimated. The expected timing and
amount of outflows are dependent on whether the customer contract execu-
tion is in line with management’s assessment. The majority of the customer-
related provisions will be utilized over 5 years.
(2.9) billion is classified as non-current.
For more information, see note A1 “Significant accounting policies” and note
A2 “Critical accounting estimates and judgments” for key estimation uncer-
tainty regarding timing and amount.
Restructuring provisions
Restructuring provisions relate to structural efficiency programs that are
planned and controlled by management and have a material impact on either
the scope of the business undertaken or the manner in which the business is
conducted. The scope of the structural efficiency measures involves service
delivery, supply and manufacturing, R&D, and selling and administration
expenses. Restructuring provisions are recognized based on the expected
costs of the respective restructuring programs and primarily consist of
personnel costs. Estimation uncertainty exists regarding the execution of the
restructuring programs, which may impact the expected timing and realization
of costs. Restructuring provisions are reviewed and adjusted regularly based
on management’s best estimate. The expected timing and amount of outflows
are dependent on whether the plan execution is in line with management’s
assessment. The majority of the restructuring provision will be utilized within
1 year. For more information about the restructuring charges booked in the
income statement, see note B3 “Expenses by nature.”
Customer-related provisions
Customer-related provisions mainly consist of provisions for loss-making
customer contracts. To measure the customer-related provisions, manage-
ment estimates the unavoidable costs to fulfil the obligations under the
Supplier-related provisions
Supplier-related provisions are for supplier claims/guarantees based on the
contractual obligations mostly relating to inventory. The provision is calculated
by comparing the committed inventory purchases with the expected usage
based on forecast and any excess is provided for based on an assessment of
the risk of obsolescence. Therefore, estimation uncertainty exists regarding the
forecast and expected usage as well as the assessment of future obsolescence,
as this is based on management’s expectations. The expected timing and
amount of outflows are dependent on the actual outcome of the supplier
claims and guarantees. The majority of the supplier-related provisions will be
utilized within 1 year.
Warranty provisions
Warranty provisions are based on historic quality rates for established products
as well as estimates regarding quality rates for new products and costs to
remedy the various types of faults predicted. Uncertainty exists regarding the
timing and amount as management utilizes the historical trends to estimate
the warranty provisions as well as the cost to repair or replace, which may differ
from the actual outcomes. New product warranty provisions require further
estimation since historical information is not available. These provisions do
not include costs for service in additions within customer contracts that are
accounted for as separate performance obligations. The expected timing and
amount of outflows are dependent on the actual product faults which may
occur. The majority of the warranty provisions are expected to be utilized over
2 years.
Financial report 2021
54
Notes to the consolidated financial statements
Note D1, cont’d.
Share-based payments provisions
Share-based payments provisions relate to cash-settled share-based pro-
grams and are based on the present period’s best estimate of the eventual
pay-outs, see note G3 “Share-based compensation” for more information. The
uncertainty regarding outflows is relating to the fair value of the underlying
instrument during the service period and expected fulfilment of the service
conditions. The majority of the share-based payment provisions are expected
to be utilized within 1 year.
Other provisions
Other provisions relate mostly to litigation and patent infringement disputes.
Management regularly assesses the likelihood of any adverse outcomes and if
deemed probable then a provision is raised based on the best estimate of the
expenditure required to settle with the counterpart. There is uncertainty in the
final outcome and settlement, therefore management reviews the estimation
regularly. Outflows relating to litigation are inherently uncertain in timing and
amount and therefore the majority of the provisions are expected to be utilized
within 1 year.
D2 Contingent liabilities
D3 Assets pledged as collateral
Contingent liabilities
Contingent liabilities
Total
Assets pledged as collateral
2021
1,614
1,614
2020
1,198
1,198
Chattel mortgages 1)
Bank deposits 2)
Total
2021
6,341
532
6,873
2020
6,332
476
6,808
Contingent liabilities mainly relate to pensions, litigations and tax litigations in
subsidiaries. Contingent liabilities assumed by the Company include guaran-
tees of loans to other companies of SEK 16 (15) million.
All ongoing legal and tax proceedings have been evaluated, their potential
economic outflows and probability estimated, and necessary provisions made,
or contingent liabilities disclosed. In note A2 “Critical accounting estimates
and judgments,” further disclosure is presented in relation to (i) key sources
of estimation uncertainty and (ii) the decision made in relation to accounting
policies applied.
On October 4, 2021, Ericsson asked the U.S. District Court for the Eastern
District of Texas for a declaration that Ericsson has, in its negotiations with
Apple, complied with its FRAND commitment and all other applicable laws
and policies that would affect the terms of Ericsson’s and Apple’s prospective
license. On December 17, 2021, Apple filed a responsive case against Ericsson
in the U.S. District Court for the Eastern District of Texas alleging, among
other things, that Ericsson breached obligations associated with the licensing
of its standard essential patents under FRAND terms. The filing of lawsuits,
complaints and other proceedings, when parties take legal action over a patent
license agreement renewal, is standard and consequently additional lawsuits,
complaints and other proceedings, may follow. See also note H6 “Events after
reporting period.”
As part of its defense to a now settled patent infringement lawsuit filed by
Ericsson in 2013 in the Delhi High Court against Indian handset company
Micromax, Micromax filed a complaint against Ericsson with the Competition
Commission of India (CCI). The CCI decided to refer the case to the Director
General’s Office for an in-depth investigation. The CCI opened similar inves-
tigations against Ericsson in January 2014 based on claims made by Intex
Technologies (India) Limited and, in 2015, based on a now settled claim from
iBall. Ericsson has challenged CCI’s jurisdiction in these cases before the Delhi
High Court and is awaiting final appellate decision by the Supreme Court of
India.
In April 2019, Ericsson was informed by China’s State Administration for
Market Regulation (SAMR) Anti-monopoly bureau that SAMR has initiated
an investigation into Ericsson’s patent licensing practices in China. Ericsson is
cooperating with the investigation, which is still in a fact-finding phase. The
next steps include continued fact finding and meetings with SAMR in order to
facilitate the authority’s assessments and conclusions.
In October 2021, Ericsson received correspondence from the US
Department of Justice (DOJ) stating its determination that the Company had
breached its obligations under its Deferred Prosecution Agreement (DPA) by
failing to provide certain documents and factual information. The Company
cannot provide further detail about the determination by the DOJ or predict
the outcome of the resolution of this matter at this time. Hence it is not possible
to reliably estimate potential future cash outflows in resolving the matter. See
also note H6 “Events after reporting period.”
The above matters relating to Apple, Micromax, SAMR and the DOJ have
not been included in the contingent liability amount disclosed in the table.
1) See also note G1 “Post-employment benefits.”
2) See also note F1 “Financial risk management.”
D4 Contractual obligations
Contractual obligations 2021
Total
33.4
10.6
1.6
27.6
35.7
47.3
0.8
Total
31.3
10.9
1.4
15.2
32.0
26.9
0.2
(SEK billion)
Current and non-current
debt 1)
Lease obligations 2)
Other non-current liabilities
Purchase obligations 3)
Trade payables
Commitments for customer
finance 4)
Derivatives liabilities 4)
Payment due by period
<1
year
1–3
years
3–5
years
>5
years
9.8
2.6
—
23.2
35.7
34.4
0.4
10.4
4.3
1.0
4.1
—
9.7
0.4
10.1
1.4
0.6
—
—
—
—
3.1
2.3
—
0.3
—
3.2
—
8.9
12.1
157.0
Total
106.1
29.9
Contractual obligations 2020
(SEK billion)
Current and non-current
debt 1)
Lease obligations 2)
Other non-current liabilities
Purchase obligations 3)
Trade payables
Commitments for customer
finance 4)
Derivatives liabilities 4)
Total
Payment due by period
<1
year
1–3
years
3–5
years
>5
years
8.4
2.6
0.1
12.0
32.0
26.9
0.1
82.1
10.8
3.9
0.7
2.6
—
—
0.1
10.2
2.5
—
0.6
—
—
—
1.9
1.9
0.6
—
—
—
—
18.1
13.3
4.4
117.9
1) Current and non-current debt, including interest commitments.
2) Future lease obligations, nominal lease liability, see also note C3 “Leases.”
3) The amounts of purchase obligations are gross, before deduction of any related provisions.
4) See also note F1 “Financial risk management.”
As a measure to secure resilience in our supply chain, both due to continued
uncertainties from COVID-19 and due to the constrained situation in the
electronic components global market, we have increased our contractual
obligations with several suppliers. This is coming from purchase obligations
related to extended lead-times but also in some cases from volume commit-
ments beyond lead-times. Any risks related to such contractual and purchase
obligations are assessed according to the principles for recognition of provi-
sions as prescribed under note A1 “Significant accounting policies” under
heading Provisions.
Financial report 2021
Notes to the consolidated financial statements
55
Section E – Group structure
E1 Equity
Capital stock
Capital stock at December 31, 2021 and 2020, consisted of the following:
Capital stock
Parent Company
Class A shares
Class B shares
Total
Number of shares
261,755,983
3,072,395,752
3,334,151,735
Capital stock
(SEK million)
1,309
15,363
16,672
The capital stock of the Parent Company is divided into two classes: Class A
shares (quota value SEK 5.00) and Class B shares (quota value SEK 5.00).
Both classes have the same rights of participation in the net assets and earn-
ings. Class A shares, however, are entitled to one vote per share while Class B
shares are entitled to one tenth of one vote per share.
At December 31, 2021, the total number of treasury shares was 4,009,306
(6,043,960 in 2020 and 19,853,247 in 2019) Class B shares
Number of shares
Number of shares Jan 1, 2021
Number of shares Dec 31, 2021
Number of shares
3,334,151,735
3,334,151,735
Capital stock
(SEK million)
16,672
16,672
Dividend proposal
The Board of Directors propose a dividend for 2021 of SEK 2.50 per share
(SEK 2.00 in 2020 and SEK 1.50 in 2019) to the Annual General Meeting. The
dividend is proposed to be paid in two equal installments, SEK 1.25 per share
with the record date March 31, 2022, and SEK 1.25 per share with the record
date September 30, 2022.
Additional paid in capital
Additional paid in capital relates to payments made by owners and includes
share premiums paid.
Other reserves
Other reserves include translation reserves, cash flow hedges and revaluation
of borrowings.
Translation reserves (cumulative translation adjustments)
The cumulative translation adjustments comprise all foreign currency transla-
tion reserves arising from the translation of the financial statements of foreign
operations to the Group presentation currency and changes regarding revalua-
tion of excess value in local currency.
Cash flow hedge reserve
For further information, see note F1 “Financial risk management.”
Revaluation of borrowings
For further information, see note F4 “Interest-bearing liabilities.”
Retained earnings
Retained earnings, including net income for the year, comprise the earned
profits of the Parent Company and its share of net income in subsidiaries,
joint ventures and associated companies. Retained earnings also include
remeasure ments related to post-employment benefits.
Remeasurements related to post-employment benefits
Actuarial gains and losses resulting from experience-based events and
changes in actuarial assumptions, fluctuations in the effect of the asset ceiling,
and adjustments related to the Swedish special payroll taxes. For more infor-
mation, see note G1 “Post-employment benefits.”
Non-controlling interests
Equity in a subsidiary not attributable, directly or indirectly, to a parent.
Other reserves
SEK million
Opening balance
Other comprehensive income
Items that will not be reclassified to
profit or loss
Revaluation of borrowings due to change
in credit risk
Tax on items that will not be reclassified
to profit or loss
Items that have been or may be
reclassified to profit or loss
Cash flow hedges
Gains/losses arising during the period
Reclassification to profit and loss
Translation reserves
Changes in translation reserves
Reclassification to profit and loss
Share of other comprehensive income of
JV and associated companies
Tax on items that have been or may be
reclassified to profit or loss
Other comprehensive income, net of tax
Total comprehensive income
Closing balance
2021
2020
Translation
reserves
Cash flow
hedge reserve
Revaluation
of borrowings
Total other
reserves
Translation
reserves
Cash flow
hedge reserve
Revaluation
of borrowings
Total other
reserves
–2,424
101
–366
–2,689
2,967
–230
–445
2,292
—
—
—
—
3,556
46
28
—
3,630
3,630
1,206
—
—
–542
–96
—
—
—
126
–512
–512
–411
31
–6
—
—
—
—
—
—
25
25
–341
31
–6
–542
–96
3,556
46
—
—
—
—
–5,434
124
28
–81
126
3,143
3,143
454
—
–5,391
–5,391
–2,424
—
—
136
281
—
—
—
–86
331
331
101
99
–20
—
—
—
—
—
—
79
79
–366
99
–20
136
281
–5,434
124
–81
–86
–4,981
–4,981
–2,689
Financial report 2021
56
Notes to the consolidated financial statements
E2 Business combinations
Acquisitions and divestments
Acquisitions
Acquisitions 2019–2021
Consideration
Cash and cash equivalents
Others
Total consideration
Net assets (liabilities) acquired
Cash and cash equivalents
Property, plant and equipment
Right-of-use of assets
Intangible assets
Investments in associates
Other assets
Provisions, incl. post-employment
benefits
Other liabilities
Total identifiable net assets
(liabilities)
Costs recognized in net income
Goodwill
Total
Acquisition-related costs 1)
2021
2020
2019
256
—
256
—
1
—
–95
—
21
—
–348
–421
—
677
256
11
9,534
314
9,848
314
55
126
3,583
167
1,292
–16
–2,781
2,740
—
7,108
9,848
92
1,815
142
1,957
142
353
—
497
101
1,357
–102
–743
1,605
153
199
1,957
85
1) Acquisition-related costs are included in Selling and administrative expenses in the consolidated
income statement.
In 2021, Ericsson made acquisitions with a negative cash flow effect amount-
ing to SEK 256 (9,534) million. The acquisitions presented below are not
material, but the Company gives the information to provide the reader a sum-
marized view of the content of the acquisitions made. The acquisitions consist
primarily of:
Cradlepoint: On November 1, 2020, the Company acquired all of the shares
in Cradlepoint Inc. (purchase price of SEK 9.5 billion), a US-based market
leader in Wireless Edge WAN 4G and 5G Enterprise solutions. The investment
is key to Ericsson’s ongoing strategy of capturing market share in the rapidly
expanding 5G Enterprise space. Cradlepoint complements Ericsson’s existing
5G Enterprise portfolio which includes Dedicated Networks and a global IoT
platform. Goodwill in this transaction represents future customers, future
technology and synergies to the sales channels and commercial model applied
by Cradlepoint and is not expected to be deductible for tax purposes.
The preliminary purchase price allocation of Cradlepoint made in 2020
was finalized during 2021. The main change between the provisional and
final fair values in the balance sheet is an increase in goodwill of SEK 0.48
billion to SEK 7.5 billion with a corresponding increase of deferred revenues
with SEK 0.35 billion and a decrease of intangibles with SEK 0.13 billion. This
resulted in a positive impact in the income statement of SEK 0.1 billion in 2021.
Axonix: On March 31, 2021, the Company acquired assets from Axonix, a UK
based mobile-first programmatic advertising exchange. The acquisition will
strengthen the Company’s supply chain in the market. Balances to facilitate
the Purchase price allocation are final.
Quortus: On November 17, 2021, the Company acquired selected assets,
including 29 employees, from Quortus, a UK-based company with expertise in
enterprise 4G/5G technology. The acquisition augments the Company’s offer-
ing with richer 4G/5G networking features across its portfolio of enterprise
products. Balances to facilitate the Purchase price allocation are final.
In order to finalize a Purchase price allocation all relevant information needs
to be in place. Examples of such information are final consideration and final
opening balances, they may remain preliminary for a period of time due to
for example adjustments of working capital, tax items or decisions from local
authorities.
Divestments
Divestments 2019–2021
Proceeds
Cash and cash equivalents
Shares in associated companies
Total Proceeds
Net assets disposed of
Property, plant and equipment
Right-of-use assets
Investments in associates
Intangible assets
Goodwill
Other assets
Provisions, incl. post-employment
benefits
Other liabilities
Total net assets
Net gains/losses from divestments
Shares in associated companies
Cash flow effect
2021
2020
2019
273
—
273
26
7
—
—
–48
51
–30
36
42
231
—
273
4
—
4
1
1
—
48
4
83
–1
6
142
–138
—
4
360
1,209
1,569
171
20
5
820
—
96
244
–774
582
987
–1,209
360
In 2021, the Company made divestments with a cash flow effect amounting to
SEK 273 (4) million. Net gains/losses from the divestments are presented on
Other operating income in the Income statement, see note B4 “Other operat-
ing income and expenses” for more information.
The divestments consist primarily of a data centre business located in the
Netherlands in November 2021.
For more information, see also note H3 “Statement of cash flow.”
Financial report 2021
Notes to the consolidated financial statements
57
Note E2, cont’d.
Acquisitions 2019–2021
Company
Quortus
Axonix
Cradlepoint
Genaker
ST-Ericsson
Kathrein
CSF
Description
A UK based mobile core software company with expertise in enterprise 4G/5G technology.
A UK based mobile-first programmatic advertising exchange.
A US company providing Wireless WAN Edge 4G and 5G solutions for the enterprise market.
A Spain provider of Mission Critical Push-to-talk (MC-PTT) solutions.
The remaining shares were acquired in ST-Ericsson (previously a joint venture).
A German provider of antenna and filter technologies.
A US based company related to the iconectiv business.
Divestments 2019–2021
Company
Data center
MediaKind
Description
A data center business located in the Netherlands.
A divestment of 51% of its MediaKind business.
Transaction date
Nov 2021
Mar 2021
Nov 2020
Mar 2020
Dec 2019
Oct 2019
Aug 2019
Transaction date
Nov 2021
Feb 2019
E3 Associated companies
Equity in associated companies
Opening balance
Investments
Share in earnings
Distribution of capital stock
Taxes
Dividends
Translation differences
Closing balance
2021
1,274
—
–260
—
–11
–90
28
941
2020
1,565
167
–298
–3
–33
–43
–81
1,274
The Company owns 49% of MediaKind, located in US, with an investment
of SEK 0.8 (0.8) billion. The Company’s share in earnings of MediaKind was
SEK –0.4 (–0.4) billion and the remaining investment is SEK 0.0 (0.4) billion.
The Company has provided a loan to MediaKind of SEK 0.5 (0.5) billion.
The Company owns 49.07% of the shares in Ericsson Nikola Tesla d.d.,
located in Croatia. See also note H4 “Related party transactions.”
Financial report 2021
58
Notes to the consolidated financial statements
Section F – Financial instruments
F1 Financial risk management
The Company’s financial risk management is governed by a policy approved
by the Board of Directors. The Board of Directors is responsible for overseeing
the capital structure and financial management of the Company, approving
certain matters (such as investments, customer finance commitments and
borrowing) and setting limits on the exposure to financial risks.
For the Company, a robust financial position with an investment grade
rating, low leverage and ample liquidity is deemed important. This provides
financial flexibility and independence to operate and manage variations in
working capital needs as well as to capitalize on business opportunities.
The Company’s overall capital structure should support the financial targets.
The capital structure is managed by balancing equity, debt financing and
liquidity in such a way that the Company can secure funding of operations
at a reasonable cost of capital. Regular borrowings are complemented with
committed credit facilities to give additional flexibility to manage unforeseen
funding needs. The Company strives to deliver strong free cash flow.
The Company’s capital objectives are:
– Strong free cash flow before M&A
– Positive net cash position
– Investment grade rating by Moody’s (Baa3), Standard & Poor’s (BBB-) and
Fitch (BBB-).
Capital objectives-related information, SEK billion
Free cash flow before M&A 1)
Positive net cash 1)
Credit rating
Fitch
Standard & Poor’s
Moody´s
2021
32.1
65.8
2020
22.3
41.9
BBB-, stable BBB-, stable
BBB-, stable BBB-, stable
Ba1, stable
Ba1, stable
1) For more information about the measures, see Alternative performance measures and Financial
terminology.
The Company has a treasury and customer finance function with the principal
role to ensure that appropriate financing is in place through loans and com-
mitted credit facilities, actively managing the Company’s liquidity as well as
financial assets and liabilities, and managing and controlling financial risk
exposures in a manner consistent with underlying business risks and financial
policies. The customer finance function may arrange suitable third-party
financing solutions for customers to support their purchases from Ericsson. In
some cases, and to the extent that customer loans are not provided directly by
banks, the Parent Company may provide vendor finance credits to customers
directly. The central function also monitors the exposure from outstanding
vendor credits and credit commitments.
The Company classifies financial risks as:
– Foreign exchange risk
– Interest rate risk
– Credit risk
– Liquidity
– Refinancing risk
– Market price risk in own and other equity instruments.
The Board of Directors has established risk limits for defined exposures to
foreign exchange and interest rate risks as well as to political risks in certain
countries.
For further information about accounting policies, see note A1 “Significant
accounting policies.”
Foreign exchange risk
The Company is a global company with sales mainly outside Sweden. Sales
and incurred costs are to a large extent denominated in currencies other
than SEK and therefore the financial results of the Company are impacted by
currency fluctuations. The Company reports the financial statements in SEK.
Movements in exchange rates between currencies that affect these statements
are impacting the comparability between periods.
Line items, primarily sales, are impacted by translation exposure incurred
when converting foreign entities’ financial statements into SEK. Line items and
profitability, such as EBIT are impacted by transaction exposure incurred when
financial assets and liabilities, primarily trade receivables and trade payables,
are initially recognized and subsequently remeasured due to change in foreign
exchange rates.
The table below presents the external net sales and cost exposures for the
largest currencies which impact profitability. The internal exposures will not
impact group profitability if all related transactions occur and are recognized
in the profit and loss in the same month. Any effect on profit and loss from
internal transactions is a function of timing and FX volatility, therefore impos-
sible to predict.
Currency exposure, SEK billion
Sales
trans-
lation
exposure
Sales
trans-
action
exposure
Cost
trans-
lation
exposure
Cost
trans-
action
exposure 1)
Cost
net
exposure
Sales net
exposure
Exposure
currency
USD 2)
EUR
JPY
CAD
CNY
TWD
INR
GBP
AUD
78.9
28.3
13.4
4.5
7.1
5.5
7.4
7.6
7.6
36.1
9.5
—
—
—
—
–0.4
–0.9
–0.6
115.0
37.8
13.4
4.5
7.1
5.5
7.0
6.7
7.0
–45.2
–22.4
–5.2
—
–6.5
–2.4
–4.4
–6.2
–5.0
–53.0
3.8
—
0.3
1.4
—
0.2
–0.2
0.4
–98.2
–18.6
–5.2
0.3
–5.1
–2.4
–4.2
–6.4
–4.6
1) External purchases in foreign currency translated to functional currency.
2) Sales transaction exposure in 2021 includes volume in the cash flow hedge of USD 200 million. Based
on the outstanding cash flow hedge volume at year end, the hedged sales volume that will occur in
2022 is USD 263 million.
Translation exposure
Translation exposure relates to sales and cost incurred in foreign entities when
converted into SEK upon consolidation. These exposures cannot be addressed
by hedging.
Transaction exposure
The Company considers the following transaction exposures.
a) Transaction risk impacting net sales and EBIT
Transaction exposure relates to sales and cost incurred in non-reporting
currencies in individual group companies. Foreign exchange risk is as far as
possible concentrated in Swedish group companies, primarily Ericsson AB, by
selling to foreign subsidiaries in either the functional currency of the customers,
EUR or USD. This transaction risk can be hedged, although it is only done for
material cash inflows or outflows that are highly certain.
The Company has identified certain customer contracts where a fluctuation
in the USD/SEK foreign exchange rate would significantly impact net sales and
EBIT. These contracts are multi-year contracts with highly probable payments
at fixed points in time denominated in USD.
The Board of Directors has provided a mandate to the Company to hedge
between 0%–100% of the next three years receipts on a rolling basis, up to
the end of the contract period. This mandate instructs the treasury function to
hedge a percentage of this exposure according to a defined scale, locking in
a higher percentage of exposure as the USD strengthens against SEK, up to
100%.
Hedge accounting is applied, whereby the Company enters into foreign
exchange forward contracts that match the terms of the foreign exchange
exposure as closely as possible and designates them as hedging instruments.
Hedge ineffectiveness is expected to be minimal but may arise due to differ-
ences in timing of the cash flows between the hedged items and the hedging
instruments.
Financial report 2021
Note F1, cont’d.
b) Transaction exposure in individual balance sheet
According to Company policy, transaction exposure in subsidiaries’ balance
sheets (e.g., trade receivables and trade payables that are remeasured due to
change in foreign exchange rates) should be fully hedged. Foreign exchange
exposures in balance sheet items are hedged through offsetting balances or
derivatives. Foreign exchange exposures are managed net, and its effects are
presented net within Financial income and expenses. This is not designated as
hedge accounting.
c) FX execution risk in Ericsson AB (EAB)
As balance sheet hedging is done net on a monthly basis, significant volatility
in USD hedge volumes exposes EAB to FX execution risk. In order to spread the
FX execution risk over the year, 14% of each of the next six months forecasted
sales and purchases in EAB are hedged monthly. The hedged volumes are
funded by internal loans from its parent company which are not hedged,
therefore the FX impact on revaluation of the loan is recognized in net FX
as incurred.
The sensitivity of the FX impact is dependent on changes in foreign
exchange rates, forecasts and seasonality. USD is the only currency being
hedged. Outstanding loan at year-end was USD 728 million (USD 610 mil-
lion), with an average balance of USD 926 million over the year. Due to the
strengthening of USD against SEK throughout 2021, this resulted in a net loss
on the hedge loan balances of SEK 845 million, comprised of realization and
revaluation results on these loans contracts of SEK 298 million and SEK 547
million respectively.
d) Transaction risk impacting business combination
The Group is exposed to FX execution risk on consideration payable for acqui-
sition in foreign currency from the period of communication of the proposed
transaction to final completion date. Such transaction, if deemed material and
highly probable, will be hedged to protect the cash consideration for acquisi-
tion accounting.
Cash flow hedge accounting is applied, whereby the Company enters
into foreign exchange forward contracts that match the terms of the foreign
exchange exposure as closely as possible and designates them as hedging
instruments. Hedge ineffectiveness is expected to be minimal but may arise
due to differences in timing of the cash flows between the hedged item and
the hedging instruments.
Interest rate risk
The Company is exposed to interest rate risk through market value fluctuations
in certain balance sheet items and through changes in interest revenues and
expenses.
Sensitivity analysis
The Company uses the Value at Risk (VaR) methodology to measure foreign
exchange and interest rate risks managed by the treasury function. This
statistical method expresses the maximum potential loss that can arise with
a certain degree of probability during a certain period of time. For the VaR
measurement, the Company has chosen a probability level of 99% and a
one-day time horizon. The daily VaR measurement uses market volatilities and
correlations based on historical daily data (one year).
The treasury function operates under two mandates. In the liquidity
management activity, it has a mandate to deviate from floating interest on net
liquidity and take foreign exchange positions up to an aggregated risk of VaR
SEK 45 million given a confidence level of 99% and a one-day horizon. The
average VaR calculated for 2021 was SEK 15.3 (21.0) million. No VaR limits
were exceeded during 2021.
In the asset-liability management activity, the interest rate risk is managed
by matching fixed and floating interest rates in interest-bearing balance
sheet items. The policy is that the net sensitivity on a one basis point move on
interest-bearing assets matching interest-bearing liabilities, taking derivatives
into consideration, is less than SEK 10 million. The average exposure during
2021 was SEK 1.1 (0.5) million per basis point shift.
Notes to the consolidated financial statements
59
Sensitivity to interest rate increase of 1 basis point, SEK million
< 3M 3–12M
1–3Y
3–5Y
>5Y
Total
Interest-bearing assets
Interest-bearing
liabilities 1)
Derivatives
Total
—
—
—
—
—
—
1
1
–4
–3
1
1
–2
1
—
–2
—
5
—
5
–7
7
2
2
1) Borrowings are included as they are designated FVTPL.
Outstanding derivatives
Outstanding derivatives
Gross
amount
recognized
Net
amount
presented
Related
amounts
not offset
– collaterals
Net
Offset
294
–707
–36
36
258
–671
—
258
467 –204
79
–111
–20
20
59
–91
—
—
59
–91
1,491
–141
–7
7
1,484
–134
–1,181
303
— –134
57
–131
–31
31
26
–100
26
—
— –100
2021
Currency
derivatives 1)
Assets
Liabilities
Interest rate
derivatives
Assets
Liabilities
2020
Currency
derivatives 1)
Assets
Liabilities
Interest rate
derivatives
Assets
Liabilities
1) Currency derivatives designated as cash flow hedge of SEK 9 (127) million are included in Other
current assets and SEK 510 (0) million in Other current liabilities.
Cash collaterals paid or received under Credit Support Annex (CSA) to ISDA
for cross-currency derivatives are recognized as Interest-bearing securities,
current or Borrowings, current, respectively.
The Company holds the following currency derivatives designated as hedging
instruments:
Foreign exchange forward contracts
2021
< 3
months
3 – 12
months
Notional Amount (USD millions)
Average forward rate (SEK/USD)
734
8.79
1,372
9.05
> 1 year
525
8.35
Total
2,631
Hedge ratio is 1:1 and changes in forward rate have been designated as
the hedged risk. The change in the fair value of the hedging instrument is
compared with the change in fair value of the hedged item, and the lower
amount is taken to OCI. If the change in fair value of the hedging instrument is
higher, then the excess change in fair value is considered ineffective hedging
and recorded in net foreign exchange gains and losses. For hedge on customer
contracts, upon recognition of the hedged net sales, the cumulative amount
in hedging reserve is released in the OCI as a reclassification adjustment and
recognized in net sales. For hedge on business combination, the cumulative
amount in hedge reserve is transferred as a basis adjustment to goodwill upon
recognition of the business combination.
See note E1 “Equity” for movement in the cash flow hedge reserve. No
hedge ineffectiveness was recognized in the income statement in 2021.
Credit risk
Credit risk is divided into three categories: credit risk in trade receivables and
contract assets, customer finance risk and financial credit risk, see note A1
“Significant accounting policies.”
Financial report 2021
60
Notes to the consolidated financial statements
Note F1, cont’d.
Credit risk in trade receivables and contract assets
Credit risk in trade receivables and contract assets is governed by a policy
applicable to all legal entities in the Company. The purpose of the policy is to:
– Avoid credit losses through establishing internal standard credit approval
routines in all the Company’s legal entities
– Ensure monitoring and risk mitigation of defaulting accounts, i.e. events of
non-payment
– Ensure efficient credit management within the Company and thereby
improve days sales outstanding and cash flow
– Define escalation path and approval process for customer credit limits.
The credit risk of all customers is regularly assessed. Through credit manage-
ment system functionality, credit checks are performed every time a sales order
is generated in the source system. These are based on the credit risk set on the
customer. Credit blocks appear if past due receivables are higher than permit-
ted levels. Release of a credit block requires authorization.
Letters of credits are used as a method for securing payments from custom-
ers operating in emerging markets, in particular in markets with unstable politi-
cal and/or economic environments. By having banks confirming the letters of
credit, the political and commercial credit risk exposures to the Company are
mitigated.
Impairment of trade receivables and contract assets
Trade receivables and contract assets are assessed for impairment under a
unified model. The Company has determined that credit risk largely depends
on both the risk in the country where the customer resides (e.g. ability to make
cross border payments) as well as the payment pattern of the customer.
Therefore, expected credit losses (ECLs) are calculated using a provision
matrix that specifies a fixed rate depending both on the number of days past
due and the country risk rating. The country risk ratings depend on the ratings
used by all Export Credit Agencies within the OECD. The rates defined in the
provision matrix are based on historical loss patterns for that grouping of
customers. These rates are adjusted for current conditions as well as manage-
ment expectations of changes to political risks and payment patterns in the
future. The provision rates are higher on high risk countries compared to
low risk countries and also higher on amounts that remain unpaid for longer
periods of time.
Since the onset of the COVID-19 pandemic in 2020, the Company has been
assessing the wider economic impact on the expected credit losses model for
trade receivables and updating the provision matrix as appropriate. There has
been no material change to the provision matrix in the year as a direct result of
COVID-19.
Trade receivables and contract assets together amounted to SEK 55,905
(53,336) million as of December 31, 2021. Provisions for expected credit losses
on trade receivables and contract assets amounted to SEK 2,398 (2,518) mil-
lion as of December 31, 2021. Total past due > 360 days has increased but the
expectation of collection from some customers has also improved, resulting
in a lower allowance at year end. The Company’s write-offs have historically
been low. During the year SEK 163 (136) million were written off due to the
Company having no reasonable expectation of collection. Of these write-offs,
SEK 0 (0) million are still subject to enforcement.
Movements in allowances for impairment of trade receivables and contract assets
Opening balance
Increase / (decrease) in allowance
Write-offs
Translation difference
Closing balance 1)
2021
2,518
40
–163
3
2,398
2020
2,983
–118
–136
–211
2,518
Aging analysis of gross values of trade receivables and contracts assets
by risk category
Days past dues
2021
Not due
1–90 91–180 181–360
>360
Total
Country risk :Low
36,439
Country risk: Medium 12,119
4,044
Country risk: High
976
689
429
Total
52,602
2,094
171
208
293
672
51
220
270
541
292 37,929
735 13,971
6,403
1,367
2,394 58,303
Days past dues
2020
Not due
1–90 91–180 181–360
>360
Total
Country risk :Low
33,620
Country risk: Medium 13,487
3,023
Country risk: High
517
1,243
394
Total
50,130
2,154
63
338
223
624
105
346
275
726
308 34,613
753 16,167
5,074
1,159
2,220 55,854
Customer finance credit risk
All major commitments to finance customers are made only after approval in
accordance with the work procedure for the Board of Directors and according
to the established credit approval process.
Prior to the approval of new facilities reported as customer finance, an
internal credit risk assessment is conducted in order to assess the credit rating
of each transaction for political and commercial risk. The credit risk analysis is
made by using an assessment tool, where the political risk rating is identical to
the rating used by all Export Credit Agencies within the OECD. The commercial
risk is assessed by analysing a large number of parameters, which may affect
the level of the future commercial credit risk exposure. The output from the
assessment tool for the credit rating also includes an internal pricing of the risk.
This is expressed as a risk margin per annum over the relevant base rate. The
reference pricing for political and commercial risk, on which the tool is based, is
reviewed using information from Export Credit Agencies and prevailing pricing
in the bank loan and bond markets for structured financed deals. The objective
is that the internally set risk margin shall reflect the assessed risk and that the
pricing is as close as possible to the current market pricing. A reassessment of
the credit rating for each customer finance facility is made on a regular basis.
As of December 31, 2021, the total amount payable to the Company under
customer finance credits was SEK 5,239 (5,262) million. The carrying value
of these assets was SEK 3,287 (3,137) million as of December 31, 2021.
Customer finance is arranged for infrastructure projects in different geographic
markets. As of December 31, 2021, there were a total of 81 (72) customer
finance arrangements originated by or guaranteed by the Company. The five
largest facilities represented 70% (75%) of the customer finance exposure in
2021. As of December 31, 2021, Middle East and Africa made up 44% (44%)
of the outstanding exposure while North America made up 32% (20%). As of
December 31, 2021, the Company also had unutilized customer finance com-
mitments of SEK 47,344 (26,939) million.
Security arrangements for customer finance facilities may include pledges
of equipment, pledges of certain assets belonging to the borrower and pledges
of shares in the operating company. If available, third-party risk coverage is, as
a rule, arranged. “Third-party risk coverage” means that a financial payment
guarantee covering the credit risk has been issued by a bank, an export credit
agency or an insurance company. All such institutions have been rated at least
investment grade. A credit risk transfer under a sub-participation arrangement
with a bank can also be arranged. In this case the entire credit risk and the
funding is taken care of by the bank for the part that they cover.
The table below summarizes the Company’s outstanding customer finance
as of December 31, 2021 and 2020.
1) Of which SEK 1 (1) million relates to contract assets.
Outstanding customer finance credit risk exposure 1)
The distribution of trade receivables and contract assets closely follows the
distribution of the Company’s sales, see note B1 “Segment information.” The
ten largest customers represented 47% (50%) of the total trade receivables
and contract assets in 2021.
Fair value of customer finance credits
Financial guarantees for third-parties
Accrued interest
Maximum exposure to credit risk
Less third-party risk coverage
2021
3,287
6
9
3,302
–94
2020
3,137
5
8
3,150
–95
The Company’s risk exposure, less third-party risk
coverage
3,208
3,055
1) This table has been adjusted to show the maximum exposure to credit risk.
Financial report 2021
Note F1, cont’d.
Fair value assessment of customer finance credits
Customer finance risk exposures are held at fair value and are classified
as Level 3 on the fair value hierarchy. The Credit Asset Management Team
within Ericsson Credit AB, reporting to Head of Group Treasury and Customer
Finance, has established a process with respect to measurement of fair values.
The quarterly credit review uses an internal model to determine a commercial
rating for each credit and for calculation of the fair value. The model is based
on external credit rating, political/country rating and bank pricing. Regular
monitoring of customer behavior is also a part of the internal assessment.
Revaluation of customer finance (excluding effect of foreign exchange transla-
tion) amounted to a net gain in the income statement of SEK 350 (loss of 262)
million in 2021, of which gain of SEK 347 (loss of 262) million relates to credits
held as of December 31, 2021. This effect is presented within selling and
administrative expenses and was mainly related to South East Asia Oceania
and India.
Notes to the consolidated financial statements
61
Cash, cash equivalents, interest bearing securities and derivative assetss
2021
valent
< 3 M 3–12 M
1–5 Y
>5 Y
Total
Rating
or equi-
Bank deposits
Other financial
institutions
Type of issuer:
Governments
Corporates
Mortgage institutes
Derivative assets
44,758
104
11
—
44,873
247
—
—
—
247
AA/AAA
A2/P2
AAA
5,743
4,226
—
118
—
2,906 11,860
—
5,749 21,700
—
199
—
—
304
—
20,509
4,226
27,753
317
55,092
8,958 33,571
304
97,925
Rating
or equi-
Customer finance fair value reconciliation
2020
valent
< 3 M 3–12 M
1–5 Y
>5 Y
Total
Opening balance
Additions
Disposals/repayments
Revaluation/amortization of interest
Translation difference
Closing balance
Of which non-current
2021
3,137
30,121
–30,468
322
175
3,287
568
2020
3,756
24,765
–25,069
–66
–249
3,137
1,221
Bank deposits
Other financial
institutions
Type of issuer:
Governments
Corporates
Mortgage institutes
Derivative assets
26,829
130
16
—
26,975
202
—
—
—
202
A2/P2
AAA
AAA 15,000
1,960
216
189
—
605 12,483
—
3,969 10,240
975
346
395
—
—
—
28,483
1,960
14,425
1,510
Due to 5G buildout, the demand for customer financing solutions has con-
tinued to increase significantly. Most of such financing has been successfully
transferred to banks, hence the balance of customer finance receivables is in
line with prior year.
Financial credit risk
Financial instruments carry an element of risk in that counterparts may
be unable to fulfill their payment obligations. This exposure arises in the
investments in cash, cash equivalents, interest-bearing securities and from
derivative positions with positive unrealized results against banks and other
counterparties.
The Company mitigates these risks by investing cash primarily in high rated
securities such as treasury bills, government bonds, commercial papers, and
mortgage-covered bonds (see Liquidity risk section below). Separate credit
limits are assigned to each counterpart in order to minimize risk concentra-
tion. All derivative transactions are covered by ISDA netting agreements to
reduce the credit risk. For cross-currency swaps a Credit Support Annex (CSA)
to ISDA is signed to further reduce the credit risk by exchanging collateral
weekly against market value. The Company has also moved some derivative
exposures to clearing counterparties with daily settlement of margins.
At December 31, 2021, the credit risk in financial cash instruments was
equal to the instruments’ carrying value. The expected credit losses on cash
equivalents and interest-bearings securities classified as amortized cost were
immaterial. Credit exposure in derivative instruments was SEK 0.3 (0.3) billion.
Liquidity risk
The Company minimizes the liquidity risk by maintaining a sufficient cash
position, centralized cash management, investments in highly liquid interest-
bearing securities, and by having sufficient committed credit lines in place to
meet potential funding needs. For information about contractual obligations,
analyzed by contractual maturity, see note D4 “Contractual obligations.” The
current cash position is deemed to satisfy all short-term liquidity requirements.
44,396
5,050 23,714
395
73,555
The instruments are classified as FVTPL or amortized cost. Cash, cash equiva-
lents and interest-bearing securities are mainly held in SEK.
Refinancing risk
Refinancing risk is the risk that the Company is unable to refinance outstand-
ing debt under reasonable terms and conditions, or at all, at a given point in
time.
Debt financing is mainly carried out through borrowing in the Swedish and
international debt capital markets.
Bank financing is used for certain subsidiary funding and to obtain
committed credit facilities.
Funding programs 1)
Euro Medium Term Note program
(USD million)
Amount
Utilized
Unutilized
5,000
–1,495
3,505
SEC Registered program (USD million) 2)
1,000
1) There are no financial covenants related to these programs.
2) Program amount indeterminate.
In March 2021, the Company redeemed EUR 500 million notes issued under
the Euro Medium Term Note program. In May 2021, the Company issued new
EUR 500 million notes under the same program with maturity in 2029. In
June 2021, the Company drew on its credit commitment with the European
Investment Bank (EIB) of USD 305 million with maturity in 2028.
Committed credit facilities
Multi-currency revolving credit facility
(USD million)
Amount
Utilized Unutilized
2,000
—
2,000
In September 2021, Ericsson entered into a USD 2 billion sustainability-linked
revolving credit facility. The USD 2 billion facility replaces the previous USD 2
billion facility. The facility does not have interest rates linked to credit rating or
financial covenants but is linked to two of Ericsson’s sustainability KPIs.
Financial report 2021
62
Notes to the consolidated financial statements
Note F1, cont’d.
Fair valuation of the Company’s financial instruments
The Company’s financial instruments accounted for at fair value generally
meet the requirements of level 1 valuation as they are based on quoted prices
in active markets for identical assets. For some of the Company’s financial
assets and liabilities, especially derivatives, quoted prices are not readily
available and fair values are calculated using market inputs such as interest
rate quotes and currency rates.
For financial liabilities designated at fair value to profit and loss, the carry-
ing amount reflects the effect in own credit spreads either in quoted prices or
quoted Credit Default Swap (CDS) for Investment Grade companies.
– Valuation technique using significant unobservable inputs – level 3
Assets and liabilities are classified as level 3 if their valuation incorporates
significant inputs that are not based on observable market data (unobserv-
able inputs). Apart from trade receivables and customer finance receivables,
this valuation technique mainly applies to investment in shares and other
participations whereby valuation input is considered observable if it can be
directly observed from transactions in an active market, or if there is compelling
external evidence demonstrating an executable exit price. Unobservable input
levels are generally determined via reference to observable inputs, historical
observations or using other analytical techniques.
Valuation hierarchy
– Quoted market prices – level 1
Assets and liabilities are classified as level 1 if their value is observable in an
active market. Such instruments are valued by reference to unadjusted quoted
prices for identical assets or liabilities in active markets where the quoted price
is readily available, and the price represents actual and regularly occurring
market transactions.
– Valuation technique using observable inputs – level 2
Assets and liabilities classified as level 2 have been valued using models
whose inputs are observable either directly or indirectly. Valuations based
on observable inputs include cash equivalents (e.g. discounted papers, term
deposits) and interest rate derivatives which are valued using interest rate yield
curves. Other market observable inputs include credit spreads and FX forward
rates. Inputs for base interest rates are quoted fixing rates, interest rates swaps
and IBOR rates.
FX derivatives are valued by using observable forward rates, discounted
using base interest rate curve. Valuation of foreign exchange options are made
using the Black-Scholes formula.
The value of credit risks in derivative contracts are monitored regularly.
Derivative credit and debit valuations adjustments are calculated based on
outstanding market values and default probabilities from the CDS market, and
if effect on valuation is material, are included in the fair value of the derivatives.
Reconciliation of Level 3 fair value items
Opening balance
Additions
Disposals
Gain or losses 1)
Transfers to level 1 2)
Closing balance
Investment in shares
and participations
1,519
184
–229
255
–55
1,674
1) Table shows net gains or losses recognized in Other operating income or expenses, of which SEK 163
million unrealized gains relate to Level 3 assets held at the end of the year.
2) Transfer between hierarchies is recognized from the date of change in circumstances that resulted in
the transfer. Transfer in the year relates to an investment that was converted into listed equity shares.
Unrealized gain of SEK 529 million was recognized in Other operating income as a gain on Level 1
asset, excluded from the gain or loss presented in the table above.
Financial instruments carried at amortized cost
Financial instruments, such as some cash equivalents, interest-bearing securi-
ties, borrowings and payables, are carried at amortized cost which is deemed
to be equal to fair value. When a market price is not readily available and there
is insignificant interest rate exposure and credit spreads affecting the value,
the carrying value is considered to represent a reasonable estimate of fair
value.
Financial instruments
SEK billion
Assets at fair value through profit
or loss
Customer finance
Interest bearing securities
Cash equivalents 1)
Other financial assets
Other current assets
Assets at fair value through OCI
Trade receivable
Assets at amortized cost
Interest bearing securities
Cash equivalents 1)
Other financial assets
Financial assets
Financial liabilities at designated
FVTPL
2021
2020
Amortized
cost
Fair
value
Fair value hierarchy level
Level 1
Level 2
Level 3
Amortized
cost
Fair
value
Fair value hierarchy level
Level 1
Level 2
Level 3
—
—
—
—
—
—
0.3
4.0
0.5
4.8
3.3
43.3
26.0
2.3
0.3
45.4
—
—
—
120.6
—
43.3
—
0.6
—
—
—
—
—
—
—
26.0
—
0.3
—
—
—
—
3.3
—
—
1.7
—
45.4
—
—
—
—
—
—
—
—
—
0.4
3.6
0.5
4.5
3.1
28.1
23.6
1.5
1.5
42.1
—
—
—
99.9
—
28.1
—
—
—
—
—
—
—
—
—
23.6
—
1.5
—
—
—
—
Parent Company borrowings
—
–31.4
–19.5
–11.9
—
—
–27.2
–18.9
–8.3
Financial liabilities at FVTPL
Other current liabilities
Liabilities at amortized cost
Trade payables
Borrowings
Financial liabilities
—
–0.8
–35.7
–0.4
–36.1
—
—
–32.2
—
—
—
–0.8
—
—
–0.2
—
—
—
—
–32.0
–2.9
–34.9
—
—
–27.4
—
—
—
–0.2
—
—
1) Total Cash and cash equivalent is SEK 54.1 (43.6) billion, of which SEK 30.0 (27.2) billion relating to Cash equivalents are presented in the table above.
3.1
—
—
1.5
—
42.1
—
—
—
—
—
—
—
Financial report 2021
Note F1, cont’d.
Market price risk in own shares and other listed equity investments
The Company is exposed to fluctuations in its own share price through share-
based compensation for employees and the Board of Directors. Some of the
plans are share-settled and some are cash-settled as further disclosed in note
A1 “Significant accounting policies”, note G2 “Information regarding members
of the Board of Directors and Group management” and note G3 “Share-based
compensation.”
Share-based plans for employees
The obligation to deliver shares under the 2019 and 2020 Long-Term Variable
compensation programs (LTV) for the Executive Team is covered by holding
Ericsson Class B shares as treasury stock. The cash flow exposure is managed
through the holding of Ericsson Class B shares as treasury stock to be sold to
generate funds, which also cover social security payments. A change in the
share price will result in a change in social security charges, which represents a
risk to the income statement. The cash flow exposure relating to the 2021 LTV
program is not managed in the same manner.
F2 Financial income and expenses
Financial income and expenses
Contractual interest on financial assets 1)
of which on financial assets at amortized cost 1)
Net revaluation gains and losses on financial assets
Other financial income 1)
Financial income
Contractual interest on financial liabilities 1)
of which on financial liabilities at amortized cost 1)
Net revaluation gains and losses on financial liabilities
Lease interest expense
Other financial expenses 1)
Financial expenses
Net foreign exchange gains/losses
Financial income and expenses, net
Net gains and losses on financial instruments exclude effect of foreign exchange translations:
Financial instruments at fair value through profit or loss 2)
Financial liabilities designated at fair value through profit or loss
Notes to the consolidated financial statements
63
Cash-settled plans to employees and the Board of Directors
In the case of synthetic share programs (a cash-settled program as defined
in IFRS 2) to Board members and cash-settled plans to employees, the
Company is exposed to risks in relation to own share price, both with regard
to compensation expenses and social security charges. The obligations to pay
compensation amounts under the synthetic share-based compensations to
the Board of Directors and employees are covered by a provision in the balance
sheet. For further information about LTV, the cash- settled plans to employees
and the synthetic share-based compensations to the Board of Directors, see
note G2 “Information regarding members of the Board of Directors and Group
management” and note G3 “Share-based compensation.”
2021
360
148
10
321
691
–525
–41
67
–426
–790
–1,674
–1,547
–2,530
–534
404
2020
665
148
–103
131
693
–873
–152
9
–490
–762
–2,116
827
–596
–257
–121
2019
1,234
430
–100
161
1,295
–1,222
–132
–69
–551
–860
–2,702
–395
–1,802
47
–344
1) Prior years’ contractual interest income and expenses are re-presented to improve the analysis of returns on assets and funding costs. This resulted in reclassifications between contractual interest on financial
assets and other financial income, and between contractual interest on financial liabilities and other financial expenses, with no impact in the total amount of Financial income and Financial expenses,
respectively.
2) Excludes net gain from revaluation of customer finance receivables of SEK 350 million (net loss of SEK 262 million in 2020 and net loss of SEK 650 million in 2019), reported as Selling and administrative
expenses, and net gain on revaluation of investments in shares and participations of SEK 784 million (net gain of SEK 12 million in 2020 and net loss of SEK 149 million in 2019) reported as Other operating
income or expenses.
F3 Financial assets, non-current
Financial assets, non-current
Opening balance
Additions
Disposals/repayments/deductions
Change in value in funded pension plans 1)
Revaluation
Reclassification
Translation differences
Closing balance
Other
investments
in shares and
participations
1,519
184
–229
—
784
–1
1
2,258
2021
Interest-
bearing
securities,
non-curent
21,613
30,305
–13,547
—
–75
–7,670
—
30,626
Other
financial
assets,
non-current
Other
investments
in shares and
participations
4,842
1,054
–959
1,064
99
–1
118
6,217
1,432
123
–43
—
12
—
–5
1,519
2020
Interest-
bearing
securities,
non-curent
20,354
11,091
–5,021
—
–72
–4,739
—
21,613
Other
financial
assets,
non-current
5,614
893
–913
51
–53
–271
–479
4,842
1) This amount includes asset ceiling. For further information, see note G1 “Post-employment benefits.”
Financial report 2021
64
Notes to the consolidated financial statements
F4 Interest-bearing liabilities
As of December 31, 2021, the Company’s outstanding interest-bearing liabili-
ties were SEK 31.8 (30.2) billion.
Interest-bearing liabilities (excluding lease obligations)
Borrowings, current
Current part of non-current borrowings
Other borrowings, current
Total borrowings, current
Borrowings, non-current
Notes and bond loans
Other borrowings, non-current
Total borrowings, non-current
Total interest-bearing liabilities
Reconciliation of liabilities arising from financing activities
(including lease obligations)
Opening balance
Cash flows
Proceeds from issuance of borrowings
Repayment of borrowings
Other financing activities
Lease payments
Non-cash changes
Effect of foreign exchange movement
Revaluation due to changes in credit risk
Other changes in fair value
Acquisition of new lease contracts
Other non-cash movements
Closing balance
Notes, bonds and bilateral loans
2021
2020
9,459
131
9,590
22,016
225
22,241
31,831
5,269
2,673
7,942
22,008
210
22,218
30,160
2021
39,460
2020
47,578
7,882
–5,791
–2,128
–2,368
2,621
–31
–415
2,009
–105
41,134
3,220
–9,031
1,568
–2,417
–4,030
–99
136
2,604
–69
39,460
Issued-maturing
Notes and bond loans
2012–2022
2017–2021
2017–2024
2017–2025 1)
2020–2030 1)
2021–2029
Total notes and bond loans
Bilateral loans
2017–2023 2)
2019–2024 3)
2019–2025 2)
2021–2028 3)
Total bilateral loans
Nominal
amount
Coupon
Currency
Maturity date
4.125%
0.875%
1.875%
2.741%
3.020%
1.000%
1,000
500
500
150
200
500
220
281
150
305
USD
EUR
EUR
USD
USD
EUR
USD
USD
USD
USD
May 15, 2022
Mar 1, 2021
Mar 1, 2024
Dec 22, 2025
Dec 30, 2030
May 26, 2029
Jun 15, 2023
July 31, 2024
Dec 18, 2025
Jun 21, 2028
1) Private Placement, Swedish Export Credit Corporation (SEK).
2) Nordic Investment Bank (NIB), R&D project financing.
3) European Investment Bank (EIB), R&D project financing.
To secure long-term funding, the Company uses notes and bond programs
together with bilateral research and development loans. All outstanding notes
and bond loans are issued by the Parent Company under its Euro Medium Term
Note (EMTN) program or under its US Securities and Exchange Commission
(SEC) Registered program. Bonds issued at a fixed interest rate are normally
swapped to a floating interest rate using interest rate swaps under the Asset
and liability management mandate described in note F1 “Financial risk man-
agement.” Total weighted average interest rate cost for the long-term funding
during the year was 1.75% (2.18%).
Carrying value
(SEK million)
2021
Changes in fair
value due to
changes in credit
risk 2021
Cumulative
changes in fair
value due to
changes in credit
risk 2021
Carrying value
(SEK million)
2020
9,163
—
5,297
1,393
1,825
5,007
22,685
2,033
2,608
1,400
2,692
8,733
–86
–3
–27
31
47
–26
–64
17
47
35
–66
33
58
—
118
81
115
–26
346
44
62
44
–66
84
8,537
5,034
5,290
1,278
1,698
—
21,837
1,826
2,320
1,237
—
5,383
Financial report 2021
Notes to the consolidated financial statements
65
Section G – Employee related
G1 Post-employment benefits
Ericsson sponsors a number of post-employment benefit plans throughout
the Company, which are in line with market practice in each country. The main
change in 2021 was driven by higher than expected return on investments of
SEK 3.5 billion. Financial assumption changes resulted in net actuarial gains
on defined benefit obligations of SEK 0.3 billion although this was largely
offset by experience losses in the year.
Swedish plans
Sweden has both defined benefit and defined contribution plans based on
collective agreement between the parties in the Swedish labor market:
– A defined benefit plan, known as ITP 2 (occupational pension for salaried
employees in manufacturing industries and trade), complemented by
a defined contribution plan, known as ITPK (supplementary retirement
benefits). This is a final salary-based plan.
– A defined contribution plan, known as ITP 1, for employees born in 1979
or later.
– A defined contribution plan ITP 1 or alternative ITP, for employees earning
more than 10 income base amount and who have opted out of the defined
benefit plan ITP 2, where rules are set by the Company and approved by
each employee selected to participate.
The Company has by far most of its Swedish pension liabilities under defined
benefit plans which according to IAS 19 is funded to 51% (48%) by the assets
of Ericsson Pensionsstiftelse (a Swedish Pension Foundation). These liabilities,
if valued using different methodology and assumptions established by the
Swedish PRI Pensionsgaranti, are considered funded to more than 100% by
the assets of Ericsson Pensionsstiftelse. There are no funding requirements for
the Swedish plans.
The disability and survivors’ pension part of the ITP-plan is secured through
an insurance solution with the company Alecta, see section about Multi-
employer plans.
The Company pays benefit directly to the pensioners as the obligations fall
due. The responsibility for governance of the plans and the plan assets lies with
the Company and the Pensionsstiftelse. The Swedish Pensionsstiftelse is man-
aged on the basis of a capital preservation strategy and the risk profile is set
accordingly. Traditional asset-liability matching (ALM) studies are undertaken
on a regular basis to allocate within different asset classes.
The plans are exposed to various risks, e.g., a sudden decrease in the bond
yields, which would lead to an increase in the plan liability. A sudden instability
in the financial market might also lead to a decrease in fair value of plan assets
held by the Pensionsstiftelse, as the holdings of plan assets partly are exposed
to equity markets; however, this may be partly offset by higher values in fixed
income holdings. Swedish plans are linked to inflation and higher inflation will
most likely lead to a higher liability.
Multi-employer plans
As before, the Company has secured the disability and survivors’ pension part
of the ITP Plan through an insurance solution with the insurance company
Alecta. Although this part of the plan is classified as a multi-employer defined
benefit plan, it is not possible to get sufficient information to apply defined
benefit accounting, as for most of the accrued pension benefits in Alecta,
information is missing on the allocation of earnings process between employ-
ers. Full vesting is instead registered on the last employer. Alecta is not able to
calculate a breakdown of assets and provisions for each respective employer,
and therefore, the disability and survivors’ pension portion of the ITP Plan has
been accounted for as a defined contribution plan.
Alecta has a collective funding ratio which acts as a buffer for its insurance
commitments to protect against fluctuations in investment return and insur-
ance risks. Alecta’s collective funding ratio ranges from 125% to 175% and
reflects the market value of Alecta’s plan assets as a percentage of its commit-
ments to policy holders (both guaranteed and non-guaranteed), measured
in accordance with Alecta’s actuarial assumptions, which are different from
those in IAS 19. Alecta’s collective funding ratio was 172% (148%) as of
December 31, 2021. The Company’s share of Alecta’s saving premiums is
0.4%, the total share of active members in Alecta is 2.1%. The expected contri-
bution to the plan is SEK 109 million for 2022.
Contingent liabilities / Assets pledged as collateral
Contingent liabilities include the Company’s mutual responsibility as a credit
insured company of PRI Pensionsgaranti in Sweden. This mutual responsibility
can only be imposed in the instance that PRI Pensionsgaranti has consumed
all of its assets, and it amounts to a maximum of 2% of the Company’s pension
liability in Sweden. The Company has a pledged business mortgage of SEK 6.1
billion to PRI Pensionsgaranti.
US plans
The Company operates both defined contribution and defined benefit pension
plans in the US, which are a combination of final salary pension plans and
contribution-based arrangements. The final salary pension plans provide
benefits to members in the form of a guaranteed level of pension payable for
life. The level of benefits provided depends on members’ length of service and
their salary in the final years leading up to retirement. Retirees generally do not
receive inflationary increases once in payment.
The other type of plan is a contribution-based pension plan, which provides
a benefit determined using a “cash balance” approach. The balance is credited
monthly with interest credits and contribution credits, based on a combination
of current year salary and length of service.
The majority of benefit payments are from trustee-administered funds;
however, there are also a number of unfunded plans where the Company
meets the benefit payment obligation as it falls due. In the US, the Company’s
policy is at least to meet or exceed the funding requirements of federal regula-
tions. The funded level in the US Pension Plan is above the point at which
minimum funding would be required for fiscal year 2021.
Plan assets held in trusts are governed by local regulations and practice,
as is the nature of the relationship between the Company and the trustees (or
equivalent) and their composition. Responsibility for governance of the plans,
including investment decisions and contribution schedules, lies with the Plan
Administrative Committee (PAC). The PAC is composed of representatives
from the Company.
The Company’s plans are exposed to various risks associated with pen-
sion plans, i.e., a sudden decrease in bond yields would lead to an increase
in the present value of the defined benefit obligation. A sudden instability in
the financial markets might also lead to a decrease in the fair value of plan
assets held by the trust. Pension benefits in the US are not linked to inflation;
however, higher inflation poses the risk of increased final salaries being used to
determine benefits for active employees. There is also a risk that the duration
of payments to retirees will exceed the life expectancy in mortality tables.
UK plans
The Company operates both defined benefit and defined contribution plans in
the UK. All defined benefit plans in the UK are closed to future pension accrual.
The defined benefit plans provide benefits to members in the form of a
guaranteed level of pension payable for life. The level of benefits provided is
defined by the Trust Deed & Rules and depends on members’ length of service
and their salary. Pensions in payment are generally updated in line with the UK
retail price index, subject to caps defined by the rules.
The plans’ assets are held in trusts and are invested in a diverse range of
assets. The plans are governed by local regulations and responsibility for the
governance of the plans lies with the Trustee Directors, who are appointed by
the Company from its employees and from the plans’ members. Independent
professional trustees sit on a number of the Boards.
The plans remain exposed to various risks associated with defined benefit
plans, e.g. a decrease in bond yields or increase in inflation would lead to an
increase in the present value of the defined benefit obligation. Alternatively,
Financial report 2021 66
Notes to the consolidated financial statements
Note G1, cont’d.
the duration of payments to retirees could exceed the life expectancy assumed
in the current mortality tables leading to an increase in liabilities. A sudden
instability in the financial markets might also lead to a decrease in the fair
value of the plans’ assets. The Company and Trustees’ aim is to reduce the
plans’ exposure to the key risks over time.
Other plans
The Company also sponsors plans in other countries. The main plans are in
Brazil, India and Ireland. The main pension plans in Brazil are wholly funded
with a net surplus of assets. The plan in Ireland is a final salary pension plan
and is partly funded. The plans are managed by corporate trustees with direc-
tors appointed partly by the local company and partly by the plan members.
Amount recognized in the Consolidated balance sheet
Amount recognized in the Consolidated balance sheet
2021
Defined benefit obligation (DBO)
Fair value of plan assets
Deficit/surplus (+/–)
Plans with net surplus, excluding asset ceiling 1)
Provision for post-employment benefits 2)
2020
Defined benefit obligation (DBO)
Fair value of plan assets
Deficit/surplus (+/–)
Plans with net surplus, excluding asset ceiling 1)
Provision for post-employment benefits 2)
The trustees are independent from the local company and subject to the
specific country’s pension laws.
The Provident Fund Plan in India is self-managed through a registered
Exempted Trust and according to local legislation, investment returns shall
be guaranteed at minimum rates of return specified by the government. The
Company has an obligation to fund any shortfall on the yield of the trust’s
investments over the administered interest rates on an annual basis. These
administered rates are determined annually predominantly considering the
social and economic factors in the past.
Sweden
US
UK
Other
Total
58,754
29,876
28,878
—
28,878
56,138
26,967
29,171
—
29,171
18,463
18,254
209
450
659
17,921
17,327
594
92
686
17,071
19,427
–2,356
2,802
446
15,788
17,326
–1,538
2,090
552
19,255
13,798
5,457
610
6,067
18,341
11,991
6,350
594
6,944
113,543
81,355
32,188
3,862
36,050
108,188
73,611
34,577
2,776
37,353
1) Plans with a net surplus, i.e., where plan assets exceed DBO, are reported as Other financial assets, non-current, see note F3 “Financial assets, non-current.”
The asset ceiling increased during the year to SEK 540 (518) million.
2) Plans with net liabilities are reported in the balance sheet as Post-employment benefits, non-current.
Total pension cost recognized in the Consolidated income statement
The costs for post-employment benefits within the Company are distributed between defined contribution plans and defined benefit plans.
Pension costs for defined contribution plans and defined benefit plans
2021
Pension cost for defined contribution plans
Pension cost for defined benefit plans 1)
Total
Total pension cost expressed as a percentage of wages and salaries
2020
Pension cost for defined contribution plans
Pension cost for defined benefit plans
Total
Total pension cost expressed as a percentage of wages and salaries
2019
Pension cost for defined contribution plans
Pension cost for defined benefit plans
Total
Total pension cost expressed as a percentage of wages and salaries
Sweden
1,199
1,920
3,119
963
1,783
2,746
953
1,704
2,657
US
460
97
557
415
13
428
456
–110
346
UK
Other
138
–6
132
136
–4
132
132
–47
85
1,084
931
2,015
664
993
1,657
1,193
889
2,082
Total
2,881
2,942
5,823
9.3%
2,178
2,785
4,963
8.1%
2,734
2,436
5,170
8.8%
1) For the UK plans, negative cost was due to interest income of SEK 269 million exceeding interest cost of SEK 245 million during the year.
Financial report 2021
Notes to the consolidated financial statements
67
Note G1, cont’d.
Change in the net defined benefit obligation
Change in the net defined benefit obligation
Opening balance
Included in the income statement 2)
Current service cost
Past service cost and gains and losses on settlements
Interest cost/income (+/–)
Taxes and administrative expenses
Other
Remeasurements
Return on plan assets excluding amounts in interest expense/income
Actuarial gains/losses (–/+) arising from changes in demographic
assumptions
Actuarial gains/losses (–/+) arising from changes in financial assumptions
Experience-based gains/losses (–/+)
Other changes
Translation difference
Contributions and payments from:
Employers 3)
Plan participants
Payments from plans:
Benefit payments
Settlements
Business combinations and divestments
Closing balance
Present value
of obligation
2021 1)
Fair value
of plan
assets
2021
Total
2021
Present value
of obligation
2020 1)
Fair value
of plan
assets
2020
108,188
–73,611
34,577
105,088
–72,435
Total
2020
32,653
2,644
1
1,463
—
10
4,118
—
2,644
—
–1,240
41
–17
–1,216
1
223
41
–7
2,902
2,424
–76
1,759
—
51
4,158
—
2,424
—
–1,454
29
2
–1,423
–76
305
29
53
2,735
—
–3,526
–3,526
—
–4,734
–4,734
–49
–287
350
14
—
—
—
–49
–287
350
–3,526
–3,512
10
9,247
320
9,577
—
—
—
–4,734
10
9,247
320
4,843
3,951
–3,764
187
–5,373
5,249
–124
–1,260
285
–1,825
–12
84
–679
–270
1,825
—
–114
–1,939
15
—
–12
–30
–1,921
223
–1,834
–1,745
15
–3,612
–223
–5,533
—
1,834
1,733
—
—
–12
15
113,543
–81,355
32,188
108,188
–73,611
34,577
1) The weighted average duration of DBO is 20.4 (20.8) years.
2) Excludes the impact of the asset ceiling of SEK 40 million in 2021 and SEK 50 million in 2020.
3) The expected contribution to the plans is SEK 1.8 billion during 2022.
Present value of the defined benefit obligation
2021
DBO, closing balance
Of which partially or fully funded
Of which unfunded
2020
DBO, closing balance
Of which partially or fully funded
Of which unfunded
Sweden
US
UK
Other
Total
58,754
58,754
—
56,138
56,138
—
18,463
17,805
658
17,921
17,235
686
17,071
17,071
—
15,788
15,788
—
19,255
15,574
3,681
18,341
14,811
3,530
113,543
109,204
4,339
108,188
103,972
4,216
Financial report 2021
68
Notes to the consolidated financial statements
Note G1, cont’d.
Asset allocation by asset type and geography 1)
2021
Cash and cash equivalents
Equity securities
Debt securities
Real estate
Investment funds
Assets held by insurance company
Other
Total
Of which real estate occupied by the Company
Of which securities issued by the Company
2020
Cash and cash equivalents
Equity securities
Debt securities
Real estate
Investment funds
Assets held by insurance company
Other
Total
Of which real estate occupied by the Company
Of which securities issued by the Company
Sweden
US
UK
Other
Total
Of which
unquoted 2)
1,100
7,619
14,427
5,157
1,782
—
–209
29,876
—
—
1,117
5,635
13,570
4,338
2,153
—
154
26,967
—
—
500
659
15,817
—
1,247
—
31
18,254
—
—
575
655
14,557
—
1,495
—
45
17,327
—
—
1,468
3,823
12,705
195
—
—
1,236
19,427
—
—
911
3,469
11,745
152
274
—
775
17,326
—
—
46
2,651
7,999
594
484
1,597
427
13,798
—
—
34
2,235
6,985
531
419
1,409
378
11,991
—
—
3,114
14,752
50,948
5,946
3,513
1,597
1,485
81,355
—
—
2,637
11,994
48,857
5,021
4,341
1,409
1,352
73,611
—
—
33%
58%
44%
100%
64%
100%
69%
45%
58%
45%
100%
74%
100%
72%
1) Asset class is presented based on the underlying exposure of the investment. This includes direct investment in securities or investment through pooled funds that invests in an asset class.
2) Unquoted refers to assets classified as fair value level 2 and 3. Amounts reported in prior year included only level 3 assets, hence re-presented for comparison purposes. Unquoted assets comprise mainly
investments in pooled investment vehicles.
Actuarial assumptions
Financial and demographic actuarial assumptions
Financial assumptions
Discount rate
Inflation rate
Salary increase rate
Demographic assumptions
Life expectancy after age 65 in years
2021
2020
Sweden
0.6%
2.0%
2.8%
23
US
2.7%
2.5%
3.5%
23
UK
1.8%
3.2%
—
23
Sweden
0.5%
1.8%
2.8%
23
US
2.3%
2.5%
3.5%
23
UK
1.5%
2.8%
—
23
Actuarial assumptions are assessed on a quarterly basis. See also note A1
“Significant accounting policies” and note A2 “Critical accounting estimates
and judgments.”
Sweden
The defined benefit obligation (DBO) has been calculated using a discount rate
based on the yields of Swedish government bonds. IAS 19 Employee Benefits
prescribes that if there is not a deep market in high-quality corporate bonds,
the market yields on government bonds shall be applied for the pension liabil-
ity calculation. As of December 31, 2021, the discount rate applied in Sweden
was 0.6% (0.5%). If the discount rate had been based on Swedish covered
mortgage bonds, the discount rate as of December 31, 2021 would have been
2.1% (1.5%). If the discount rate based on Swedish covered mortgage bonds
had been applied for the pension liability calculation, the DBO at December 31,
2021 would have been approximately SEK 18.8 (11.8) billion lower.
US and UK
The defined benefit obligation has been calculated using a discount rate based
on yields of high-quality corporate bonds, where “high-quality” has been
defined as a rating of AA and above.
Higher corporate bond discount rates were used to value pensions liabilities
in the US and UK plans at year end hence lowering the liabilities, although this
was partially offset by higher inflation rate in the UK. Increase in the value of
plan assets was due to relatively high exposure to debt securities in these plans.
Total remeasurements in Other comprehensive income related to
post-employment benefits
Actuarial gains and losses (+/–)
The effect of asset ceiling
Swedish special payroll taxes
Total
2021
3,255
25
257
3,537
2020
–3,946
226
–898
–4,618
Sensitivity analysis of significant actuarial assumptions
Impact on the DBO of a change
in assumptions
Financial assumptions
Discount rate –0.5%
Discount rate +0.5%
Inflation rate –0.5%
Inflation rate +0.5%
Salary increase rate –0.5%
Salary increase rate +0.5%
Demographic assumptions
Longevity – 1 year
Longevity + 1 year
2021
Sweden
US
7.5
–6.5
–5.2
6.0
–1.4
1.5
–3.1
3.1
1.0
–0.9
—
—
—
—
–0.5
0.5
UK
2.0
–1.8
–1.4
1.5
—
—
–0.7
0.7
Financial report 2021
G2 Information regarding members of the Board of Directors and Group management
Notes to the consolidated financial statements
69
Remuneration to the Board of Directors
Remuneration to members of the Board of Directors
SEK
Board fees
Number of
synthetic
shares/portion
of Board fee
Value at grant
date of synthetic
shares allocated
in 2021
Number of
previously
allocated
synthetic shares
outstanding
Board member
Ronnie Leten
Helena Stjernholm
Jacob Wallenberg
Jon Fredrik Baksaas
Jan Carlson
Nora Denzel
Börje Ekholm
Eric A. Elzvik
Kurt Jofs
Kristin S. Rinne
4,225,000
1,060,000
1,060,000
1,060,000
1,060,000
1,060,000
—
1,060,000
1,060,000
1,060,000
17,804/50%
4,466/50%
6,700/75%
4,466 /50%
6,700/75%
2,233/25%
—
2,233/25%
—
4,466/50%
Employee Representatives
Torbjörn Nyman
Anders Ripa 4)
Kjell-Åke Soting
Roger Svensson 5)
Per Holmberg (deputy) 6)
Ulf Rosberg (deputy) 7)
Loredana Roslund (deputy)
27,000
27,000
27,000
4,500
21,000
22,500
27,000
—
—
—
—
—
—
—
A
2,112,445
529,891
794,955
529,891
794,955
264,945
—
264,945
—
529,891
—
—
—
—
—
—
—
Net change
in value of
synthetic
shares 1)
B
Committee
fees
Total fees
paid in cash 2)
Total
remunera-
tion 2021
C
(A+B+C)
77,150
27,742
41,615
38,533
41,615
13,869
—
13,869
19,378
18,200
–122,346
201,814
135,755
–14,377
2,201
729
150,241
729
–91,077
106,677
—
—
—
—
—
—
—
—
—
—
—
—
—
—
385,000
180,000
180,000
205,000
450,000
180,000
—
420,000
630,000
205,000
16,500
9,000
12,000
3,000
—
—
—
2,497,500
710,000
445,000
735,000
715,000
975,000
—
1,215,000
1,690,000
735,000
43,500
27,000
39,000
7,500
21,000
22,500
27,000
4,487,599
1,441,705
1,375,710
1,250,514
1,512,156
1,240,674
150,241
1,480,674
1,598,923
1,371,568
43,500
27,000
39,000
7,500
21,000
22,500
27,000
Total
12,861,000
49,068
5,821,918
291,971
370,346
2,875,500
9,905,000
16,097,264 3)
1) The difference in value as of the time for payment, compared to December 31, 2020, for synthetic shares allocated in 2016 (for which payment was made in 2021). The difference in value as of December 31,
2021 compared to December 31, 2020, for synthetic shares allocated in 2017, 2018, 2019 and 2020. Calculated on a share price of SEK 99.79. The difference in value as of December 31, 2021, compared to grant
date for synthetic shares allocated in 2021. The value of synthetic shares allocated in 2017, 2018, 2019 and 2020 includes respectively SEK 1.00, SEK 1.00, SEK 1.50 and SEK 2.00 per share in compensation for
dividends resolved by the Annual General Meetings 2018, 2019, 2020 and 2021 and the value of the synthetic shares allocated in 2016 includes dividend compensation for dividends resolved in 2017, 2018, 2019
and 2020.
2) Committee fee and cash portion of the Board fee.
3) Excluding social security charges in the amount of SEK 3,561,162.
4) Appointed employee representative Board member as of March 30, 2021, previously deputy employee representative Board member.
5) Resigned as employee representative Board member as of March 30, 2021.
6) Resigned as deputy employee representative Board member as of November 3, 2021.
7) Appointed deputy employee representative Board member as of March 30, 2021.
Comments to the table
– The Chair of the Board was entitled to a Board fee of SEK 4,225,000 and
a fee of SEK 205,000 as Chair of the Finance Committee and a fee of SEK
180,000 as member of the Remuneration Committee.
– The other Directors elected by the Annual General Meeting were entitled
to a fee of SEK 1,060,000 each. In addition, the Chair of the Audit and
Compliance Committee was entitled to a fee of SEK 420,000 and the other
non-employee members of the Audit and Compliance Committee were enti-
tled to a fee of SEK 270,000 each. The Chairs of the Finance, Remuneration
and Technology and Science Committees were entitled to a fee of SEK
205,000 each and the other non-employee members of these Committees
were entitled to a fee of SEK 180,000 each.
– Members of the Board, who are not employees of the Company, have
not received any remuneration other than the fees and synthetic shares
as above. None of the Directors have entered into a service contract with
the Parent Company or any of its subsidiaries, providing for termination
benefits.
– Members and deputy members of the Board who are Ericsson employees
received no remuneration or benefits other than their entitlements as
employees and a fee to the employee representatives and their deputies of
SEK 1,500 per attended Board meeting and Committee meeting.
– The Annual General Meeting 2021 resolved that non-employee Directors
may choose to receive the Board fee (i.e., exclusive of Committee fee) as
follows: i) 25% of the Board fee in cash and 75% in the form of synthetic
shares, with a value corresponding to 75% of the Board fee at the time of
allocation, ii) 50% in cash and 50% in the form of synthetic shares, or iii)
75% in cash and 25% in the form of synthetic shares. Directors may also
choose not to participate in the synthetic share program and receive 100%
of the Board fee in cash. Committee fees are always paid in cash.
The number of synthetic shares allocated is based on a volume-weighted
average of the market price of Ericsson’s Class B shares on Nasdaq Stockholm
during the five trading days immediately following the publication of Ericsson’s
interim report for the first quarter 2021; SEK 118.65. The number of synthetic
shares is rounded down to the nearest whole number of shares.
The synthetic shares are vested during the Directors’ term of office and the
right to receive payment with regard to the allocated synthetic shares occurs
after the publication of the Company’s year-end financial statement during
the fifth year following the Annual General Meeting which resolved on the
synthetic share program, i.e., in 2026. The amount payable shall be determined
based on the volume-weighted average price for shares of Ericsson’s Class
B during the five trading days immediately following the publication of the
year-end financial statement.
Synthetic shares were allocated to members of the Board for the first time
in 2008 and have been allocated annually since then on equal terms and
conditions. Payment based on synthetic shares allocated in 2016 occurred
in 2021. The amounts paid in 2021 under the synthetic share programs were
determined based on the volume-weighted average price for Ericsson’s Class
B shares on Nasdaq Stockholm during the five trading days immediately
following the publication of the year-end financial statements for 2020:
Financial report 2021
70
Notes to the consolidated financial statements
Note G2, cont’d.
SEK 109.20 and totalled SEK 3,957,171 excluding social security charges.
The payments made do not constitute a cost for the Company in 2021. The
Company’s costs for the synthetic shares have been disclosed each year and
the net change in value of the synthetic shares for which payment was made in
2021, is disclosed in the table above “Remuneration to members of the Board
of Directors”.
The value of all outstanding synthetic shares fluctuates in line with the
market value of Ericsson’s Class B share and may differ from year to year
compared to the original value on their respective grant dates. The change in
value of the outstanding synthetic shares is established each year and affects
the total recognized costs that year. As of December 31, 2021, the total
outstanding number of synthetic shares under the programs is 341,039 and
the total accounted debt is SEK 35,181,987.
Remuneration to the Group management
The Company’s costs for remuneration to the Group management are the
costs recognized in the income statement during the financial year. These costs
are disclosed under Remuneration costs below.
Costs recognized during a financial year in the income statement are not
fully paid by the Company at the end of the fiscal year. The unpaid amounts
that the Company has in relation to the Group management are disclosed
under Outstanding balances.
Remuneration costs
The total remuneration to the President and CEO and to other members of the
Group management, consisting of the Executive Team (ET), includes fixed sal-
ary, short- and long-term variable compensation, pension and other benefits.
These remuneration elements are based on the guidelines for remuneration
to Group management (the Guidelines) as approved by the Annual General
Meeting (AGM) of shareholders held in 2020.
Remuneration costs for the President and CEO and other members of Executive Team (ET)
SEK
Salary 1)
Termination benefits
Annual variable remuneration
provision earned for the year
Long-term variable compensation
provision
Pension costs 2)
Other benefits 3)
Social charges and taxes 3)
Total
President
and CEO 2021
President
and CEO 2020
Other members
of ET 2021
Other members
of ET 2020
18,208,859
—
17,727,726
—
110,043,431
—
98,063,266
—
Total 2021
128,252,290
—
Total 2020
115,790,992
—
—
—
52,507,185
37,992,529
52,507,185
37,992,529
43,701,650
41,110,656
9,569,049
555,688
22,633,474
94,668,720
9,113,376
770,276
21,592,463
90,314,497
48,260,833
40,886,802
11,199,631
57,469,705
41,237,506
39,685,920
14,360,413
52,289,551
91,962,483
50,455,851
11,755,319
80,103,179
82,348,162
48,799,296
15,130,689
73,882,014
320,367,587
283,629,185
415,036,307
373,943,682
1) Includes compensation for unused vacation days.
2) Includes cash payments to the President and CEO in lieu of defined contribution payment in a cost neutral way to Ericsson.
3) Other benefits and Social charges and taxes for other members of ET 2020 adjusted due to clerical error.
Outstanding balances
The Company has recognized the following liabilities relating to unpaid
remunerations in the balance sheet:
– Ericsson’s commitments for defined benefit based pensions as of December
31, 2021, for other members of ET under IAS 19 amounted to 2021:
SEK 47.4 million, 2020: SEK 45.6 million of which 2021: SEK 32.9 mil-
lion, 2020: SEK 32.0 million refers to the ITP and early retirement, and
the remaining 2021 SEK 14.5 million, 2020 SEK13.6 million to disability
and survivors’ pensions. The President and CEO does not have a Swedish
defined benefit based pension plan, hence, Ericsson bears no commitment.
– For previous Presidents and CEOs, the Company has made provisions for
defined benefit pension plans in connection with their active service periods
within the Company.
Comments to the table
– Fredrik Jejdling was appointed Executive Vice President by the Board of
Directors effective November 7, 2017. He did not substitute the President
and CEO as the deputy to the President and CEO in 2021. Information
regarding Fredrik Jejdling is included in the group “Other members of ET.”
The details of Fredrik Jejdling’s remuneration in 2021 can be found in the
Remuneration report 2021.
– Arun Bansal was appointed as Executive Vice President by the Board
of Directors effective June 10, 2020. He did not substitute the President
and CEO as the deputy to the President and CEO in 2021. Information
regarding Arun Bansal is included in the group “Other members of ET.” The
details of Arun Bansal’s remuneration in 2021 corresponding to the period
after he was appointed as Executive Vice President can be found in the
Remuneration report 2021.
– The group “Other members of ET 2021” and “Other members of ET 2020
comprises of the following 14 persons: MajBritt Arfert, Arun Bansal, Xavier
Dedullen, Erik Ekudden, Niklas Heuveldop, Chris Houghton, Fredrik Jejdling,
Jan Karlsson, Peter Laurin, Stella Medlicott, Carl Mellander, Nunzio Mirtillo,
Fadi Pharaon and Åsa Tamsons.
– The salary stated in the table for the President and CEO and other members
of the ET includes vacation pay paid during 2021 as well as other contracted
compensation expenses in 2021.
– “Long-term variable compensation provision” refers to the compensation
costs for full year 2021 for all outstanding share-based plans.
Financial report 2021
G3 Share-based compensation
Accounting treatment of Long-Term Variable Compensation Programs
In note A1” Significant accounting policies”, the overall accounting policies for
share-based payments within the Company are disclosed. In summary:
– Share-settled programs, the total compensation expense is calculated
based on the fair value (FV) at grant date and recognized over the service
period of three years.
– Cash-settled plans, the accounting principles are the same as for any other
accruals or provisions. Prior to payout an accrual or provision is recognized
every period based on the present period’s best estimate of the total
amount. Any difference between total payout and the sum of accruals
of provisions is recognized in the income statement in the period of final
payout.
Long-Term Variable Compensation
All long-term variable compensation programs have been designed to form
a part of a well-balanced total remuneration package and in general to span
over a minimum of three years (service period). As these are variable compen-
sation programs, the outcomes cannot be predicted when the programs are
introduced and rewards depend on long-term personal commitment, corpo-
rate performance and the share price performance.
Following discontinuation of the previous long-term variable compensation
programs at the end of 2016, the shareholders approved the new Long-Term
Variable Compensation Program (LTV) for the Executive Team (ET). The
Company also introduced the new Executive Performance Plan (EPP) for
senior managers and the Key Contributor Plan (KC Plan) for key employees as
integral parts of its remuneration strategy starting from 2017.
All new programs are share-based payment programs as defined by IFRS 2
“Share-based Payment,” either share- or cash-settled.
Share-Settled Programs
Long-Term Variable Compensation Program for the Executive Team
The Long-Term Variable Compensation Program for the ET as approved by the
shareholders, is designed to provide long-term incentives for members of the
ET and to incentivize the Company’s performance creating long-term value.
LTV and EPP performance criteria
Notes to the consolidated financial statements
71
Awards under LTV (Performance Share Awards) are granted to the par-
ticipants, provided that certain performance conditions are met, to receive a
number of shares, free of charge, following expiration of a three-year vesting
period (vesting period). Allotment of shares pursuant to Performance Share
Awards are subject to the achievement of performance criteria which are
defined specific to each year’s program when the program is introduced.
Which portion, if any, of the Performance Share Awards for LTV will vest is
determined at the end of the relevant performance period based on the satis-
faction of the predetermined performance criteria for that year’s LTV program
(performance period). The performance criteria for the currently running
LTV and EPP are summarized in the below table along with the satisfaction
and achieved vesting levels for the ones which the performance period have
lapsed. It is generally required that the participant retains his or her employ-
ment over a period of three years from the date of grant of awards to be eligible
for receiving the performance awards.
Provided that the performance criteria have been met during the perfor-
mance period and that the participant has retained his or her employment
(unless special circumstances are at hand) during the service period, allotment
of vested shares will take place as soon as practicably possible following the
expiration of the vesting period.
When determining the final vesting level of Performance Share Awards, the
Board of Directors examines whether the vesting level is reasonable consider-
ing the Company’s financial results and position, conditions on the stock mar-
ket and other circumstances, and if not, reserves the right to reduce the vesting
level to a lower level deemed appropriate.
In the event delivery of shares to the participants cannot take place under
applicable law or at a reasonable cost and employing reasonable administra-
tive measures, the Board of Directors is entitled to decide that participants
may, instead, be offered cash settlement.
All major decisions relating to outcome of LTV are taken by the
Remuneration Committee, with approval by the full Board of Directors as
required.
Target
Criteria
Weight
Performance Period
Vesting Opportunity
(linear pro-rata)
50%
Jan 1, 2021–Dec 31, 2021
0%–200%
Program
Year
2021
2021
2021
2021 Total
2020
2020
2020
2020 Total
2019
2019
2019
2019 Total
2018
2018
2018
2018 Total
2021 Group operating
income (EBIT)
Absolute TSR
Relative TSR
Range (SEK billion):
15.0–24.0
Range: 6%–14%
Ranking of Ericsson: 6–2
2020 Group operating
income (EBIT)
Absolute TSR
Relative TSR
Range (SEK billion):
19.1–27.9
Range: 6%–14%
Ranking of Ericsson: 6–2
2019 Group operating
income (EBIT)
Absolute TSR
Relative TSR
Range (SEK billion):
10.0–20.0
Range: 6%–14%
Ranking of Ericsson: 7–2
2018 Group operating
income (EBIT)
Absolute TSR
Relative TSR
Range (SEK billion):
4.6–9.6
Range: 6%–14%
Ranking of Ericsson: 7–2
Jan 1, 2021–Dec 31, 2023
Jan 1, 2021–Dec 31, 2023
Jan 1, 2020–Dec 31, 2020
Jan 1, 2020–Dec 31, 2022
Jan 1, 2020–Dec 31, 2022
Jan 1, 2019–Dec 31, 2019
Jan 1, 2019–Dec 31, 2021
Jan 1, 2019–Dec 31, 2021
Jan 1, 2018–Dec 31, 2018
Jan 1, 2018–Dec 31, 2020
Jan 1, 2018–Dec 31, 2020
30%
20%
100%
50%
30%
20%
100%
50%
30%
20%
100%
50%
30%
20%
100%
Achievement
SEK 27.4
billion 2)
Achieved
Vesting Level
200%
SEK 29.1
billion 3)
200%
SEK 20.4
200%
0%–200%
0%–200% 1)
0%–200%
0%–200%
0%–200%
0%–200% 1)
0%–200%
0%–200%
billion 4)
0%–200%
9.00%
0%–200% 1) 6.52 out of 12
0%–200%
0%–200%
SEK 11.5
billion 5)
0%–200%
26.92%
0%–200% 1) 1.94 out of 12
0%–200%
74.89%
19.39%
126.35%
200%
200%
200%
200%
1) The portion of the Performance Share Awards granted to a participant based on the relative TSR performance condition is subject to fulfilment of the related performance criteria over the performance period
compared to Peer Groups consisting of 11 companies for the program year 2021 and 2020 and 12 companies for the program years 2019 and 2018.The vesting of the Performance Share Awards under this
performance condition will vary depending on the Company’s TSR performance ranking versus the other companies in the peer group at the end of the performance period.
2) Excludes restructuring charges and items not included in target performance criterion.
3) Excludes restructuring charges.
4) Excludes fines and similar related to the United States Department of Justice (DOJ) / Securities and Exchange Commission (SEC) resolution.
5) Excludes restructuring charges and the provisions taken in Q4 2018 related to the revised BSS strategy
Financial report 2021
72
Notes to the consolidated financial statements
Note G3, cont’d.
2021 Long-Term Variable Compensation Program for the Executive Team
(LTV 2021)
LTV 2021 was approved at the Annual General Meeting (AGM) of shareholders
held in 2021 and includes all members of the ET, a total of 15 ET members in
2021, including the President and CEO.
The participants were granted Performance Share Awards on May 3, 2021.
The value of the underlying shares in respect of the Performance Share Awards
made to the President and CEO was 190% of the annual base salary, and for
other participants ranged between 30% and 70% of the participants’ respec-
tive annual base salaries at the time of grant. The share price used to calculate
the number of shares to which the Performance Share Awards entitles was
calculated as the volume weighted average of the market price of Ericsson B
shares on Nasdaq Stockholm during the five trading days immediately follow-
ing the publication of the Company’s interim report for the fourth quarter of
2020.
Following evaluation of the previously introduced Long-term variable
compensation programs, the Board of Directors decided to use the same per-
formance criteria for LTV 2021 as the ones used for LTV 2020, LTV 2019 and
LTV 2018 in order to secure continuity and consistency in supporting achieve-
ment of the Company’s 2022 targets. Hence again a one-year Group operating
income (EBIT) target measured over the period January 1, 2021 to December
31, 2021 was included as a performance condition for LTV 2021 in addition
to the standard three-year total shareholder return (TSR) performance condi-
tions, which were also used for LTV 2020, LTV 2019 and LTV 2018.
The performance criteria relating to TSR are absolute TSR development and
relative TSR development for the Ericsson B share over the period January 1,
2021 to December 31, 2023 (the performance period).
The performance criteria for LTV 2021 along with the details on how the
performance criteria will be calculated and measured are explained in minutes
from the AGM 2021 under Item 16.
The Board of Directors resolved on the achieved vesting level for the 2021
Group operating income (EBIT) performance criteria as 200% for this portion
of the Performance Share Awards granted based on the 2021 Group operating
income (EBIT) outcome.
2020 Long-Term Variable Compensation Program for the Executive Team
(LTV 2020)
LTV 2020 was approved at the Annual General Meeting (AGM) of shareholders
held in 2020 and includes all members of the ET, a total of 15 ET members in
2020, including the President and CEO.
The participants were granted Performance Share Awards on April 1, 2020.
The value of the underlying shares in respect of the Performance Share Awards
made to the President and CEO was 180% of the annual base salary, and for
other participants ranged between 30% and 70% of the participants’ respec-
tive annual base salaries at the time of grant. The share price used to calculate
the number of shares to which the Performance Share Awards entitles was
calculated as the volume weighted average of the market price of Ericsson B
shares on Nasdaq Stockholm during the five trading days immediately follow-
ing the publication of the Company’s interim report for the fourth quarter of
2019.
Following evaluation of the previously introduced Long-term variable
compensation programs, the Board of Directors decided to use the same
performance criteria for LTV 2020 as the ones used for LTV 2019 and LTV
2018 in order to secure continuity and consistency in supporting achievement
of the Company’s 2020 targets. Hence again a one-year Group operating
income (EBIT) target measured over the period January 1, 2020 to December
31, 2020 was included as a performance condition for LTV 2020 in addition
to the standard three-year total shareholder return (TSR) performance condi-
tions, which were also used for LTV 2019, LTV 2018 and LTV 2017.
The performance criteria relating to TSR are absolute TSR development and
relative TSR development for the Ericsson B share over the period January 1,
2020 to December 31, 2022 (the performance period).
The performance criteria for LTV 2020 along with the details on how the
performance criteria will be calculated and measured are explained in minutes
from the AGM 2020 under Item 17.
The Board of Directors resolved on the achieved vesting level for the 2020
Group operating income (EBIT) performance criteria as 200% for this portion
of the Performance Share Awards granted based on the 2020 Group operating
income (EBIT) outcome.
2019 Long-Term Variable Compensation Program for the Executive Team
(LTV 2019)
LTV 2019 was approved at the AGM 2019 and includes a total of 14 ET mem-
bers in 2019, including the President and CEO, but excluding Helena Norrman
who was not granted LTV 2019 due to her resignation, and Stella Medlicott
and Fadi Pharaon who carried over their EPP entitlements for 2019 after their
appointments to the ET.
The participants were granted Performance Share Awards on May 18, 2019.
The value of the underlying shares in respect of the Performance Share Awards
made to the President and CEO was 180% of the annual base salary, and for
other participants ranged between 30% and 70% of the participants’ respec-
tive annual base salaries at the time of grant. The share price used to calculate
the number of shares to which the Performance Share Awards entitles was
calculated as the volume weighted average of the market price of Ericsson B
shares on Nasdaq Stockholm during the five trading days immediately follow-
ing the publication of the Company’s interim report for the first quarter of 2019.
Following evaluation of the previously introduced Long-Term Variable
Compensation Programs, the Board of Directors decided to use the same per-
formance criteria for LTV 2019 as the ones used for LTV 2018 in order to secure
continuity and consistency in supporting achievement of the Company’s
2020 targets. Hence again a one-year Group operating income (EBIT) target
measured over the period January 1, 2019 to December 31, 2019 was included
as a performance condition for LTV 2019 in addition to the standard three-year
total shareholder return (TSR) performance conditions, which were also used
for LTV 2018 and LTV 2017.
The performance criteria relating to TSR are absolute TSR development and
relative TSR development for the Ericsson B share over the period January 1,
2019 to December 31, 2021 (the performance period).
The performance criteria for LTV 2019 along with the details on how the
performance criteria will be calculated and measured are explained in minutes
from the AGM 2019 under Item 17.
The Board of Directors resolved on the achieved vesting level for the 2019
Group operating income (EBIT) performance criteria as 200% for this portion
of the Performance Share Awards granted based on a 2019 Group operating
income (EBIT) outcome excluding fines and similar related to the United
States Department of Justice (DOJ) / Securities and Exchange Commission
(SEC) resolutions.
The Board of Directors also resolved on the achieved vesting levels for the
absolute and relative TSR development performance criteria as 74,89% and
19,39% based on the achievement results of 9.00% absolute TSR and 6.52th
ranking for relative TSR respectively. Which resulted in an overall achieved
vesting level of 126.35% for LTV 2019 as illustrated in the table LTV and EPP
Performance Criteria on the prior page.
2018 Long-Term Variable Compensation Program for the Executive Team
(LTV 2018)
LTV 2018 was approved by the AGM 2018 and includes all members of the ET,
a total of 14 employees in 2018, including the President and CEO, but exclud-
ing Ulf Ewaldsson, Elaine Weidman-Grunewald and Nina Macpherson who
left the ET prior to the award grant date of May 18, 2018, and Jan Karlsson
who carried over his EPP entitlement for 2018 after his appointment to the ET.
The participants were granted Performance Share Awards on May 18,
2018. The value of the underlying shares in respect of the Performance Share
Awards made to the President and CEO was 180% of the annual base salary,
and for other participants ranged between 30% and 70% of the participants’
respective annual base salaries at the time of grant. The maximum value of
underlying shares in respect of the Performance Share Awards made to the
ET members other than the President and CEO were increased from 22.5% in
2017 to between 30% and 70% of participants’ respective base salaries at the
time of grant in 2018. The increases were approved at the AGM 2018 with the
intention to increase the long-term focus and alignment with the long-term
expectations of the shareholders. The share price used to calculate the number
of shares to which the Performance Share Awards entitles was calculated
as the volume weighted average of the market price of Ericsson B shares on
Nasdaq Stockholm during the five trading days immediately following the
publication of the Company’s interim report for the first quarter of 2018.
Following continuous evaluation of the Long-Term Variable Compensation
Programs a one-year Group operating income (EBIT) target was added to LTV
2018 measured over the period January 1, 2018 to December 31, 2018, to
Financial report 2021 Note G3, cont’d.
support achieving the Company’s 2020 targets, in addition to the three-year
targets relating to total shareholder return (TSR), which were also used for LTV
2017.
The performance criteria relating to TSR are absolute TSR development and
relative TSR development for the Ericsson B share over the period January 1,
2018 to December 31, 2020 (the performance period).
The performance criteria for LTV 2018 along with the details on how the
performance criteria will be calculated and measured are explained in minutes
from the AGM 2018 under Item 17.
The Board of Directors resolved on the achieved vesting level for the 2018
Group operating income (EBIT) performance criteria as 200% for this portion
of the Performance Share Awards granted based on a 2018 Group operating
income (EBIT) outcome excluding restructuring charges and the provisions
taken in Q4 2018 related to the revised BSS strategy.
The Board of Directors also resolved on the achieved vesting levels for both
the absolute and relative TSR development performance criteria as 200%
based on the achievement results of 26.92% absolute TSR and 1.94th ranking
for relative TSR, which resulted in an overall achieved vesting level of 200% for
LTV 2018 as illustrated in the table LTV and EPP Performance Criteria on the
prior page.
The Performance Share Awards vested during 2021 and the participants
received the equivalent number of shares free of charge with the official
closure of LTV 2018.
Cash-Settled Plans
Executive Performance Plans (EPP)
The Executive Performance Plan (EPP) is a cash-settled plan which uses the
same performance criteria as the ones under the respective year’s long-term
variable compensation program for the ET.
Senior managers, except for the members of the ET, are selected as partici-
pants to EPP annually through a nomination process that identifies individuals
according to performance, potential, critical skills, and business critical roles.
There are two award levels, high and regular, which represent the potential
award levels as a percentage of the participant’s annual gross salary, which
are determined separately by the Board of Directors for each year’s plan before
the plan is launched. Participants are assigned a potential award, which is
converted into a number of synthetic shares based on the same market price
of Ericsson B shares used for the respective year’s LTV. The three-year vesting
period is the same as for the LTV. The vesting level of the award is subject to
the achievement of the same performance criteria over the same performance
period defined for the respective year and generally requires that the partici-
pant retains his or her employment over the vesting period.
At the end of the vesting period, the allotted synthetic shares are converted
into a cash amount, based on the market price of Ericsson B shares at Nasdaq
Stockholm at the vesting date, and this final amount is paid to the participant
in cash gross before tax.
Executive Performance Plan 2021 (EPP 2021)
159 senior managers were selected to participate in EPP 2021. The regular
award level is set at 15% and the high award level is set at 25% for all countries
except for the USA. The regular and high award levels are set at 25% and 35%
respectively in the US.
Executive Performance Plan 2020 (EPP 2020)
155 senior managers were selected to participate in EPP 2020. The regular
award level is set at 15% and the high award level is set at 25% for all countries
except for the USA. The regular and high award levels are set at 25% and 35%
respectively in the USA.
Executive Performance Plan 2019 (EPP 2019)
161 senior managers were selected to participate in EPP 2019. The regular
award level is set at 15% and the high award level is set at 22.5%.
Executive Performance Plan 2018 (EPP 2018)
171 senior managers were selected to participate in EPP 2018. The regular
award level is set at 15% and the high award level is set at 22.5%.
The awards under EPP 2018 were paid in 2021 at the end of the vesting
period and EPP 2018 was officially closed.
Notes to the consolidated financial statements
73
Key Contributor Plans (KC Plans)
The KC Plan is a cash-settled retention plan. Employees, except for senior
managers and the members of the ET, are selected as participants to KC Plan
annually through a nomination process that identifies individuals according to
performance, potential, critical skills, and business critical roles. Participants
are assigned a potential award based on a percentage of their annual gross
salary, which is converted into a number of synthetic shares based on the same
market price of Ericsson B shares used for the respective year’s LTV.
The KC Plan is a retention plan, therefore there are no performance criteria
for vesting of awards. In general, there is a three-year service period for receiv-
ing the award in full and the award is subject only to continued employment
during the service period. As of the KC 2019 plan the total service period is
three years, however the payout is distributed over the entire service period
with staggered payments according to the below schedule:
– 25% of the award to be paid at the end of the first year,
– 25% of the award to be paid at the end of the second year, and
– the remaining 50% of the award to be paid at the end of the third year.
Accounting wise, the plans with three staggered payments are seen as three
separate tranches. The tranches are accounted for as separate awards and
accrued in parallel with the same grant date but different vesting dates. The
consequence of the staggered payments is a front-end loaded cost for these
plans. The accounting model is referred to as staged vesting.
The value of each synthetic share is driven by the absolute share price
performance of Ericsson B shares during the service period. At the end of the
service period, the allotted synthetic shares are converted into a cash amount,
based on the market price of Ericsson B shares Nasdaq Stockholm at the
vesting date, and this final amount is paid to the participant in cash gross
before tax.
Key Contributor Plan 2021 (KC Plan 2021)
7,246 employees were selected to participate in KC Plan 2021. There are three
award levels at 10%, 25% and 30% of the participants’ annual gross salary.
The total service period is three years, however the payout is distributed over
the entire service period with staggered payments as explained under Key
Contributor Plans (KC Plans).
Key Contributor Plan 2020 (KC Plan 2020)
7,007 employees were selected to participate in KC Plan 2020. There are three
award levels at 10%, 25% and 30% of the participants’ annual gross salary.
The total service period is three years, however the payout is distributed over
the entire service period with staggered payments as explained under Key
Contributor Plans (KC Plans).
Key Contributor Plan 2019 (KC Plan 2019)
6,941 employees were selected to participate in KC Plan 2019. There are three
award levels at 10%, 25% and 30% of the participants’ annual gross salary.
The total service period is three years, however the payout is distributed over
the entire service period with staggered payments as explained under Key
Contributor Plans (KC Plans).
Key Contributor Plan 2018 (KC Plan 2018)
5,886 employees were selected to participate in KC Plan 2018. There are two
award levels at 10% and 25% of the participants’ annual gross salary. The
total service period is three years and the awards are paid at the end of the full
service period.
The awards under KC Plan 2018 were paid in 2021 at the end of the service
period and KC Plan 2018 was officially closed.
Number of shares and synthetic shares
The awards granted to the participants of the LTV programs and the develop-
ment of the granted shares over time, considering the fulfilment of perfor-
mance conditions, are displayed in the below table, together with the number
of synthetic shares for the EPP and KC plans.
Financial report 2021 74
Notes to the consolidated financial statements
Note G3, cont’d.
Number of shares and synthetic shares
Executive team programs
Of which the President and CEO
(million)
Share-settled programs
Maximum shares required
Granted shares
Outstanding number of shares
beginning of 2021
Exercised during 2021
Forfeited during 2021
Increase due to performance
condition 2021
Outstanding number of shares
end of 2021
LTV 2021
LTV 2020
LTV 2019
LTV 2018
2.1
0.6
—
—
—
0.3
0.9
2.5
0.9
1.3
—
—
3.0
0.6
0.9
—
—
—
–0.1
1.3
0.8
3.0
0.8
1.6
–1.6
—
—
—
Cash-settled plan
Synthetic shares
EPP 2021
EPP 2020
EPP 2019
EPP 2018
1.2
1.5
0.8
—
Executive performance program
Total
10.6
2.9
3.8
–1.6
—
0.2
3.0
Total
3.5
LTV 2021
LTV 2020
LTV 2019
LTV 2018
Total
—
0.3
—
—
—
0.2
0.5
—
0.4
0.6
—
—
—
0.3
0.4
—
—
—
–0.1
0.6
0.3
—
0.4
0.8
–0.8
—
—
—
Key contributors plans
KC 2021
KC 2020
KC 2019
KC 2018
7.6
8.0
3.9
—
—
1.4
1.8
–0.8
—
0.1
1.4
Total
19.5
Compensation expense
The compensation expense is based on the FV and the number of shares or
synthetic shares. The compensation expense for the share-settled long-term
variable compensation programs for the President and CEO and the ET during
2021 were SEK 93 million.
The compensation expenses for cash-settled plans, the EPP and the KC
Plans during 2021 were SEK 124 million and SEK 1,129 million respectively
as shown in the table Compensation expense for LTV 2018-2021 below. The
total compensation expense during 2021 amounted to SEK 1,346 million.
The total provision for the cash-settled plans amounted to SEK 1,591 (2,107)
million, including social charges of SEK 190 (227) million, at the end of 2021.
Compensation expense for LTV 2018-2021
Share-settled programs
2021
2020
2019
2018
Total
LTV 2021
LTV 2020
LTV 2019
LTV 2018
Total executive team programs
Of which the President and CEO
Cash-settled plans
EPP 2021
EPP 2020
EPP 2019
EPP 2018
Total executive performance plans
KC 2021
KC 2020
KC 2019
KC 2018
Total key contributor plans
Total cash-settled plans
Total compensation expense
24
31
28
10
93
44
17
56
14
37
124
355
376
194
204
—
23
28
28
79
38
—
34
50
76
160
—
523
335
368
1,129
1,253
1,346
1,226
1,386
1,465
—
—
17
28
45
22
—
—
11
53
64
—
—
248
245
493
557
602
—
—
—
18
18
9
—
—
—
20
20
—
—
—
156
156
176
194
24
54
73
84
235
113
17
90
75
186
368
355
899
777
973
3,004
3,372
3,607
Financial report 2021
Notes to the consolidated financial statements
75
Note G3, cont’d.
Fair value
The compensation expense for the share-settled plans is based on FV and the
number of shares. The FV for the LTV programs are including adjustments for
absolute and relative TSR development performance criteria at the grant date,
using a Monte Carlo model, which uses a number of inputs, including expected
dividends, expected share price volatility and the expected period to exercise.
The performance criteria of the LTV program are also based on the outcome of
the Group operating income (EBIT) as per fiscal years 2021, 2020 and 2019.
The FV for the Group operating income (EBIT) performance criteria is calcu-
lated as the share price at grant date, reduced by the net present value of the
dividend expected during the three-year vesting period. For the performance
criteria the number of shares is adjusted in relation to the achievement level of
the performance criteria at the end of the performance period.
The compensation expense for the cash-settled plans is based on the FV
and the number of synthetic shares allocated. The FV for the EPP includes
the same criteria as the share-settled plans and calculated in a similar way,
however reassessed quarterly with updated criteria. The FV for the KC Plans
are the share price reduced by the net present value of the dividend expected
during the service period. The KC Plans 2021, 2020 and 2019 have three FV
based on the three different service periods. The FV per performance criteria
and program is shown in the table Fair values below.
Fair values (SEK)
Executive team programs
Share price at grant
Fair value Absolute TSR
Fair value Relative TSR
Fair value Group operating income (EBIT)
Executive performance plans
Fair value Absolute TSR
Fair value Relative TSR
Fair value Group operating income (EBIT)
Key contributor plans
Fair value - Tranche 1
Fair value - Tranche 2
Fair value - Tranche 3
Fair value
LTV 2021
116.66
113.47
108.61
110.70
EPP 2021
60.41
29.20
92.23
KC 2021
96.21
94.20
92.23
—
LTV 2020
78.88
54.69
98.06
74.22
EPP 2020
67.54
28.97
94.20
KC 2020
109.80
96.21
94.20
—
LTV 2019
90.70
87.92
94.63
86.94
EPP 2019
67.59
12.97
95.70
KC 2019
84.12
111.78
95.70
—
LTV 2018
65.79
80.40
78.66
62.93
EPP 2018
111.78
111.78
111.78
KC 2018
—
—
—
111.78
Payout of Cash-settled Plan
During 2021 four plans vested; EPP 2018 and KC Plan 2018, KC Plan 2019
tranche 2 (vesting May 18th) and KC Plan 2020 tranche 1 (vesting Feb 18th).
The share price for the plan that vested Feb 18th was SEK 109.80 and for the
plans that vested May 18th SEK 111.78 and the accumulated payout to the
participants amounted to SEK 1,618 million.
The Ericsson share purchase plan (ESPP)
Ericsson is committed to helping employees thrive and to recognizing them
for the impact they create by providing opportunities to enrich their working
experience. In order to encourage employees to play an active role in achieving
the Company’s purpose, further create sense of belonging and ownership,
the new Ericsson share purchase plan was launched in November 2021 (in
58 countries to approximately 58,900 eligible employees), with continued
deployment in additional countries where possible in line with local statutory
legislation during 2022.
The ESPP is an all-employee share purchase plan that enables employees
to purchase Ericsson B-shares up to a maximum value of SEK 50,000 per year
via monthly payroll deduction. In recognition of the employees’ commitment,
Ericsson supports the participants with a net cash payment up to 15% of their
elected contribution amounts and will cover the tax on the Company sup-
ported amount, which is payable via payroll. Under the ESPP participants will
acquire Ericsson B shares at market price on the stock exchange and the ESPP
does therefore not have any dilutive effect.
Ericsson share purchase plan
Eligible employees
Number of
countries with
ESPP
58,900
58
Number of
participants
9,314
Take-up rate
– percent of eligible
employees
15.8%
Option agreements
Prior to taking office as President and CEO of Ericsson, Board member Börje
Ekholm entered into an option agreement in 2016 with Investor AB and AB
Industrivärden, shareholders of Ericsson. Each of these two shareholders has
issued 1,000,000 call options to Börje Ekholm on market terms (valuation
conducted, using the Black & Scholes model, by an independent third party).
Under the agreements, Börje Ekholm has purchased in total 2,000,000 call
options, issued by the shareholders, for a purchase price of SEK 0.49 per call
option. Each call option entitles the purchase of one Ericsson B share from the
shareholders at a strike price of SEK 80 per share (to be recalculated to neutral-
ize the effects of dividend payments during the option period) during one year
after a seven-year period. Due to the fact that the call options were purchased
on market terms as described above, no compensation expense has been
recognized by the Company and will not be recognized during the remaining
part of the seven-year period.
In 2019 Investor AB, shareholder of Ericsson, made an offer to the Board
Chairs of its listed core investment to purchase call options relating to shares
in the respective core investment. Following this offer, Ronnie Leten, Chair of
the Board of Directors, entered into such a call option agreement with Investor
AB with respect to Class B share of Telefonaktiebolaget LM Ericsson. Under
the agreement, Investor AB has issued 128,452 call options to Ronnie Leten
on market terms (valuation conducted, using the Black & Scholes model, by an
independent third party) and Ronnie Leten has purchased these call options
for a purchase price of SEK 15.57 per call option. Each call option entitles
the purchase of one Ericsson B share from Investor AB at a strike price of
SEK 87.97 per share (to be recalculated to neutralize the effects of dividend
payments during the option period) during one year after a four-year period
starting February 5, 2019. Due to the fact that the call options were purchased
on market terms as described above, no compensation expense has been
recognized by the Company and will not be recognized during the remaining
part of the period.
Financial report 2021
76
Notes to the consolidated financial statements
G4 Employee information
Employee numbers, wages and salaries
Average number of employees by gender and market area
South East Asia, Oceania and India
North East Asia
North America
Europe and Latin America 1)
Middle East and Africa
Total
1) Of which in EU
Of which in Sweden
Women
5,470
4,579
2,269
11,581
823
24,722
8,728
3,173
2021
Men
20,828
9,323
7,999
34,336
3,549
76,035
25,971
10,237
Total
26,298
13,902
10,268
45,917
4,372
100,757
34,699
13,410
Women
5,025
4,532
2,075
11,205
807
23,644
8,462
2,911
2020
Men
20,306
9,344
7,635
34,226
3,434
74,945
25,811
9,709
Total
25,331
13,876
9,710
45,431
4,241
98,589
34,273
12,620
Number of employees by market area at year-end
Wages and salaries and social security expenses
South East Asia, Oceania and India
North East Asia
North America
Europe and Latin America 1)
Middle East and Africa
Total
1) Of which in EU
Of which in Sweden
2021
26,369
13,091
10,344
47,064
4,454
101,322
35,950
14,183
Number of employees by gender and age at year-end 2021
Under 25 years old
25–35 years old
36–45 years old
46–55 years old
Over 55 years old
Percent of total
Women
1,201
9,693
7,560
4,987
2,041
25%
Men
1,799
22,173
26,760
17,914
7,194
75%
2020
25,869
13,944
10,175
46,580
4,256
100,824
35,552
13,173
Percent
of total
3%
31%
34%
23%
9%
100%
Employee movements
Headcount at year-end
Employees who have left the Company
Employees who have joined the Company
Temporary employees
2021
101,322
11,631
12,129
868
2020
100,824
7,839
9,246
609
(SEK million)
Wages and salaries
Social security expenses
Of which pension costs
2021
62,823
14,639
5,601
2020
60,950
13,695
4,963
Amounts related to the President and CEO and the Executive Leadership Team
are included in the table above.
Remuneration to Board members and Presidents in subsidiaries
(SEK million)
Salary and other remuneration
Of which annual variable remuneration
Pension costs 1)
2021
572
80
41
2020
458
58
32
1) Pension costs are over and above any social security charges and taxes.
Board members, Presidents and Group management by gender at year end
2021
2020
Women
Men
Women
Men
Parent Company
Board members and
President
Group Management
Subsidiaries
Board members and
Presidents
23%
20%
77%
80%
23%
20%
77%
80%
21%
79%
19%
81%
Financial report 2021
Section H – Other
H1 Taxes
The Company’s tax expense for 2021 was SEK –6,270 (–9,589) million or
21.4% (35.2%) of income after financial items. The tax rate may vary between
years depending on business and geographical mix. Items reported for income
taxes include the impact of the Swedish tax rate reduction which was signed
into law on June 14, 2018. The law enacts a corporate income tax of 21.4%
from January 1, 2019 and then reduces it to 20.6% from January 1, 2021.
Income taxes recognized in the income statement
Current income taxes for the year
Current income taxes related to prior years
Deferred tax income/expense (+/–)
Share of taxes in joint ventures and
associated companies
Income tax expense
2021
–6,110
–337
188
2020
–5,470
–175
–3,911
2019
–2,564
–2,237
–2,116
–11
–33
–5
–6,270
–9,589
–6,922
A reconciliation between reported tax expense for the year and the theoretical
tax expense that would arise when applying statutory tax rate in Sweden,
20.6% (21.4%), on the consolidated income before taxes, is shown in the table
below.
The withholding tax expense 2020 includes an impairment of withholding
tax.
Taxes were positively impacted by SEK 969 million as a result of utilization
of previously impaired withholding tax assets in Sweden.
Reconciliation of Swedish income tax rate with effective tax rate
Calculated tax expense at Swedish tax
rate 20.6% (21.4%)
Effect of foreign tax rates
Current income taxes related to
prior years
Remeasurement of tax loss
carry-forwards
Remeasurement of deductible
temporary differences
Withholding tax expense
Reversal of impaired withholding tax
Tax effect of non-deductible expenses
Tax effect of non-taxable income
Tax effect of changes in tax rates
Income tax expense
Effective tax rate
2021
2020
2019
–6,025
–324
–5,823
–616
–1,875
–419
–175
–258
52
220
—
969
–975
392
–15
–6,270
21.4%
369
–1,393
—
–2,079
372
14
–9,589
35.2%
84
–230
519
–3,555
803
–64
–6,922
79.0%
–337
–175
–2,237
Changes in deferred taxes, net
Notes to the consolidated financial statements
77
Deferred tax balances
Deferred tax assets and liabilities are derived from the balance sheet items as
shown in the table below.
Tax effects of temporary differences and tax loss carry-forwards
Deferred tax
liabilities
Deferred
tax assets
Net
balance
2021
Intangible assets and property, plant
and equipment
Current assets
Post-employment benefits
Provisions
Deferred tax credits
Other
Loss carry-forwards
Deferred tax assets/liabilities
Netting of assets/liabilities
Deferred tax balances, net
2020
Intangible assets and property, plant
and equipment
Current assets
Post-employment benefits
Provisions
Deferred tax credits
Other
Loss carry-forwards
Deferred tax assets/liabilities
Netting of assets/liabilities
Deferred tax balances, net
Opening balance, net
Recognized in net income (loss)
Recognized in other comprehensive income
Acquisitions/divestments of subsidiaries
Deferred tax credits utilization
Translation difference
Closing balance, net
160
3,605
6,782
3,555
5,288
1,425
4,214
25,029
–1,920
23,109
771
2,235
7,062
3,739
8,285
1,794
4,417
28,303
–2,007
26,296
1,331
862
567
—
—
44
—
2,804
–1,920
22,225
884
22,225
1,579
862
378
—
—
277
—
3,096
–2,007
25,207
1,089
25,207
2021
25,207
188
–556
171
–3,027
242
22,225
2020
29,950
–3,911
794
–1,223
386
–789
25,207
Tax effects reported directly in Other comprehensive income (loss) amount to
SEK –556 (794) million, of which actuarial gains and losses related to pensions
constituted SEK –675 (900) million, revaluation of borrowings SEK –6 (–20)
million, cash flow hedges SEK 126 (–86) million and non-controlling interests
SEK –1 (1) million.
Deferred tax assets are only recognized in countries where the Company
expects to be able to generate corresponding taxable income in the future to
benefit from tax reductions.
Tax loss carry-forwards
Significant tax assets regarding tax loss carry-forwards are reported to the
extent that realization of the related tax benefit through future taxable profits
is probable also when considering the period during which these can be
utilized, as described below.
The majority of tax loss carry-forwards pertains to Sweden, United States,
Mexico and Germany. These countries have long or indefinite periods of utili-
zation. Of the total SEK 4,214 (4,417) million recognized deferred tax assets
related to tax loss carry-forwards, SEK 3,512 (3,513) million relates to Sweden.
Future income projections considering 5G roll-out, technology leadership
based on increased investments in R&D, strengthened competitive position
and expansion of the product portfolio, support the conclusion that the
deferred tax assets will be utilized in the foreseeable future.
Financial report 2021
78
Notes to the consolidated financial statements
Note H1, cont’d.
As of December 31, 2021, the recognized tax loss carry-forwards amounted
to SEK 19,635 (21,442) million. The reduction is primarily attributable to
utilization of the loss carry-forward against current year’s taxable income.
The tax value of the tax loss carry-forward is reported as a tax asset based on
the indefinite utilization period and the expectation that the group will realize
a significant taxable income to offset these loss carry-forwards.
The final years in which the recognized tax loss carry-forwards can be
utilized are shown in the following table.
H3 Statement of cash flows
Cash and cash equivalents include cash of SEK 24,015 (16,422) million and
cash equivalents of SEK 30,035 (27,190) million. For more information regard-
ing the disposition of cash and cash equivalents and unutilized credit commit-
ments, see note F1 “Financial risk management.”
Cash and cash equivalents as of December 31, 2021, include SEK 2,616
(2,351) million in countries where there exist significant cross-border conver-
sion restrictions due to hard currency shortage or strict government controls.
This amount is not directly available for distribution to the Parent Company,
however it may be used to pay normal business expenditures in the local
jurisdictions, thereby reducing group liabilities.
Tax loss carry-forwards
Year of expiration
2022
2023
2024
2025
2026
2027 or later (also includes unlimited
carry-forwards)
Total
Tax loss
carry-forwards
Tax value
37
49
91
38
9
9
9
20
7
2
19,411
19,635
4,167
4,214
Total
Adjustments to reconcile net income to cash
Property, plant and equipment
Depreciations
Impairment losses
In addition to the table above there are tax loss carry-forwards of SEK 4,038
(3,570) million at a tax value of SEK 671 (735) million that have not been
recognized due to judgments that they are unlikely to be utilizable against
future taxable profits in the respective jurisdictions. The majority of these tax
loss carry-forwards have an expiration date in excess of five years.
The Company has again considered the effect of COVID-19 pandemic
on the business and currently expect no material changes to forecast future
profits which could impact recoverability of deferred tax assets. Risk assess-
ment on the business plans is carried out on a regular basis, and deferred tax
asset recoverability analysis will be performed if conditions suggest that such
assets may be impaired.
H2 Earnings per share
Earnings per share
Basic
Net income attributable to owners of the
Parent Company (SEK million)
Average number of shares outstanding,
basic (millions)
Earnings per share, basic (SEK)
Diluted
Net income attributable to owners of the
Parent Company (SEK million)
Average number of shares outstanding,
basic (millions)
Dilutive effect for stock purchase (millions)
Average number of shares outstanding,
diluted (millions)
Earnings per share, diluted (SEK)
2021
2020
2019
22,694
17,483
2,223
3,329
6.82
3,323
5.26
3,306
0.67
22,694
17,483
2,223
3,329
3
3,332
6.81
3,323
3
3,326
5.26
3,306
14
3,320
0.67
Right-of-use assets
Depreciations
Impairment losses
Total
Intangible assets
Amortizations
Capitalized development expenses
Intellectual Property Rights, brands and
other intangible assets
Total amortizations
Impairments
Capitalized development expenses
Intellectual Property Rights, brands and
other intangible assets
Goodwill
Total impairments
Total
Total depreciation, amortization and
impairment losses on property, plant
and equipment and intangible assets
Taxes
Dividends from joint ventures/associated
companies 1)
Undistributed earnings in joint ventures/
associated companies 1)
Gains/losses on investments and sale of
operations, intangible assets and PP&E,
net 2)
Other non-cash items 3)
Total adjustments to reconcile
net income to cash
2021
2020
2019
3,674
198
3,872
2,277
—
2,277
3,602
512
4,114
2,387
47
2,434
3,587
360
3,947
2,474
75
2,549
1,343
906
1,519
1,164
2,507
1,083
1,989
1,019
2,538
—
201
112
313
—
137
—
137
36
19
—
55
2,820
2,126
2,593
8,969
8,674
6,576
10,436
90
43
270
331
–971
2,209
77
370
9,089
6,870
66
340
–812
2,279
17,143
19,931
17,832
When a company reports a loss, the number of shares used for calculating
earnings diluted per share shall be the same as for basic calculation.
For information about reconciliation of liabilities arising from financing
activities, see note F4 “Interest-bearing liabilities.”
1) See note E3 “Associated companies.”
2) Includes revaluation gains and losses on investments, see note B4 “Other operating income and
expenses.”
3) Relates mainly to unrealized foreign exchange, gains/losses on financial instruments.
Financial report 2021
Note H3, cont’d.
Note H5, cont’d.
Notes to the consolidated financial statements
79
The audit-related services include quarterly reviews and assurance on
Ericsson’s Sustainability and Corporate Responsibility report. The tax services
include corporate tax compliance work. Other services include work related to
agreed-upon-procedures engagements.
H6 Events after the reporting period
Legal proceedings
Ericsson and Apple were not able to renew the now expired patent license
agreement between the parties in a timely manner. On January 18, 2022
Ericsson filed three complaints with the U.S. International Trade Commission
(ITC) alleging infringement of 12 patents by certain Apple products. In addi-
tion, Ericsson filed companion lawsuits in the Western District of Texas alleging
infringement of the same 12 patents. Also, in January 2022 Ericsson filed
complaints in several jurisdictions in Europe (Germany, Netherlands, Belgium)
and South America (Brazil, Colombia) alleging that certain Apple products
infringe Ericsson patents. On January 19, 2022 Apple filed a complaint against
Ericsson in the ITC alleging infringement of three Apple patents by certain
Ericsson products. Apple also filed a complaint in Germany at the District court
of Düsseldorf alleging infringement of a German utility model and another
complaint at the District court of Mannheim alleging infringement of an Apple
patent by certain Ericsson products. The filing of lawsuits, complaints and
other proceedings, when parties take legal action over a patent license agree-
ment renewal, is standard and consequently additional lawsuits, complaints
and other proceedings, may follow.
Euro Medium Term Note program
On February 8, 2022, the Company issued new EUR 750 million notes under
the Euro Medium Term Note (EMTN) program, with maturity in February 2027.
Vonage
In November, 2021, Ericsson announced the entering into of an agreement to
acquire Vonage Holdings Corp. for a total acquisition price of approximately
USD 6.2 billion. It was stated in the announcement that completion of the
transaction was expected in the first half of 2022, subject to Vonage share-
holder approval, regulatory approvals, and other customary conditions. Since
then, Vonage shareholder approval has been obtained and all requisite foreign
and U.S. regulatory requirements for closing have been satisfied, except certain
clearance from the Committee on Foreign Investment in the United States.
If the agreement were to terminate under specified circumstances where we
have failed to obtain such clearance, we may have to pay a USD 200 million
termination fee to Vonage. Ericsson still expects the closing of the transaction
to occur in the first half of 2022.
Update on Deferred Prosecution Agreement
On December 6, 2019, Ericsson entered into a Deferred Prosecution
Agreement (DPA) with the United States Department of Justice (DOJ). On
March 1, 2022, the DOJ informed Ericsson that the disclosure made by the
Company prior to the DPA about its internal investigation into conduct in Iraq
in the period 2011 until 2019 was insufficient. Furthermore, it determined
that the Company breached the DPA by failing to make subsequent disclosure
related to the investigation post-DPA. The Company is in communication with
the DOJ regarding the facts and circumstances of the breach determination
and is committed to co-operating with the DOJ to resolve the matter.
At this stage it is premature to predict the outcome of this matter. DOJ has
sole discretion under the DPA to determine whether a breach has occurred.
Acquisitions/divestments of subsidiaries and other operations
Acquisitions Divestments
2021
Cash flow from business combinations 1)
Acquisitions/divestments of other investments
Total
2020
Cash flow from business combinations 1)
Acquisitions/divestments of other investments
Total
2019
Cash flow from business combinations 1)
Acquisitions/divestments of other investments
Total
1) See also note E2 “Business combinations.”
–256
–133
–389
–9,534
–123
–9,657
–1,815
62
–1,753
273
175
448
4
55
59
360
–112
248
H4 Related party transactions
IAS 24, “Related Party Disclosures” requires disclosure of related party rela-
tionships, transactions and outstanding balances.
During 2021, various minor related party transactions were executed pursu-
ant to contracts based on terms customary in the industry and negotiated on
an arm’s length basis. The main related party transactions relate to Ericsson
Nikola Tesla d.d located in Croatia, with sales from the Company to the associ-
ate of SEK 0.4 billion (SEK 0.4 billion in 2020 and SEK 0.6 billion in 2019) and
purchases from the associate to the Company of SEK 1.2 billion (SEK 1.2 billion
in 2020 and SEK 1.5 billion in 2019). Ericsson holds 49.07% of the shares.
For information regarding equity and Ericsson’s share of assets, liabilities and
income in joint ventures and associated companies, see note E3 “Associated
companies.”
For information regarding transactions with the Board of Directors and
Group management, see note G2 “Information regarding members of the
Board of Directors and Group management.”
For information about the Company’s pension trusts, see note G1 ”Post-
employment benefits.”
H5 Fees to auditors
Fees to auditors
2021
Audit fees
Audit-related fees
Tax fees
Other fees
Total
2020
Audit fees
Audit-related fees
Tax fees
Other fees
Total
2019
Audit fees
Audit-related fees
Tax fees
Other fees
Total
Deloitte
Others
Total
132
9
2
1
144
8
1
6
2
17
140
10
8
3
161
Deloitte
Others
Total
97
8
4
5
114
9
—
6
2
17
106
8
10
7
131
PwC
Others
Total
96
12
10
6
124
9
—
11
6
26
105
12
21
12
150
At the 2021 Annual General Meeting Deloitte was appointed auditor for the
period until the 2022 Annual General Meeting.
Financial report 2021
80
Parent Company financial statements with notes
Parent Company
financial statements with notes
Contents
Parent Company financial statements
92
P10
81 Parent Company income statement and
statement of comprehensive income (loss)
82 Parent Company balance sheet
84 Parent Company statement of cash flows
85 Parent Company statement of changes in
stockholders’ equity
Notes to the Parent Company
financial statements
86
87
87
87
87
88
89
90
91
P1
P2
P3
P4
P5
P6
P7
P8
P9
Significant accounting policies
Other operating income
and expenses
Financial income and expenses
Taxes
Intangible assets
Property, plant and equipment
Financial assets
Investments
Trade receivables and customer
finance
Receivables and liabilities –
subsidiary companies
92
92
93
93
94
94
94
96
96
97
97
97
97
97
98
98
98
P11 Other current receivables
P12
P13
P14
Equity and other
comprehensive income
Contributions
Post-employment benefits
P15 Other provisions
P16
P17
Interest-bearing liabilities
Financial risk management
and financial instruments
P18 Other current liabilities
P19
P20
P21
P22
P23
P24
P25
P26
P27
Trade payables
Assets pledged as collateral
Contingent liabilities
Statement of cash flows
Leasing
Information regarding employees
Related party transactions
Fees to auditors
Events after the reporting period
Financial report 2021 Parent Company
financial statements
Parent Company income statement
January–December, SEK million
Selling expenses
Administrative expenses
Operating expenses
Other operating income and expenses
EBIT (loss)
Financial income and expenses, net
Income after financial items (loss)
Contributions to subsidiaries, net
Taxes
Net income (loss)
Parent Company statement of comprehensive income (loss)
January–December, SEK million
Net income (loss)
Other comprehensive income (loss)
Items that will not be reclassified to profit or loss
Revaluation of borrowings due to change in credit risk
Tax on items that will not be reclassified to profit or loss
Items that have been or may be reclassified to profit/loss
Cash flow hedge reserve
Gains/losses arising during the period
Total other comprehensive income, net of tax
Total comprehensive income (loss)
Parent Company financial statements
81
Notes
P2
P3
P13
P4
2021
–470
–350
–820
1,770
950
8,368
9,318
2020
–506
–872
–1,378
2,866
1,488
6,845
8,333
–1,526
–1,540
7,792
–161
7,631
6,793
–408
6,385
2021
7,631
31
–6
–26
–1
7,630
2020
6,385
99
–20
–
79
6,464
2019
–664
–867
–1,531
–8,148
–9,679
6,610
–3,069
–1,961
–5,030
87
–4,943
2019
–4,943
–651
134
–
–517
–5,460
Financial report 2021 82
Parent Company financial statements
Parent Company balance sheet
December 31, SEK million
Assets
Fixed assets
Intangible assets
Tangible assets
Financial assets
Investments
Subsidiaries
Joint ventures and associated companies
Other investments
Receivables from subsidiaries
Customer finance, non-current
Deferred tax assets
Other financial assets, non-current
Interest-bearing securities, non-current
Current assets
Receivables
Trade receivables
Customer finance, current
Receivables from subsidiaries
Current income taxes
Other current receivables
Short-term investments
Cash and cash equivalents
Total assets
Notes
P5
P6
P7, P8
P7, P8
P7
P7, P10
P9
P4
P7
P7
P9
P9
P10
P11
P17
P17
2021
2020
8
413
72,009
1,184
2,175
13,284
287
507
544
30,615
26
460
68,798
1,184
1,382
10,631
395
544
458
21,597
121,026
105,475
1
499
25,035
16
1,813
12,722
37,128
77,214
7
525
28,367
14
1,317
6,621
28,775
65,626
198,240
171,101
Financial report 2021
Parent Company balance sheet, cont’d.
December 31, SEK million
Stockholders’ equity, provisions and liabilities
Stockholders’ equity
Capital stock
Revaluation reserve
Statutory reserve
Restricted equity
Retained earnings
Net income (loss)
Other reserves
Non-restricted equity
Provisions
Post-employment benefits
Other provisions
Non-current liabilities
Notes and bond loans
Other borrowings, non-current
Liabilities to subsidiaries
Other non-current liabilities
Current liabilities
Borrowings, current
Trade payables
Liabilities to subsidiaries
Other current liabilities
Parent Company financial statements
83
Notes
P12
P14
P15
P16
P16
P10
P16
P19
P10
P18
2021
2020
16,672
20
31,472
48,164
27,720
7,631
–367
34,984
83,148
–
293
293
13,430
8,586
20
370
22,406
9,405
419
80,668
1,901
92,393
16,672
20
31,472
48,164
27,896
6,385
–366
33,915
82,079
–
343
343
16,716
5,305
–
90
22,111
6,393
451
58,605
1,119
66,568
Total stockholders’ equity, provisions and liabilities
198,240
171,101
Financial report 2021
84
Parent Company financial statements
Parent Company statement of cash flows
January–December, SEK million
Operating activities
Net income (loss)
Adjustments to reconcile net income to cash
Changes in operating net assets
Customer finance, current and non-current
Trade receivables
Trade payables
Provisions and post-employment benefits
Other operating assets and liabilities, net
Interest received
Interest paid
Taxes paid/received
Cash flow from operating activities
Investing activities
Investments in property, plant and equipment
Investments in intangible assets
Sales/disposals of property, plant and equipment
Investments in shares and other investments
Divestments of shares and other investments
Other investing activities
Purchase of investments
Sale of investments
Cash flow from investing activities
Cash flow before financing activities
Financing activities
Borrowings from subsidiaries
Repayment of loans from subsidiaries
Proceeds from issuance of borrowings
Repayment of borrowings
Stock issue
Sale/repurchase of own shares
Dividends paid
Settled contributions from/to (–) subsidiaries
Other financing activities
Cash flow from financing activities
Effect from remeasurement in cash
Net change in cash
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Notes
P22
P17
2021
7,631
2,196
9,827
135
94
–124
–50
519
574
759
–634
–94
10,432
–62
–
–
–6,657
2,076
66
–35,415
20,114
–19,878
–9,446
144,574
–150,656
7,574
–5,066
–
42
–6,658
–1,540
30,406
18,676
–877
8,353
28,775
37,128
2020
2019
6,385
5,465
11,850
712
–554
–229
–325
1,230
834
523
–840
–246
12,121
–253
–
–
–1,552
511
1,174
–13,637
12,289
–1,468
10,653
131,538
–135,585
1,686
–7,517
–
163
–4,985
–1,961
4,907
–11,754
76
–1,025
29,800
28,775
–4,943
1,763
–3,180
–161
329
204
576
–279
669
565
–1,132
–125
–3,203
–127
–
–
–2,656
2,382
–412
–12,507
16,721
3,401
198
112,056
–139,708
4,103
–648
–
197
–3,301
–1,535
30,129
1,293
459
1,950
27,850
29,800
Financial report 2021 Parent Company financial statements
85
Parent Company statement of changes in stockholders’ equity
Revaluation
reserve
Statutory
reserve
Total
restricted
equity
Disposition
reserve
Cash flow
hedge
reserve
Revaluation of
borrowings
SEK million
January 1, 2021
Capital stock
16,672
Total comprehensive income
Transactions with owners
Stock issue
Sale of own shares
Long-term variable compensation
Repurchase of own shares
Dividends paid
December 31, 2021
January 1, 2020
Total comprehensive income
Transactions with owners
Stock issue
Sale of own shares
Long-term variable compensation
Repurchase of own shares
Dividends paid
–
–
–
–
–
–
16,672
16,672
–
–
–
–
–
–
20
–
–
–
–
–
–
20
20
–
–
–
–
–
–
31,472
48,164
100
–
–
–
–
–
–
–
–
–
–
–
–
31,472
48,164
31,472
48,164
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
100
–
–
–
–
–
–
–
-26
–
–
–
–
–
–26
–
–
–
–
–
–
–
–
December 31, 2020
16,672
20
31,472
48,164
100
Other
retained
earnings
34,181
Non-
restricted
equity
33,915
Total
82,079
–366
25
7,631
7,630
7,630
–
–
–
–
–
–341
–445
–
42
55
–
–6,658
35,251
–
42
55
–
–6,658
34,984
–
42
55
–
–6,658
83,148
32,567
32,222
80,386
79
6,385
6,464
6,464
–
–
–
–
–
–366
–
163
51
–
–4,985
34,181
–
163
51
–
–4,985
33,915
–
163
51
–
–4,985
82,079
Financial report 2021 86
Notes to the Parent Company financial statements
Notes to the Parent Company
financial statements
P1 Significant accounting policies
The financial statements of the Parent Company, Telefonaktiebolaget LM
Ericsson, have been prepared in accordance with the Annual Accounts Act and
RFR 2 “Reporting in separate financial statements.” RFR 2 requires the Parent
Company to use the same accounting principles as for the Group, i.e., IFRS,
to the extent allowed by RFR 2.
The main deviations between accounting policies adopted for the Group
and accounting policies for the Parent Company are:
Subsidiaries, associated companies and joint ventures
The investments are accounted for according to the acquisition cost method.
Investments are carried at cost and only dividends are accounted for in the
income statement. An annual impairment test for the investments in each sub-
sidiary company is performed in the fourth quarter, or when there is an indica-
tion of impairment. An impairment loss is recognized if the carrying amount of
an investment exceeds the sum of the subsidiary’s equity and related goodwill,
intangible liabilities and deferred tax liabilities or its estimated future cash
flows after tax. Cash flows are discounted to present value using an after-tax
discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset.
Contributions to/from subsidiaries and shareholders’ contributions
are accounted for according to RFR 2. Contributions from/to Swedish subsidi-
aries are reported net in the income statement. Shareholders’ contributions
increase the Parent Company’s investments.
Classification and measurement of financial instruments
IFRS 9 “Financial instruments” is adopted, except regarding financial guaran-
tees where the exception allowed in RFR 2 is chosen. Financial guarantees are
included in Contingent liabilities.
Leases
Leases are reported according to the exception allowed in RFR 2. For leases
where the Parent Company is lessee this means that the right-of-use assets
and liabilities are not recognized on the balance sheet. Costs under the lease
are recognized in the income statement on a straight-line basis over the term
of the lease. Lease incentives received are recognized as an integral part of
the total lease expense, over the term of the lease. For leases where the Parent
Company is lessor, the equipment is recorded as property, plant and equipment
and revenue as well as depreciation is recognized on a straight-line basis over
the lease term. Expenses related to the leasing income are recognized when
incurred. Direct expenses incurred when a leasing agreement is entered are
added to the carrying amount of the leased asset and expensed over the lease
period on the same basis as the lease income.
Deferred taxes
The accounting of untaxed reserves in the balance sheet results in different
accounting of deferred taxes as compared to the principles applied in the con-
solidated statements. Swedish GAAP and tax regulations require a company to
report certain differences between the tax basis and book value as an untaxed
reserve in the balance sheet of the standalone financial statements. Changes
to these reserves are reported as an addition to, or withdrawal from, untaxed
reserves in the income statement.
Pensions
Pensions are accounted for according to the simplification rule in RFR 2. The
pension obligation is secured with transferring of funds to a pension trust. A net
pension obligation is only accounted for to the extent that the fair value of the
trust is lower than the pension obligation. According to RFR 2, disclosures from
IAS 19 is adopted as applicable.
Business combinations
Transaction costs attributable to the acquisition are included in the cost
of acquisition in the Parent Company statements compared to Group
Statements where these costs are expensed as incurred.
Critical accounting estimates and judgments
See notes to the consolidated financial statements – note A2 “Critical account-
ing estimates and judgments.” Major critical accounting estimates and judg-
ments applicable to the Parent Company include “Trade and customer finance
receivables” and “Acquired intellectual property rights and other intangible
assets, excluding goodwill.”
Changes to the presentation in the financial statements
The following changes were made to the presentation of the Parent Company
statement of cash flows in 2021:
– Interests and tax cash flows are presented as separate line items within
the “Cash flow from operating activities.” Previously, interests and tax cash
flows were subsumed within various lines in the sections “Adjustments to
reconcile net income to cash” and “Changes in operating net assets,” and
only disclosed in note P22 (P23 in previous years) “Statement of cash flow.”
Prior years have been re-presented and there is no impact on cash flows
from operating activities.
– Historically the net movement of amounts lent to subsidiaries was presented
as investing activities, while the net movement of amounts borrowed from
subsidiaries was presented as financing activities. To improve visibility, all
the internal funding > 3 months is now presented on a gross basis within
financing cash flow. Net movements in Internal funding < 3 months, includ-
ing In House Bank balances, are presented as Other financing activities
since these balances fluctuate over a short duration. Cash flow in prior years
have been restated accordingly, resulting in new lines for “Borrowing from
subsidiaries” and “Repayment of loans from subsidiaries”.
– Net movements in cash collaterals received and bank borrowings less than 3
months (used for short term liquidity purposes) are presented within “Other
financing activities” since these balances fluctuate over a short duration,
therefore it is neither practical nor useful to present their gross movements
on the cash flow statement. Cash flow from financing activities in prior years
have been restated accordingly, resulting in a reclassification between the
lines “Proceeds from issuance of borrowings,” “Repayment of borrowings”
and “Other financing activities”.
– Purchases and sales of interest-bearing securities are presented on a gross
basis to improve the visibility of cash flows. Cash flow from investing activi-
ties in prior years have been restated accordingly, resulting in new lines for
“Purchase of investments” and “Sale of investments”.
Changes in accounting policies
On January 1, 2021 the following amendments issued by the IASB were
adopted with no material impact on the result and financial position of the
Parent Company:
– Interest Rate Benchmark Reform Phase 2, Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16 (the Phase 2 Amendments)
– Amendments to IFRS 16 Leases: COVID-19-related rent concessions
beyond 30 June 2021
– Amendments to IFRS 4 Insurance Contracts: Extension of the Temporary
Exemption from Applying IFRS 9
A number of issued new standards, amendments to standards and interpreta-
tions are not yet effective for the year ended December 31, 2021 and have not
been applied in preparing the Parent Company financial statements. The IASB
has issued Amendments with effective date January 1, 2022 relating to “IFRS
3 Business Combinations”, “IAS 16 Property, Plant and Equipment”, “IAS 37
Financial report 2021 Note P1, cont’d.
Provisions, Contingent Liabilities and Contingent Assets” and Annual improve-
ments to IFRS 2018-2020. The amendments are not estimated to have a
significant impact. Among the Amendments issued by IASB with effective date
January 1, 2023 are “IFRS 17 Insurance contracts” and “Amendments to IAS
8 Accounting policies, Changes in Accounting Estimates and Errors: Definition
of Accounting Estimates”. The impact from adopting IFRS 17 is expected to
be immaterial whereas the amendments to IAS 8 will impact the Parent Com-
pany. Additions or exceptions allowed in RFR 2 are however not yet decided by
the Swedish Financial Reporting Board. For the current and coming changes
in IFRS standards, more details can be found in the Consolidated Financial
Statements, note A1 ”Significant accounting policies.”
P2 Other operating income and expenses
Other operating income and expenses
License revenues and other
operating revenues
Subsidiary companies
Other operating income/expenses1)
Total
2021
2020
2019
2,573
–803
1,770
2,588
278
2,866
2,479
–10,627
–8,148
1) Includes costs of SEK –0,8 in 2021 as a result of the Nokia settlement related to the 2019 resolutions
with SEC and DOJ, and costs of SEK –10.7 billion in 2019 related to the resolution of the US SEC and
DOJ resolution.
P3 Financial income and expenses
Notes to the Parent Company financial statements
87
P4 Taxes
Income taxes recognized in the income statement
Current income taxes for the year
Current income taxes related to prior years
Deferred tax income/expense (+/–)
Tax expense/benefit
2021
–72
–58
–31
–161
2020
–100
–194
–114
–408
2019
–60
–148
295
87
A reconciliation between reported tax expense for the year and the theoretical
tax expense that would arise when applying the statutory tax rate in Sweden,
20.6% (21.4% in 2020 and 2019), on the income before taxes, is shown in the
table below.
Reconciliation of Swedish income tax rate with effective tax
Expected tax expense at Swedish tax rate
Current income taxes related to prior years
Tax effect of non-deductible expenses
Tax effect of non-taxable income
Tax effect related to write-downs of invest-
ments in subsidiary companies
Tax effect of changes in tax rate
Tax expense/benefit
2021
–1,605
–58
–190
1,962
–270
–
–161
2020
–1,454
–194
–107
2,067
–724
4
–408
2019
1,076
–148
–2,474
1,700
–56
–11
87
Deferred tax balances
Deferred tax assets are derived from the balance sheet items as shown in the
table below.
Total
10,331
10,905
Financial income and expenses
Financial income
Result from participations
in subsidiary companies
Dividends
Net gains on participations
Result from participations in joint
ventures and associated companies
Dividends
Net gains on sales
Result from participations in other companies
Net gains on participations
Interest income from subsidiary companies
Interest income from others
Financial expenses
Losses on sales of participations
in subsidiary companies
Write-down of investments in subsidiary
companies
Net loss from joint ventures and
associated companies
Net loss from participations in other
companies
Interest expense to subsidiary companies
Interest expenses to others
Other financial expenses
Total
Net foreign exchange gain/(loss) on financial
liabilities/assets
Financial income and expenses, net
Net gains and losses on financial instruments
below excluding effect of gains and losses
from foreign exchange transactions:
Net gains and losses on financial instruments
at FVTPL
Net gains and losses on financial liabilites des-
ignated at FVTPL
Financial assets at fair value through OCI
2021
2020
2019
Tax effects of temporary differences
8,602
12
9,423
–
5,539
1,996
72
–
718
886
41
43
38
103
1,038
260
67
78
1,484
485
9,649
–8
–3
–105
–1,300
–3,383
–922
–
–
–418
–
–30
–304
–210
–62
–64
–705
–63
–1,852
–4,280
–111
8,368
220
6,845
–10
–289
–1,152
–489
–3,385
346
6,610
–543
–251
52
Current assets
Post-employment benefits
Provisions
Other
Deferred tax assets
Changes in deferred taxes
Opening balance
Recognized in net income (loss)
Recognized in other comprehensive income
Closing balance
P5 Intangible assets
Patents, licenses, trademarks and similar rights
Accumulated acquisition costs
Opening balance
Acquisitions
Sales/disposals
Closing balance
Accumulated amortization
Opening balance
Amortization
Sales/disposals
Closing balance
Accumulated impairment losses
Opening balance
Impairment losses
404
–
–121
–
–344
–
Closing balance
Net carrying value
2021
2020
290
38
40
139
507
2021
544
–31
–6
507
266
38
57
183
544
2020
678
–114
–20
544
2021
2020
5,086
–
–
5,086
–4,115
–15
–
–4,130
–945
–3
–948
8
5,086
–
–
5,086
–4,083
–32
–
–4,115
–945
–
–945
26
Interest expenses on pension liabilities are included in the interest expenses
shown above.
The balances are mainly related to Radio Frequency technology.
Financial report 2021 88
Notes to the Parent Company financial statements
P6 Property, plant and equipment
Property, plant and equipment
2021
Accumulated acquisition costs
Opening balance
Additions
Sales/disposals
Reclassifications
Closing balance
Accumulated depreciation
Opening balance
Depreciation
Sales/disposals
Closing balance
Net carrying value
2020
Accumulated acquisition costs
Opening balance
Additions
Sales/disposals
Reclassifications
Closing balance
Accumulated depreciation
Opening balance
Depreciation
Sales/disposals
Closing balance
Net carrying value
Other equipment
and instal lations
Construction in
process and advance
payments
1,722
14
–6
218
1,948
–1,444
–110
6
– 1,548
400
1,617
62
–42
85
1,722
–1,389
–97
42
–1,444
278
182
50
–1
–218
13
–
–
–
–
13
75
196
–4
–85
182
–
–
–
–
182
Total
1,904
64
–7
–
1,961
–1,444
–110
6
–1,548
413
1,692
258
–46
–
1,904
–1,389
–97
42
–1,444
460
Financial report 2021 P7 Financial assets
Investments in subsidiary companies, joint ventures and associated companies
Opening balance
Acquisitions and stock issues
Shareholders’ contribution
Repayment of shareholders’ contribution
Write-downs 1)
Disposals
Closing balance
Notes to the Parent Company financial statements
89
Subsidiary companies
Associated companies
2021
68,798
127
6,396
–1,388
–1,300
–624
72,009
2020
71,172
–
1,010
–
–3,383
–1
68,798
2021
1,184
–
–
–
–
–
1,184
2020
1,184
–
–
–
–
–
1,184
1) In 2021 write-downs of investments in subsidary companies were made by SEK 1.3 (3.4) billion. For impairment test in 2021 of investments in subsidiary companies a discount rate of 8.0% (8.0%) has been
applied. The write-downs are mainly a result of devaluation of currency in one market and lowered expectation on future profitability for a few entities. At the time of the write-downs the recognized amounts
in the balance sheet related to each impacted subsidiary company are equal to value in use or equity value of the entity.
Other financial assets
Accumulated acquisition costs
Opening balance
Additions
Disposals/repayments/ deductions
Reclassifications
Fair value remeasurement
Translation difference
Closing balance
Other investments in shares
and participations
Interest-bearing
securities, non-current
Other financial assets,
non-current
Receivables from
subsidiaries, non-current
2021
2020
2021
2020
2021
2020
2021
2020
1,382
134
–49
–1
709
–
2,175
1,272
123
–40
–
27
–
1,382
21,597
30,305
–13,561
–7,651
–75
–
30,615
20,354
11,076
–5,022
–4,739
–72
–
21,597
458
754
–775
–
107
–
544
454
748
–465
–233
–46
–
458
10,631
2,215
–714
–
–
1,152
13,284
10,133
7,435
–248
–5,061
–
–1,628
10,631
Financial report 2021 90
Notes to the Parent Company financial statements
P8 Investments
The following listing shows certain shareholdings owned directly and indirectly by the Parent Company as of December 31, 2021.
A complete listing of shareholdings, prepared in accordance with the Swedish Annual Accounts Act and filed with the Swedish Companies Registration Office
(Bolagsverket), may be obtained upon request to: Telefonaktiebolaget LM Ericsson, External Reporting, SE-164 83 Stockholm, Sweden.
Shares owned directly by the Parent Company
Company
Reg. No.
Domicile
Percentage of
ownership
Par value in local
currency, million
Carrying value,
SEK million
Subsidiary companies
Ericsson AB
Ericsson Shared Services AB
Ericsson Software Technology Holding AB
Datacenter i Rosersberg AB
Datacenter i Mjärdevi Aktiebolag
AB Aulis
Ericsson Credit AB
Other (Sweden)
Ericsson Austria GmbH
Ericsson Danmark A/S
Oy LM Ericsson Ab
Ericsson France S.A.S
Ericsson Antenna Technology Germany GmbH
Ericsson Germany GmbH
Ericsson Hungary Ltd.
L M Ericsson Limited
Ericsson Telecomunicazioni S.p.A.
Ericsson Holding International B.V.
Ericsson A/S
Ericsson Television AS
Ericsson Corporatia AO
Ericsson España S.A.
Ericsson AG
Ericsson Holdings Ltd.
Other (Europe, excluding Sweden)
Ericsson Holding II Inc.
Ericsson Smart Factory Inc.
Companía Ericsson S.A.C.I.
Ericsson Canada Inc.
Belair Networks
Ericsson Telecom S.A. de C.V.
Other (United States, Latin America)
Teleric Pty Ltd.
Ericsson Ltd.
Ericsson (China) Company Ltd.
P.T. Ericsson Indonesia
Ericsson India Global Services PVT. Ltd
Ericsson Kenya Limited
Ericsson-LG CO Ltd.
Ericsson (Malaysia) Sdn. Bhd.
Ericsson Telecommunications Pte. Ltd.
Ericsson South Africa PTY. Ltd
Ericsson Taiwan Ltd.
Ericsson (Thailand) Ltd.
Other countries (the rest of the world)
Total
Joint ventures and associated companies
Concealfab Co
Leone Media Inc.
Ericsson Nikola Tesla d.d.
Total
556056-6258
556251-3266
559094-8963
556895-3748
556366-2302
556030-9899
556326-0552
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Austria
Denmark
Finland
France
Germany
Germany
Hungary
Ireland
Italy
The Netherlands
Norway
Norway
Russia
Spain
Switzerland
United Kingdom
United States
United States
Argentina
Canada
Canada
Mexico
Australia
China
China
Indonesia
India
Kenya
Korea
Malaysia
Singapore
South Africa
Taiwan
Thailand
USA
USA
Croatia
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
95 1)
100
100
100
–
100
100
100
95
100
100
75
100
100
70
90
49 2)
–
28
49
49
50
361
–
–
10
14
5
–
4
90
13
21
2
1
1,301
4
44
222
75
161
5
28
–
328
–
–
–
193
–
108
939
–
20
2
65
9,531
291
–
285
3
2
–
270
90
–
–
134
65
–
20,731
2,216
7
88
69
6
5
1,142
94
216
196
524
21
2,844
120
34
3,173
2,983
114
160
5
14
–
10
972
30,281
191
99
51
170
576
486
100
2
475
614
51
69
2,279
131
1
135
36
17
501
72,009
64
790
330
1,184
1) Through subsidiary holdings, total holdings amount to 100% of Compania Ericsson S.A.C.I.
2) Through subsidiary holdings, total holdings amount to 74% of Ericsson (Thailand) Ltd.
Financial report 2021
Notes to the Parent Company financial statements
91
Reg. No.
Domicile
Percentage
of ownership
556044-9489
Sweden
United States
Germany
Germany
The Netherlands
Turkey
United Kingdom
United Kingdom
United States
United States
United States
United States
Brazil
Australia
China
China
Japan
Singapore
Note P8, cont’d.
Shares owned by subsidiary companies
Company
Subsidiary companies
Ericsson Cables Holding AB
Emodo Inc.
Ericsson Telekommunikation GmbH
Ericsson GmbH
Ericsson Telecommunicatie B.V.
Ericsson Telekomunikasyon A.S.
Ericsson Ltd.
Creative Broadcast Services Holdings Ltd.
Ericsson Inc.
Ericsson Wireless Office Inc.
Cradlepoint Inc.
Iconectiv, LLC.
Ericsson Telecomunicações S.A.
Ericsson Australia Pty. Ltd.
Ericsson (China) Communications Co. Ltd.
Nanjing Ericsson Panda Communication Co. Ltd.
Ericsson Japan K.K.
Ericsson Communication Solutions Pte Ltd.
P9 Trade receivables and customer finance
Credit risk management is governed on a Group level.
For further information, see notes to the consolidated financial statements – Note B6, “Customer contract related balances”
and note F1 “Financial risk management.”
Trade receivables and customer finance
Movements in allowances for impairment
Trade receivables excluding associated
companies and joint ventures
Allowances for impairment
Trade receivables, net
Trade receivables related to associated
companies and joint ventures
Trade receivables, total
Customer finance
Customer finance, net
2021
2020
17
–16
1
–
1
786
786
21
–15
6
1
7
920
920
Opening balance
Additions
Utilization
Reversal of excess amounts
Translation difference
Closing balance
Outstanding customer finance credit risk exposure 1)
Customer Finance Fair Value Reconciliation 1)
Fair value of customer finance credits
Of which current
Financial guarantees for third-parties
Accrued interest
Maximum exposure to credit risk
Less third-party risk coverage
Parent Company’s risk exposure,
less third-party risk coverage
Credit commitments for customer finance
1) This table has been adjusted to show the maximum exposure to credit risk.
2021
2020
786
499
6
9
801
–
801
303
920
525
6
8
934
–74
860
1,626
Opening balance
Additions
Disposals/repayments
Revaluation
Translation difference
Closing balance
1) This table has been adjusted to show the net fair value of customer finance. 2020 figures have there-
for been restated.
100
100
100
100
100
100
100
100
100
100
100
83
100
100
100
51
100
100
Trade receivables
2021
2020
15
–
–
–
1
16
41
–
–26
–
–
15
2021
920
243
–395
18
–
786
2020
1,633
457
–1 362
192
–
920
Financial report 2021 92
Notes to the Parent Company financial statements
P10 Receivables and liabilities –
subsidiary companies
Receivables and liabilities – subsidiary companies
Payment due by period
< 1
year
1–5
years
>5
years
Total
2021
Total
2020
Non-current receivables
Financial receivables
Current receivables
Trade receivables
Financial receivables
Total
Non-current liabilities
Financial liabilities
Current liabilities
Trade payables
Financial liabilities
Total
–
13,284
820
24,215
25,035
–
–
–
–
20
101
80,567
80,668
–
–
–
–
–
–
–
–
–
–
–
13,284
10,631
Total
820
24,215
25,035
1,030
27,337
28,367
20
–
101
80,567
80,688
199
58,406
58,605
P11 Other current receivables
Other current receivables
Prepaid expenses
Accrued revenues
Derivative assets
Other
2021
391
222
1,155
45
1,813
2020
323
139
736
119
1,317
P12 Equity and other comprehensive income
Capital stock 2021
Capital stock at December 31, 2021, consisted of the following:
Capital stock
Class A shares 1)
Class B shares 1)
Total
Number of shares
Capital stock
261,755,983
3,072,395,752
3,334,151,735
1,309
15,363
16,672
1) Class A shares (quotient value SEK 5.00) and Class B shares (quotient value SEK 5.00).
per share with the record date March 31, 2022, and SEK 1.25 per share with
the record date September 30, 2022. The Class B treasury shares held by
the Parent Company are not entitled to receive dividend. Assuming that no
treasury shares remain on the record date, the Board of Directors proposes that
earnings be distributed as follows:
Proposed disposition of earnings
Proposed disposition of earnings
The Board of Directors proposes a dividend of SEK 2.50 (2.00) per share and
that the Parent Company shall retain the remaining part of non-restricted
equity. The dividend is proposed to be paid in two equal installments, SEK 1.25
Amount to be paid to the shareholders
Amount to be retained by the Parent Company
Total non-restricted equity of the Parent Company
SEK 8,335,379,338
SEK 26,649,074,267
SEK 34,984,453,605
Equity and other comprehensive income 2021
Capital
stock
Revaluation
reserve
Statutory
reserve
Total
restricted
equity
Disposition
reserve
Cash flow
hedge
reserve
Revaluation of
borrowings
Other
retained
earnings
Non-
restricted
equity
January 1, 2021
Net income
Other comprehensive income
Items that will not be reclassified
to profit or loss
Revaluation of borrowings due to change
in credit risk
Tax on items that will not be reclassified
to profit or loss
Items that have been or may be
reclassified to profit or loss
Cash flow hedge reserve
Gains/losses arising during the period
Total other comprehensive income,
net of tax
Total comprehensive income
Transactions with owners
Stock issue
Sale of own shares
Long-term variable compensation
Repurchase of own shares
Dividends paid
16,672
–
–
–
–
–
–
–
–
–
–
–
20
–
–
–
–
–
–
–
–
–
–
–
31,472
48,164
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–26
–26
–26
–
–
–
–
–
December 31, 2021
16,672
20
31,472
48,164
100
–26
–341
–366
34,181
33,915
Total
82,079
–
7,631
7,631
7,631
31
–6
–
25
25
–
–
–
–
–
–
–
–
–
7,631
–
42
55
–
–6,658
35,251
31
–6
31
–6
–26
–26
–1
7,630
–1
7,630
–
42
55
–
–6,658
34,984
–
42
55
–
–6,658
83,148
Financial report 2021 Notes to the Parent Company financial statements
93
Note P12, cont’d.
Equity and other comprehensive income 2020
January 1, 2020
Net income
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of borrowings due to change in credit risk
Tax on items that will not be reclassified to profit or loss
Total other comprehensive income, net of tax
Total comprehensive income
Transactions with owners
Stock issue
Sale of own shares
Long-term variable compensation
Repurchase of own shares
Dividends paid
December 31, 2020
P13 Contributions
16,672
–
–
–
–
–
–
–
–
–
–
20
–
–
–
–
–
–
–
–
–
–
Capital
stock
Revaluation
reserve
Statutory
reserve
Total
restricted
equity
Disposition
reserve
Revaluation of
borrowings
31,472
48,164
100
–445
Other
retained
earnings
32,567
Non-
restricted
equity
32,222
Total
80,386
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,385
6,385
6,385
99
–20
79
79
–
–
–
–
–
–
–
–
99
–20
79
99
–20
79
6,385
6,464
6,464
–
163
51
–
–4,985
34,181
–
163
51
–
–4,985
33,915
–
163
51
–
–4,985
82,079
16,672
20
31,472
48,164
100
–366
Contributions to Swedish subsidiaries amount to SEK 1,526 (1,540) million. There were no contributions from Swedish subsidiaries in 2021 and 2020.
P14 Post-employment benefits
The Parent Company has two types of pension plans:
– Defined contribution plans: post-employment benefit plans where the
Parent Company pays fixed contributions into separate entities and has no
legal or constructive obligation to pay further contributions if the entities do
not hold sufficient assets to pay all employee benefits relating to employee
service. The expenses for defined contribution plans are recognized during
the period when the employee provides service.
– Defined benefit plans: post-employment benefit plans where the Parent
Company’s undertaking is to provide predetermined benefits that
the employee will receive on or after retirement.
Change in the net defined benefit obligation
Opening balance
Pension costs, excluding taxes, related to defined benefit
obligations accounted for in the income statement
Pension payments
Return on plan assets
Return on plan assets not accounted for
Closing balance provision for pensions
2021
0
103
–71
–179
147
0
2020
0
89
–72
–68
51
0
Estimated pension payments for 2022 related to defined benefit obligations
are SEK 73 million.
Defined benefit obligation – amount recognized in the Balance sheet
Total pension cost and income recognized in the Income statement
Defined benefit obligations
Costs excluding interest and taxes¹)
Interest cost
Credit insurance premium
Total cost defined benefit plans
excluding taxes
Defined contribution plans
Pension insurance premium
Total cost defined contribution plans
excluding taxes
Return on plan assets
Total pension cost, net excluding taxes
2021
2020
2019
64
39
2
105
70
70
–32
143
361
39
2
402
60
60
–17
445
54
39
1
94
58
58
–26
126
1) The pension cost for 2020 includes a contribution to the pension trust with SEK 311 millions.
Of the total pension cost, SEK 136 (423 in 2020 and 113 in 2019) million is
included in operating expenses and SEK 7 (22 in 2020 and 13 in 2019) million
in the financial net.
Present value of wholly or partially funded pension plans1)
Fair value of plan assets
Net obligation/surplus(–) of funded pension plans
Excess from plan assets not accounted for
Closing balance provision for pensions
2021
1,298
2020
1,266
–1,836
–1,657
–538
538
0
–391
391
0
1) The total defined benefit obligation is considered to be secured in the pension trust.
The defined benefit obligations are calculated based on the actual salary levels
at year-end and based on a discount rate of 3.84% (3.84%) regarding ITP2
and –0.1% (0.3%) for other pension liabilities.
Weighted average life expectancy after the age of 65 is 24.7 (24.8) years
for women and 23 (23) years for men.
The Parent Company utilizes no assets held by the pension trust.
Return on plan assets was 10.8% (4.9%).
Plan assets allocation
Cash and cash equivalents
Equity securities
Debt securities
Real estate
Derivatives
Investment funds
Total
Of which Ericsson securities
2021
68
468
887
317
–13
109
1,836
–
of which
unquoted
2020
of which
unquoted
0%
35%
16%
100%
–110%
84%
0%
31%
14%
100%
–
28%
78
346
834
267
–
132
1,657
–
Financial report 2021 94
Notes to the Parent Company financial statements
P15 Other provisions
Other provisions
Opening balance
Additions
Reversal of excess amounts
Cash out/utilization
Reclassifications
Closing balance1)
2021
343
88
–2
–136
–
293
2020
668
42
–271
–96
–
343
1) Consists mainly of costs for the independent compliance monitor appointed in 2020, and costs for LTV
expenses. SEK 206 (139) million is expected to be utilized within one year.
P16 Interest-bearing liabilities
As of December 31, 2021, the Parent Company’s outstanding interest-bearing
liabilities, excluding liabilities to subsidiaries, stood at SEK 31.4 (28.4) billion.
Interest-bearing liabilities
Reconciliation of liabilities arising from financing activities
Borrowings, current
Current part of non-current borrowings
Other borrowings, current
Total borrowings, current
Borrowings, non-current
Notes and bond loans
Other borrowings, non-current
Total borrowings, non-current
Total interest-bearing liabilities
2021
2020
9,405
–
9,405
13,430
8,586
22,016
31,421
5,212
1,181
6,393
16,716
5,305
22,021
28,414
Opening balance
Cash flows
Proceeds from issuance of borrowings
Repayment of borrowings
Other financing activities
Non-cash changes
Effect of foreign exchange movement
Revaluation due to changes in credit risk
Other changes in fair value
Reclassification
Other non-cash movements
Closing balance
2021
28,414
7,574
–5,066
–1,181
2,118
–31
–407
–
–
31,421
2020
35,941
1,686
–7,517
1,181
–2,908
–99
130
–
–
28,414
To secure long-term funding, the Company uses notes and bond programs
together with bilateral research and development loans. All outstanding notes
and bond loans are issued by the Parent Company under its Euro Medium Term
Note (EMTN) program or under its US Securities and Exchange Commission
(SEC) Registered program. Bonds issued at a fixed interest rate are normally
swapped to a floating interest rate using interest rate swaps under the Asset
and liability management mandate described in note F1, “Financial risk man-
agement.” Total weighted average interest rate cost for the long-term funding
during the year was 1.75% (2.18%).
The borrowings issued by the Parent Company are held at fair value with
changes in value due to changes in credit risk recognized in Other compre-
hensive income (OCI).
For detailed information about Notes, bonds and bilateral loans, see notes to
the Consolidated Financial Statements, note F4 “Interest-bearing liabilities”.
P17 Financial risk management and financial instruments
Ericsson’s financial risk management is governed on a Group level. For further information see notes to the Consolidated Financial Statements,
note F1, ”Financial risk management”
Outstanding derivatives
Gross
amount
recognized
Offset
Net
amount
presented
Related
amounts
not offset
– collaterals
Net
2020
Gross
amount
recognized
Offset
Net
amount
presented
Related
amounts
not offset
– collaterals
2021
Currency derivatives1)
Assets
Liabilities
Interest rate
derivatives
Assets
Liabilities
83
–111
1,128
–696
–20
20
–36
36
63
–91
1,092
–660
–
–
63
–91
Currency derivatives
Assets
Liabilities
–
467
1,092
–193
Interest rate
derivatives
Assets
Liabilities
1,519
–958
79
–131
–13
13
–31
31
1,506
–945
–1,181
–
Net
325
–945
48
–100
–
–
48
–100
1) Currency derivatives designated as cash flow hedge of SEK 9 (0) million are included in Other current
assets and SEK 25 (0) million in Other current liabilities.
Cash collaterals under Credit Support Annex (CSA) to ISDA for cross-currency derivatives are recognized as Interest-bearing securities, current or Borrowings,
current, respectively.
Financial report 2021
Notes to the Parent Company financial statements
95
Note P17, cont’d.
The Parent Company holds the following currency derivatives designated as
hedging instruments:
Foreign exchange forward contracts
2021
National amount (USD millions)
Awerage forward date (SEK/USD)
< 3 M 3–12 M
> 1 Y
471
1,372
9.0213 9.0546
–
Total
1,843
Hedge ratio is 1:1 and changes in forward rate have been designated as the
hedged risk. The change in the fair value of the hedging instrument is compared
with the change in fair value of the hedged item, and the lower amount is taken
to OCI. If the change in fair value of the hedging instrument is higher, then the
excess change in fair value is considered ineffective hedging and recorded in
net foreign exchange gains and losses.
See note P 12 “Equity and other comprehensive income” for movement in
the cash flow hedge reserve. No hedge ineffectiveness was recognized in the
income statement in 2021.
Cash, cash equivalents, interest bearing securities and derivative assets
2021
Bank deposits
Other financial
institutions
Type of issuer:
Governments
Corporates
Mortgage institutes
Derivative assets
Total
Rating or
equivalent
< 3 M 3–12 M 1–5 Y
> 5 Y
Total
2020
Rating or
equivalent
< 3 M 3–12 M 1–5 Y
> 5 Y
Total
27,730
247
5,743
4,226
–
202
–
–
–
–
– 27,730
–
247
2,906 11,860
–
5,749 21,700
–
– 20,509
4,226
–
304 27,753
Bank deposits
Other financial
institutions
Type of issuer:
Governments
Corporates
Mortgage institutes
641
312
–
1,155
Derivative assets
38,148
9,296 33,872
304 81,620
Total
AAA
A2/P2
AAA
11,974
202
15,000
1,960
216
–
–
–
–
– 11,974
–
202
605 12,483
–
3,918 10,240
–
395 28,483
1,960
–
– 14,374
211
346
996
–
1,553
29,563
4,869 23,719
395 58,546
AAA
A2/P2
AAA
The instruments are classified as FVTPL or amortized cost. Cash, cash equivalents and interest-bearing securities are mainly held in SEK.
Debt financing is mainly carried out through borrowing in the Swedish and
international debt capital markets. Bank financing is used for certain subsidiary
funding and to obtain committed credit facilities, see note P16, “Interest-
bearing liabilities.”
Funding programs 1)
Euro Medium-Term Note program
(USD million)
SEC Registered program (USD million) 2)
Amount
Utilized
Unutilized
5,000
–1,495
1,000
3,505
1) There are no financial covenants related to these programs.
2) Program amount indeterminate.
In March 2021, the Company redeemed EUR 500 million notes issued under
the Euro Medium-Term Note program.
In May 2021, the Company issued new EUR 500 million notes under the
same program with maturity in 2029.
In June 2021, the Company drew on its credit commitment with the Euro-
pean Investment Bank (EIB) of USD 305 million with maturity in 2028.
Committed credit facilities
Multi-currency revolving credit facility
(USD million)
Amount
Utilized Unutilized
2,000
–
2,000
In September 2021, Ericsson entered into a USD 2 billion sustainability-linked
revolving credit facility. The USD 2 billion facility replaces the previous USD 2
billion facility. The facility does not have interest rates linked to credit rating or
financial covenants but is linked to two of Ericsson’s sustainability KPIs.
The following table shows analysis of financial liabilities by contractual
maturity:
2021
Trade payables
Borrowings and loans
Derivative liabilities
Total
2020
Trade payables
Borrowings and loans
Derivative liabilities
Total
< 1 Y
419
9,405
411
1–3 Y
–
10,221
330
10,235
10,551
3–5 Y
–
2,796
–
2,796
> 5 Y
Total
–
419
8,999 31,421
751
10
9,009 32,591
< 1 Y
451
6,393
253
7,097
1–3 Y
3–5 Y
> 5 Y
Total
–
10,198
792
–
10,125
–
–
451
1,698 28,414
1,045
–
10,990
10,125
1,698 29,910
The Company has a treasury and customer finance function with the principal
role to ensure that appropriate financing is in place through loans and com-
mitted credit facilities, actively managing the Company’s liquidity as well as
financial assets and liabilities, and managing and controlling financial risk
exposures in a manner consistent with underlying business risks and financial
policies. The customer finance function may arrange suitable third-party
financing solutions for customers to support their purchases from Ericsson. In
some cases, and to the extent that customer loans are not provided directly by
banks, the Parent Company may provide vendor finance credits to customers
directly. The central function also monitors the exposure from outstanding
vendor credits and credit commitments.
Financial report 2021 96
Notes to the Parent Company financial statements
Note P17, cont’d.
Fair valuation of the Company’s financial instruments
For a description of the Company’s valuation techniques and valuation hierarchies, see note F1
“Financial risk management”.
Reconciliation of Level 3 fair value items
Opening balance
Additions
Disposals
Gain or losses 1)
Transfers to level 1 2)
Reclassifications
Closing balance
Other investments in
shares and participations
1,382
134
–49
180
–55
–1
1,591
1) Table shows net gains or losses recognized in Financial income, of which SEK 163 million unrealized gains relate to Level 3
assets held at the end of the year.
2) Transfer between hierarchies is recognized from the date of change in circumstances that resulted in the transfer. Transfer in
the year relates to an investment that was converted into listed equity shares. Unrealized gain of SEK 529 million was recog-
nized in Financial income as a gain on Level 1 asset, excluded from the gain or loss presented in the table above.
Financial instruments
SEK billion
Assets at fair value through profit or loss
Customer finance
Interest bearing securities
Cash equivalents 2)
Other financial assets 1)
Other current receivables
Assets at fair value through OCI
Trade receivable
Assets at amortized cost
Interest bearing securities
Cash equivalents
Other financial assets
Receivables subsidiaries
Financial assets
Financial liabilities at designated FVTPL
Interest-bearing liabilities
Financial liabilities at FVTPL
Other current liabilities
Liabilities at amortized cost
Trade payables
Borrowings
Liabilities subsidiaries
Financial liabilities
2021
Fair value hierarchy level
2020
Fair value hierarchy level
Amortized
cost
Fair value
Level 1
Level 2
Level 3
Amortized
cost
Fair value
Level 1
Level 2
Level 3
–
–
–
–
–
–
0.1
–
0.5
38.3
38.9
–
–
–0.4
–0.0
–80.7
–81.1
0.8
43.2
26.0
2.2
1.2
0.0
–
–
–
–
73.4
–
43.2
–
0.6
–
–
–
–
–
–
–
–
–
26.0
–
1.2
–
–
–
–
–
–
–31.4
–19.5
–11.9
–0.8
–
–
–
–32.2
–
–
–
–
–
–0.8
–
–
–
–
0.8
–
–
1.6
–
0.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
–
0.5
39.0
39.7
–
–
–0.5
–1.2
–58.6
–60.3
0.9
28.1
23.6
1.4
0.7
0.0
–
–
–
–
54.7
–
28.1
–
–
–
–
–
–
–
–
–
–
–
23.6
–
0.7
–
–
–
–
–
–
–27.2
–18.9
–8.3
–0.2
–
–
–
–27.4
–
–
–
–
–
–0.2
–
–
–
–
0.9
–
–
1.4
–
0.0
–
–
–
–
–
–
–
–
–
–
–
1) Other financial assets relate to investment in equity interests which are included in ‘Other investments in shares and participations’ within note P7.
2 ) Total Cash and cash equivalent is SEK 37.1 (28.8) billion, of which SEK 26.0 (23.6) billion relating to Cash equivalents are presented in the table above.
P18 Other current liabilities
P19 Trade payables
Other current liabilities
Accrued interest
Accrued expenses, of which
Employee related
Other
Derivative liabilities
Other current liabilities
Total
2021
2020
Trade payables
Trade payables excluding associated companies and joint
ventures
Associated companies and joint ventures
Total
171
665
461
204
751
314
162
729
466
263
228
–
1,901
1,119
2021
2020
419
–
419
451
–
451
Financial report 2021
Notes to the Parent Company financial statements
97
P20 Assets pledged as collateral
Assets pledged as collateral
Bank deposits
Other
Total
Leasing with the Parent Company as lessor
The operating lease income is mainly income from the subleasing of real
estate.
At December 31, 2021, future minimum payment receivables were
distributed as follows:
Future minimum payment receivables
2021
532
242
774
2020
476
233
709
Other includes pledged capital insurances for pension agreements to
employees.
P21 Contingent liabilities
Contingent liabilities
Total contingent liabilities
2021
20,322
2020
20,495
Contingent liabilities include pension commitments of SEK 20,102
(19,459) million.
P22 Statement of cash flows
Adjustments to reconcile net income to cash
Property, plant and equipment
Depreciation
Total
Intangible assets
Amortization
Total
Total depreciation and amortization
on tangible and intangible assets
Taxes
Write-downs and capital gains (–)/losses
on sale of fixed assets, excluding customer
finance, net
Unsettled group contributions
Unsettled dividends
Other non-cash items
Total adjustments to reconcile
net income to cash
P23 Leasing
2021
2020
2019
110
110
18
18
128
154
578
1,526
–
–293
97
97
32
32
129
552
3,304
1,540
–
–239
82
82
79
79
161
–204
–619
1,961
–
199
2,093
5,286
1,498
Leasing with the Parent Company as lessee
The Parent Company has the following types of leasing agreements: leasing
of real estate and vehicles. 2021 costs for real estate amounted to SEK 596.2
(588.9) million and vehicles to SEK 4.4 (4.0) million. The Parent Company
had variable lease expenses related to property taxes to a value of SEK 46.2
(37.0) million in 2021.
At December 31, 2021, future payment obligations for leases were
distributed as follows:
Future payment obligations for leases
2022
2023
2024
2025
2026
2027 and later
Total
Operating leases
594
592
529
477
389
254
2,835
2022
2023
2024
2025
2026
2027 and later
Total
Operating leases
14
10
2
–
–
–
26
P24 Information regarding employees
Average number of employees
2021
2020
Men Women
Total
Men Women
Total
177
177
177
177
185
185
185
185
362
362
362
362
169
169
169
169
174
174
174
174
343
343
343
343
Europe &
Latin America 1)
Total
1) of which in EU
of which in Sweden
Remuneration
Wages and salaries and social security expenses
Wages and salaries
Social security expenses¹)
of which pension costs¹)
2021
2020
606
397
179
513
744
555
1) The pension cost for 2020 includes a contribution to the pension trust with SEK 311 million and
associated effect on special salary tax with SEK 76 million.
Wages and salaries per region
Europe & Latin America 1)
Total
1) of which in EU
of which in Sweden
2021
2020
606
606
606
606
513
513
513
513
Remuneration in foreign currency has been translated to SEK at average
exchange rates for the year.
Remuneration to the Board of Directors and the President and CEO
See notes to the consolidated financial statements, note G2 “Information
regarding members of the Board of Directors and Group management.”
Long-term variable compensation
Compensation costs for employees of the Parent Company for the cash-based
plan amounted to SEK 24.3 (5.6) million and the cost for share-based plan
amounted to SEK 56.8 (51.3) million. See notes to the consolidated financial
statements, note G3, “Share-based compensation”.
Financial report 2021
98
Notes to the Parent Company financial statements
P25 Related party transactions
P26 Fees to auditors
IAS 24, “Related Party Disclosures” requires disclosure of related party
relationships, transactions and outstanding balances.
During 2021, various transactions were executed pursuant to contracts
based on terms customary in the industry and negotiated on an arm’s
length basis.
Ericsson Nikola Tesla d.d.
Ericsson Nikola Tesla d.d. is a company providing the design, sales and service
of telecommunications systems and equipment and an associated member
of the Ericsson Group. Ericsson Nikola Tesla d.d. is located in Zagreb, Croatia.
The Parent Company holds 49.07% of the shares.
For the Parent Company, the major transactions are license revenues for
Ericsson Nikola Tesla d.d.’s usage of trademarks and received dividends.
Ericsson Nikola Tesla d.d.
Related party transactions
License revenues
Dividends
Related party balances
Receivables
2021
2020
3
72
3
6
43
6
The Parent Company does not have any contingent liabilities, assets pledged
as collateral or guarantees toward Ericsson Nikola Tesla d.d.
Leone Media Inc.
MediaKind includes platforms for compression video processing and stor-
age. 51% of the MediaKind business was divested February 1 2019. After
the t ransaction, the Parent Company holds 49% of the shares. The Parent
Company has provided a loan to MediaKind of SEK 0.5 (0.5) billion.
Leone Media Inc.
Related party transactions
License revenues
Dividends
Related party balances
Receivables
2021
2020
–
–
–
–
536
451
The Parent Company does not have any contingent liabilities, assets pledged
as collateral or guarantees toward Leone Media Inc.
Other related parties
Total receivables from other related parties were SEK 3.5 (0) million.
For information regarding the remuneration of management, see notes to the
consolidated financial statements, note G2, “Information regarding members
of the Board of Directors and Group management.
Fees to auditors
2021
Audit fees
Audit-related fees
Tax services fees
Other fees
Total
2020
Audit fees
Audit-related fees
Tax services fees
Other fees
Total
2019
Audit fees
Audit-related fees
Tax services fees
Other fees
Total
Deloitte
Others
Total
90
–
–
–
90
56
8
1
–
65
PwC
26
9
1
2
38
3
–
9
1
13
28
5
1
1
35
Other
–
–
–
–
–
93
–
9
1
103
84
13
2
1
100
Total
26
9
1
2
38
The allocation of fees to the auditors is based on the requirements in the
Swedish Annual Accounts Act.
At the 2021 Annual General Meeting, Deloitte was appointed auditor for
the period until the 2022 Annual General Meeting. PricewaterhouseCoopers
(PwC) was appointed auditor for the period until the 2020 Annual General
Meeting.
During the period 2019–2021, in addition to audit services, PwC and
Deloitte provided certain audit-related services, tax and other services to the
Parent Company. The audit-related services include quarterly reviews, SSAE
16 reviews and services in connection with the issuing of certificates and
opinions and con sultation on financial accounting. The tax services include
corporate tax compliance work. Other services include services related to
acquisitions.
P27 Events after the reporting period
PRI non-profit association have decided to change the calculation criteria for
old-age pension related to the ITP2 plan. The changes will apply from 1 Janu-
ary 2022 and this will have an impact on the pension liability. The changed
calculation criteria are:
1. The discount rate will be updated from 4% (3.84% after deduction for future
expenses) to 3% (2.85% after deduction). PRI indicates that this means an
average increase of the pension liability of approximately 15%. The increase is
dependent on the age profile amongst the beneficiaries, i.e. how long time in
the future the benefit payments is expected to happen.
2. The life expectancy assumptions will increase for men by 0.5 year and
will have an average life expectancy on retirement at 65 of 23.5 years. The
average life expectancy on retirement for women on retirement at 65 remains
unchanged at 24.7 years. PRI indicates in general an increase of the liability
with 2% but this is dependent on the beneficiaries in the pension plan.
3. The consolidation reserve, which is a reserve for next years indexation of
earned pension entitlements (decided by Alecta every year), is calculated as
2% of the capital value revised from 4%. This impact will result in a decrease
of the pension liability.
For other events after the reporting period, see notes to the Consolidated
Financial Statements, note H6,”Events after the reporting period”.
Financial report 2021 Risk factors
99
Risk factors
All the information in this Annual Report and in particular the risks
and uncertainties outlined below should be carefully considered.
Based on the information currently known to the Company, Ericsson
believes that the following section identifies the most significant
risks affecting our business. Any of the factors described below,
or any other risk factors discussed elsewhere in this report, could
have a material negative effect on strategic objectives, business,
operations, future performance, revenues, operating and after-tax
results (EBIT), profit margins, financial condition, cash flow, liquid-
ity, credit rating, market share, reputation, brand and/or our share
price. Additional risks and uncertainties not presently known to
the Company or that Ericsson currently believes to be immaterial
may also materially adversely affect our business. Furthermore, our
operating results may have a greater variability than in the past and
Ericsson may have difficulties in accurately predicting future devel-
opments. See also “Forward-Looking Statements”.
Contents
99 Risks related to business activities and industry
106 Risks related to Ericsson’s financial situation
107 Legal and regulatory risk
110 Internal control risk
111 Environmental, social and governance risk
1
Risks related to business activities and industry
1.1 Ongoing geopolitical and trade uncertainty from a range of
factors may have a material adverse impact on our business, opera-
tions, business prospects and consequently on operating results,
financial conditions and our ability to meet our targets.
Geopolitical alliances are shifting as global tensions, including between
US-China, drive growing economic, technological, military, and political
competition across the world. At the same time, there are numerous
ongoing local and regional conflicts, of which the ongoing military con-
flict between the Ukraine and Russia are of particular significance. It is
not yet clear how these new dynamics will play out across the world, but
we can expect more difficulty navigating through this variable geopoliti-
cal geometry, as old alliances fracture and new ones emerge. These
tensions, including trade restrictions, enhanced sanctions measures and
increased safeguards for national security purposes, can impact global
market conditions and continue to be challenging for global supply
chains in general and ICT supply chains in particular. These uncertain-
ties include the effects of trade disputes and other political tensions
involving the governments of the European Union, the US. China and
Russia.
There are also uncertainties for the future bilateral trading relation-
ship between China and several countries as a result of the restrictions
towards Chinese vendors in 5G networks that have been adopted.
Of special relevance for Ericsson in this context is the trade relation-
ship between Sweden and China, since Ericsson, even though it is
a global company with a global presence, has its headquarters in
Sweden and therefore risks being affected by any deterioration of the
Swedish-Chinese relationship. For example, the decision by the Post
and Telecommunication Authority to exclude Huawei and ZTE products
from 5G networks is still subject to judicial appeal.
Because the Company’s continued business operations in China
are part of Ericsson’s current and future growth plans, further changes
in the economic and political policies in or relating to China could have
a material adverse effect on the Company’s business. During the last
years Ericsson has also seen the global free trade system, that has
hitherto allowed increased efficiency and economic growth, facing
sustained challenges, including towards the World Trade Organization
(WTO) dispute settlement body. Any increased prospect of government
policies and actions violating WTO agreements could negatively impact
Ericsson’s ability to benefit from open markets and free trade.
The mandated, or otherwise required, localization of manufacturing
and R&D – as well as their digital counterparts (including localization
of IT-infrastructure and restrictions on data flows) has been steadily
growing and have been motivated by either protectionism, indigenous
industrial policies or national security. There is a risk of moves away
from global value chains and towards more regional or national alterna-
tives. Governments may continue to impose conditions that require the
use of local suppliers and local production or partnerships with local
companies for R&D and IT-infrastructure, require the license or other
transfer of intellectual property, or engage in other efforts to promote
local businesses and local competitors, which could have a significant
adverse impact on Ericsson’s ability to pursue a business globally.
Additionally, political instability in the regions in which the Company
operates may further increase the risk of possible legal or regulatory
violations by Ericsson or its employees. Any violation by Ericsson or its
employees could cause severe reputational harm to the Company and
a material adverse effect on Ericsson’s business operations and result in
government actions and the imposition of significant financial penalties
and restrictions on the Company’s ability to do business with certain
customers, such as government bodies. See risk factor 3.3.
The geopolitical situation can have consequences on the entire
industry, with the possibility of further industry split, separation of global
value chains and separation of global standards for mobile telecom-
munications. These developments have also led to several countries
evaluating how to ensure uninterrupted access to telecommunication
network infrastructure, for example through promoting disaggregation
of the Radio Access Network and support of national communication
network infrastructure champions as alternative to the established
global vendors such as Ericsson – although the timing and extent of this
remains unclear.
All of the above may have a material and potentially lasting adverse
impact on Ericsson’s international product development and supply
chains and necessitates a flexible and adaptive organizational setup,
therefore impacting its profitability and business as a whole. Such
adverse impacts may include for example:
Financial report 2021 100
Risk factors
– Reduced or loss of sales and market share, e.g. in China, Ukraine and
– Reduced demand for products and services, resulting in increased
Russia and weakened market position
– Reduced or lost market access
– Decreased ability for unrestricted use of Ericsson’s global supply
chain for all markets, e.g. as a result of import or export restrictions in
the US and China
– Increased trade restrictions, including economic sanctions and
export controls, tariffs and increased costs which may not be
recoverable
– Separation of global standards for mobile telecommunication
– Sourcing restrictions and constraints for access to hardware and
software products and components
– Reduced efficiency in R&D and restrictions in use of R&D resources
– Deferrals of purchases, with lower revenues not fully compensated
through reduced costs
– Excess and obsolete inventories and excess manufacturing capacity
– Financial difficulties or failures among Ericsson’s suppliers
– Impairment losses related to Ericsson’s intangible assets as a result
of lower forecasted sales of certain products
– Increased difficulties in forecasting sales and financial results as well
as increased volatility in Ericsson’s reported results.
1.2 Challenging global economic conditions may adversely impact
the demand, cost and pricing for Ericsson’s products and services as
well as limit the Company’s ability to grow.
The challenging global economic conditions, e.g. due to the pandemic,
downturn in the global economy, political unrest and uncertainty, labor
and supply shortages, increasing inflation and rising interest rates, or
geopolitical risks and trade frictions may have adverse, wide-ranging
effects on demand for Ericsson’s products and for the products of
Ericsson’s customers. This could cause operators and other customers
to postpone investments or initiate other cost-cutting measures to
maintain or improve their financial position. This could also result in
significantly reduced expenditures for the Company’s products and
services, including network infrastructure, in which case Ericsson’s
operating results (EBIT) would suffer. If demand for the Company’s
products and services were to fall, Ericsson may experience material
adverse effects on Ericsson’s revenues, cash flow, capital employed
and value of the Company’s assets and Ericsson could incur operating
losses. Furthermore, if demand is significantly weaker or more volatile
than expected, Ericsson’s credit rating, borrowing opportunities and
costs as well as the trading price of Ericsson’s shares could be adversely
impacted. Should global economic conditions fail to improve or should
they worsen or should political unrest and uncertainty, labor and supply
shortages, increasing inflation and rising interest rates, or geopolitical
problems or trade frictions fail to improve or should they worsen, other
business risks Ericsson face could intensify and could also negatively
impact Ericsson’s business prospects of operators and other custom-
ers. Some operators and other customers, in particular in markets
with weak currencies, may incur funding difficulties and slower traffic
development, which may negatively affect their investment plans and
cause them to purchase less of the Company’s products and services.
Increased inflation may impact our cost base through increased costs of
labor and supply of material, products and services. Although inflation
is a normal part of business and the Company has measures in place
to address this, it may not be possible to fully compensate for such
increased costs through increased sales prices to the Company’s cus-
tomers, leading to lower margins and decreased financial performance.
The potential adverse effects of an economic downturn include:
price competition or deferrals of purchases, with lower revenues not
fully compensated through reduced costs
– Excess and obsolete inventories and excess manufacturing capacity
– Financial difficulties or failures among Ericsson’s suppliers
– Increased demand for customer finance, difficulties in collection of
accounts receivable and increased risk of counter party failures
– Impairment losses related to Ericsson’s intangible assets as a result
of lower forecasted sales of certain products
– Increased difficulties in forecasting sales and financial results as well
as increased volatility in Ericsson’s reported results
– Changes in the value in the Company’s pension plan assets resulting
from, for example, adverse equity and credit market developments
and/ or increased pension liabilities resulting from, for example,
lower discount rates. Such development may trigger additional pen-
sion trust capitalization needs negatively affecting the company’s
cash balance
– End user demand could also be adversely affected by reduced
consumer spending on technology, changed operator pricing,
security breaches and trust issues.
1.3 Ericsson’s business depends upon the continued growth of
mobile communications and the success of Ericsson’s existing and
targeted customer base. If growth slows or if the Company’s cus-
tomers do not manage to maintain or grow relevance in the digital
value chain or if Ericsson’s products and/or services are not success-
ful, Ericsson’s customers’ investment in networks may slow or stop,
harming the Company’s business and operating results (EBIT).
A substantial portion of Ericsson’s business depends on the continued
growth of mobile communications in terms of both the number of sub-
scriptions and usage per subscriber, which in turn drives the continued
deployment and expansion of network systems by Ericsson’s customers.
If operators fail to increase the number of subscribers and/or usage
does not increase, or if they fail to utilize opportunities from the tech-
nological evolution, Ericsson’s business and operating results could be
materially adversely affected. Also, if operators fail to monetize services,
fail to adapt their business models or experience a decline in their
revenues or profitability, their willingness to further invest in their exist-
ing and new networks may decrease which will reduce their demand
for Ericsson’s products and services and have an adverse effect on the
Company’s business, operating results (EBIT), and financial condition.
Traffic development on cellular networks could be affected if more
traffic is offloaded to WI-FI-networks. Further alternative services
provided over the internet have profound effects on operator voice/
SMS revenues with possible reduced capital expenses consequences.
Ericsson’s strategy depends on the development and success of global
standards. This could be affected adversely in the future by industry
forces more interested in de-facto standards or geopolitical forces lead-
ing to standards fragmentation and increased difficulties of creating
economies of scale.
Fixed and mobile networks converge and new technologies, such as
IP and broadband, enable operators to deliver services in both fixed and
mobile networks. Ericsson is dependent on the uptake of such services
and the outcome of regulatory and standardization activities such as
spectrum allocation. If delays in uptake, standardization or regulation
occur, this could adversely affect Ericsson’s business, operating results
(EBIT), and financial condition.
Financial report 2021 Risk factors
101
1.4 Pandemics, such as for example the one caused by the
Coronavirus, COVID-19, could severely impact Ericsson’s business
and local and global operations.
Pandemics, such as for example the one caused by the COVID-19 in
March 2020 and its continued prolonged effects, could severely impact
Ericsson’s local and global operations related to e.g. Service Delivery,
Research & Development, Sales and Supply, as well as the Company’s
customers and suppliers, which could result in significant financial
and other consequences. For example, the COVID-19 pandemic has
caused challenges and risks relating to travel and lockdowns limiting
access to sites, transportation and logistics and impacting the flow of
goods, as well as having major parts of the workforce working remotely.
The infection rate in Ericsson markets can increase, giving further
disturbances to the Company’s operations, including in network deploy-
ments and impacting corresponding revenues. Disruptions to the global
economy and to the operations and business of Ericsson’s customers,
suppliers, and partners could cause disturbances in the Company’s
operations and may have a material adverse effects on Ericsson’s busi-
ness and financial position. Moreover, the extensive working from home
may limit creativity and efficiency in parts of the Company’s operations,
as well as negatively impact the health and motivation for some of
Ericsson’s employees.
The extent to which the COVID-19 pandemic will impact our busi-
ness, financial performance and liquidity, including our ability to execute
our near-term and long-term business strategies and initiatives in the
expected time frame, will depend on future developments, including
the duration and severity of the pandemic, the emergence of new
variants, changes in infection rates, the vaccine participation rate, the
effectiveness of vaccines and the speed with which the vaccine can
be distributed, as well as regulations and requirements impacting the
return of employees to the offices and/or our ability to visit customer
sites, none of which can be predicted. Any of the foregoing factors,
or other cascading effects of the COVID-19 pandemic that are not
currently foreseeable, could have a material adverse effect on our
business, results of operations (EBIT), financial condition and/or cash
flows. Additionally, as pandemic conditions wane, we cannot predict
how quickly the marketplaces in which the Company operate will return
to pre-pandemic levels.
1.5 Ericsson may not be successful in implementing its strategy,
in achieving improvements in its profitability, in estimating
addressable markets or market CAGR in the markets in which the
Company operates.
There can be no assurance that Ericsson will be able to successfully
implement its strategy to achieve future profitability, growth or create
share-holder value. When deemed necessary, Ericsson has under-
taken and expect to continue to undertake specific restructuring or
cost-saving initiatives; however, there are no guarantees that such
initiatives will be sufficient, successful or executed in time to deliver any
improvements in Ericsson’s earnings. Furthermore, this annual report
includes certain estimates with respect to addressable markets as well
as with respect to growth rate in the market segments in which Ericsson
operates, including Networks, Digital Services, Managed Services and
Emerging Business and Other. If the underlying assumptions on which
the Company’s estimates are based prove not to be accurate, the actual
performance or addressable markets and CAGR may be materially
different from the estimates presented in this annual report, which may
have a materially adverse effect upon Ericsson’s financial condition.
1.6 Ericsson may not be successful in executing its strategy to
capture the 5G market opportunity in terms of e.g. scale, time and
volume of business.
The 5G market opportunity will depend on availability of attrac-
tive spectrum for 5G, and time of spectrum allocations, amount of
spectrum, type of frequency bands such as low bands (below 1 GHz),
mid-bands (3–6 GHz) and high bands (above 24 GHz), as well as
terms of spectrum licenses, such as cost and license period of time, may
not be according to needs and plans, which could delay or reduce the
5G market. In addition, the operator usage of this spectrum could be
restricted by regulatory authorities for shorter or longer time and in dif-
ferent geographical areas, due to unforeseen reasons such as interfer-
ence with other electronic equipment at sensitive locations, e.g. airports,
and the Ericsson Group cannot guarantee that it will not become the
subject of related liability claims (such as product liability or claims asso-
ciated with the configuration or installation of equipment), all of which
could have a material adverse impact on the Ericsson Group’s business,
operating results, financial condition, reputation and brand.
Operator speed and scale to adopt to 5G could also be changed due
to market situations, including resolution of M&A transactions as well
as government incentives to deploy 5G. Operator 5G deployment plans
could also be delayed by operational aspects such as site access, per-
mits, availability of installation crews. There is also a risk that the scale
and time of 5G deployments will change due to the availability of 5G
devices, not only for launch but also due to the speed with which device
prices will decline to drive mass market adoption.
In addition to this, the timing, size and technology choices of market
opportunities beyond enhanced mobile broadband, such as fixed
wireline access, industrial IoT and private networks, may materialize
differently than estimated, which could have a materially adverse effect
on our business.
Finally, Ericsson or its suppliers may encounter unforeseen technical
challenges that can affect Ericsson’s ability to develop, supply or deploy
5G networks.
All of the above risks may have a negative impact on the ability of
Ericsson to implement it’s strategy and it’s business as a whole.
1.7 Ericsson engages in acquisitions and divestments which
may be disruptive and require the Company to incur significant
expenses, and Ericsson may not be successful in consummating such
transactions, protecting the value of acquisitions during integration
following consummation, or creating the value anticipated with the
acquisition.
In addition to in-house innovation efforts, Ericsson makes acquisitions
in order to obtain various benefits such as reduced time-to-market,
access to technology and competence, increased scale or to broaden
Ericsson’s product portfolio or customer base. One recent example is the
acquisition of Cradlepoint. Acquisitions could result in the incurrence of
contingent liabilities and an increase in amortization expenses related
to intangible assets or impairment of goodwill, which could have a
material adverse effect upon Ericsson’s business, operating results
(EBIT), financial condition and liquidity. Risks Ericsson could face with
respect to acquisitions include:
– Insufficiencies of technologies and products acquired, such as
unexpected quality problems
– Difficulties in the integration of the operations, technologies,
products and personnel of the acquired company
– Risks of entering markets in which the Company has no or limited
prior experience
– Potential loss of key employees
Financial report 2021 102
Risk factors
– Diversion of management’s attention away from other business
concerns
– Expenses of any undisclosed or potential legal liabilities of the
acquired company, including failure to comply with laws or
regulations.
From time-to-time Ericsson also divests parts of Ericsson’s business to
optimize the Company’s product portfolio or operations. Any decision
to dispose of or otherwise exit businesses may result in the recording of
special charges, such as workforce reduction costs and industry- and
technology-related write-offs. The risks associated with such acquisi-
tions and divestments could have a material adverse effect upon
Ericsson’s business, operating results (EBIT), financial condition and
liquidity. Risks Ericsson could face with respect to divestments include:
– Difficulties in the separation of the operations, technologies,
products and personnel of the business divested
– Potential loss of key employees
– Expenses of any undisclosed or potential legal liabilities of the
business divested.
In addition, we cannot assure that we will be successful in consummat-
ing acquisitions or divestments on favorable terms or at all. For example,
although we expect our agreement, dated November 22, 2021, to
acquire Vonage Holdings Corp. to be consummated during the first half
of 2022, it may take up to a year to satisfy the conditions to closing this
acquisition. Moreover, it is possible that certain of the conditions to the
closing of this acquisition may not be satisfied or waived and, if that
were to happen, the agreement would terminate without a closing. The
closing conditions include the receipt of regulatory clearances and the
approval of the agreement by a special meeting of the shareholders of
Vonage. If the agreement were to terminate under specified circum-
stances where we have failed to obtain certain clearances from the
Committee on Foreign Investment in the United States, we may have to
pay a USD 200 million termination fee to Vonage. The delay or inability
to consummate an acquisition or divestiture may impede our ability to
execute our strategic plan and achieve the benefits that we anticipated
from these transactions.
1.8 Ericsson is in, and may enter into new, JV arrangements and
have, and may have new, partnerships, which may not be successful
and could expose the Company to future costs.
Ericsson’s JV and partnership arrangements, may fail to perform as
expected for various reasons, including an incorrect assessment of
the Company’s needs and synergies, Ericsson’s inability to take action
without the approval of Ericsson’s partners, the Company’s difficulties in
implementing Ericsson’s business plans, the lack of capabilities or finan-
cial instability of the Company’s strategic partners. Ericsson’s ability to
work with these partners or develop new products and solutions, e.g. as
part of Ericsson’s 5G portfolio, may become constrained, which could
harm the Company’s competitive position in the market.
Additionally, Ericsson’s share of any losses from or commitments to
contri bute additional capital or borrowings to such JVs and partnerships
may adversely affect Ericsson’s business, operating results (EBIT),
financial condition and cash flow.
1.9 The telecommunications industry investment levels fluctuate
and are affected by many factors, including the economic environ-
ment, and decisions made by operators and other customers
regarding deployment of technology and their timing of purchases.
The telecommunications industry has historically experienced down-
turns in which operators substantially reduced their capital spending
on new equipment. While Ericsson expects the network operator
equipment market, telecommunications services market and ICT
market to grow in the coming years, the uncertainty surrounding global
economic growth and the geopolitical situation may materially harm
actual market conditions, which could have a material adverse effect on
Ericsson’s business. Moreover, market conditions are subject to substan-
tial fluctuation, and could vary geographically and across technologies.
Even if global conditions improve, conditions in the specific industry
segments in which the Company participates could be weaker than in
other segments. In that case, the Company’s revenue and operating
results (EBIT) may be adversely affected. If capital expenditures by
operators and other customers are weaker than Ericsson anticipates,
the Company’s revenues, operating results (EBIT) and profitability may
be adversely affected. The level of demand from operators and other
customers who buy Ericsson’s products and services can vary over short
periods of time, including from month to month. Due to the uncertainty
and variations in the telecommunication industry, as well as in the ICT
industry, accurately forecasting revenues, results, and cash flow remains
difficult.
1.10 Sales volumes and gross margin levels can be reduced by an
unfavorable mix and order time of Ericsson’s products and services.
Ericsson’s sales to operators and other customers represent a mix of
equipment, software and services, which normally generate different
gross margins. The operators still represent the main part of Ericsson’s
business and are also the main focus for sales going forward. Ericsson
provides all of the Company’s customers with solutions based on
Ericsson’s own products as well as third-party products which normally
have lower margins than Ericsson’s own products. As a consequence,
Ericsson’s reported gross margin in a specific period will be affected by
the overall mix of products and services as well as the relative content of
third-party products. In the Company’s Digital Services and Emerging
Business and Other segments, third-party products and services repre-
sent a larger portion of Ericsson’s business than the Company’s tradi-
tional sales, which impact Ericsson’s business models. Further, network
expansions and upgrades have much shorter lead times for delivery
than initial network build outs. Orders for such network expansions
and upgrades are normally placed on short notice by customers, often
less than a month in advance, and consequently variations in demand
are difficult to forecast. As a result, changes in Ericsson’s product and
service mix and the short order time for certain of Ericsson’s products
may affect Ericsson’s ability to accurately forecast sales and margins
or detect in advance whether actual results will deviate from market
consensus and expectations. Product and delivery lead times of certain
products may be prolonged due to possibly restricted market availability
of certain components caused e.g. by the pandemic and subsequent
supply chain delays. Short-term variation could have a material adverse
effect on Ericsson’s business, operating results (EBIT), financial condi-
tion and cash flow.
1.11 Ericsson may not be able to properly respond to market trends
in the industries in which it operates, including virtualization of
network functions.
Ericsson is affected by market conditions and trends within the indus-
tries in which the Company operates, including the convergence of the
IT and telecom industries. Technological developments largely drive
convergences enabling digitalization and a move from dedicated hard-
ware to software and cloud based services. This includes also a disag-
gregation of the Radio Access Network, although the timing and extent
of this remains unclear. This is changing the competitive landscape of
Ericsson ‘s business as well as value chains and business models and
Financial report 2021 Risk factors
103
affects Ericsson’s objective-setting, risk assessment and strategies. The
change makes access to market easier for new competitors including
new competitors to Ericsson’s business that have entered and may
continue to enter the market and negatively impact Ericsson’s market
share in selected areas. If Ericsson fails to understand or anticipate
the market trends and development, or fail to acquire the necessary
competencies to develop and sell products, services and solutions that
are competitive in this changing business environment, the Company’s
business, operating results and financial condition will suffer.
1.12 Ericsson faces intense competition from the Company’s exist-
ing competitors as well as new entrants, and this could materially
adversely affect the Company’s results.
The markets in which Ericsson operates are highly competitive in terms
of price, functionality, service quality, customization, timing of develop-
ment, and the introduction of new products and services. The Company
faces intense competition from significant competitors, many of which
are very large companies, with substantial technological and financial
resources and established relationships with operators. Ericsson’s
operator customers, which represent the main part of Ericsson’s busi-
ness, are also large and highly sophisticated and exercise significant
buying power through the common use of competitive bidding process.
Ericsson also encounters increased competition from new market
entrants and alternative technologies are evolving industry standards.
In addition, if Ericsson chooses to enter new market segments, it might
underestimate the skills and practices of the competitors within these
segments. The Company’s competitors may implement new technolo-
gies before Ericsson does, offer more attractively priced or enhanced
products, services or solutions, or they may offer other incentives that
Ericsson does not provide. Some of the Company’s competitors may
also have greater resources in certain business segments or geographic
areas than Ericsson does. Increased competition, and the crystallization
of any of the risks above, could result in reduced profit margins, loss
of market share, increased research and development costs as well as
increased sales and marketing expenses, which could have a material
adverse effect on Ericsson’s business, operating results (EBIT), financial
condition and market share.
Additionally, Ericsson operates in markets characterized by rapidly
changing technology and also the nature in which this technology is
being brought to market is rapidly changing. This has, and may con-
tinue to result in continuous price pressure on Ericsson’s products and
services. If Ericsson’s counter measures, including enhanced products
and business models or end to end cost reductions cannot be achieved
or do not occur in a timely manner, there could be adverse impacts on
Ericsson’s business, operating results, financial condition and market
share.
1.13 Vendor consolidation may lead to stronger competitors who
are able to benefit from integration, scale and greater resources,
which could increase competition in our market.
Industry convergence and consolidation among equipment and ser-
vices suppliers could potentially result in stronger competitors that are
competing as end-to-end suppliers as well as competitors more special-
ized in particular areas, which could for example impact certain of
Ericsson’s segments such as Digital Services, and Emerging Business
and Other. If established actors in adjacent markets acquire players with
new technologies in Ericsson’s markets, new strong competitors could
emerge. Consolidation may also result in competitors with greater
resources than Ericsson has. Both of these events could have a materi-
ally adverse effect on Ericsson’s business, operating results (EBIT),
financial condition and market share.
1.14 Ericsson relies on a limited number of suppliers of components,
production capacity and R&D and IT services, which exposes the
Company to supply disruptions and cost increases.
Ericsson’s ability to deliver according to market demands and contrac-
tual commitments depends significantly on obtaining a timely and
adequate supply of materials, components, production capacity and
other vital services on competitive terms. Although Ericsson strives
to avoid single- source supplier solutions, this is not always possible.
This includes also development and supply of key ASIC and FPGA
components, for which Ericsson has a dependency to very few suppliers.
Accordingly, there is a risk that the Company will be unable to obtain key
supplies it needs to produce Ericsson’s products and provide Ericsson’s
services on commercially reasonable terms, in time, or at all. Failure
by any of the Company’s suppliers could delay or interrupt Ericsson’s
product or services supply or operations and significantly limit sales
or increase Ericsson’s costs. To find an alternative supplier or redesign
products to replace components may take significant time which could
cause significant delays or interruptions in the delivery of Ericsson’s
products and services and result in a reduction in sales. Ericsson has
from time to time experienced interruptions of supply and the Company
may experience such interruptions in the future.
Furthermore, the Company’s procurement of supplies requires
Ericsson to predict future customer demands. If Ericsson fails to antici-
pate customer demand properly, an over or under supply of components
and production cap acity could occur. In many cases, some of Ericsson’s
competitors utilize the same manufacturers and if they have purchased
capacity ahead of Ericsson, the Company could be blocked from acquir-
ing the needed products. This factor could limit Ericsson’s ability to sup-
ply its customers and increase costs. At the same time, Ericsson commits
to certain capacity levels or component quantities, which, if unused, will
result in charges for unused capacity, unrecoverable costs or the scrap-
ping of costs used to procure such components. The Company is also
exposed to financial counterpart risks to suppliers when Ericsson pays
in advance for supplies. Such supply disruptions and cost increases may
negatively affect the Company’s business, operating results (EBIT) and
financial condition.
1.15 A significant portion of Ericsson’s revenue is currently
generated from a limited number of key customers, and operator
consolidation may increase Ericsson’s dependence on key customers
and key markets. The Company is also significantly dependent on
the sales of certain of Ericsson’s products and services.
Ericsson derives most of its business from large, multi-year agree-
ments with a limited number of significant customers. Many of these
agreements are reviewed on a yearly basis to renegotiate the price for
Ericsson’s products and services and do not contain committed pur-
chase volumes. Ericsson’s largest customer represented approximately
12% of the Company’s sales in 2021, Ericsson’s ten largest customers
accounted for 53% of Ericsson’s sales in 2021. A loss of or a reduced role
with a key customer could have a significant adverse impact on sales,
profit and market share for an extended period. In addition, Ericsson’s
dependence on the sales of certain of Ericsson’s products and services
may have a significant adverse impact on sales, profit and market share.
In recent years, service providers have undergone significant consoli-
dation, resulting in fewer operators with activities in several countries.
This trend is expected to continue, and intra-country consolidation is
likely to accelerate as a result of competitive pressure. A market with
fewer and larger operators will increase Ericsson’s reliance on key
customers and may negatively impact Ericsson’s bargaining position
and profit margins. Moreover, if the combined companies operate in
the same geographic areas, networks may be shared and less network
Financial report 2021 104
Risk factors
equipment and fewer associated services may be required. Network
investments could be delayed by the consolidation process, which
may include, among others, actions relating to merger or acquisition
agreements, securing necessary regulatory approvals, or integration
of businesses. Network operators also share parts of their network
infrastructure through cooperation agreements rather than legal
consolidations, which may adversely affect demand for network equip-
ment. Accordingly, operator consolidation may have a material adverse
effect on Ericsson’s business, operating results (EBIT), market share
and financial condition.
Service providers are increasingly looking for ways to save cost by
co-investing in and sharing their assets based on their commercial
plans, besides network infrastructure, also of site, and IT-infrastructure.
In addition, some of the service providers may becoming more willing
to partner with hyperscalers to build and run the telecom’s access
networks. Moreover, service providers including Ericsson’s key custom-
ers may be adversely impacted by new competition, especially in rural
mobile broadband growth affected by the emerging competition from
the greenfield satellite broadband sector. Accordingly, Ericsson’s busi-
ness may experience a material adverse effect, including impacts on
Ericsson’s operating sales, operating results (EBIT), market share and
financial condition.
1.16 Certain long-term agreements with customers include commit-
ments to future price reductions, requiring us to constantly manage
and control Ericsson’s cost base.
Long-term agreements with Ericsson’s customers are typically awarded
on a competitive bidding basis. In some cases, such agreements also
include a commitment to future price reductions. In order to maintain
Ericsson’s gross margin with such price reductions, Ericsson continu-
ously strives to reduce the costs of the Company’s products through
design improvements, negotiation of better purchase prices from
Ericsson’s suppliers, allocation of more production to low-cost countries
and increased productivity in Ericsson’s own production. However,
there can be no assurance that Ericsson’s actions to reduce costs will be
sufficient or quick enough to maintain the Company’s gross margin in
such contracts, which may have a material adverse effect on Ericsson’s
business, operating results (EBIT) and financial condition.
1.17 If the Company’s customers’ financial conditions decline,
Ericsson will be exposed to increased credit and commercial risks.
After completing sales to customers, the Company may encounter
difficulty collecting accounts receivables and could be exposed to risks
associated with uncollectable accounts receivable. Ericsson regularly
assesses the credit worthiness of Ericsson’s customers and based on
that assessment Ericsson determines a credit limit for each customer.
Challenging financial conditions have impacted some of Ericsson’s
customers’ ability to pay their invoices. Ericsson may be unable to avoid
future losses on the Company’s trade receivables. Ericsson has also
experienced demands for customer financing, and in adverse financial
markets or more competitive environments for the customers, those
demands may increase. Upon the financial failure of a customer, the
Company may experience losses on credit extended and loans made to
such customer, losses relating to Ericsson’s commercial risk exposure,
and the loss of the customer’s ongoing business. If customers fail to
meet their obligations to us, the Company may experience reduced
cash flows and losses in excess of reserves, which could have a material
adverse effect on its operating results (EBIT) and financial condition.
1.18 Product, solution or service quality issues could lead to reduced
revenue and gross margins and declining sales to existing and new
customers, as well as penalties, claims and liquidity damage.
Sales contracts normally include warranty undertakings for faulty prod-
ucts and often include provisions regarding penalties and/or termina-
tion rights in the event of a failure to deliver ordered products or services
on time or with required quality, possibly also for damages incurred
on customer businesses. Although Ericsson undertakes a number of
quality assurance measures to reduce such risks, product quality or
service performance issues may negatively affect Ericsson’s reputation,
business, operating results (EBIT) and financial condition. This could
also include poor quality of AI based solutions, or third-party products
that are part of Ericsson’s solutions. If significant warranty obligations
arise due to reliability or quality issues, Ericsson’s operating results and
financial position could be negatively impacted by costs associated with
fixing software or hardware defects including replacement, high service
and warranty expenses, high inventory obsolescence expense, delays
in collecting accounts receivable or declining sales to existing and new
customers, and reputational damage.
1.19 The development of Ericsson’s managed services business is
increasingly reliant on acceptance of value-based business models.
Ericsson has invested in increased use of automation and Artificial
Intelligence (AI) to deliver managed services and network optimization
to customers, as part of a service offering or packaged software capa-
bilities. Monetization of these investments relies on a value-based
commercial model that shows increased benefit for the customer and
proper returns to Ericsson development efforts. Failure to stay competi-
tive in this area and to get customer acceptance for new business mod-
els could have a material adverse effect on Ericsson’s business, operat-
ing results (EBIT) and financial condition. Further, most managed
services contracts span more than one year, with long sales cycle for
new contracts. Risk of termination and reduced scope or renegotiation
of existing contracts may have a negative impact on sales and earnings.
1.20 Ericsson depends upon the development of new products and
enhancements to the Company’s existing products, and the success
of Ericsson’s substantial research and development investments is
uncertain.
Rapid technological and market changes in Ericsson’s industry require
us to make significant investments in technological innovation. Ericsson
invests significantly in new technology, products and solutions, e.g.
related to 5G. In order for us to be successful, those technologies, prod-
ucts and solutions must often be accepted by relevant standardization
bodies and/or by the industries and markets as a whole. The failure of
Ericsson’s research and development efforts to be technically or com-
mercially successful could have adverse effects on Ericsson’s business,
operating results (EBIT) and financial condition. If Ericsson invests in
the development of technologies, products and solutions that do not
function as expected, are not adopted by the industry, are not ready in
time, or are not successful in the marketplace, the Company’s sales and
earnings may materially suffer. Additionally, it is common for research
and development projects to encounter delays due to changing require-
ments and unforeseen problems. Delays in production and research
and development may increase the cost of research and development
efforts and put us at a disadvantage against Ericsson’s competitors,
and can also include delays of communicated product availability dates.
This could have a material adverse effect upon the Company’s business,
customer relationships, operating results (EBIT) and financial condition.
Financial report 2021 Risk factors
105
1.21 Ericsson may not be successful in reaching the Digital Services
business objectives.
Ericsson may be unable to meet its Digital Services business objectives
and several risks related to market, technology and operations can
impact the turnaround plan.
5G market development and subscriber growth, as well as the
uptake of virtualization and consequent adoption of Ericsson’s new
products and automated delivery can be slower than expected.
Increased competition from both emerging and established competitors
may impact Ericsson’s market position.
The Company could be too slow to adapt and adopt new technolo-
gies like AI and Machine Learning to drive more automation in products
and solutions. The product overhaul to cloud native solutions mandated
by customers could also take longer than expected. In addition, the
increasing influence of open source initiatives such as Open Network
Automation Platform (ONAP) could drive a best of breed approach in
Ericsson’s customers, driving prices down and adversely impact the
Company’s full suite offerings.
In the operational dimension, Ericsson may be unable to successfully
execute on continued efficiency measures in end-to-end; inability in
implementing and successfully driving organizational-wide transforma-
tion programs across the develop-sell-deliver dimension for operating
model simplification; as well as being unable to mitigate risks in the
customer projects and product launches, which could have a material
adverse effect on Ericsson’s business.
1.22 Ericsson’s ability to benefit from intellectual property rights
(IPR), which are critical to the Company’s business, may be
limited by changes in regulation relating to patents, inability to
prevent infringement, the loss of licenses to or from third-parties,
infringement claims brought against us by competitors and oth-
ers and changes in the area of open standards when it comes to
licensing of open standard essential patents.
Although the Company has a large number of patents, there can be no
assurance that they will not be challenged, invalidated, or circumvented,
or that any rights granted in relation to Ericsson’s patents will in fact
provide us with competitive advantages.
Ericsson utilizes a combination of trade secrets, confidentiality poli-
cies, nondisclosure and other contractual arrangements in addition to
relying on patent, copyright and trademark laws to protect Ericsson’s
intellectual property rights. However, these measures may not be
adequate to prevent or deter infringement or other misappropriation. In
addition, Ericsson relies on many software patents, and limitations on
the patentability of software may materially affect Ericsson’s business.
Moreover, the Company may not be able to detect unauthorized use
or take appropriate and timely steps to establish and enforce Ericsson’s
proprietary rights. In fact, existing legal systems of some countries
in which Ericsson conducts business offer only limited protection of
intellectual property rights, if at all. The Company’s solutions may also
require us to license technologies from third-parties. It may be neces-
sary in the future to seek or renew licenses and there can be no assur-
ance that they will be available on acceptable terms, or at all. Moreover,
the inclusion in Ericsson’s products of software or other intellectual
property licensed from third-parties on a non-exclusive basis could limit
the Company’s ability to protect proprietary rights in Ericsson’s products.
Many key aspects of telecommunications and data network technol-
ogy are governed by industry-wide standards usable by all market
participants. As the number of market entrants and the complexity of
technology increases, the possibility of functional overlap and inadvert-
ent infringement of intellectual property rights also increases, which
has been the case with the introduction of 5G technology. In addition
to industry-wide standards, other key industry-wide software solutions
are currently developed by market participants as free and open source
software. Contributing to the development and distribution of software
developed as free and open source software may limit Ericsson’s ability
to enforce applicable patents in the future. Third-parties have asserted,
and may assert in the future, claims, directly against us or against
Ericsson’s customers, alleging infringement of their intellectual property
rights. Defending such claims may be expensive, time-consuming and
divert the efforts of Ericsson’s management and/or technical personnel.
As a result of litigation, Ericsson could be required to pay damages and
other compensation directly or to indemnify Ericsson’s customers for
such damages and other compensation, develop non-infringing prod-
ucts/technology or enter into royalty or licensing agreements. However,
the Company cannot be certain that such licenses will be available to
us on commercially reasonable terms or at all, and such judgments
could have a material adverse effect on Ericsson’s business, reputation,
operating results and financial condition. Using free and open source
software may allow third-parties to further investigate the Company’s
software due to the accessibility of source code. This may in turn make
this software more prone to assertions from third-parties.
Investigations held by antitrust authorities, court judgments and
legislative change could potentially affect Ericsson’s ability to benefit
from its patent portfolio when licensing patents necessary to conduct an
open standard (e.g. 4G and 5G technology), which could have a mate-
rial adverse effect on Ericsson’s business, reputation, operating results
(EBIT) and financial condition. Ericsson holds a leading patent portfolio
in open standards and possible changes regarding such a portfolio
may materially affect Ericsson’s reputation, business, operating results
(EBIT) and financial condition.
Ericsson’s ability to benefit from intellectual property rights (IPR),
may be limited by the loss of patent licenses to or from third-parties.
Patent licensing agreements are generally multi-year and term based
and the process for renewal of these licenses normally requires nego-
tiations, particularly in conjunction with technology shifts and the intro-
duction of new standards, such as 5G. Such renewals and negotiations
may take time to resolve, sometimes involve litigation and may have
material adverse impact on Ericsson’s business and financial position,
including on the timing for and level of revenues from the IPR licensing
contract portfolio.
Challenging global economic conditions and political unrest and
uncertainty, geopolitical risks and trade frictions could have adverse
effects on Ericsson’s IPR licensing revenues as well as on the ability
to acquire licenses.
1.23 Ericsson may not be successful in continuing to attract and
retain highly qualified employees to remain competitive.
Ericsson believes that the Company’s future success largely depends
on Ericsson’s continued ability to hire, develop, motivate and retain
engineers and other qualified employees who develop successful new
products/solutions, support Ericsson’s existing product range and
provide services to the Company’s customers and create great customer
experience.
Competition for highly qualified people in the industries in which the
Company operates remains intense. This competition is only further
increased by the fact that other industries are looking for similar talent.
The Company is continuously developing its corporate culture, and
Ericsson’s philosophies with the aim to create a positive work experi-
ence that makes it easy for us to focus on Ericsson’s business and the
Company’s customers as well as inspiring Ericsson’s people to grow and
Financial report 2021 106
Risk factors
to find “their great”. The Company’s ability to succeed depends in part on
maintaining a favourable corporate reputation which can be adversely
impacted by many factors including ongoing litigation, investigations,
and adverse media reports. However, there are no guarantees that
Ericsson will be successful in attracting and retaining employees with
the right skills in the future, and failure in retaining and recruiting could
have a material adverse effect on Ericsson’s business and brand.
1.24 Ericsson’s operations are complex and several critical opera-
tions are centralized in a single location. Any disruption of Ericsson’s
operations, whether due to natural or man-made events, may be
highly damaging to the operation of Ericsson’s business.
The Company’s business operations and those of our suppliers are
vulnerable to interruption by fire, earthquake, hurricane, flood or other
natural disasters, power loss, computer viruses, computer systems
failure, telecommunications failure, pandemics, quarantines, national
catastrophe, terrorist activities, war and other events beyond our control.
If any disaster were to occur, our or our suppliers ability to operate could
be seriously impaired and we could experience material harm to our
business, operating results (EBIT) and financial condition.
Having outsourced significant portions of Ericsson’s operations, such as
parts of IT, finance and HR operations, Ericsson depends on the per-
formance of external companies, including their security and reliability
measures. Regardless of protection measures, systems and communica-
tions networks are susceptible to disruption due to failure, vandalism,
computer viruses, security or privacy breaches, natural disasters, power
outages and other events. Ericsson also has a concentration of opera-
tions on certain sites, including R&D, production, network operation
centers, ICT centers and logistic centers and shared services centers,
where business interruptions could cause material damage and costs.
The delivery of goods from suppliers, and to customers, could also
be hampered for the reasons stated above. Interruptions to Ericsson’s
systems and communications may have an adverse effect on the
Company’s operations and financial condition.
1.25 The Company may not achieve some or all of the expected
benefits of Ericsson’s restructuring activities and the Company’s
restructuring may adversely affect Ericsson’s business.
Restructuring activities may be costly and disruptive to Ericsson’s
business, and Ericsson may not be able to achieve and retain the cost
savings and benefits that were initially anticipated. Additionally, as
a result of Ericsson’s restructuring, the Company may experience a
loss of continuity, loss of accumulated knowledge and/or inefficiency
during transitional periods. Reorganization and restructuring can
require a significant amount of management and other employees’
time and focus, which may divert attention from operating and growing
Ericsson’s business. Restructuring activities can create unanticipated
consequences and negative impacts on the business such as Ericsson’s
ability to develop, sell and deliver, and Ericsson cannot be sure that any
ongoing or future restructuring efforts will be successful or generate
expected cost savings. Factors that may impede a successful implemen-
tation include the retention of key employees, the impact of regulatory
matters, and adverse economic market conditions. If Ericsson fails to
achieve some or all of the expected benefits of restructuring, it could
have a material adverse effect on the Company’s competitive position,
business, financial condition, results of operations (EBIT), cash flows,
reputation and share price.
2
Risks related to Ericsson’s financial situation
2.1 Ericsson’s debt increases the Company’s vulnerability to
general adverse economic and industry conditions, limits Ericsson’s
ability to borrow additional funds, and may limit the Company’s
flexibility in planning for, or reacting to, changes in Ericsson’s
business and industry.
As of December 31, 2021, Ericsson’s outstanding debt was SEK 31,8
billion and while the Company is rated investment grade by Standard
& Poor’s (BBB-) and Fitch (BBB-) it is rated one step below investment
grade with Moody’s (Ba1). This degree of debt and the credit ratings
could have important consequences, including:
– Increasing Ericsson’s vulnerability to general economic and industry
conditions
– Requiring a substantial portion of cash flow from operations to be
dedicated to the payment of principal and interest on the Company’s
indebted-ness, thereby reducing Ericsson’s ability to use its cash flow
to fund the Company’s operations, capital expenditures and future
business opportunities
– Restricting us from making strategic acquisitions or causing us to
make non-strategic divestitures
– Limiting Ericsson’s ability to obtain additional financing for adjusted
working capital, capital expenditures, debt service requirements,
acquisitions and general corporate or other purposes
– Limiting the Company’s ability to adjust to changing market condi-
tions and placing us at a competitive disadvantage compared to
Ericsson’s competitors.
Ericsson may choose to incur substantial additional indebtedness in
the future. If new indebtedness is added to the Company’s current debt
levels, the related risks that Ericsson now faces could increase.
If Ericsson’s financial performance were to deteriorate, the Company
may not be able to generate sufficient cash to service all of its indebted-
ness and may be forced to take other actions to satisfy Ericsson’s obliga-
tions under the Company’s indebtedness, which may not be successful.
Ericsson’s ability to make scheduled payments on or to refinance
the Company’s debt obligations depends on its financial condition and
operating performance, which is subject to prevailing economic and
competitive conditions and to certain financial, business and other
factors beyond Ericsson’s control. While the Company believes that
Ericsson currently has adequate cash flows to service its indebtedness,
if Ericsson’s financial performance were to deteriorate significantly, the
Company might be unable to maintain a level of cash flows from operat-
ing activities sufficient to permit us to pay the principal, premium, if any,
and interest on Ericsson’s indebtedness.
If, due to such a deterioration in the Company’s financial perfor-
mance, Ericsson’s cash flows and capital resources were to be insuf-
ficient to fund its debt service obligations, Ericsson may be forced to
reduce or delay investments and capital expenditures, or to sell assets,
seek additional capital or restructure or refinance Ericsson’s indebted-
ness. These alternative measures may not be successful and may not
permit us to meet Ericsson’s scheduled debt service obligations. In
addition, if the Company were required to raise additional capital in the
current financial markets, the terms of such financing, if available, could
result in higher costs and greater restrictions on its business.
In addition, if Ericsson were to refinance its existing indebtedness,
the conditions in the financial markets at that time could make it difficult
to refinance Ericsson’s existing indebtedness on acceptable terms or
at all. If such alternative measures proved unsuccessful, Ericsson could
face substantial liquidity problems and might be required to dispose of
material assets or operations to meet the Company’s debt service and
other obligations.
Financial report 2021 Risk factors
107
2.2 Due to having a significant portion of Ericsson’s costs in SEK
and revenues in other currencies, the Company’s business is exposed
to foreign exchange fluctuations that could negatively impact its
revenues and operating results (EBIT).
Ericsson incurs a significant portion of the Company’s expenses in SEK,
please refer to the consolidated financial statement note F1, “Financial
risk management”. As a result of Ericsson’s international operations,
Ericsson generates, and expects to continue to generate, a significant
portion of the Company’s revenue in currencies other than SEK. To the
extent Ericsson is unable to match revenue received in foreign currencies
with costs paid in the same currency, exchange rate fluctuations could
have a negative impact on Ericsson’s consolidated income statement,
balance sheet and cash flows when foreign currencies are exchanged or
translated to SEK, which increases volatility in reported results.
As market prices are predominantly established in US dollars or
Euros, Ericsson presently has a net revenue exposure in foreign curren-
cies which means that a stronger SEK exchange rate would generally
have a negative effect on Ericsson’s reported results. The Company’s
attempts to reduce the effects of exchange rate fluctuations through a
variety of natural and financial hedging activities may not be sufficient
or successful, resulting in an adverse impact on Ericsson’s results and
financial condition.
2.3 Ericsson relies on various sources for short-term and long-term
capital for the funding of the Company’s business. Should such
capital become unavailable or available in insufficient amounts or
unreasonable terms, Ericsson’s business, financial condition and
cash flow may materially suffer.
Ericsson’s business requires a significant amount of cash. If Ericsson
does not generate sufficient amounts of capital to support the
Company’s operations, service its debt and continue Ericsson’s research
and development and customer finance programs, or if the Company
cannot raise sufficient amounts of capital at the required times and on
reasonable terms, Ericsson’s business, financial condition and cash flow
are likely to be adversely affected. Access to funding may decrease or
become more expensive as a result of Ericsson’s operational and finan-
cial condition, market conditions, or due to deterioration in Ericsson’s
credit rating. There can be no assurance that additional sources of funds
that Ericsson may need from time to time will be available on reason-
able terms or at all. If the Company cannot access capital on a commer-
cially viable basis, Ericsson’s business, financial condition and cash flow
could materially suffer.
2.4 Impairment of goodwill, other intangible assets, property
and equipment (PP&E) and right-of-use (RoU) asset leased by the
Company have impacted and may continue to negatively impact
Ericsson’s financial condition and results of operations (EBIT).
An impairment of goodwill, other intangible assets, PP&E and RoU
could adversely affect the Company’s financial condition or results of
operations (EBIT).
Ericsson has a significant amount of these assets; for example, patents,
customer relations, trademarks, software, PP&E and RoU.
Goodwill is the only intangible asset the company has recognized
to have indefinite useful life. Other intangible assets are mainly amor-
tized on a straight-line basis over their estimated useful lives and the
assets are reviewed for impairment whenever events such as product
discontinuances, product dispositions or other changes in circumstances
indicate that the carrying amount may not be fully recoverable. Those
intangible assets not yet in use are tested for impairment annually.
Historically, the Company has recognized impairment charges
mainly due to restructuring, which is usually limited, but occasionally
significant. Additional impairment charges may be incurred in the future
and could be significant due to various reasons, including strategy
changes, restructuring actions or adverse market conditions that are
either specific to us or the broader industries in which Ericsson operates
or more general in nature and that could have an adverse effect on
Ericsson’s operating results (EBIT) and financial condition.
Negative deviations in actual cash flows compared to estimated
cash flows as well as new estimates that indicate lower future cash
flows might result in recognition of impairment charges. Estimates
require management judgment as well as the definition of cash-gen-
erating units for impairment testing purposes. Other judgments might
result in significantly different results and may differ from the actual
financial condition in the future.
3
Legal and regulatory risk
3.1 Ericsson could experience penalties and adverse rulings in
enforcement or other proceedings for non-compliance with laws,
rules and regulations governing its business. Compliance with
changed laws, rules or regulations may subject Ericsson to increased
costs or reduced products and services demand. Compliance failures
as well as required operational changes could have a material
adverse impact on Ericsson, including its reputation, business,
financial condition, results of operations (EBIT), cash flows or
prospects.
Ericsson is subject to multiple laws, rules and regulations. The Company
could experience penalties and adverse rulings in enforcement or
other proceedings for non-compliance with applicable laws, rules or
regulations governing its business, which could have a material adverse
effect on Ericsson, including its reputation, business, financial condition,
results of operations (EBIT), cash flows, or prospects. While Ericsson
strives for compliance, the Company has not been in compliance with
all such laws, rules and regulations in the past and cannot assure that
all past violations have been addressed or that additional violations will
not occur in the future.
Further changes in laws, rules or regulations could subject us to
liability, increased costs, or reduced products and services demand and
have a material adverse effect on Ericsson, including its reputation,
business, financial condition, results of operations (EBIT), cash flows or
prospects.
Changes to laws, rules or regulations may adversely affect both
Ericsson’s customers’ and the Company’s own operations. For example,
regulations imposing more stringent, time-consuming or costly plan-
ning and zoning requirements or building approvals for radio base
stations and other network infrastructure could adversely affect the
timing and costs of network construction or expansion, and ultimately
the commercial launch and success of these networks. Similarly, tariff
and roaming laws, regulations or rules on network neutrality could also
affect operators’ ability or willingness to invest in network infrastructure,
which in turn could affect the sales of Ericsson’s systems and services.
Additionally, delay in radio frequency spectrum allocation, and alloca-
tion between different types of usage may adversely affect operator
spending or force us to develop new products to be able to compete.
Further, Ericsson develops many of the Company’s products and ser-
vices based on existing laws, rules, regulations and technical standards.
Changes to existing laws, rules, regulations and technical standards,
or the implementation of new laws, rules, regulations and technical
Financial report 2021 108
Risk factors
standards relating to products and services not previously regulated,
could adversely affect Ericsson’s development efforts by increasing
compliance costs and causing delay. Demand for those products and
services could also decline. Regulatory changes related to e.g. license
fees, environment, health and safety, privacy (including the cross-border
transfer of personal data for example between the EU and the US), and
other regulatory areas may increase costs and restrict Ericsson’s opera-
tions or the operations of network operators. Also, indirect impacts of
such changes and changes to laws, rules or regulations in other fields,
such as pricing regulations, could have an adverse impact on Ericsson
even though the specific laws, rules or regulations may not apply directly
to the Company’s products or us.
3.2 Ericsson’s substantial international operations are subject to
uncertainties which could affect the Company, including its reputa-
tion, business, financial condition, results of operations (EBIT), cash
flows or prospects.
Ericsson conducts business throughout the world and is subject to the
effects of general global economic conditions as well as conditions
unique to specific countries or regions. The Company has customers in
more than 180 countries, with a significant proportion of Ericsson’s sales
to emerging markets in the Asia Pacific region, Latin America, Eastern
Europe, the Middle East and Africa.
Ericsson’s extensive operations are subject to additional risks,
including civil disturbances, acts of terrorism, acts of war, economic and
geopolitical instability and conflict, potential misuse of technology lead-
ing to human rights violations, pandemics, the imposition of exchange
controls, economies which are subject to significant fluctuations, nation-
alization of private assets or other governmental actions affecting the
flow of goods and currency, effects from changing climate and difficulty
of enforcing agreements and collecting receivables through local legal
systems.
Further, in certain markets in which Ericsson operates, there is a risk
that national governments actively favor or establish local vendors in
their respective markets at the expense of foreign competitors. The
implementation of such measures could adversely affect Ericsson’s
sales, Ericsson’s market share and its ability to purchase critical
components.
The Company strives to comply with applicable export control regu-
lations and sanctions or other trade embargoes in force. The political
situation in parts of the world, particularly in Russia/Ukraine and parts
of the Middle East, remains uncertain and the level of sanctions is still
relatively high from a historical perspective and this level could even
increase, thus significantly impacting our operations where increase
occurs, including in these markets. A universal element of these sanc-
tions is the financial restrictions with respect to individuals and legal
entities, but sanctions can also restrict certain exports and ultimately
lead to a complete trade embargo towards a country. During the last
years, the global free trade system has been under sustained attack
which has increased the risk of states adopting policies and actions that
violate WTO agreements. Further there is a risk in many countries of
unexpected changes in regulatory requirements, tariffs and other trade
barriers, price or exchange controls, restrictions of imports, or other gov-
ernmental policies which could limit Ericsson’s operations and decrease
Ericsson’s profitability. Furthermore, export control regulations, sanc-
tions or other forms of trade restrictions targeting countries in which
Ericsson is active may result in a reduction of commitment in those
countries. As an example, escalation of trade tensions between the US
and China has resulted in additional trade restrictions and increased
tariffs, which if further negatively developed could harm the Company’s
ability to compete effectively in Chinese markets or with Chinese compa-
nies. Additionally, the ongoing Ukraine-Russia crisis has resulted in the
application of enhanced export control and sanctions measures against
Russia by a number of other jurisdictions, including the EU and the US.
These measures, and any additional measures that may be imposed
should the crisis continue, may have a material impact on our ability to
operate in the ordinary course of business in Russia and Ukraine. The
need to terminate activities as a result of further trade restrictions may
also expose us to customer claims and other inherent risks. Although the
Company seeks to comply with all export control and sanctions rules or
regulations, these laws, rules and regulations are complex, frequently
changing and increasing in number and the Company has not been in
compliance with all such export control and sanctions rules or regula-
tions in the past and cannot assure that all past violations have been
addressed or that additional violations will not occur in the future. Such
violations could have material adverse effects on Ericsson, including its
reputation, business, financial condition, results of operations (EBIT),
cash flows, or prospects and could constitute a violation of its resolu-
tion with the United States Department of Justice (DOJ), known as a
Deferred Prosecution Agreement (DPA) or the consent judgment with
the United States Securities and Exchange Commission.
The business operations are complex involving the development,
production and delivery of telecom solutions to customers in a very large
number of jurisdictions. Each jurisdiction has its own tax laws, rules and
regulations and the Company has to comply with the relevant laws,
rules and regulations in each of these countries. These laws, rules and
regulations involve income taxes and indirect taxes such as VAT and
sales taxes as well as withholding taxes on domestic and cross border
payments and social security charges related to Ericsson’s employees.
Constant changes of the laws, rules or regulations and the interpretation
thereof also create exposures regarding taxes. This results in complex
tax issues and tax disputes that may lead to additional tax payment
obligations. Being a global operation, Ericsson also faces risk of being
taxed for the same income in more than one jurisdiction (double taxa-
tion). This could have adverse effects on Ericsson, including its reputa-
tion, business, financial condition, results of operations (EBIT), cash
flows, or prospects.
There has been a concern reported by some media and others, that
certain countries may use features of their telecommunications systems
in ways that could result in potential violation of human rights, among
others. This may adversely affect the telecommunications business and
may have a negative impact for people and Ericsson.
All of the above may have a material and potentially lasting adverse
impact on Ericsson, including its reputation, business, including sales
market share, market access, supply chain and R&D activities, financial
condition, results of operations (EBIT), cash flows, or prospects.
3.3 We are subject to certain US and other anti-corruption (includ-
ing anti-bribery, anti-money-laundering, sanctions, terror finance
and anti-terrorism) laws, rules and regulations. Ericsson may be sub-
ject to further adverse consequences following the 2019 resolutions
with the DOJ and the SEC of the previously disclosed investigations
under the US Foreign Corrupt Practices Act (FCPA).
The Company is required to comply with anti-corruption (including
anti-bribery, anti-money-laundering, sanctions, terror finance and
anti-terrorism) laws, rules and regulations in the jurisdictions in which
Ericsson does business. In addition, some of the international locations
in which we operate lack a developed legal system and have elevated
levels of corruption affecting many aspects of conducting business.
From time to time, the Company investigates potential instances of
Financial report 2021 Risk factors
109
corruption, including potential violations of anti-bribery, anti-money-
laundering, sanctions, terror finance and anti-terrorism laws, rules and
regulations. While Ericsson strives for compliance, the Company has
not been in compliance with all such laws, rules and regulations in the
past and cannot assure that all past violations have been addressed
or that additional violations will not occur in the future. For example,
the Company has previously acknowledged publicly that it had failed
to implement sufficient internal controls, including internal controls
designed to deter and detect corruption. Over the last years, Ericsson has
made significant investments in compliance which have enhanced the
Company’s ability to uncover and address past misconduct. We have
policies and procedures designed to assist us and our personnel in com-
plying with applicable laws, rules and regulations but our employees,
subcontractors and agents have taken, and may from time to time take,
actions that violate these requirements. Actions by Ericsson’s employ-
ees, or by third party intermediaries acting on the Company’s behalf in
violation of these laws, rules or regulations whether carried out in the
US or elsewhere in connection with the conduct of Ericsson’s business
may expose the Company to significant liability for violations of such
laws, rules or regulations and may have a material adverse effect on the
Company, including its reputation, business, financial condition, results
of operations (EBIT), cash flows, or prospects.
For example, in December 2019, Ericsson resolved the previously
disclosed investigations by the DOJ and SEC regarding the Company’s
compliance with the FCPA. The resolution with the DOJ provided for: a
DPA with a three-year term and a guilty plea by Ericsson’s Egyptian sub-
sidiary to one criminal charge of violating the anti-bribery provisions of
the FCPA. The resolution with the SEC provided for: consent to the entry
of a judgment to resolve civil claims related to allegations of violations
of the anti-bribery, books and records, and internal controls provisions of
the FCPA. The Company paid fines, penalties and pre-judgment interest
to the DOJ and SEC totalling USD 1,060,570,432. Ericsson also agreed
to the retention of an independent compliance monitor for the term of
three years pursuant to the resolutions with both the DOJ and SEC.
Under Ericsson’s DPA with the DOJ, the Company admitted to the
conduct described in the statement of facts attached to the DPA, and the
DOJ agreed to defer prosecution of Ericsson for the three-year term of
the DPA, after which period the charges will be dismissed with prejudice
if Ericsson does not violate the terms of the DPA.
In October 2021, Ericsson received correspondence from the DOJ
stating that it has determined that Ericsson breached its obligations
under the DPA by failing to provide certain documents and factual infor-
mation and that Ericsson will have the opportunity to respond in writing
to explain the nature and circumstances of such breach, as well as the
actions Ericsson has taken to address and remediate the situation.
The Company also publicly disclosed a 2019 internal investigation,
that included a review of the conduct of Ericsson employees, vendors
and suppliers in Iraq during the period 2011–2019. The 2019 investiga-
tion, which was supported by external legal counsel, conducted over
the course of a year, and involved the collection and review of a large
amount of information, found serious breaches of compliance rules
and the Company’s Code of Business Ethics. It identified evidence of
corruption-related misconduct, including: Making a monetary donation
without a clear beneficiary; paying a supplier for work without a defined
scope and documentation; using suppliers to make cash payments;
funding inappropriate travel and expenses; and improper use of sales
agents and consultants. In addition, it found violations of Ericsson’s
internal financial controls; conflicts of interest; non-compliance with tax
laws; and obstruction of the investigation. The investigating team also
identified payments to intermediaries and the use of alternate transport
routes in connection with circumventing Iraqi Customs, at a time when
terrorist organizations, including ISIS, controlled some transport routes.
Investigators could not determine the ultimate recipients of these pay-
ments. Payment schemes and cash transactions that potentially created
the risk of money laundering were also identified. The investigation
could not identify that any Ericsson employee was directly involved in
financing terrorist organizations.
As a result of the investigation, several employees were exited from
the company and multiple other disciplinary and other remedial actions
were taken. This included closing gaps in our internal processes in the
region and incorporating lessons from the investigation into our ethics
and compliance program. Furthermore, Ericsson terminated a number
of third-party relationships and prioritized the Iraq country business for
enhanced training and awareness activities, policies and procedures,
and third-party management processes. Ericsson is continuing to work
with external counsel to review the findings and remediation resulting
from the 2019 investigation to identify any additional measures that the
company should take.
On March 1, 2022, the DOJ informed Ericsson that the disclosure
made by the Company prior to the DPA about its internal investigation
into conduct in Iraq in the period 2011 until 2019 was insufficient.
Furthermore, it determined that the Company breached the DPA by
failing to make subsequent disclosure related to the investigation post-
DPA. The company is in communication with the DOJ regarding the facts
and circumstances of the breach determination and is committed to
co-operating with the DOJ to resolve the matter.
If the DOJ determines that the Company violated the terms of the
DPA for these or any other reason, the DOJ may in its sole discretion
commence prosecution, including, but not limited to, for the charged
conspiracy to violate the anti-bribery and books and records and internal
controls provisions of the FCPA that were included in the information
filed in conjunction with the DPA. In such circumstances, the DOJ would
be permitted to rely upon the admissions Ericsson made in the DPA and
would benefit from Ericsson’s waiver of certain procedural and eviden-
tiary defenses. In addition, the DOJ may in its sole discretion decide to
extend the term of the DPA. Under Ericsson’s consent judgment with the
SEC, Ericsson is permanently enjoined from violating the anti-bribery
and books and records and internal controls provisions of the FCPA.
Failure to comply with this injunction or other violations of the consent
judgment could result in the imposition of civil or criminal penalties, a
new enforcement action, or both. Any criminal prosecution or civil or
criminal penalties imposed as a result of non-compliance for any reason
with the DPA or consent judgment could have a material adverse effect
on the Company, including its reputation, business, financial condition,
results of operations (EBIT), cash flows, or prospects.
Ericsson may also face other potentially negative consequences
relating to the investigations by, and settlements with, the DOJ and SEC,
or to other potential investigations. Enforcement authorities in the US
or elsewhere, including the SEC, the DOJ or OFAC, could investigate us
for additional possible violations of applicable anti-corruption (includ-
ing anti-bribery, anti-money laundering, sanctions, terror finance and
anti-terrorism) laws, rules or regulations of which we are aware or
unaware at any time. Such violations could result in severe reputational
damage, and have a materially adverse effect on Ericsson, including its
reputation, business, financial condition, results of operations (EBIT),
cash flows, or prospects and could constitute a violation of the DPA or
the consent judgment with the SEC. Neither the DPA nor the consent
judgment prevents the DOJ, SEC or any other authorities from carrying
out investigations with respect to facts not covered in the agreements
or in other jurisdictions, or prevents other authorities from carrying out
investigations related to these or other matters. It has been reported
Financial report 2021 110
Risk factors
that Swedish authorities have initiated an investigation into the conduct
that resulted in the above-mentioned resolutions with the DOJ and SEC.
Similarly, the resolutions with the DOJ and SEC do not foreclose third
parties, such as competitors, customers, suppliers, or shareholders, from
commencing litigation related to these or other matters.
There can be no assurance that the remedial measures described
above and any others Ericsson may take in the future will be effective
or that there will not be a finding of material weakness in Ericsson’s
internal controls. Any one or more of the foregoing could have a material
adverse effect on the Company, including its reputation, business, finan-
cial condition, results of operations (EBIT), cash flows, or prospects.
Additionally, any ongoing media or governmental interest in
investigations and resolutions or additional company investigations
that we are currently undertaking or may undertake in the future could
result in the discovery of additional facts, impact the public percep-
tion of Ericsson and result in reputational harm and other negative
consequences. For example, customers or suppliers may reconsider
their relationships with the Company, or governmental and regulatory
authorities in the relevant jurisdictions or elsewhere could seek to
penalize the Company or place restrictions on its operations or ability
to participate in public tenders. Harm to reputation, or any resulting
disruption in customer or supplier relationships, could have a material
adverse impact on Ericsson, including its reputation, business, financial
condition, results of operations (EBIT), cash flows, or prospects.
3.4 Ericsson is involved in lawsuits, legal proceedings and
investigations which, if determined unfavorably, could require the
Company to pay substantial damages, fines and/or penalties.
In the normal course of Ericsson’s business Ericsson is involved in legal
proceedings. These proceedings include such matters as commercial
disputes, claims regarding intellectual property, antitrust, tax and labor
disputes, as well as government inquiries and investigations. Legal
proceedings can be expensive, lengthy and disruptive to normal busi-
ness operations. Moreover, the results of complex legal proceedings are
difficult to predict. An unfavorable resolution of a particular matter could
have a material adverse effect on Ericsson’s business, operating results
(EBIT), financial condition and reputation. As a publicly listed company,
Ericsson may be exposed to lawsuits in which plaintiffs allege that the
Company or its officers have failed to comply with securities laws, stock
market regulations or other laws, regulations or requirements. Whether
or not there is merit to such claims, the time and costs incurred to defend
the Company and its officers and the potential settlement or compensa-
tion to the plaintiffs could have significant impact on Ericsson’s reported
results and reputation.
For additional information regarding certain of the inquiries and
lawsuits in which Ericsson is involved, see “Legal proceedings” in the
Board of Directors’ Report.
In addition, the Company is from time to time and may in the future
be subject to additional inquiries, litigation or other proceedings or
actions, regulatory or otherwise, arising in relation to the matters
described above and related litigation and investigative matters. An
unfavorable outcome of any such litigation or regulatory proceeding
or action could have a material adverse effect on Ericsson’s business,
financial condition and results of operations (EBIT).
In April 2019, Ericsson was informed by China’s State Administration
for Market Regulations (SAMR) Anti-monopoly bureau that SAMR has
initiated an investigation into Ericsson’s patent licensing practices in
China. Ericsson is cooperating with the investigation, which is still in a
fact-finding phase. The next steps include continued fact-finding and
meetings with SAMR in order to facilitate the authority’s assessment
and conclusions. In case of adverse findings, SAMR has the power to
impose behavioral and financial remedies, which may have material
adverse effects on Ericsson’s business, financial condition and results of
operations (EBIT).
3.5 Ericsson may be found non-compliant to privacy regulations
and may be subject to regulatory penalties.
The introduction of more stringent privacy regulations with heavy and
challenging requirements to implement such regulations when it comes
to personal data processing as well as stringent regulations on cross-
border data transfers by regulators in many countries and markets in
which Ericsson operates comes with a risk that Ericsson is found to be
non-compliant to privacy legislation, either accidentally, through the
actions of third parties, or otherwise, and subject to penalties levied
against Ericsson, with the associated damage to Ericsson’s brand and
reputation. Due to the diverse nature of privacy legislation worldwide,
any single incidence of non-compliance by Ericsson may lead to regula-
tory agencies in various jurisdictions levelling separate penalties or
judgments against Ericsson. Due to the nature of Ericsson’s business
and the amount of personally identifiable information of which Ericsson
is the controller or processor, such an event could have far ranging con-
sequences, even if it was caused by a third party outside of the control
of Ericsson. This could include large fines, as well as significant damage
claims and losing trust from customers, end-users and employees.
4
Internal control risk
4.1 Cybersecurity incidents may have a material adverse effect on
Ericsson’s business, operations, financial performance, customer
and vendor relationships, reputation and brand, and may introduce
the possibility of litigations or regulatory investigations or actions.
The Company’s cybersecurity capabilities regularly manage cyberse-
curity incidents and vulnerabilities. Ericsson’s business operations are
vulnerable to cybersecurity incidents that may impact the confidential-
ity, availability or integrity of information assets, IT assets, products,
services, or solutions. These incidents may include data breaches, intru-
sions, espionage, data privacy infringements, leakage of confidential
or sensitive data, unauthorized or accidental modification of data and
general malfeasance.
Ericsson utilizes third-parties to a large extent to whom the
Company has outsourced significant aspects of Ericsson’s IT infra-
structure, product development, services, hardware, software, finance
and HR operations. Events or incidents that are caused as a result of
vulnerabilities in their operations or products supplied to us could have
a material adverse effect upon Ericsson, Ericsson’s business, financial
performance, reputation and brand, potentially slowing operations,
leaking valuable or sensitive information, personal data or damaging
Ericsson’s products that have been installed in the Company’s custom-
ers’ networks.
It is possible that a cybersecurity incident in Ericsson’s operations or
supply chain could have an adverse impact on the integrity of solutions
or services provided by Ericsson as well as Ericsson’s ability to comply
with legal, regulatory or contractual requirements. These incidents
may include tampering with components, the inclusion of backdoors or
implants, the unintentional inclusion of vulnerabilities in components
or software, and cybersecurity incidents which prevent a supplier from
being able to fulfil commitments to Ericsson.
Any cybersecurity incident including unintended use, misconfigura-
tion, or unintended actions, involving Ericsson’s operations, supply
Financial report 2021 Risk factors
111
chain, product development, services, third-party providers or installed
product base, could cause severe harm to Ericsson and could have a
material adverse effect on Ericsson’s business, financial performance,
customer and vendor relationships, reputation and brand, and may
introduce the possibility of litigation or regulatory investigations or
actions.
Ericsson’s network systems and storage and other business applica-
tions, and the systems, storage and other business applications main-
tained by the Company’s third-party providers, have been in the past,
and may be in the future, subject to cyber intrusions, including attempts
to gain unauthorized access, breach, malfeasance or other system
disruptions. In some cases, such incidents are difficult to anticipate or
to detect immediately and the damage caused thereby. If an actual or
perceived breach of security occurs in Ericsson’s network or any of its
third-party providers’ networks, Ericsson could incur significant costs
and the Company’s reputation could be harmed. While Ericsson works to
safeguard Ericsson’s internal network systems and assess and validate
the security of the Company’s third-party providers to mitigate these
potential risks, including through security requirements and employee
awareness and training, there is no assurance that such actions will be
sufficient to prevent cyber attacks or security breaches.
4.2 The presence of vulnerabilities in Ericsson’s products, services
or operations, may not be detected during product development
and operations, and may be leveraged by a threat actor to cause
material harm to Ericsson or Ericsson’s customers.
Vulnerabilities in Ericsson’s products, solutions or services not detected
and treated during product development or solution delivery may be
exploited by a threat actor to cause harm to Ericsson’s customers, end-
users or Ericsson. Vulnerabilities could be brought in through different
stages of the product life cycle. In some situations, it may be hard to
detect these vulnerabilities due to their location, or due to the fact that
they are unknown vulnerabilities, often referred to as “zero-day vulner-
abilities”. As almost any modern software can contain open source and
third-party components, so does software in networks, unmitigated
security exposures can put Ericsson customers at varying levels of risk
and expose Ericsson to liabilities or loss of business.
4.3 Identities may be compromised, either from the misuse of
Ericsson’s identities or accounts, leading to material damage to
Ericsson’s products, services or brand.
If identities in Ericsson are misused or compromised it can be difficult to
differentiate authorized parties undertaking normal account activities
from the threat actor’s use of a compromised identity or credential.
Ericsson’s identity and access management routines are required to
access Ericsson’s customer’s networks, and any limitation of this capa-
bility would impact Ericsson’s ability to offer services and products to
Ericsson’s customers, which could have a material adverse effect upon
Ericsson’s reputation and it’s business as a whole.
4.4 Threat actors may target employees, or other members of
Ericsson’s workforce, through technological and non-technological
means.
Recent trends have shown that there is a willingness to target end users,
rather than the entire enterprises. This has manifested itself in the rise
of threats such as ransomware, phishing, spear phishing, spoofing and
other extortion methods. With a diverse workforce of approximately
100,000 employees, Ericsson is susceptible to risks of disruption or
information loss resulting from large scale attacks towards Ericsson’s
employees, or society at large. This could have a material adverse effect
on the Company’s business, financial condition, reputation and brand.
4.5 Insiders may steal or monitor information or disrupt networks
related to Ericsson or its customers, through technological or non-
technological means.
To gain strategic access or to steal specific information competitors
or governments may induce insiders or recruit employees who sells
information or services for personal gain. Several organizations and
institutes report an increase of the insider threat over the last years. Any
insider incident could cause severe harm to Ericsson and could have a
material adverse effect on Ericsson’s business, financial performance,
customer and vendor relationships, reputation and bran, and may intro-
duce the possibility of litigation or regulatory investigations or actions.
5
Environmental, social and governance risk
5.1 Failure to comply with environmental, occupational health and
safety regulations in many jurisdictions may expose us to significant
penalties and other sanctions.
Ericsson is subject to certain environmental, occupational health and
safety laws and regulations that affect Ericsson’s operations, facilities,
products and services in each of the jurisdictions in which the Company
operates. While Ericsson works actively to ensure compliance with laws,
rules, regulations and customer requirements related to the environ-
ment, health, and safety (including without limitation occupational
health and safety) that apply to the Company, Ericsson can provide no
assurance that the Company has been, is, or will continue to be compli-
ant with these laws, rules or regulations. If Ericsson has failed or fails
to comply with these laws, rules or regulations the Company could be
subject to significant penalties and other sanctions that could have a
material adverse effect on Ericsson’s business, operating results (EBIT),
financial condition, reputation and brand. Additionally, there is a risk
that Ericsson may have to incur expenditures to cover environmental,
occupational health and safety-liabilities to maintain compliance with
current or future applicable laws and regulations or to undertake any
necessary remediation. It is difficult to reasonably estimate the future
impact of environmental matters, such as climate change and extreme
weather events, including potential liabilities. Adverse future events,
regulations, or judgments could have a significant adverse effect on
Ericsson’s business, operating results (EBIT), financial condition, repu-
tation and brand.
5.2 Ericsson has failed and may fail to comply with environmental,
social and governance standards, which could negatively affect the
Company, including its reputation, business, financial condition,
results of operations (EBIT), cash flows or prospects.
The Company is subject to environmental, social and governance laws,
rules and regulations as well as sustainability and corporate responsibil-
ity requirements and Ericsson expect such laws, rules, regulations and
other requirements to increase as governments impose new laws, rules,
regulations or other requirements. These laws, rules, regulations and
other requirements have a high focus on anti-corruption (including
anti-bribery, anti-money-laundering, sanctions, terror finance and anti-
terrorism). To ensure that Ericsson’s operations are conducted in accord-
ance with applicable laws, rules, regulations and other requirements,
Ericsson’s management system includes the Code of Business Ethics,
the Code of Conduct for Business Partners and a Sustainability Policy,
Financial report 2021 112
Risk factors
as well as other Group Policies and Directives to govern the Company’s
processes and operations.
Ericsson is committed to the UN Global Compact ten principles, the
UN Guiding Principles on Business and Human Rights and principles of
the World Economic Forum’s Partnering Against Corruption Initiative.
However, Ericsson cannot fully prevent unintended or unlawful violation
of Ericsson’s Code of Business Ethics, corruption (including violations of
anti-bribery, anti-money laundering, sanctions, terror finance and anti-
terrorism laws, rules or regulations), fraud, embezzlement, misuse of
the Company’s technology leading to potential human rights breaches
or violations of anti-trust legislation, trade restrictions and international
sanctions, Ericsson’s Code of Conduct for Business Partners in Ericsson
or in the supply chain.
There is also an increased demand from external stakeholders, for
example non-governmental organizations and investors, on transpar-
ency about sustainability and corporate responsibility issues that might
be difficult to fulfill. If we fail to adequately meet these expectations, our
business may be adversely affected.
Climate change and the potential resulting environmental impact
may also result in new environmental, health and safety laws, rules and
regulations that may affect us, our suppliers, and our customers. Such
laws, rules or regulations could cause us to incur additional direct costs
for compliance, including costs associated with changes to manufactur-
ing processes, or costs associated with the procurement of raw materials
and components used in our products, as well as increased indirect costs
resulting from our customers, suppliers or both incurring additional
costs that are passed on to us. These costs may adversely impact the
Company, including its reputation, business, financial condition, results
of operations (EBIT), cash flows, or prospects. In addition, climate
change could cause severe weather events, such as droughts, heat
waves, wildfires, storms, and flooding, to occur more frequently or with
greater intensity, as well as chronic changes in temperatures and rising
sea levels, which could pose physical risks to our manufacturing facilities
or our suppliers’ facilities, cause disruptions in our upstream and down-
stream logistic flows, and consequently increase operating costs and/or
cause business interruptions.
While the Company attempts to monitor and audit internally and
externally Ericsson’s compliance with the policies, directives, laws, rules
and regulations, including anti-corruption (including anti-bribery, anti-
money laundering, sanctions, terror finance and anti-terrorism) laws,
rules and regulations, as well as the Company’s suppliers’ adherence to
Ericsson’s Code of Conduct for Business Partners and strives for continu-
ous improvements, Ericsson has not been in compliance with all such
policies, directives, laws, rules and regulations in the past and cannot
provide any assurances that future violations will not occur which could
have material adverse effects on Ericsson, including its reputation,
business, financial condition, results of operations (EBIT), cash flows, or
prospects, see risk factor 3.3 above.
5.3 Potential health risks related to radiofrequency electro-
magnetic fields may subject us to various product liability claims and
result in regulatory changes.
The mobile telecommunications industry is subject to claims that mobile
devices and other equipment that generate radiofrequency electromag-
netic fields may expose individuals to health risks. At present, a sub-
stantial number of scientific reviews conducted by various independent
research bodies have concluded that radiofrequency electromagnetic
fields, when used at levels within the limits prescribed by public health
authority safety standards and recommendations, cause no adverse
effects to human health. However, any perceived risk or new scientific
findings of adverse health effects from mobile communication devices
and equipment could adversely affect us through a reduction in sales
or through liability claims. Although Ericsson’s products are designed
to comply with currently applicable safety standards and regulations
regarding radio frequency electromagnetic fields, the Company cannot
guarantee that Ericsson will not become the subject of product liability
claims. We also cannot guarantee that the Company will not be held
liable for such claims or be required to comply with future changed regu-
latory requirements. Ericsson may in addition be affected by regulatory
or other restrictions imposed on the Company’s customers use of radio
equipment that may have a material adverse effect on our business,
operating results (EBIT), financial condition, reputation and brand.
5.4 Regulations related to “conflict minerals” may cause us to incur
additional expenses, and may make our supply chain demands more
complex.
In 2012, the US Securities and Exchange Commission (SEC) adopted a
rule requiring disclosures of specified minerals (“conflict minerals”) that
are necessary to the functionality or production of products manufac-
tured or contracted to be manufactured by companies that file periodic
reports with the SEC, whether or not these products or their components
are manufactured by third-parties. While Ericsson believes that the
Company is able to fulfill these requirements without materially affect-
ing our costs or access to materials Ericsson can provide no assurance
that there will not be material costs associated with complying with the
disclosure requirements. These requirements could adversely affect the
sourcing, availability and pricing of minerals used in the manufacture of
certain of our products, which may have a material adverse effect on our
business. In addition, since our supply chain is complex, the Company
may not be able to sufficiently verify the origins for these minerals
contained in our products through the due diligence procedures that
Ericsson implements, which may harm our reputation and our business.
Ericsson may also encounter challenges if customers put more emphasis
on the idea that all of the Ericsson’s product components be certified as
“conflict-free”.
Financial report 2021 Auditor’s report
113
Auditor’s report
To the general meeting of the shareholders of Telefonaktiebolaget LM Ericsson (publ) corporate identity number 556016-0680
Report on the annual accounts and consolidated accounts
Opinions
We have audited the annual accounts and consolidated accounts of
Telefonaktiebolaget LM Ericsson (publ) for the financial year January 1, 2021
– December 31, 2021. The annual accounts and consolidated accounts of the
company are included on pages 12 – 112 in this document.
In our opinion, the annual accounts have been prepared in accordance
with the Annual Accounts Act and present fairly, in all material respects, the
financial position of the parent company as of 31 December 2021 and its
financial performance and cash flow for the year then ended in accordance
with the Annual Accounts Act. The consolidated accounts have been prepared
in accordance with the Annual Accounts Act and present fairly, in all material
respects, the financial position of the group as of 31 December 2021 and their
financial performance and cash flow for the year then ended in accordance
with International Financial Reporting Standards (IFRS), as adopted by the
EU, and the Annual Accounts Act. The statutory administration report is con-
sistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts
the income statement and balance sheet for the parent company and the group.
Our opinions in this report on the annual accounts and consolidated
accounts are consistent with the content of the additional report that has been
submitted to the parent company’s audit committee in accordance with the
Audit Regulation (537/2014) Article 11.
Basis for Opinions
We conducted our audit in accordance with International Standards on
Auditing (ISA) and generally accepted auditing standards in Sweden. Our
responsibilities under those standards are further described in the Auditor’s
Responsibilities section. We are independent of the parent company and the
group in accordance with professional ethics for accountants in Sweden and
have otherwise fulfilled our ethical responsibilities in accordance with these
requirements. This includes that, based on the best of our knowledge and
belief, no prohibited services referred to in the Audit Regulation (537/2014)
Article 5.1 have been provided to the audited company or, where applicable, its
parent company or its controlled companies within the EU.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions.
Key Audit Matters
Key audit matters of the audit are those matters that, in our professional
judgment, were of most significance in our audit of the annual accounts and
consolidated accounts of the current period. These matters were addressed
in the context of our audit of, and in forming our opinion thereon, the annual
accounts and consolidated accounts as a whole, but we do not provide a
separate opinion on these matters.
Revenue recognition of significant contracts
Ericsson generates revenues from sales of hardware, software, and services
to its customers. Total revenue for 2021 amounted to SEK 232.3 billion. Most
of these revenues are related to multi-year framework agreements with large
customers which often include discounts and incentives arrangements. The
customers issue purchase orders under these framework agreements that in
combination constitute a commitment to purchases of products and services
over the duration of the agreement with the customer. These arrangements
may give rise to a risk of material misstatement due to the incorrect identifica-
tion of performance obligations and timing of revenue recognition for each
obligation, for significant contracts that could have a material impact on the
financial statements.
Ericsson conducts an assessment at contract inception to determine which
promised goods and services in a customer contract are distinct and accord-
ingly identified as performance obligations. The Company considers there to
be a distinct performance obligation if the customer can benefit from the good
or service either on its own or together with other resources readily available,
and if the Company’s obligation to transfer the good or service is separately
identifiable from other obligations in the contract.
The amount and timing of revenue recognized is determined in relation
to the individual elements of the contract. Transaction prices including vari-
able considerations, discounts, concessions and incentive agreements, are
estimated at the commencement of the contract (and periodically thereafter).
Judgment is used in the estimation process based on historical experience with
the type of business and customer and in allocating revenue to each perfor-
mance obligation by reference to their standalone selling prices.
We identified revenue recognition of significant contracts as a critical audit
matter due to the complex application of revenue recognition accounting
standards and that it requires management to make judgments and estimates
in determining the amount and timing of revenue recognized in relation to
individual elements of the contracts. Accounting principles and disclosures
related to revenue recognition can be found in note B1 and B2.
Our audit procedures related to the amount and timing of revenue recog-
nized in relation to significant contracts included, but were not limited to the
following:
– We tested the effectiveness of the Company’s controls over revenue rec-
ognition with particular focus on the controls related to the identification
of performance obligations within revenue contracts and determination of
the timing of recognition for each revenue obligation including the reviews
performed by the company’s central board for material and complex deals.
– We tested a sample of significant contracts to assess management’s judg-
ments and estimates related to the identification of performance obligations
and determination of the timing of recognition for each revenue obligation
based on the contract.
– We tested a sample of revenue transactions recorded during the year
by tracing them to supporting evidence of delivery and acceptance and
assessed the judgments and estimates for revenue recorded in the period by
comparing it to contractual terms such as, delivery terms, transaction prices
including variable considerations, discounts, concessions and incentive
agreements.
– We tested a sample of ongoing negotiations with existing customers and
analysed reversals of revenue subsequent to year-end for indicators of
unrecorded discounts and concessions during the period.
Valuation of Goodwill
Goodwill is a significant asset in the consolidated balance sheet and amounts
to SEK 38.2 billion as of December 31, 2021. The Company’s evaluation of the
carrying value of goodwill involves the comparison of the recoverable amount
of each cash generating unit to their carrying values. Ericsson’s assessment is
based on a discounted cash flow model using a business plan covering 5 or 10
years, which requires management to make significant estimates and assump-
tions regarding forecasts of future sales growth, operating income, working
capital and capital expenditure requirements, as well as assumptions on dis-
count rates. Changes in these assumptions could have a significant impact on
either the recoverable amount, the amount of any impairment charge, or both.
We identified goodwill as a key audit matter because of the significant
judgments made by management to estimate the recoverable amount. The
assessment of management’s assumptions regarding recoverable amount
requires a high degree of auditor judgment, including an increased extent
of complexity and the need to involve our fair value specialists. Accounting
principles and disclosures related to goodwill and other intangible assets can
be found in note C1.
Our audit procedures related to the assumptions regarding recoverable
amount included, but were not limited to the following:
– We tested the effectiveness of The Company’s controls over goodwill impair-
ment evaluation and determination of the recoverable amount with particular
focus on the controls over management’s preparation and review of assump-
tions for future sales growth, operating income, working capital, capital
expenditure requirements and method for determining the discount rate used.
Financial report 2021 114
Auditor’s report
– We evaluated management’s ability to accurately forecast future sales
growth and operating income by comparing actual results to management’s
historical forecasts, the Company’s historical results, external analyst
reports and internal communications to management and the Board of
Directors.
– With the assistance of our fair value specialists, we evaluated the dis-
count rates, including testing the underlying source information and the
mathematical accuracy of the calculations, and developing a range of
independent estimates and comparing those to the discount rates selected
by management.
Other information than the annual accounts and consolidated accounts
This document also contains other information than the annual accounts
and consolidated accounts and is found on pages 1–11 and 116–130 in
the Financial report, 1–26 in the Corporate governance report, 1–12 in the
Remuneration report, 1–36 and 38–39 in the Sustainability and corporate
responsibility report. The Board of Directors and the Managing Director are
responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not
cover this other information and we do not express any form of assurance
conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated
accounts, our responsibility is to read the information identified above and
consider whether the information is materially inconsistent with the annual
accounts and consolidated accounts. In this procedure we also take into
account our knowledge otherwise obtained in the audit and assess whether
the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, conclude
that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors and the Managing Director
The Board of Directors and the Managing Director are responsible for the
preparation of the annual accounts and consolidated accounts and that they
give a fair presentation in accordance with the Annual Accounts Act and,
concerning the consolidated accounts, in accordance with IFRS as adopted by
the EU. The Board of Directors and the Managing Director are also responsible
for such internal control as they determine is necessary to enable the prepara-
tion of annual accounts and consolidated accounts that are free from material
misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The Board
of Directors and the Managing Director are responsible for the assessment of
the company’s and the group’s ability to continue as a going concern. They
disclose, as applicable, matters related to going concern and using the going
concern basis of accounting. The going concern basis of accounting is however
not applied if the Board of Directors and the Managing Director intends to
liquidate the company, to cease operations, or has no realistic alternative but
to do so.
The Audit Committee shall, without prejudice to the Board of Director’s
responsibilities and tasks in general, among other things oversee the com-
pany’s financial reporting process.
The auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether the annual
accounts and consolidated accounts as a whole are free from material mis-
statement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinions. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs and
generally accepted auditing standards in Sweden will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reason-
ably be expected to influence the economic decisions of users taken on the
basis of these annual accounts and consolidated accounts.
As part of an audit in accordance with ISAs, we exercise professional judg-
ment and maintain professional scepticism throughout the audit. We also:
– Identify and assess the risks of material misstatement of the annual
accounts and consolidated accounts, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opin-
ions. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal
control.
– Obtain an understanding of the company’s internal control relevant to our
audit in order to design audit procedures that are appropriate in the circum-
stances, but not for the purpose of expressing an opinion on the effective-
ness of the company’s internal control.
– Evaluate the appropriateness of accounting policies used and the reasona-
bleness of accounting estimates and related disclosures made by the Board
of Directors and the Managing Director.
– Conclude on the appropriateness of the Board of Directors’ and the
Managing Director’s use of the going concern basis of accounting in prepar-
ing the annual accounts and consolidated accounts. We also draw a conclu-
sion, based on the audit evidence obtained, as to whether any material
uncertainty exists related to events or conditions that may cast significant
doubt on the company’s and the group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the
annual accounts and consolidated accounts or, if such disclosures are inad-
equate, to modify our opinion about the annual accounts and consolidated
accounts. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may
cause a company and a group to cease to continue as a going concern.
– Evaluate the overall presentation, structure and content of the annual
accounts and consolidated accounts, including the disclosures, and whether
the annual accounts and consolidated accounts represent the underlying
transactions and events in a manner that achieves fair presentation.
– Obtain sufficient and appropriate audit evidence regarding the financial
information of the entities or business activities within the group to express
an opinion on the consolidated accounts. We are responsible for the direc-
tion, supervision and performance of the group audit. We remain solely
responsible for our opinions.
We must inform the Board of Directors of, among other matters, the planned
scope and timing of the audit. We must also inform of significant audit findings
during our audit, including any significant deficiencies in internal control that
we identified.
We must also provide the Board of Directors with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reason-
ably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated with the Board of Directors, we determine
those matters that were of most significance in the audit of the annual
accounts and consolidated accounts, including the most important assessed
risks for material misstatement, and are therefore the key audit matters. We
describe these matters in the auditor’s report unless law or regulation pre-
cludes disclosure about the matter.
Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated accounts,
we have also audited the administration of the Board of Directors and the
Managing Director of Telefonaktiebolaget LM Ericsson (publ) (publ) for the
financial year January 1, 2021 – December 31, 2021 and the proposed appro-
priations of the company’s profit or loss.
We recommend to the general meeting of shareholders that the profit to be
appropriated in accordance with the proposal in the statutory administration
report and that the members of the Board of Directors and the Managing
Director be discharged from liability for the financial year.
Basis for Opinions
We conducted the audit in accordance with generally accepted auditing
standards in Sweden. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities section. We are independent of
the parent company and the group in accordance with professional ethics for
accountants in Sweden and have otherwise fulfilled our ethical responsibilities
in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions.
Financial report 2021 Auditor’s report
115
Responsibilities of the Board of Directors and the Managing Director
The Board of Directors is responsible for the proposal for appropriations of the
company’s profit or loss. At the proposal of a dividend, this includes an assess-
ment of whether the dividend is justifiable considering the requirements which
the company’s and the group’s type of operations, size and risks place on the
size of the parent company’s and the group’s equity, consolidation require-
ments, liquidity and position in general.
The Board of Directors is responsible for the company’s organization and
the administration of the company’s affairs. This includes among other things
continuous assessment of the company’s and the group’s financial situation
and ensuring that the company’s organization is designed so that the account-
ing, management of assets and the company’s financial affairs otherwise are
controlled in a reassuring manner. The Managing Director shall manage the
ongoing administration according to the Board of Directors’ guidelines and
instructions and among other matters take measures that are necessary to
fulfill the company’s accounting in accordance with law and handle the man-
agement of assets in a reassuring manner.
Basis for opinion
We have performed the examination in accordance with FAR’s recommenda-
tion RevR 18 Examination of the Esef report. Our responsibility under this
recommendation is described in more detail in the Auditors’ responsibility sec-
tion. We are independent of Telefonaktiebolaget LM Ericsson (publ) in accord-
ance with professional ethics for accountants in Sweden and have otherwise
fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Responsibilities of the Board of Directors and the Managing Director
The Board of Directors and the Managing Director are responsible for the
preparation of the Esef report in accordance with the Chapter 16, Section 4 a
of the Swedish Securities Market Act (2007:528), and for such internal control
that the Board of Directors and the Managing Director determine is necessary
to prepare the Esef report without material misstatements, whether due to
fraud or error.
The auditor’s responsibility
Our objective concerning the audit of the administration, and thereby our
opinion about discharge from liability, is to obtain audit evidence to assess
with a reasonable degree of assurance whether any member of the Board of
Directors or the Managing Director in any material respect:
– has undertaken any action or been guilty of any omission which can give rise
to liability to the company, or
– in any other way has acted in contravention of the Companies Act, the
Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations of the
company’s profit or loss, and thereby our opinion about this, is to assess with
reasonable degree of assurance whether the proposal is in accordance with
the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with generally accepted auditing stand-
ards in Sweden will always detect actions or omissions that can give rise to
liability to the company, or that the proposed appropriations of the company’s
profit or loss are not in accordance with the Companies Act.
As part of an audit in accordance with generally accepted auditing stand-
ards in Sweden, we exercise professional judgment and maintain professional
scepticism throughout the audit. The examination of the administration and
the proposed appropriations of the company’s profit or loss is based primarily
on the audit of the accounts. Additional audit procedures performed are based
on our professional judgment with starting point in risk and materiality. This
means that we focus the examination on such actions, areas and relationships
that are material for the operations and where deviations and violations would
have particular importance for the company’s situation. We examine and test
decisions undertaken, support for decisions, actions taken and other circum-
stances that are relevant to our opinion concerning discharge from liability.
As a basis for our opinion on the Board of Directors’ proposed appropriations
of the company’s profit or loss we examined the Board of Directors’ reasoned
statement and a selection of supporting evidence in order to be able to assess
whether the proposal is in accordance with the Companies Act.
The auditor’s examination of the Esef report
Opinion
In addition to our audit of the annual accounts and consolidated accounts, we
have also examined that the Board of Directors and the Managing Director
have prepared the annual accounts and consolidated accounts in a format
that enables uniform electronic reporting (the Esef report) pursuant to
Chapter 16, Section 4 a of the Swedish Securities Market Act (2007:528) for
Telefonaktiebolaget LM Ericsson (publ) for the financial year 2021.
Our examination and our opinion relate only to the statutory requirements.
In our opinion, the Esef report a3ef24cd82ad2403d3bf0bbd96471b0bf-
c285a4eacdb85553ff919912db2abdb has been prepared in a format that, in
all material respects, enables uniform electronic reporting.
The auditor’s responsibility
Our responsibility is to obtain reasonable assurance whether the Esef report
is in all material respects prepared in a format that meets the requirements
of Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528),
based on the procedures performed.
RevR 18 requires us to plan and execute procedures to achieve reason-
able assurance that the Esef report is prepared in a format that meets these
requirements.
Reasonable assurance is a high level of assurance, but it is not a guarantee
that an engagement carried out according to RevR 18 and generally accepted
auditing standards in Sweden will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the Esef report.
The audit firm applies ISQC 1 Quality Control for Firms that Perform Audits
and Reviews of Financial Statements, and other Assurance and Related
Services Engagements and accordingly maintains a comprehensive system
of quality control, including documented policies and procedures regarding
compliance with professional ethical requirements, professional standards and
legal and regulatory requirements.
The examination involves obtaining evidence, through various procedures,
that the Esef report has been prepared in a format that enables uniform
electronic reporting of the annual accounts and consolidated accounts. The
procedures selected depend on the auditor’s judgment, including the assess-
ment of the risks of material misstatement in the report, whether due to fraud
or error. In carrying out this risk assessment, and in order to design audit
procedures that are appropriate in the circumstances, the auditor considers
those elements of internal control that are relevant to the preparation of the
Esef report by the Board of Directors and the Managing Director, but not for
the purpose of expressing an opinion on the effectiveness of those internal
controls. The examination also includes an evaluation of the appropriateness
and reasonableness of assumptions made by the Board of Directors and the
Managing Director.
The procedures mainly include a technical validation of the Esef report, i.e.,
if the file containing the Esef report meets the technical specification set out
in the Commission’s Delegated Regulation (EU) 2019/815 and a reconcili-
ation of the Esef report with the audited annual accounts and consolidated
accounts.
Furthermore, the procedures also include an assessment of whether the
Esef report has been marked with iXBRL which enables a fair and complete
machine-readable version of the consolidated statement of financial perfor-
mance, financial position, changes in equity and cash flow.
Deloitte AB, was appointed auditor of Telefonaktiebolaget LM Ericsson
(publ) by the general meeting of the shareholders on March 30, 2021 and has
been the company’s auditor since March 31, 2020.
Stockholm March 3, 2022
Deloitte AB
Thomas Strömberg
Authorized Public Accountant
Financial report 2021 116
Forward-looking statements
Forward-looking statements
This Annual Report includes forward-looking statements, including
statements reflecting management’s current views relating to the
growth of the market, future market conditions, future events, financial
condition, and expected operational and financial performance,
including, in particular the following:
– Our goals, strategies, planning assumptions and operational
or financial performance expectations
– Industry trends, future characteristics and development
of the markets in which we operate
– Our future liquidity, capital resources, capital expenditures,
cost savings and profitability
– The expected demand for our existing and new products and
services as well as plans to launch new products and services
including research and development expenditures
– The ability to deliver on future plans and to realize potential
for future growth
The words “believe”, “expect”, “foresee”, “anticipate”, “assume”, “intend”,
“likely”, “projects”, “may”, “could”, “plan”, “estimate”, “forecast”, “will”,
“should”, “would”, “predict”, “aim”, “ambition”, “seek”, “potential”, “target”,
“might”, “continue”, or, in each case, their negative or variations, and
similar words or expressions are used to identify forward-looking
statements. Any statement that refers to expectations, projections or
other characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements.
We caution investors that these statements are subject to risks
and uncertainties many of which are difficult to predict and generally
beyond our control that could cause actual results to differ materially
from those expressed in, or implied or projected by, the forward-looking
information and statements.
Important factors that could affect whether and to what extent
any of our forward-looking statements materialize include but are not
limited to the factors described in the section Risk Factors.
– The expected operational or financial performance of strategic
These forward-looking statements also represent our estimates and
coop eration activities and joint ventures
– The time until acquired entities and businesses will be integrated
and accretive to income
– Technology and industry trends including the regulatory and
standardization environment in which we operate, competition
and our customer structure.
assumptions only as of the date that they were made. We expressly
disclaim a duty to provide updates to these forward-looking statements,
and the estimates and assumptions associated with them, after the
date of this Annual Report, to reflect events or changes in circumstances
or changes in expectations or the occurrence of anticipated events,
whether as a result of new information, future events or otherwise,
except as required by applicable law or stock exchange regulation.
Financial report 2021 Five-year summary – Financial information
117
Five-year summary – Financial information
For definitions of certain financial terms used, see Alternative performance measures and Financial terminology.
Five-year summary
Income statement and cash flow items, SEK million
Net sales 1)
Operating expenses 1)
EBIT (loss) 1)
Net income (loss) 1)
Cash flow from operating activities
Year-end position, SEK million
Total assets 1)
Property, plant and equipment
Stockholders’ equity 1)
Non-controlling interests
Per share indicators
Earnings (loss) per share, basic, SEK 1)
Earnings (loss) per share, diluted, SEK 1)
Dividends per share, SEK 2)
Dividends per share, USD 2)
Number of shares outstanding (in millions)
end of period, basic
average, basic
average, diluted
Other information, SEK million
Additions to property, plant and equipment
Depreciations and write-downs/impairments of property, plant
and equipment
Acquisitions/capitalization/divestments of intangible assets
Amortizations and write-downs/impairments of intangible assets
Research and development expenses 1)
as percentage of net sales
Inventory turnover days
Alternative Performance Measures (APMs) 3)
Sales growth adjusted for comparable units and currency
Gross margin 1)
Gross margin excluding restructuring charges 1)
EBIT margin 1)
EBIT margin excluding restructuring charges 1)
EBITA margin 1)
EBITA margin excluding restructuring charges 1)
Restructuring charges, SEK million
Free cash flow before M&A, SEK million
Free cash flow after M&A, SEK million
Capital employed, SEK million 1)
Return on equity 1)
Return on capital employed 1)
Equity ratio 1)
Capital turnover 1)
Adjusted working capital, SEK million 1)
Gross cash, SEK million
Net cash, SEK million
Adjusted earnings (loss) per share, SEK
Statistical data, year-end
Number of employees
of which in Sweden
Export sales from Sweden, SEK million 1)
2021
Change
2020
2019
2018
2017
232,314
–69,071
31,780
22,980
39,065
305,614
13,580
108,775
–1,676
6.82
6.81
2.50
0.23
3,330
3,329
3,332
0%
4%
14%
30%
35%
13%
1%
25%
–
30%
29%
25%
44%
0%
0%
0%
232,390
–66,280
27,808
17,623
28,933
271,530
13,383
86,674
–1,497
5.26
5.26
2.00
0.16
3,328
3,323
3,326
3,663
–18%
4,493
3,872
1,723
2,820
42,074
18.1%
88
4%
43.4%
43.5%
13.7%
13.9%
14.3%
14.6%
549
32,056
32,115
184,283
23.2%
18.4%
35.0%
1.3
59,667
97,608
65,777
7.26
101,322
14,183
140,898
–6%
–85%
33%
6%
–
13%
–
–
–
–
–
–
–
–58%
44%
154%
14%
–
–
–
–7%
31%
35%
57%
25%
0%
8%
7%
4,114
11,817
2,126
39,714
17.1%
78
5%
40.3%
40.6%
12.0%
12.5%
12.5%
13.1%
1,306
22,261
12,663
161,990
20.7%
17.0%
31.4%
1.4
45,613
72,045
41,885
5.83
100,824
13,173
132,269
227,216
–64,215
10,564
1,840
16,873
276,383
13,850
82,559
–681
0.67
0.67
1.50
0.16
3,314
3,306
3,320
5,118
3,947
–13,692
2,593
38,815
17.1%
77
4%
37.3%
37.5%
4.6%
5.0%
5.1%
5.5%
798
7,633
6,128
165,273
2.6%
6.7%
29.6%
1.4
48,821
72,192
34,496
1.07
99,417
12,730
120,822
210,838
–66,848
1,242
–6,276
9,342
268,761
12,849
86,978
792
–1.98
–1.98
1.00
0.11
3,297
3,291
3,318
205,378
–70,563
–34,743
–32,433
9,601
259,882
12,857
96,935
636
–9.94
–9.94
1.00
0.12
3,284
3,277
3,317
3,975
3,877
3,843
2,315
4,475
38,909
18.5%
70
1%
32.3%
35.2%
0.6%
4.4%
1.4%
5.2%
8,015
4,253
2,968
149,615
–7.1%
0.8%
32.7%
1.4
52,508
68,996
35,871
0.27
95,359
12,502
109,969
6,314
1,759
21,578
37,887
18.4%
66
–
23.3%
25.9%
–16.9%
–12.8%
–8.8%
–4.7%
8,501
4,833
5,109
155,625
–28.1%
–20.4%
37.5%
1.2
56,439
67,702
34,657
–3.24
100,735
13,864
87,463
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
2) For 2021, as proposed by the Board of Directors.
3) A reconciliation to the most directly reconcilable line items in the financial statements for 2021 and four comparison years is available on pages 119–123.
Financial report 2021 118
Five-year summary – Non-financial information
Five-year summary – Non-financial information
For additional information and definitions, see Consolidated sustainability notes, found on pages 28–36 of the Sustainability and Corporate
Responsibility report.
Five-year summary
Employees
Employee headcount at year-end
Average number of employees
Employees who have left the Company
Employees who have joined the Company
Employee diversity by age at year-end (%)
Under 25 years old
25–35 years old
36–45 years old
46–55 years old
Over 55 years old
Female representation (%)
All employees
Line managers
Executive population
Executive Team
Board of Directors
Compliance concerns, sensitive business and information security
Total number of reported compliance concerns
Total number of cases reviewed in the Sensitive business process
Total number of information security and privacy incidents reported
Occupational health and safety
Number of fatalities – Ericsson employees
Number of fatalities – Supply chain and public
Number of major incidents – Ericsson employees
Number of major incidents – Supply chain and public
Number of lost workday incidents – Ericsson employees
Number of lost workday incident – Supply chain and public
Responsible management of suppliers
Tier one suppliers risk assessed (%) 2)
Energy consumption (facility energy usage) (GWh)
Electricity and cooling – non-renewable
Electricity and cooling – renewable
District heating
Local heating and backup electricity
Energy intensity (GWh/net sales SEK billion)
Waste, product take-back and water
Waste generated at facilities (tonnes)
of which recycled (%)
Product take-back (tonnes)
of which recycled or re-used (%)
Total water consumption (Mm3)
Green House Gas Emissions (CO2e) (Ktonne)
Direct emissions – Scope 1
Indirect emissions – Scope 2 (market based)
Other indirect emissions – Scope 3 3)
Emissions intensity (Ktonnes CO2e/net sales SEK billion)
Scope 1
Scope 2 (market based)
2021
Change
2020
2019
2018
2017
101,322
100,757
11,631
12,129
3
31
34
23
9
25
21
36
20
23
1,059
722
2,463
1
13
56
50
77
68
99
189
391
26
25
2.7
6,777
67
8,849
96
1.2
38
58
34,637
0.16
0.25
0%
2%
48%
31%
0%
–6%
0%
5%
13%
0%
0%
13%
0%
0%
14%
–13%
–3%
–
86%
–15%
39%
–14%
28%
0%
4%
0%
13%
–24%
0%
–2%
38%
–13%
1%
–20%
–5%
–22%
–5%
–8%
–22%
100,824
98,589
7,839
9,246
99,417
94,503
11,078
15,136
95,359
97,843
16,630
11,254
100,735
107,369
21,791
11,062
3
33
34
22
8
25
21
32
20
23
3
35
32
22
8
25
20
32
20
23
3
36
32
22
7
23
20
31
27
23
4
37
32
21
7
25
20
27
36
43
933
828
2,533
538
651
3,840
445
587
3,312
412
846
3,235
0
7
66
36
90
53
99
182
390
23
33
2.7
6,916
49
10,204
95
1.5
40
74
36,605
0.17
0.32
0
11
122
57
180
87
98
255
333
26
50
2.9
11,013
44
8,403
93
1.5
49
124
35,877
0.22
0.55
0
14
83
33
143
61
47
299
335
33
49
3.4
10,217
34
8,380
93
1.6
54
134
–
0.26
0.64
0
23
1)
1)
1)
1)
–
347
357
33
45
3.8
11,755
38
12,252
94
1.8
73
156
–
0.36
0.76
1) Due to limitations in data availability, reporting on major incidents and lost-time incident broken down on employees and supply chain/public for 2017 is not possible.
2) Risk assessment process described in the Sustainability and Corporate Responsibility report 2021, page 26. The process was formalized in 2018 wherefore comparative figures before that year are not available.
3 ) Scope of reporting has been updated during 2021 wherefore comparable figures for 2018 and 2017 are not available.
Financial report 2021 Alternative performance measures
Alternative performance measures
119
In this section, the Company presents its Alternative Performance
Measures (APMs), which are not recognized measures of financial
performance under IFRS. This section includes a reconciliation of the
APM’s to the most directly reconcilable line items in the financial state-
ments. The presentation of APMs has limitations as analytical tools
and should not be considered in isolation or as a substitute for related
financial measures prepared in accordance with IFRS.
APMs are presented to enhance an investor’s evaluation of ongoing
operating results, to aid in forecasting future periods and to facilitate
meaningful comparison of results between periods.
Management uses these APMs to, among other things, evaluate
ongoing operations in relation to historical results, for internal planning
and forecasting purposes and in the calculation of certain performance-
based compensation. APM’s should not be viewed as substitutes for
income statement or cash flow items computed in accordance with IFRS.
Adjusted earnings (loss) per share 1)
SEK
Earnings (loss) per share, diluted
Restructuring charges
Amortizations and write-downs of acquired intangibles
Adjusted earnings (loss) per share
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
The APMs presented in this report may differ from similarly titled
measures used by other companies.
As from 2021 Operating income has been renamed as EBIT and
Operating margin as EBIT margin. The definitions of EBIT and EBIT
margin remain unchanged. The APMs have been updated with the
new names.
As from 2021 EBITA excluding restructuring charges has been
added. The main reason for the update is that Ericsson’s long-term
target is expressed as EBITA excluding restructuring charges as a
percentage of net sales.
2021
6.81
0.13
0.32
7.26
2020
5.26
0.30
0.27
5.83
2019
0.67
0.18
0.22
1.07
2018
–1.98
1.88
0.37
0.27
2017
–9.94
1.93
4.77
–3.24
Definition
Adjusted earnings (loss) per share (EPS), diluted, excluding
amortizations and write-downs of acquired intangible
assets and excluding restructuring charges.
Reason to use
Restructuring charges vary between years. This measurement gives an indication of the performance without
restructuring and without the impact of amortizations and write-downs of acquired intangible assets from
acquired companies.
Adjusted working capital 1)
SEK million
Current assets
Current non-interest-bearing provisions and liabilities
Provisions, current
Contract liabilities
Trade payables
Current tax liabilities 2)
Other current liabilities 2)
Adjusted working capital
2021
174,805
–5,782
–32,834
–35,684
–2,917
–37,921
59,667
2020
149,795
–7,580
–26,440
–31,988
–4,486
–33,688
45,613
2019
153,914
–8,244
–29,041
–30,403
–
–37,405
48,821
2018
161,167
–10,537
–29,348
–29,883
–
–38,891
52,508
2017
153,423
–6,283
–29,076
–26,320
–
–35,305
56,439
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
2) As from 2021 current tax liabilities is presented as a separate line item in the balance sheet and the comparison year 2020 has been updated accordingly. For 2017– 2019 the current tax liabilities is included in
other current liabilities.
Definition
Current assets less current non-interest-bearing provisions
and liabilities (which include: current provisions, contract
liabilities, trade payables, current tax liabilities and other
current liabilities).
Reason to use
Due to the need to optimize cash generation to create value for Ericsson’s shareholders, management focuses on
working capital and reducing lead times between orders booked and cash received.
Financial report 2021 120
Alternative performance measures
Capital employed 1)
SEK million
Total assets
Non-interest-bearing provisions and liabilities
Provisions, non-current
Deferred tax liabilities
Other non-current liabilites
Provisions, current
Contract liabilities
Trade payables
Current tax liabilities 2)
Other current liabilities 2)
Capital employed
2021
305,614
3,722
884
1,587
5,782
32,834
35,684
2,917
37,921
184,283
2020
271,530
2,886
1,089
1,383
7,580
26,440
31,988
4,486
33,688
161,990
2019
276,383
2,679
1,224
2,114
8,244
29,041
30,403
–
37,405
165,273
2018
268,761
5,471
670
4,346
10,537
29,348
29,883
–
38,891
149,615
2017
259,882
3,596
901
2,776
6,283
29,076
26,320
–
35,305
155,625
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
2) As from 2021 current tax liabilities is presented as a separate line item in the balance sheet and the comparison year 2020 has been updated accordingly. For 2017–2019 the current tax liabilities is included in
other current liabilities.
Definition
Total assets less non-interest-bearing provisions
and liabilities.
Reason to use
Capital employed represents the value of the balance sheet assets that contributes to revenue and profit generation.
It is also used in the calculation of return on capital employed.
Capital turnover 1)
SEK million
Net sales
Average capital employed
Capital employed at beginning of period
Captial employed at end of period
Average capital employed
Capital turnover (times)
2021
232,314
161,990
184,283
173,137
1.3
2020
232,390
165,273
161,990
163,632
1.4
2019
227,216
149,615
165,273
157,444
1.4
2018
210,838
155,625
149,615
152,620
1.4
2017
205,378
185,666
155,625
170,646
1.2
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
Definition
Net sales divided by average capital employed.
Reason to use
Capital turnover indicates how effectively investment capital is used to generate revenues.
EBITA and EBITA margin / EBITA and EBITA margin excluding restructuring charges 1)
SEK million
Net income (loss)
Income tax
Financial income and expenses, net
Amortizations and write-downs of acquired intangibles
EBITA (loss)
Net sales
EBITA margin (%)
Restructuring charges
EBITA (loss) excluding restructuring charges
EBITA margin excluding restructuring charges (%)
2021
22,980
6,270
2,530
1,477
33,257
232,314
14.3%
549
33,806
14.6%
2020
17,623
9,589
596
1,220
29,028
232,390
12.5%
1,306
30,334
13.1%
2019
1,840
6,922
1,802
1,038
11,602
227,216
5.1%
798
12,400
5.5%
2018
–6,276
4,813
2,705
1,662
2,904
210,838
1.4%
8,015
10,919
5.2%
2017
–32,433
–3,525
1,215
16,652
–18,091
205,378
–8.8%
8,501
–9,590
–4.7%
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
Definition
Earnings (loss) before interest, taxes, amortizations and write-
downs of acquired intangibles, as a percentage of net sales.
Reported EBITA (loss) excluding restructuring charges as a
percentage of net sales.
Reason to use
Amortizations and write-downs of intangible assets are normally non-cash items in the annual income statement,
EBITA margin % gives an indication of the financial performance without the impact from acquired companies.
The Company’s view is that EBITA margin excluding restructuring charges gives a fair view of the profitability of the
ongoing business.
Financial report 2021 Alternative performance measures
121
EBIT and EBIT margin / EBIT and EBIT margin excluding restructuring charges 1)
SEK million
EBIT (loss)
Net sales
EBIT margin (%)
Restructuring charges
EBIT (loss) excluding restructuring charges
EBIT margin excluding restructuring charges (%)
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
2021
31,780
232,314
13.7%
549
32,329
13.9%
2020
27,808
232,390
12.0%
1,306
29,114
12.5%
2019
10,564
227,216
4.6%
798
11,362
5.0%
2018
1,242
210,838
0.6%
8,015
9,257
4.4%
2017
–34,743
205,378
–16.9%
8,501
–26,242
–12.8%
Definition
Reported EBIT (loss) as a percentage of net sales.
Reported EBIT (loss) excluding restructuring charges as a
percentage of net sales.
Reason to use
EBIT margin shows the EBIT in per centage of net sales. EBIT margin is a key internal measure as the Company
believes that it provides users of the financial statements with a better understanding of the Group’s financial
performance both short and long term. The Company’s view is that EBIT margin excluding restructuring charges gives
a fair view of the profitability of the ongoing business.
Equity ratio 1)
SEK million
Total equity
Total assets
Equity ratio (%)
2021
107,099
305,614
35.0%
2020
85,177
271,530
31.4%
2019
81,878
276,383
29.6%
2018
87,770
268,761
32.7%
2017
97,571
259,882
37.5%
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
Definition
Equity expressed as a percentage of total assets.
Reason to use
An equity ratio above 40% is one of the company’s capital targets. This supports financial flexibility and independence
to operate and manage variations in working capital needs as well as to capitalize on business opportunities.
Free cash flow before M&A / Free cash flow after M&A
SEK million
Cash flow from operating activities
Net capital expenditures and other investments (excluding M&A)
Investments in property, plant and equipment
Sales of property, plant and equipment
Product development
Other investing activities
Repayment of lease liabilities
Free cash flow before M&A
Acquisitions of subsidiaries and other operations
Divestments of subsidiaries and other operations
Free cash flow after M&A
Definition
Free cash flow before M&A: Cash flow from operating
activities less net capital expenditures, other investments
(excluding M&A) and repayment of lease liabilities.
Free cash flow after M&A: Cash flow from operating
activities less net capital expenditures, other investments
and repayment of lease liabilities.
2021
39.065
–3,663
115
–962
–131
–2,368
32,056
–389
448
32,115
2020
28,933
–4,493
254
–817
801
–2,417
22,261
–9,657
59
12,663
2019
16,873
–5,118
744
–1,545
–331
–2,990
7,633
–1,753
248
6,128
2018
9,342
–3,975
334
–925
–523
–
4,253
–1,618
333
2,968
2017
9,601
–3,877
1,016
–1,444
–463
–
4,833
–289
565
5,109
Reason to use
Free cash flow before M&A represents the cash that the Company generates after capital expenditures, other
investments and repayment of lease liabilities. The Company believes that free cash flow before M&A is a good way
of reflecting the cash flows generated by the Company that can be used to expand the business, invest in subsidiaries,
pay dividends and reduce debt.
Free cash flow after M&A represents the cash that the Company generates after capital expenditures, other
investments, repayment of lease liabilities and acquisitions/divestments of subsidiaries. The Company believes that
free cash flow after M&A is a good way of reflecting the cash flows generated by the company that can be used to
expand the business, pay dividends and reduce debt.
Financial report 2021 122
Alternative performance measures
Gross cash
SEK million
Cash and cash equivalents
Interest-bearing securities, current
Interest-bearing securities, non-current
Gross cash
2021
54,050
12,932
30,626
97,608
2020
43,612
6,820
21,613
72,045
2019
45,079
6,759
20,354
72,192
2018
38,389
6,625
23,982
68,996
2017
35,884
6,713
25,105
67,702
Definition
Cash and cash equivalents plus interest-bearing securities
(current and non-current).
Reason to use
Gross cash is showing total available cash and interest-bearing securities and is a parameter for calculating
the net cash position.
Gross margin and Gross margin excluding restructuring charges 1)
SEK million
Gross income
Net sales
Gross margin (%)
Restructuring charges included in cost of sales
Gross income excluding restructuring charges
Gross margin excluding restructuring charges (%)
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
2021
100,749
232,314
43.4%
273
101,022
43.5%
2020
93,724
232,390
40.3%
725
94,449
40.6%
2019
84,824
227,216
37.3%
337
85,161
37.5%
2018
68,200
210,838
32.3%
5,938
74,138
35.2%
2017
47,927
205,378
23.3%
5,242
53,169
25.9%
Definition
Reported gross income as a percentage of net sales.
Reported gross income excluding restructuring charges as
a percentage of net sales.
Reason to use
Gross margin shows the difference between net sales and cost of sales, in percentage of net sales. Gross margin is
impacted by several factors such as business mix, service share, price development and cost reductions. Gross margin
is an important internal measure and this number is also provided in the income statement as the Company believes
that it provides users of the financial statements with a better understanding of the Group’s business development.
The Company’s view is that gross margin excluding restructuring charges gives a fair view of the profitability of the
ongoing business.
Net cash
SEK million
Cash and cash equivalents
+ Interest-bearing securities, current
+ Interest-bearing securities, non-current
– Borrowings, current
– Borrowings, non-current
Net cash
2021
54,050
12,932
30,626
9,590
22,241
65,777
2020
43,612
6,820
21,613
7,942
22,218
41,885
2019
45,079
6,759
20,354
9,439
28,257
34,496
2018
38,389
6,625
23,982
2,255
30,870
35,871
2017
35,884
6,713
25,105
2,545
30,500
34,657
Definition
Cash and cash equivalents plus interest-bearing securities
(current and non-current) less borrowings (current and non-
current).
Reason to use
A positive net cash position that is larger than the pension liability is one of the company’s capital targets.
This creates financial flexibility and independence to operate and manage variations in working capital needs.
Operating expenses, excluding restructuring charges
SEK million
Operating expenses
Restructuring charges included in R&D expenses
Restructuring charges included in selling and administrative expenses
Operating expenses, excluding restructuring charges
2021
–69,071
137
139
–68,795
2020
–66,280
411
170
–65,699
2019
–64,215
344
117
–63,754
2018
–66,848
1,293
784
–64,771
2017
–70,563
2,307
952
–67,304
Definition
Reported operating expenses, excluding restructuring
charges.
Reason to use
Restructuring charges vary between years and in order to analyse trends in reported expenses overtime,
restructuring charges are excluded.
Financial report 2021 Alternative performance measures
123
Return on capital employed 1)
SEK million
EBIT (loss)
Average capital empolyed
Capital employed at beginning of period
Capital employed at end of period
Average capital empolyed
Return on capital employed (%)
2021
31,780
161,990
184,283
173,137
18.4%
2020
27,808
165,273
161,990
163,632
17.0%
2019
10,564
149,615
165,273
157,444
6.7%
2018
1,242
155,625
149,615
152,620
0.8%
2017
–34,743
185,667
155,625
170,646
–20.4%
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
Definition
Reported EBIT (loss) as a percentage of average capital
employed.
Reason to use
Return on capital employed is a measure of the profitability after taking into account the amount of capital used. A higher
return on capital employed indicates a more efficient use of capital.
Return on equity 1)
SEK million
Net income (loss) attributable to owners
of the Parent Company
Average stockholders’ equity
Stockholders’ equity, beginning of period 2)
Stockholders’ equity, end of period
Average stockholders’ equity
Return on equity (%)
2021
2020
2019
2018
2017
22,694
17,483
2,223
–6,530
–32,576
86,674
108,775
97,725
23.2%
82,559
86,674
84,617
20.7%
86,729
82,559
84,644
2.6%
95,952
86,978
91,465
–7.1%
134,582
96,935
115,759
–28.1%
1) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers.”
2) For 2019, adjusted opening balance due to implementation of IFRS 16 “Leases,” and for 2018, adjusted opening balance due to implementation of IFRS 9 “Financial instruments.”
Definition
Net income (loss) attributable to owners of the Parent
Company as a percentage of average stockholders’ equity.
Reason to use
Return on equity is a measure of the profitability in relation to the book value of shareholder equity. Return on equity is
a measure of how investments are used to generate earnings growth.
Sales growth adjusted for comparable units and currency
SEK million
Net sales
Acquired/divested business
Net FX impact
Comparable net sales, excluding FX impact
Comparable net sales adjusted for acquired/divested business
Sales growth adjusted for comparable units and currency (%)
2021
232,314
–1,201
11,607
242,720
232,390
4%
2020
232,390
–1,362
7,796
238,824
227,132
5%
2019
227,216
–96
–10,675
216,445
208,130
4%
2018
210,838
–
–4,232
206,606
–
1%
Definition
Sales growth adjusted for the impact of acquisitions and
divestments as well as the effects of foreign currency
fluctuations. Also named organic sales.
Reason to use
Ericsson’s presentation currency is SEK while the total revenues are mainly in other currencies. Reported sales growth
is dependent on fluctuations in SEK versus other currencies and in addition acquired or divested business can have an
impact on reported net sales. Sales growth adjusted for comparable units and currency shows the underlying sales
development without these parameters.
Financial report 2021 124
The Ericsson share
The Ericsson share
Share trading
The Telefonaktiebolaget LM Ericsson (the Parent Company) Class A and Class B shares
(Ericsson shares) are listed on Nasdaq Stockholm. In the United States, the Class B shares
are listed on NASDAQ New York in the form of American Depositary Shares (ADS) evidenced
by American Depositary Receipts (ADR) under the symbol ERIC. Each ADS represents one
Class B share.
In 2021, approximately 1.8 (2.3) billion Class B shares were traded on Nasdaq Stockholm
and approximately 1.6 (2.2) billion ADS were traded in the United States (incl. NASDAQ New
York). A total of 3.5 (4.5) billion Ericsson Class B shares were thus traded on the exchanges in
Stockholm and in the United States. According to Nasdaq, trading volume in Ericsson shares
decreased by approximately 21% on Nasdaq Stockholm and decreased by approximately
25% in the United States when compared to 2020.
With the implementation of the Mifid directive
in the EU, share trading became heavily fragmen-
ted across a large number of venues and trading
categories. Trading on MTFs (multilateral trading
facilities) and other venues gained market shares
from stock exchanges such as Nasdaq Stockholm.
In the last few years however, following a series
of merger and acquisitions among trading venues,
trading has become more concentrated.
According to Nasdaq, trading in Stockholm
represented 53% of total trading in 2021. Total
trading in Ericsson B shares on all venues com-
bined has decreased over the past five years from
7.9 billion shares in 2017 to 5.2 billion shares in
2021. Over the same period, trading of Ericsson
ADS in the US has increased from 1.2 billion
shares in 2017 to 1.6 billion shares.
Share trading on different
market places (class B shares)
Shares traded, millions
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2017
2018
2019
2020
2021
Cboe APA/BXE/CXE
Stockholm
London
Turquoise
BOAT
Other
The Ericsson share
Share/ADS listings
Nasdaq Stockholm
NASDAQ New York
Share data
Total number of shares in issue
of which Class A shares,
each carrying one vote 1)
of which Class B shares, each carrying
one tenth of one vote 1)
Ericsson treasury shares, Class B
Quotient value
Market capitalization, December 31, 2021
ICB (Industry Classification Benchmark)
1) Both classes of shares have the same rights of participation
in the net assets and earnings.
3,334,151,735
261,755,983
3,072,395,752
4,009,306
SEK 5.00
SEK 333 billion
9,500
Ticker codes
Nasdaq Stockholm
NASDAQ New York
Bloomberg Nasdaq Stockholm
Bloomberg Nasdaq
Reuters Nasdaq Stockholm
Reuters Nasdaq
ERIC A/ERIC B
ERIC
ERICA SS/ERICB SS
ERIC US
ERICa.ST/ERICb.ST
ERIC.O
Changes in number of shares and capital stock 2017–2021
2017
2017
2018
2019
2020
2021
May 10, new issue (Class C shares, later converted to Class B-shares) 1)
December 31
December 31
December 31
December 31
December 31
Number of shares
Share capital (SEK)
3,000,000
3,334,151,735
3,334,151,735
3,334,151,735
3,334,151,735
3,334,151,735
15,000,000
16,670,758,678
16,670,758,678
16,670,758,678
16,670,758,678
16,670,758,678
1) The AGM 2017 resolved to issue 3,000,000 Class C shares for the Long-Term Variable Compensation Program 2017. In accordance with an authorization from the AGM, in the second quarter 2017, the Board of
Directors resolved to repurchase the new issued shares, which were subsequently converted into Class B shares. The quotient value of the repurchased shares was SEK 5, totaling SEK 15 million, representing less
than 0.1% of capital stock, and the acquisition cost was approximately SEK 15.1 million.
Share performance indicators
Earnings (loss) per share, diluted (SEK) 1)
Adjusted earnings (loss) per share (SEK) 2)
Dividend per share (SEK) 3)
Total shareholder return (%)
P/E ratio
2021
6.81
7.26
2.50
4
15
2020
5.26
5.83
2.00
22
19
2019
0.67
1.07
1.50
6
122
2018
–1.98
0.27
1.00
47
n/a
20174)
–9.94
–3.24
1.00
3
n/a
1) Calculated on average number of shares outstanding, diluted.
2) EPS, diluted, excluding amortizations and write-downs of acquired intangible assets, and excluding restructuring charges, SEK.
A reconcilation of Alternative performance measures is available on pages 119–123.
3) For 2021 as proposed by the Board of Directors.
4) 2017 is restated due to implementation of IFRS 15 “Revenue from Contracts with Customers”.
For definitions of the financial terms used including a description of alternative performance measure, see Glossary and Financial Terminology.
Financial report 2021 The Ericsson share
125
Share and ADS prices
Share prices on Nasdaq Stockholm
Principal trading market – Nasdaq Stockholm – share prices
The tables state the high and low share prices for the Class A and Class B
shares as reported by Nasdaq Stockholm for the periods indicated. Trading on
the exchange generally continues until 5:30 p.m. (CET) each business day. In
addition to trading on the exchange, there is trading off the exchange and on
alternative venues during trading hours and also after 5:30 p.m. (CET).
Nasdaq Stockholm publishes a daily Official Price List of Shares which
includes the volume of recorded transactions in each listed stock, together with
the prices of the highest and lowest recorded trades of the day. The Official
Price List of Shares reflects price and volume information for trades completed
by the members.
(SEK)
Class A at last day of trading
Class A high
(Feb 15, 2021)
Class A low
(Nov 3, 2021)
Class B at last day of trading
Class B high
(Apr 21, 2021)
Class B low
(Nov 3, 2021)
2021
2020
100.20
105.40
2019
85.40
2018
77.40
2017
53.25
128.80
119.00
96.80
85.20
64.80
91.90
99.79
64.10
99.98
74.70
81.56
49.05
77.92
44.17
53.85
121.80
110.15
96.74
85.66
64.95
91.00
59.54
74.02
49.04
43.75
Source: Nasdaq Stockholm
Host market – NASDAQ New York – ADS prices
The tables state the high and low share prices quoted for the ADSs on
NASDAQ New York for the periods indicated. The NASDAQ New York
quotations represent prices between dealers, not including retail markups,
markdowns or commissions, and do not necessarily represent actual
transactions.
Share prices on NASDAQ New York
(USD)
ADS at last day of trading
ADS high (Jan 27, 2021)
ADS low (Dec 3, 2021)
2021
10.87
15.32
9.93
2020
11.95
12.20
6.15
2019
8.78
10.46
7.58
2018
2017
8.88
9.45
6.00
6.68
7.47
5.52
Source: NASDAQ New York
Share prices on Nasdaq Stockholm and NASDAQ New York
Period
Annual high and low
2017
2018
2019
2020
2021
Quarterly high and low
2020 First Quarter
2020 Second Quarter
2020 Third Quarter
2020 Fourth Quarter
2021 First Quarter
2021 Second Quarter
2021 Third Quarter
2021 Fourth Quarter
Monthly high and low
August 2021
September 2021
October 2021
November 2021
December 2021
January 2022
1) One ADS = 1 Class B share.
Nasdaq Stockholm
SEK per Class A share
SEK per Class B share
NASDAQ New York
USD per ADS 1)
High
Low
High
Low
High
Low
64.80
85.20
96.80
119.00
128.80
96.10
100.60
114.80
119.00
128.80
122.60
116.00
107.00
105.00
104.80
107.00
98.70
100.60
116.40
44.17
49.05
74.70
64.10
91.90
64.10
77.40
92.50
100.40
105.40
104.40
95.40
91.90
97.90
95.40
93.20
91.90
92.20
99.70
64.95
85.66
96.74
110.15
121.80
89.22
91.78
105.10
110.15
118.05
121.80
116.16
107.04
104.78
104.48
107.04
98.59
99.99
115.38
43.75
49.04
74.02
59.54
91.00
59.54
77.60
85.40
93.42
96.90
104.90
95.58
91.00
97.78
95.58
92.92
91.00
91.16
97.01
7.47
9.45
10.45
12.61
15.32
9.24
9.88
12.10
12.61
15.32
14.39
13.40
12.24
12.00
12.13
12.24
11.19
11.02
12.39
5.52
6.00
7.58
6.15
9.93
6.15
7.62
9.20
10.50
11.55
12.40
10.88
9.93
11.16
10.88
10.82
9.94
9.93
10.54
Source: Nasdaq Stockholm and NASDAQ New York.
Financial report 2021
126
The Ericsson share
Shareholders
As of December 31, 2021, the Parent Company had 423,904 shareholders
registered at Euroclear Sweden AB (the Central Securities Depository – CSD),
of which 698 holders had a US address. According to information provided
by the Company’s depositary bank, Deutsche Bank, there were 335,317,026
ADSs outstanding as of December 31, 2021, and 3,041 registered holders of
such ADSs. A significant number of Ericsson ADSs are held by banks, brokers
and/or nominees for the accounts of their customers. As of January 14, 2022,
the total number of bank, broker and/or nominee accounts holding Ericsson
ADSs was 214,032.
According to information known at year-end 2021, approximately 87% of
the Class A and Class B shares were owned by institutions, Swedish and inter-
national. The major shareholders do not have different voting rights than other
shareholders holding the same classes of shares. As far as Ericsson knows, the
Company is not directly or indirectly owned or controlled by another corpora-
tion, by any foreign government or by any other natural or legal person(s)
separately or jointly.
The table below shows the total number of shares in the Parent Company
owned by the Executive Team and Board members (including Deputy
employee representatives) as a group as of December 31, 2021.
The Executive Team and Board members, ownership
Number of
Class A shares
Number of
Class B shares
Voting rights,
percent
The Executive Team and
Board members as a group
( 30 persons)
1, 708
3,077,014
0.05%
For individual holdings, see Corporate Governance Report.
Geographical ownership breakdown of share capital including
retail shareholders and treasury shares
Percent of capital
Sweden
United States
United Kingdom
Norway
France
2021
39.83%
26.67%
6.47%
4.10%
2.47%
2020
41.04%
26.14%
5.90%
3.90%
1.50%
Other countries
20.46%
21.52%
Source: Nasdaq
Ownership breakdown by type of owner
Percentage of voting rights
Swedish institutions
Of which:
– Investor AB
– AB Industrivärden 1)
– AMF Tjänstepension &
AMF Fonder
Foreign institutions
Swedish retail investors
Other
2021
58.66%
23.79%
15,45%
4.36%
2020
59.81%
22.81%
19.26%
2.56%
28.23%
27.63%
5.02%
8.09%
4.81%
7.75%
Source: Nasdaq
1) Together with SHB Pensionsstiftelse and Pensionkassan SHB
Tjänstepensionsförening.
Number of shares 1)
Holding
1–500
501–1,000
1,001–5,000
5,001–10,000
10,001–15,000
15,001–20,000
20,001–
Total, December 31, 2021 2)
No. of
shareholders
339,582
38,180
37,886
4,762
1,266
599
1,626
423,904
No. of
A shares
1,476,912
986,204
2,805,648
1,050,198
373,924
311,008
254,752,089
261,755,983
No. of
B shares
Percentage
of share capital
Percentage
of voting rights
42,268,120
28,029,100
79,845,443
32,985,657
15,224,160
10,431,025
2,863,287,988
3,072,395,752
1.31%
0.87%
2.48%
1.02%
0.47%
0.32%
93.52%
100%
1.00%
0.67%
1.90%
0.76%
0.33%
0.24%
95.09%
100%
Market value
(MSEK)
4,365,922
2,895,842
8,248,903
3,396,869
1,556,686
1,072,075
311,253,668
332,822,322
1) Source: Euroclear.
2) Includes a nominee reporting discrepancy of 324,264 shares.
The following table shows share information as of December 31 2021 with respect to the 15 largest shareholders ranked by voting rights as well as their
percentage of voting rights as of December 31 2021, 2020 and 2019.
Largest shareholders December 31, 2020 and percentage of voting rights December 31, 2021, 2020 and 2019
Identity of person or group 1)
Investor AB
AB Industrivärden
AMF Tjänstepension & AMF Fonder
Cevian Capital
BlackRock Institutional Trust Company, N.A.
Swedbank Robur Fonder AB 2)
AFA Försäkring AB
PRIMECAP Management Company
The Vanguard Group, Inc.
Livförsäkringsbolaget Skandia, ömsesidigt
Fidelity International
Tredje AP Fonden
State Street Global Advisors (US)
Handelsbanken Asset Management
Norges Bank Investment Management (NBIM)
Others
Total
Number of
Class A shares
Of total Class
A shares
percent
Number of
Class B shares
Of total Class
B shares
percent
Of total Class
A+B shares
percent
2021
Voting rights
percent
2020
Voting rights
percent
2019
Voting rights
percent
120,762,803
86,052,615
20,650,000
339,228
522
8,277
11,484,600
0
867,142
4,417,721
0
4,253,533
0
11,352
260,203
12,647,987
261,755,983
145,982,932
46.14
1,000,000
32.88
41,849,713
7.89
151,386,082
0.13
137,111,236
0.00
127,530,652
0.00
1,881,329
4.39
105,576,247
0.00
80,337,772
0.33
23,875,322
1.69
59,948,762
0.00
15,657,855
1.62
53,785,677
0.00
52,624,728
0.00
0.10
48,011,969
4.83 2,025,835,476
100 3,072,395,752
4.75
0.03
1.36
4.93
4.46
4.15
0.06
3.44
2.61
0.78
1.95
0.51
1.75
1.71
1.56
65.94
100
8.00
2.61
1.87
4.55
4.11
3.83
0.40
3.17
2.44
0.85
1.80
0.60
1.61
1.58
1.45
61.14
100
23.79
15.14
4.36
2.72
2.41
2.24
2.05
1.86
1.56
1.20
1.05
1.02
0.95
0.93
0.89
37.83
100
22.81
15.14
2.56
3.25
2.35
2.31
1.99
2.18
1.42
1.17
0.79
0.44
0.97
0.89
1.03
40.71
100
22.53
15.14
2.71
4.99
2.16
2.33
2.06
2.32
1.46
1.18
0.57
0.53
1.03
1.25
1.49
38.24
100
1) Source: Nasdaq
2) In 2019 Annual report, Folksam’s holdings were included in Swedbank Robur Fonder AB’s holdings for 2019, which is why Swedbank Robur Fonder AB’s holdings were then stated as 3.07% of the voting rights
and 5.24% of the number of shares for 2019.
Financial report 2021 The Ericsson share
127
Earnings (loss) per share, diluted
7.26
6.81
5.26
5.83
1.07
0.67
0.27
−1.98
−3.24
SEK
8
6
4
2
0
−2
−4
−6
−8
−10
−9.94
2)
2017
2)
2018
2019
2020
2021
Earnings (loss) per share, diluted
Adjusted earnings (loss) per share 1)
1) EPS, diluted, excl. restructuring charges,
amortizations and write-downs of acquired
intangible assets, SEK. A reconciliation
of Alternative performance measures is
available on pages 119–123.
2) 2017 is restated due to implementation
of IFRS 15 “Revenue from Contracts with
Customers”.
Dividend per share
SEK
2.5
2.0
1.5
1.0
0.5
0.0
2.50
2.00
1.50
1.00
1.00
2017
2018
2019
2020
2021
1)
1) For 2021 as proposed by the Board of Directors.
Share trend
In 2021, Ericsson’s total market capitalization increased by 2.2% to SEK 333 billion, compared to an
increase by 19.7% reaching SEK 326 billion in 2020. In 2021, the index, OMX Stockholm, on Nasdaq
Stockholm increased by 29.1%, the Nasdaq composite index increased by 21.4% and the S&P 500
Index increased by 26.9%.
Share turnover and price trend, Nasdaq Stockholm
Class A shares, SEK
150
125
100
75
50
25
0
2017
2018
2019
2020
2021
Class B shares, SEK
150
125
100
75
50
25
0
2017
2018
2019
2020
2021
Volume traded, 000’s monthly
Ericsson share
Nasdaq Stockholm Index OMXS30
Volumes reflect trading on Nasdaq Stockholm only.
Share turnover and price trend, NASDAQ New York
ADS, USD
24
20
16
12
8
4
0
2017
2018
2019
2020
2021
Volume traded, 000’s monthly
Ericsson ADS
S&P 500
000’s share traded
monthly
26,000
//
5,000
4,000
3,000
2,000
1,000
0
000’s share traded
monthly
600,000
500,000
400,000
300,000
200,000
100,000
0
000’s share traded
monthly
300,000
250,000
200,000
150,000
100,000
50,000
0
Financial report 2021
128
Shareholder information
Shareholder information
Telefonaktiebolaget LM Ericsson’s Annual
General Meeting of shareholders 2022 will
be held on Tuesday, March 29, 2022 at 3 p.m.
Due to COVID-19, the Board of Directors
has decided that the Annual General Meet-
ing of shareholders 2022 will be conducted
without the physical presence of shareholders,
representatives and third parties and that the
meeting will be conducted as a digital meeting
with online participation, in accordance with
the Swedish Act on temporary exceptions to
facilitate the execution of general meetings in
companies and other associations. Sharehold-
ers are also able to exercise their voting rights
by post before the meeting.
Information on registration and notice of
participation, on how shareholders will be able
to exercise their voting rights, and on proxies
and assistants is found in the notice of the
Annual General Meeting. Information is also
available on Ericsson’s website
www.ericsson.com.
Dividend
The Board of Directors will propose a dividend
for 2021 of SEK 2.50 (2.00) per share to the
Annual General Meeting. The dividend is
proposed to be paid in two equal installments,
SEK 1.25 per share with the record date
March 31, 2022, and SEK 1.25 per share with
the record date September 30, 2022.
Financial information from Ericsson
2021 Form 20-F for the US market:
– March 24, 2022
Interim reports 2022:
– Q1, April 14, 2022
– Q2, July 14, 2022
– Q3, October 20, 2022
– Q4, January 20, 2023
Annual Report 2022:
– March, 2023
Financial report 2021 Financial terminology
129
Financial terminology 1)
Adjusted earnings (loss) per share
Earnings (loss) per share (EPS), diluted, excluding
amortizations and write-downs of acquired intan-
gible assets and excluding restructuring charges.
EBIT margin
Reported EBIT (loss) as a percentage
of net sales.
P/E ratio
The P/E ratio is calculated as the price of a Class B
share at last day of trading divided by earnings per
basic share.
Adjusted working capital
Current assets less current non-interest-bearing
provisions and liabilities (which include current
provisions, contract liabilities, trade payables,
current tax liabilities and other current liabilities).
CAPEX
Capital expenditures.
Capital employed
Total assets less non-interest-bearing provisions
and liabilities (which includes non-current provi-
sions, deferred tax liabilities, contract liabilities,
other non-current liabilities, current provisions,
trade payables, current tax liabilities and other
current liabilities).
Capital turnover
Net sales divided by average capital employed.
Compound annual growth rate (CAGR)
The year-over-year growth rate over a specified
period of time.
Days sales outstanding (DSO)
Trade receivables balance at quarter end divided
by net sales in the quarter and multiplied by
90 days. If the amount of trade receivables is
larger than last quarter’s sales, the excess amount
is divided by net sales in the previous quarter
and multiplied by 90 days, and total DSO are
the 90 days of the most current quarter plus the
additional days from the previous quarter.
Earnings (loss) per share (EPS)
Basic earnings (loss) per share: profit or loss
attributable to stockholders of the Parent Com-
pany divided by the weighted average number of
ordinary shares outstanding during the period.
Earnings (loss) per share diluted (EPS diluted)
Earnings (loss) per share, using the weighted
average number of shares outstanding adjusted
for the effects of dilutive potential ordinary shares.
EBITA
Earnings (loss) before interest, taxes, amorti-
zations and write-downs of acquired intangible
assets
EBITA margin
Earnings (loss) before interest, taxes, amortiza-
tions and write-downs of acquired intangible
assets (EBITA) as a percentage of net sales.
Equity ratio
Equity expressed as a percentage of total assets.
Free cash flow after M&A
Cash flow from operating activities less net capital
expenditures, other investments and repayment
of lease liabilities.
Free cash flow before M&A
Cash flow from operating activities less net capital
expenditures, other investments and repayment
of lease liabilities (excluding M&A).
Gross cash
Cash and cash equivalents plus interest-bearing
securities (current and non-current).
Gross margin
Reported gross income as a percentage of net
sales.
Inventory turnover days (ITO days)
365 divided by inventory turnover, calculated as
total cost of sales divided by the average invento-
ries for the year (net of advances from customers).
M&A
Mergers and Acquisitions.
Net cash
Cash and cash equivalents plus interest-bearing
securities (current and non-current) less borrow-
ings (current and non-current).
OCI
Other comprehensive income.
EBIT
Reported earnings (loss) before financial items
and income tax.
OPEX
Operational expenses.
1) For additional information of certain financial terms, see Alternative performance measures on pages 119–123.
Payable days
The average balance of trade payables at the
beginning and at the end of the year divided
by cost of sales for the year, and multiplied by
365 days.
Return on capital employed
Reported EBIT (loss) as a percentage of aver-
age capital employed (based on the amounts at
J anuary 1 and December 31).
Return on equity
Net income (loss) attributable to owners of the
Parent Company as a percentage of average
stockholders’ equity (based on the amounts at
January 1 and December 31).
Sales growth adjusted for comparable units
and currency
Sales growth adjusted for the impact of acquisi-
tions and divestments as well as the effects of
foreign currency fluctuations. Also named as
organic sales.
SG&A
Selling, General & Adminstrative operating
expenses.
Total shareholder return (TSR)
The increase or decrease in Class B share price
during the period, including dividend, expressed
as a percentage of the share price at the start of
the period.
Value at Risk (VaR)
A statistical method for calculating the maximum
potential loss that may occur with a given confi-
dence level over a given time period.
Exchange rates
Exchange rates in consolidation
SEK/EUR
Average rate 1)
Closing rate
SEK/USD
Average rate 1)
Closing rate
January–December
2021
2020
10.15
10.24
8.56
9.05
10.46
10.06
9.14
8.19
1) Average for the year for disclosure purpose only.
Period income and expenses for each income statement
are translated at period average exchange rates.
Financial report 2021 130
Glossary
Glossary
2G
Second generation of mobile systems (the first
digital generation). Includes GSM, TDMA, PDC
and cdmaOne.
CO2e
The amount of a particular greenhouse gas,
expressed as the amount of carbon dioxide that
gives the same greenhouse effect.
3G
Third generation mobile systems. Includes
WCDMA/HSPA, CDMA2000 and TD-SCDMA.
4G
Forth generation mobile systems, also known
as LTE.
5G
The fifth generation of mobile systems. An evolu-
tion of 4G/LTE.
BSS
Business Support Systems, the IT-systems that a
service provider uses to run its business operations
towards customers. Together with operations
support systems (OSS), they are used to support
various services for both business processes and
the network end-to-end.
Cloud
When data and applications reside in accessible
data centers.
Core network
The mobile network’s core part, which offers
numerous services to the end users who are inter-
connected by the access network. Its key function
is to direct voice calls and route data traffic.
COVID-19
The disease caused by the coronavirus
(SARS-CoV-2).
COVID-19 pandemic
The global spread of the disease caused by the
coronavirus (SARS-CoV-2).
ICT
Information and Communication Technology.
IoT
Internet of things, interconnection of computing
things enabling them to send and receive data.
IP
Internet Protocol. Defines how information travels
between network elements across the internet.
IPR
Intellectual Property Rights, or specifically patents.
LTE
Long-Term Evolution. 4G; the evolutionary step
of mobile technology beyond 3G HSPA, allowing
data rate above 100 Mbps.
Managed services
Management of operator networks and/or hosting
of their services.
Mobile broadband
Wireless high-speed internet access using
the HSPA, LTE, CDMA2000EV-DO and 5G
technologies.
OSS
Operations Support Systems, IT-systems used
by service providers to manage their networks.
They support management functions such as
network inventory, service provisioning, network
configuration and fault management. Together
with Business Support Systems (BSS), they are
used to support various services for both business
processes and the network end-to-end.
RAN
Radio Access Network, consists of a large number
radio base stations that handsets and devices can
connect to.
The terms “Ericsson”, “the Company”, “the Group”, “us”, “we”, and “our” all refer to Telefonaktiebolaget LM Ericsson and its subsidiaries.
Financial report 2021 Corporate
Governance
report
Part of
Ericsson
Annual Report
2021
Annual Report 2021
Financial
report
Corporate
Governance
report
Remuneration
report
Sustainability
and Corporate
Responsibility
report
ericsson.com
Contents
Corporate Governance report 2021
Regulation and compliance
Governance structure
General Meetings of shareholders
Nomination Committee
Board of Directors
Committees of the Board of Directors
Remuneration to Board members
Members of the Board of Directors
Management
Members of the Executive Team
Auditor
Internal control over financial reporting
Auditor’s report on the Corporate
Governance report
2
4
5
6
6
9
11
12
16
20
24
24
27
This Corporate Governance report is rendered as a separate report
added to the Financial Report in accordance with the Annual
Accounts Act ((SFS 1995:1554) Chapter 6, Sections 6 and 8) and
the Swedish Corporate Governance Code.
The report has been reviewed by Ericsson’s auditor in accordance
with the Annual Accounts Act.
A report from the auditor is appended here to.
1
Corporate Governance report 2021
Corporate governance describes how rights and responsibilities are
distributed among corporate bodies according to applicable laws,
rules and internal processes. Corporate governance also defines
the decision-making systems and structures through which owners
directly or indirectly control a company.
“For the Board, governance and compliance are a
top priority. The Board oversees Ericsson’s continued
strengthening of its Ethics and Compliance program to
ensure that it lives up to its ambitious standards. The
Company is committed to continuously developing
and improving its internal processes and internal anti-
corruption controls in the years to come.
The Code of Business Ethics outlines the fundamen-
tal ethical principles and expectations for Ericsson’s
business decisions and integrity. The Board fully supports
the addition of integrity to the Company’s core values of
respect, professionalism, and perseverance, as it clearly
strengthens the Company’s ongoing cultural transforma-
tion and reflects Ericsson’s strong ambition to build an
integrity-based “speak-up” culture.”
Ronnie Leten
Chair of the Board
Corporate Governance report 2021 2
Regulation and compliance
External rules
As a Swedish public limited liability company
with securities quoted on Nasdaq Stockholm
as well as on NASDAQ New York, Ericsson
is subject to a variety of rules that affect its
governance. Some relevant external rules
applicable to Ericsson’s governance include:
– The Swedish Companies Act
– Applicable EU regulations
– The Nordic Main Market Rulebook for
Issuers of Shares, Nasdaq Nordic
– The Swedish Corporate Governance Code
(the Code)
– The NASDAQ Stock Market Rules, including
applicable NASDAQ New York corporate
governance requirements (subject to
certain exemptions principally reflecting
mandatory Swedish legal requirements)
– Applicable requirements of the US
Securities and Exchange Commission (SEC).
Internal rules
In addition, to ensure compliance with legal
and regulatory requirements and the high
standards that Ericsson has set, Ericsson has
adopted internal rules that include:
– The Code of Business Ethics
– Group Steering Documents, including
Group policies and directives, instructions
and business processes for approval,
control and risk management
– The Code of Conduct for Business Partners
The articles of association and the work pro-
cedure for the Board of Directors also include
internal corporate governance rules.
Sustainability and corporate responsibility
governance
Ericsson’s approach to sustainability and
corporate responsibility is an integral part
of the Company’s strategy and culture and
is embedded across its operations to drive
business transformation and create value
for stakeholders.
The environmental, social and economic
performance of the Company is regularly
measured, assessed and externally assured.
A dedicated Sustainability and Corporate
Responsibility unit is accountable for devel-
oping and implementing relevant strategies,
policies, steering documents, targets and
processes.
The Board of Directors oversees the
Company’s sustainability and corporate
responsibility strategy. The Board receives
reports on risks and performance annually,
or more often as needed.
Ericsson has prepared a separate
Sustainability Report in accordance with the
Swedish Annual Accounts Act, named the
Sustainability and Corporate Responsibility
Report 2021.
Compliance with regulations
Compliance with the Swedish
Corporate Governance Code
The Code is based on the principle of “comply
or explain” and is published on the website
of the Swedish Corporate Governance
Board, which administers the Code:
www.corporategovernanceboard.se.
Ericsson does not report any deviations
from the rules of the Code in 2021.
Compliance with applic able
stock exchange rules
There has been no infringement by Ericsson
of applicable stock exchange rules and no
breach of good practice on the securities
market reported by the disciplinary
committee of Nasdaq Stockholm or the
Swedish Securities Council in 2021.
Corporate Governance report 2021 3
2019 Resolutions with US Authorities
In 2019, Ericsson announced the resolution
of investigations by the US Department
of Justice (DOJ) and the Securities and
Exchange Commission (SEC) regarding the
Company’s compliance with the US Foreign
Corrupt Practices Act (FCPA). As part of the
Deferred Prosecution Agreement (DPA) with
the DOJ and consent judgment with the SEC,
Ericsson agreed to engage an independent
compliance monitor for a period of three years
while the Company continues to undertake
significant reforms to strengthen its Ethics &
Compliance Program. In 2020, the three-year
period for the monitorship commenced with
the appointment of Dr. Andreas Pohlmann of
the firm Pohlmann & Company – Compliance
and Governance Advisory LLP as Ericsson’s
monitor. The monitor’s main responsibilities
include reviewing Ericsson’s compliance with
the terms of the resolution and evaluating
the Company’s progress in implementing
and operating its enhanced compliance
program and accompanying controls as
well as providing recommendations for
improvements.
On October 21, 2021 Ericsson received
correspondence from the DOJ stating its deter-
mination that the Company had breached its
obligations under the DPA by failing to provide
certain documents and factual information.
At this time we cannot provide further details
about the determination by the DOJ and
cannot predict the outcome of the resolution
of this matter. Ericsson has taken steps to
avoid a recurrence of the issues that led to the
breach determination. Ericsson is committed
to cooperating openly and fully with the DOJ
and its Independent Compliance Monitor
consistent with all terms set out in the DPA.
The Code of Business Ethics
Ericsson’s newly revised and enhanced Code
of Business Ethics (COBE), launched in 2021,
outlines the Company’s fundamental ethical
principles and expectations. COBE is designed
to ensure that the Company pursues business
with a strong sense of integrity and reflects
the Company’s commitment to conducting
business responsibly, consistent with all inter-
nationally recognized human rights principles
and the applicable laws and regulations where
the Company operates.
COBE is applicable to all individuals
performing work for Ericsson and under its
control (including employees, the Board
of Directors, the President and CEO, and
consultants and contractors) and has been
translated into 43 languages to ensure that it
is understood by all. Everyone working for the
Company has an individual responsibility to
ensure that their business practices adhere to
COBE.
The Company reviews and updates COBE’s
content periodically, and runs an acknowledg-
ment process regularly, including during 2021,
to ensure that everyone working for Ericsson
has read and understood it. New employees
and individuals starting work for Ericsson are
also required to acknowledge their under-
standing of COBE upon their recruitment or
on the first day of their assignment.
Ericsson’s core values
Professionalism
Respect
The Company’s core values are the foundation of its
culture. They guide employees’ daily work, in how
they relate to each other and the world around them
and in the way the Company does business.
The Code of Business Ethics and the Code of
Conduct for Business Partners can be found on
Ericsson’s website.
Perseverance
Integrity
Corporate Governance report 2021 4
Governance structure
Shareholders may exercise their decision-
making rights in Telefonaktiebolaget LM
Ericsson (the “Parent Company”) at General
Meetings of shareholders.
A Nomination Committee is appointed
each year by the major shareholders in accord-
ance with the Instruction for the Nomination
Committee adopted by the Annual General
Meeting of shareholders. The tasks of the
Nomination Committee include the proposal
of Board members and external auditor for
election by the Annual General Meeting of
shareholders and proposal of Board member
and auditor remuneration.
In addition to the Board members elected
by shareholders, the Board of Directors con-
sists of employee representatives and their
deputies who the unions have the right to
appoint under Swedish law. The Board of
Directors is ultimately responsible for the
strategy and the organization of Ericsson and
the management of its operations.
The President and CEO, appointed by the
Board of Directors, is responsible for handling
the day-to-day management of Ericsson in
accordance with guidelines issued by the
Board. The President and CEO is supported by
the Executive Team.
The external auditor of Ericsson is
appointed by the shareholders at the General
Meeting of shareholders.
More information on Ericsson’s share-
holders can be found in the chapter “The
Ericsson share” in the Financial Report.
Ownership structure
As of December 31, 2021, the Parent
Company had 423,904 registered share-
holders, of which 411,093 were resident or
located in Sweden (according to the share
register kept by Euroclear Sweden AB).
Swedish institutions held approximately
58.66% of the votes. The largest share holders
as of December 31, 2021 were Investor AB
with approximately 23.79% of the votes
(8.00% of the shares) and AB Industrivärden
(together with Svenska Handelsbankens
Pensionsstiftelse and Pensionskassan SHB
Tjänstepensionsförening) with approximately
15.45% of the votes (2.95% of the shares)
and AMF Tjänstepension & AMF Fonder with
approximately 4.36% of the votes (1.87% of
the shares).
A significant number of the shares held by
foreign investors are nominee-registered, i.e.,
held of record by banks, brokers and/or
nominees. This means that the actual share-
holder is not displayed in the share register or
included in the shareholding statistics.
Shares and voting rights
The share capital of the Parent Company
consists of two classes of shares listed on
Nasdaq Stockholm: A and B shares. Each
Class A share carries one vote, and each Class
B share carries one tenth of one vote. Class
A and B shares entitle the holder to the same
proportion of assets and earnings and carry
equal rights to dividends.
The Parent Company may also issue Class
C shares, which are converted into Class B
shares to create treasury stock to finance
and hedge long-term variable compensation
programs resolved by the General Meeting
of shareholders.
In the US, the Ericsson Class B shares are
listed on NASDAQ New York in the form of
American Depositary Shares (ADS) evidenced
by American Depositary Receipts (ADR). Each
ADS represents one Class B share.
The members of the Board of Directors and
the Executive Team have the same voting
rights on shares as other shareholders holding
the same class of shares.
Governance structure
Shareholders
Ownership percentage (voting rights)
General Meeting of shareholders
Annual General Meeting/Extraordinary General Meeting
Nomination
Committee
Unions
Board of Directors
Directors elected by the General Meetings of shareholders
3 Directors & Deputies appointed by the Unions
External
Auditors
Audit and
Compliance
Committee
Finance
Committee
Remuneration
Committee
Technology
and Science
Committee
President and CEO
Management
Head of Internal
audit function
Chief Compliance
Officer
Swedish institutions:
Of which:
– Investor AB:
– AB Industrivärden:
(together with SHB Pensions -
stiftelse and Pensionskassan
SHB Tjänstepensionsförening
58.66%
23.79%
15.45%
– AMF Tjänstepension & AMF Fonder: 4.36%
28.23%
5.02%
8.09%
Foreign institutions:
Swedish retail investors:
Others:
Source: Nasdaq
Corporate Governance report 2021 5
General Meetings of shareholders
Decision-making at General Meetings
The decision-making rights of Ericsson’s
shareholders are exercised at General
Meetings of shareholders. Most resolutions
at General Meetings are passed by a simple
majority. However, the Swedish Companies
Act requires qualified majorities in certain
cases, for example in case of:
– Amendment of the articles of association
– Resolution to transfer treasury stock to
employees participating in long-term
variable compensation programs.
The Annual General Meeting
of shareholders
The Annual General Meeting of shareholders
(AGM) is held in Stockholm. The date and
venue for the meeting are announced on the
Ericsson website no later than at the time of
release of the third-quarter interim financial
report in the preceding year.
Shareholders who cannot participate in
person may be represented by proxy. The
Board of Directors may decide, in accordance
with the articles of association, that the share-
holders also shall be able to exercise their
voting rights by post before the AGM pursuant
to the procedure stated in the Swedish
Companies Act. Only shareholders registered
in the share register have voting rights.
Nominee-registered shareholders who wish to
vote must request to be entered into the share
register by the record date for the AGM.
The AGM is held in Swedish and is simulta-
neously translated into English.
Documentation provided by the Company is
available in both Swedish and English.
The AGM gives shareholders the opportu-
nity to raise questions relating to the opera-
tions of the Group. Normally, the majority of
the members of the Board of Directors and
the Executive Team is present to answer
such questions.
– Approval of Board of Directors’ fees,
in accordance with the Nomination
Committee’s proposal:
- Chair: SEK 4,225,000 (previously
SEK 4,075,000)
- Other non-employee Board members:
SEK 1,060,000 each (previously
SEK 1,020,000)
The external auditor is present at the AGM.
- Chair of the Audit and Compliance
Ericsson’s AGM 2021
Including shareholders represented by proxy,
1,890 shareholders were represented at the
AGM held on March 30, 2021 representing
approximately 67% of the votes.
Due to the COVID-19 pandemic, the AGM
2021 was conducted without the physical
presence of shareholders, representatives and
third parties and the shareholders were able to
exercise their voting rights only by post before
the meeting. This in line with section 22 of the
Act (2020:198) on temporary exceptions to
facilitate the execution of general meetings in
companies and other associations. To allow
shareholders to listen to management and ask
questions, the Company also held an on-line
shareholder event before the voting deadline.
Decisions of the AGM 2021 included:
– Payment of a dividend of SEK 2.00 per
share to be paid in two instalments
– Re-election of Ronnie Leten as Chair
of the Board of Directors
– Re-election of other members of the
Board of Directors: Jon Fredrik Baksaas,
Jan Carlson, Eric A. Elzvik, Nora Denzel,
Börje Ekholm, Kurt Jofs, Kristin S. Rinne,
Helena Stjernholm and Jacob Wallenberg
Committee: SEK 420,000 (previously
SEK 400,000)
- Other non-employee members of the
Audit and Compliance Committee:
SEK 270,000 each (previously
SEK 250,000)
- Chairs of the Finance Committee, the
Remuneration Committee and the
Technology and Science Committee:
SEK 205,000 each (previously
SEK 200,000)
- Other non-employee members of the
Finance Committee, the Remuneration
Committee and the Technology and
Science Committee: SEK 180,000 each
(previously SEK 175,000)
– Approval for part of the Directors’ fees to be
paid in the form of synthetic shares
– Appointment of Deloitte AB as auditor for
the period up until the end of the AGM 2022
– Amendment of the articles of association
– Implementation of a Long-Term Variable
Compensation Program 2021 (LTV 2021)
for the Executive Team.
The minutes from the AGM 2021 are available
on Ericsson’s website.
Contact the Board of Directors
Telefonaktiebolaget LM Ericsson
The Board of Directors Secretariat
SE-164 83 Stockholm
Sweden
boardsecretariat@ericsson.com
Annual General Meeting 2022
Ericsson’s AGM 2022 will take place on March
29, 2022. Further information is available on
Ericsson’s website.
Corporate Governance report 2021 6
Nomination Committee
The AGM has adopted an Instruction for the
Nomination Committee that includes the
tasks of the Nomination Committee and the
procedures for appointing its members. The
Instruction applies until the General Meeting
of shareholders resolves otherwise. Under the
Instruction, the Nomination Committee shall
consist of:
– Representatives of the four largest share-
holders by voting power by the end of the
month in which the AGM was held, and
– The Chair of the Board of Directors.
The Committee may also include additional
members following a request by a shareholder.
The request must be justified by changes in
the shareholder’s ownership of shares and be
received by the Nomination Committee no
later than December 31 of each year. No fees
are paid to the members of the Nomination
Committee. However, the Company shall bear
the reasonable expenses reasonably related to
the assignment of the Nomination Committee.
Members of the Nomination Committee
The current Nomination Committee members
are:
– Johan Forssell (Investor AB), Chair of the
Nomination Committee
– Karl Åberg (AB Industrivärden)
– Anders Oscarsson (AMF Tjänstepension &
AMF Fonder)
– Jonas Synnergren (Cevian Capital Partners
Limited)
– Ronnie Leten (the Chair of the Board
of Directors).
The tasks of the Nomination Committee
The main task of the Nomination Committee
is to propose Board members for election
by the AGM. As member of the Nomination
Committee, the Chair of the Board of Directors
fulfills an important role to inform the
Committee of the Company’s strategy and
future challenges. Such insights are necessary
for the Committee to be able to assess the
competence and experience that is required
by the Board. In addition, the Committee must
consider independence rules applicable to the
Board of Directors and its committees.
The Nomination Committee also makes the
following proposals, for resolution by the AGM:
– Remuneration to non-employee Directors
elected by the AGM and remuneration to
the auditor
– Appointment of auditor, whereby candi-
dates are selected in cooperation with the
Audit and Compliance Committee of the
Board
– Election of Chair at the AGM
– Changes to the Instruction for the
Nomination Committee (if any).
Work of the Nomination Committee
for the AGM 2022
The Nomination Committee started its work
by going through a checklist of its duties
under the Code and the Instruction for the
Nomination Committee and by setting a
time plan for its work ahead. The complete
proposals of the Nomination Committee
are presented in connection with the notice
convening the AGM 2022.
A good understanding of Ericsson’s busi-
ness and strategy is important for the
Nomination Committee. Therefore, the Chair
of the Board presented his views to the
Committee on the Company’s strategy and
challenges. The Committee also met with
Ericsson’s President and CEO, Börje Ekholm,
who presented his views in this respect.
The Committee has analysed the needs
of competencies in the Board and has been
informed of the results of the Board work
evaluation led by the Chair of the Board. On
this basis the Nomination Committee has
assessed the competence and experience
required by Ericsson’s Board members and the
need for improvement of the composition of
the Board in terms of diversity in age, gender
and cultural/geographic background. The
Nomination Committee has applied the
Swedish Corporate Governance Code, section
4.1, as diversity policy. The Nomination
Committee aims to propose a composition
of Board members with complementing expe-
riences and competencies to make it possible
for the Board to contribute to a positive devel-
opment of Ericsson. The Nomination
Committee searches for potential Board
member candidates both with a long-term
and a short-term perspective and always
focuses on diversity to ensure that the Board
is provided with different perspectives into
the Board work and considerations. The
Nomination Committee also considers the
need for renewal and carefully assesses
whether the proposed Directors have the
capability to devote necessary time and care
to the Board work.
In 2021, the Committee met with the Chair
of the Audit and Compliance Committee to
acquaint itself with the assessments made by
the Company and the Audit and Compliance
Committee of the quality and efficiency of
external auditor work. The Audit and
Compliance Committee also provided its
recommendations on external auditor and
audit fees.
As of February 22, 2022, the Nomination
Committee has held four meetings.
Board of Directors
The Board of Directors is ultimately respon-
sible for the organization of Ericsson and the
management of Ericsson’s operations. The
Board appoints the President and CEO who
is responsible for managing the day-to-day
operations in accordance with guidelines from
the Board. The President and CEO ensures
that the Board is updated regularly on issues
of importance to Ericsson. This includes
updates on business development, results,
financial position and liquidity.
Directors serve from the close of one AGM
to the close of the next, but can serve any
number of consecutive terms.
The President and CEO may be elected a
Director of the Board but may not be elected
Chair of the Board under the Swedish
Companies Act.
Contact the Nomination Committee
Telefonaktiebolaget LM Ericsson
The Nomination Committee
c/o The Board of Directors Secretariat
SE-164 83 Stockholm
Sweden
nomination.committee@ericsson.com
Proposals to the Nomination Committee
Shareholders may submit proposals to the
Nomination Committee at any time but should
do so in due time before the AGM to ensure
that the proposals can be considered by the
Committee. Further information is available on
Ericsson’s website.
Corporate Governance report 2021 7
Conflicts of interest
Ericsson maintains rules and regulations
regarding conflicts of interest. Directors are
disqualified from participating in any decision
regarding agreements between themselves
and Ericsson. The same applies to agreements
between Ericsson and any third party or legal
entity in which the Board member has an
interest that may be contrary to the interests
of Ericsson.
The Audit and Compliance Committee
oversees the procedures for related-party
transactions. The Committee has also imple-
mented a pre-approval process for non-audit
services carried out by the external auditor.
Composition of the Board of Directors
and diversity
The current Board of Directors consists of ten
Directors elected by the shareholders at the
AGM 2021 for the period until the close of
the AGM 2022. The Board of Directors also
consists of three employee representatives
and two deputies, appointed by the trade
unions for the same period of time.
The Nomination Committee advised before
the AGM 2021 that the Nomination
Committee had applied the Swedish
Corporate Governance Code, section 4.1,
as diversity policy with the aim to propose a
composition of Board members with comple-
menting experiences and competencies that
is diverse also in terms of age, gender and
cultural/geographical background. The cur-
rent Board composition is the result of the
work of the Nomination Committee prior to
the AGM 2021. The Board consists of Board
members with experiences from different
cultural/geographic areas, com peten cies from
different industry sectors and, excluding the
President and CEO, 33% of the shareholder
elected Board members are women.
session is normally held without Ericsson
management present.
Work procedure
In accordance with the Swedish Companies
Act, the Board of Directors has adopted a work
procedure for the Board and its Committees
outlining rules for the distribution of tasks
among the Board, its Committees and the
President and CEO. This complements the
rules in the Swedish Companies Act and in
the articles of association of the Company.
The work procedure is reviewed, evaluated
and amended by the Board as required or
appropriate, and is adopted by the Board at
least once a year.
Independence
The Board of Directors and its Committees
are subject to a variety of independence rules
under applicable Swedish law, the Code and
applicable US securities laws, SEC rules and
the NASDAQ Stock Market Rules. Ericsson
can rely on exemptions from certain US and
SEC requirements and may decide to follow
Swedish practices in lieu of the NASDAQ Stock
Market independence rules.
The composition of the Board of Directors
meets all applicable independence criteria.
The Nomination Committee concluded before
the AGM 2021 that, for purposes of the Code,
at least six of the nominated Directors were
independent from Ericsson, its senior manage-
ment and its major shareholders. These were
Jon Fredrik Baksaas, Jan Carlson, Nora Denzel,
Eric A. Elzvik, Kurt Jofs and Kristin S. Rinne.
At Board meetings where the Board
members meet in person, a non-executive
Structure of the work of the Board
of Directors
The work of the Board follows a yearly cycle.
This enables the Board to appropriately
address each of its duties and to keep strategy,
risk assessment and value creation high on
the agenda.
As the Board is responsible for financial
oversight, financial information is presented
and evaluated at Board meetings.
Furthermore, the Chair of each Committee
reports on Committee work at Board meetings
and minutes from the Committee meetings are
made available to all Directors.
At Board meetings, the President and CEO
reports on business and market developments
as well as on the financial performance of the
Group. Strategic issues and risks are also
addressed at most Board meetings. The Board
is regularly informed of developments in legal
and regulatory matters of importance. Board
and Committee meetings may, as appropriate,
be held by way of telephone or video confer-
ence, and resolutions may be taken per capsu-
lam (unanimous written consent). Such reso-
lutions are accounted for as Board/Committee
meetings. During 2021, most of the Board
meetings have been held by way of video
conference due to the COVID-19 pandemic.
The 2021 annual work cycle of the Board
– Fourth-quarter and full-year financial
results meeting
Following the end of the calendar year, the
Board held a meeting which focused on the
The Board’s annual work cycle 2021
The annual cycle applied to
the Board’s work allows the
Board to appropriately address
its duties during the year. It
also facilitates the organiza-
tion in aligning its global
processes to allow appropriate
Board involvement.
Financial targets meeting
– Board work evaluation
Fourth-quarter and full-year
financial results meeting
– Financial result of the past year
Third interim report meeting
– Q3 Financial report
– Financial outlook
Q4
Dec
Jan
Q1
Nov
Feb
Oct
Sep
Strategy meeting
Mar
Apr
Board meeting
(incl. statutory matters)
First interim report meeting
– Q1 Financial report
Aug
May
Q3
Jul
Jun
Q2
Second interim report meeting
– Q2 Financial report
Strategy meeting
Corporate Governance report 2021 8
financial results of the entire year 2020 and
handled the fourth-quarter financial report.
– Board meeting (incl. statutory matters)
A Board meeting was held in connection
with the AGM 2021. Members of each of
the Board Committees were appointed and
the Board resolved on signatory powers.
– First interim report meeting
Directors’ knowledge in these fields is crucial
to allow well-founded Board resolutions, and
to ensure that the Company takes due advan-
tage of the different competencies of the
Directors.
During 2021, the Board has had deep dives
into topics such as ethics and compliance and
the regulatory landscape.
At the first interim report meeting, the
Board addressed the interim financial
report for the first quarter of the year.
– Strategy meeting
A Board meeting was held to address
particular strategic matters in further detail.
– Second interim report meeting
At the second interim report meeting, the
Board addressed the interim financial
report for the second quarter of the year.
– Strategy meeting
A Board meeting was held, in essence
dedicated to short-term and long-term
strategies of the Group, with particular
focus on merger & acquisitions.
– Third interim report meeting
At the third interim report meeting, the
Board addressed the interim financial
report for the third quarter of the year and
the financial outlook.
– Financial targets meeting
A Board meeting was held, e.g., for the
Board to address the financial targets.
At this meeting, the results of the Board
evaluation were presented to and dis-
cussed by the Board.
Training
New Directors receive training tailored to their
individual needs. Introductory training typi-
cally includes meetings with heads of business
areas and Group functions, as well as training
required by Nasdaq Stockholm on listing
issues and insider rules.
The Board’s strategy discussions are
usually combined with deep dives into issues
of importance for the Ericsson Group, includ-
ing business area and market area deep dives.
Auditor involvement
At the AGM 2021, Deloitte AB was reappointed
external auditor.
The Board meets with Ericsson’s external
auditor in closed sessions at least once a year
to receive and consider the auditor’s observa-
tions. The auditor provides reports to manage-
ment on the accounting and financial
reporting of the Group.
The Audit and Compliance Committee also
meets regularly with the auditor to receive and
consider observations on the interim reports
and the Annual Report. The auditor reports on
whether the accounts, the management of
funds and the general financial position of
the Group are presented fairly in all material
respects.
In addition, the Board reviews and
assesses the process for financial reporting,
as described on page 25 under Internal control
over financial reporting. Combined with other
steps taken internally, the Board’s and the
auditor’s review of the interim and annual
reports are deemed to give reasonable
assurance of the effectiveness of the internal
controls over financial reporting.
Work of the Board of Directors in 2021
In 2021, 18 Board meetings were held. For
attendance at Board meetings, see the table
on page 11. In addition to the Board meet-
ings held as a part of the annual work cycle
of the Board, the Board receives information
updates, in writing or in telephone meetings,
as deemed appropriate.
Business strategy, ethics and compliance,
geopolitics, cyber security and mergers and
acquisitions, are among the matters that have
been in focus within the Board during the year.
Compliance, strategy and risk management
are always high on the Board’s agenda as well
as sustainability and corporate responsibility,
which are integrated into the business
strategy. The Board continuously monitors
international developments and their possible
impact on Ericsson.
Board work evaluation
A key objective of the Board work evaluation
is to ensure that the Board work is functioning
well. This includes gaining an understanding
of the issues that the Board thinks warrant
greater focus, as well as determining areas
where additional competence is needed within
the Board and whether the Board composition
is appropriate. The evaluation also serves
as guidance for the work of the Nomination
Committee.
Each year, the Chair of the Board initiates
and leads the evaluation of the Board and
Committee work and procedures. Evaluation
tools include detailed questionnaires and
discussions. The services of an external corpo-
rate advisory firm have been retained by the
Company to assist in developing question-
naires, carrying out surveys and summarizing
responses.
In 2021, Directors responded to a written
questionnaire covering the Board work in
general as well as the work of the Chair of the
Board, the Audit and Compliance Committee,
the Finance Committee, the Remuneration
Committee and the Technology and Science
Committee. In addition, each Director
responded to a questionnaire on the Director’s
individual performance. As part of the evalua-
tion process, the Chair of the Board also had
individual discussions with each of the
Directors. The results from the evaluations
were presented to the Board and were
t horoughly discussed. The Nomination
Committee was informed of the results of
the Board work evaluation.
Organization of the Board work
Number of Committee members as of December 31, 2021
Board of Directors
13 Directors
Audit and Compliance Committee
(4 Directors)
Finance Committee
(4 Directors)
Oversight of financial reporting
Finance strategy
Oversight of internal control
Oversight of auditing
Oversight of the Group’s Ethics &
Compliance program
Remuneration Committee
(4 Directors)
Guidelines for remuneration
to Group management
Long-Term Variable Remuner ation
Executive remuneration
Technology and Science
Committee
(5 Directors)
Technology strategy and planning
Technology ecosystem and
partnerships
Science direction
Corporate Governance report 2021 9
Committees of the Board of Directors
The Board of Directors has currently
established four Committees: the Audit
and Compliance Committee, the Finance
Committee, the Remuneration Committee
and the Technology and Science Committee.
Members of each Committee are appointed for
one year from among the Board members.
The main task of the Committees is to
prepare matters for resolution by the Board.
However, the Board has authorized each
Committee to determine and handle certain
issues in limited areas. It may also on occasion
provide extended authorization for the
Committees to determine specific matters. If
deemed appropriate, the Board of Directors
and each Committee have the right to engage
independent external expertise, either in
general or with respect to specific matters.
The minutes from the Committee meetings
are made available to all Directors and the
Chair of the Committee reports on the work of
the Committee at Board meetings.
Audit and Compliance Committee
On behalf of the Board, the Audit and
Compliance Committee monitors the
following:
– The scope and accuracy of the financial
statements
– Compliance with material legal and regula-
tory requirements
– Internal control over financial reporting
– Risk management
– The effectiveness and appropriateness of
the Group’s compliance programs including
the Ethics & Compliance (E&C) Program.
The Audit and Compliance Committee also
reviews the annual and interim financial
reports and oversees the external audit
process. In order to ensure the auditor’s
independence, there are pre-approval policies
and procedures in place for audit and non-
audit related services to be performed by the
external auditor. Pre-approval authority may
not be delegated to management.
The Audit and Compliance Committee
itself does not perform audit work. The Head
of Ericsson’s internal audit function reports
directly to the Audit and Compliance
Committee.
Ericsson’s external auditor is appointed by
the shareholders at the AGM. The Committee
is involved in the preparatory work for the
Nomination Committee to propose external
auditor for appointment at the AGM. It also
monitors the ongoing performance and inde-
pendence of the auditor with the aim to avoid
conflicts of interest.
The Audit and Compliance Committee
oversees matters relating to compliance risk,
and regularly receives reporting on compli-
ance related matters from the Chief Legal
Officer, the Chief Compliance Officer and the
Head of Corporate Investigations. The Chief
Legal Officer has a direct reporting line to the
Audit and Compliance Committee on compli-
ance matters that fall outside the scope of the
E&C Program, and on the holistic manage-
ment of legal, compliance, ethical and associ-
ated reputational risks arising in the
Company’s operations. The Chief Compliance
Officer has a further independent reporting
line to the Committee on the areas of the E&C
Program (defined as the areas of ethics, anti-
bribery and -corruption, conflicts of interests,
anti-money laundering and competition law).
The Chief Compliance Officer regularly reports
to the Committee on the effective operation of
the E&C Program, including information of
actual or suspected serious Code of Business
Ethics (COBE) violations, insights from investi-
gations outcomes and remediation activities,
the identification of patterns of failures, and
emerging risks and changes in the legal and
regulatory environment. The Head of
Corporate Investigations has an extraordinary
reporting line to the Committee in the event
s(he) is impeded or obstructed in fulfilling his/
her duties.
The Audit and Compliance Committee also
oversees Ericsson’s process for reviewing
transactions with related parties and
Ericsson’s whistleblower procedures. Further,
the Audit and Compliance Committee reviews
the Group’s handling of information and cyber
security as well as data privacy, and the
Group’s environmental, social and governance
(ESG) reporting and performance.
On an annual basis, the Audit and
Compliance Committee receives training on
topics of special relevance to the Committee,
within areas such as finance, legal, compliance
and cyber security. During 2021, the
Committee received training on several topics
including anti-corruption and competition law.
Reporting Compliance Concerns
Ericsson provides employees and other exter-
nal stakeholders a dedicated communication
channel for reporting compliance concerns
– the Ericsson Compliance Line. The Ericsson
Compliance Line is operated by a third party
and it is available 24/7, 365 days per year,
enabling people to report from multiple
countries and in many languages. Employees
and external stakeholders are encouraged
to report conduct that could violate the law,
Ericsson’s policies including COBE and related
steering documents or the Ericsson Code of
Conduct for Business Partners. Such conduct
may relate to corruption, fraud, questionable
accounting, deficiencies in the internal con-
trols, auditing, environmental, occupational
health and safety, human right matters, work-
place respect and fairness or other matters
that could constitute a breach of law, or that
could harm the sustainability or reputation of
Ericsson, its employees and shareholders.
Ericsson’s Allegation Management Office
is responsible for the overall management
process from the time an allegation of a
potential compliance violation is reported to
the remediation of any such substantiated
violation. Corporate Investigations is respon-
sible for ensuring that all plausible allegations
Members of the Committees as of December 31, 2021
Members of the Committees of the Board of Directors
Audit and Compliance Committee
Finance Committee
Remuneration Committee
Eric A. Elzvik (Chair)
Jan Carlson
Kurt Jofs
Torbjörn Nyman
Ronnie Leten (Chair)
Anders Ripa
Helena Stjernholm
Jacob Wallenberg
Jon Fredrik Baksaas (Chair)
Kurt Jofs
Ronnie Leten
Kjell-Åke Soting
Technology and Science
Committee
Kristin S. Rinne (Chair)
Jan Carlson
Nora Denzel
Kurt Jofs
Anders Ripa
Corporate Governance report 2021 10
of potential compliance violations assigned to
Corporate Investigations are appropriately
investigated and for oversight of investiga-
tions that it delegates to other Ericsson units
(e.g., Security, People) or to external third-
party investigators. Group-relevant allega-
tions reported through the Ericsson
Compliance Line and other channels are
reported to the Audit and Compliance
Committee.
To respond to the coming into force of the
EU Directive on Whistleblower Protection, and
its transposition into Swedish and other local
laws, Ericsson has enhanced its internal pro-
cesses and is further analyzing the impact on
its current allegation management process to
meet further requirements entering into force
during 2022.
More information on reporting compliance
concerns can be found on page 18 of the
Sustainability and Corporate Responsibility
report.
Members of the Audit and Compliance
Committee
The Audit and Compliance Committee consists
of four Board members appointed by the
Board in connection with the AGM 2021:
Eric A. Elzvik (Chair), Jan Carlson, Kurt Jofs,
and Torbjörn Nyman (employee representa-
tive). The Board has appointed shareholder
elected Board members with CFO or CEO
experience to the Committee.
The composition of the Audit and
Compliance Committee meets all applicable
independence requirements, including the
conditions for reliance on an exemption for
employee representatives. The Board of
Directors has determined that each of Eric A.
Elzvik, Jan Carlson and Kurt Jofs is an “audit
committee financial expert”, as defined under
the SEC rules and regulations, and that each of
them qualifies as financially sophisticated
under the applicable Nasdaq listing rules and
are familiar with the accounting practices of
an international company, such as Ericsson.
Work of the Audit and Compliance
Committee in 2021
The Audit and Compliance Committee held
eleven meetings in 2021. Directors’ attend-
ance is reflected in the table on page 11.
During the year, the Audit and Compliance
Committee reviewed the scope and results
of external financial audits and the inde-
pendence of the external auditor. Prior to
publishing, the Committee also reviewed
and discussed each interim report and the
annual report with the external auditor. The
Committee also monitored the external
audit fees and approved non-audit-services
performed by the external auditor in accord-
ance with such policies and procedures.
The Committee approved the audit plan for
the internal audit function based on among
other things the annual risk assessment, and
reviewed the reports of the internal audit
function. The Committee also received and
reviewed updates and reports to the Ericsson
Compliance Line and from other internal
reporting channels including updates on
on-going investigations within the Group.
The Committee monitored the continued
compliance with the Sarbanes-Oxley Act as
well as the internal control and risk manage-
ment process and monitored and evaluated
the effectiveness and appropriateness of
Ericsson’s E&C Program.
Finance Committee
The Finance Committee is responsible for
preparing for resolution by the Board, matters
related to the finance strategy such as capital
structure, capital targets, rating strategy and
treasury operations.
Members of the Finance Committee
The Finance Committee consists of four Board
members appointed by the Board in connec-
tion with the AGM 2021: Ronnie Leten (Chair),
Anders Ripa (employee representative),
Helena Stjernholm and Jacob Wallenberg.
The Board has appointed shareholder elected
Board members with extensive industrial and
financial experience to the Committee.
Work of the Finance Committee in 2021
The Finance Committee held four meetings in
2021. Directors’ attendance is reflected in the
table on page 11. During 2021, the Finance
Committee assessed the Company’s finan-
cial strength and balance-sheet as well as
reviewed the finance strategy including capital
structure, capital targets, rating strategy and
treasury operations.
Remuneration Committee
The Remuneration Committee’s responsibili-
ties include:
– Reviewing and preparing, for resolution by
the Board, proposals on salary and other
remuneration, including retirement com-
pensation, for the President and CEO
– Reviewing and preparing, for resolution
by the Board, proposals to the AGM
on Guidelines for remuneration to the
Executive Team
– Reviewing and preparing, for resolution
by the Board, proposals to the AGM on
the Long-Term Variable Compensation
Program (LTV) and similar equity
arrangements
– Approving proposals on salary and other
remuneration, including retirement
compensation, for the members of the
Executive Team (other than the President
and CEO)
– Approving proposals on target levels for the
short-term variable compensation (STV)
for the members of the Executive Team
(other than the President and CEO)
– Approving pay-out of the STV for the
members of the Executive Team members
(other than the President and CEO), based
on achievements and performance.
In its work, the Remuneration Committee
considers trends in remuneration, legislative
changes, disclosure rules and the general
global executive remuneration environment.
It reviews salary survey data before preparing
salary adjustment recommendations for the
President and CEO for resolution by the Board
and before approving any salary adjustments
for the other members of the Executive Team.
Members of the Remuneration Committee
The Remuneration Committee appointed by
the Board in connection with the AGM 2021
consists of four Board members: Jon Fredrik
Baksaas (Chair), Kurt Jofs, Ronnie Leten
and Kjell-Åke Soting (employee representa-
tive). The Board has appointed shareholder
elected Board members to the Committee
with experiences from different markets of
relevance to the Group.
During the year 2021, Peter Boreham from
Mercer advised and assisted the
Remuneration Committee as an independent
expert.
Work of the Remuneration Committee
in 2021
The Remuneration Committee held eight
meetings in 2021. Director’s attendance is
reflected in the table on page 11.
The Remuneration Committee reviewed
and prepared a proposal for LTV 2021 for the
Executive Team, for resolution by the Board
and further approval by the AGM 2021. It
further resolved on salaries and STV 2021 for
the members of the Executive Team (other
than the President and CEO), reviewed the
vesting results for LTV 2018 and result of the
2020 EBIT (Group operating income) perfor-
mance condition for LTV 2020, and prepared
proposals regarding remuneration to the
President and CEO for resolution by the Board.
It reviewed the implementation of Guidelines
for remuneration to the Executive Team in
2021 and resolved not to propose any
changes for resolution by the Board. It also
proposed the Remuneration Report 2020 to
be approved by the Board and subsequently
referred to the AGM 2021 for adoption.
During the latter part of 2021 the
Remuneration Committee reviewed the
current LTV structure and executive remunera-
tion, including the integration of environmen-
tal, social and governance (ESG) performance
measures to executive remuneration, along
Corporate Governance report 2021 11
with 2022 targets for STV for the members of
the Executive Team (other than the President
and CEO) and the Remuneration Report 2021.
The resulting proposals on LTV 2022 and the
Remuneration Report will be referred to the
AGM 2022 for approval.
For further information on fixed and vari-
able remuneration, please see Notes to the
consolidated financial statements – note G2
Information regarding members of the Board
of Directors and Group management and
note G3 “Share-based compensation” in the
Financial report and the Remuneration report.
Technology and Science Committee
The responsibilities of the Technology and
Science Committee include:
– Reviewing and preparing for consideration
and/or resolution by the Board, matters
related to technology strategy and plan-
ning for the Group, monitoring the Group’s
technology ecosystem, relationships and
partnerships
– Reviewing and preparing for consideration
and/or resolution by the Board, matters
related to science direction and influence
on a geopolitical level.
Members of the Technology and Science
Committee
The Technology and Science Committee
consists of five Board members appointed
by the Board in connection with the AGM
2021: Kristin S. Rinne (Chair), Jan Carlson,
Nora Denzel, Kurt Jofs and Anders Ripa
(employee representative). The Board has
appointed Board members to the Committee
with extensive experience within technology.
Work of the Technology and Science
Committee in 2021
The Technology and Science Committee held
four meetings in 2021. Directors’ attendance
is reflected in the table below. The Technology
and Science Committee has during the year
reviewed selected focus areas:
– Network evolution
– Semiconductor industry
– Artificial Intelligence
– Cloud and edge technologies
– Energy and sustainability.
Directors’ attendance and fees 2021
Board member
Ronnie Leten
Helena Stjernholm
Jacob Wallenberg
Jon Fredrik Baksaas
Jan Carlson
Nora Denzel
Börje Ekholm
Eric A. Elzvik
Kurt Jofs
Kristin S. Rinne
Torbjörn Nyman
Anders Ripa 4)
Kjell-Åke Soting
Roger Svensson 5)
Per Holmberg 6)
Ulf Rosberg 7)
Loredana Roslund
Total number of meetings
Fees resolved by the AGM 2021
Number of Board/Committee meetings attended in 2021
Board fees,
SEK 1)
Committee fees,
SEK
Audit and
Compliance-
Committee
Board
Finance
Committee
Remun.
Committee
Tech. and
Science
Committee
4,225,000
1,060,000
1,060,000
1,060,000
1,060,000
1,060,000
– 2)
1,060,000
1,060,000
1,060,000
27,000 3)
27,000 3)
27,000 3)
4,500 3)
21,000 3)
22,500 3)
27,000 3)
385,000
180,000
180,000
205,000
450,000
180,000
–
420,000
630,000
205,000
16,500 3)
9,000 3)
12,000 3)
3,000 3)
–
–
–
18
18
18
18
18
18
18
18
18
18
18
18
18
3
14
15
18
18
10
11
11
11
11
4
4
4
3
1
4
8
8
8
8
8
4
4
4
4
3
1
4
1) Non-employee Directors can choose to receive part of their Board fee (exclusive of Committee fees) in the form of synthetic shares.
2) Board member remuneration resolved by the AGM is only for non-employee Directors elected by the shareholders.
3) Employee representative Board members and their deputies are not entitled to a Board fee, but instead get paid compensation in the amount of SEK 1,500 per attended Board and Committee meeting.
4) Appointed employee representative Board member as of March 30, 2021 (previously deputy employee representative Board member).
5) Resigned as employee representative Board member as of March 30, 2021.
6) Resigned as deputy employee representative Board member as of November 3, 2021.
7) Appointed deputy employee representative Board member as of March 30, 2021.
Remuneration to Board members
Remuneration to Board members not
employed by the Company is proposed by the
Nomination Committee for resolution by the
AGM.
The AGM 2021 approved the Nomination
Committee’s proposal for fees to non-
employee Board members for Board and
Committee work. For further information on
Board of Directors’ fees 2021, please refer to
Notes to the consolidated financial statements
– note G2 “Information regarding members
of the Board of Directors and Group manage-
ment” in the Financial Report.
The shareholders at the AGM 2021 also
approved the Nomination Committee’s pro-
posal that Board members may be paid part of
their Board fee in the form of synthetic shares.
A synthetic share gives the right to receive
a future cash payment of an amount which
corresponds to the market value of a Class
B share in Ericsson at the time of payment.
The Directors’ right to receive payment with
regard to allocated synthetic shares occurs,
as a general rule, after the publication of the
Company’s year-end financial statement
during the fifth year following the General
Meeting that resolved on the allocation of
the synthetic shares. The purpose of paying
part of the Board of Directors’ fee in the form
of synthetic shares is to further align the
Directors’ interests with shareholder interests.
For more information on the terms and condi-
tions of the synthetic shares, please refer to
the notice convening the AGM 2021 and to
the minutes from the AGM 2021, which are
available at Ericsson’s website.
Corporate Governance report 2021 12
Members of the Board of Directors
Board members elected by the AGM 2021
Ronnie Leten
Chair of the Board of Directors, Chair
of the Finance Committee, Member
of the Remuneration Committee
Helena Stjernholm
Deputy Chair of the Board of
Directors, Member of the Finance
Committee
First elected
2018
Born
1956
Education
Master of Science in Applied
Economics, University of Hasselt,
Belgium.
First elected
2016
Born
1970
Education
Master of Business Administration,
Stockholm School of Economics,
Sweden.
Nationality
Belgium
Board Chair
Epiroc AB and Piab
Board Member
–
Holdings in Ericsson
100,000 Class B shares 1), 128,452
call options 2). and 94,954 synthetic
shares 3).
Principal work experience
and other information
President and CEO of Atlas Copco AB
2009–2017 and various leadership
positions within the Atlas Copco
Group 1997–2009 and 1985–1995.
Previous positions include plant
manager of Tenneco Automotive
Inc., Belgium, 1995–1997 and
various positions within General
Biscuits 1979–1985.
Nationality
Sweden
Board Chair
–
Board Member
AB Industrivärden, AB Volvo and
Sandvik AB
Holdings in Ericsson
20,060 Class B shares 1)
and 32,208 synthetic shares 3).
Principal work experience
and other information
President and CEO of AB
Industrivärden since 2015.
Partner in the private equity firm
IK Investment Partners (2008–
2015), with responsibility for the
Stockholm office from 2011 to
2015. Investment Manager at IK
Investment Partners (1998–2008).
Previous experience as consultant for
Bain & Company (1997–1998).
Jacob Wallenberg
Deputy Chair of the Board of Directors,
Member of the Finance Committee
Jon Fredrik Baksaas
Chair of the Remuneration
Committee
Jan Carlson
Nora Denzel
Börje Ekholm
Member of the Audit and Compliance
Member of the Technology and
President, CEO and Member of the
Chair of the Audit and Compliance
Committee and the Technology and
Science Committee
Board
First elected
2017
Born
1954
Education
Master of Science in Economics, NHH
Norwegian School of Economics &
Business Administration, Norway.
Nationality
Norway
Board Chair
Statnett SA and DNV GL Group AS
Board Member
Svenska Handelsbanken AB.
Holdings in Ericsson
42,999 synthetic shares 3).
Principal work experience
and other information
President and CEO of Telenor Group
(2002–2015). Previous positions
within the Telenor Group since 1989,
including Deputy CEO, CFO and CEO
of TBK AS. Positions before Telenor
include CFO of Aker AS, finance
director of Stolt Nielsen Seaway AS
and controller at Det Norske Veritas,
Norway and Japan. Member of the
GSMA Board (2008–2016) and
Chair of the GSMA Board
(2014–2016).
First elected
2011
Born
1956
Education
Bachelor of Science in Economics and
Master of Business Administration,
Wharton School, University of
Pennsylvania, USA. Officer of the
Reserve, Swedish Navy.
Nationality
Sweden
Board Chair
Investor AB
Deputy Board Chair
ABB Ltd., FAM and Patricia Industries
Board Member
The Knut and Alice Wallenberg
Foundation, Wallenberg Investments
AB and Nasdaq Inc.
Holdings in Ericsson
427,703 Class B shares 1) and 48,315
synthetic shares 3).
Principal work experience
and other information
Chair of the Board of Investor AB
since 2005. President and CEO of
SEB in 1997 and Chair of SEB’s
Board of Directors 1998–2005.
Executive Vice President and CFO of
Investor AB 1990–1993. Honorary
Chair of IBLAC (Mayor of Shanghai’s
International Business Leaders
Advisory Council) and member of the
steering committee of the European
Round Table of Industrialists, Deputy
Chair of the Swedish-American
Chamber of Commerce US, member
of the International Advisory Board of
the Atlantic Council, Washington DC,
member of the International Business
Council of the World Economic
Forum, Trilateral Commission and the
Advisory Board of Tsinghua University.
Eric A. Elzvik
Committee
First elected
2017
Born
1960
Education
Nationality
Sweden and Switzerland
Board Chair
Global Connect Group
Master of Science degree in
Master of Business Administration,
Master of Science in Electrical
Master of Business Administration,
Engineering Physics and Electrical
Santa Clara University, USA.
Engineering, KTH Royal Institute of
Stockholm School of Economics,
Engineering, the University of
Linköping, Sweden.
Bachelor of Science in Computer
Science, State University of New
Technology, Stockholm, Sweden.
Sweden.
Master of Business Administration,
Science Committee
First elected
2017
Born
1960
Education
Nationality
Sweden
Board Chair
Board Member
–
Autoliv Inc. and Veoneer Inc.
–
First elected
2013
Born
1962
Education
York, USA.
Nationality
USA and Ireland
Board Chair
First elected
2006
Born
1963
Education
INSEAD, France.
Nationality
Sweden and USA
Board Chair
–
Board Member
Advanced Micro Devices Inc.,
NortonLifeLock Inc. and SUSE
Board Member
Board Member
Alibaba Group and Trimble Inc.
Landis+Gyr Group AG, AB Volvo and
VFS Global
Holdings in Ericsson
Holdings in Ericsson
Holdings in Ericsson
Holdings in Ericsson
7,900 Class B shares 1) and 48,315
3,850 ADS 1) and 16,102 synthetic
260,351 Class B shares, 1,009,000
10,000 Class B shares 1)
synthetic shares 2).
shares 2)
ADS 1) and 2,000,000 call options 3).
and 16,102 synthetic shares 2)
Principal work experience
and other information
Chair and President and CEO of
Veoneer Inc. since June 2018.
President and CEO of Autoliv Inc.
2007–2018 and Chair of Autoliv
Principal work experience
and other information
CEO (interim) of Outerwall Inc.
(January 2015–August 2015).
Senior Vice President Big Data,
Marketing and Social Product
Principal work experience
and other information
President and CEO of
Telefonaktiebolaget LM Ericsson
since 2017. CEO of Patricia
Principal work experience
and other information
CFO and member of the Group
Executive Committee of ABB Ltd
(2013–2017). Division CFO ABB
Industries, a division within Investor
Discrete Automation & Motion
Inc. since 2014. Previous positions
Design and General Manager
AB (2015–2017). President and
(2010–2012) and division CFO
within the Autoliv Group since 1999,
QuickBooks Payroll Division (2008–
CEO of Investor AB (2005–2015).
Automation Products Division
including President Autoliv Europe,
2012). Previous positions include
Formerly Head of Investor Growth
(2006–2010). Previous positions
Vice President Engineering of Autoliv
Senior Vice President and General
Capital Inc. and New Investments.
within the ABB Group since 1984,
and President Autoliv Electronics.
Manager of HP’s Global Software,
Previous positions at Novare Kapital
including senior management
Previous positions include President
Storage and Consulting Divisions
AB and McKinsey & Co Inc. Holds
of Saab Combitech and of Swedish
(2000–2006), Senior Vice President
honorary Doctorate at KTH Royal
positions within finance, mergers
& acquisitions and new ventures.
Gate Array.
Product Operations Legato Systems
Institute of Technology, Sweden.
Currently, senior industrial advisor
(bought by Dell EMC) and various
Since 2017, member of the Steering
to EQT.
engineering, marketing and
Committee of the World Economic
executive positions at IBM. Non-
Forum Digital Communication
Profit board member of the National
Governors. Member of the Board of
Association of Corporate Directors
the Swedish-American Chamber of
(NACD) Northern California Chapter.
Commerce New York.
The Board memberships and holdings in Ericsson reported above are as of December 31, 2021.
1) The number of shares and ADS includes holdings by related persons, if applicable.
2) Call options issued by Investor AB entitling to purchase Ericsson Class B shares.
3) Since 2008, the AGM has each year resolved that part of the Board fee may be received in the form of synthetic shares. A synthetic share is a right to receive in the future a payment corresponding to the value of
the Class B share in Ericsson at the time of payment. Please see page 11 for further information.
Corporate Governance report 2021
13
Jan Carlson
Member of the Audit and Compliance
Committee and the Technology and
Science Committee
First elected
2017
Born
1960
Education
Master of Science degree in
Engineering Physics and Electrical
Engineering, the University of
Linköping, Sweden.
Nationality
Sweden
Board Chair
Autoliv Inc. and Veoneer Inc.
Nora Denzel
Member of the Technology and
Science Committee
Börje Ekholm
President, CEO and Member of the
Board
Eric A. Elzvik
Chair of the Audit and Compliance
Committee
First elected
2013
Born
1962
Education
Master of Business Administration,
Santa Clara University, USA.
Bachelor of Science in Computer
Science, State University of New
York, USA.
Nationality
USA and Ireland
Board Chair
–
First elected
2006
Born
1963
Education
Master of Science in Electrical
Engineering, KTH Royal Institute of
Technology, Stockholm, Sweden.
Master of Business Administration,
INSEAD, France.
Nationality
Sweden and USA
Board Chair
–
First elected
2017
Born
1960
Education
Master of Business Administration,
Stockholm School of Economics,
Sweden.
Nationality
Sweden and Switzerland
Board Chair
Global Connect Group
Board Member
Board Member
Board Member
AB Industrivärden, AB Volvo and
The Knut and Alice Wallenberg
Svenska Handelsbanken AB.
Sandvik AB
Foundation, Wallenberg Investments
Board Member
–
Board Member
Advanced Micro Devices Inc.,
NortonLifeLock Inc. and SUSE
Board Member
Alibaba Group and Trimble Inc.
Board Member
Landis+Gyr Group AG, AB Volvo and
VFS Global
Holdings in Ericsson
Holdings in Ericsson
Holdings in Ericsson
100,000 Class B shares 1), 128,452
20,060 Class B shares 1)
427,703 Class B shares 1) and 48,315
42,999 synthetic shares 3).
call options 2). and 94,954 synthetic
and 32,208 synthetic shares 3).
synthetic shares 3).
Holdings in Ericsson
7,900 Class B shares 1) and 48,315
synthetic shares 2).
Holdings in Ericsson
3,850 ADS 1) and 16,102 synthetic
shares 2)
Holdings in Ericsson
260,351 Class B shares, 1,009,000
ADS 1) and 2,000,000 call options 3).
Holdings in Ericsson
10,000 Class B shares 1)
and 16,102 synthetic shares 2)
Principal work experience
and other information
Chair and President and CEO of
Veoneer Inc. since June 2018.
President and CEO of Autoliv Inc.
2007–2018 and Chair of Autoliv
Inc. since 2014. Previous positions
within the Autoliv Group since 1999,
including President Autoliv Europe,
Vice President Engineering of Autoliv
and President Autoliv Electronics.
Previous positions include President
of Saab Combitech and of Swedish
Gate Array.
Principal work experience
and other information
CEO (interim) of Outerwall Inc.
(January 2015–August 2015).
Senior Vice President Big Data,
Marketing and Social Product
Design and General Manager
QuickBooks Payroll Division (2008–
2012). Previous positions include
Senior Vice President and General
Manager of HP’s Global Software,
Storage and Consulting Divisions
(2000–2006), Senior Vice President
Product Operations Legato Systems
(bought by Dell EMC) and various
engineering, marketing and
executive positions at IBM. Non-
Profit board member of the National
Association of Corporate Directors
(NACD) Northern California Chapter.
Principal work experience
and other information
President and CEO of
Telefonaktiebolaget LM Ericsson
since 2017. CEO of Patricia
Industries, a division within Investor
AB (2015–2017). President and
CEO of Investor AB (2005–2015).
Formerly Head of Investor Growth
Capital Inc. and New Investments.
Previous positions at Novare Kapital
AB and McKinsey & Co Inc. Holds
honorary Doctorate at KTH Royal
Institute of Technology, Sweden.
Since 2017, member of the Steering
Committee of the World Economic
Forum Digital Communication
Governors. Member of the Board of
the Swedish-American Chamber of
Commerce New York.
Principal work experience
and other information
CFO and member of the Group
Executive Committee of ABB Ltd
(2013–2017). Division CFO ABB
Discrete Automation & Motion
(2010–2012) and division CFO
Automation Products Division
(2006–2010). Previous positions
within the ABB Group since 1984,
including senior management
positions within finance, mergers
& acquisitions and new ventures.
Currently, senior industrial advisor
to EQT.
The Board memberships and holdings in Ericsson reported above are as of December 31, 2021.
1) The number of shares and ADS includes holdings by related persons, if applicable.
2) Since 2008, the AGM has each year resolved that part of the Board fee may be received in the form of synthetic shares. A synthetic share is a right to receive in the future a payment corresponding to the value of
the Class B share in Ericsson at the time of payment. Please see page 11 for further information.
3) Call options issued by AB Industrivärden (1,000,000 call options) and Investor AB (1,000,000 call options), each entitling the purchase of one Ericsson B share from AB Industrivärden/Investor AB respectively
(further information is available in the Notes to the consolidated financial statements – note G2 “Information regarding members of the Board of Directors and Group management” in the Financial Report).
Ronnie Leten
Helena Stjernholm
Jacob Wallenberg
Jon Fredrik Baksaas
Chair of the Board of Directors, Chair
Deputy Chair of the Board of
Deputy Chair of the Board of Directors,
Chair of the Remuneration
of the Finance Committee, Member
Directors, Member of the Finance
Member of the Finance Committee
Committee
of the Remuneration Committee
Committee
Master of Science in Applied
Master of Business Administration,
Bachelor of Science in Economics and
Master of Science in Economics, NHH
Economics, University of Hasselt,
Stockholm School of Economics,
Master of Business Administration,
Norwegian School of Economics &
Belgium.
Sweden.
Business Administration, Norway.
First elected
2016
Born
1970
Education
Nationality
Sweden
Board Chair
–
First elected
2018
Born
1956
Education
Nationality
Belgium
Board Chair
Epiroc AB and Piab
Board Member
–
shares 3).
First elected
2017
Born
1954
Education
First elected
2011
Born
1956
Education
Nationality
Sweden
Board Chair
Investor AB
Wharton School, University of
Pennsylvania, USA. Officer of the
Reserve, Swedish Navy.
Deputy Board Chair
ABB Ltd., FAM and Patricia Industries
AB and Nasdaq Inc.
Holdings in Ericsson
Nationality
Norway
Board Chair
Statnett SA and DNV GL Group AS
Principal work experience
and other information
Principal work experience
and other information
President and CEO of Atlas Copco AB
President and CEO of AB
2009–2017 and various leadership
Industrivärden since 2015.
positions within the Atlas Copco
Partner in the private equity firm
Group 1997–2009 and 1985–1995.
IK Investment Partners (2008–
Principal work experience
and other information
Chair of the Board of Investor AB
since 2005. President and CEO of
SEB in 1997 and Chair of SEB’s
Board of Directors 1998–2005.
Principal work experience
and other information
President and CEO of Telenor Group
(2002–2015). Previous positions
within the Telenor Group since 1989,
including Deputy CEO, CFO and CEO
Previous positions include plant
2015), with responsibility for the
Executive Vice President and CFO of
of TBK AS. Positions before Telenor
manager of Tenneco Automotive
Stockholm office from 2011 to
Investor AB 1990–1993. Honorary
include CFO of Aker AS, finance
Inc., Belgium, 1995–1997 and
various positions within General
Biscuits 1979–1985.
2015. Investment Manager at IK
Chair of IBLAC (Mayor of Shanghai’s
director of Stolt Nielsen Seaway AS
Investment Partners (1998–2008).
International Business Leaders
and controller at Det Norske Veritas,
Previous experience as consultant for
Advisory Council) and member of the
Norway and Japan. Member of the
Bain & Company (1997–1998).
steering committee of the European
GSMA Board (2008–2016) and
Round Table of Industrialists, Deputy
Chair of the GSMA Board
(2014–2016).
Chair of the Swedish-American
Chamber of Commerce US, member
of the International Advisory Board of
the Atlantic Council, Washington DC,
member of the International Business
Council of the World Economic
Forum, Trilateral Commission and the
Advisory Board of Tsinghua University.
Corporate Governance report 2021
14
Board members elected by the AGM 2021, cont’d.
Kurt Jofs
Member of the Remuneration
Committee, the Audit and
Compliance Committee and the
Technology and Science Committee
First elected
2018
Born
1958
Education
Master of Science in Engineering,
Royal Institute of Technology,
Stockholm, Sweden.
Nationality
Sweden
Board Chair
–
Board Member
AB Volvo, Feal AB and Arjeplog Hotel
Silverhatten AB
Holdings in Ericsson
50,450 Class B shares 1) and 19,378
synthetic shares 2).
Principal work experience
and other information
Entrepreneur and investor with
extensive experience in various
industries. Previous positions
include Executive Vice President and
responsible for Ericsson’s Networks
business 2003–2008, CEO of
Segerström & Svensson 1999–2001.
CEO of Linjebuss 1996–1999, and
various positions within ABB and
Ericsson.
Kristin S. Rinne
Chair of the Technology and Science
Committee
First elected
2016
Born
1954
Education
Bachelor of Arts, Washburn
University, USA.
Nationality
USA
Board Chair
–
Board Member
Synchronoss
Holdings in Ericsson
22,666 synthetic shares 2).
Principal work experience
and other information
Previously Senior Vice President,
Network Technology, Network
Architecture & Planning, at AT&T
(2007–2014). CTO of Cingular
Wireless (2005–2007) and
VP Technology & New Product
Development of Cingular Wireless
(2000–2005). Previous positions
within Southwestern Bell and SBC
(1976–2000). Trustee of Washburn
University Foundation. Member of
the Advisory Board of Link Labs.
The Board memberships and holdings in Ericsson reported above are as of December 31, 2021.
1) The number of shares and ADS includes holdings by related person, if applicable.
2) Since 2008, the AGM has each year resolved that part of the Board fee may be received in the form of synthetic shares. A synthetic share is a right to receive in the future a payment corresponding to the value
of the Class B share in Ericsson at the time of payment. Please see page 11 for further information.
Corporate Governance report 2021 Board members and deputies appointed by the trade unions
15
Torbjörn Nyman
Employee representative, Member of
the Audit and Compliance Committee
Anders Ripa
Employee representative, Member
of the Finance Committee and of the
Technology and Science Committee
Kjell-Åke Soting
Employee representative, Member of
the Remuneration Committee
First appointed
2017
Born
1961
Appointed by
LO, the Swedish Trade Union
Confederation
Nationality
Sweden
Holdings in Ericsson
33,828 Class B shares 1).
Employed since
1996
Working as ICT Strategic Product
Manager within Business Area
Networks.
First appointed
2017
Born
1962
Appointed by
PTK
Nationality
Sweden
Holdings in Ericsson
2,377 Class B shares and 1,708 Class
A shares 1).
Employed since
1998
Working as Security Advisor for
Mission Critical Networks within
Business Area Networks.
First appointed
2016
Born
1963
Appointed by
PTK
Nationality
Sweden
Holdings in Ericsson
9,107 Class B shares 1).
Employed since
1996
Working as Global SQA Manager
within Business Area Networks.
Ulf Rosberg
Employee representative – Deputy
Loredana Roslund
Employee representative – Deputy
First appointed
2021
Born
1964
Appointed by
PTK
Nationality
Sweden
Holdings in Ericsson
10 Class B shares1).
Employed since
1985
Working as System Manager within
R&D, Business Area Networks.
First appointed
2017
Born
1967
Appointed by
PTK
Nationality
Sweden
Holdings in Ericsson
2,271 Class B shares 1).
Employed since
1994
Working as Project Manager within
R&D, Business Area Networks.
Börje Ekholm was the only Director who held an operational
management position at Ericsson in 2021.
Per Holmberg left his position as deputy Employee representative
of the Board of Directors on November 3, 2021.
1) The number of shares and ADS reflects ownership as of December 31, 2021 and includes holdings by related persons, if applicable.
Corporate Governance report 2021 16
Management
The President and CEO and the
Executive Team
The Board of Directors appoints the President
and CEO and the Executive Vice President(s).
The President and CEO is responsible for the
management of day-to-day operations and
is supported by the other members of the
Executive Team.
The role of the Executive Team is to:
– Define Group strategies and policies, drive
corporate agenda and establish a strong
corporate culture
– Determine targets for operational units,
allocate resources and monitor unit
performance
– Secure operational excellence and realize
global synergies through efficient organi-
zation of the Group.
The organizational structure includes four
business areas, five geographical market
areas and a number of supporting group
functions.
Business areas are responsible for
developing competitive product-led business
solutions, including both products and services
and for investing in research and development
for technology and cost leadership. Segments
have been defined for financial reporting
purposes based on the business areas. See
further information in Note B1, “Segment
Information” in the Financial Report.
Market areas are responsible for selling
and delivering customer solutions. Resources
are moved closer to the customers in order to
establish leading positions in critical markets.
Group functions are responsible for provid-
ing an effective support platform to the market
areas and business areas to drive synergies
Ericsson Group Management System
Demands and
Expectations
Strategy
& Risk
Performance
Improvement
and align ways of working across units and for
driving the corporate agenda.
The Executive Team members as of
December 31, 2021, are presented on pages
20–23.
Remuneration to the Executive Team
Guidelines for remuneration to the Executive
Team were approved by the AGM 2020. For
further information on fixed and variable
remuneration, see the Remuneration Report
and note G2, “Information regarding members
of the Board of Directors and the Group
management” in the Financial Report.
The Ericsson Group Management System
Ericsson has a global management system, the
Ericsson Group Management System (EGMS).
EGMS aims to ensure an adequate and effective
management and continual improvement of
Ericsson´s operations, ensure ISO certification
as decided, support effecting Ericsson’s core
values, contribute to the corporate culture, and
ensure that the business is managed:
– To fulfill the objectives of Ericsson’s major
stakeholders (customers, shareholders,
employees)
– Within established risk limits and with
reliable internal control (win with integrity)
– In compliance with relevant applicable
laws, listing requirements, governance
codes and corporate responsibilities.
EGMS is a framework consisting of rules and
requirements for Ericsson’s business, speci-
fied through governance structures, ways of
working, processes, organizational descrip-
tions, policies, directives and instructions. The
management system is applied in Ericsson’s
operations globally, and its consistency and
global reach is designed to build trust in the
way Ericsson operates. EGMS is founded on
ISO 9001 (international standard for quality
management systems) but is designed as
a dynamic governance system to enable
Ericsson to adapt the system to evolving
demands and expectations, including new
legislation as well as customers’ and other
stakeholders’ requirements. Ericsson imple-
ments external requirements only after
thorough analysis and after putting them into
the Ericsson context.
The main elements of EGMS are:
– Management and control
– Ericsson business processes
– Organization and resources, culture.
Management and control
Ericsson’s strategy process includes the whole
chain from business intelligence and strategic
forecasting to deployment of developed
strategies into targets and programs in coor-
dinated cycles; capturing the overall strategic
direction, market development and progress of
strategy execution.
Group-wide policies, directives and
instructions govern how the organization
works and are core elements in managing and
directing Ericsson. The policies, directives and
instructions contain, among other things, the
Code of Business Ethics, the Code of Conduct
for Business Partners and accounting and
reporting directives to fulfill external reporting
requirements. Ericsson has a Group Steering
Documents Committee that works to align
policies and directives with Group strategies,
values and structures.
Customers
Key Stakeholders
Business Environment
Management and Control
Steering Documents
Roles and Responsibilities
Operating Model
Ericsson
Business Process
Organization and Resources
Culture
Satisfaction through
Value Deliverables
Results
Performance
Evaluation
Corporate Governance report 2021 17
Ericsson business processes
Ericsson business processes are a set of
defined Group-wide processes integrated in
EGMS. They describe how Ericsson delivers
value to customers, proactively and on-
demand. Ericsson business processes offer
capabilities to translate customer require-
ments into defined hardware, software, solu-
tions and services offered by Ericsson.
Organization and resources
Ericsson is operated in two dimensions: one
operational structure and one legal structure.
The operational structure aligns account-
ability and authority regardless of country
borders and supports the process flows with
cross-country operations. In the operational
structure, Ericsson is organized in group func-
tions, segments, business areas and market
areas. The legal structure is the basis for legal
requirements and responsibility as well as for
tax and statutory reporting purposes. There
are more than 200 legal entities within the
Ericsson Group with approximately 80 branch
offices with representation (via legal entities,
branch and representative offices) in approxi-
mately 150 countries. The company culture is
defined by the core values, respect, profession-
alism, perseverance and integrity, as well as
the five focus areas of the culture transforma-
tion initiative: Ericsson on the Move.
Chief Compliance Officer
Ericsson’s Board of Directors and Executive
Team are committed to ensuring ethics and
compliance remain a priority for the Group. The
Audit and Compliance Committee monitors the
effectiveness and appropriateness of Ericsson’s
Ethics & Compliance (E&C) Program. The
Chief Compliance Officer (CCO) oversees the
operation of the E&C Program, with particular
focus on ethics, anti-bribery and -corruption,
conflicts of interests, anti-money laundering,
and competition. The CCO advises and updates
the Group Compliance Committee, the CEO,
Executive Team, the Audit and Compliance
Committee and the Board on operations relat-
ing to the E&C Program. The CCO has a dual
reporting line to the Chief Legal Officer and
to the Audit and Compliance Committee to
ensure adequate independence of the Compli-
ance Office. Compliance officers, located at
Ericsson’s headquarters in Stockholm, Sweden,
and in other geographies support Ericsson’s
market area and business area operating
model and report to the CCO.
Insider Committee
Ericsson has established an Insider Committee
to make assessments relating to the disclosure
of inside information. The Insider Committee
comprises the Chief Legal Officer, the Chief
Financial Officer and the Chief Marketing and
Communications Officer.
Audits, assessments and certification
The purpose of audits and assessments is
to determine the level of compliance and to
provide valuable information for understand-
ing, analyzing and continually improving
performance, to ensure that the EGMS is ade-
quate and effective in managing Ericsson´s
operations. Management monitors compli-
ance with policies, directives, instructions and
processes through internal self-assessment
activities within the respective units. This is
complemented by internal and external audits
and assessments.
To ensure fulfilment of demands and
requirements from customers and other exter-
nal stakeholders, Ericsson takes conscious
decisions on certification. Certification means
that Ericsson’s interpretation of standards or
requirements are confirmed by a third party
via an assessment activity.
As EGMS is a global system, group-wide
ISO certificates are issued by a third party
certification body proving that the system is
efficient throughout the organization as well
as compliant to the ISO standards in scope.
Ericsson’s operations are currently globally
certified to ISO 9001 (Quality), ISO 14001
(Environment), ISO 45001 (Health & Safety)
and ISO 27001 (Information Security).
Selected Ericsson units are also certified to
TL 9000 (telecom-specific standard). EGMS
is also assessed within the scope of the audit
plan of Ericsson’s internal audit function
(Corporate Audit).
ISO/management system assessments
are performed by BSI (British Standards
Institution). Internal audits are performed
by the Company’s internal audit function
which reports to the Audit and Compliance
Committee.
With a risk-based approach, Ericsson con-
ducts audits of suppliers to secure compliance
with Ericsson’s Code of Conduct for Business
Partners, which includes rules that suppliers
to the Ericsson Group must comply with.
Ericsson’s external financial audits are
performed by Deloitte AB.
Different types of assurance as described
above have differing scope and rationale. All
assurance providers have defined and estab-
lished accountabilities and responsibilities.
ERM Process
Read more about Risk management on next page.
Group Risk Management
Risk Assessment
Top down Risk Identification
Group Risk Consolidation
Prime Risk Selection
Group Function/Market
area/Business area
Risk Management
Risk Management
Planning
Bottom up
Risk
Identifi cation
Risk
Analysis
Risk
Evaluation
Risk
Treatment
Risk
Sign-off
Ericsson Business and Financial Planning Process
Corporate Governance report 2021 18
Risk management
The management of operational risks in Ericsson
is embedded in various business processes and
controls, such as decision tollgates and approv-
als. Certain cross-process risks are centrally
coordinated, such as risks relating to information
security, IT security, sustainability and corporate
responsibility, privacy and anti-bribery and
-corruption. Financial risk management is
governed by a Group policy and carried out by
the Treasury and Customer Finance functions.
For further information on financial risk man-
agement, please see Notes to the consolidated
financial statements – note F1 “Financial risk
management” in the Financial Report.
Governance
& Culture
Strategy
Monitoring
ERM
Framework
Assessment
& Treatment
Communication
& Reporting
Ericsson’s Enterprise Risk Management
(ERM) framework is an integrated part of
the EGMS. The aim of the ERM framework
is to strengthen the Group’s governance
by integrating risk management with the
strategy-setting and execution.
The ERM framework is designed to estab-
lish an adequate and effective management
of risk, i.e. the uncertainty in achieving the
strategic objectives of the Company. The
framework provides methods to assess and
treat the risks, and to agree on and stay within
the Company’s risk appetite. The ERM frame-
work is based on five elements (illustrated
above and described in the following text). It
is applied across Ericsson’s operations and
Risk Universe
covers business areas, market areas and group
functions. The framework comprises the mini-
mum requirements that the units must meet
to have a common basis for ERM to enable
transparency and risk oversight.
Governance & Culture
Ericsson is executing on an ERM strategy
with the aim to drive transformation in certain
focus areas, such as risk culture, risk appetite
and usage of risk weighted return concepts in
strategic decisions, relation between risk and
internal control, and aligned assurance.
Risk Governance
Each manager is responsible for handling
the risks that emerges from their respective
area of responsibility. The responsibility for
the identified prime risks of the Company is
always allocated to a member of the Executive
Team. The Group Risk Management function
is responsible for driving the ERM strategy
execution and the ERM operations on Group
level. The head of each group function, market
area and business area, is accountable for
appointing one or several risk manager(s) to
drive risk management within the unit’s area
of responsibility, and for overseeing the ERM in
the respective unit. The CFO is accountable for
performing oversight of ERM and the Board
of Directors and the Audit and Compliance
Committee are responsible for reviewing the
effectiveness and appropriateness of the ERM.
Risk culture
Ericsson’s risk culture is reflected in the atti-
tudes, behaviours, and understanding about
risk, both positive and negative, that influence
decisions made by leaders and employees.
The implementation of Ericsson’s ERM Frame-
work is supporting the five focus areas of the
culture transformation initiative: Ericsson on
the Move.
Strategy
Risk management is an important element of
strategic decision making and value creation
since it captures the opportunities and threats
that are related to reaching the strategic
objectives. Ericsson’s risk management activi-
ties are interconnected with the development
and deployment of Ericsson’s business plans
and functional strategies.
Assessment & Treatment
Assessment and Treatment of risks are done in
accordance with the ERM process (illustrated
on page 17) that applies to the Group and to all
roles with responsibilities with regards to risk
management activities. It focuses on getting
the group functions, market areas and busi-
ness areas to connect their risks with strategic
objectives and accountabilities for decision
making, in a clear way. The process also covers
the activities that are managed centrally by the
Group Risk Management function.
Risk management planning
Risk management planning is done in collabo-
ration between risk managers in the group
functions, market areas, business areas and
the Group Risk Management function.
Risk Assessment
The Risk Assessment results in a risk register
for the unit where all significant risks to
achieve strategic objectives are identified and
their probability, impact and dependencies are
understood. The risks in the units’ risk registers
are re-assessed on regular base.
Current risks within the scope of account-
ability for the group function, market area and
business area are identified in the bottom-up
risk identification process step. The appropri-
ate risk manager engages the leadership
teams and stakeholders in a unit and the
organization to identify risks. In the top-down
risk identification, the Group Risk Manage-
ment function conducts interviews with senior
management, and external experts, to identify
and refine the risks Ericsson faces.
The Risk Universe (illustrated on page 18)
is used as inspiration to identify emerging risks
and secure that all applicable risk categories
Intellectual
Property Rights
Competition
M&A
Cyber and
information security
Security, safety
and continuity
People
Governance,
risk and control
Laws and regulations
Communication
and marketing
Geopolitical
Customer
Accounting
Treasury
Technology
Supply
and sourcing
Product and service
Project execution
Environment
and climate
Corporate Governance report 2021 are covered. Risk Descriptions cover event,
cause and impact (illustrated below). For fur-
ther information on risks related to Ericsson’s
business, see the chapter “Risk factors” in the
Financial Report.
In the Risk Analysis process step, the
impact of an identified risk is estimated
considering four dimensions – financial
impact, strategic impact, occupational health
and safety impact, and reputational impact.
The key risks in a unit are presented in a heat
map (see example to the right). The heat map
shows the impact and probability for each key
risk and enables comparison for all kinds of
risks supporting prioritization.
Risk Evaluation is done to define the risk
appetite for each risk i.e., the accepted prob-
ability and impact rating. The risk appetite for
an individual risk indicates the ambition with
treatment plans, hence driving operational
decisions.
The Group Risk Management function
identifies opportunities to consolidate risks
based on commonalities: e.g. similar treat-
ment plans or root causes. Further, the Group
Risk Management function identifies and
hands over the responsibility of the Group
consolidated risks, to the suitable units for
further analysis and treatment.
Risk Treatment
For identified risks of relevance, treatment
options are chosen, i.e. avoid or accept the risk,
mitigate the probability or impact of the risk, or
increase the risk in order to pursue an opportu-
nity. Based on the selected treatment option(s),
a treatment plan for getting the probability and
impact within the risk appetite is defined and
described, including references to current or
planned internal controls (illustrated below).
Once the treatment plan is implemented, its
effectiveness shall be assessed on an ongoing
basis, and decisions shall be made where
corrective actions are needed.
Risk sign-off
The risk sign-off entail a process step where the
risks, including the responsibility for handling
a risk and treatment plans, are acknowledged
by the unit’s leadership team and aligned
cross-Group in a workshop with the applicable
leadership team and the head of the Group
Risk Management function. Such workshops
are arranged by the appropriate risk manager.
Prime Risk Selection
Ericsson’s prime risks are defined as the identi-
fied top risks in the Group. The responsibility
for each prime risk is allocated to a member
of the Executive Team and these risks are
given additional attention in terms of analysis
and reporting. The Group Risk Management
function identifies potential prime risks in the
Ericsson risk register in collaboration with the
responsible units and the Executive Team.
Communication & Reporting
Risk Communication
Effective communication is important to ena-
ble employees to share information, collabo-
rate, and support each other in managing risks
in the business. The risk management com-
munity has the mission to create awareness
and, improve knowledge with respect to risk
management issues and requirements.
Ericsson has established a Group Risk Council
to facilitate cross-Group alignment and
improvements of the ERM framework as well
as of the management of actual risks. The
Head of Group Risk Management is the chair
of the council in which all risk managers par-
ticipate.
Risk Reporting
The risk managers coordinate the reporting of
key risk status to the leadership teams within
the respective unit on a regular basis. Each
unit’s risk register is also reported to the Group
Risk Management function as part of the
Group risk consolidation and prime risk selec-
tion. The formal reporting to the Group Risk
Management function is only required once
19
a year. Risks identified outside of the report-
ing cycle that could potentially be significant
at Group level are however required to be
escalated when identified to the Group Risk
Management function.
The Head of the Group Risk Management
function reports, in collaboration with the
Prime Risk Owners, the status of the prime
risks to the Executive Team and the Audit and
Compliance Committee on a regular basis.
These reports include a heat map overview
and a more detailed reporting of prime risks
and relevant treatment.
Risk Heat Map
Risk Heat Map
y
t
i
l
i
b
a
b
o
r
P
i
i
h
h
g
g
h
h
y
y
r
r
e
e
V
V
h
h
g
g
H
H
i
i
i
i
m
m
u
u
d
d
e
e
M
M
w
w
o
o
L
L
Low
Low
Medium
Medium
High
High
Very high
Very high
Impact
The illustration shows an example of the heat map
used for presenting the key risks in a unit.
Monitoring
The Group Risk Management function
monitors the efficiency and effectiveness of the
ERM Framework. This is done through self-
assessments but also by providing assessment
requirements regarding risk management to the
ISO 9001 internal assessment process and fol-
low up on the internal assessment results. The
Group Risk Management function also reviews
internal and external audit results to address
identified weaknesses as part of the continuous
improvements of the ERM framework.
Risk Description
Treatment plan
Risk Descriptions are created by answering the following questions:
T
Treatment plans for the risk are defined by looking at different treatment
options to reduce the probability of the cause and impact of the event.
2
Cause
Cause
Cause
1
Event/
Condition
3
Impact
Impact
Impact
Why could it happen?
What could happen?
Why do we care?
Cause
Cause
Cause
T
T
T
Event/
Condition
T
T
T
Impact
Impact
Impact
Corporate Governance report 2021
20
Members of the Executive Team
Börje Ekholm
President and Chief Executive Officer
(CEO) (since 2017)
Fredrik Jejdling
Executive Vice President, Business
Area Networks (since 2017)
Arun Bansal
Executive Vice President (since 2020),
Market Area Europe & Latin America
(since 2017)
MajBritt Arfert
Senior Vice President, Chief People
Officer (CPO) (since 2017)
–
Born
1963
Functions
Head of Business Area Networks and
Head of Segment Networks
Functions
Head of Market Area Europe & Latin
America
Functions
Head of Group Function People
Born
1969
Born
1968
Born
1963
Education
Master of Science in Electrical
Engineering, KTH Royal Institute of
Technology, Stockholm, Sweden.
Master of Business Administration,
INSEAD, France.
Education
Master of Science in Economics and
Business Administration, Stockholm
School of Economics, Sweden.
Education
Bachelor of Engineering
(Electronics), University of Jiwaji,
India, and Postgraduate Diploma in
Marketing, Indira Gandhi National
Open University, India.
Education
Bachelor of Human Resources,
University of Gothenburg, Sweden.
Nationality
Sweden and USA
Nationality
Sweden
Nationality
India
Board Member:
Telefonaktiebolaget LM Ericsson,
Alibaba Group and Trimble Inc.
Board Member
Teknikföretagen and the
Confederation of Swedish Enterprise
Board Member
OPCOM Cables Sdn Bhd, Malaysia
and Mycronic AB Sweden
Nationality
Sweden
Board Member
–
Holdings in Ericsson1)
260,351 Class B shares, 1,009,000
ADS and 2,000,000 call options 2).
Background
CEO of Patricia Industries, a division
within Investor AB (2015–2017).
President and CEO of Investor
AB (2005–2015). Formerly Head
of Investor Growth Capital Inc.
and New Investments. Previous
positions at Novare Kapital AB and
McKinsey & Co Inc. Since 2017,
member of the Steering Committee
of the World Economic Forum
Digital Communication Governors.
Member of the Board of the Swedish-
American Chamber of Commerce
New York.
Holdings in Ericsson1)
72,767 Class B shares.
Background
Senior Vice President and Head of
Business Unit Network Services
(2016–2017). Has held a variety of
positions in commercial operations
and financials, including Head of
Region Sub-Saharan Africa, Head
of Region India, and Head of Sales
and Finance for Business Unit Global
Services. Previous positions include
senior positions with LUX Asia Pacific
and Tele2 Group.
Holdings in Ericsson1)
100,771 Class B shares and
18,078 ADS.
Background
Various senior management
positions, including Senior Vice
President (2016–2017), Head
of Business Unit-Radio (2014-
2016), Head of South East Asia &
Oceania and Country Manager in
Indonesia and Bangladesh. Lived
and worked across multiple countries
and markets, including Malaysia,
Sweden, Singapore, UK and USA.
Holdings in Ericsson1)
51,021 Class B shares.
Background
Acting Head of Group Function
Human Resources (November
2016–March 2017). Previously
Head of Human Resources Ericsson
Sweden (2015–2016) and Vice
President and Head of Human
Resources Business Unit Support
Solutions (2007–2015). Has held
various senior global positions in
Ericsson including Head of Human
Resources Business Unit Broadband
Networks, Head of Human
Resources Microwave Systems
as well as a position as Head of
Human Resources and Internal
Communicatins at Sony Ericsson
Germany.
The Board memberships and Ericsson holdings reported above are as of December 31, 2021.
1) The number of shares and ADS includes holdings by related persons, if applicable.
2) Call options issued by AB Industrivärden (1,000,000 call options) and Investor AB (1,000,000 call options), each entitling the purchase of one Ericsson B share from AB Industrivärden/Investor AB respectively
(further information is available in the Notes to the consolidated financial statements – note G2 “Information regarding members of the Board of Directors and the Group management” in the Financial Report).
Xavier Dedullen
Erik Ekudden
Niklas Heuveldop
Chris Houghton
Senior Vice President, Chief Legal
Senior Vice President, Chief
Senior Vice President, Market Area
Senior Vice President, Market Area
Officer, and secretary of the Board of
Technology Officer (CTO)
North America (since 2017)
North East Asia (since 2017)
Directors of Telefonaktiebolaget LM
(since 2018)
Ericsson (since 2018)
Head of Group Function Legal Affairs
Head of Group Function Technology
Head of Market Area North America
Head of Market Area North East Asia
Functions
Functions
Functions
Master of Laws (LL.M), New York
Master of Science in Electrical
Master of Science in Industrial
Bachelor of Law, Huddersfield
Engineering, KTH Royal Institute of
Engineering and Management, the
Polytechnic, United Kingdom.
Technology, Stockholm, Sweden.
Linköping Institute of Technology,
Functions
& Compliance
Born
1964
Education
Born
1968
Education
University School of Law, USA,
Master of Laws (Lic. Jur), KU
University of Leuven, Belgium, and
Bachelor in Law, Facultés Notre
Dame de la Paix, Belgium.
Nationality
Belgium
Board Member
–
Nationality
Sweden
Board Member
–
Born
1968
Education
Sweden.
Nationality
Sweden
Board Member
Born
1966
Education
Nationality
United Kingdom
Board Member
The Swedish-American Chamber of
–
Commerce New York and CTIA – US
wireless industry trade association
Holdings in Ericsson1)
44,923 Class B shares.
Holdings in Ericsson1)
31,198 Class B shares
and 9,118 ADS.
Holdings in Ericsson1)
82,209 Class B shares
and 13,908 ADS.
Holdings in Ericsson1)
96,963 Class B shares.
Background
Background
Background
Background
Previously Group General Counsel
Group Chief Technology Officer
Senior Vice President, Chief Strategy
Head of Region North East Asia
at Holcim Ltd (2013–2018) with
and Head of Technology and
Officer and Head of Group Function
(2015–2017). Has also previously
responsibility for the Legal and
Compliance functions, based in
Switzerland. Started career in
private practice in New York in
Architecture within Group Function
Technology & Emerging Business
held management positions within
Technology and Emerging Business
(April 2017–March 2018). Previous
Ericsson, including Head of Region
(July 2017–March 2018). Joined
positions include Chief Customer
India, Head of Customer Unit UK and
Ericsson in 1993 and has held
Officer and Head of Group Function
Ireland and various management
1988 followed by various in-house
various management positions
Sales (2016–2017) and senior
positions within Ericsson in China,
positions of increasing seniority in
in the company, including Head
leadership positions across Europe
Hungary, India, Ireland, Japan,
and the Americas, including Head
Sweden and the UK.
the banking, power and telecom
industries, based in the UK, Hong
Kong and Switzerland. Prior to
of Technology Strategy, Chief
Technology Officer Americas
in Santa Clara US, and Head of
joining Holcim Ltd, worked at Verizon
Standardization and Industry.
(2004–2013) most recently as Vice
Member of the Royal Swedish
President International – Legal and
Academy of Engineering Sciences
CEO of ServiceFactory and COO of
External Affairs.
of Global Customer Unit AT&T
and Head of Market Unit Central
America and Caribbean. Previous
positions outside Ericsson include
WaterCove Networks.
(IVA). Since 2020, member of
the Broadband Commission for
Sustainable Development and
member of the board of IVA’s
Näringslivsråd.
Corporate Governance report 2021
21
Xavier Dedullen
Senior Vice President, Chief Legal
Officer, and secretary of the Board of
Directors of Telefonaktiebolaget LM
Ericsson (since 2018)
Functions
Head of Group Function Legal Affairs
& Compliance
Erik Ekudden
Senior Vice President, Chief
Technology Officer (CTO)
(since 2018)
Niklas Heuveldop
Senior Vice President, Market Area
North America (since 2017)
Chris Houghton
Senior Vice President, Market Area
North East Asia (since 2017)
Functions
Head of Group Function Technology
Functions
Head of Market Area North America
Functions
Head of Market Area North East Asia
Born
1964
Born
1968
Born
1968
Born
1966
Education
Master of Laws (LL.M), New York
University School of Law, USA,
Master of Laws (Lic. Jur), KU
University of Leuven, Belgium, and
Bachelor in Law, Facultés Notre
Dame de la Paix, Belgium.
Education
Master of Science in Electrical
Engineering, KTH Royal Institute of
Technology, Stockholm, Sweden.
Education
Master of Science in Industrial
Engineering and Management, the
Linköping Institute of Technology,
Sweden.
Education
Bachelor of Law, Huddersfield
Polytechnic, United Kingdom.
Nationality
Belgium
Board Member
–
Nationality
Sweden
Board Member
–
Nationality
Sweden
Board Member
The Swedish-American Chamber of
Commerce New York and CTIA – US
wireless industry trade association
Nationality
United Kingdom
Board Member
–
Holdings in Ericsson1)
260,351 Class B shares, 1,009,000
ADS and 2,000,000 call options 2).
Holdings in Ericsson1)
72,767 Class B shares.
Holdings in Ericsson1)
100,771 Class B shares and
Holdings in Ericsson1)
51,021 Class B shares.
Holdings in Ericsson1)
44,923 Class B shares.
Holdings in Ericsson1)
31,198 Class B shares
and 9,118 ADS.
Holdings in Ericsson1)
82,209 Class B shares
and 13,908 ADS.
Holdings in Ericsson1)
96,963 Class B shares.
Background
Previously Group General Counsel
at Holcim Ltd (2013–2018) with
responsibility for the Legal and
Compliance functions, based in
Switzerland. Started career in
private practice in New York in
1988 followed by various in-house
positions of increasing seniority in
the banking, power and telecom
industries, based in the UK, Hong
Kong and Switzerland. Prior to
joining Holcim Ltd, worked at Verizon
(2004–2013) most recently as Vice
President International – Legal and
External Affairs.
Background
Group Chief Technology Officer
and Head of Technology and
Architecture within Group Function
Technology and Emerging Business
(July 2017–March 2018). Joined
Ericsson in 1993 and has held
various management positions
in the company, including Head
of Technology Strategy, Chief
Technology Officer Americas
in Santa Clara US, and Head of
Standardization and Industry.
Member of the Royal Swedish
Academy of Engineering Sciences
(IVA). Since 2020, member of
the Broadband Commission for
Sustainable Development and
member of the board of IVA’s
Näringslivsråd.
Background
Senior Vice President, Chief Strategy
Officer and Head of Group Function
Technology & Emerging Business
(April 2017–March 2018). Previous
positions include Chief Customer
Officer and Head of Group Function
Sales (2016–2017) and senior
leadership positions across Europe
and the Americas, including Head
of Global Customer Unit AT&T
and Head of Market Unit Central
America and Caribbean. Previous
positions outside Ericsson include
CEO of ServiceFactory and COO of
WaterCove Networks.
Background
Head of Region North East Asia
(2015–2017). Has also previously
held management positions within
Ericsson, including Head of Region
India, Head of Customer Unit UK and
Ireland and various management
positions within Ericsson in China,
Hungary, India, Ireland, Japan,
Sweden and the UK.
The Board memberships and Ericsson holdings reported above are as of December 31, 2021.
1) The number of shares and ADS includes holdings by related persons, if applicable.
Börje Ekholm
Fredrik Jejdling
Arun Bansal
MajBritt Arfert
President and Chief Executive Officer
Executive Vice President, Business
Executive Vice President (since 2020),
Senior Vice President, Chief People
(CEO) (since 2017)
Area Networks (since 2017)
Market Area Europe & Latin America
Officer (CPO) (since 2017)
–
Born
1963
Education
Functions
Born
1969
Education
Functions
Born
1963
Education
Head of Business Area Networks and
Head of Market Area Europe & Latin
Head of Group Function People
Head of Segment Networks
Master of Science in Electrical
Master of Science in Economics and
Bachelor of Engineering
Bachelor of Human Resources,
Engineering, KTH Royal Institute of
Business Administration, Stockholm
(Electronics), University of Jiwaji,
University of Gothenburg, Sweden.
Technology, Stockholm, Sweden.
School of Economics, Sweden.
Master of Business Administration,
INSEAD, France.
India, and Postgraduate Diploma in
Marketing, Indira Gandhi National
Open University, India.
Nationality
Sweden and USA
Board Member:
Nationality
Sweden
Board Member
Nationality
India
Board Member
Nationality
Sweden
Board Member
Telefonaktiebolaget LM Ericsson,
Teknikföretagen and the
OPCOM Cables Sdn Bhd, Malaysia
–
Alibaba Group and Trimble Inc.
Confederation of Swedish Enterprise
and Mycronic AB Sweden
(since 2017)
Functions
America
Born
1968
Education
18,078 ADS.
Background
Background
Background
CEO of Patricia Industries, a division
Senior Vice President and Head of
Various senior management
within Investor AB (2015–2017).
Business Unit Network Services
positions, including Senior Vice
President and CEO of Investor
(2016–2017). Has held a variety of
President (2016–2017), Head
Background
Acting Head of Group Function
Human Resources (November
2016–March 2017). Previously
AB (2005–2015). Formerly Head
positions in commercial operations
of Business Unit-Radio (2014-
Head of Human Resources Ericsson
of Investor Growth Capital Inc.
and New Investments. Previous
and financials, including Head of
2016), Head of South East Asia &
Sweden (2015–2016) and Vice
Region Sub-Saharan Africa, Head
Oceania and Country Manager in
President and Head of Human
positions at Novare Kapital AB and
of Region India, and Head of Sales
Indonesia and Bangladesh. Lived
Resources Business Unit Support
McKinsey & Co Inc. Since 2017,
and Finance for Business Unit Global
and worked across multiple countries
Solutions (2007–2015). Has held
member of the Steering Committee
Services. Previous positions include
and markets, including Malaysia,
various senior global positions in
of the World Economic Forum
senior positions with LUX Asia Pacific
Sweden, Singapore, UK and USA.
Ericsson including Head of Human
Digital Communication Governors.
and Tele2 Group.
Member of the Board of the Swedish-
American Chamber of Commerce
New York.
Resources Business Unit Broadband
Networks, Head of Human
Resources Microwave Systems
as well as a position as Head of
Human Resources and Internal
Communicatins at Sony Ericsson
Germany.
Corporate Governance report 2021
22
Members of the Executive Team, cont’d.
Jan Karlsson
Senior Vice President, Business Area
Digital Services (since 2018)
Peter Laurin
Senior Vice President, Business Area
Managed Services (since 2017)
Functions
Head of Business Area Digital
Services and Head of Segment
Digital Services
Functions
Head of Business Area Managed
Services and Head of Segment
Managed Services
Stella Medlicott
Senior Vice President, Chief
Marketing and Communications
Officer (CMO and CCO) (since 2019)
Carl Mellander
Senior Vice President, Chief Financial
Officer (CFO) (since 2017)
Functions
Head of Group Function Marketing &
Corporate Relations
Functions
Head of Group Function Finance &
Common Functions
Born
1966
Born
1971
Born
1969
Born
1964
Education
Bachelor in Business Administration,
ESSEC Business School, France.
Nationality
Sweden
Board Member
TM Forum
Holdings in Ericsson1)
1,368 Class B-shares
and 6,964 ADS.
Education
Master of Technology, Chalmers
University of Technology,
Sweden, and Master of Business
Administration, Gothenburg School
of Economics and Commercial Law,
Sweden.
Education
Bachelors of Arts (Hons) degree in
Social Science, University of Lincoln
(known at that time as University of
Humberside), United Kingdom and
Postgraduate Diploma in Marketing,
Chartered Institute of Marketing,
United Kingdom.
Education
Bachelor of Arts in Business
Administration and Economics,
Stockholm University, Sweden; and
East- and South East Asia Program,
Lund University, Sweden
Nationality
Sweden
Board Member
ByggVesta AB
Nationality
United Kingdom
Board Member
–
Nationality
Sweden
Board Member
International Chamber of Commerce
(ICC) Sweden
Holdings in Ericsson1)
3,775 Class B shares.
Holdings in Ericsson1)
7,572 Class B shares.
Holdings in Ericsson1)
91,461 Class B shares.
Background
Acting Head of Business Area Digital
Services February–July 2018.
Previous Head of Solution Area
BSS within Business Area Digital
Services. Before joining Ericsson
early 2017 Jan Karlsson was the
CEO of DigitalRoute, an ISV focusing
on data collection & pre-processing
across Telco and Non-telco verticals.
Background
Head of Region Northern Europe and
Central Asia. Previous management
positions within Ericsson include
Head of Ericsson’s Global Customer
Unit Vodafone (2013–2016) and
various executive positions in North
America, Asia and Europe. Previous
external roles include positions in
Arthur D. Little and Mediatude Ltd.
Background
Vice President of Marketing,
Communications and Government
Relations for Ericsson Market Area
Europe and Latin America July
2017–June 2019. Prior to joining
Ericsson, Stella Medlicott was Chief
Marketing Officer at Red Bee Media,
which was acquired by Ericsson in
May 2014. She has over 25 years
of marketing experience in major
IT, telecoms and media companies
including two years at Technicolor
as VP Marketing and ten years at
Siemens Communications as Global
VP Marketing.
Background
Acting Chief Financial Officer and
Head of Group Function Finance
and Common Functions (July 2016–
March 2017). Previous positions
within Ericsson include Vice
President and Group Treasurer, and
Head of Finance in Region Western
and Central Europe. Also held Head
of Finance/CFO positions within the
telecom operator space and defence
industry.
The Board memberships and Ericsson holdings reported above are as of December 31, 2021.
1) The number of shares and ADS includes holdings by related persons, if applicable.
Nunzio Mirtillo
Fadi Pharaon
Åsa Tamsons
Senior Vice President, Market Area
Senior Vice President, Market Area
Senior Vice President, Business Area
South East Asia, Oceania & India
Middle East & Africa (since 2019)
Technologies & New Businesses
Head of Market Area South East Asia,
Head of Market Area Middle East &
Head of Business Area Technologies
(since 2017)
Functions
Oceania & India
Born
1961
Education
Functions
Africa
Born
1972
Education
& New Businesses and Head of
Segment Emerging Business and
(since 2018)
Functions
Other
Born
1981
Education
Master in Electronic Engineering,
Sapienza University, Italy.
Master of Science in Computer
Science, KTH Royal Institute of
Master of Business Administration,
Stockholm School of Economics,
Technology, Sweden and a Master
Sweden.
of Business Administration, Heriot
Watt University, Edinburgh Business
School, Scotland.
Nationality
Italy
Board Member
–
Holdings in Ericsson1)
130,189 Class B shares.
Nationality
Sweden and Lebanon
Board Member
–
Holdings in Ericsson1)
334 Class B shares
and 1,138 ADS.
Nationality
Sweden
Board Member
CNH Industrial
Holdings in Ericsson1)
35,311 Class B shares.
Background
Previously Head of Region
Mediterranean. Previous
management positions within
Ericsson include Head of Sales
Background
Background
Vice President of Networks &
Head of Business Area Technology
Managed Services (presales and
and Emerging Business
commercial management) within
(April–September 2018) and
Market Area Europe & Latin America.
Group Strategy and M&A.
Networks for Western Europe within
Previous management positions
Business Unit Networks, Head of
within Ericsson include Head of
Previously Partner at McKinsey &
Company, serving high-tech and
Business Operations in Market Unit
Presales and Strategy for Ericsson
telecommunications companies
South East Europe and Key Account
Region South East Asia & Oceania,
worldwide on growth strategies,
Manager for Wind Italy, Vodafone
and Country Manager for Ericsson
digital and commercial
Italy and other customers.
Singapore and Brunei.
transformations. Before joining
Ericsson lived and work in the US,
Brazil, France, Sweden and
Singapore.
Corporate Governance report 2021 23
Jan Karlsson
Peter Laurin
Stella Medlicott
Carl Mellander
Senior Vice President, Business Area
Senior Vice President, Business Area
Senior Vice President, Chief
Senior Vice President, Chief Financial
Digital Services (since 2018)
Managed Services (since 2017)
Marketing and Communications
Officer (CFO) (since 2017)
Officer (CMO and CCO) (since 2019)
Functions
Functions
Functions
Head of Business Area Managed
Head of Group Function Marketing &
Head of Group Function Finance &
Services and Head of Segment
Corporate Relations
Common Functions
Bachelor in Business Administration,
Master of Technology, Chalmers
Bachelors of Arts (Hons) degree in
Bachelor of Arts in Business
ESSEC Business School, France.
University of Technology,
Social Science, University of Lincoln
Administration and Economics,
Sweden, and Master of Business
(known at that time as University of
Stockholm University, Sweden; and
Administration, Gothenburg School
Humberside), United Kingdom and
East- and South East Asia Program,
of Economics and Commercial Law,
Postgraduate Diploma in Marketing,
Lund University, Sweden
Born
1969
Education
Born
1964
Education
Functions
Head of Business Area Digital
Services and Head of Segment
Digital Services
Born
1966
Education
Nationality
Sweden
Board Member
TM Forum
Holdings in Ericsson1)
1,368 Class B-shares
and 6,964 ADS.
Managed Services
Born
1971
Education
Sweden.
Nationality
Sweden
Board Member
ByggVesta AB
Chartered Institute of Marketing,
United Kingdom.
Nationality
United Kingdom
Board Member
–
Nationality
Sweden
Board Member
(ICC) Sweden
International Chamber of Commerce
Holdings in Ericsson1)
3,775 Class B shares.
Holdings in Ericsson1)
7,572 Class B shares.
Holdings in Ericsson1)
91,461 Class B shares.
Background
Background
Background
Background
Acting Head of Business Area Digital
Head of Region Northern Europe and
Vice President of Marketing,
Acting Chief Financial Officer and
Services February–July 2018.
Previous Head of Solution Area
BSS within Business Area Digital
Services. Before joining Ericsson
early 2017 Jan Karlsson was the
Central Asia. Previous management
Communications and Government
Head of Group Function Finance
positions within Ericsson include
Relations for Ericsson Market Area
and Common Functions (July 2016–
Head of Ericsson’s Global Customer
Europe and Latin America July
March 2017). Previous positions
Unit Vodafone (2013–2016) and
2017–June 2019. Prior to joining
within Ericsson include Vice
various executive positions in North
Ericsson, Stella Medlicott was Chief
President and Group Treasurer, and
CEO of DigitalRoute, an ISV focusing
America, Asia and Europe. Previous
Marketing Officer at Red Bee Media,
Head of Finance in Region Western
on data collection & pre-processing
external roles include positions in
which was acquired by Ericsson in
and Central Europe. Also held Head
across Telco and Non-telco verticals.
Arthur D. Little and Mediatude Ltd.
May 2014. She has over 25 years
of Finance/CFO positions within the
of marketing experience in major
telecom operator space and defence
IT, telecoms and media companies
industry.
including two years at Technicolor
as VP Marketing and ten years at
Siemens Communications as Global
VP Marketing.
Nunzio Mirtillo
Senior Vice President, Market Area
South East Asia, Oceania & India
(since 2017)
Fadi Pharaon
Senior Vice President, Market Area
Middle East & Africa (since 2019)
Functions
Head of Market Area South East Asia,
Oceania & India
Functions
Head of Market Area Middle East &
Africa
Åsa Tamsons
Senior Vice President, Business Area
Technologies & New Businesses
(since 2018)
Functions
Head of Business Area Technologies
& New Businesses and Head of
Segment Emerging Business and
Other
Born
1961
Born
1972
Born
1981
Education
Master in Electronic Engineering,
Sapienza University, Italy.
Education
Master of Science in Computer
Science, KTH Royal Institute of
Technology, Sweden and a Master
of Business Administration, Heriot
Watt University, Edinburgh Business
School, Scotland.
Education
Master of Business Administration,
Stockholm School of Economics,
Sweden.
Nationality
Italy
Board Member
–
Holdings in Ericsson1)
130,189 Class B shares.
Nationality
Sweden and Lebanon
Board Member
–
Holdings in Ericsson1)
334 Class B shares
and 1,138 ADS.
Background
Previously Head of Region
Mediterranean. Previous
management positions within
Ericsson include Head of Sales
Networks for Western Europe within
Business Unit Networks, Head of
Business Operations in Market Unit
South East Europe and Key Account
Manager for Wind Italy, Vodafone
Italy and other customers.
Background
Vice President of Networks &
Managed Services (presales and
commercial management) within
Market Area Europe & Latin America.
Previous management positions
within Ericsson include Head of
Presales and Strategy for Ericsson
Region South East Asia & Oceania,
and Country Manager for Ericsson
Singapore and Brunei.
Nationality
Sweden
Board Member
CNH Industrial
Holdings in Ericsson1)
35,311 Class B shares.
Background
Head of Business Area Technology
and Emerging Business
(April–September 2018) and
Group Strategy and M&A.
Previously Partner at McKinsey &
Company, serving high-tech and
telecommunications companies
worldwide on growth strategies,
digital and commercial
transformations. Before joining
Ericsson lived and work in the US,
Brazil, France, Sweden and
Singapore.
The Board memberships and Ericsson holdings reported above are as of December 31, 2021.
1) The number of shares and ADS includes holdings by related persons, if applicable.
Corporate Governance report 2021 24
Auditor
According to the articles of association, the
Parent Company shall have no less than one
and no more than three registered public
accounting firms as external independent
auditor. Ericsson’s auditor is currently
appointed each year at the AGM for a one-year
mandate period. The auditor reports to the
shareholders at General Meetings.
The duties of the auditor include:
– Updating the Board of Directors regarding
the planning, scope and content of the
annual audit work
– Reviewing the interim reports to assess
that the financial statements are presented
fairly in all material respects and providing
review opinions over the interim reports for
the third and fourth quarters and the year-
end financial statements
– Providing an audit opinion over the Annual
Report
– Advising the Board of Directors of non-
audit services performed, the consideration
paid and other issues that determine the
auditor’s independence.
Auditing work is carried out by the auditor
continuously throughout the year. For further
information on the contacts between the
Board and the auditor, please see “Work of the
Board of Directors” earlier in this Corporate
Governance report.
Current auditor
Deloitte AB was reappointed auditor at the
AGM 2021 for a period of one year, i.e. until
the close of the AGM 2022. Deloitte AB has
appointed Thomas Strömberg, Authorized
Public Accountant, to serve as auditor in
charge. Thomas Strömberg is also auditor in
charge in Epiroc AB.
Fees to the auditor
Ericsson paid the fees (including expenses)
for audit-related and other services listed in
the table in note H5, “Fees to auditors” in the
Financial Report.
Internal control over financial reporting
This section has been prepared in accordance
with the Annual Accounts Act and the Swedish
Corporate Governance Code and is limited to
internal control over financial reporting.
Since Ericsson is listed in the US, the
requirements outlined in the Sarbanes-Oxley
Act (SOX) apply, subject to certain exceptions.
These regulate the establishment and mainte-
nance of internal control over financial report-
ing as well as management’s assessment of
the effectiveness of the controls.
In order to support high-quality reporting
and to meet the requirements of SOX, the
Company has implemented detailed docu-
mented controls and testing, and reporting
procedures based on the internationally estab-
lished 2013 COSO framework for internal
control. The COSO framework is issued by the
Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
Management’s internal control report,
according to SOX, will be included in Ericsson’s
Annual Report on Form 20-F and filed with
the SEC in the US.
Disclosure policies
Ericsson’s financial reporting and disclosure
policies follow the International Financial
Reporting Standards (IFRS) and aim to ensure
transparent, relevant and consistent com-
munication with equity and debt investors on
a timely, fair and equal basis. This will support
a fair market value for Ericsson securities.
Ericsson wants current and potential investors
to have a good understanding of how the
Company works, including operational perfor-
mance, prospects and potential risks.
To achieve these objectives, financial
reporting and disclosure must be:
– Transparent – enhancing understanding
of the economic drivers and operational
performance of the business, building trust
and credibility
– Consistent – comparable in scope and
level of detail to facilitate comparison
between reporting periods
– Simple – to support the understanding of
the business operations and performance,
and to avoid misinterpretations
– Relevant – with focus on what is relevant
to Ericsson’s stakeholders or required by
regulation or listing agreements, to avoid
information overload
– Timely – with regularly scheduled disclo-
sures as well as ad-hoc information, such
as press releases on important events,
performed in a timely manner
– Fair and equal – where all material infor-
mation is published via press releases to
ensure that the whole investor community
receives the information at the same time
– Complete – free from material errors and
a reflection of best practice – disclosures
compliant with applicable financial report-
ing standards and listing requirements and
in line with industry norms.
Ericsson’s website comprises comprehensive
information about the Group, including:
– An archive of annual and interim reports
– Access to recent news.
Disclosure controls and procedures
Ericsson has controls and procedures in
place to allow for timely disclosure in accord-
ance with applicable laws and regulations,
including the US Securities Exchange Act of
1934, and under agreements with Nasdaq
Stockholm and NASDAQ New York. These
procedures also require that such information
is provided to management, including the
President and CEO and the CFO, so timely
decisions can be made regarding the required
disclosures.
The Disclosure Committee assists manage-
ment in fulfilling their responsibility regarding
disclosures made to the shareholders and the
investment community. One of the main tasks
of the committee is to monitor the integrity
and effectiveness of the disclosure controls
and procedures. The Disclosure Committee
comprises members with various expertise
including representation from the segments.
Ericsson has investments in certain entities
that the Company does not control or manage.
With respect to such entities, disclosure con-
trols and procedures are substantially more
limited than those maintained with respect
to subsidiaries.
Corporate Governance report 2021 Controls and procedures, no matter how
well designed and operated, can only provide
reasonable assurance of achieving the desired
control objectives. Ericsson’s President and
CEO and the CFO evaluated the Company’s
disclosure controls and procedures and con-
cluded that they were effective at a reason-
able assurance level as of December 31, 2021.
Internal control over financial reporting
Ericsson has integrated risk management and
internal control over financial reporting into
its business processes. As defined in the COSO
framework, internal control is an aggregation
of components such as a control environment,
risk assessment, control activities, information
and communication and monitoring.
The control framework is updated regularly
to reflect relevant changes in processes, tools
usage, outcome of risk assessments, changes
in legislations, etc. Continuous enhancements
are initiated to strengthen and risk-adapt the
design of the controls and the efficiency of the
internal control over financial reporting. The
scope of the enhancements covers both busi-
ness process controls and IT controls.
The Company continued to adapt its work-
place practices globally due to the COVID-19
pandemic, resulting in most of its employees
still working remotely; this has not significantly
affected the Company’s internal controls over
financial reporting.
Control environment
The Company’s internal control structure is
based on the division of tasks between the
Board of Directors and its Committees and
the President and CEO. The Company has
implemented a management system that is
based on:
– Steering documents, such as policies and
directives, and the Code of Business Ethics
– A strong corporate culture
– The Company’s organization and mode
of operations, with well-defined roles and
responsibilities and delegations of authority
– Several well-defined Group-wide processes
for planning, operations and support.
The most essential parts of the control envi-
ronment relative to financial reporting are
included in steering documents and processes
for accounting and financial reporting. These
steering documents are updated regularly to
include, among other things:
– Changes to laws
– Financial reporting standards and listing
requirements, such as IFRS and SOX.
The processes include specific controls to be
performed to ensure high-quality financial
reports. The management of each reporting
legal entity, region and business unit is sup-
ported by finance functions in the execution of
controls related to transactions and reporting.
The finance functions are organized in Com-
pany Control and Business Shared Services
Hubs/Centers, each supporting a number of
legal entities within a geographical area. A
financial controller function is also established
on Group level, reporting to the CFO.
Risk assessment
Risks of material misstatements in the finan-
cial reporting may exist in relation to recogni-
tion and measurement of assets, liabilities,
revenue and cost or insufficient disclosure.
Other risks related to financial reporting
include fraud, loss or embezzlement of assets
and undue favorable treatment of counterpar-
ties at the expense of the Company.
Policies and directives regarding account-
ing and financial reporting cover areas of
particular significance to support correct,
complete and timely accounting, reporting
and disclosure.
Identified types of risks are mitigated
through well-defined business processes with
integrated risk management activities, segre-
gation of duties and appropriate delegation
of authority. This requires specific approval of
material transactions and ensures adequate
asset management.
Control activities
The Company’s business processes include
financial controls regarding the approval and
accounting of business transactions. The
financial closing and reporting process has
controls regarding recognition, measurement,
and disclosure. These include the application
of critical accounting policies and estimates,
25
in individual subsidiaries as well as in the
consolidated accounts.
Regular analyses of the financial results
for each subsidiary, region and business unit
cover the significant elements of assets, liabili-
ties, revenues, costs and cash flow. Together
with further analysis of the consolidated
financial statements performed at Group level,
these procedures are designed to produce
financial reports without material errors.
For external financial reporting purposes,
the Disclosure Committee performs additional
control procedures to review whether the
disclosure requirements are fulfilled.
The Company has implemented controls
to ensure that financial reports are prepared
in accordance with its internal accounting and
reporting policies, and IFRS as well as with
the relevant listing regulations. It maintains
detailed documentation on internal controls
related to the accounting and financial report-
ing. It also keeps records on the monitoring of
the execution and results of such controls. This
allows the President and CEO and the CFO to
assess the effectiveness of the controls in a
way that is compliant with SOX.
Entity-wide controls, focusing on the
control environment and compliance with
financial reporting policies and directives,
are implemented in the subsidiaries. Detailed
process controls and documentation of con-
trols performed are also implemented in the
significant subsidiaries or operational units
covering these subsidiaries, covering the items
with significant materiality and risk.
In order to secure compliance, govern-
ance and risk management in the areas of
legal entity accounting and taxation, as well
as securing funding and equity levels, the
Company operates through Company Control
and Business Shared Services Hubs/Centers,
covering subsidiaries in each geographical
area.
Based on a common IT platform, a com-
mon chart of accounts and common master
data, the Company Control and Business
Shared Services Hubs/Centers perform
accounting and financial reporting services
for most subsidiaries.
Corporate Governance report 2021 26
Information and communication
The Company’s information and communica-
tion channels support complete, correct and
timely financial reporting by making all rel-
evant internal process instructions and policies
accessible to all the employees concerned.
Regular updates and briefing documents
regarding changes in accounting policies,
reporting and disclosure requirements are also
supplied.
Subsidiaries and operating units prepare
regular financial and management reports
for internal steering groups and Company
management. These include analysis and
comments on financial performance and
risks. The Board of Directors receives financial
reports monthly. Ericsson has established a
whistleblower tool, the Ericsson Compliance
Line, that can be used for the reporting of
alleged violations that:
– Are conducted by Group or local manage-
ment, and
– Relate to corruption, questionable account-
ing, deficiencies in the internal control of
accounting or auditing matters, or other-
wise seriously affect vital interests of the
Group or personal health and safety.
Monitoring
The Company’s process for financial report-
ing is reviewed annually by management.
This forms a basis for evaluating the internal
management system and internal steering
documents to ensure that they cover all
significant areas and risks related to financial
reporting. The Management of the Company
Control and Business Shared Services Hubs/
Centers continuously monitor accounting
quality through a set of performance indica-
tors. Compliance with policies and directives is
monitored through annual self-assessments
and representation letters from company
heads and company controllers in subsidiaries
as well as in business areas and market areas.
The Company’s financial performance
is also reviewed at Board meetings. The
Committees of the Board fulfill important
monitoring functions regarding remuneration,
loans, investments, customer finance, cash
management, financial reporting and internal
control. The Audit and Compliance Committee
and the Board of Directors review all interim
and annual financial reports before they are
released to the market. The Company’s inter-
nal audit function reports directly to the Audit
and Compliance Committee. The Audit and
Compliance Committee also receives regular
reports from the external auditor. The Audit
and Compliance Committee follows up on any
actions taken to improve or modify controls.
Board of Directors
Stockholm, March 3, 2022
Telefonaktiebolaget LM Ericsson (publ)
Org. no. 556016-0680
Corporate Governance report 2021 27
Auditor’s report on the
Corporate Governance report
To the general meeting of the shareholders in Telefonaktiebolaget LM Ericsson (publ) corporate identity number 556016-0680
Engagement and responsibility
It is the board of directors who is responsible for the corporate governance
statement for the financial year January 1, 2021 – December 31, 2021
on pages 1– 26 and that it has been prepared in accordance with the
Annual Accounts Act.
The scope of the audit
Our examination has been conducted in accordance with FAR’s stand-
ard RevR 16 The auditor’s examination of the corporate governance
statement. This means that our examination of the corporate govern-
ance statement is different and substantially less in scope than an audit
conducted in accordance with International Standards on Auditing and
generally accepted auditing standards in Sweden. We believe that the
examination has provided us with sufficient basis for our opinions.
Opinions
A corporate governance statement has been prepared. Disclosures in
accordance with chapter 6 section 6 the second paragraph points 2–6
the Annual Accounts Act and chapter 7 section 31 the second paragraph
the same law are consistent with the annual accounts and the consoli-
dated accounts and are in accordance with the Annual Accounts Act.
Stockholm, March 3rd 2022
Deloitte AB
Thomas Strömberg
Authorized public accountant
Corporate Governance report 2021 Remuneration
report
Part of
Ericsson
Annual Report
2021
Annual Report 2021
Financial
report
Corporate
Governance
report
Remuneration
report
Sustainability
and Corporate
Responsibility
report
ericsson.com
Contents
Remuneration report 2021
Statement from the Chair of the
Remuneration Committee
Introduction
Remuneration 2021 at a glance
Total remuneration to the President and CEO
and Executive Vice Presidents
Variable remuneration
Short term variable compensation (STV)
Long-term variable compensation (LTV)
Shareholding guidelines for the
Executive Team
Comparative information on the change of
remuneration and company performance
1
2
3
5
6
6
7
12
12
The Report has been prepared in accordance with Chapter 8,
Sections 53 a and 53 b of the Swedish Companies Act (2005:551)
and the Remuneration Rules (December 1, 2020) issued by the
Swedish Corporate Governance Board.
Information required under Chapter 5, Sections 40–44 of the
Annual Accounts Act (1995:1554) is available in note G1–G4
in the Financial report.
Information on the work of the Remuneration Committee during
2021 is set out in the Corporate Governance report, which is avail-
able on page 10 in the Corporate Governance report.
1
Remuneration report 2021
Statement from the Chair of
the Remuneration Committee
On behalf of the Board of Directors, I am pleased
to present Ericsson’s Remuneration report for the
financial year 2021. The Remuneration report
describes how the Guidelines for remuneration
to Group Management approved at the Annual
General Meeting 2020 have been adhered to
during 2021. Furthermore, the Remuneration
report also includes information on the long-term
variable compensation programs during 2021.
In 2021, Ericsson continued to execute on the
focused business strategy introduced in 2017. In
addition, in 2021 Ericsson has made acquisitions
to further develop and expand its 5G enterprise
business. The Company continues to pursue
selective, disciplined and profitable growth in
order to build a stronger Ericsson in the long-term
remaining committed to the targets for 2022 as
well as the long-term target of 15–18% EBITA
margin excluding restructuring charges.
It is only possible for Ericsson to accomplish its
long-term goals under a strong leadership team
with a mix of talent consisting of individuals with
a range of backgrounds, skills and capabilities.
This requires that the Company can attract, retain
and motivate the right talent and can offer them
competitive remuneration at a global level. Hence,
Ericsson’s remuneration philosophy and practices
are based on the principles of competitiveness,
fairness, transparency and impact, with long-term
value creation for shareholders as the overall
purpose in order to successfully implement the
Company’s strategy and sustainable long-term
interests.
In 2021, the Guidelines for remuneration to
Group Management, approved by the shareholders
in March 2020, were complied with and remunera-
tion was paid in accordance with the guidelines.
In the annual total compensation review, each
compensation element (at target level) in the total
remuneration mix has been benchmarked
against external local and global market levels
where Ericsson competes for talent.
Furthermore, the Remuneration Committee
and the Board of Directors continue to evaluate
the long-term variable compensation programs
for the Executive Team on an ongoing basis for
effectiveness in serving their purpose to support
achieving Ericsson’s strategic business objectives
and sustainable long-term interests as well as
their facility to secure the long-term focus of the
members of the Executive Team and align their
interests with the long-term expectations and
the interests of the shareholders. The long-term
variable compensation programs introduced
for the Executive Team in 2017 along with the
inclusion of the one-year Group operating income
(EBIT) performance criterion starting from 2018
proved effective in terms of playing a key role in
the achievement of Ericsson’s Group financial
targets. Having evaluated the ongoing long-term
variable compensation programs and considering
investor input obtained, the Remuneration Com-
mittee and the Board of Directors propose to the
Annual General Meeting of shareholders 2022 a
long-term variable compen sation program 2022
for the Executive Team similar to the long-term
variable compensation program 2021 adding a
Group Environmental, Social and Governance
performance criterion. The purpose is to further
strengthen the Ericsson’s commitment to long-term
sustainability and responsible business.
Finally, yet importantly, I want to express the
Remuneration Committee’s appreciation to the
Executive Team and all our people across the
global organization for Ericsson’s performance
during the year.
Thank you all!
Jon Fredrik Baksaas
Chair of the Remuneration Committee
Remuneration report 2021
2
Introduction
This Remuneration report (the Report) provides an outline of how the
Guidelines for Remuneration to Group Management (the Guidelines) of
Telefonaktiebolaget LM Ericsson (Ericsson or the Company), adopted
by the Annual General Meeting of shareholders (AGM) 2020, have been
adhered to in the financial year 2021. The Report also provides details
on total remuneration, including fixed and variable remuneration, to
Ericsson’s President and CEO and the two Executive Vice Presidents
(EVPs). In addition, the Report contains a summary of the Company’s
current short-term and long-term variable compensation programs to
the Executive Team (ET).
During 2021, the following key decisions with regards to remunera-
tion were made by the Renumeration Committee and the Board of
Directors respectively:
– Total compensation review was conducted in January 2021, taking
into account the total remuneration, resulting in:
– An increase of the short term variable compensation (STV)
target opportunity level to 40% and increase of the maximum
opportunity level to 80% for all members of the ET excluding the
President and CEO
– An increase of the LTV grant level to 190% for the President and
The remuneration to the President and CEO and the EVPs presented
CEO.
in the Report constitute their total remuneration, regardless of being
paid through the Company or a Group company.
The Guidelines, adopted by the AGM 2020, can be found on page
22–26 in the Financial report. The auditor’s report regarding whether
the Company has complied with the Guidelines is available on
Ericsson’s website, www.ericsson.com.
Remuneration to the Board of Directors is not covered by this Report.
Such remuneration is resolved annually by the AGM and is disclosed in
note G2 on page 69–70 in the Financial report 2021.
Executive outline
Information regarding Ericsson’s performance during the financial year
can be found in the Financial report 2021.
– Achieved vesting level of the LTV 2019 determined to be 126.35%,
based on the pre-agreed performance criteria; Group operating
income (EBIT), relative and absolute total shareholder return (TSR).
– Achieved vesting level for the LTV 2021 Group operating income
(EBIT) performance criteria was determined to be 200%.
The Remuneration Committee supports the Board of Directors with the
review and evaluation of the Guidelines and Ericsson’s application of
the Guidelines. The Guidelines approved by the AGM 2020 are intended
to apply to the AGM 2024. The Remuneration Committee and the Board
of Directors have concluded that the Guidelines should not be revised
this year. Since no changes are proposed to the Guidelines no share-
holder approval of remuneration guidelines will be required at the AGM
2022.
A successful implementation of the Company’s strategy and sustain-
The Remuneration Committee and the Board of Directors evaluate
able long-term interests requires that the Company can attract, retain
and motivate the right talent and can offer them competitive remunera-
tion. For Ericsson, long-term value creation for shareholders and pay
for performance constitute a strong foundation for remuneration. The
Guidelines aim to ensure alignment with Ericsson’s current remunera-
tion philosophy and practices applicable for the Company’s employees
based on the principles of competitiveness, fairness, transparency and
impact. In particular to:
– Attract and retain highly competent, high performing, and motivated
people that have the ability, experience and skill to deliver on the
Ericsson strategy,
– Encourage behavior consistent with Ericsson’s culture, core values
and Ethics and Compliance Program,
– Ensure fairness in reward by delivering total remuneration that is
appropriate but not excessive, and clearly explained,
– Have a total compensation mix of fixed pay, variable pay and
benefits that is competitive where Ericsson competes for talent, and
– Encourage variable remuneration which aligns employees with
clear and relevant targets, reinforces their performance and enables
flexible remuneration costs.
The Guidelines also aim to allow the Company to offer the members of
the ET attractive and competitive total remuneration globally.
Under the Guidelines, remuneration to the ET shall be on market
terms and may consist of the following components: fixed salary,
variable remuneration, pension and other benefits. In addition to
remuneration covered by the Guidelines, the shareholders have decided
to implement long-term variable compensation programs (LTV). The
programs LTV 2019, LTV 2020 and LTV 2021 are still ongoing.
During 2021, no derogations or deviations have been made from
the Guidelines or from the decision procedures set out in the Guidelines
for determining the remuneration to the ET. No remuneration has been
reclaimed during 2021.
the LTV programs to the ET on an ongoing basis for effectiveness in
serving their purpose to support achieving the Company’s strategic
business objectives and sustainable long-term interests, as well as their
facility to increase the long-term focus of the members of the ET and
align their interests with the long-term expectations and the interests of
the shareholders.
Upon evaluation of the ongoing LTV programs to the ET, the
Remuneration Committee and the Board of Directors concluded that
the ongoing program for 2019 and 2020 as well as the vested program
for 2018, enabled the Company to achieve its long-term objectives for
2020 set forth in 2017, especially with the inclusion of the one-year
Group operating income (EBIT) performance criterion. Although the
Group operating income (EBIT) performance criterion has a one-year
performance period, it has a three-year vesting period that is the same
as the vesting periods for the absolute and relative TSR performance
criteria, which is in line with the objectives of the LTV programs. This
means that the participants cannot exercise any of the allocated
Performance Share Awards until the three-year vesting period is
completed and that the participants are fully exposed to share price
movements for the three-year period.
Given that LTV programs of 2018, 2019 and 2020 have served their
purpose to support achieving the Company’s long-term objectives for
2020, the AGM 2021 resolved an LTV program to the ET for 2021 with
the same structure as the previous LTV programs to support the
Company’s 2022 targets. In order to further strengthen Ericsson’s and
the ET ‘s commitment to long-term sustainability and responsible
business, the Remuneration Committee and the Board of Directors
resolved to propose a long-term variable compensation program for
2022 with similar structure to the long-term variable compensation
program of 2021 with the addition of a Group Environmental, Social
and Governance (ESG) performance criterion to the Annual General
Meeting of shareholders in 2022.
Remuneration report 2021
Remuneration 2021 at a glance
Total remuneration
The table below summarizes how the remuneration elements outlined in the Guidelines have been applied in relation to the President and CEO
and the EVPs. The table also summarizes information on LTV, as approved by the shareholders.
3
Purpose and link to strategy
Key features
Fixed salary
Support the attraction and retention of
executive talent required to implement
Ericsson’s strategy.
Deliver part of the annual compen sation in
a predictable format.
Salaries are normally reviewed annually in January
taking into account:
– Ericsson’s overall business performance,
– business performance of the unit that the
individual leads,
– year-on-year performance of the individual,
– external economic environment,
– size and complexity of the position,
– external market data,
– pay and conditions for other employees based in
locations considered to be relevant to the role.
When setting fixed salaries, the impact on total
remuneration is also taken into consideration.
Execution during the financial year that
ended on December 31, 2021
President and CEO: fixed annual salary of
SEK 17,720,460 corresponding to an increase
of 5% compared to 2020.
EVP and Head of Business Area Networks: fixed
annual salary of SEK 8,339,494, corresponding
to an increase of 5% compared to 2020.
EVP and Head of Market Area Europe & Latin
America: fixed salary of INR 68,985,000,
corresponding to an increase of 9.5% compared
to 2020.
Other benefits
Provide market competitive benefits to sup-
port the attraction and retention of execu-
tive talent required to implement Ericsson’s
strategy.
Benefits are set in line with competitive market
practices in the individual’s country of employment.
President and CEO: other benefits to a value of
SEK 555,688
EVP and Head of Business Area Networks:
other benefits to a value of SEK 14,980.
EVP and Head of Market Area Europe &
Latin America: other benefits to a value of
SEK 1,345,055.
The levels of benefits provided may vary year on
year depending on the cost of the provision of
benefits to the Company.
Benefits are capped at 10% of the annual fixed
salary for members of the ET located in Sweden.
Benefits for members of the ET who are on long-
term international assignment (LTA) in countries
other than their home countries of employment, are
determined in line with the Company’s global inter-
national mobility policy which may include (but
is not limited to) commuting or relocation costs;
cost of living adjustment, housing, home travel
and education allowance; tax and social security
equalization assistance.
Pension
Offer long term financial security and plan-
ning for retirement by way of providing com-
petitive retirement arrangements in line with
local market practices.
The pension plans follow competitive practice in
the individual’s home country.
Pension plans for the President and CEO and the
EVPs are defined contribution plans.
Company pension contribution:
– President and CEO: SEK 9,569,049
– EVP and Head of Business Area Networks:
SEK 4,314,186,
– EVP and Head of Market Area Europe & Latin
America: SEK 985,340
Short term
variable
compensation
(STV)
Set clear and relevant targets for the ET that
are aligned with Ericsson’s strategy and sus-
tainable long-term interests.
Provide individuals an earning opportunity for
performance at flexible cost to the Company.
The President and CEO is not entitled to any STV.
Outcome of STV 2021:
Target opportunity is at 40% of fixed salary and
maximum is 80% of fixed salary for the EVPs.
– EVP and Head of Business Area Networks:
100% of the maximum opportunity
Performance measures, weightings and target
levels are set annually.
– EVP and Head of Market Area Europe & Latin
America: 100% of the maximum opportunity.
Long term
variable
compensation
(LTV)
Align the long-term interests of the members
of the ET with those of shareholders.
Rewards consistent with long-term perfor-
mance in line with Ericsson’s business strategy.
Provide individuals with long-term com-
pensation for long-term commitment and
value creation in alignment with shareholder
interests.
Subject to malus and clawback.
Awards granted after AGM approval.
Award levels are determined as percentage of fixed
salary:
– For the President and CEO 190% of fixed salary.
– For the EVPs 50% of fixed salary.
Performance measures, weightings and targets
levels are presented to the AGM for approval.
Three-year vesting period.
Subject to malus and clawback.
Achieved vesting of LTV 2019 at 126.35%
of target.
Remuneration report 2021
4
Remuneration earned in 2021
Börje Ekholm
President and CEO
MSEK
120
100
80
60
40
20
0
78.5
72.4
36.6
8.3
16.3
0.6
9.1
17.7
0.8
9.6
18.2
0.6
2019
2020
2021
Fredrik Jejdling
EVP and Head of Business Area Networks
Remuneration earned – Fredrik Jejdling
Arun Bansal 1)
EVP and Head of Market Area Europe & Latin America
Remuneration earned – Arun Bansal
MSEK
MSEK
40
35
30
25
20
15
10
5
0
9.0
4.4
3.5
7.9
0.0
4.1
6.7
4.3
9.1
0.0
3.7
3.1
3.3
6.9
0.1
2019
2020
2021
40
35
30
25
20
15
10
5
0
4.7
6.7
15.2
1.0
1.3
9.8
8.7
2.3
0.5
0.8
2019
2020
2021
Fixed salary
Benefits
Pension
LTV
Fixed salary
Benefits
Pension
STV
LTV
Fixed salary
Benefits
Pension
STV
LTV
STV
The information presented for 2021 covers the financial year 2021, and
the information for 2020 and 2019 covers the financial years 2020 and
2019, respectively.
LTV
The information presented for 2021 include information on LTV 2019 that
will vest during 2022. Information presented for 2020 and 2019 include
information on vested programs LTV 2018 and LTV 2017, respectively.
1) Arun Bansal was appointed Executive Vice President
in June 2020. Information disclosed covers the time
period from June 1, 2020.
Performance outcome in 2021
STV 2021 outcome
2020 Short Term Variable Compensation outcome
LTV 2019 outcome
2018 Long Term Variable Compensation outcome
LTV 2019 TSR development (2019–2021)
%
100
80
60
40
20
0
100
60
100
60
100
60
40
40
40
Opportunity
Outcome
Fredrik Jejdling
EVP and Head
of Business
Area Networks
Outcome
Arun Bansal
EVP and Head
of Market Area
Europe & Latin
America
Economic Profit: Business Area/Market Area as % of maximum
opportunity
Economic Profit: Group as % of maximum opportunity
Economic Profit means operating profit less cost of capital.
%
100
80
60
40
20
0
100
20
30
50
2
63
11
50
%
QUALCOMM
Motorola Solutions
Cap Gemini
181.30
106.93
100.90
Harris
50.68
CGI Group
38.54
Cisco Systems
33.00
Ericsson
29.49
F5 Networks
26.18
Corning
24.44
Juniper
18.59
IBM
17.86
Cognizant
16.95
Nokia
4.58
Relative TSR
ranking 6.52 out of
12, achieved vest-
ing level 19.39%
Absolute TSR
9.00% CAGR
achieved vesting
level 74.89%
Opportunity
Outcome
0
50
100
150
200
Relative TSR: As % of maximum opportunity
Absolute TSR: As % of maximum opportunity
Group Operating income (EBIT): As % of maximum
opportunity
To support the execution of Ericsson’s business strategy and achievement of the financial targets of the Group, the Company’s variable
compensation programs focus on targets relating to economic profit, Group operating income (EBIT) and TSR. The variable remuneration is
thereby designed to create incentives for the contribution to Ericsson’s short- and long-term strategic plan and business objectives.
Remuneration report 2021
5
Total remuneration to the President
and CEO and Executive Vice Presidents
The table below sets out total remuneration in SEK to the President and CEO and the EVPs of Ericsson between 2019 and 2021.
Total remuneration to the President and CEO and Executive Vice Presidents
Fixed remuneration
Variable remuneration
Name and position
Börje Ekholm
President and CEO
Fredrik Jejdling
EVP and Head of Business Area
Networks
Arun Bansal EVP and Head of
Market Area Europe &
Latin America 10,11)
Financial
year
Fixed salary
(incl. vaca-
tion pay)
Other
benefits 1)
One-year
variable 2)
Multi-year
variable 3)
Additional
arrange-
ments 4)
Pension 5)
Total
remuneration 6)
Proportion
of fixed
remuneration 7)
Proportion
of variable
remuneration 8)
2021
2020
2019
2021
2020
20199)
2021
202011)
201911)
18,208,859
17,727,726
16,299,080
9,129,087
7,925,971
6,933,652
15,158,407
8,673,843
–
555,688
770,276
600,572
14,980
22,110
142,305
1,345,055
840,273
–
– 36,630,457
– 78,475,833
– 72,397,175
6,671,595
4,415,425
3,085,500
6,727,226
2,253,084
–
4,092,344
9,025,678
3,724,945
4,741,209
9,844,590
–
– 9,569,049
64,964,053
– 9,113,376
106,087,211
– 8,284,891
97,581,719
– 4,314,186
– 3,457,409
– 3,282,635
985,340
–
516,344
–
–
–
24,222,193
24,846,592
17,169,037
28,957,237
22,128,134
–
44%
26%
26%
56%
46%
60%
60%
45%
–
56%
74%
74%
44%
54%
40%
40%
55%
–
1) For further information about other benefits, see table regarding the Execution of fixed remuneration and pension to the President and CEO and the Executive Vice Presidents.
2) Amounts represent STV that was earned during the financial year that is paid the following year, i.e. for 2021 amounts represent STV 2021, for 2020 amount represents STV 2020 and for 2019 amout represents
STV 2019
3) Amounts represent the LTV for which all performance periods lapsed during the financial year and the Executive Performance Stock Plan (EPSP) share matching that took place during the financial year. For 2021
amounts represent LTV 2019, for 2020 amounts represent LTV 2018 and for 2019 amounts represents LTV 2017. Amounts are calculated based on the numbers of Performance Share Awards that will vest at the
end of the vesting period multiplied by the volume weighted average of the five last trading days of each financial year. The 2016 EPSP was settled and closed with the final delivery of the remaining performance
matching shares to the participants on August 17, 2020. The 2016 EPSP performance period ended December 31, 2018, and since 2016 no EPSP has been introduced for members of the ET. The details of the
EPSP are explained in the notes to the consolidated financial statements – note G3 share-based compensation, page 73 in the Financial report 2020.
4) Amounts represent discretionary additional arrangements approved by the Remuneration Committee or the Board of Directors that was made during the financial year
5) Amounts represent cash in lieu of pension (for the President and CEO) or pension contributions (for the EVPs) paid during the financial year.
6) Amounts represent the sum of Fixed remuneration, Variable remuneration, Additional arrangements and Pension.
7) Amounts represent the sum of Fixed remuneration and Pension divided by Total remuneration.
8) Amounts represent the sum of Variable remuneration and Additional arrangements divided by Total remuneration.
9) Pension regarding 2019 updated compared to Remuneration report 2020 due to a typo, other amounts, including Total remuneration, remain the same.
10) Any remuneration in foreign currency has been translated to SEK at average exchange rates for the year.
11) Arun Bansal was appointed EVP in June 2020. Fixed salary, Other benefits, One-year variable, Additional arrangements and Pension are calculated on a pro-rata basis based on the time period
June 1 – December 31, 2020. With regards to multi-year variable, it constitutes LTV 2018 and EPSP share matching for the time period June 1 – December 31, 2020.
Execution of fixed remuneration and pension to the President and CEO and the Executive Vice Presidents
The table below sets out the implementation of fixed remuneration and pension to the President and CEO and the EVPs.
Fixed salary
Other benefits
Pension
Börje Ekholm
President and
CEO
During the yearly total compensation review the Board of
Directors resolved in a salary increase of 5% from January
1, 2021 for the President and CEO. The increase reflects the
performance of the President and CEO up until the end of 2020.
The fixed salary level deemed appropriate in relation to the
responsibility of being the President and CEO of a leading global
ICT solutions provider compared to the compensation packages
of President and CEOs of similar international companies.
In accordance with the
Company’s Swedish benefits
policy, Börje Ekholm is entitled to
a company car or a cash allow-
ance and other ordinary benefits
as other employees in Sweden.
Due to Börje Ekholm being
resident of the USA he is also
entitled to a US medical insurance
as well as tax advisory services
with regards to his income
statement.
Fredrik Jejdling
EVP and Head
of Business Area
Networks
The salary level reflects Fredrik Jejdling’s responsibility as
head of Ericsson’s largest segment Networks. The salary level
is deemed competitive with regards to the external market of
both other EVPs of leading global ICT solutions providers as
well as smaller sized companies’ President and CEOs.
Arun Bansal
EVP and Head
of Market Area
Europe & Latin
America
The fixed salary reflects Arun Bansal’s responsibility as head
of two major geographies, both Europe and Latin America. His
salary level is deemed competitive to reflect his responsibility.
Arun Bansal is currently on LTA in the United Kingdom from his
original employment in India. In accordance with best practice
for international assignments, his compensation is set with a
“home base approach”.
In accordance with the
Company’s Swedish benefits
policy, Fredrik Jejdling is entitled
to a company car or a cash allow-
ance and other ordinary benefits
as other employees in Sweden.
As Arun Bansal is on LTA, he is
entitled to benefits in line with
Ericsson’s international mobility
policy such as housing allowance,
transportation allowance, home
travel, tax and social security
equalization assistance and
medical insurance.
Börje Ekholm receives a cash payment in lieu
of a defined contribution pension, because
it is not possible to enroll him in the Swedish
defined contribution pension plan (ITP1)
due to his residency in the USA. The cash
payment is treated as salary for the purposes
of tax and social security and is made in a way
which is cost neutral for Ericsson. Because
Börje Ekholm’s remuneration package does
not include an STV component, and because
incentive payments in cash are included as
part of the pensionable income under Swedish
rules, it was agreed in his employment contract
that his pension contribution would include an
additional premium over annual fixed salary to
take into account an assumed STV on-target
opportunity.
In accordance with Ericsson’s pension guide-
lines, Fredrik Jejdling participates in the defined
contribution plan ITP1. He is not entitled to any
other retirement benefit outside of the rules and
regulations in the ITP.
In accordance with Ericsson’s pension
guidelines and according to his employment
contract, Arun Bansal is eligible for Ericsson’s
LTA pension plan, International Pension Plan
(IPP) and annual pension contribution is paid
into Interben Trustees Limited in 2021.
Remuneration report 2021
6
Variable remuneration
Ericsson believes that, where possible, variable compensation should
be encouraged as an integral part of total remuneration. First and
foremost, this aligns the employees’ interests with Ericsson’s strategic
business objectives, sustainable long-term interests and the relevant
unit’s performance. In addition, it enables more flexible payroll costs
and emphasizes the link between performance and pay.
All variable compensation plans have maximum award and vesting
limits. Short-term variable compensation is to a greater extent depend-
ent on the performance of Ericsson and the specific unit, while long-
term variable compensation is dependent on the achievements of the
Ericsson Group.
Short term variable compensation (STV)
Short-term annual variable compensation is delivered through cash-
based programs that are dependent only on financial business targets.
Specific financial business targets are derived from the annual business
plan approved by the Board of Directors and, in turn, defined by the
Company’s long-term strategy. Ericsson strives to achieve best-in-class
margins and return on investment along with strong cash conversion
and therefore the starting point is to have one core economic profit
target which is a measure of operational profitability after the deduction
of cost of capital.
For the ET, economic profit targets are defined:
– At Group level for heads of Group functions,
– As a combination of Group level and business area level for heads of
business areas,
– As a combination of Group level and market area level for heads of
market areas.
The President and CEO does not uphold any short-term variable com-
pensation, with the main intention to encourage and ensure a long-term
engagement and performance. The Remuneration Committee decides
on and approves all targets which are set for other members of the ET.
These targets are cascaded within the organization and broken down
to unit-related targets throughout the Company where applicable. The
Remuneration Committee monitors the appropriateness and fairness
of the Group, business area and market area target levels throughout
the performance year and has the authority to revise them should they
cease to be relevant or stretching or to enhance shareholder value. The
current weighting for the EVPs as well as other business or market area
heads is 40% Group Economic Profit target and 60% business/market
area Economic Profit target.
The tables below set out the outcome of STV 2021 for each EVP, determined by reference to performance against applicable financial measures.
EVP and Head of Business Area Networks – Fredrik Jejdling (STV 2021)
Measure
Weighting
Group Economic Profit 1)
Business Area Networks Economic Profit 1)
Total
40%
60%
100%
1) Economic Profit means operating profit less cost of capital.
Threshold performance
level (as % of target)
SEK outcome at
threshold performance
Target
performance level
Maximum performance
level (as % of target)
SEK outcome at
target performance
SEK outcome at
maximum performance
Actual Performance
(as % of target)
SEK outcome at
actual performance
36%
SEK 0
82%
SEK 0
SEK 0
100%
SEK 1,334,319
100%
SEK 2,001,479
SEK 3,335,798
196%
SEK 2,668,638
118%
SEK 4,002,957
SEK 6,671,595
264%
SEK 2,668,638
149%
SEK 4,002,957
SEK 6,671,595
EVP and Head of Market Area Europe & Latin America– Arun Bansal (STV 2021)
Measure
Weighting
Group Economic Profit 1)
Market Area Europe & Latin America
Economic Profit 1)
Total
40%
60%
100%
1) Economic Profit means operating profit less cost of capital.
Threshold performance
level (as % of target)
SEK outcome at
threshold performance
Target
performance level
Maximum performance
level (as % of target)
SEK outcome at
target performance
SEK outcome at
maximum performance
Actual Performance
(as % of target)
SEK outcome at
actual performance
36%
SEK 0
77%
SEK 0
SEK 0
100%
SEK 1,345,445
100%
SEK 2,018,168
SEK 3,363,613
196%
SEK 2,690,890
119%
SEK 4,036,336
SEK 6,727,226
264%
SEK 2,690,890
123%
SEK 4,036,336
SEK 6,727,226
Remuneration report 2021
Long-term variable compensation (LTV)
The current LTV programs have been designed to encourage long-term
commitment and value creation in alignment with Ericsson’s long-term
strategic objectives and shareholder interests. They form part of a total
remuneration package and in general span over a minimum of three
years. As these are variable compensation programs, the outcomes
cannot be predicted when the programs are introduced and rewards
depend on long-term personal commitment, corporate performance
and share price development.
The LTV programs within Ericsson consist of share-based remunera-
tion for members of the ET. The aim of the LTV programs is to attract,
retain and motivate executives in a competitive market through
performance-based share related incentives and to encourage the
build-up of significant equity holdings to align the interests of the ET
with those of shareholders. Awards under LTV 2018, 2019, 2020 and
2021 (Performance Share Awards) are granted free of charge entitling
the participants, provided that i.a. certain performance conditions are
met, to receive a number of shares, free of charge, following expiration
of a three-year vesting period (vesting period) under each program.
Allotment of shares pursuant to Performance Share Awards are
subject to the achievement of challenging performance criteria which
are defined specific to each year’s program when the program was
introduced. Which portion, if any, of the Performance Share Awards for
LTV that will vest is determined at the end of the relevant performance
period based on the satisfaction of the predetermined performance
criteria for that year’s LTV program, ranging from one to three years
(performance period). It is generally required that the participant
retains his or her employment over a period of three years from the
date of grant of awards to be eligible to receive the performance
awards. Provided that the performance criteria have been met during
the performance period and that the participant has retained his or
her employment (unless special circumstances are at hand) during
the service period, allotment of vested shares will take place as soon
as practicably possible following the expiration of the vesting period.
7
When determining the final vesting level of Performance Share Awards,
the Board of Directors examines whether the vesting level is reasonable
considering the Company’s financial results and position, conditions on
the stock market and other circumstances, and if not, reserves the right
to reduce the vesting level to a lower level deemed appropriate.
The Board of Directors may, at any time prior to the Vesting Date
of an award, reduce (including to zero) the number of shares to which
an award relates, to the extent it considers appropriate, taking into
account:
– the Company’s financial results and position;
– conditions on the stock market; and/or
– other circumstances and reasons as the Board considers appropriate.
In addition, the Company has the right in its discretion to deny in whole
or in part the entitlement of a participant to the program related to the
year(s) in which the participant has acted in breach of Ericsson’s Code of
Business Ethics. The Company also has the right in its discretion to claim
repayment in whole or in part the awards vested in respect of year(s) in
which the participant has acted in breach of Ericsson’s Code of Business
Ethics.
The details for each of the ongoing long-term variable compensation
programs within Ericsson, including the programs for other employees,
are explained in the notes to the consolidated financial statements –
note G3 Share-based compensation, page 71 in the Financial report.
Long-Term Variable compensation program 2021 (LTV 2021)
LTV 2021 was approved at the AGM 2021 and includes all members of
the ET, a total of 15 ET members in 2021, including the President and
CEO. The participants were granted Performance Share Awards on
May 3, 2021. The Performance Share Awards granted to the President
and CEO and EVPs are summarized in the table below.
Grant information Long-Term Variable compensation program 2021 (LTV 2021)
Participant
Börje Ekholm
Fredrik Jejdling
Arun Bansal
Grant value 1)
33,668,874
4,169,747
3,944,866
Grant value as
percentage of
annual base salary 2)
Number of
Performance Share
Awards granted 3)
Percentage of grant
subject to performance
condition 4)
Maximum number of
possible performance
awards vesting 5)
190%
50%
50%
308,323
38,184
36,125
100%
100%
100%
616,646
76,368
72,250
1) Amounts represent base entitlement amount in SEK.
2) Numbers represent base entitlement amount as percentage of the annual base salary at grant date.
3) Calculated as the respective grant value divided by the volume weighted average of the market price of Ericsson B shares on Nasdaq Stockholm during the five trading days immediately following the publication
of the Company’s interim report for the fourth quarter 2020.
4) All Performance Share Awards are subject to challenging performance criteria that are measured over pre-determined performance periods, ranging from one to three years. Performance criteria for LTV 2021 are:
(i) Group operating income (EBIT) target (weight 50%) that is measured over the period January 1, 2021 to December 31, 2021; (ii) Absolute TSR development (weight 30%) ranging from 6–14% compounded
annual growth rate; (iii) Relative TSR development (weight 20%) for the Ericsson B share, ranking 6–2 against 11 peer companies, measured over the period January 1, 2021 to December 31, 2023. The perfor-
mance criteria for LTV 2021 along with the details on how the performance criteria will be calculated and measured are explained in minutes from the AGM 2021 under Item 16.
5) The maximum number of shares that could vest will result in a dilution of approximately 0.1% of the total number of outstanding shares. The effect on important key figures is only marginal.
Remuneration report 2021
8
Performance outcome under LTV 2019 and Group operating income (EBIT) performance criterion for LTV 2021
LTV 2019 and LTV 2021 had targets with performance periods ending December 31, 2021, which are summarized in the tables below. LTV 2019 will vest during
2022 since all performance periods under the program have now ended. LTV 2021 will not vest until 2024, but the performance period for the one-year Group
operating income (EBIT) performance criterion of LTV 2021 ended on December 31, 2021.
LTV 2021 performance criteria
Program
Performance criterion
Criteria
Weight
Performance
period
Vesting opportunity
(linear pro rata)
Achievement
Achieved
vesting level 1)
LTV 2021
LTV 2021
LTV 2021
Total
2021 Group
Operating income
(EBIT)
Range (SEK billion)
15.0–24.0
Absolute TSR
Relative TSR
Range 6–14%
Ranking of
Ericsson 6–2
Jan 1, 2021–
Dec 31, 2021
Jan 1, 2021–
Dec 31, 2023
Jan 1, 2021–
Dec 31, 2023
50%
30%
20%
100%
0–200%
SEK 27.4 billion 2)
200.00%
0–200%
0–200%
0–200%
–
–
–
–
1) The Board of Directors resolved on the achieved vesting level for the 2021 Group operating income (EBIT) performance criterion as 200% for this portion of the Performance Share Awards granted based on the
2021 Group operating income (EBIT) outcome. For further information regarding the number or Performance Share Awards earned for each of the President and CEO and the EVPs, see table Long-Term Variable
compensation (LTV) to the President and CEO and the Executive Vice Presidents. Vesting of the Performance Share Awards will occur at the end of the vesting period in 2024.
2) Excludes restructuring charges and items not included in target performance criterion.
LTV 2019 performance criteria
Program
LTV 2019
LTV 2019
LTV 2019
Total
Performance crite-
rion 1)
Criteria
Weight
Performance
period
Vesting opportunity
(linear pro rata)
Achievement
Achieved
vesting level 2)
2019 Group Operating
income (EBIT)
Range (SEK billion)
10.0–20.0
Absolute TSR
Relative TSR
Range 6%–14%
Ranking of
Ericsson 7–2
Jan 1, 2019–
Dec 31, 2019
Jan 1, 2019–
Dec 31, 2021
Jan 1, 2019–
Dec 31, 2021
50%
30%
20%
100%
0–200%
SEK 20.4 billion
200.00% 1)
0–200%
0–200%
0–200%
9.00%
74.89% 2)
6.52 out of 12
19.39% 2)
126.35%
1) As communicated in the Annual Report 2019, the Board of Directors resolved on the achieved vesting level for the 2019 Group operating income (EBIT) performance criterion as 200% for this portion of the
Performance Share Awards granted based on a 2019 Group operating income (EBIT) outcome excluding fines and similar related to the United States Department of Justice (DOJ)/Securities and Exchange
Commission (SEC) resolution.
2) The Board of Directors resolved on the achieved vesting levels for the absolute TSR and relative TSR development performance criteria as 74.89% and 19.39% respectively based on the achievement results of
9.00% absolute TSR and 6.52 ranking for relative TSR, which resulted in an overall achieved vesting level of 126.35% for LTV 2019. Vesting of Performance Share Awards will occur at the end of the vesting period
in 2022. For further information regarding the number or Performance Share Awards earned for each of the President and CEO and the EVPs, see table Long-Term Variable compensation (LTV) to the President
and CEO and the Executive Vice Presidents.
Remuneration report 2021
9
Long term variable compensation (LTV) to the President and CEO and the Executive Vice Presidents
The table below sets out relevant information of LTV 2018, 2019, 2020 and 2021 with regards to the President and CEO and the EVPs.
Long-Term Variable compensation (LTV) to the President and CEO and the Executive Vice Presidents
Main conditions of share award plans
Information regarding reported financial year
Name and
position
Program
Börje
Ekholm
President
and CEO
LTV 2021
LTV 2020
LTV 2019 13)
LTV 2018
Total
Performance
criterion
(weight) 1)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Perfor-
mance
period
end
date 4)
Perfor-
mance
period 3)
Performance
share awards
granted
(value in SEK) 6)
Vesting
Date 5)
Maximum
number of
possible
Performance
Share Awards
vesting
(value in SEK) 7)
Performance
Share Awards
earned during
the year
(value in SEK) 9)
Performance
Share Awards
still subject to
performance
condition (value
in SEK) 10)
Performance
Share Awards
vested during
the year (value
in SEK) 11)
Year-end
balance, earned
Performance
Share Awards
unvested (value
in SEK) 12)
Opening
balance
(value in SEK) 8)
1 year
2021-
12-31
2024-
05-03
154,161
( 16,834,437)
308,322
( 33,668,874)
308,322
( 30,594,792)
308,322
( 30,594,792)
Grant
date 2)
2021-
05-03
2021-
05-03
3 years
2023-
12-31
2024-
05-03
154,162
( 16,834,437)
308,324
( 33,668,874)
308,324
( 30,594,991)
2020-
04-01
1 year
2020-
12-31
2023-
04-01
194 830
(15,188,966)
389,660
(30,377,932)
389,660
( 38,245,129)
2020-
04-01
3 years
2022-
12-31
2023-
04-01
194,830
(15,188,966)
389,660
(30,377,932)
389,660
(38,665,962)
2019-
05-18
1 year
2019-
12-31
2022-
05-18
146,087
(13,808,151)
292,174
(27,616,302)
292,174
(28,676,878)
2019-
05-18
3 years
2021-
12-31
2022-
05-18
146,087
(13,808,151)
292,174
(27,616,302)
76,973
(7,638,031)
389,660
( 38,665,962)
292,174
(28,992,426)
76,973
(7,638,031)
2018-
05-18
2018-
05-18
1 year
2018-
12-31
2021-
05-18
199,888
(13,150,620
399,776
(26,301,240)
399,776
(39,238,014)
3 years
2020-
12-31
2021-
05-18
199,887
(13,150,620)
399,774
(26,301,240)
399,774
(39,237,818)
399,776
(44,391,247)
399,774
(44,391,024)
1,389,932
(117,964,348)
2,779,864
(235,928,696)
1,481,384
(145,397,840)
385,295
(38 232 823)
697,984
(69,260,952)
799,550
(88,782,271)
1,067,129
(105,891,211)
1) The TSR performance criteria includes both the absolute and the relative performance criteria for each respective program.
2) Grant date represents the date at which the initial grant was made.
3) Performance period represents the period over which each performance criterion will be measured.
4) Performance period end date represents the date when the performance period ends.
5) Vesting date represents the date of which the Performance Share Awards, if any, will vest and entitle the participants to receive shares free of charge.
6) Numbers represent the number of initial Performance Share Awards that were granted at the grant date. SEK values represent the equivalent value at the grant date.
7) Numbers represent the maximum number of Performance Share Awards that could be earned for each performance criterion. SEK values represent the equivalent value at the grant date.
8) Numbers represent the balance at the beginning of the year, which includes earned Performance Share Awards for previous year(s) that are yet to vest. SEK values are calculated as the number of earned
Performance Share Awards multiplied by the volume weighted average share price of the five last trading days for the previous financial year.
9) Numbers represent the number of Performance Share Awards earned that had a performance period ending during the financial year. SEK values are calculated as the number of earned Performance Share Awards
multiplied by the volume weighted average share price of the five last trading days for the financial year.
10) Numbers represent the maximum number of outstanding Performance Share Awards that are still subject to an ongoing performance period. SEK values are calculated as the number of outstanding Performance
Share Awards that are still subject to an ongoing performance period multiplied by the volume weighted average share price of the five last trading days for the financial year.
11) Numbers represent the number of Performance Share Awards that had a vesting period ending during the financial year and which entitled the participant to receive shares free of charge. SEK values represent the
actual value of shares given to the participant at the vesting date.
12) Numbers represent the balance at the end of the year, which includes earned Performance Share Awards for the financial year and previously earned Performance Share Awards that are yet to vest. SEK values are
calculated as the number of earned Performance Share Awards multiplied by the volume weighted average share price of the five last trading days for the financial year.
13) LTV 2019 maximum number of possible Performance Share Awards vesting updated compared to Remuneration report 2020 due to a typo. Opening balance and Year-end balance, earned Performance Share
Awards unvested adjusted accordingly.
Remuneration report 2021
10
Long term variable compensation (LTV) to the President and CEO and the Executive Vice Presidents, cont’d.
Main conditions of share award plans
Information regarding reported financial year
Grant
date 2)
2021-
05-03
Name and
position
Program
Fredrik Jejdling
EVP and Head
of Business Area
Networks
LTV 2021
LTV 2020
LTV 2019
LTV 2018
Total
Performance
criterion
(weight) 1)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Perfor-
mance
period
end
date 4)
Perfor-
mance
period 3)
Performance
share awards
granted
(value in SEK) 6)
Vesting
Date 5)
Maximum
number of
possible
Performance
Share Awards
vesting
(value in SEK) 7)
Performance
Share Awards
earned during
the year
(value in SEK) 9)
Performance
Share Awards
still subject to
performance
condition (value
in SEK) 10)
Performance
Share Awards
vested during
the year (value
in SEK) 11)
Year-end
balance, earned
Performance
Share Awards
unvested (value
in SEK) 12)
Opening
balance
(value in SEK) 8)
1 year
2021-
12-31
2024-
05-03
19,092
( 2,084,874)
38,184
(4,169,747)
38,184
(3,788,998)
2021-
05-03
3 years
2023-
12-31
2024-
05-03
19,092
( 2,084,874)
38,184
(4,169,747)
(38,184)
(3,788,998)
2020-
04-01
1 year
2020-
12-31
2023-
04-01
22,262
(1,735,594)
44,524
(3,471,188)
44,524
(4,370,031)
2020-
04-01
3 years
2022-
12-31
2023-
04-01
22,263
(1,735,594
44,526
(3,471,188)
44,526
(4,418,315)
2019-
05-18
1 year
2019-
12-31
2022-
05-18
16,321
(1,542,750)
32,642
(3,085,500)
32,642
(3,203,812)
2019-
05-18
3 years
2021-
12-31
2022-
05-18
16,322
(1,542,750)
32,644
(3,085,500)
8,599
(853,279)
38,184
(3,788,998)
44,524
(4,418,117)
32,642
(3,239,066)
8,599
(853,279)
2018-
05-18
2018-
05-18
1 year
2018-
12-31
2021-
05-18
22,991
(1,512,500)
45,982
(3,025,000)
45,982
(4,513,133)
3 years
2020-
12-31
2021-
05-18
22,988
(1,512,500)
45,976
(3,025,000)
45 976
(4,512,544)
45,982
(5,105,855)
45 976
(5,105,189)
161 331
(13 751 435)
322 662
(27 502 870)
169 124
(16 599 521)
46 783
(4 642 277)
82 710
(8 207 313)
91,958
(10,211,044)
123,949
(12,299,459)
1) The TSR performance criteria includes both the absolute and the relative performance criteria for each respective program.
2) Grant date represents the date at which the initial grant was made.
3) Performance period represents the period over which each performance criterion will be measured.
4) Performance period end date represents the date when the performance period ends.
5) Vesting date represents the date of which the Performance Share Awards, if any, will vest and entitle the participants to receive shares free of charge.
6) Numbers represent the number of initial Performance Share Awards that were granted at the grant date. SEK values represent the equivalent value at the grant date.
7) Numbers represent the maximum number of Performance Share Awards that could be earned for each performance criterion. SEK values represent the equivalent value at the grant date.
8) Numbers represent the balance at the beginning of the year, which includes earned Performance Share Awards for previous year(s) that are yet to vest. SEK values are calculated as the number of earned Perfor-
mance Share Awards multiplied by the volume weighted average share price of the five last trading days for the previous financial year.
9) Numbers represent the number of Performance Share Awards earned that had a performance period ending during the financial year. SEK values are calculated as the number of earned Performance Share
Awards multiplied by the volume weighted average share price of the five last trading days for the financial year.
10) Numbers represent the maximum number of outstanding Performance Share Awards that are still subject to an ongoing performance period. SEK values are calculated as the number of outstanding Performance
Share Awards that are still subject to an ongoing performance period multiplied by the volume weighted average share price of the five last trading days for the financial year.
11) Numbers represent the number of Performance Share Awards that had a vesting period ending during the financial year and which entitled the participant to receive shares free of charge. SEK values represent
the actual value of shares given to the participant at the vesting date.
12) Numbers represent the balance at the end of the year, which includes earned Performance Share Awards for the financial year and previously earned Performance Share Awards that are yet to vest. SEK values
are calculated as the number of earned Performance Share Awards multiplied by the volume weighted average share price of the five last trading days for the financial year.
Remuneration report 2021
Long term variable compensation (LTV) to the President and CEO and the Executive Vice Presidents, cont’d.
Main conditions of share award plans
Information regarding reported financial year
11
Grant
date 2)
2021-
05-03
Name and
position
Program
Arun Bansal
EVP
and Head of
Market Area
Europe & Latin
America
LTV 2021
LTV 2020
LTV 2019
LTV 2018
Total
Performance
criterion
(weight) 1)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Group
Operating
income (EBIT)
(50%)
TSR
performance
criteria (50%)
Perfor-
mance
period
end
date 4)
Perfor-
mance
period 3)
Performance
share awards
granted
(value in SEK) 6)
Vesting
Date 5)
Maximum
number of
possible
Performance
Share Awards
vesting
(value in SEK) 7)
Performance
Share Awards
earned during
the year
(value in SEK) 9)
Performance
Share Awards
still subject to
performance
condition (value
in SEK) 10)
Performance
Share Awards
vested during
the year (value
in SEK) 11)
Year-end
balance, earned
Performance
Share Awards
unvested (value
in SEK) 12)
Opening
balance
(value in SEK) 8)
1 year
2021-
12-31
2024-
05-03
18,062
(1,972,433)
36,124
( 3,944,866)
36,124
(3,584,585)
2021-
05-03
3 years
2023-
12-31
2024-
05-03
18,063
(1,972,433)
36,126
( 3,944,866)
2020-
04-01
1 year
2020-
12-31
2023-
04-01
27,399
(2,136,026)
54,798
(4,272,052)
54,798
(5,378,424)
2020-
04-01
3 years
2022-
12-31
2023-
04-01
27,398
(2,136,026)
54,796
(4,272,052)
2019-
05-18
1 year
2019-
12-31
2022-
05-18
18,909
(1,787,323)
37,818
(3,574,646)
37,818
(3,711,837)
36,126
(3,584,783)
54,796
(5,437,407)
2019-
05-18
3 years
2021-
12-31
2022-
05-18
18,909
(1,787,323)
37,818
(3,574,646)
9,962
( 988,529)
36,124
(3,584,585)
54,798
(5,437,606)
37,818
(3,752,680)
9,962
(988,529)
2018-
05-18
2018-
05-18
1 year
2018-
12-31
2021-
05-18
24,745
(1,627,930)
49,490
(3,255,860)
49,490
(4,857,444)
3 years
2020-
12-31
2021-
05-18
24,743
(1,627,930)
49,486
(3,255,860)
49,486
(4,857,051)
49,490
(5,495,384)
49,486
(5,494,940)
178,228
(15,047,424)
356,456
(30,094,848)
191,592
(18,804,755)
46,086
(4,573,114)
90,922
(9,022,190)
98,976
(10,990,325)
138,702
(13,763,399)
1) The TSR performance criteria includes both the absolute and the relative performance criteria for each respective program.
2) Grant date represents the date at which the initial grant was made.
3) Performance period represents the period over which each performance criterion will be measured.
4) Performance period end date represents the date when the performance period ends.
5) Vesting date represents the date of which the Performance Share Awards, if any, will vest and entitle the participants to receive shares free of charge.
6) Numbers represent the number of initial Performance Share Awards that were granted at the grant date. SEK values represent the equivalent value at the grant date.
7) Numbers represent the maximum number of Performance Share Awards that could be earned for each performance criterion. SEK values represent the equivalent value at the grant date.
8) Numbers represent the balance at the beginning of the year, which includes earned Performance Share Awards for previous year(s) that are yet to vest. SEK values are calculated as the number of earned Perfor-
mance Share Awards multiplied by the volume weighted average share price of the five last trading days for the previous financial year.
9) Numbers represent the number of Performance Share Awards earned that had a performance period ending during the financial year. SEK values are calculated as the number of earned Performance Share Awards
multiplied by the volume weighted average share price of the five last trading days for the financial year.
10) Numbers represent the maximum number of outstanding Performance Share Awards that are still subject to an ongoing performance period. SEK values are calculated as the number of outstanding Performance
Share Awards that are still subject to an ongoing performance period multiplied by the volume weighted average share price of the five last trading days for the financial year.
11) Numbers represent the number of Performance Share Awards that had a vesting period ending during the financial year and which entitled the participant to receive shares free of charge. SEK values represent the
actual value of shares given to the participant at the vesting date.
12) Numbers represent the balance at the end of the year, which includes earned Performance Share Awards for the financial year and previously earned Performance Share Awards that are yet to vest. SEK values are
calculated as the number of earned Performance Share Awards multiplied by the volume weighted average share price of the five last trading days for the financial year.
Remuneration report 2021
12
Shareholding guidelines for the Executive Team
The Board of Directors has adopted the following shareholding guide-
lines to be applied to the current and future members of the ET effective
from January 1, 2019 in order to encourage acquiring and maintaining a
level of ownership of shares that more closely aligns the interests of the
members of the ET with those of the Company’s shareholders:
– The President and CEO is required to build up and maintain a share-
holding equivalent to at least 200% of his gross annual base salary.
– The other members of the ET are required to build up and maintain
a shareholding equivalent to at least 75% of their gross annual base
salaries.
The current members of the ET have five years to build up the required
share ownership starting from January 1, 2019. In case of new appoint-
ments to the ET, the new members will be expected to fulfil the share
ownership requirement at the fifth anniversary of the receipt of their first
grant of Performance Share Awards under the LTV program. The Board
of Directors will consider as counting towards the applicable sharehold-
ing objective;
– any interests in Ericsson B shares held or acquired directly by
the member of the ET,
– any vested but unexercised options (post-tax, post-exercise
cost value),
– any equity awards held by the member of the ET where performance
and/or employment conditions have been met, but which are subject
to a holding period (on a post-tax basis).
Any unvested share, synthetic share or share option awards subject
to performance conditions or continued employment shall not count
towards the shareholding guideline requirements.
The Remuneration Committee shall monitor adherence to the share-
holding guidelines and report periodically to the Board of Directors, and
inform the members of the ET of the extent to which the shareholding
guidelines have been met.
The holdings of the ET are set out in the Corporate Governance
report, which is available on page 20–23 in the Corporate Governance
report.
Comparative information on the change
of remuneration and company performance
Comparative table on the change of remuneration and company performance over the last three reported financial years
Ericsson performance
Remuneration for the President
and CEO and Executive Vice Presidents
Börje Ekholm
President and CEO
Fredrik Jejdling
EVP and Head of
Business Area
Networks
Arun Bansal
EVP and Head of
Market Area Europe &
Latin America 3)
Average
remuneration
to employees
on a full-time
equivalent basis 4)
Fixed remuneration 1)
18,764,547 (1%)
9,144,067 (15%)
16,503,462 (73%)
889,538 (13%)
Variable remuneration 2) 88,782,271 (22%) 14,626,469 (122%) 14,763,028 (11248%)
295,193 (–1%)
Group operating
income (EBIT)
Group net sales
31,780 (14%) 232,314 (–0.03%)
Share Price
as per
December
31 of the
financial
year
99.79
(2.20%)
97.64
(19.72%)
Fixed remuneration 1)
18,498,002 (13%)
7,948,081 (15%)
9,514,116
790,295 (–23%)
27,808 (163%) 232,390 (2.28%)
Variable remuneration 2)
72,507,054 6,595,909 (103%)
130,096
299,589 (25%)
Fixed remuneration 1)
16,299,080
6,933,652
Variable remuneration 2)
0
3,244,887
–
–
1,030,185
238,913
10,564
227,216
81.56
Comments
LTV 2018 vested
and shares were
transferred in may
2021.
LTV 2018 vested
and shares were
transferred in may
2021.
LTV 2018 vested and
shares were trans-
ferred in may 2021.
Information disclosed
and compared from
date of appointment
as EVP.
During 2021 the
delayed annual
salary review for
2020 took place
with a company
sponsored retro-
active effect,
increasing the
remuneration paid
to other employees.
A majority of
employees in the
parent company
does not have vari-
able remuneration.
2021
(% change YoY)
2020
(% change YoY)
2019
1) Fixed remuneration includes fixed salary and other benefits.
2) Variable remuneration for the President and CEO and the EVPs include STV and LTV, as applicable. For the employees of the Company, the variable remuneration includes short- and long-term variable
compensation. For comparability reasons, the variable remuneration represents numbers vested during the financial year, since performance evaluations and long-term variable compensation programs
for other employees that have performance periods ending during the financial year 2021 are yet to be finalized.
3) Arun Bansal was appointed EVP in June, 2020. Information disclosed covers the time period after June 1 2020.
4) Employees of Telefonaktiebolaget LM Ericsson, excluding the President and CEO and the other members of the ET employed within the Company.
Board of Directors
Stockholm, March 3, 2022
Telefonaktiebolaget LM Ericsson (publ)
Org. no. 556016-0680
Remuneration report 2021
Sustainability
and Corporate
Responsibility
report
Part of
Ericsson
Annual Report
2021
Annual Report 2021
Financial
report
Corporate
Governance
report
Remuneration
report
Sustainability
and Corporate
Responsibility
report
ericsson.com
Contents
Sustainability and Corporate
Responsibility report 2021
Sustainability creates value
Sustainability performance summary
Sustainability approach and governance
Our people
Environmental sustainability
Digital inclusion
Corporate citizenship
Responsible business
Consolidated sustainability notes
Auditor’s Assurance Report
Glossary
1
2
6
8
10
16
17
18
28
37
38
This Sustainability and Corporate Responsibility report is rendered
as a separate report added to Ericsson’s Financial report in accord-
ance with the Annual Accounts Act (SFS 1995:1554) chapter
6, section 10 and 11). An assurance report from the auditor is
appended hereto.
Sustainability creates value
1
Ericsson’s core contribution to the SDGs is
primarily through SDG 9 – Industry, innovation
and infrastructure, and SDG 17 – Partnerships
for the goals. These two SDGs are central to
Ericsson’s business as a technology leader
that creates and orchestrates ecosystems and
works across trusted partnerships to create
positive impact at scale.
With this approach, Ericsson enables public
and industrial sectors to access technology
that helps them accelerate progress towards
targets in key areas related, but not limited to,
SDG 13 – Climate action; SDG 12 – Respon-
sible production and consumption; SDG 8 –
Decent work and sustainable economic growth
and SDG 4 – Education. Ericsson’s sustain-
ability targets on climate, responsible business
practices and production systems contribute to
the ambitions behind the same SDGs.
Sustainability creates value
Ericsson has been a sustainability pioneer
in the private sector and has been reporting
on its progress in this area for more than 20
years. Sustainability and responsible business
practices are fundamental to Ericsson’s culture
and its strategy to drive business transforma-
tion and create value for stakeholders. The
Company firmly believes that part of that value
is derived from its focus on sustainability in its
operations, portfolio and how its technology is
applied across sectors of society.
Technology as driver of positive change
Ericsson was founded on the premise that
access to communication is a basic human
need and should be available to all. Ericsson’s
vision to improve lives, redefine business and
pioneer a sustainable future is built on the
power of mobile connectivity to deliver positive
impact. The Company’s efforts in pioneering
a sustainable future are grounded in research
and science as well as concrete targets set
across its value chain.
Energy consumption, costs and sourcing
are global business challenges and directly
linked to the ICT industry’s ambition to be Net
Zero. The Company and its customers have
made reducing energy use in network opera-
tions a priority, and Ericsson continues to make
substantial investments in energy-efficiency-
led R&D, as well as product and solution
development, across all technology portfolios.
These investments allow the Company to
offer customers sustainable and innovative
alternatives for their network modernization
strategies. The 5G standard is essential to
many of these advances, as it is designed to
enable high performance and low network
energy consumption.
In line with the industry’s aspiration,
Ericsson has set an ambition to reach Net
Zero carbon emissions across its value chain
by 2040 and, to that end, is working toward
halving emissions in its supply chain and
portfolio by 2030 and being Net Zero in its
own activities at the same time. In addition to
reducing company and ICT industry impacts,
the technology Ericsson delivers has the poten-
tial to reduce global carbon emissions in other
sectors by 15% by 2030 and will play a key role
as technology helps to redefine business.
During the second year of the global
COVID-19 pandemic, digitalization contin-
ued to prove critical to social and economic
development. However, around 2.9 billion
people globally remain offline and are
unable to enjoy the benefits of the digital
economy. There are several important ways
in which Ericsson can improve lives, including
developing and delivering offerings to bridge
the digital divide, deploying networks that
support universal connectivity and develop-
ing solutions that can help improve financial
inclusion as well as access to information and
other services.
The Company also contributes to digital
inclusion through its efforts in education.
Ericsson is a partner to UNICEF in the Giga
initiative with the aim to connect every school
to the internet by 2030. In addition, as part of
the World Economic Forum’s Edison Alliance,
Ericsson has committed to improving digital
literacy and skills development for one million
children and youth by 2025 to help them
prepare for a 5G future.
Conducting business responsibly
Responsible business is the foundation of
everything Ericsson does, no matter where in
the world it operates. Ericsson drives a pro-
active agenda to improve and strengthen its
responsible business practices, with a focus on
building and maintaining trust, transparency
and integrity.
Ericsson’s commitment to sustainability
and corporate responsibility is reflected in
its policies and practices. The Company
supports the Ten Principles of the UN Global
Compact as well as the UN Guiding Principles
on Business and Human Rights. Ericsson
is committed to building a culture founded
on integrity and compliance as well as demon-
strating how taking responsibility throughout
its value chain is fundamental to its success
and a way to drive real and lasting positive
impact.
Building on decades of sustainability
reporting, the Company has begun a journey
to report progress on environmental, social,
and governance goals aligned to the World
Economic Forum’s Stakeholder Capitalism
metrics.
Contributing to the achievement of the
Sustainable Development Goals
The technology Ericsson delivers has the
potential to contribute to the achievement
of all 17 United Nations Sustainable Develop-
ment Goals (SDGs).
Sustainability and Corporate Responsibility report 2021 2
Sustainability performance summary
Sustainability performance summary
Value chain
Topic
Topic relevance
Ericsson’s approach
Target or key performance indicator
Performance
SDG contribution
Portfolio
Climate action -
Network energy
performance
Security
and privacy
Digital inclusion
Respect for
human rights
Supply chain
Responsible
management
of suppliers
The mobile industry has set the ambition to transform
itself to reach Net Zero carbon emissions by 2050.
Technological innovations and the introduction of
5G mobile systems have the potential to provide the
increased capacity, coverage and efficiencies necessary
to deliver on these sustainability commitments and to
reduce emissions for the ICT industry as well as other
sectors.
Network energy performance improvements play a
key role in enabling a fast tracked global 5G deployment
to achieve this ambition.
Innovative technologies and services are pioneering
new ways to connect systems and societies. This also
brings new privacy and security risks as connected
devices, applications and integrated networks become
potential targets for fraud, disruptive cyber-attacks and
information and identity theft.
Any responsible business must recognize the increas-
ingly higher threat level and related security and privacy
risks. Thus, companies must take proactive action in this
area and formulate appropriate counter measures and
effective security and privacy strategies.
Digitalization and connectivity are a foundation for
global sustainable development. Approximately 2.9
billion people still remain offline and are unable to enjoy
the benefits of the digital economy.
While digital technology is becoming more wide-
spread and continues to prove critical to social and
economic development, the COVID-19 pandemic has
highlighted a growing divide between people who are
connected and those who are not in both developed
and developing markets.
To meet customer expectations and help the industry
reach Net Zero, Ericsson has introduced an innovative
approach to reduce network energy use. Ericsson’s
solutions also enable telecom operators to manage
expected growth in data traffic to meet the needs of
current and 5G networks.
The energy performance of Ericsson’s portfolio is a
competitive advantage and delivers value from both
a sustainability and a cost perspective. Environmental
factors are considered in design principles and
material choices within Ericsson’s portfolio to
minimize negative impacts on the environment.
Providing the world with resilient products and
services now and in the future starts with robust and
efficient security capabilities internally as well as
throughout Ericsson’s business processes. In 2021
Ericsson has not had any critical security or privacy
incidents. Ericsson is committed to continue strength-
ening the protection of its assets and to contributing
to a safe digital society by providing trustworthy
products and services. As the value of information
and the capabilities of threat actors increase, securing
information and personal data is the foundation of the
Ericsson’s trustworthy technology leadership.
Ericsson aims to be the preferred partner to bridge the
digital divide as mobile broadband (3GPP technology)
is one of the most cost-efficient options to empower
people and societies through digital infrastructure.
Important ways in which Ericsson can improve lives
include developing and delivering offerings to bridge
the digital divide, deploying networks that support
universal connectivity and providing solutions
that help improve financial inclusion. Ericsson also
contributes to digital inclusion through its efforts in
the area of education.
Within the ICT industry, there is increased focus on
concerns related to the negative impact of technology
on human rights, such as government surveillance,
misuse of artificial intelligence, network shutdowns and
widespread processing of personal data.
All companies have a responsibility to respect and
uphold internationally recognized human rights. It is
therefore critical that companies in the ICT industry
remain vigilant to potential human rights violations and
work to ensure their technology is not misused.
Ericsson is committed to respecting human rights
across its value chain and is a founding member of
the UN Global Compact, an early adopter of the UN
Guiding Principles on Business and Human Rights
and a member of the Global Network Initiative. This
responsibility is addressed throughout Ericsson’s busi-
ness operations, including its supply chain and end use
of products. Ericsson’s Sensitive Business Framework
evaluates sales opportunities from a human rights risk
perspective. Risks are identified based on the para-
meters of its Sensitive Business risk methodology.
Companies are today expected to integrate sustain-
ability and responsible business practices across their
value chains, including suppliers. This includes, but is
not limited to, climate action, business ethics, human
and labor rights and health and safety.
Moreover, close collaboration across sectors and
value chains is essential to achieving global climate
objectives. Companies must work together to address
emissions not directly caused by their own activities,
including emissions in the supply chain.
Managing the social, ethical, and environmental
impacts of Ericsson’s supplier base is part of the
Company’s value chain approach. Ericsson’s Code of
Conduct for Business Partners is the basis for Ericsson’s
Responsible Sourcing program and is part of the
standard supplier contract.
Ericsson is one of the founders of the 1.5°C Supply
Chain Leaders to drive climate action in global supply
chains. The Company has set a target to engage with
its high-emitting and strategic suppliers to have them
set their own 1.5°C aligned climate targets.
Group targets
5G energy efficiency target
– Achieve a 5G product portfolio that is ten times
more energy efficient (per transferred data) than
4G by 2022. Performance year to date against
target is shown in the graph to the right.
– Achieve 35% energy saving in Ericsson Radio
System compared with the legacy portfolio
by 2022. Approved by Science Based Target
Initiative. Performance shown on page 12.
Key performance indicator
Incidents reported through Security Incidents
Management System (SIMS).
Incidents reported
2017
2018
2019
2020
2021
2022
Enable internet for all through roll out of mobile
broadband to connect additional 500 million people
Group target
by 2024.
Due to updates in the methodology to measure
Ericsson’s share of new broadband connects made
in 2021, past year’s figures have been restated.
Key performance indicator
Cases reviewed in the sensitive business process
and process adherence.
2019
2020
2021
Minor
Medium
Major*
Critical*
* Major 11 (25 in 2020 and 30 in 2019), Critical 0 (1 in 2020 and 3 in 2019)
Additional people connected (aggregated)
2019
2020
2021
2024
//
People
Target
Outcome of cases reviewed and process adherence
100%
80%
60%
40%
20%
0%
2019
Approved
Dismissed
Approved with conditions
Process adherence
2020
2021
Group target
Suppliers with 1.5°C aligned climate targets
Ericsson to engage with 350 of its high emitting and
strategic suppliers, responsible for 90% of Ericsson’s
supply chain emissions, to set their own 1.5°C
aligned climate targets by 2025.
2020
2021
//
2025
Suppliers with aligned targets
Target
10
8
6
4
2
0
y
c
n
e
i
c
fi
f
e
y
g
r
e
n
e
n
i
t
n
e
m
e
v
o
r
p
m
I
4,000
3,000
2,000
1,000
0
s
t
n
e
d
i
c
n
i
f
o
.
o
N
500
400
300
200
100
0
n
o
i
l
l
i
M
900
700
500
300
100
0
350
300
250
200
150
100
50
0
d
e
d
r
a
o
b
n
o
s
r
e
i
l
p
p
u
s
f
o
.
o
N
Sustainability and Corporate Responsibility report 2021
Sustainability performance summary
3
Value chain
Topic
Topic relevance
Ericsson’s approach
Target or key performance indicator
Performance
SDG contribution
Portfolio
Climate action -
Network energy
performance
Security
and privacy
Digital inclusion
Respect for
human rights
Supply chain
Responsible
management
of suppliers
The mobile industry has set the ambition to transform
To meet customer expectations and help the industry
itself to reach Net Zero carbon emissions by 2050.
reach Net Zero, Ericsson has introduced an innovative
Technological innovations and the introduction of
approach to reduce network energy use. Ericsson’s
5G mobile systems have the potential to provide the
solutions also enable telecom operators to manage
increased capacity, coverage and efficiencies necessary
expected growth in data traffic to meet the needs of
to deliver on these sustainability commitments and to
current and 5G networks.
reduce emissions for the ICT industry as well as other
The energy performance of Ericsson’s portfolio is a
sectors.
competitive advantage and delivers value from both
Network energy performance improvements play a
a sustainability and a cost perspective. Environmental
key role in enabling a fast tracked global 5G deployment
factors are considered in design principles and
to achieve this ambition.
material choices within Ericsson’s portfolio to
minimize negative impacts on the environment.
Innovative technologies and services are pioneering
Providing the world with resilient products and
new ways to connect systems and societies. This also
services now and in the future starts with robust and
brings new privacy and security risks as connected
efficient security capabilities internally as well as
devices, applications and integrated networks become
throughout Ericsson’s business processes. In 2021
potential targets for fraud, disruptive cyber-attacks and
Ericsson has not had any critical security or privacy
information and identity theft.
incidents. Ericsson is committed to continue strength-
Any responsible business must recognize the increas-
ening the protection of its assets and to contributing
ingly higher threat level and related security and privacy
to a safe digital society by providing trustworthy
risks. Thus, companies must take proactive action in this
products and services. As the value of information
area and formulate appropriate counter measures and
and the capabilities of threat actors increase, securing
effective security and privacy strategies.
information and personal data is the foundation of the
Ericsson’s trustworthy technology leadership.
Digitalization and connectivity are a foundation for
Ericsson aims to be the preferred partner to bridge the
global sustainable development. Approximately 2.9
digital divide as mobile broadband (3GPP technology)
billion people still remain offline and are unable to enjoy
is one of the most cost-efficient options to empower
the benefits of the digital economy.
people and societies through digital infrastructure.
While digital technology is becoming more wide-
Important ways in which Ericsson can improve lives
spread and continues to prove critical to social and
include developing and delivering offerings to bridge
economic development, the COVID-19 pandemic has
the digital divide, deploying networks that support
highlighted a growing divide between people who are
universal connectivity and providing solutions
connected and those who are not in both developed
that help improve financial inclusion. Ericsson also
and developing markets.
contributes to digital inclusion through its efforts in
the area of education.
Within the ICT industry, there is increased focus on
Ericsson is committed to respecting human rights
concerns related to the negative impact of technology
across its value chain and is a founding member of
on human rights, such as government surveillance,
the UN Global Compact, an early adopter of the UN
misuse of artificial intelligence, network shutdowns and
Guiding Principles on Business and Human Rights
widespread processing of personal data.
and a member of the Global Network Initiative. This
All companies have a responsibility to respect and
responsibility is addressed throughout Ericsson’s busi-
uphold internationally recognized human rights. It is
ness operations, including its supply chain and end use
therefore critical that companies in the ICT industry
of products. Ericsson’s Sensitive Business Framework
remain vigilant to potential human rights violations and
evaluates sales opportunities from a human rights risk
work to ensure their technology is not misused.
perspective. Risks are identified based on the para-
meters of its Sensitive Business risk methodology.
Companies are today expected to integrate sustain-
Managing the social, ethical, and environmental
ability and responsible business practices across their
impacts of Ericsson’s supplier base is part of the
value chains, including suppliers. This includes, but is
Company’s value chain approach. Ericsson’s Code of
not limited to, climate action, business ethics, human
Conduct for Business Partners is the basis for Ericsson’s
and labor rights and health and safety.
Responsible Sourcing program and is part of the
Moreover, close collaboration across sectors and
standard supplier contract.
value chains is essential to achieving global climate
Ericsson is one of the founders of the 1.5°C Supply
objectives. Companies must work together to address
Chain Leaders to drive climate action in global supply
emissions not directly caused by their own activities,
chains. The Company has set a target to engage with
including emissions in the supply chain.
its high-emitting and strategic suppliers to have them
set their own 1.5°C aligned climate targets.
Group targets
– Achieve a 5G product portfolio that is ten times
more energy efficient (per transferred data) than
4G by 2022. Performance year to date against
target is shown in the graph to the right.
– Achieve 35% energy saving in Ericsson Radio
System compared with the legacy portfolio
by 2022. Approved by Science Based Target
Initiative. Performance shown on page 12.
Key performance indicator
Incidents reported through Security Incidents
Management System (SIMS).
Group target
Enable internet for all through roll out of mobile
broadband to connect additional 500 million people
by 2024.
Due to updates in the methodology to measure
Ericsson’s share of new broadband connects made
in 2021, past year’s figures have been restated.
Key performance indicator
Cases reviewed in the sensitive business process
and process adherence.
Group target
Ericsson to engage with 350 of its high emitting and
strategic suppliers, responsible for 90% of Ericsson’s
supply chain emissions, to set their own 1.5°C
aligned climate targets by 2025.
5G energy efficiency target
10
8
6
4
2
0
y
c
n
e
i
c
fi
f
e
y
g
r
e
n
e
n
i
t
n
e
m
e
v
o
r
p
m
I
2017
2018
2019
2020
2021
2022
Incidents reported
4,000
3,000
2,000
1,000
0
s
t
n
e
d
i
c
n
i
f
o
.
o
N
2019
2020
2021
Minor
Medium
Major*
Critical*
* Major 11 (25 in 2020 and 30 in 2019), Critical 0 (1 in 2020 and 3 in 2019)
Additional people connected (aggregated)
500
400
300
200
100
0
n
o
i
l
l
i
M
2019
2020
2021
//
2024
People
Target
Outcome of cases reviewed and process adherence
900
700
500
300
100
0
2019
Approved
Dismissed
2020
2021
Approved with conditions
Process adherence
100%
80%
60%
40%
20%
0%
Suppliers with 1.5°C aligned climate targets
350
300
250
200
150
100
50
0
d
e
d
r
a
o
b
n
o
s
r
e
i
l
p
p
u
s
f
o
.
o
N
2020
2021
//
2025
Suppliers with aligned targets
Target
Sustainability and Corporate Responsibility report 2021
4
Sustainability performance summary
Sustainability performance summary, cont’d.
Value chain
Topic
Topic relevance
Ericsson’s approach
Target or key performance indicator
Performance
SDG contribution
Own operations
Our people
Health, safety
and well-being
Business ethics
and anti-corruption
Climate action -
Ericsson’s own carbon
emissions
Human capital is one of the most important assets
for companies, particularly in the technology sector,
as a cornerstone for driving innovation. Being able to
attract, develop and retain talent can be a significant
competitive advantage and keys to achieving this
include building a corporate culture that values integrity,
empathy, career and growth, as well as diversity and
inclusion.
COVID-19 has heightened the importance of the
wellbeing of the workforce, requiring companies to
provide greater levels of support and flexibility in a
hybrid working model.
Ericsson’s ability to attract, develop and retain talent
is largely determined by the experience it provides
for its people. Ericsson strives to enable employees to
realize their full potential, and in doing so, create long
term value for the business. This includes building a
strong culture driven by courageous and ethical lead-
ers. Ericsson is focused on employee development,
building business-critical skills, enhancing workforce
wellbeing and providing fair and competitive rewards.
Ericsson also works to ensure it is accessing the whole
talent pool to meet future business demands through
a greater focus on inclusivity and a target to increase
the representation of women across the Company.
An integrated approach to health, safety and well-being
in an organization can enable heightened levels of
employee engagement, productivity and help them to
be an employer of choice.
Providing a safe and healthy work environment
should be a core element of companies’ business
strategy and central to the way an organization
operates. Companies should therefore prioritize
health, safety and well-being to stay productive
and competitive.
Ericsson is committed to providing a safe and healthy
work environment for its employees and the employees
of its suppliers so everyone can be safe and well.
Ericsson has launched Target Zero – a goal of zero
fatalities and lost workday incidents – to demonstrate
its strong commitment to the idea that nothing other
than zero is acceptable. This target encompasses
both physical injuries and other work-related illnesses
including mental health. Ericsson aims to reach this
target by providing a safe and healthy work environ-
ment through its global program Ericsson Care.
Corruption and unethical business practices are an
obstacle to economic and social development. They
often disproportionally affect fragile communities and
undermine democratic institutions.
There are increasing demands from all stakeholders
for more transparency around business practices and for
companies to have zero-tolerance policies for corruption
and ethics and compliance programs to ensure a culture
of compliance. Failure to implement a robust ethics
and compliance program and to adequately train the
workforce around it puts the Company at risk of losing
trust and reputation, increasing costs and losing licenses
to operate.
Ericsson recognizes that reputation and trust are
hard won and easily lost and strives to win business
with integrity and based on its technology leadership.
Ericsson has raised integrity to the rank of a core
value in 2021, and takes a value chain approach to
embedding corporate responsibility in its business.
This is notably reflected in Ericsson’s training for
leaders that focuses on leading with integrity and
solving ethical dilemmas, and a targeted anti-bribery
and -corruption (ABC) training for managers and
employees in exposed roles. In addition, all employees
must take a mandatory online ABC training.
Climate change is one of the most urgent global
challenges, and in order to be resilient, companies
need to take a holistic approach to climate action.
Expectations and requirements on companies in this
area have increased dramatically in recent years,
particularly regarding transparency around climate-
related business impacts.
To meet essential global climate targets, all
companies must take responsibility for their own
carbon emissions.
Proactive climate action and environmental manage-
ment is a core component of Ericsson’s Group strategy.
By the end of 2021, Ericsson has achieved a 60%
reduction compared to the baseline, which is ahead
of the target trajectory. Ericsson has committed to
achieve Net Zero emissions from its own activities –
as well as reducing emissions by 50% in its portfolio
and supply chain – by 2030, while the Company also
continues to work for Net Zero emissions across its
value chain by 2040.
Group target
Share of women employees
30% women in the total workforce, line manager,
and executive population by 2030.
%
0
2019
2020
2021
2030
//
Share of women
Target
Group target
Zero fatalities and lost workday incidents by 2025.
Number of fatalities and lost workday incidents
2019
2020
2021
Fatalities
Lost workday incidents
Compliance training and awareness
Group target
Strengthen and enhance Ericsson’s Ethics and
Compliance program to ensure an effective and
sustainable anti-bribery and corruption program
by 2022.
Group targets
– Reduce emissions in Scope 1, 2 and Scope 3
categories Business travel and Downstream
transportation by 35% by 2022 compared to
a 2016 baseline. Approved by Science Based
Target Initiative. Progress year to date is shown
in the performance graph to the right.
– Achieve Net Zero emissions from Ericsson’s
own activities by 2030. In 2021, Ericsson
expanded its previous carbon neutral target
for own operations into the Net Zero emissions
target for own activities. See page 14.
Mandatory ABC training
Enhanced ABC training
Ethics training
– all employees
–managers and employees
for leaders
exposed roles
Progression on Science Based Target
2016
//
2021
2022
Yearly emissions
Target
30
20
10
300
250
200
150
100
50
0
.
o
N
100
80
60
40
20
0
%
e
c
n
a
d
n
e
t
t
A
1
2
0
2
600
500
400
300
100
0
2
200
e
O
C
e
n
n
o
t
K
Sustainability and Corporate Responsibility report 2021
Value chain
Topic
Topic relevance
Ericsson’s approach
Target or key performance indicator
Performance
SDG contribution
Sustainability performance summary
5
Own operations
Our people
Group target
30% women in the total workforce, line manager,
and executive population by 2030.
Health, safety
and well-being
An integrated approach to health, safety and well-being
Ericsson is committed to providing a safe and healthy
in an organization can enable heightened levels of
work environment for its employees and the employees
Group target
Zero fatalities and lost workday incidents by 2025.
Business ethics
and anti-corruption
Group target
Strengthen and enhance Ericsson’s Ethics and
Compliance program to ensure an effective and
sustainable anti-bribery and corruption program
by 2022.
Human capital is one of the most important assets
Ericsson’s ability to attract, develop and retain talent
for companies, particularly in the technology sector,
is largely determined by the experience it provides
as a cornerstone for driving innovation. Being able to
for its people. Ericsson strives to enable employees to
attract, develop and retain talent can be a significant
realize their full potential, and in doing so, create long
competitive advantage and keys to achieving this
term value for the business. This includes building a
include building a corporate culture that values integrity,
strong culture driven by courageous and ethical lead-
empathy, career and growth, as well as diversity and
ers. Ericsson is focused on employee development,
inclusion.
building business-critical skills, enhancing workforce
COVID-19 has heightened the importance of the
wellbeing and providing fair and competitive rewards.
wellbeing of the workforce, requiring companies to
Ericsson also works to ensure it is accessing the whole
provide greater levels of support and flexibility in a
talent pool to meet future business demands through
hybrid working model.
a greater focus on inclusivity and a target to increase
the representation of women across the Company.
employee engagement, productivity and help them to
of its suppliers so everyone can be safe and well.
be an employer of choice.
Ericsson has launched Target Zero – a goal of zero
Providing a safe and healthy work environment
fatalities and lost workday incidents – to demonstrate
should be a core element of companies’ business
its strong commitment to the idea that nothing other
strategy and central to the way an organization
than zero is acceptable. This target encompasses
operates. Companies should therefore prioritize
both physical injuries and other work-related illnesses
health, safety and well-being to stay productive
including mental health. Ericsson aims to reach this
and competitive.
target by providing a safe and healthy work environ-
ment through its global program Ericsson Care.
Corruption and unethical business practices are an
Ericsson recognizes that reputation and trust are
obstacle to economic and social development. They
hard won and easily lost and strives to win business
often disproportionally affect fragile communities and
with integrity and based on its technology leadership.
undermine democratic institutions.
Ericsson has raised integrity to the rank of a core
There are increasing demands from all stakeholders
value in 2021, and takes a value chain approach to
for more transparency around business practices and for
embedding corporate responsibility in its business.
companies to have zero-tolerance policies for corruption
This is notably reflected in Ericsson’s training for
and ethics and compliance programs to ensure a culture
leaders that focuses on leading with integrity and
of compliance. Failure to implement a robust ethics
solving ethical dilemmas, and a targeted anti-bribery
and compliance program and to adequately train the
and -corruption (ABC) training for managers and
workforce around it puts the Company at risk of losing
employees in exposed roles. In addition, all employees
trust and reputation, increasing costs and losing licenses
must take a mandatory online ABC training.
to operate.
Share of women employees
30
20
10
%
0
2019
2020
2021
//
2030
Share of women
Target
Number of fatalities and lost workday incidents
300
250
200
150
100
50
0
.
o
N
2019
2020
2021
Fatalities
Lost workday incidents
Compliance training and awareness
100
80
60
40
20
0
%
e
c
n
a
d
n
e
t
t
A
1
2
0
2
Mandatory ABC training
– all employees
Enhanced ABC training
–managers and employees
exposed roles
Ethics training
for leaders
Climate action -
Climate change is one of the most urgent global
Proactive climate action and environmental manage-
Ericsson’s own carbon
challenges, and in order to be resilient, companies
ment is a core component of Ericsson’s Group strategy.
emissions
need to take a holistic approach to climate action.
By the end of 2021, Ericsson has achieved a 60%
Expectations and requirements on companies in this
reduction compared to the baseline, which is ahead
area have increased dramatically in recent years,
of the target trajectory. Ericsson has committed to
particularly regarding transparency around climate-
achieve Net Zero emissions from its own activities –
related business impacts.
as well as reducing emissions by 50% in its portfolio
To meet essential global climate targets, all
and supply chain – by 2030, while the Company also
companies must take responsibility for their own
continues to work for Net Zero emissions across its
carbon emissions.
value chain by 2040.
Group targets
– Reduce emissions in Scope 1, 2 and Scope 3
categories Business travel and Downstream
transportation by 35% by 2022 compared to
a 2016 baseline. Approved by Science Based
Target Initiative. Progress year to date is shown
in the performance graph to the right.
– Achieve Net Zero emissions from Ericsson’s
own activities by 2030. In 2021, Ericsson
expanded its previous carbon neutral target
for own operations into the Net Zero emissions
target for own activities. See page 14.
Progression on Science Based Target
600
500
400
300
200
100
0
e
2
O
C
e
n
n
o
t
K
2016
//
2021
2022
Yearly emissions
Target
Sustainability and Corporate Responsibility report 2021
6
Sustainability approach and stakeholder engagement
Sustainability approach
Ericsson focuses on embedding its sustainabil-
ity strategy and programs across the Company
to create positive impact and mitigate risks to
the Company and its stakeholders.
The Company’s contributions to the sus-
tainable development of society can be seen in
a wide variety of ways, including the develop-
ment and deployment of technology and solu-
tions, the impact of its partnerships and the
contribution and expertise of its employees.
Science and research are fundamental to
Ericsson’s sustainability efforts. The Company
carries out peer-reviewed research, both inde-
pendently and in collaboration with research
partners from academia and business.
Research topics include the direct and indirect
sustainability impacts of the Information and
Communication Technology (ICT) sector.
Ericsson recognizes the need for transpar-
ent and comparable environmental, social and
governance (ESG) disclosures to enable both
companies and their stakeholders to make
fact-based decisions. The Company bases
its ESG reporting on several complementary
reporting standards to ensure it is on par with
global best practices. Ericsson aims to continu-
ously improve by setting and reaching ambi-
tious ESG targets that contribute to creating
value for Ericsson, its customers, investors and
society at large.
Ericsson’s sustainability strategy covers
three focus areas described below.
Environmental sustainability
Ericsson’s climate targets are in line
with the 1.5°C ambition going towards
Net Zero across the value chain by
2040. The Company’s circular economy
approach encapsulates everything
from design, manufacturing and the
use phase through reuse, product
take-back and end of life. Ericsson
strives to minimize the negative
impacts of its operations and invests to
improve the energy performance of its
portfolio to reduce environmental
impacts within the industry and across
other industries.
Digital inclusion
Universal and affordable connectivity
is critical to the sustainable develop-
ment of society, and Ericsson’s
approach is based on the belief that
technology developed and deployed
responsibly can help bridge the digital
divide. The Company works towards
this goal through institutional capacity
building, digital literacy and skills
development programs, as well as
business-focused universal and
affordable internet access solutions
and services.
Corporate responsibility
Ericsson is committed to conducting
business responsibly and with integrity
across its value chain. Ericsson drives
an agenda that delivers value to the
Company and stakeholders across its
value chain and that extends beyond
legal compliance by proactively miti-
gating and addressing risks. Ericsson
engages with local communities and
societal stakeholders through its corpo-
rate citizenship initiatives including
volunteering and donations.
Ericsson is committed to placing its workforce at the center of everything the Company does. Ericsson strives to create a people experi-
ence that supports and enables a positive customer experience and the creation of long-term business value. The Company focuses on
attracting the best talent, supporting competence development and enabling a work culture that supports its people to bring out the best
version of themselves and Ericsson.
Enabled by our people
Stakeholder engagement
Overview significant topics
Ericsson engages with its stakeholders on an
ongoing basis to understand their expectations,
requirements and concerns. This engagement
provides insights into risks as well as opportu-
nities from sustainability-related topics, both
current and emerging ones. For more detailed
information on the stakeholders engaged, the
types of engagement and topics raised and
addressed, see page 28.
Pages 2–5 give an overview of the environ-
mental, social and governance topics
addressed in this report and that have been
assessed as most relevant for Ericsson. The
topic’s context and Ericsson’s approach are
summarized, and information on relevant
targets and key performance indicators is
provided.
Proper management of these topics is key
to meeting external and internal standards,
and following relevant regulations. Further,
it is a key enabler for achieving strategies
and business objectives as well as protecting
reputation and brand. The overview, and the
subsequent sections of the report, contain
information on topic-specific risks and oppor-
tunities. This information is complemented
by the Company-wide Risk factors presented
on pages 99–112 in the Financial Report. For
more details on Ericsson’s significant topics,
see page 29.
Sustainability and Corporate Responsibility report 2021 Sustainability governance
Governance of sustainability and corporate
responsibility topics follow the Company’s
overall governance structure. The Board of
Directors, Executive Team and manage-
ment’s respective roles and responsibilities
with regards to sustainability and corporate
responsi bility are described below. The Board
of Directors oversees Ericsson’s sustainability
and corporate responsibility strategy and
receives reports on risk and performance
annually, or more often as needed. The
Board approves the annual Sustainability
and Corporate Responsibility (S&CR) report.
The Audit and Compliance Committee of
the Board of Directors oversees the Company’s
ESG reporting practices and the Ethics and
Compliance Program, which currently has its
focus on enhancing Ericsson’s anticorruption
framework.
The Executive Team (ET) is responsible
for approving strategies as well as targets for
sustainability and corporate responsibility. The
ET regularly receives reports on the implemen-
tation of strategies and progress against targets
and milestones. Its members are also part of
dedicated Steering Boards and Committees
that provide more frequent strategic guidance
and oversight of S&CR-related matters.
Group policies are approved by the President
and CEO and are reinforced by awareness
and training programs across Ericsson. They
reflect Ericsson’s commitments to and require-
ments on its stakeholders. Responsibility for
Governance and risk management
7
Board of Directors
Directors elected by the General Meetings of shareholders
3 Directors & Deputies appointed by the Unions
Audit and Compliance
Committee
Finance
Committee
Remuneration
Committee
Technology and Science
Committee
President and CEO
Management
Sustainability-related
Steering boards and committees
Sustainability-related
Group-wide programs
Business
areas
Market
areas
Group
functions
Group Sustainability & Corporate Responsibility unit
executing on strategies and progressing on
targets lies with the Group Functions, Business
and Market Areas, in collaboration with
each other. Execution is further reinforced by
dedicated Group-wide programs. A dedicated
S&CR unit, reporting to the Head of Group
Function Marketing and Corporate Relations, is
accountable for developing and imple menting
strategies, policies, steering documents, targets
and processes related to sustainability and
corporate responsibility topics.
Ericsson has incorporated sustainability
into its business primarily through a company-
wide sustainable business program, governed
by the ET. The scope of the program is to
accelerate and fully integrate circularity and
sustainability-related aspects of Ericsson’s
portfolio. The program is cross-functional and
includes eight workstreams in areas with the
highest impact on Ericsson’s sustainability
strategy and execution. The workstreams
are: Climate action, Energy performance,
Circular economy, Material and substances,
Responsible sourcing, Position and standards,
ESG reporting and Digital inclusion.
Steering boards and committees
Chaired by
Group Compliance Committee
Sensitive Business Board
SVP and Chief Legal Officer
SVP and Chief Legal Officer
Sustainable Business Reference Group
SVP and Chief Financial Officer
Group Enterprise Security Board
SVP and Chief Financial Officer
Product and Technology Security Board
SVP and Chief Technology Officer
Global Occupational Health and Safety Board
SVP and Head of Business Area Managed Services
Group-wide programs
Ethics & Compliance Program
Ericsson Care Program
Sustainable Business Program
Foundational policies and steering documents
Code of Business Ethics
Sustainability Policy
Health, safety and well-being Policy
Security and Privacy Policies
Code of Conduct for Business Partners
Business and human rights statement
Risk management
Ericsson has integrated the identification
and treatment of S&CR-related risks into its
Enterprise Risk Management (ERM) frame-
work. The Company also has dedicated Risk
Management frameworks aligned with its
ERM framework that cover specific areas of
risks such as Anti-corruption, Environment,
Health and Safety and Information Security.
Ericsson assesses, manages and treats
risk in the part of the business where it is most
relevant, and the Heads of Group Functions,
Market and Business Areas, and other units
with Group-wide responsibilities are given
ownership for specific identified risks. To
embed this approach throughout the Company,
a central Group Risk Management Function
coordinates and governs the ERM framework
and process.
The S&CR report includes information on
S&CR-related risks that are not considered
significant on a group level but which from
a sustainability perspective are relevant to
disclose. For more information on the ERM
framework and identified risks factors, both
financial and non-financial, see the Corporate
Governance report, pages 17–19, and the
Financial report, page 19. Additionally, as a
contribution to its climate strategy, Ericsson has
conducted a climate scenario analysis during
2021 in which climate-driven risks and oppor-
tunities were analyzed. More information on
this topic on page 33.
Sustainability and Corporate Responsibility report 2021 8
Our people
Our people
Ericsson is committed to placing its workforce
at the center of everything the Company does.
Ericsson strives to create a people experience
that enables employees to realize their full
potential and, in doing so, creates long term
value for the business.
This people experience is shaped by
Ericsson’s purpose, vision and values. In 2021
the Company added integrity to its existing
three values of professionalism, respect, and
perseverance. This reflects Ericsson’s commit-
ment to ethical, responsible, and sustainable
practices and its pride in making transparent,
honest, and uncompromising decisions.
Ericsson embeds its values in its business
through the Company’s ongoing culture trans-
formation program, Ericsson on the Move. This
program has five focus areas: Empathy and
humanness, Cooperation and collaboration,
Executing speedily, Fact based and courageous
decisions and Speak up.
Ericsson is committed to ensuring that its
workforce has the diverse skills and capabili-
ties necessary to create value. In 2021 Ericsson
invested in enhancing talent attraction,
providing targeted learning and development
and strengthening retention of talent. This
was paired with action to protect workforce
well being in the context of the continuing
challenges of COVID-19.
Identified risks and opportunities
As Ericsson moves into 2022, it is mindful of
the following risks:
COVID-19: COVID-19 continues to create
challenges for the health, wellbeing, and work-
life balance of all of Ericsson’s workforce. In
particular, the impact on schools and family
life are disproportionately impacting women,
potentially increasing attrition rates. This is
occurring at a time when Ericsson is seeking
Figure 1: Strategy areas
to increase gender balance as part of its strat-
egy to ensure access to the whole talent pool
to meet future business demands.
Talent attraction and retention: According
to external reports, approximately 40% of the
global workforce is considering changing jobs
in the next three to six months1). Ericsson is
already in a highly competitive market with
skills shortages, and there is a risk that the
Company cannot hire sufficient people with
the key competencies and skills required by
the business. To mitigate this, in 2021 Ericsson
launched a new segmented recruitment model,
which leverages the latest artificial intelligence
technologies, to improve the candidate hiring
experience.
Ericsson is also focused on capitalizing on
opportunities including:
Upskilling for the future: Ericsson’s busi-
ness growth requires that it has world-leading
capabilities connected to its strategy. More-
over, it is important for Ericsson to build these
critical skills in anticipation of their relevance
to future development. This is the basis for its
focus on broad and deep upskilling in the work-
force, which creates a strong employee value
proposition in the market.
Attracting new and diverse talent:
Ericsson has the opportunity to attract new
and diverse candidates through an employee
value proposition grounded in a human and
empathetic experience of work. The Company’s
recent investments in cultural transformation
(Ericsson on the Move) and its revised purpose,
vision and values put Ericsson in a good
position to attract new candidates.
Enhancing workforce well-being: Ericsson
is well positioned to support its workforce in
maintaining their productivity and wellbeing
during challenging times. In 2021, Ericsson
built on its systematic approach to well-being
through the Ericsson Care program with tools
and assets that are easy for employees to
access. To support the workforce through the
challenges of COVID-19, Ericsson also provided
additional financial flexibility in locations where
this was most needed, for example, salary
advances. An Ericsson survey revealed that
90% of employees believe that a genuine
interest has been taken in their well-being. This
further enhances its employee value proposition.
Delivering on our People Strategy 2021
With its People strategy, Ericsson seeks to
enable the future success of its business as the
Company gears for growth, with a focus on
three strategic people areas detailed here.
Talent and Skills: Ericsson works to ensure
that it has the best talent in its business, where
people are performing at their best. This is
grounded in data-driven insight through global
People analytics and workforce planning.
Ericsson is committed to accessing the whole
talent pool to meet future business demands.
To deliver on this, in 2021, Ericsson launched
a program of work to enhance the candidate
hiring experience, including ensuring both
that candidates from different backgrounds
are represented in Ericsson’s hiring process and
that the hiring process is tailored to the many
different roles the Company recruits at any one
time. This complements Ericsson’s ongoing
work to increase representation in Science
Technology Engineering and Math (STEM)
fields, which includes partnering with organi-
zations such as Black Girls Code in the US to
increase the diversity of the future workforce.
Ericsson works to ensure that, once in the
Company, people can perform at their best.
In 2021, Ericsson delivered on this by clearly
signalling the global, critical skills necessary to
execute on its 2025 growth strategy and pro-
viding learning and development opportunities
that enable the workforce to upskill and reskill
in these areas. The critical skills identified are
a mix of technology, including 5G, Internet
of Things (IoT), artificial intelligence and
sales and commercial as well as power skills
such as transformation, design thinking and
communication.
In 2021 over 97,000 employees actively
used Ericsson’s learning platform to upskill,
completing 3.1 million learning sessions and
earning more than 10,000 new credentials,
such as digital badges. This represented a 64%
year over year increase in the amount of learn-
ing. Employees together with their managers
set individual career and learning plans and
follow up on these throughout the year.
Diversity and inclusion: Ericsson aims to
ensure that people from different backgrounds
can succeed in the Company, and in 2021
there were a growing community of Employee
Resource Groups to support this. The Company
also continued its work to achieve greater
gender balance with its leadership accelera-
tion program for women, ALTitude. Since the
program started, 26% of the 257 participants
changed roles, and 23% had a change of
job stage (seniority). Ericsson will scale the
ALTitude program in 2022 alongside expand-
ing a leadership training program piloted in
2021 to embed inclusive behaviors.
1 ) https://www.mckinsey.com/business-functions/people-and-organizational-performance/our-insights/great-attrition-or-great-attraction-the-choice-is-yours
People ExperienceTalent & SkillsFuture of WorkCulture & LeadershipSustainability and Corporate Responsibility report 2021 Our people
9
Share of women per employee category
%
40
35
30
25
20
15
10
5
0
All employees
Line managers
Executive population
2019
2020
2021
Ericsson employee satisfaction
Score
100
80
60
40
20
0
2019
2020
2021
Ericsson employees
Figure 2: Critical Skills Areas
and coverage for COVID-19 cases, enhanced
Employee Assistance programs and access to
telemedicine and IT support.
In preparation for a phased return to the
office, when and where it is safe to do so,
Ericsson’s leaders have been trained in new
ways of working and leading that promote
flexibility, well-being, belonging, and perfor-
mance in the hybrid workplace.
The impact of these actions is apparent
in Ericsson’s employee satisfaction score,
which is currently at 81 and has been stable
and above 80 the last two years. This is above
average for the technology industry (73). After
several years of steady increase in different
employee engagement dimensions, Ericsson
saw a stabilization of scores in 2021, with a
slight decline in some dimensions in Q4. This
decline is consistent across industries and may
be linked to pandemic fatigue. While being
above average of the technology industry for
all areas measured, Ericsson is addressing the
outcome through its cultural transformation to
avoid a downward trend.
Governance
Ericsson’s People Strategy is governed by
Group Function People, with the Global People
Leadership team having responsibility for
strategy formulation and execution. Subject
matter experts develop Group-wide processes
that are embedded throughout business and
market areas, and other group functions by
unit people leaders. A global people services
function supports the delivery of the people
process in an efficient way, ensuring consistent
practices across the business.
The People Strategy is anchored on
Ericsson’s Code of Business Ethics and sum-
marizes the fundamental Group policies. The
People Group Policy states that all activity
relating to the workforce, including employ-
ment, development, compensation, and
benefits, will be carried out without discrimi-
nation and with equal opportunity for all.
Global
critical skills
2021-2025
Gearing up for growth
skills sensing
skills journeys
s
kills shift as OKR
Ericsson matches its commitment to diver-
sity and inclusion with public targets, and in
2021 the Company reviewed and reiterated its
target of 30% representation of women in the
total workforce, among line managers and in
the executive population by 2030. Represen-
tation of women is currently at 25%, 21%
and 36% respectively. This target is driven by
the Executive Team, alongside greater focus
on representation of nationalities and age
groups and is underpinned by targets for each
Business Area and Market Area.
To ensure it attracts and retains candidates
across the whole talent pool, the Company is
addressing the gender pay gap, which at the
global level equates to an unadjusted average
pay gap of women in relation to men of 18%.
Among other things, this figure reflects the
higher proportion of men in senior leadership
positions and in technical roles. To ensure
Ericsson continues to make progress in this
area in 2022, it will continue to make inclusion
and fairness a focus in training for leaders and
a review criterion in reward processes.
Culture and Leadership: Ericsson supports
all employees in being courageous and ethi-
cal. The addition of integrity as a new value,
including performance metric, complemented
the existing Ericsson on the Move global
culture transformation program, which, to
date, has engaged more than 80% of Com-
pany leaders in workshops on how to embed
Ericsson’s culture and values in the business.
The Company also launched the revised and
enhanced Code of Business Ethics, which
was embedded in the business through a new
approach to compliance training.
The impact of these actions is reflected in
Ericsson’s employee survey, where the highest
score is in Ethics and Compliance, with 91%
of respondents stating that they agree that
Ericsson is showing a commitment to ethical
and responsible business.
Future of Work: Ericsson is focused on
being an attractive company for which to work,
where everyone feels included and proud to
belong to a caring technology leader.
In 2021, Ericsson worked to drive engage-
ment, with a particular focus on preparing for
the future of work. This included supporting
more flexible ways of working, particularly
through COVID-19, and providing wellbeing
support for employees in challenging situa-
tions. Ericsson adjusted local rewards policies
to better fit changing needs. For example,
the Company provided enhanced support
Sustainability and Corporate Responsibility report 2021 10
Environmental sustainability
Environmental sustainability
Climate change is one of the most urgent
global challenges. Ericsson continues its focus
on energy use and environmental impact of
technology as well as operations across the
value chain to be a resilient company. Ericsson
will continue to address rising requirements
and stakeholder expectations on the Company,
particularly regarding transparency around
climate-related business impacts.
Approach to environmental sustainability
Ericsson strives to minimize the negative
environmental impact across its value chain.
The Company’s circular economy approach
encapsulates everything from design, manu-
facturing and the use phase through reuse,
product take-back and end of life processes.
Ericsson has continued to make significant
investments to improve the energy perfor-
mance of its portfolio. The Company’s work
on environmental sustainability is divided
into the following areas:
– Improving the energy performance of
Ericsson’s portfolio.
– Reducing emissions from Ericsson’s supply
chain and own activities.
– Implementing a circular economy approach
to product design and material use.
– Demonstrating how Ericsson’s business
and products can enable society and other
industries to reduce emissions and become
more circular.
Figure 1: Ericsson’s Net Zero journey
Ktonnes CO2e
37,000
36,719
34,733
Sustainability research
Science and research underpin Ericsson’s
sustainability efforts. Since 2008, Ericsson
has made many relevant contributions
to international standards in the area of
environmental sustainability. The Company
prioritizes research on the direct and indirect
environmental impacts of the ICT sector.
Ericsson also contributes to the development
of international methodologies for assessing
the environmental impact of the ICT sector.
To support the ICT sector’s transition to
a low carbon economy, the International
Telecommunication Union (ITU) has released
the Net Zero standard 1) to guide companies
in the sector on setting Net Zero targets and
strategies. Ericsson has contributed to the
development of this standard, which meets the
requirements of Science Based Target Initia-
tive and UN Race to Zero Net Zero definitions.
Ericsson’s Net Zero ambition
The Company has committed to following
the Net Zero standard1), and in 2021 Ericsson
officially set a long-term ambition to be Net
Zero by 2040 across its value chain.
To meet this ambition, Ericsson is progress-
ing against its set targets in line with the 1.5°C
ambition set by the Paris Agreement. Ericsson
has set a first major milestone to achieve Net
Zero emissions from its own activities – as well
as reducing emissions by 50% in its portfolio
and supply chain – by 2030, see Figure 1.
Figure 2 on page 11, shows Ericsson’s
carbon footprint and climate targets. The
Company’s initial focus is on reducing and
avoiding emissions across the value chain as
well as on investing in renewable energy. As
a last resort to address any unavoidable emis-
sions, Ericsson will work to remove remaining
emissions from the atmosphere through
approved carbon removal 2) credits. Ericsson is
committed to building credibility regarding its
long-term objectives in this area, with a focus
on ownership of the issue and integration of its
climate strategy in the line organization. The
following pages cover targets, performance
and the necessary actions to reduce emissions
in each stage of Ericsson’s value chain.
ICT is an enabler of climate action
ICT and digitalization are key enablers of
reductions in global greenhouse gas emissions.
According to Ericsson´s research, ICT solutions
has the potential to enable a 15% reduction of
emissions across industries by 2030 3), while
being responsible for only 1.4% of the global
carbon footprint.
1) ITU L.1471 Net Zero standard
2) Carbon dioxide removal, also known as negative CO2 emissions,
is a process in which carbon dioxide (CO2) is removed from the
atmosphere and locked away for long periods of time. To reach
Net Zero in the value chain, companies can neutralize their resid-
ual emissions that cannot be further reduced, by means of specific
removal trustworthy technologies that adhere to global standards.
3) J. Malmodin and P. Bergmark, 2015, Exploring the effect of ICT
solutions on GHG emissions in 2030: https://www.atlantis-press.
com/proceedings/ict4s-env-15/25836149.
4) Defined as Scope 1 (facilities and fleet vehicles), Scope 2, and
Scope 3 categories Business Travel and Employee Commuting
(and teleworking).
By 2030
Emissions from Own activities: Net Zero
Emissions from Supply chain: 50% reduction
Emissions from Portfolio use: 50% reduction
0
–5,000
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
Actual
Trajectory
Portfolio use
Supply chain
Own activities4)
Carbon removal2) —— Total carbon footprint
By 2040
Net Zero
Sustainability and Corporate Responsibility report 2021 Environmental sustainability
11
Climate action – Ericsson’s carbon footprint
Ericsson was an early supporter of the Paris
Agreement and recognizes the need to limit
global warming to 1.5°C, as described by
the Intergovernmental Panel on Climate
Change (IPCC). The Company’s climate action
approach and target setting for its own opera-
tions and industry impact is based on more
than two decades of sustainability research.
In 2021, Ericsson conducted a climate
scenario analysis in line with the recommen-
dations of the Task Force on Climate-Related
Financial Disclosures (TCFD) to further
understand potential climate-related risks and
opportunities relevant to its business model.
The analysis confirmed that the main
climate-related business opportunities for
Ericsson relate to providing customers with
energy efficient networks and expanding its
connectivity offerings to other sectors enabling
further emission reductions. Main risks identi-
fied under the scenarios used relate to carbon
pricing and business disruptions driven by
physical risks, such as those caused by severe
weather events. More details on this analysis
and conclusions can be found on page 33.
Ericsson’s carbon footprint
The environmental impact and carbon foot-
print of Ericsson’s value chain are quantified
based on life-cycle assessments of products
and through extensive research on the impact
of the ICT industry. Figure 2 shows the Compa-
ny’s total carbon footprint, measured in carbon
dioxide equivalents (CO2e). The impact is
divided into four sections: portfolio use (includ-
ing products and software in operation); supply
chain (including product design, procurement,
and transport); own activities (including fleet
vehicles, business travel, commuting, tele-
working and facilities); and product recycling,
(including end-of-life products that are taken
back from customers and then recycled).
As seen in Figure 2, the carbon emissions
resulting from the lifetime energy usage of
Ericsson’s delivered portfolio corresponded to
approximately 94% and supply chain emis-
sions accounted for 8% of the Company’s total
carbon footprint. Ericsson’s emissions from
own activities are small relative to the previous
two categories. They make up 0.4% of the total
emissions. In 2021, the Company expanded its
carbon neutral target for own operations into
a Net Zero emissions target for own activities
by 2030, including fleet vehicles, facilities,
business travel and commuting/teleworking.
Own activities previously included product
transportation, this is now moved to supply
chain emissions.
According to Ericsson’s estimations, recy-
cling of its products at end-of-life contribute
to lower supply chain emissions. The reason
for this is that emissions from recovered raw
materials, such as aluminum, are lower than
those from virgin raw material. Thus, product
recycling results in a negative share of Com-
pany emissions as shown in the figure below.
Advocacy
Ericsson actively contributes to consultations
and hearings on strategies and legislative
proposals presented by different legislative
bodies. Within the European Union (EU)
the EU Commission has historically taken a
pro active approach to environmental legisla-
tion and is now accelerating its efforts through
the EU Green Deal. The Company’s approach
is to advocate for clear environmental legal
requirements that are effective, based on
science and that improve the environmental
performance of the sector.
To address these areas, Ericsson is active in
industry organizations such as Digital Europe,
the Association of Swedish Engineering Indus-
tries, the European Round Table for Industry
and other relevant forums. The Company also
engages with organizations 1) that are focused
on global environmental standardization
development.
Further, in order to communicate the
benefits of digitalization in the transition to
a low carbon economy, Ericsson engages
with organizations such as the World Eco-
nomic Forum, the European CEO Alliance,
the Exponential Roadmap Initiative, The
Pathways Coalition and the EU Green Digital
Coalition.
1) The International Telecommunication Union (ITU), the European
Telecommunications Standards Institute (ETSI) and the Euro-
pean Committee for Standardization (CEN) and European
Electrotechnical Committee for Standardization (CENELEC).
Figure 2: Ericsson’s carbon footprint
Mtonne CO2e
93.5%
35
25
15
5
t
n
i
r
p
t
o
o
f
n
o
b
r
a
C
1
2
0
2
j
r
o
a
M
s
e
n
o
t
s
e
l
i
m
e
c
n
a
m
r
o
f
r
e
P
s
t
e
g
r
a
t
7.6%
0.4%
–1.5%
Portfolio use
Halve emissions
from portfolio use
by 2030
Supply chain
Halve emissions
from supply chain
by 2030
Own activities
Reach Net Zero emissions
from own activities
by 2030
Product recycling
Increase recycling and
avoid exploration of
virgin materials
– Achieve 35% energy saving in
Ericsson Radio System compared
with the legacy portfolio by 2022.
Approved by Science Based Target
Initiative.
– Achieve a 5G product portfolio that is
ten times more energy efficient (per
transferred data) than 4G by 2022.
Engage with around 350 high emit-
ting and strategic suppliers, respon-
sible for 90% of Ericsson’s supply
chain emissions, to set their own 1.5ºC
aligned climate targets by 2025.
Reduce emissions by 35% in Scopes
1, 2 and Scope 3 (categories Business
travel and Downstream transporta-
tion) by 2022 compared to a 2016
baseline. Approved by Science Based
Target Initiative.
Sustainability and Corporate Responsibility report 2021
12
Environmental sustainability
Climate action – Network energy performance
To meet the industry aspiration to achieve
Net Zero greenhouse gas emissions by 2050,
technological innovations that enable mobile
networks to support more traffic while using
less energy will be needed. To achieve this
ambition, 5G must be fast tracked globally in
order to provide the increased capacity and
coverage necessary to deliver on sustainability
commitments and reduce emissions for the ICT
industry as well as other sectors.
Energy use in network operations remains
a priority for Ericsson and its customers.
Carbon emissions resulting from the lifetime
energy usage of Ericsson’s delivered portfolio
correspond to approximately 94% of the
Company´s total carbon footprint. With this
in mind, Ericsson can contribute to its custom-
ers’ sustainability transformation primarily
through improved energy performance across
the mobile network, which also helps lower
customers’ Total Cost of Ownership (TCO).
Ericsson’s ambition is to provide high
quality, high performing 5G experiences while
simultaneously aiming to reduce network
energy consumption. To this end, Ericsson
has developed an innovative network-wide
approach called “Breaking the energy curve”.
It provides a holistic approach to introducing
5G while managing mobile network energy
use across core, transport, radio access and
site equipment. This approach gives customers
insights into how to maximize energy savings
through products and solutions in Ericsson’s
portfolio. Some examples include modernizing
the installed base and rightsizing 5G equipment
for new frequency bands, as well as the use of
energy-saving software and intelligent remote
site management of passive site equipment
such as batteries, climate control units and
diesel generators.
Improving energy performance
Through significant investments in R&D,
Ericsson has been able to develop market
leading products and solutions for more
sustainable mobile networks and to achieve
significant energy and performance improve-
ments across its portfolio. These improvements
also contribute positively to the business case
for and viability of renewable energy as the
primary energy source for future Radio Access
Network (RAN) sites.
In the mobile network, the RAN is built to
provide nationwide coverage and capacity
for users. As a result, the RAN’s energy con-
sumption represents over 75% of total network
consumption. This means that RAN energy
efficiency is of the utmost importance in keep-
ing energy consumption under control while
still delivering optimal user experience.
The transition from 4G to 5G involves a
significant increase in processing require-
ments for the RAN equipment. The Company’s
purpose-built Ericsson Silicon processing
hardware, is designed to meet these perfor-
mance demands. It also plays a key role in
facilitating the creation of high-performing,
energy efficient and lightweight products. The
energy efficiency of Ericsson Silicon has grown
by a factor of seven from 2016 to 2021, see
figure 1.
Alongside other energy efficiency improve-
ments, during 2021 the Company launched
its ultra-lightweight massive MIMO family,
exemplified by the AIR3268 radio that weighs
only 12 kg with a volume of 23 liters. These
additions to the portfolio aim to enable an
easier and efficient 5G mid-band deployment.
The advancements with Ericsson Silicon
also allow Ericsson to combine multiple
frequency bands into a single ERS remote
radio unit. In 2021, the Company launched
Radio 6626, making it possible to replace six
single-band radios with one, which reduces
energy consumption up to 50%, among other
benefits.
The above high-performing RAN products
are examples of how the Company can
enable energy savings in mobile networks
while managing the mobile broadband traffic
growth including 5G roll-outs.
Targets and performance 2021
The Company’s target for its 5G product
portfolio is to, by 2022, make it ten times more
energy-efficient for the same transferred data
than the 4G portfolio (baseline 2017) for an
enhanced mobile broadband (eMBB) use case.
Results from 2021 show that Ericsson’s current
5G radios already are very close to achieving
the targeted level and are approximately 9,3
times more energy efficient, see figure 2.
Energy savings can also be achieved by
replacing less efficient equipment in the legacy
network. Ericsson has set a target of 35%
energy savings in Ericsson Radio System (ERS)
versus the legacy portfolio by 2022 (baseline
2016). This target has been approved by
the Science Based Target initiative. In 2021,
the Company achieved 36% energy savings
from delivered ERS radios versus the legacy
port folio, surpassing the target level one year
ahead of schedule. See figure 3.
Figure 1: Ericsson Silicon energy consumption for
32TR-200MHz product (normalized)
Figure 2: 5G portfolio energy performance (com-
pared to 4G and same amount of transferred data)
Figure 3: Progress Science Based Target
Energy savings in Ericsson Radio System
10
8
6
4
2
0
y
c
n
e
i
c
i
f
f
e
y
g
r
e
n
E
7xmore energy efficient
2016
2017
2018
2019
2020
2021
y
c
n
e
i
c
i
f
f
e
y
g
r
e
n
e
n
i
s
t
n
e
m
e
v
o
r
p
m
I
10
8
6
4
2
0
6.6x
5.5x
4.2x
Target
10x
9.3x
Achieve 35% energy saving in Ericsson Radio
System compared with legacy portfolio by
2022 (baseline 2016). Target approved by
Science Based Target Initiative.
Result 2021
36%
2017
2018
2019
2020
2021
2022
Sustainability and Corporate Responsibility report 2021
Environmental sustainability
13
Climate action – Supply chain
Ericsson is actively working to reduce emis-
sions in its supply chain. In 2021 Ericsson
supply chain emissions totalled 2.6 Mtonnes
of CO2e and corresponded to 8% of Ericsson’s
total carbon footprint.
In 2020, Ericsson set a target to engage
with 350 of its high emitting and strategic
suppliers – responsible for 90% of Ericsson’s
supply chain emissions – to set their own
1.5°C-aligned climate targets by 2025. In
addition to the long-term commitment, this
would also mean that the suppliers in scope
must reduce their operational emissions by
half by 2030. By the end of 2021, 121 suppliers
had set such targets, which is in line with the
Company’s outreach target.
Ericsson also set a new target in 2021 to
cut supply chain emissions by 50% by 2030
from a 2016 baseline, aligning reductions in
the supply chain with the Company’s Net Zero
ambition. The results of this work will directly
support Ericsson’s customers, many of which
have shown a commitment to decarbonizing
their purchased portfolio carbon footprint.
In addition to the work with reducing direct
emissions from first-tier suppliers, Ericsson
also aims to meet its supply chain decarboni-
zation goals though other measures. These
include further strengthening the Company’s
approach to design, sourcing of raw material,
country level energy emission factors, mate-
rial substitution, use of recycled material and
method of die casting, among others.
Decarbonization of product transportation
is a particularly important strategic part of
the overall supply chain emissions. In 2021,
Ericsson focused its efforts in this area on
optimizing processes, driven by digitalization
of the supply chain data aiming to improve
transportation planning and to reduce emis-
sions. To achieve this, Ericsson has developed
and started to deploy a transport management
tool with the aim to have full end-to-end CO2e
reporting and target tracking for product
transportation.
Furthermore, in 2021, an internal shadow
carbon price of 100 EUR/ton CO2 was
launched as a pilot for part of the product
transportation process in order to internally
visualize the cost of carbon emissions.
Ericsson and Deutsche Telekom have partnered to bring solar panels to a RAN network site. Image source: DFMG Deutsche Funkturm GmbH.
Sustainability and Corporate Responsibility report 2021 14
Environmental sustainability
Climate action – Own carbon emissions
The Company’s Science Based Target to reduce
emissions by 35% by 2022 covers emissions
from fleet vehicles, facilities, business travel
and outbound product transportation. By the
end of 2021, Ericsson has achieved a 60%
reduction compared to the baseline, which
is ahead of the target trajectory. In 2021,
Ericsson expanded its carbon neutral target
for own operations into the Net Zero emissions
target for own activities by 2030. The new
target covers the Company’s Scope 1 and 2
emissions, as well as Scope 3 categories, busi-
ness travel and employee commuting (includ-
ing teleworking).
Performance 2021
Facilities
Emissions from the Company’s real estate
portfolio, including offices, production sites,
data centers and test labs, declined to 64 in
2021 from 81 Ktonnes in 2020. This represents
a reduction of approximately 21% compared
to 2020. Ericsson has taken targeted actions to
reduce energy consumption and procure more
renewable electricity at its sites in countries
such as Sweden, the UK, the US, India, China,
and Hungary. Renewable electricity amounted
to 67% of the Company’s total electricity
consumption in 2021. Calculated as the share
of total energy consumption, including heating
and cooling, it equalled 62% (see Figure 2).
Ericsson is on track to source 100% renewable
energy by 2030.
Fleet vehicle
In 2021, Ericsson’s fleet for operational activi-
ties included approximately 5,970 vehicles,
and the related carbon emissions were 32
Ktonnes, which is a 3% reduction in emissions
from 2020.
In 2020, Business Area Managed Services
and Business Area Networks introduced a
program to decarbonize the operational fleet
in line with the Company´s climate targets.
The Company has started to prepare to replace
vehicles with fossil fuel-free alternatives,
and it has rolled out a Fleet Management
System to all Market Areas. The introduction of
telematics, a system to gather vehicle location
and activity data through the use of GPS and
cellular networks, in operational vehicles
will further improve fleet management with
more frequent, reliable and automated data
collection processes. The telematics system is
not yet fully rolled out in all Market Areas but,
as this happens, will enable the Company to
capture increasingly more accurate emissions
data.
Business travel
The carbon emissions from business travel in
2021 were 12 KTonnes, which corresponds
to a decrease of 29% compared to 2020. The
Company has had a global travel restriction
in place during the COVID-19 pandemic,
resulting in significant reductions in travel
and resulting emissions. As part of its Net
Zero ambition, the Company decided to cap
business travels emissions in 2022 at 50% of
2019 levels. Each Group Function, Segment
and Market Area will get a specific yearly
business travel emission budget.
Commuting and teleworking
Emissions from commuting and teleworking
are included in the new target for Net Zero
emissions from own activities. A large part
of Ericsson’s workforce continued to work
remotely in 2021 due to the pandemic, with
related emissions amounting to 23 Ktonnes,
of which teleworking is estimated to represent
approximately 56%. As part of reaching the
Net Zero target, Ericsson will increase focus on
reducing global emissions from teleworking
and commuting. Work in this area started in
2021 and will continue during 2022. It includes
improving data collection and developing a
target roadmap with defined actions that will
support the Net Zero trajectory.
Figure 1: Performance against Science Based Target
Ktonne CO2e
Figure 2: Energy usage at Ericsson facilities
Share of renewables %
600
500
400
300
200
100
0
560
481
513
427
364
243
227
Baseline
2016
2017
2018
2019
2020
2021
2022
100
80
60
40
20
0
2016
2017
2018
2019
2020
2021
Scope 1
Ericsson’s Science Based Target Initiative approved emissions reduction trajectory
Scope 3: Business travel and outbound product transportation
Scope 2
Electricity
All energy (including electricity, cooling and heating)
Sustainability and Corporate Responsibility report 2021 Environmental sustainability
15
Circular economy approach to design and material use
Minimizing waste and increasing reuse,
recycling and recovery is key in a circular
economy context. Further, waste from elec-
trical and electronic equipment (e-waste) is
one of the fastest growing waste streams in
the world.
Potential impacts to the environment
are associated with resource exploitation,
scarcity, and increasing requirements related
to the presence of certain substances in
products. Material choices, increased use of
recycled material and design enabling efficient
recycling are all important for halving supply
chain emissions by 2030 and lowering the
embedded carbon footprint of our products.
Ericsson’s approach
The Company’s work in this area is based on
more than 20 years of life-cycle assessments
covering data on raw material extraction,
design, manufacturing, transport, use of
products and end-of-life management.
Ericsson’s sustainability strategy addresses
the development, manufacture and distri-
bution of products, areas in which circular
business models and materials efficiency are
key topics.
For Ericsson, efficient and sustainable use
of materials is part of the Company’s circular
economy approach, including responsible
materials selection and product design, manu-
facturing and supply and effective reuse and
recycling of end-of-life products. A design that
enables efficient recycling, material choices,
and increased use of recycled material, are
all important steps in halving supply chain
emissions by 2030.
Risks and opportunities
Product design, product manufacturing and
selection and use of materials involves both
risks – such as unwanted substance content –
as well as opportunities – such as innovative
materials – that can positively impact energy
and product performance. There is also an
increased focus from stakeholders related to
materials traceability in the supply chain and
product content knowledge. Other possible
risks include materials scarcity and increased
regulatory requirements on substances,
which impacts a supplier’s ability to deliver
components.
Environmentally conscious design has been
Ericsson circular economy approach
an integrated part of the Ericsson product
development process for over twenty years,
ensuring that requirements from regulators,
standard-setters and customers are imple-
mented. To secure compliance, enable
substance phase-out and fulfil design require-
ments, Ericsson requires its suppliers to adhere
to the Ericsson List of Banned and Restricted
Substances and collects full material declara-
tions from its component suppliers.
Product design principles and end-of-life
management
Principles such as product durability, upgra-
dability, reparability, serviceability and recy-
clability are an integrated part of the Ericsson
product-design and life-cycle management
processes. Minimizing the size and weight of
Ericsson’s products decreases their embed-
ded carbon and can positively impact cost of
material and transport.
Contributing to lowering Ericsson’s carbon
footprint and securing environmentally
sound recycling and material recovery, the
Company collects equipment that has reached
its end-of-life through the Company’s global
Product Take-Back program. As the equipment
is the property of Ericsson’s customers, the
Take-Back depends on customer manage-
ment of used equipment. There are risks that
equipment that does not enter the Product
Take-Back program may end up in poorly
managed waste treatment activities. Improved
handling of used equipment is also important
to reducing the risk of privacy breaches due to
poor data-wiping and avoiding uncontrolled
recycling operations that cause environmental
harm.
Performance 2021
When end-of-life equipment is collected
through Ericsson’s Product Take-Back
program, the Company works to secure data-
wiping, compliance with relevant legislation
and delivering a certificate of destruction to
its customers. During 2021 Ericsson initiated
a review of its processes for trans-boundary
shipments of e-waste, due to discussions with
authorities in EU.
In 2021 the total weight of retrieved
equipment was over 8,800 metric tons.
Materials
Supply
Design
Use
Reuse/
Recycle
Take back
Ericsson Refurbished Spares is
a commercial offering focusing
on buy-back, refurbishment and
re-use of spare parts from used
equipment, to create both customer
and sustainability value. Ericsson
refurbished spares’ quality is
comparable to new ones and
supports a more
efficient way
to utilize
materials
in a circular
approach.
Sustainability and Corporate Responsibility report 2021 16
Digital inclusion
Digital inclusion
With around 2.9 billion people still being
offline, the digital divide continues to be a key
challenge to global economic development 1).
High costs, lack of digital literacy or lack of
access to connectivity are some of the reasons
for this.
Ericsson’s aims to be the preferred partner
to bridge the digital divide, as mobile broad-
band (3GPP technology) is considered one
of the most cost-efficient option to empower
people and societies through digital infra-
structure.
Ericsson is focusing its efforts on areas
where it can have the greatest influence while
also positively impacting its customers’ and
own business. These areas include expand-
ing connectivity and upgrading networks as
well as advocating for future proof, secure,
and cost-efficient networks. This work has
the potential to develop societies, improve
people’s lives, drive economic growth and
increase access to education and digital skills
development.
Economic growth
Research done in conjunction with Imperial
College London, shows that, on average, a
10% increase in the mobile broadband adop-
tion can increase economic growth (GDP) by
up to 0.8 %, with the effect being significantly
larger in low-income countries. Further,
mobile financial services are a strong creator
of financial inclusion. Currently, more than
300 million people worldwide use Ericsson’s
Wallet Platform solutions, which are delivered
by telecom operators.
Access and affordability
The ongoing COVID-19 pandemic increased
global focus on the digital divide, and multi-
lateral organizations are advocating for
greater governmental efforts in providing
affordable connectivity options for the uncon-
nected across all geographies. To bridge the
divide, there is a widespread need to upgrade
existing networks to achieve faster and more
meaningful connectivity. For example, accord-
ing to the Ericsson Mobility Report 2), 62% of
the mobile subscriptions in Sub-Saharan Africa
will still be 2G and 3G subscriptions by 2027.
Ericsson’s long-term target is to provide
internet access through mobile broadband to
an additional 500 million subscribers by 2024
compared to a 2018 baseline. During 2021,
the number of subscribers that get access to
internet through Ericsson’s mobile broadband
solutions has increased by approximately
59 million. The biggest challenges to achieving
this are affordability for all users and business
model profitability. To expand networks in
unconnected areas, sustainable business
models for telecom operators need to be
developed, including cost efficient roll-out and
operations as well as use cases for consumers
and enterprises. In many regions high device
costs can also be a major roadblock to access.
Ericsson is working with customer and inter-
national organizations to address some of
these challenges.
During 2021, Ericsson has explored how its
portfolio and offerings can be used to develop
cost efficient and profitable business offerings
targeting regions with no or low internet pene-
tration. The scope of these efforts includes
radio and power management solutions as
well as business cases and use case scenarios.
Ericsson is working in different forums
to advocate for increased digitalization,
universal coverage and affordability, such as
the United Nations Broadband Commission
for Sustainable Development and the Alliance
for Affordable Internet.
Mobile subscriptions by region and technology (percent)
100
80
60
40
20
0
2021 2027
2021 2027
2021 2027
2021 2027
2021 2027
2021 2027
2021 2027
2021 2027
2021 2027
2021 2027
Sub-Saharan
Africa
Middle East
and North Africa1)
India
Central and
Eastern Europe
Latin
America
South East Asia
and Oceania
North
East Asia
Gulf Cooperation
Council
Western
Europe
North
America
5G
LTE (4G)
WCDMA/HSPA (3G)
GSM/EDGE-only (2G)
CDMA-only (2G/3G)
1) All Middle East and North Africa figures include GCC countries.
Access to digital learning and skills
development
Ericsson’s commitment to bridging the digital
divide includes a sustained focus on access to
education and digital skills. To reinforce this
effort, the Company aims to positively impact
1 million children and youth by 2025 by provid-
ing access to digital learning and skill develop-
ment programs. This commitment is part of
the World Economic Forum-aligned EDISON
Alliance 1 Billion Lives Challenge – a global
movement of 45 champions bringing together
digital inclusion commitments from govern-
ments, companies and other organizations.
Through its flagship education initia-
tive Connect To Learn, Ericsson has to date
empowered teachers, students, and schools in
more than 30 countries.
This commitment is in addition to Ericsson’s
partnership with UNICEF in support of the
Giga initiative which aims to connect every
school to the internet by 2030. Through this
effort, Ericsson is helping to tackle the challenge
of mapping schools and assessing their con-
nectivity in 35 countries by the end of 2023.
This will enable Giga to aggregate demand
and convene governments and the private
sector with compelling business cases to
secure financing for school connectivity. Giga
has now mapped more than 1 million schools
working together with national governments,
Ericsson and other partners. For its part in
the Giga project, Ericsson is building on its
communication infrastructure capabilities
coupled with data science expertise to sup-
port UNICEF to collect, validate, analyze and
v isualize connectivity data for schools.
Ericsson is also widening the reach of
its digital skills development programs:
Ericsson Educate and Ericsson Digital Lab,
which are focused on training children and
youth in existing and emerging technologies
important to the telecom and IT sector. The
Company also co-led the working group of the
UN Broadband Commission for Sustainable
Development which published the report
Connecting Learning Spaces: Possibilities for
Hybrid Learning, providing recommendations
to governments on strategies for implementing
digital learning.
1) https://www.itu.int/itu-d/reports/statistics/facts-figures-2021/
2) Ericsson Mobility Report, November 2021 edition.
Sustainability and Corporate Responsibility report 2021 Corporate citizenship
Ericsson engages as an active local partner
in the communities where it operates. Volun-
teering is one way Ericsson employees help
the Company realize its vision to improve lives,
redefine business and pioneer a sustainable
future. During 2021 Ericsson strengthened
its corporate citizenship efforts, including
the launch of a new volunteering strategy
focused on encouraging employee and
community engagement. The Company also
re-established global governance of this pro-
gram with a new Volunteer Program Board.
Ericsson also strengthened its donation
strategy to focus on proactive efforts, efficiency
improvements and long-term partnerships.
Making a difference across the globe
In 2021 the Company’s largest donation was
related to the COVID-19 response in India.
The donation of almost USD 1 million was a
combination of direct company contribution
and company-matched employee donations.
The donation went to UNICEF India and
helped with the acquisition of oxygen genera-
tion plants, RT-PCR testing machines and
other medical equipment.
Due to the pandemic, Ericsson pivoted its
volunteering efforts to virtual engagements.
In 2021 Ericsson initiated multiple virtual
volunteering pilots inviting more than 24,000
employees in 39 countries to participate.
Lessons from these pilots will be incorporated
into the launch of the global volunteer program
in 2022.
One example of a global virtual volunteer
initiative is Missing Maps, an open and colla-
borative project in which volunteers can virtu-
ally map buildings in areas at risk of disasters.
As a result of this global opportunity, Ericsson
volunteers mapped more than 4,500 buildings.
Climate action
During 2021, Ericsson continued to support
management of mangrove trees in Malaysia
and renewed its partnerships with local stake-
holders in the Philippines to protect more than
405 hectares of mangrove wetlands. This
project in the Philippines utilizes Ericsson’s
technology and its employee expertise, and
the project in Malaysia includes a company
donation of mangrove saplings for reforesta-
tion purposes.
Building on its six-year commitment to
mangrove preservation projects, Ericsson has
made a pledge to contribute to the organiza-
tion 1t.org, which aims to conserve, restore,
and grow one trillion trees by 2030. 1t.org is
part of the World Economic Forum’s work to
accelerate nature-based solutions in support
of the UN Decade on Ecosystem Restoration
(2021–2030).
Corporate citizenship
17
Humanitarian response
Ericsson Response is the Company’s flagship
volunteer program and has been in operation
since the year 2000. Together with partners,
Ericsson uses its core competencies to provide
communication and other support to help
humanitarian workers save lives and to
support communities in need of humanitarian
relief, for example, after a natural disaster. The
work is a continuous journey to prepare and
improve the humanitarian response for future
emergencies.
In 2021, the Company extended its
partnership with the United Nations and
established a partnership with UNHCR, the
UN refugee agency to support its important
work in the area of emergency response to
refugee situations.
As a first deployment in support of UNHCR,
Ericsson Response deployed in Colombia to
support the Venezuelan refugee response.
Ericsson Response supported other deploy-
ments after a devastating earthquake in Haiti
and in response to severe flooding in Germany.
Ericsson Malaysia employees regularly volunteer their time to plant and care for mangrove trees for the Connected Mangroves project, which the Company has with the Kampong Dato
Hormat community in Selangor, Malaysia since 2015.
Sustainability and Corporate Responsibility report 2021 18
Responsible business
Responsible business
The Company works to continuously improve
and strengthen its responsible business prac-
tices, with a focus on building and maintaining
trust, transparency and integrity everywhere
Ericsson operates.
Ericsson drives an agenda to deliver value
to both the Company and stakeholders. This
agenda extends beyond legal compliance by
proactively addressing and mitigating risks,
including corruption risks.
Respect for human rights and ethically and
environmentally sound business practices, fair
and safe working conditions and employee
well-being, are fundamental to Ericsson’s cul-
ture and identity. This commitment to respon-
sible and ethical behavior starts at the Board of
Directors level and is implemented throughout
Ericsson’s organization through on-going
due diligence and specific frameworks and
programs such as Ethics and Compliance,
Sensitive business, Responsible sourcing and
Health, safety and well-being.
The Ericsson Code of Business Ethics and
the Code of Conduct for Business Partners set
out the Company’s commitments and require-
ments. Ericsson aims to prevent, mitigate and
address risks of adverse impacts throughout
its operations, products and business engage-
ments.
Ericsson actively engages in awareness
raising on responsible business topics and
encourages employees and its stakeholders
to report compliance concerns through the
Ericsson Compliance Line.
Reporting compliance concerns
Ericsson encourages employees, suppliers,
and other external parties to report conduct
that could violate the law, Ericsson’s Code of
Business Ethics or Ericsson’s Code of Conduct
for Business Partners (collectively “Compliance
concerns”). Compliance concerns may relate
to corruption, fraud, auditing, questionable
accounting, deficiencies in internal controls,
personal health and safety, environmental
issues, human right matters, working environ-
ment and conditions or other matters that
could constitute a breach of law or that could
harm Ericsson, its workforce, its shareholders
or the Company’s reputation.
Employees are encouraged to report
Compliance concerns directly to their manager,
the superior of a manager or Group Functions
People or Legal Affairs and Compliance.
Compliance concerns can also be reported
anonymously, if permitted under applicable
legislation, via the Ericsson Compliance
Line by phone or secure website, 24/7, 365
days a year. Ericsson does not accept any
discrimination of, or retaliation against,
individuals who report compliance concerns
in good faith. The process for receiving and
handling compliance concerns is designed
to help maintain an appropriate degree of
independence.
Ericsson’s Allegation Management Office
is responsible for the intake and assessment
of allegations or reports of potential compli-
ance violations and for tracking execution of
the remediation plans until closure of cases.
Corporate Investigations is responsible for
conducting Group-relevant investigations and
for oversight of investigations that it delegates
to other Ericsson units or to external third-
party investigators. Findings and remediation
plans for Group-relevant cases are presented
to Ericsson’s Group Remediation Committee,
consisting of the Chief Legal Officer, the
Head of the Chief Financial Officer’s Office, the
Chief People Officer, and the Chief Compliance
Officer. Findings from Group-relevant cases
are presented every quarter to the Audit
and Compliance Committee of the Board of
Directors. Cases that are non Group-relevant
are handled according to the same process in
the respective Market Areas and are presented
to Ericsson’s Market Area Remediation
Committees.
Ericsson has seen an increase in compli-
ance concerns reported from 933 in 2020 to
1,059 in 2021. Ericsson believes this reflects
an increase in employee awareness of
compliance-related risks and the Company’s
continued efforts to foster a stronger speak up
culture.
Figure 1 shows the total number of allega-
tions in 2021 by category. From the total,
237 cases were deemed to be substantiated
allegations. 715 cases were assessed to be
unsubstantiated, out of scope, or no further
response was received from the reporter upon
follow-up. 414 cases reported in 2020 and
2021 remain open. Figure 2 illustrates the
actions taken in response to the substantiated
cases in 2021.
Figure 1: Reported compliance concerns by category 1)
Figure 2: Corrective or disciplinary actions 2)
1,059
Fraud, corruption and
regulatory breach
Operations
Conflicts of interest
Security
Human resources
Other
20%
13%
8%
8%
35%
17%
233
Terminations
Resignations
Demotions
Warning letters
Verbal warnings
Other
97
19
2
89
22
4
1) The Allegation Management Office assesses allegations and categorizes them
according to available information. The category may be modified during the
investigation as additional information becomes available.
Figures rounded to nearest whole percentages wherefore total does not sum to
one hundred percent.
2) Corrective or disciplinary actions related to breaches of the Ericsson Code
of Business Ethics executed in 2021. Each action represents a distinct
employee. Numbers reflect the most severe action per employee.
Sustainability and Corporate Responsibility report 2021 Responsible business
19
Business ethics and anti-corruption
Since December 2019, Ericsson has been
under a Deferred Prosecution Agreement
(DPA) with the US Department of Justice
(DOJ) to resolve criminal US Foreign Corrupt
Practices Act (FCPA) charges and a consent
judgment with the Securities and Exchange
Commission (SEC) to resolve related civil
claims. On October 21, 2021 Ericsson received
correspondence from the DOJ stating its deter-
mination that the Company had breached its
obligations under the DPA by failing to provide
certain documents and factual information.
At this time we cannot provide further details
about the determination by the DOJ or predict
the outcome of the resolution of this matter.
Ericsson has taken steps to avoid a recurrence
of the issues that led to the breach determina-
tion and is committed to cooperating openly
and fully with the DOJ and its Independent
Compliance Monitor consistent with all terms
set out in the DPA.
Cultural Transformation
Ericsson continued to strengthen and enhance
its Ethics and Compliance (E&C) Program
in 2021 with a focus on the global cultural
transformation to ingrain ethical, responsible
and sustainable business practices everywhere
the Company operates. One cornerstone of
that transformation is Ericsson’s new value of
integrity, added in 2021. Concurrently, Ericsson
launched a company-wide E&C strategy
which focuses on ensuring that integrity is
embedded into Ericsson’s culture and ways of
working to foster accountability, build trust and
respect with customers, business partners and
regulators, and drive sustainable success. The
Company empowers its employees and busi-
ness partners to take part in the transformation
by providing them with tools and information
to make fact-based, integrity-driven decisions.
Updated Code of Business Ethics
Ericsson’s newly revised Code of Business
Ethics (COBE), launched in 2021, outlines the
Company’s fundamental ethical principles and
expectations. It reflects the Company’s com-
mitment to conduct business with integrity,
consistent with all internationally recognized
human rights principles and the applicable
laws and regulations where Ericsson operates.
COBE is applicable to all individuals performing
work for Ericsson (including the Board of Direc-
tors and the President and CEO) and has been
translated into 43 languages to ensure that it
is understood by all. The Company reviews and
updates COBE periodically and frequently runs
an acknowledgment process, including during
2021, to ensure that everyone performing work
for Ericsson has read and understood it.
Policies and Procedures
In addition to launching COBE, Ericsson has
also been working towards enhancing and
simplifying its E&C-related policies, procedures
and processes to provide clarity, improve
their user-friendliness and to set up adequate
controls for high-risk transactions. Relevant
examples include the new revision of the
Gifts, Entertainment and Hospitality (GEH)
Group Instruction and the global roll-out of
the enhanced Third-Party Management (TPM)
Program to identify and mitigate corruption-
and integrity-related risk in connection with
third party relationships (see page 26 on
Responsible management of suppliers).
Ericsson also launched guidance embedding
E&C into the mergers and acquisitions process,
ensuring adequate oversight of strategic
transactions and the Company’s portfolio of
non-wholly owned companies.
Training and Communications
Ericsson has developed engaging com-
munications and trainings on E&C-related
topics to promote integrity-driven behaviors
by employees and third parties. The Company
launched “Putting our values into action – a
guide to E&C for Ericsson Leaders” which
includes resources that enable all leaders to
embrace their E&C responsibilities. Notable
new trainings include instructor-led workshops
for senior executives and middle-management
on leading with integrity and solving ethical
dilemmas and a targeted anti-bribery
and -corruption (ABC) e-learning for line
managers and employees in highly exposed
roles. In addition to these specific trainings,
all employees must take a mandatory online
ABC training which is frequently refreshed.
Additional trainings are also available for
employees in more exposed positions to ensure
that they are equipped to face compliance risks
inherent to their positions. Training is a manda-
tory condition to contracting with certain third
parties where risk of corruption is higher.
Risk Assessment
Ericsson has continued to develop its compli-
ance risk assessment process, which is used
to identify and manage compliance risk and
evaluate the effectiveness of the E&C Program.
In 2021, Ericsson completed risk assessments
of select units in each of its Market Areas,
also including transaction testing in certain
high-risk geographies. The risk assessments
identified several risk areas in need of further
attention, such as heightened risk of potential
conflicts of interest between employees and
external suppliers, the need for continued
attention and improved guidance in connec-
tion with public official interactions and further
improvement of third-party management.
Allegation Management and Investigations
Ericsson launched new steering and guidance
documents, as well as a new Speak up report-
ing tool and case management system. The
new system manages the allegation and inves-
tigation process from end-to-end and facili-
tates timely and consistent disciplinary and
remedial measures, promoting accountability
for non-compliant and unethical conduct.
Reward and Sanctioning
The Company’s willingness to instill a change
of culture is reflected in its performance
assessment structure, which includes a new
Integrity goal for all employees and new ethics
and compliance targets that impact the Short
Term Variable compensation of executives.
Ericsson addresses breaches of COBE by way
of consequence management for employees
and for third parties as well as process and
control enhancements (see page 18 for over-
view of disciplinary actions).
Digitalization, Monitoring, and Controls
Digitalization has also been at the core of
Ericsson’s E&C-related improvements in 2021.
An E&C Portal has been deployed to facilitate
controls by the Compliance Office around high-
risk transactions, including benefits provided
to third parties, particularly public officials.
The newly-launched allegation case manage-
ment system enables enhanced analytics of
compliance-related incidents.
In addition, Ericsson has launched an
integrated E&C reporting and analytics
application to support overall program deploy-
ment, monitoring and testing. Central to those
monitoring and testing efforts is the design
and deployment of the Anti-corruption Internal
Control System over core anti-corruption-
related processes, such as GEH, TPM, and
hiring, which progressed during 2021 and will
continue in 2022.
All of the actions carried out by the
Company during 2021 contribute to the
realization of its three-year strategy for the
implementation of a mature E&C Program
where integrity, ethics and compliance will be
reflected not just in core company values, but
also consistently within its day-to-day business
operations and with understanding and full
ownership across the organization. Ericsson
is continuously updating its E&C operational
plan for the future, to ensure the effectiveness
and sustainability of the E&C Program in the
years ahead.
Sustainability and Corporate Responsibility report 2021 Other relevant activities
During 2021 Ericsson continued its engage-
ment as a thought leader on business and
human rights within the ICT industry. Exam-
ples of activities include participating in the
UN B-Tech Project’s Community of Practice,
joining the Danish Government’s Tech for
Democracy Initiative, as well as continuing
the Company’s engagement on aligning
upcoming EU mandatory human rights due
diligence legislation with international human
rights standards. Additionally, developments
in countries such as Myanmar and Afghanistan
required the Company to implement enhanced
due diligence measures to address rising
human rights risks.
20
Responsible business
Respect for human rights
Companies have a responsibility to respect
internationally recognized human rights.
Ericsson is a founding member of the UN
Global Compact, an early adopter of the UN
Guiding Principles on Business and Human
Rights and a member of the Global Network
Initiative. Ericsson is committed to this respon-
sibility across its business operations, including
its supply chain and end use of products.
While there are many benefits to tech-
nology, the increasing use of Information
and Communication Technology (ICT), and
specifically of new technologies such as
machine learning and artificial intelligence
(AI), can create human rights challenges.
Ericsson is committed to ensuring that misuse
of its technology and related human rights
impacts are prevented.
The Company leads by example in embed-
ding human rights due diligence across its
business operations. The aim of these actions
is to ultimately provide better outcomes for
people and ensure the Company’s technology
is a force for good, by preventing and mitigat-
ing intended and unintended misuse.
Risks and opportunities
Ericsson has analyzed its supply chain, own
operations and the use of its products in terms
of respect for human rights. Ericsson identifies
its salient human rights issues as the right to
freedom of expression, the right to privacy in
relation to the use of its technology, as well as
primarily labor-related rights as the prevailing
set of rights for responsible management of
suppliers. These salient human rights issues
have been defined based on continuous due
diligence, expert guidance, and internal and
external dialogue, as well as through analysis
of Ericsson’s current operations and business
engagements.
In 2021, Ericsson published a human
rights assessment of 5G technology, identi fying
a range of impact areas and necessary miti-
gating actions for the Company and the broader
ICT industry. The assessment cuts across the
ICT value chain and includes impact areas
such as automation and job t ransitions, IoT
and privacy concerns, government surveillance,
and digital inclusion, as well as mitigations for
each impact area. Since its publication, the
assessment has been a foundation for further
stakeholder engagement and awareness
raising throughout the year.
In order to assess, prevent and mitigate
potential misuse of Ericsson’s technology,
the Company has integrated human rights
due diligence into its sales process through
the Sensitive Business Framework. This
framework aims to ensure that business
opportunities and engagements are conducted
in accordance with international human rights
standards.
The Sensitive Business Framework
evaluates sales opportunities from a human
rights risk perspective. Risks are identified
based on the parameters of the Sensitive
Business risk methodology (see graph on
page 21). As a result of these due diligence
measures, Ericsson decides how to proceed
with the opportunity and how to mitigate
identified risks. The decision can be to approve,
with or without conditions, or to reject the sales
engagement. Conditional approvals include
technical and contractual mitigations as
applicable.
Governance
Ericsson’s commitment to respect human
rights is part of its Code of Business Ethics
(CoBE) and its Code of Conduct for Business
Partners (CoC). The Ericsson Business and
Human Rights Statement further clarifies
Ericsson’s commitment to respect human
rights throughout its value chain.
Ericsson’s Sensitive Business Board, a cross-
functional forum that consists of high-level
representatives of Group Functions and
Business Areas, oversees the Sensitive
Business Framework, and meets regularly.
Performance 2021
The market areas and Customer Units shall
obtain Sensitive Business approval before
moving ahead with a sales engagement. All
contractual mitigations in a Sensitive Business
conditional approval must be included in the
customer contract.
Ericsson achieved its target of 100%
adherence to the Sensitive Business process
in 2020 and continued to monitor the adher-
ence to the process during 2021.
In 2021, 722 cases were evaluated through
the Sensitive Business framework. As in the
previous year, all applicable contracts included
relevant conditions, and all required conditions
as decided in the Sensitive Business process
were duly implemented. Ericsson continues
to monitor the adherence to the Sensitive
Business process during 2022.
During 2021, Ericsson has not, through its
reporting channels, been made aware of any
human rights violations in which the Company
has been involved, and consequently no
remediation actions have been undertaken.
Sustainability and Corporate Responsibility report 2021 Responsible business
21
Sensitive Business case examples
The table below provides anonymized case examples of human rights due diligence measures conducted as a result of adhering to the Sensitive
Business framework and process. The examples demonstrate how human rights risks are considered and addressed in sales opportunities.
Example of cases
Decision
Approved
Ericsson’s customer
Description
Motivation
Global telecom
operator
A telecom operator in a high-risk country
approached Ericsson with a request to
expand the core network hardware
The customer had already previously procured the related software that
runs on the requested hardware, and agreed to use cases that prevent
misuse. The core network software stores and processes sensitive data
such as user location and call logs. The expansion would fall under the
same use and was therefore already mitigated. Ericsson decided to
approve the engagement with no additional Sensitive Business conditions.
Approved
with conditions
Local telecom
operator
A telecom operator in a high-risk country
requested Ericsson to upgrade its radio and
core network software.
The customer’s network contains, and processes sensitive personal infor-
mation such as user location and call logs. Contractual mitigations limiting
the approved use of such functionalities, in line with human rights stand-
ards, were therefore agreed with the customer.
Dismissed
Local telecom
operator
A local telecom operator requested Ericsson
to provide a functionality that would give
law enforcement authorities unrestricted
direct access to all subscribers’ current
location. The purpose for such a
functionality was not disclosed.
While locating subscribers in the mobile network, can be legitimate and
proportionate, for example in case of emergencies such as natural disas-
ters, the law enforcement authority did not agree to disclose the purpose of
the functionality and how it would be used. In such a case the risk of misuse
and potential adverse human rights impacts cannot be effectively
mitigated. The engagement was therefore dismissed.
Approved
with conditions
Local telecom
operator
A local telecom operator requested Ericsson
to supply a solution for network manage-
ment
The requested solution processes sensitive personal information, and the
customer account, supported by Ericsson’s automatic evaluation tool
decided to agree with the customer as to how and for what purpose the
solution can be used.
Cases reviewed in the sensitive
business process, by outcome
Sensitive business risk methodology
722
Approved
Approved with conditions
Dismissed
40%
60%
1%
Figures rounded to nearest whole percent-
ages wherefore total does not sum to one
hundred percent.
Sales opportunities are evaluated according to
the following criteria:
Country
Portfolio
1. Portfolio: Whether the sale includes technology that
stores or process personally identifiable information.
Risk
evaluation
2. Purpose: The purpose and context in which the customer
intends to use the product, service or solution.
Customers
Purpose
3. Customer: The type and ownership structure.
4. Country: Ericsson uses a third-party risk analytics firm to
rank countries according to right to privacy and freedom
of opinion and expression risks. In addition, the Company
routinely follows international developments.
Sustainability and Corporate Responsibility report 2021 22
Responsible business
Security and privacy
Innovative technologies and services are
pioneering new ways to connect systems and
societies. The technological evolution that
enables this positive change also brings new
privacy and security risks as applications,
connected devices and integrated networks
become potential targets for fraud, disruptive
cyber-attacks and information and identity
theft. The assumption that security and privacy
incidents and breaches do and will occur is
fundamental for any responsible business.
Providing the world with resilient products
and services now and in the future starts with
robust and efficient security capabilities inter-
nally as well as throughout Ericsson’s business
processes.
Ericsson is committed to contributing to a
safe digital society by providing trustworthy
products and services. As both the value of
information and the capabilities of threat actors
increase, securing information and personal
data is the foundation of the Company’s trust-
worthy technology and services leadership.
Strategic priorities
Ericsson’s security and privacy strategies
outline the Company’s ambition level and set
the overarching long-term strategic objectives
to further build Ericsson’s trustworthiness by
integrating security and privacy by design and
enhance the maturity of security capabilities.
Ericsson’s ambition is to continue to strengthen
the protection of its valuable assets and
increase resilience throughout its portfolio.
To support this journey, Ericsson is investing
in more integrated, proactive and customized
security and privacy controls throughout the
Company and its portfolio.
The objectives that Ericsson has set for 2025
include, but are not limited to, enhanced capa-
bilities in cyber defense, for example, advanced
threat hunting, AI-detection and behavioral
analysis to quicker detect and eliminate any
threat actor activities. Ericsson will also continue
invest in rapid vulnerability management
capabilities across the value chain to close any
potential entry-point for threats.
Security and privacy risks
Identifying and managing security and privacy
risks is embedded in the Company’s business
processes. Security or privacy risks identified
by Ericsson, or its partners are handled directly
or escalated to the regional or global level
for mitigation in accordance with Ericsson’s
frameworks and processes. Key risks are
fed into the strategy process as the basis for
strategic direction and prioritization.
In all areas the Company continuously
strengthens its security culture by improving
competence and security and privacy aware-
ness. Regularly recurring security and privacy
trainings are mandatory for all employees.
This includes in-depth training and security
awareness programs for sensitive and critical
functions to build specific security and privacy
competence. During 2021 Ericsson rolled out
its Security Masters concept to reinforce all
product development units with colleagues
who have received specialized security training.
The Company constantly dimensions its
tools and capabilities to detect and respond to
changing threats. Ericsson’s threat intelligence
teams assess potential threats against the
Company, its products and the telecom and
tech sector in general. New risks stemming from
the assessments feed into strategic decision-
making to improve the resilience throughout
the Company portfolio and adjust defense
mechanisms.
Ericsson’s key security and privacy risks include,
but are not limited to:
Ransomware attacks: During ransomware
attacks, the threat actor prevents an organiza-
tion from accessing its data and may also
threaten to publish sensitive information
unless a ransom is paid. Ransomware attacks
continue to pose an exceedingly high threat to
every company including Ericsson. The direct
impact of a ransomware attack is violation of
the availability, integrity and confidentiality
of information. The barriers for engaging
in ransomware attacks are decreasing as
multiple adversaries are selling ransomware as
a service to other cyber criminals. The trend is
moving towards higher ransomware demands
per victim each year, and ransomware is
expected to continue to rise in coming years.
Ericsson follows the development of
ransomware attacks closely. In 2021, Ericsson
has increased its focus on ransomware threat
intelligence, and reviewed and improved
capabilities for ransomware protection and
detection. The Company has also prioritized
incidents and crises management exercises
and published instructions on how to manage
potential ransomware attacks in an efficient
manner.
Supply chain attacks: As companies increase
their cyber resilience, advanced threat actors
manipulate suppliers’ software components
in the product development, deployment or
reconfiguration stage to reach a well-protected
target. If Ericsson were to be subject to such an
attack, the end target could be end-user data,
service disruption, Ericsson’s own information
or information related to its customers.
Before engaging a supplier, Ericsson
identifies the sensitivity and criticality of the
Industrial applications
/Private networks
• Supply chain attacks
• Ransomware
• Data theft
• Production line
disruptions
Critical society
services
• Supply chain attacks
• Ransomware
• Data manipulation
• Privacy violations
Consumer services
• Call record theft
• Ransomware and Fraud
• Privacy violations
Consumer IoT
• Data and identity theft
• Device hijacking
Telecom network
As society, enterprises and consumers depend more and
more on 5G networks and related interconnected digital
services, opportunities for threat actors committing cyber-
attacks are multiplied, leading to greater potential risk.
This reality is crucial to address in order to uphold resilient
infrastructure globally. Ericsson constantly strengthen
its security posture and develops its portfolio in order to
mitigate potential security and privacy risks that may
impact the Company or society, enterprises and people.
For more information see ericsson.com/security
Sustainability and Corporate Responsibility report 2021
Responsible business
23
project and performs risk-based security due
diligence on the supplier and the solution they
provide. Ericsson assesses the supplier’s ability
to adhere to the applicable Ericsson security
and privacy requirements. During the supplier
life cycle, Ericsson continually assesses the
supplier’s resilience to minimize risks associ-
ated with third parties. During 2021, Ericsson
has further strengthened its Third-Party Risk
Management process.
Conflicting privacy legislation: Stringent
privacy regulations is implemented in a high
pace in many countries and markets in which
Ericsson operates. The high implementation
phase and contradictions in conflicting local
or regional privacy legislation may introduce
a risk that Ericsson is found non-compliant to
specific privacy legislation. Due to the nature
of Ericsson’s business at the core of critical
infrastructure and the amount of personally
identifiable information of which Ericsson is
the controller or processor, such an event could
have far-reaching consequences, even if it was
caused by a third party outside of the control of
Ericsson.
To be on par with evolving legislation,
Ericsson continuously updates its internal
frameworks and processes. Ericsson’s local
experts help guiding the company in the event
of contractionary privacy legislation. During
2021, Ericsson boosted its global personal
data mapping activities and redefined impact
assessments. In addition, Ericsson has also
refined its instruction on Privacy Trustworthy
AI Development and launched a cross-
organisational awareness program regarding
new privacy and AI legislation.
For more extensive information about
information, privacy and cyber security
risks, see Risk factors section in the Ericsson
Financial report 2021.
Incident management
Ericsson’s incident management process is
activated if a security or privacy risk material-
izes, or potential or actual vulnerabilities are
detected involving the Company’s people,
infra structure, information or Ericsson’s
products or services. Incidents are detected
through technical controls or reported by
employees or business partners through
Ericsson’s Security Incident Management
System and routed to the appropriate function
for handling.
Incidents are escalated, managed and
communicated in accordance with the
Security Incident Management Process and
legal requirements. Incidents that result in
employee security investigations are handled
by a dedicated and specially trained team.
Ericsson’s People and Legal functions are
notified in the event of disciplinary actions,
and law enforcement is notified in the
suspicion of criminal offence.
Response and recovery plans and processes
are implemented throughout the Company
to limit the scale and impact of an incident.
The efficiency and robustness of response
and recovery plans are continuously tested.
For severe incidents, a root cause analysis
with lessons learned and recommendations
for improvement or mitigating actions is
conducted and communicated.
Governance
Enterprise security and privacy is governed
through the Chief Security Officer Security
Board and Ericsson’s Group Enterprise Security
and Privacy Board, while the Product and
Technology Security Board governs product
security.
The integration of security and privacy
controls across all phases of the value chain for
Ericsson’s products and services is detailed in
the Ericsson Security Reliability Model (SRM).
SRM is aligned with GSMA NESAS 1) and NIST
CSF 2) and ensures a managed, risk-based
approach tailored to the target environment.
By that Ericsson continuously incorporates
requests and learnings to adapt evolving
technologies and comply with global legislation.
SRM enables security and resilience by design in
Ericsson’s products while the Ericsson enterprise
security capabilities and frameworks 3), such
as the Information Security Management
System (ISMS), protect the enterprise, including
environments for product development.
The Ericsson ISMS ensures adequate and
proportionate security controls across Ericsson’s
enterprise and its value chains. Ericsson’s
ISMS is globally certified to ISO/IEC 27001.
The certification scope includes management,
research, product management, product devel-
opment, production and supply, as well as sales,
installation and maintenance of hardware,
software, services and solutions for Information
and Communications Technology (ICT), includ-
ing emerging technologies.
The Audit and Compliance Committee and
Technology and Science Committee of the
Board of Directors regularly receives updates on
security and privacy. Besides audits, Ericsson
tests its internal resilience against a variety
of attacks by utilizing internal and third-party
simulation and tests. Tailored security tests
and simulations against a variety of attacks
are integrated and automated throughout
Ericsson’s product development process.
Ericsson actively contributes to the devel-
opment of industry and security standards
globally. For example, Ericsson representatives
are part the EU work group ENISA AHWG EU5G
developing the EU’s 5G Cybersecurity Certifica-
tion Scheme, as well as the Swedish Institute
for Standards committee TK318 reviewing the
ISO 27001 standard.
Performance 2021
Major efforts in 2021 to strengthen Ericsson’s
security posture included investments in state-
of-the-art detection technology and insider
threat prevention, as well as optimization of
the security incident process, the vulnerability
management process and the information
security risk management process. The
Company has also during 2021 run a cross-
organizational product security program, to
simplify and automate security by-design
across the full value chain including increased
risk evaluation and security requirements put
on suppliers and open-source intake.
During 2021 Ericsson has not had any
critical security or privacy incidents. Most
incidents reported were of minor and medium
severity. This means that the Company
efficiently has mitigated risks of smaller
incidents expanding to a critical severity level.
The decrease in the number of incidents since
2019 is mainly due to fewer lost devices with a
majority of the employees working from home
and fewer lost devices. For more information
see page 36.
1) The Network Equipment Security Assurance Scheme (NESAS) is jointly defined by the industry organisations 3GPP and GSMA, and provides an industry-wide security assurance framework to facilitate
improvements in security levels across the mobile communications industry.
2) NIST Cybersecurity Framework is a set of guidelines for mitigating organizational cybersecurity risks, published by the US National Institute of Standards and Technology (NIST).
3) The Enterprise security frameworks cover information security, IT-security, physical security, risk management, sourcing and third parties, mergers and acquisitions, incident management, business continuity,
insider threat prevention and travel and event security
Sustainability and Corporate Responsibility report 2021 24
Responsible business
Health, safety and well-being
The Company is committed to providing a safe
and healthy work environment for anyone
working on its behalf where everyone can stay
safe and be well every day.
At Ericsson it is believed that all work-related
injuries and illnesses are preventable, and the
Company is committed to a proactive agenda
that reaches beyond legal compliance, interna-
tional standards and related customer require-
ments. The Company has launched Target Zero
– its goal of zero fatalities and lost workday
incidents – to demonstrate its strong commit-
ment that nothing less than zero is acceptable.
The target encompasses both physical injuries
and work-related illnesses including mental
health cases. The Company aims to reach
Target Zero by 2025 through the global Ericsson
Care program which covers health, safety and
well-being efforts for everyone working for
Ericsson.
During 2021, the Company’s response to the
COVID-19 pandemic included actions to monitor
impact on employee well-being, specifically
focusing on mental health using employee Pulse
surveys and upskilling managers. The health
and well-being offerings were expanded to
include increased employee assistance program
coverage, the launch of a global mental health
training program and vaccine provision where
national programs were not easily accessible.
Well-being in focus
Ericsson believes that employees perform
better and deliver on the Company’s business
strategy when they are well. The well-being
program is part of the holistic Ericsson Care
framework, and it covers four areas: physical,
emotional, financial and social well-being.
In 2021, Ericsson built on its systematic
approach to well-being with tools and assets,
easily accessible to employees through a
dedicated internal website. Twice during the
year, Ericsson ran an employee pulse survey
specifically designed to assess its response to
the pandemic. Results showed that 90% of the
employees believed that a genuine interest had
been taken in their well-being. However, with
the ongoing uncertainty caused by the pandemic,
more than half of employees continued to
report that their stress levels had increased or
remained unchanged.
Remote working continued for most
employees and feedback indicates that the
majority want to continue to work remotely
part-time. In response to this, Ericsson is
transitioning to a hybrid working model in
2022. A focus group in 2021, showed that
1) Incidents resulting in three or more lost workdays.
the home furniture package targeted at
improving ergonomics for remote working is
one of the benefits most valued by employees.
It also highlighted further actions needed to be
introduced in 2022 to improve the employees’
understanding of financial well-being. The
feedback also indicates that work life balance
for some employees continues to be problematic
due to perceived unclear boundaries between
work and private life. In response Ericsson
introduced software designed to analyze
working habits and support employees to take
breaks and disconnect from work. More than
19,000 employees have enrolled so far.
Ericsson’s well-being activities in 2021
had a key focus on mental health, physical
well-being and stress management. A global
program with a mindfulness app, was launched;
approximately 21% of employees are enrolled
and more than 11,000 employees attended the
engagement webinars. In addition, Ericsson has
appointed a mental health training partner to
deliver a range of webinars and training.
To further strengthen the Company’s
approach to and awareness of health, safety
and well-being, Ericsson held its second virtual
Ericsson Care Week in May 2021. This is an
annual company-wide effort to reinforce
Ericsson’s commitment to this important topic.
Due to COVID-19 pandemic, Ericsson has
adapted its health and safety training and
seminars to be delivered virtually.
Risk management
Strategic assessments are conducted annually
to identify company-level health- and safety-
related risks and opportunities, prevent
undesired consequences and evaluate control
measures. These assessments consist of
compiled and analyzed risks from Market
and Business Areas. They cover, but are not
limited to, potential hazards, legal matters and
customer and stakeholder requirements, as
well as concerns and learnings from incident
investigations.
Based on these assessments, targets, key
performance indicators and performance
metrics are set, which are followed up on at
relevant levels across Market and Business
Areas and Group Functions.
The primary health and well-being
employee-related risks identified and
exacerbated in part by the COVID-19
pandemic continue to be related to mental
health, including stress and work-life balance,
as well as musculoskeletal and ergonomic
risks.
The highest safety risks identified within the
Company are within suppliers, specifically field
operators, and related to driving, climbing and
working at heights and with electricity. These
risks continued to account for the majority of
fatalities and major incidents1) in 2021.
As part of the Company’s efforts to mitigate
safety risks, any person working on Ericsson’s
behalf, including contractors, must have
adequate health and safety competence,
training and experience for their specific
role. Ericsson identifies training needs and
ensures provision of training based on the
roles and risks to which each employee is
exposed. A health and safety introduction
course is mandatory for all employees includ-
ing employees of suppliers. Targeted courses,
such as the Safe Driving Awareness and the
Zero Tolerance Safety Rules, are also available
to all employees and suppliers.
Incident reporting
All health and safety incidents involving
Ericsson employees and suppliers are reported
in the Global Incident Reporting Tool (GIRT).
Reported incidents are investigated, including
root-cause analysis to remedy damage and
prevent reoccurrence. Ericsson encourages
employees and suppliers’ employees to report
risks, hazards, opportunities and near misses
related to health, safety and well-being.
During 2021 Ericsson deployed a new
GIRT system designed to provide a better
user experience, intelligent data analytics,
real-time notifications, seamless integration
with other tools and modules and offline
reporting of incidents. Health and well-being
concerns related to working from home or
remote working considerations are also being
captured in the tool.
Governance
Ericsson’s approach and commitment to
health, safety and well-being is summarized in
the related Ericsson Group policy, available on
the Company website.
Within Ericsson, health, safety and well-
being issues are governed globally by two fora.
The Global Occupational Health and Safety
Board drives the execution of the strategy and
programs within the business and includes
Executive Team members. The Major Incident
Review Board, reviews performance and major
incidents and consists of senior leaders in the
organization. These fora are mirrored in Market
Areas to support consistency, alignment and
accountability.
Sustainability and Corporate Responsibility report 2021 Responsible business
25
The Company’s Environment, Health
and Safety organization is structured as an
overarching global unit with health and safety
organizations in each of the business areas and
market areas. The global unit sets the strategy,
policy, framework and requirements. Business
Areas develop processes, tools and solutions
that aim to mitigate the risks in their respective
areas based on the nature of their business.
The Market Areas are responsible for deploying
requirements from the global unit as well as
managing local operational risks and driving
initiatives focused on health, safety and well-
being that encourage employee participation.
Ericsson’s health and safety management
system was reassessed during 2021 and
globally certified to ISO 45001 Occupational
health and safety managements systems
standard.
Performance 2021
In 2021 there was an increase in fatalities
compared to 2020, in contrast to the decreas-
ing trend in recent years. The fatalities were in
emerging markets, and the majority of them
were reported by suppliers. Fatigue and mental
health issues were identified as contributing
factors to the increase in number of fatalities.
In addition, there have been fatalities related
to logistics and transportation of products.
During 2021, there was a slight increase
in the number of major incidents. Control
measures taken for suppliers and Ericsson
employees conducting field operations
continued. There were slight increases in the
number of lost workday incidents reported as
well as number of lost workdays. There was a
35% increase in reported near misses and risk
observations primarily due to an additional
focus on and increased awareness of reporting.
Near-miss and risk observation reporting allows
the Company to proactively take action before
an injury occurs.
As a result of Ericsson’s efforts to increase
the visibility of the cause of musculoskeletal
illness and promote higher levels of reporting,
the Company has seen a 460% increase of
reported cases. The closure rate stood at 88%
which is a substantial increase compared to
2020. At the same time, it has gained a better
understanding of the underlying causes of the
illnesses.
During 2021 Ericsson strengthened its work
on supplier management including introducing
new health and safety courses for the manage-
ment teams and supplier employees in order
to explain health and safety requirements,
enhance the consequence management
process and strengthen the onboarding and
qualification process for new suppliers.
Ericsson continued its Consequence
Management Process, further enforcing the
consistency and implementation of Company
health and safety requirements with suppliers
(see Figure 1). There has been a total of 247
violations by suppliers in 2021 with 82 red
cards 2) and 165 yellow cards 2) issued. The
majority of violations occurred due to lack of
risk assessments and incorrect use of Personal
Protective Equipment (PPE). The primary
consequences that resulted from the issuing of
red and yellow cards in order of volume were:
increased volume of quality inspections/audits,
financial penalty, written warning, reduction of
business volume and termination of supplier
(see Figure 2).
During 2021, Ericsson continued deploy-
ment of the Ericsson Care Program to achieve
Target Zero of zero fatalities and lost workday
incidents by 2025. Highlights of the Ericsson
Care program include;
– Launch of a Global Safety Leadership
Program to support cultural change.
– Performing diverse communication
and engagement activities to increase
awareness.
– Introducing a new tool to verify and follow-
up supplier compliance with respect to
Company’s requirements.
– Conducting focused training for targeted
audience to increase knowledge.
2) Red card and yellow card indicate the severity of the consequence
issued to a supplier after a violation of Ericsson’s Health and
Safety Standards. Red cards are used for serious breaches and
carry significant consequences
Figure 1: Supplier consequence management in 2021
Figure 2: Consequences applied to suppliers
Total
82
165
Working at heights
24 18
Lack of Risk assessment/Safe work conditions
22
74
Incorrect use of PPE (Pers. Protect Equip)
20 29
Lack of required and certified competence
11
18
Insufficient incident and resource management
263
Lack of adherence to driving/vehicle standards
2
0
50
100
150
200
250
150
120
90
60
30
0
97
40
44
28
10
3
4
1
20
Increase of
quality inspections
and audit
Financial
penalty
Reduction of
business volume
Supplier
terminated
Safe
working
Warning
notification issued
Red cards
Yellow cards
Red cards
Yellow cards
Sustainability and Corporate Responsibility report 2021 26
Responsible business
Responsible management of suppliers
Managing the social, ethical, and environmen-
tal impacts of Ericsson’s supplier base is part of
the Company’s value chain approach and aims
to meet increasing regulation and stakeholder
expectations. Ericsson is working with its
suppliers to create sustainable business value
through integrating responsible business
values in sourcing processes, tools and culture.
The Code of Conduct for Business Partners
Ericsson’s Code of Conduct for Business
Partners (CoC) is the basis for Ericsson’s
Responsible Sourcing program and is part of its
standard supplier contract. It covers four main
areas: environmental management, human
and labor rights, occupational health and
safety and business ethics and anti-corruption.
Suppliers not adhering to the CoC may be
subject to termination of their contracts.
Ericsson offers free online training on the
Company website for business partners that
cover the CoC in general as well as additional
focus training on anti-corruption, conflict
minerals, occupational health and safety and
climate action.
Risk assessments, audits and compliance
Every year Ericsson performs a risk assess-
ment of its suppliers as input to planning due
diligence activities for responsible sourcing.
The assessment focuses on the largest suppli-
ers that together make up 90% of Ericsson’s
purchasing spend. This represents approxi-
mately 2,000 suppliers out of Ericsson’s close
to 18,000 tier one suppliers. Among the 2,000,
Ericsson assesses risk based on three criteria
– country, time since last audit and type of
service or product provided. In 2021, 99% of
Ericsson’s suppliers were assessed through this
approach.
Ericsson audits its suppliers both using
internal auditors and a third-party auditing
firm to assess its suppliers’ compliance with the
CoC requirements. In 2021, 124 audits were
performed on suppliers located in 40 countries.
The choice of suppliers to audit is based on
the risk assessment along with other business
considerations. Ericsson views each audit as
an opportunity for improvement, and suppli-
ers are to address identified findings. During
2021, most of the major deviations concerned
working hours and wages and benefits while
most of the minor deviations were in hazards
and health and safety. Ericsson is a member
of the Responsible Business Alliance (RBA)
and is working to have its suppliers join the
organization to make further use of the RBA
audit program and other RBA assets.
Due to the pandemic, audits have been
delayed or postponed. Where on-site audits
were not possible due to travel restrictions,
Ericsson performed remote initial audits and
then arranged for on-site audits as a follow up.
The remote procedure has been satisfactory
and will continue. However, they are not fully
able to replace on-site audits, which are more
comprehensive and are planned to be re-started
when travel returns to normal.
Business ethics and anti-corruption
In 2021, Ericsson completed the global roll
out of an enhanced Third Party Management
(TPM) Program, which was supported by
a robust training and communications initia-
tive. The enhanced program is designed to
secure effective identification and manage-
ment of potential bribery and corruption risks
in the supply chain and in sales. The Program
introduced new or improved procedures and
guidance documents clearly defining the
process and roles of employees and functions
to ensure a comprehensive and consistent
approach to third party due diligence. The
enhanced TPM Program also features new
tools to assist in risk-ranking, tracking, pro-
cessing, monitoring and documenting third
party relationships. In addition, the Company
expanded its team of specialists conducting
due diligence and assessing third party risks.
Under the enhanced TPM Program,
Ericsson continues to automatically screen its
suppliers on a regular basis. The screening
covers corruption, regulatory, financial,
environmental, social and labor issues through
the review of adverse media coverage and
watchlists that include politically exposed
persons, sanction lists and state ownership. A
dedicated team assesses the alerts identified in
the screening process. The Company continues
to improve the TPM Program based on stake-
holder feedback, risk assessments and testing.
Environmental management
Ericsson has environmental requirements for
its business partners that cover manufacturing,
transport, energy use, greenhouse gas emissions,
chemicals in manufacturing, product chemical
content and water and waste management.
The most significant environmental aspects
identified in the supply chain are associated
with suppliers’ carbon footprint and the
generation of waste.
Ericsson has a Supplier Climate Action
program aimed at having around 350 high
emitting and strategic suppliers, together
covering 90% of Ericsson’s supply chain
emissions, set their own 1.5°C-aligned climate
targets. Suppliers are engaged through semi-
nars, one-on-one meetings and in writing. By
the end of 2021, 121 out of the suppliers in
Risk assessment and audit planning
Thousands
of suppliers
Identification of
critical ones
Risk assessment
• Top 90% spend
• Geographical risk
• Type of service or product
• Audited within past 2 years
• Business considerations
31
Planned yearly or according
to a rolling schedule
Supplier risk
assessment
Planning
Auditing
Follow-upp
and improvement
Performed by
Ericsson
Performed by
3rd party auditor
Performed by
3rd party
auditor and Ericsson
Sustainability and Corporate Responsibility report 2021 Responsible business
27
between Ericsson and smelters or refiners
of minerals, and Ericsson does not normally
have a direct purchasing relationship with
them. As a member of the Responsible Mineral
Initiative, the Company has supported the
system for certification of smelters and refiners
(RMAP). To increase transparency, Ericsson
is reporting reasonable country of origin
of conflict minerals in its Conflict Minerals
Report prepared under the US Dodd-Frank Act
available on the Company website.
scope, have committed to setting such targets,
see page 13. Ericsson is one of the founders
of the 1.5°C Supply Chain Leaders to drive
climate action in global supply chains. Within
this initiative, the Company was part of the
creation of the Supplier Engagement Guide,
released at COP26 in Glasgow, which aims
to help businesses take 1.5°C aligned climate
action in their supply chain.
Human and labor rights
The most relevant risks identified in the area
of human and labor rights, include forced labor,
living wage, working hours, non-discrimina-
tion, occupational health and safety (OHS),
conflict-related impacts such as sourcing of
conflict materials, freedom of association and
the right to collective bargaining. During the
year an assessment of all supplier categories
was conducted to better understand the
level of forced labor risk for each respective
category, and if the risk is for direct suppliers
or sub-suppliers.
The main high-risk categories continue to
be within suppliers manufacturing, logistics,
site services and facility management, with
the understanding that there are several other
categories that may hold high risk of forced
labor. Due diligence activities for human and
labor rights are based on the risks identified
and assessments made.
Focus during 2021 has been on collabora-
tion and dialogue. Internal and external
seminars and workshops have been conducted
on the area of Worker Management Dialogue,
Code of Conduct and the impact on suppliers
coming from planning and forecasting a supply
demand. A workshop has been held with second
tier suppliers on the topic of human rights due
diligence and dialogs have been arranged
with peers, suppliers, customers, and NGOs
for sharing information and for collaboration.
Further due diligence activities for human and
labor rights are described in Ericsson’s Modern
Slavery and Human Trafficking Statement
available on the Company website.
Occupational health and safety
The Company believes that OHS incidents
are preventable. The suppliers that are most
exposed to OHS risks are field operators
within the Sourcing Site Services category.
To further strengthen Ericsson’s sourcing
process and ways of working OHS training
has been implemented as a mandatory step
during onboarding of new Site Services sup-
pliers. For current suppliers a new competence
program has been deployed both for supplier
management teams and employees.
The Company’s consequence management
program applies to Site Service suppliers and
aims at strengthening compliance and improv-
ing safety standards, as well as encouraging
and facilitating reporting of non-compliance.
In 2021 the most frequent findings and
violations regarding Site Service suppliers
were related to lack of risk assessment and
incorrect use of personal protective equipment.
More information on pages 24–25.
Raw materials sourcing due diligence
Ericsson’s approach to sourcing of minerals and
metals is in line with the OECD Due Diligence
Guidance for Responsible Supply Chains of
Minerals from Conflict-Affected and High-Risk
Areas (OECD Guidance). In addition to tin,
tantalum, tungsten and gold (3TGs), cobalt
has been added to the list of minerals for which
Ericsson requests information from suppliers.
There are often several tiers of suppliers
Distribution of non-conformities after follow-up, per audit area (%)
Anti-Corruption
Environmental management
Communicating requirements to sub-suppliers
Chemicals handling
System for incident follow-up, preventive and corrective action
Accident and incident prevention
Health and safety standards and hazards
Competence management
Under-aged labor, forced labor/modern slavery
Working hours, wages and benefits
Management dialogue, discrimination
Employment contracts, freedom of association
0
20
40
60
80
100
Critical
Warning
Sustainability and Corporate Responsibility report 2021
28
Consolidated sustainability notes
Consolidated sustainability notes
S1 About this report
Scope and boundaries
This Sustainability and Corporate Responsibility report ("the report") consti-
tutes Ericsson's statutory sustainability report and contains information about
targets, performance, governance, policies, risks, and opportunities relevant to
significant environmental, social, and corporate governance related aspects
and impacts of the Company's business. A description of Ericsson's business
model can be found on pages 4-10, and a description of financial and non-
financial risk factors on pages 99-112 in the Company's Financial Report,
which is also part of the Annual Report.
Unless otherwise stated, the information and data provided pertain to the
period January 1, 2021 to December 31, 2021. The report covers the Ericsson
Group, that is the Parent Company Telefonaktiebolaget LM Ericsson and its
subsidiaries.
Reporting principles and frameworks
The report has been prepared in accordance with the GRI Standards: Core
option. Ericsson has in the preparation of the report applied principles for
defining report content such as stakeholder inclusiveness, materiality, and
completeness, as well as reporting quality principles such as accuracy, balance,
clarity, comparability, reliability, and timeliness. The report has also been pre-
pared in accordance with the UN Guiding Principles on Business and Human
Rights reporting framework. Ericsson is a UN Global Compact signatory since
2000 and the report serves as the Company's annual Communication on
Progress. In addition, the report includes climate-related disclosures included
in the recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD) as well as relevant disclosures in applicable SASB stand-
ards. Ericsson is currently in the process of implementing disclosures of the
Stakeholder Capitalism Metrics developed and endorsed by the IBC and WEF.
As a supplement to the report, an ESG reporting reference index is published
on the ESG-related section of the investor relations pages on Ericsson's web-
site. This contains references to applied reporting frameworks and standards
and includes the GRI content index.
External assurance
The report has been subject to assurance procedures by Deloitte AB, in accord-
ance with ISAE 3000. The assurance statement can be found on page 37.
Related reporting
Ericsson publishes other annual statements and reports on its website such as
the Company's annual CDP Climate Change response, a Modern Slavery and
Human Trafficking Statement, and a Conflict Minerals Report.
S2 Stakeholder engagement and materiality
During the past year Ericsson has engaged with its stakeholders through several channels and methods as presented below. In addition, Ericsson leverages its
social media outreach to extend the conversation and hear from the public.
Stakeholder group
Examples of sustainability-related engagements
Focus of engagement and topics raised
– Employee VOICE and S&CR surveys
– Training
– Volunteering and matching donations
– Ericsson On the Move (cultural transformation) workshops
– Business ethics and anti-corruption
– Health, safety, and well-being, including response to COVID-19 pandemic.
– Learning and development
– Climate action
Employees
Customers
Shareholders
Society
Suppliers
– Individual customer meetings and dialogues
– Customer ESG assessments
– Joint research and development
– Investor dialogues
– Analyst inquiries and meetings
– ESG surveys and rankings
– Responsible Business Alliance
– 1.5°C Supply Chain Leaders
– Supplier assessments and audits
– Supplier training, seminars, and workshops
Regulators and
international institutions
– Policy advocacy towards regulators
– Partnerships with:
UNICEF/UNHCR/UN World Food Programme
UN B-tech Project
World Health Organization
ITU/UNESCO Broadband Commission for Sustainable Development
Academia and business
Civil society, NGOs
and other
– Joint research and research funding
– Development of technology curriculum
– Participation in standardization bodies
– Membership of industry associations
– European CEO Alliance
Participation in/partnerships with:
– COP26
– World-Wide Fund for Nature
– Exponential Roadmap Initiative
– Global Networking initiative
– Alliance for Affordable Internet
– Business ethics and anti-corruption
– Portfolio energy performance and circularity
– Product security and privacy
– Role of industry and digitalization in society
– Industry-wide supply chain requirements
– Business ethics and anti-corruption
– Portfolio sustainability
– Transparent and comparable ESG reporting
– Corporate governance
– Business ethics and anti-corruption
– Health, safety, and well-being of workforce
– Labor rights and working conditions
– Environmental and climate requirements
– Conflict minerals and material traceability
– ICT impact on climate, environment, and human rights
– Digital inclusion and connectivity
– Humanitarian relief
– Radio waves and health
– Environmental impacts of ICT sector
– Enablement effect of IT in mitigating climate change
– Radio waves and health
– Climate action
– Privacy and freedom of expression
– Digital inclusion and education
Sustainability and Corporate Responsibility report 2021 Consolidated sustainability notes
29
Note S2, cont’d.
Ericsson’s stakeholder engagement model
Stakeholders' expectations,
requirements and concerns
– Employees
– Customers
– Shareholders
– Society
Engagement approach
Which issues
should we
engage with?
When should
the engage-
ment take
place?
How should
the engage-
ment take
place?
Analysis
Sustainability outcome
Situation analysis
and insights to
identify sustainability
related risks and
opportunities
– Strategy
– Targets
– Significant topics
– Reports
– Programs
Insights
2021 materiality analysis and results
The annual materiality analysis starts with a
review of the previous year’s analysis. To this, input
from stakeholder engagements, consultations with
internal experts and other sources of information
are incorporated. The universe of topics assessed
is based on frameworks such as GRI and SASB. In
2021 the review focused on the information needs
of investors and analysts. The results of Ericsson’s
annual employee Sustainability and Corporate
Responsibility survey were also included. This
year shows no material changes in the assessed
topics’ significance compared to 2020, however
new topics have been assessed and included in the
analysis. The topic of Diversity and Inclusion was
in 2021 expanded into the topic Human Capital,
covering talent attraction and retention, diversity
and inclusion, and learning and development,
and is identified as one of the most significant
topics for Ericsson. In addition, the topics Resource
Circularity and Corporate Citizenship were also
included in the 2021 analysis. The Sustainability
and Corporate Responsibility Report includes both
qualitative and quantitative information about the
identified significant topics.
Assess and engage
Address and engage
A Business ethics and anti-corruption
B Climate action – Network energy performance
h
g
H
i
i
m
u
d
e
M
l
s
r
e
d
o
h
e
k
a
t
s
o
t
e
c
n
a
v
e
l
e
R
F
L
M
N
w
o
L
Assess
Low
A
B
C
D
E
K
C Human capital1)
D Health, safety & wellbeing
E Security and privacy
F Radio waves & health
G Climate action – own activities
H Human rights
I Resource circularity
J Responsible management of suppliers
K Digital inclusion
L Biodiversity
M Non-GHG emissions to air
N Water2)
O Waste3)
P Corporate Citizenship
1) Human capital covers several people-related aspects
such as talent attraction and retention, diversity &
i nclusion and learning and development.
2) Water in this context refers to process and sanitary
water use at Ericsson’s own facilities.
3) Waste in this context refers to waste generated in
Ericsson’s day-to-day operations. Waste in the form
of end-of-life products is included under the topic
“Resource circularity”.
Address
High
G
I
O
H
J
P
Medium
Impact
Topics considered significant and covered in this report
Topics not considered significant and therefore not covered in this report
Results inform strategy and disclosures
Ericsson’s approach to each topic is based on the
outcome of the materiality assessment. Topics with
high impact and high importance to stakeholders
are addressed through comprehensive manage-
ment, including setting of performance targets,
paired with transparent disclosures and stake-
holder engagement. Topics where the importance
to stakeholders is high but the impact is assessed
as low are continuously re-assessed through
engagement with stakeholders. Topics where
impact is high but importance to stakeholders is
low are addressed and proactively managed, and
disclosures are made when relevant. Finally, topics
with low impact and low importance to stake-
holders are monitored and regularly re-assessed to
capture any changes in their relevance to Ericsson.
30
Consolidated sustainability notes
S3 Human Capital
Employees and external workforce
(No.)
Executive Team
Executive population 1)
Line managers
Technical employees 2)
Non-technical employees
Total
2021
15
163
7,241
75,859
18,044
2020
15
170
7,121
75,952
17,566
101,322
100,824
2019
15
165
6,895
74,776
17,626
99,477
External workforce 3)
12,308
11 398
12 105
Share of women per employee category
(%)
Executive team
Executive population 1)
Line managers
Technical employees 2)
Non-technical employees
All employees
Share of employees by age and employee category
(%)
Executive population 1)
<25
25–35
36–45
46–55
>55
Line managers
<25
25–35
36–45
46–55
>55
Technical employees 2)
<25
25–35
36–45
46–55
>55
Non–technical employees
<25
25–35
36–45
46–55
>55
2021
2020
2019
20
36
21
20
47
25
20
32
21
20
46
25
20
32
20
20
48
25
2021
2020
2019
0
1
18
58
23
0
7
40
41
12
3
35
34
20
8
2
26
33
26
12
0
2
22
54
23
0
8
42
40
10
3
37
33
20
7
2
27
33
26
11
0
2
26
55
17
0
9
42
40
9
4
39
31
19
7
2
29
32
26
11
Share of employees by nationality and employee category 4)
(%)
Indian
Chinese
Swedish
American
Romanian
Other
All employees
Line
managers
Technical
employees 2)
24
12
10
6
4
44
20
16
10
6
3
45
29
12
10
5
3
42
1) Employees reporting to members of the Executive Team.
2) Non managerial employees in job roles within the fields of science, technology, engineering and
mathematics (STEM).
3) Includes consultants, contractors, interns and other workforce not directly employed by Ericsson
4) Nationalities shown are the top five nationalities among all employees.
Turnover
(%)
Turnover rate
Leavers by gender
Men
Women
Leavers by age
<25
25–35
36–45
46–55
>55
Hiring
(%)
Hiring rate
New joiners by gender
Men
Women
New joiners by age
<25
25–35
36–45
46–55
>55
Positions filled by internal candidates 1)
Ratio of compensation of women to men 2)
(%)
Base salary
Total compensation
CEO to average employee compensation
(ratio)
Base salary – Sweden 3)
Base salary – Global 3)
Total compensation – Sweden 4)
Total compensation – Global 4)
2021
12
2020
8
2019
11
76
24
6
49
24
13
8
75
25
7
43
25
15
9
76
24
7
47
25
14
7
2021
12
2020
9
2019
15
70
30
19
54
19
6
2
40
74
26
14
51
23
10
2
41
70
30
17
49
19
11
4
32
2021
2020
2019
86
82
83
80
80
77
2021
2020
2019
25
38
67
97
25
38
63
93
23
34
58
82
1) Derived by dividing the number of positions filled in a year by people already employed by Ericsson by
the total number of positions filled in the same year
2) The figures presented reflect the unadjusted average pay ratio of women to men for Ericsson’s total
global workforce. This metric does not take into consideration other factors affecting compensation
levels, such as location, job role and responsibilities, experience, age, education level etc. For timing
and practical reasons, the calculations are based on compensation levels as of October 1st of each
respective year and covers full time annual base salary, short term variable pay / sales incentive plan
(STV/SIP) target entitlement, and long-term variable pay (LTV) grants given in the current year. Data
excludes employees who are in exit programs. In addition, the figure for Total Compensation excludes
Field Service Organisation (FSO) employees (approximately 7,000 individuals) since local variances in
STV plans and reporting for FSOs presents difficulties to making relevant comparisons.
3) For comparison reasons, Base Salary in this context excludes holiday pay in Sweden (including for the
CEO) and therefore differs from the data presented in the table “Total Remuneration to the President
and CEO and Executive Vice Presidents ”, on page 5 in the 2021 Remuneration report, which includes
holiday pay.
4) For comparison reasons, Total Compensation in this context is based on STV/SIP target level
entitle ment and LTV granted in the specified year (including for the CEO) and therefore differs from
the information presented in the ”Total Remuneration to the President and CEO and Executive Vice
Presidents”, on page 5 in the 2021 Remuneration report, which shows actual earned STV and vested LTV.
Sustainability and Corporate Responsibility report 2021 Note S3, cont’d.
Learning and development
(hrs.)
Average recorded training hours per person
Men
Women
All employees
(Thousands )
Completed learning opportunities 1)
Men
Women
Total
(SEK)
2021
2020
2019
(ton)
19.7
17.0
19.0
25.9
22.0
24.9
2,321
823
3,144
1,428
493
1,921
27.0
23.7
26.2
392
130
522
Average spend on L&D per employee
3,800
3,600
5,100
Performance evaluations
(%)
Employees receiving evaluations 2)
Employee satisfaction
(eSAT score) 3)
Men
Women
All employees
2021
91
2020
95
2019
85
2021
2020
2019
81
81
81
83
83
83
78
77
78
1) Completed learning opportunities refer to learning contents (courses, articles, webinars etc.)
consumed and completed through Ericsson’s learning platform Degreed. Includes both external and
Ericsson-internal contents.
2) Performance evaluations recorded as of January 31st the following year. Field service personnel not
included.
3) Measuring scale: 0–100 with 100 being the most favorable score.
Basis for consolidation
Employee-related data presented in note S3 covers employees of the Parent
Company and all consolidated subsidiaries in which the Parent Company has a
controlling interest. It does not include data related to employees of associated
companies and joint ventures. Workforce composition related metrics refer to
head count at year-end. Any other limitations in scope are specified in connec-
tion to each respective metric.
Collective bargaining
Ericsson’s Code of Business Ethics stipulates that all employees shall be free
to form and to join, or not to join, trade unions or similar organizations and to
bargain collectively. The coverage varies from country to country. In Sweden,
all employees except for Group Management are covered by collective agree-
ments. The Company estimates that approximately 30% of all employees
globally are covered by collective bargaining agreements.
Consolidated sustainability notes
31
S4 Waste, product take-back and water
Waste generated at facilities by disposal method 1) 2)
Recycling
Energy recovery
Landfill
Hazardous waste
Total
Product take-back (incl. batteries) by disposal method
%
Re-use
Recycling
Energy recovery
Landfill
Total 3)
2021
4,573
1,429
740
35
6,777
2020
3,370
1,465
2,065
16
2019
4,900
2,300
3,800
13
6,916
11,013
2021
2020
2019
0
96
3
0
1
94
4
1
2
91
6
1
100
100
100
Weight of products taken back (ton)
8,849
10,204
8,403
Water consumption 4)
(Mm3)
All facilities 2)
2021
1.2
2020
1.5
2019
1.5
1) Volumes of waste from production sites are based on reported figures. Waste from other facilities are
estimates based on extrapolations of waste generated at the Company's headquarters.
2) Facilities includes offices, production sites, warehouses, data centers and labs
3) Figures rounded to nearest whole percentage wherefore individual values for certain years do not sum
up to 100 percent.
4) Reported water consumption covering approximately 40% of headcount is based on measured
volumes with the remainder being estimated based on extrapolations of measured volumes.
S5 Energy & transportation
Energy consumption
(GWh)
Facilities 1)
Electricity & cooling – renewable
Electricity & cooling – non-renewable
District heating
Local heating and back-up electricity
Fleet vehicles 2)
Total
Energy intensity
(GWh/net sales in SEK billion)
Facility energy usage
Product transportation, by mode 3)
(Mtonnekm)
Air
Road
Sea
Rail
Total
2021
2020
2019
391
189
26
25
122
753
390
182
23
33
127
755
333
255
26
50
146
810
2021
2.7
2020
2.7
2019
2.9
2021
2020
2019
154
180
152
3
489
117
163
261
7
548
175
245
370
10
800
1) Measured energy consumption at facilities (offices, production sites, warehouses, data centers and
labs ) represents approximately 93% of reported energy consumption. For locations were measured
data is not available, extrapolation of consumption at similar locations have been used to estimate
the consumption.
2) Energy consumption is estimated based on number of vehicles in fleet.
3) Data for 2021 is primarily based on information about transported derived from Ericsson’s ERP sys-
tem, while past years’ data is primarily based on reported information from service logistic providers.
Transported distances have been estimated based on linear routes between locations. For a smaller
share (approximately 12%) of distances transported by truck and some additional air transport, data
is derived from purchase orders using a spend-based method.
32
Consolidated sustainability notes
S6 GHG and other emissions
Scope 1 - direct GHG emissions
(kiloton)
Facilities
Fleet vehicles
Total
Scope 2 - indirect GHG emissions
(kiloton)
Market-based
Location-based
Scope 3 - other indirect GHG emissions
(kiloton)
Upstream
Purchased goods & services
Capital Goods
Fuel- and energy-related activities 1)
Upstream transportation
Business travel 2)
Employee commuting (incl. teleworking)
Downstream
Downstream transportation 2)
Use of sold products 3)
Total
Emissions intensity
(kiloton/net sales SEK billion)
Scope 1
Scope 2 (market based)
Total
Other emissions to air
(kiloton)
NOx
SOx
Particle matters
2021
2020
2019
6
32
38
7
33
40
11
38
49
2021
58
139
2020
74
156
2019
124
168
2021
2020
2019
2,313
42
49
79
12
23
2,272
43
52
79
17
30
2,342
52
82
88
114
60
119
32,000
112
34,000
139
33,000
34,637
36,605
35,877
2021
0.16
0.25
0.41
2021
0.65
0.69
0.08
2020
0.17
0.32
0.49
2020
0.67
0.77
0.08
2019
0.22
0.55
0.77
2019
1.23
1.19
0.14
1) Emissions from fuel- and energy-related activities not included in Scope 1 or 2, typically from the
manufacturing and transportation of fuels, and grid transmission and distribution losses.
2) Figures reported do not include the so-called high-altitude effect of emissions from air travel. The
high-altitude effect is estimated to correspond to emissions of 109 ktonne CO2e in 2021.
3) Underlying assumptions and input data used in the calculation of emissions in this category have
been revised in 2021. In particular, emission factors of electricity grids have been updated and are
now weighted based on actual sales volumes in the markets where Ericsson operates, as opposed
to global averages used in previous years. In addition, the energy consumed by products sold is
now based on actual energy consumption retrieved from field data, rather than on estimates based
on manufacturing test data. These changes combined reduce the emissions from use of sold by
approximately 20%. Had the model assumptions used in previous years been applied for the 2021
reporting period, the result would be emissions of around 40,000 kiloton from use of sold products.
GHG accounting methodology
Ericsson reports GHG emissions according to the GHG protocol using financial
control as the basis for its GHG accounting. GHG Emissions are calculated
and reported as carbon dioxide equivalents (CO2e) and includes the following
gases: CO2, CH4, N2O, HFCs and PFCs. For practical and timing reasons energy
and emission data for facilities and product transport is collected and reported
for the period December–November.
Scope 1 and 2: Underlying energy consumption at facilities is partly estimated,
see note S5. Emissions from fleet vehicles are calculated partially based on
estimated distances driven.
Scope 3: Emissions in categories Purchased goods and services, Capital goods,
Fuel- and energy-related activities, Upstream transportation, and Use of sold
products are estimated based on Ericsson's LCA of the carbon footprint of its
products. The assumed average useful life of products sold is ten years and
emission factors relevant to the use phase have been estimated using the
current energy mix of the girds in markets served. The majority of emissions in
category Downstream transportation are calculated based on reported data
of transported products and distances, with a smaller part being extrapolated
based on reported figures, and include all transport sourced by Ericsson. The
majority of emissions in category Business travel are based on data reported
by travel agencies, with a smaller part being estimated based on travel spend.
Emissions in category Employee commuting are estimated based on a survey of
employees' commuting habits with data for 2021 and 2020 including estimated
emissions from employees teleworking. Emissions in remaining Scope 3 cat-
egories have been assessed as not material and are therefore not reported on.
Emission factors used in consolidation
Energy type
Emission factor
Source/Comments
Electricity and cooling
0.012–0.928 kg/kWh.
IEA, US Energy Information Administration
(EIA), Association of Issuing Bodies (AIB),
supplier specific data where available.
Green Electricity
0.000 kg/kWh
District heating, Sweden
0.006 kg/kWh
Supplier specific data
District heating, other
0.004–0.13 kg/kWh
Country averages
Local heating/natural gas 0.20 kg/kwH
Generator fuel/diesel
0.26 kg/kWh
DEFRA
DEFRA
Air travel
Car travel
0.13 kg/pkm
Airline data
0.11–0.4 kg/pkm
Country averages based on fleet composition
Air transport
0.65 kg/tonnekm
Road transport
0.09 kg/tonnekm
Sea transport
Rail transport
0.02 kg/tonnekm
0.03 kg/tonnekm
As provided by logistic service providers
Sustainability and Corporate Responsibility report 2021
Consolidated sustainability notes
33
S7 Climate-related scenario analysis, risks, and opportunities
As part of the Company’s overall climate strategy as well as its commitment to align to the reporting recommendations of the Task force on Climate-
related Financial Disclosures (TCFD), Ericsson has analyzed potential climate-related risks and opportunities using two different climate scenarios,
"Net Zero 2050" and "Current Policies". The main conclusions from this analysis are presented below, together with an overview of the assessment
methodology. For further details, please refer to Ericsson’s response to the CDP Climate Change questionnaire, available on the Company's website.
Scenarios used
Net Zero 2050
Assumed emissions trajectory
• Ambitious mitigating actions introduced imminently
• Net-zero global CO2 emissions around 2050
• 50% chance of limiting global warming to below 1,5 ˚C by end of century
• Relatively low physical risks but high transitional impacts
Current Policies
• Mitigating actions limited to currently adopted or announced policies
• Emissions grow until 2080
• Global warming of around 3 ˚C by end of century
• High physical risks but lower transitional impacts
60
30
)
t
G
(
s
n
o
i
s
s
i
m
e
G
H
G
l
a
u
n
n
a
l
a
b
o
G
l
0
2020
2030
2040
2050
Current Policies
Net Zero 2050
Assessment approach
Risk and Opportunity Heat Map
i
h
g
H
y
r
e
V
h
g
H
i
i
m
u
d
e
M
w
o
L
y
t
i
l
i
b
a
b
o
r
P
Low
Medium
High
Very High
Impact
The illustration shows an example of the heatmaps used
in the scenario analysis.
As a starting point of the analysis, more than 30 potential climate related risks and opportunities were
considered. The initial items on the longlist were identified through consultations with internal subject
matter experts covering several company functions, and through external benchmarking. The probability
and impact of all items were analyzed qualitatively through the usage of heatmaps. This was followed by
a more granular analysis of a shortlist of risks and opportunities considered to be of highest relevance to
Ericsson.
The Company considered risks and opportunities upstream and downstream in the value chain, as well
as in its own operations. Physical risks were mainly assessed using the assumptions under the Current
Policies Scenario, whereas transitional factors were primarily looked at using the Net Zero 2050 scenario.
Both scenarios are published by the Network of Central Banks and Supervisors for Greening the Financial
System (NGFS). Regarding time horizons1), the quantitative analysis of opportunities focused on the
period up to 2025, and the quantitative analysis of risks on the period between 2025 and 2030. The
more long-term impacts of risks and opportunities, stretching beyond 2030, were primarily assessed in a
qualitative fashion. Under the Current Polices scenario, the impacts of the physical risks described below
are expected to become more severe after 2030.
1) For the purpose of this analysis Ericsson defined short-, medium-, and long-term time horizons as up to 2025, 2025–2030, and beyond
2030 respectively.
Most relevant risks and opportunities under selected scenarios
Transition
Expansion of energy efficient network solutions
Under the Net Zero 2050 scenario, energy prices are expected to rise
considerably. This will drive further efforts by telecom operators to increase
energy efficiency in mobile communication networks. At the same time tele-
com operators are striving to reduce their own emissions, with many setting
net-zero targets across value chains. The combination of these two factors
creates opportunities for Ericsson to expand its offering of network energy
efficiency solutions. Read more about Ericsson’s strategy and targets within
this area on page 12.
Physical
Solutions enabling emissions reductions in other sectors
As other more emission-intense sectors – such as power, transport, and
manufacturing rapidly increase efforts to decarbonize under the Net Zero
2050 scenario, significant investments will be made to achieve these
decarbonization ambitions. These investments, such as deployment of smart
grids and private networks, all depend on ICT solutions, which provides
significant opportunity for Ericsson to expand its connectivity offering to
these other sectors.
Increased costs due to carbon emissions pricing
The price of carbon emissions is expected to
increase substantially in the Net Zero 2050
scenario leading to increased costs for Ericsson.
The impact would be most material upstream in
the Company’s value chain, assuming emissions
stay the same and all costs are passed through
to Ericsson from affected suppliers. Read about
how Ericsson is working to decarbonize both own
operations and its supply chain on pages 10–11
and 13–14.
Input shortages due to water stress
Water is a key input upstream in Ericsson’s value
chain, as it is used when extracting minerals used
in hardware and in semiconductor manufacturing.
Under the Current Policies scenario, several regions
that are home to Ericsson suppliers, including
manufacturers of semiconductors in Southeast
Asia, are at risk of high water stress, which could
cause shortages of manufacturing inputs for
Ericsson.
Disruptions caused by severe weather events
Under the Current Policies scenario, the frequency
and intensity of severe weather events, as well as
coastal and riverine flooding, will increase. This
will lead to heightened risks for long-term business
interruptions as well as damage to stock and fixed
assets in Ericsson’s supply chain, at outsourced
manufacturing sites and at Ericsson’s own sites,
such as manufacturing facilities and IT centers.
Ericsson buys insurance policies for its own opera-
tions, covering both damage to inventory and fixed
assets, as well as potential business interruptions.
34
Consolidated sustainability notes
S8 Reporting according to article 8 of the EU Taxonomy Regulation
Key performance indicators
Key performance indicators
Turnover
Capital expenditures
Operational expenditures
1) Rounded to the nearest whole percentage
Total 2021
(SEK million)
Share taxonomy
eligible (%) 1)
Share taxonomy
non-eligible (%) 1)
232,314
5,621
33,967
0
0
0
100
100
100
Contextual information
Ericsson’s research1) shows that the adoption of
ICT solutions has the potential to enable signifi-
cant emissions reductions in other sectors of the
economy, such as power, transport, manufacturing,
and buildings.
It is also important that the ICT sector itself
continues to work towards higher energy efficiency
to contribute to the progress against internationally
agreed GHG emissions reduction targets. Ericsson
has targets in place to increase energy efficiency of
its portfolio, more information on this can be found
on pages 10 and 12.
Opex
Total Opex corresponds to non-capitalized
research and development costs, building renova-
tion costs, short-term leases, maintenance, and
repair costs and other indirect costs for the day-
to-day servicing of assets of property, plant, and
equipment.
Share of eligible Turnover, Capex and Opex
Turnover in accordance with the above definition
and that is associated with eligible activities (see
below) constitute the basis for calculating the share
of eligible turnover.
Both these aspects are recognized in the
Capex and Opex in accordance with the above
definitions and that is associated with eligible
activities (see below) constitute the basis for
calculating the share of eligible Capex and Opex.
Moreover, individual eligible Capex and Opex (see
further below) can also be added to the share of
eligible Capex and Opex.
Eligible economic activities
Identifying economic activities relevant for the
Company has required interpretations of the
Taxonomy as well as the Delegated Regulation.
Ericsson’s interpretation is that for an economic
activity, as defined in the Taxonomy, to be consid-
ered eligible, the activity must:
– be, or be aimed at, generating external turnover,
– meet the description of an activity in Annex I or
II of the Delegated Regulation, and
– have practically applicable technical screening
criteria associated with it.
Based on this interpretation, the activities stated
below are ones that have been identified as rele-
vant for Ericsson. However, there still remains some
uncertainty around how the Taxonomy should be
applied, and Ericsson expects interpretations, as
well as reporting practices, to evolve over time.
Delegated Regulation (EU) 2021/2139 on Climate
Change Mitigation and Adaptation Activities (“the
Delegated Regulation”) but technical screening
criteria for all relevant activities have not yet been
developed. The European Commission states
that it may consider developing relevant technical
screening criteria in the future. However, at present,
the vast majority of Ericsson’s commercial offering
to its customers is associated with economic activi-
ties not currently covered by the EU Taxonomy
Regulation (“the Taxonomy”).
Accounting policies
For the purpose of reporting according to article 8
of the Taxonomy, turnover, capital expenditures
(“Capex”) and operational expenditures (“Opex”)
are defined as follows. Note that these definitions
deviates from how Capex and Opex are defined in
Ericsson’s financial reporting.
Turnover
Total turnover corresponds to Net sales in the
consolidated income statement in the Financial
Report.
Capex
Total Capex corresponds to additions, including
capitalized research and development costs, to
balance sheet items property, plant and equipment,
intangible assets, before any remeasurement,
depreciation, amortization or impairment and
excluding any changes in fair value, as specified in
note C1 and C2 to the consolidated balance sheet,
complemented by additions/changes in IFRS16
classified right of use assets as specified in note C3
to the consolidated balance sheet.
1) Malmodin, Jens & Bergmark, Pernilla. (2015). Exploring
the effect of ICT solutions on GHG emissions in 2030.
10.2991/ict4s-env-15.2015.5.
Data-driven solutions for GHG emissions
reductions
(Annex I, 8.2)
Launched in 2020 and part of Business Area
Managed Services, the Energy Infrastructure
Operations is an AI-powered and data driven
operations solution, focused on managing energy
assets efficiently through intelligent site measure-
ments and control, enabling telecom operators to
reduce energy consumption, and consequently
energy related GHG emissions. Turnover, Opex
and Capex associated with this activity has been
included as taxonomy eligible in the KPIs presented
above. Turnover derived from this activity is based
on an analysis of customer contracts where the
delivery stated matches the activity in Annex I to
the Delegated Regulation.
Computer programming and related activities
(Annex II, 8.2)
Within all of Ericsson’s four business areas,
software development take place as part of the
Company’s commercial offerings to its customers.
In the case Ericsson incurs expenses associated
with making this activity more resilient against
climate change, such expenditures are accounted
for as either eligible Capex or Opex. However,
related turnover is not included in the share of
eligible turnover as this activity is not classified as
an enabling activity, as defined in the Taxonomy.
Procurement of products and services from
Taxonomy-aligned suppliers (individually
eligible Capex/Opex)
It is permitted to include as eligible Capex and
Opex other expenditures related to procurement
of products and services related to other economic
activities than the ones stated above, if these
contribute to emissions reductions for the reporting
entity, and if the economic activity of the supplier in
question is Taxonomy eligible. However, to account
for such expenditures as either eligible Capex
or Opex, the reporting entity must first assess to
which extent its suppliers' activities are Taxonomy
eligible. As 2021 is the first year the Taxonomy is in
effect, such an assessment has not been possible
to perform.
Sustainability and Corporate Responsibility report 2021
Consolidated sustainability notes
35
S9 Compliance and business ethics
Compliance training and awareness 1)
(% acknowledgement rate / attendance)
Code of Business Ethics acknowledgement
Mandatory ABC training – total workforce
Enhanced ABC training – people in highly exposed roles
Ethics training for leaders
S10 Human rights due diligence of sales
opportunities
Cases reviewed in the sensitive business process, by outcome
(No.)
Approved
Approved with conditions
Dismissed
Total
2021
2020
2019
286
432
4
722
321
480
27
828
262
358
31
651
2021
99
99
82
70
Reported compliance concerns
(No.)
Reported cases
Substantiated cases
Reported cases by category
(%)
Fraud, corruption and regulatory breach
Security 2)
Operations
Human resources
Conflicts of interest
Sustainability
Other 3)
Total 4)
2021
1,059
237
2020
933
281
2019
538
140
2021
2020
2019
20
8
13
35
8
0
17
17
5
15
46
6
0
11
35
6
12
24
9
0
15
100
100
100
1) All employees and external workforce were required to digitally confirm having read and understood
the revised and up-dated Code of Business Ethics (CoBE) launched in 2021. Ericsson's total work-
force was also required to attend mandatory anti-bribery and -corruption (ABC) training. In addition,
enhanced ABC training targeting approximately 11,000 line managers and employees in roles with
high ethics and compliance exposure, as well as ethics training for leaders targeting approximately
2,000 senior executives, including the executive team and middle management, were also held. See
more information on page 19. Ericsson’s compliance training and awareness program has under-
gone a significant transformation from recent years wherefore relevant comparative figures are not
available. The scope of reporting is limited to the active workforce, meaning people on long-term leave
or in exit programs are excluded from the statistics.
2) The category ”Security” includes security-related cases that have been reported to the Allegation
Management Office.
3) The category ”Other” includes allegations reported to the Allegation Management Office, which
are assessed as not constituting compliance concerns, such as product quality issues, employees
t esting the Compliance Line, or comments of a general nature. To the extent reported items relate to
non-CoBE topics, they are referred, where possible, to the relevant Group Function or local unit for
attention.
4) Figures rounded to nearest whole percentage wherefore individual values for certain years do not sum
up to 100 percent
Corruption risk assessments
Following a company-wide corruption risk assessment, a process for more
in-depth assessments in different market areas and units within Ericsson,
was established in 2019 and further developed in 2020 and 2021. During this
period, a number of focused anti-bribery and -corruption risk assessments have
been carried out, covering operations in a significant number of countries.
– 5 finalized and 1 ongoing assessment in Market Area Middle East and Africa
– 4 finalized and 1 ongoing assessment in Market Area Europe and Latin
America.
– 3 finalized and 1 ongoing assessment in Market Area South East Asia,
Oceania and India.
– 2 finalized assessments in Market Area North East Asia.
– 1 finalized assessment in Market Area North America.
– 2 finalized assessment outside of the market area dimension.
36
Consolidated sustainability notes
S11 Security and privacy
Security and privacy incidents reported 1) 2)
(No.)
Critical
Major
Medium
Minor
Total
2021
0
11
408
2,044
2,463
2020
1
25
473
2,034
2,533
2019
3
30
1,233
2,574
3,840
1) Cancelled and unsubstantiated incidents reported are not included.
2) Severity level is determined based on the following criteria:
S13 Responsible sourcing
Supplier risk assessments 1)
(%)
Suppliers risk assessed
Supplier audits
(No.)
Code of Conduct for Business Partners audits
Contract Compliance audits
2021
99
2020
99
2019
98
2021
124
24
2020
83
23
2019
160
35
Critical: Very high impact to the Company, its assets or its customers. Several individuals affected.
Major: High impact to the Company, its assets or its customers Several individuals affected.
Medium: Moderate impact to the Company, its assets or its customers.
Minor: No or very low impact to Ericsson, its assets or its customers.
Suppliers with 1.5°C-aligned climate targets
(No.)
Suppliers with aligned targets 2)
2021
121
2020
35
2019
–
S12 Occupational health and safety
Fatalities
(No.)
Ericsson employees
Supply chain and public
Total
Major incidents 1)
(No.)
Ericsson employees
Supply chain and public
Total
Lost workday incidents 2)
(No.)
Ericsson employees
Supply chain and public
Total
Employee fatality and lost workday incident rates
(per 100 FTEs) 3)
Fatality rate
Lost workday incident rate
2021
2020
2019
77
68
145
90
53
143
180
87
267
2021
0,001
0,074
2020
2019
–
–
–
–
1) Incidents resulting in three or more lost workdays.
2) Incidents resulting in one or more lost workdays. Includes the major incidents reported above.
3) Fatality rate and lost workday incident rate indicates the rate of fatalities/ lost workday incidents
occurring in a year per 100 full time employees (FTEs), using 200,000 hours as the standardized aver-
age number of hours worked by 100 FTEs in one year. Total hours worked is estimated based on
standard annual working hours for active employees and sums to 207,4 million hours for 2021. Due to
limitations in data availability, comparative figures for 2020 and 2019 cannot be disclosed.
2021
2020
2019
1
13
14
0
7
7
0
11
11
Responsible Minerals Assurance Process (RMAP) 3)
Minerals in
scope
Cobalt
Gold
Tantalum
Tin
Tungsten
Total
Identified
smelters in
supply chain
RMAP
participating
smelters
83
185
52
120
68
508
45
130
39
72
48
334
RMAP
conformant
smelters 4)
23
107
39
56
43
RMAP
conformant
smelters (%) 4)
51
82
100
78
90
268
80
2021
2020
2019
56
50
106
66
36
102
122
57
179
1) Risk assessment process described on page 26.
2) Out of approximately 350 strategic and high-emitting suppliers in scope, representing an estimated
90% of Ericsson's supply chain related emissions See more information on page 26–27. Target was
launched in 2020 wherefore comparative figures for 2019 are not available.
3) Based on supplier responses as of January 18, 2022.
4) Out of RMAP participating smelters.
S14 Direct economic impacts
Economic value generated and distributed
(SEK million)
Value generated
Revenues
Value distributed
Operating costs
Wages and benefits
Payment to providers of capital
Payments to governments
Community investments 1)
Economic value retained
2021
2020
2019
234,521
234,347
230,961
–127,253 – 121,462 – 127,097
–77,462 –74,645 – 72,663
–8,103
–8,496
– 7,221
–5,678 – 15,506
–6,226
–
–113
–
14,971
24,459
8,474
1) Includes donations and mandatory profit distributions made by Ericsson Group companies during
the period January 1–December 31, 2021. Sponsorships included are those with activity start date
January 1 to December 31, 2021, or multi-year contracts that were active during 2021. Sponsorships
related to recreation and sports have been excluded. Due to limitations in data availability, compara-
tive figures for 2020 and 2019 cannot be disclosed.
Sustainability and Corporate Responsibility report 2021
Auditor’s Assurance Report
37
Auditor’s Assurance Report
Auditor’s Assurance Report on Ericsson’s Sustainability and Corporate Responsibility Report and statement regarding
the Statutory Sustainability Report
To Telefonaktiebolaget LM Ericsson, corporate identity number
556016-0680
Introduction
We have been engaged by the Board of Directors and Executive
Management of Telefonaktiebolaget LM Ericsson (“Ericsson”) to
undertake an assurance engagement of the Ericsson Sustainability and
Corporate Responsibility Report (“the Sustainability Report”) for the
year 2021. The Company has defined the scope of the Sustainability
Report on page 28 in the Sustainability Report, which also constitutes
the Statutory Sustainability Report.
Responsibilities of the Board of Directors and the Executive
Management
The Board of Directors and the Executive Management are responsible
for the preparation of the Sustainability Report including the Statutory
Sustainability Report in accordance with the applicable criteria and the
Annual Accounts Act respectively. The criteria are defined on page 28 in
the Sustainability Report, and are part of the Sustainability Reporting
Guidelines published by GRI (Global Reporting Initiative), which are
applicable to the Sustainability Report, as well as the accounting and
calculation principles that the Company has developed. This responsi-
bility also includes the internal control relevant to the preparation of a
Sustainability Report that is free from material misstatements, whether
due to fraud or error.
Responsibilities of the auditor
Our responsibility is to express a conclusion on the Sustainability Report
based on the assurance procedures we have performed and to express
an opinion regarding the Statutory Sustainability Report. Our engage-
ment is limited to historical information presented and does therefore
not cover future-oriented information.
We conducted our engagement in accordance with ISAE 3000
Assurance Engagements Other than Audits or Reviews of Historical
Financial Information. The engagement includes limited assurance on
the complete Sustainability Report, and an audit of selected informa-
tion consisting of GHG emissions in Scope 1, 2, and Scope 3 categories
Business travel and Downstream transportation, disclosed on page 32
in the Sustainability Report.
The objective of an audit is to obtain reasonable assurance that
the information is free of material misstatements. A reasonable
assurance engagement includes examining, on a test basis, evidence
supporting the selected information in the Sustainability Report. A
limited assurance engagement consists of making inquiries, primarily
of persons responsible for the preparation of the Sustainability Report,
and applying analytical and other limited assurance procedures. Our
examination regarding the Statutory Sustainability Report has been
conducted in accordance with FAR’s accounting standard RevR 12
The auditor’s opinion regarding the Statutory Sustainability Report.
A limited assurance engagement and an examination according to
RevR 12 is different and substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and generally accepted auditing standards in Sweden.
The firm applies ISQC 1 (International Standard on Quality Control)
and accordingly maintains a comprehensive system of quality control
including documented policies and procedures regarding compliance
with ethical requirements, professional standards and applicable
legal and regulatory requirements. We are independent of Ericsson in
accordance with professional ethics for accountants in Sweden and
have otherwise fulfilled our ethical responsibilities in accordance with
these requirements.
The limited assurance procedures performed and the examination
according to RevR 12 do not enable us to obtain assurance that we
would become aware of all significant matters that might be identified
in an audit. The conclusion based on a limited assurance engagement
and an examination according to RevR 12 does not provide the same
level of assurance as a conclusion based on an audit. Since this engage-
ment is combined, our conclusions regarding the limited assurance, the
reasonable assurance and the examination according to RevR 12 will
be presented separately below.
Our procedures are based on the criteria defined by the Board of
Directors and the Executive Management as described above. We
consider these criteria suitable for the preparation of the Sustainability
Report.
We believe that the evidence we have obtained is sufficient and
appropriate to provide a basis for our conclusion below.
Conclusion
Based on the limited assurance procedures we have performed,
nothing has come to our attention that causes us to believe that
the Sustainability Report, is not prepared, in all material respects, in
accordance with the criteria defined by the Board of Directors and
Executive Management.
In our opinion, the selected information in the Sustainability Report
which has been subject to our reasonable assurance procedures has,
in all material respects, been prepared in accordance with the criteria
defined by the Board of Directors and Executive Management
A Statutory Sustainability Report has been prepared.
Stockholm 3 March 2022
Deloitte AB
Thomas Strömberg
Authorized Public Accountant
Lennart Nordqvist
Expert Member of FAR
38
Glossary
Glossary
Segments have been defined for financial reporting purposes based on the business areas.
See further information in Note B1, “Segment Information” in the Financial report.
2G
Second generation of mobile systems (the first
digital generation). Includes GSM, TDMA, PDC
and cdmaOne.
3G
Third generation mobile systems. Includes
WCDMA/HSPA, CDMA2000 and TD-SCDMA.
3GPP
Third Generation Partnership Project. Unites
telecommunications standard development
organizations and produce specifications that
defines a mobile technology (2G, 3G etc.).
4G
Forth generation mobile systems, also known
as LTE.
5G
The fifth generation of mobile systems.
An evolution of 4G/LTE.
AI
Artificial intelligence. The ability of a machine
to perform a task commonly associated with
intelligent beings.
CO2e
The amount of a particular greenhouse gas,
expressed as the amount of carbon dioxide that
gives the same greenhouse effect.
COVID-19
The disease caused by the coronavirus
(SARS-CoV-2).
COVID-19 pandemic
The global spread of the disease caused by the
coronavirus (SARS-CoV-2).
ESG
Environmental, Social, and Governance. Refers
to the three central factors in measuring the
sustainability and societal impact of an invest-
ment in a company or business.
GHG
Greenhouse Gas (GHG) emissions are calculated
as carbon dioxide equivalents (CO2e). CO2e
is defined as the amount of a particular GHG,
expressed as the amount of carbon dioxide that
gives the same greenhouse effect.
Global Reporting Initiative (GRI) Standards
The GRI Sustainability Reporting Standards are
the first and most widely adopted global standards
for sustainability reporting. GRI is an independent
international organization that has pioneered
sustainability reporting since 1997.
SASB
Sustainability Accounting Standards Board
SBT
Science-based targets provide companies with
a clearly defined pathway to future-proof growth
by specifying how much and how quickly they
need to reduce their greenhouse gas emissions.
SDGs
Sustainable Development Goals. The 2030
Agenda for Sustainable Development, adopted
by all United Nations Member States in 2015,
provides a shared blueprint for peace and
prosperity for people and the planet, now and
into the future. At its heart are the 17 Sustainable
Development Goals (SDGs), which are an urgent
call for action by all countries – developed and
developing – in a global partnership.
GSM
Global System for Mobile Communications.
Second generation mobile system.
IBC
International Business Council
ICT
Information and Communication Technology.
IoT
Internet of things, interconnection of computing
things enabling them to send and receive data.
LTE
Long-Term Evolution. 4G; the evolutionary step
of mobile technology beyond 3G HSPA, allowing
data rate above 100 Mbps.
Mobile broadband
Wireless high-speed internet access using
the HSPA, LTE, CDMA2000EV-DO and 5G
technologies.
TCFD
Task force on Climate-related Financial Disclosures
UNGC
United Nations Global Compact. Is a voluntary
initiative adopted in 2005 by the UN Secretary-
General, based on CEO commitments to
implement universal sustainability principles
and to take steps to support the UN Sustainable
Development Goals.
UNGP
The UN Guiding Principles Reporting Framework
was launched in February 2015 and is the first
comprehensive guidance for companies to report
on human rights issues in line with their responsi-
bility to respect human rights. This responsibility
is set out in the UN Guiding Principles on Business
and Human Rights, which constitute the authorita-
tive global standard in this field.
WEF
World Economic Forum
The terms “Ericsson”, “the Company”, “the Group”, “us”, “we”, and “our” all refer to Telefonaktiebolaget LM Ericsson and its subsidiaries.
Sustainability and Corporate Responsibility report 2021 More information
Information about Ericsson and its development is available on the website:
www.ericsson.com. Annual and interim reports and other relevant shareholder
information can be found at: www.ericsson.com/investors
Every care has been taken in the translation of this annual report to English.
However, in the event of discrepancies, the Swedish original will supersede
the English translation.
Contact details
Ericsson headquarters
Torshamnsgatan 21, Kista
SE-164 83 Stockholm
Sweden
Registered office
Telefonaktiebolaget LM Ericsson
Torshamnsgatan 21, Kista
SE-164 83 Stockholm
Sweden
Investor relations
For questions on the Company, please contact
Investor Relations:
Phone: +46 10 719 0000
Email: investor.relations@ericsson.com
Contact details for ADR program
Ericsson Annual Report 2021
For ADR institutional investors and brokers
Deutsche Bank ADR broker services desk
New York: Tel +1 212 250 9100
London: Tel +44 207 547 6500
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Deutsche Bank Shareholder Services
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Email: DB@amstock.com
Toll-free number: +1 800 937 5449
Direct Dial: +1 718 921 8124
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Ericsson Investor Relations
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About Ericsson
Ericsson provides high-performing solutions to enable its customers to capture the full value
of connectivity. The Company supplies communication infrastructure, services and software
to the telecom industry and other sectors. Ericsson has approximately 100,000 employees
and serves customers in more than 180 countries. Ericsson is listed on Nasdaq Stockholm
and the Ericsson ADS trade on NASDAQ New York. The Company’s headquarters are
located in Stockholm, Sweden.
It all started in a mechanical workshop in Stockholm in 1876 where Lars Magnus Ericsson
designed telephones and his wife Hilda manufactured them by winding copper wire coils.
With 5G now a commercial reality, we continue to invest to strengthen our 5G leadership.
Our portfolio is designed to help our customers digitalize and to increase efficiency in an
intelligent and sustainable way, while finding new revenue streams.
Telefonaktiebolaget LM Ericsson
SE-164 83 Stockholm, Sweden
Telephone +46 10 719 00 00
www.ericsson.com
EN/LZT 138 2324 R1A
ISSN 1100-8954
© Telefonaktiebolaget LM Ericsson 2022