Ericsson Annual Report 2023

Plain-text annual report

Ericsson Annual Report 2023 ericsson.com Contents Financial report Corporate Governance report This is Ericsson CEO comment Business strategy Letter from the Chair of the Board Board of Directors’ report Consolidated financial statements with notes 1 2 5 14 16 32 Parent Company financial statements with notes 86 Risk factors Auditor’s report Five-year summaries Alternative performance measures The Ericsson share 105 120 126 128 133 Introduction and Key 2023 Governance Updates Regulation Governance Structure and Core Values Ethics & Compliance Risk Management 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 Cybersecurity Members of the Executive Team Auditor Internal control over financial reporting Auditor’s report on the Corporate Governance report Remuneration report Sustainability and Corporate Responsibility report Statement from the Chair of the Remuneration Committee Introduction Remuneration 2023 at a glance Total remuneration to the President and CEO and Executive Vice President Variable remuneration 1 2 3 5 6 Comparative information on changes in remuneration and the Company’s performance 11 Introduction Strategy and targets 2023 highlights Environment Social Governance Notes to the Sustainability and Corporate Responsibility report Environment Social Governance Other Assurance report Glossary 2 3 3 5 6 8 8 9 11 13 14 18 19 20 25 25 28 1 2 4 4 6 8 10 11 25 37 46 50 51 Ericsson Annual Report 2023 Our legal Annual Report consists of four parts published as one pdf. The four parts can also be downloaded separately: • The Financial report, including Board of Directors’ report and the financial statements and notes • The Corporate Governance report • The Remuneration report • The Sustainability and Corporate Responsibility report Ericsson’s annual accounts and consolidated accounts are included on pages 16–119 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. Financial report Part of Ericsson Annual Report 2023 Annual Report 2023 Financial report Corporate Governance report Remuneration report Sustainability and Corporate Responsibility report ericsson.com Contents Financial report 2023 This is Ericsson CEO comment Business strategy – Creating long-term value 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 5 14 16 31 32 39 86 92 105 120 124 126 127 128 133 137 138 139 Financial report 2023 1 This is Ericsson Ericsson is a leading provider of mobile connectivity solutions to telecom operators as well as enterprises in various sectors. Together with our customers and partners in the ecosystem, we are leading the next wave of digitalization in society. We provide high-performance, differentiated and programmable networks and make advanced network capabilities available to developers around the world. Through world-leading research, we drive new standards and are instrumental in the development of the next-generation mobile communications infrastructure, software, and services. We are executing on a strategy to achieve a higher growth trajectory, making Ericsson a more profitable company. We do this by leveraging leadership in mobile networks, growing the enterprise business, and driving lasting cultural transformation. Our broad portfolio spans the follow- ing areas: Networks, Cloud Software and Services, Enterprise Wireless Solutions, Global Communications Platform and Intellectual Property Rights (IPR) licensing. By creating high-performance networks, game-changing technology and services that are easy to adopt, use and scale, we are enabling the full value of connectivity, making our customers successful in a fully connected world – a world where limitless connectivity improves lives, redefines business and pioneers a sustainable future. Our solutions for Communications Service Providers (CSP) are sold and distributed through 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 almost 100,000 emp- loyees, customers in more than 180 countries and is headquartered in Stockholm, Sweden. The Company’s shares are listed on Nasdaq Stockholm and the Company’s American Depositary Shares (ADS) are listed on Nasdaq New York. Purpose Vision Culture Sustainability To create connections that make the unimaginable possible. A world where limitless connectivity improves lives, redefines business and pioneers a sustainable future. A culture of ethics and integrity to make us a stronger and even more resilient company. Sustainability and respon- sible business practices to drive business transfor- mation and create value for stakeholders. Core values Professionalism, respect, perseverance, and integrity at the heart of everything we do. 2 CEO comment Financial report 2023 Mobile networks to drive future value creation Our ambition is to lead in an open world. We continue to execute against our three key priorities: strengthening our leadership in mobile networks, growing our enterprise business and driving cultural transformation. Our performance in 2023 is a testament to the strength of our team, our strategy and our ability to execute. Ericsson is well positioned to capture value from the next wave of digitalization. In 2023, we navigated a difficult mobile networks market characterized by negative volume development and an unprecedented slowdown in the North American market. In parallel, we saw a dramatic change in business mix with rapid growth in India. Despite these challenges, we concluded 2023 with EBITA1) of SEK 21.4 billion and gross margins1) of nearly 40% – a testament to our increased resilience. Mobile networks are fundamental in society – from basic communication needs, to driving advanced digitalization in industries – with continued high growth of traffic in the net- works. However, many operators fight to earn cost of capital and are in need of new revenue streams to invest further in their networks. We are working to reshape the industry by transforming the network into an innovation platform and leveraging cellular connectivity in new areas. Our strategy aims at changing the way networks are consumed and monetized. While not reaching the peak levels of 2022, we do anticipate the mobile network market to recover from today’s low levels based on the rapid growth of data traffic. However, we cannot predict the timing as the cadence of investments are in the hands of our customers. Until the recovery comes, we remain laser focused on managing what we can control such as investments in technology leadership and costs. This makes us well positioned to fully benefit from operational leverage when the market recovers. Our industry vision Over the past decade, as the consumer digital- ized, best-effort connectivity, provided through 4G and WiFi, was enough. But to digitalize enterprises and society, best effort is no longer sufficient. What’s needed now are faster speeds, higher capacity, reduced latency and improved quality of service. 5G is designed 1) Excluding restructuring charges. with these capabilities and is significantly more powerful than previous generations. In the coming 5–10 years, we will see an acceleration of trends such as the transition to renewable energy sources and increased automation leveraging cloud and AI. The flexibility of mobile connectivity is founda- tional. This future will require ubiquitous high-performance and differentiated mobile networks, combined with new ways to access, and consume advanced network capabilities. Cloud-native architecture is a key require- ment for delivering high-performance, programmable and differentiated networks. By horizontalizing their architecture, CSPs can prioritize investments in different parts of the network at different times. In addition, they can also lower their total cost of ownership, leveraging automation and AI, while opening new ways to monetize the networks. Our vision for the industry is based on open and programmable networks with capabilities Financial report 2023 CEO comment 3 that are exposed through network APIs and leveraged by an ecosystem of developers – driving rapid innovation and growth. Strategy execution Making this vision a reality begins with our strategy to extend leadership in mobile networks, expand into enterprises and trans- form our culture. Technology leadership is a foundation for our strategy. It is essential for our competitiveness but also for generating attractive gross margins. In mobile networks, our ambition is to provide the best networks in the industry, with the highest performance and the lowest total cost of ownership. During 2023, we strength- ened our RAN portfolio with a new range of radios that are more than 20% more energy efficient than comparable products. We also increased our investments in the automation of networks through AI. Our leading technology empowers our cus- tomers to build high-performance, differentiated and programmable networks while also lead- ing the shift to open, cloud-native networks. These types of networks provide our customers with a path to monetize the network in new ways through network APIs, network slicing and advanced charging platforms. We already have a commercially available CloudRAN portfolio and are one of the leading contri- butors to an open standard. In fact, we have already delivered around 1 million radios in the field that are enabled for the open standard. An additional proof point came at the end of 2023, when we signed an industry shaping 5-year deal with AT&T to modernize and trans- form their network to a programmable, open network. Through this contract, AT&T can lower their spending in non-revenue generating solu- tions generating value for both our customer and us. In Cloud Software and Services, we executed on the turnaround and reached our target by delivering an EBITA1) of SEK 1.7 billion for the full year through a fantastic effort by the team. But we are not satisfied. We will continue to increase commercial discipline, automation and delivery efficiency, focusing on long-term profitability. Our licensing business is another important element of our strategy. Our more than 60,000 1) Excluding restructuring charges. granted patents help to strengthen our leading position in 5G. We are confident of growing IPR revenues, through further agreements and by expanding into additional licensing areas. During 2023 we signed significant licensing agreements and will continue to optimize the value of the portfolio. Enterprise expansion Our expansion into enterprises builds on creat- ing new uses for cellular technology as well as new revenue sources for operators. Simply put, our ambition is to expand beyond just consum- ers by addressing enterprises and developers through two distinctive approaches. First, we are providing wireless solutions for businesses. This includes the Cradlepoint offering, which provides secure and reliable 4G and 5G connectivity to vehicles and industrial environments along with Private Networks which is based on our strong radio portfolio. We continue to invest in an enterprise go-to- market channel as well as broadening the portfolio. In 2023, we acquired Ericom, which expands our offering in zero trust and cloud- based security solutions. Secondly, we are accelerating enterprise digitalization by creating an ecosystem to expose, consume and monetize advanced network features – through network APIs. This is why we acquired Vonage, which provides us with the platform technology and a substantial developer community. Developers represent a growing user group of network resources and are crucial for driving the development of new applications that leverage the advanced capabilities of network. Through network APIs, we are putting advanced network capabilities at the fingertips of developers. Historically, the developer ecosystem has attracted limited attention from the telco industry, but in our vision, developers will play a central role in the future use of networks. For this reason they are a new target market for us. In 2023, we took an important step by launching the Global Network Platform together with Deutsche Telecom – marking a world-first in the commercialization of network APIs. This platform makes it easy to expose, consume and pay for advanced net- work capabilities, such as location and device status. Network APIs, and their potential for the industry, is something we’re currently discussing with our CSP customers. Through high-performance, differentiated networks and open network APIs, we are redefining how the network capabilities are consumed and how the industry can capture and deliver value. This is the first step towards creating a network effect of exponential growth and innovation, which will drive further usage of the network and create a need for more network investments. With a network effect, the value of the whole platform increases with each new CSP, developer or API. Leading with integrity To be an industry leader, market and technol- ogy leadership alone are not enough – we also need to run our business responsibly including, being an ethical, social and environmental leader. We are committed to our culture trans- formation, and we continue to implement stringent controls and improved governance, ethics and compliance across our company, with corresponding enhancements to our risk management approach. While we are a very different company today then just few years ago, our journey to build a culture of integrity and compliance continues. Our ambition is to protect Ericsson and our assets, and to create a stronger and improved business. We are convinced that a focus on ethics and integrity will lead to better decisions – and is therefore a competitive advantage for us. We have continued to strengthen and enhance our Ethics and Compliance program and further embed integrity into our ways of working. We are now preparing to conclude the term of our DOJ resolution, and the related monitorship, in June of this year. A critical part of strengthening our culture is building high-performing, inclusive teams based on merit. While our industry suffers from a lack of gender diversity it was encouraging that 2023 saw an increase in the percentage of women hired at Ericsson. To reach our ambi- tion of being one of the best places to work, we will continue to improve our talent acquisition capabilities while investing in the development of future critical skills. Running our business responsibly also includes our commitment to have zero 4 CEO comment Financial report 2023 fatalities and lost workday incidents by 2025. However, the outcome in 2023 was not good enough and we will need to increase our efforts. We have also set an ambition to be Net Zero across our value chain by 2040. The most significant impact towards this target comes from delivering an energy efficient portfolio that helps break the energy curve of mobile networks and reduce customer energy use, energy costs and carbon emissions. Business performance As expected, 2023 was a choppy year for the mobile networks market. Group net sales declined by −3% YoY to SEK 263.4 billion. Sales declined organically1) by −10%. Gross margins, excluding restructuring, were 39.6% and free cash flow, before M&A was SEK –1.1 billion due to the business mix shift towards big roll-out projects with a longer order-to-cash cycle. In 2023, we recorded a non-cash impair- ment charge of SEK 32 billion attributed to the acquisition of Vonage – a consequence of macroeconomic headwinds, including rising interest rates and changing demand trends. These trends have also significantly impacted the market capitalization of Vonage’s publicly traded peers. However, this does not alter our enterprise strategy or our positive outlook on the potential of the Global Network Platform. In the current market environment, we are laser focused on managing what is in our control, such as costs. We started reducing costs already in 2022 and at the end of 2023 we achieved a gross run-rate of SEK 12 billion in cost savings – in line with our target. We expect to continue to take out costs during 2024. Looking ahead During 2023, the world saw renewed conflict in multiple regions around the world, often with terrible human costs as a result. Increased geopolitical tensions significantly impacts the global business environment. Our first priority is always on the safety and well-being of our team but also on building resilience to effec- tively manage these increased tensions. The RAN market remained challenged in 2023 and we expect further volume declines. We are focused on managing what is in our control and relentlessly driving operational efficiency, while keeping intact investments that are critical to our future competitiveness. Short-term these investments will put pressure on our profitability, but they will also position us for when the market comes back. Our his- toric contract with AT&T will start to contribute during the second half of 2024. As we have seen in past slowdowns, we expect the market to recover at some point. The key driver for the recovery is the continued high pace of mobile data growth. In itself, growing data traffic will not create growth in the mobile networks market. Instead, new uses cases, as well as new monetization opportuni- ties, will be important drivers of growth. This will take some time to be meaningful. Our strategy to capture the new opportuni- ties is built on our deep expertise in telecom networks. We are confident that extending leadership in mobile networks, expanding into enterprises, and driving a culture transforma- tion with ethics and integrity at the heart of every decision, will enable us to capture signi- ficant future value for all stakeholders. AI and automation continue to be key investment areas for us. We began investing in AI more than a decade ago and over the next 2–3 years, AI will increasingly be part of our solutions. Recently, we developed our own generative AI framework, leveraging Large Language Models (LLM) that are fine-tuned and optimized for the telecom domain. AI is also shaping the way we operate our company and we will continue to leverage this tech- nology for internal productivity. Through strong strategy execution we have strengthened our competitive position through R&D leadership. On the horizon is the target to make Ericsson a more profitable company by capturing the next major wave of networks innovation with a substantial platform 1) Net sales adjusted for comparable units and currency. 2) Excluding restructuring charges. business. We remain committed to our long- term targets on 15–18% EBITA2) and 9–12% free cash flow target as the market recovers. We are driving a paradigm shift, putting high-performance networks and differentiated models at the heart of the digital future. This is a once-in-a-lifetime opportunity to create long-lasting value and drive positive change in both our industry and society as a whole. The ongoing discussions with a broad range of ecosystem partners strengthen our conviction we are on the right path. I want to extend my deepest gratitude to the entire team for their hard work and perse- verance. Their relentless effort and unwavering commitment have made the achievements of the past year possible. Together, we are going to shape the future by leading the next wave of network innovation. Börje Ekholm President and CEO Financial report 2023 Strategy Creating long-term value Business strategy 5 Through our business strategy we aim to put high-performance, differentiated and programmable networks at the center of the next wave of digitalization. We do this by extending our leadership in mobile networks and through a focused expansion into enterprises. In addition, we are reshaping the industry by creating a Global Network Platform – leveraging the innovation power of 5G in close cooperation with developers, Communications Service Providers (CSPs) and partners across the ecosystem. Digitalization and society Over the past three decades, mobile connectivity has fundamentally transformed our world – driving advanced digitalization in industries and society. Today, we have near-ubiquitous connec- tivity globally, with 8.5 billion mobile phone sub- scriptions. And over the last 30 years, data speeds have increased at a rate faster than Moore's Law. During this time, 4G networks gave rise to the app economy and digitalized consumer life. Today digitalization is a key tool for solving some of society’s biggest challenges, including the climate crisis and social inclusion. But to take the next step in digitalization, “best effort” connectivity for consumers will not be enough. What is needed are faster speeds, reduced latency and improved quality of service to achieve complete digitalization in both enterprises and the public sector. Satisfying those demands will require higher-performance networks that are significantly more powerful than previous generations. Enabling the future with high-performance networks In the coming 5–10 years, we will see an acceleration of major trends such as energy transition, the green transition, resilient supply chains, and industrial automation for increased efficiency and productivity. These trends, however, will not progress to their full potential unless they leverage a mobile-first, Artificial Intelligence (AI) and cloud-based world. Mobile infrastructure, powered by cloud and AI automation, is the enabling technology, but without mobile connectivity, AI and cloud cannot be deployed at scale. A mobile-first world requires ubiquitous high-performance, differentiated and programmable networks – with capabilities such as higher speed, bounded latency, location, and authentication – that are available everywhere and easily accessible to a broad ecosystem of businesses and developers. Open network interfaces, known as network APIs (Application Programming Interfaces), give developers easy access to advanced network capabilities. Combining these with high-performance and programmable net- works, it becomes possible to satisfy much more demanding new use cases such as: • Quality of Service and time-bound latency for real-time cloud interactions including digital twins and Extended Reality (XR) • Improved outdoor and indoor coverage for autonomous vehicles in industrial settings • Advanced location and positioning, for drones and 3D-mapping • Improved security and authentication Ericsson is repositioning the industry by redefining how people can access and utilize network capabilities, as well as how networks can be monetized. The combination of high-performance and programmable net- works, with network APIs and an ecosystem of developers, will result in a network effect of accelerated growth and innovation. A network effect gains momentum with the creation of network APIs that are made broadly available on a global platform. As more and more developers join the platform and create new applications, traffic on the network increases generating more revenue for CSPs. This in turn prompts further network invest- ments, accelerating the cycle and increasing the value of the platform with each new devel- oper, enterprise and CSP that joins. We are well positioned to deliver on this future potential through our business strategy, which focuses on creating long-term business value through leadership in mobile networks and a focused expansion into enterprise. 6 Business strategy Financial report 2023 Market environment Historically, the RAN market has been largely flat over time but with cyclicality. We are currently in the lower end of the latest investment phase. Over time however, we expect the market to normalize with traffic growth representing the underlying driver of mobile network investments. In 2023, the RAN market continued to be choppy with sharp contrasts between the market decline in North America and the substantial growth in India – which saw a record-paced rollout of 5G. During the year, the number of 5G sub- scriptions grew to 1.6 billion, making 5G the fastest scaling mobile generation; the num- ber of 5G subscriptions already accounts for 19% of total mobile subscriptions. At the end of 2023, Ericsson’s technology was used in 158 out of the approximately 300 live 5G networks globally. In the medium term, 2025–2026, the mobile infrastructure market is expected to see moderate growth outside of China. CSP revenues will remain predictable as consum- ers increase their use of mobile devices and prioritize telecom services as a basic need. Mobile data traffic is expected to continue to grow at an estimated compound annual growth rate (CAGR) of 22% until 2029. 5G is expected to grow with a CAGR of 50% for the same period. Around 50% of all mobile traffic, outside of China, is carried over net- works provided by Ericsson. The 5G cycle is in its early stages and we expect the migration to 5G standalone to continue in order to deliver on this technol- ogy’s full potential. Furthermore, about 70% of all LTE nodes globally are yet to be upgraded to 5G mid-band. 5G is also spurring new use cases that will drive future traffic. Examples include Fixed Wireless Access (FWA) – which is seeing significant growth – and Mission Critical Networks which is driving new use cases for public safety, rail and utilities. Other emerging growth areas include 5G for indoor, satellites and airspace and in some advanced 5G countries, a combination of high-performance networks and cloud services is powering enterprises with secure and cost-efficient IT and communications infrastructure. Financial report 2023 Business strategy 7 Ericsson strategy Through our strategy we will create long-term value for all stakeholders, by leading in our mobile networks business and capitalizing on the rapidly digitalizing enterprise market. In addition, we will expand the mobile infrastructure market by helping CSPs address new monetization opportunities – together with developers and ecosystem partners. This is what we are driving through the Global Network Platform. Superior experience for consumers Reliable & easy-to-use solutions for businesses Capabilities for developers Customer success Businesses Best performance for differentiated networks, relentless efﬁciency and growth in an open world Leadership in mobile networks Focused expansion into enterprise • Technology leadership for performance, security, and sustainability at lowest TCO across RAN, Core & OSS/BSS • Lead industry shift to programmable, automated cloud-native networks and operations, and advanced network services Wireless networks • Pre-packaged solutions • Leading reliability, security, and operations Communication platform • Accelerate the world’s ability to connect • Global network platform Be ﬁrst in critical innovations, and capture strategic business opportunities Foundation Technology leadership Cost efﬁciency Data-driven operations Global skill & scale Delivering on end-user requirements Customer success Creating value through our strategy is closely linked with our commit- ment to fulfill the diverse needs of consumers, enterprises and developers. For consumers, this means delivering on their demand for an unparalleled experience with seamless connectivity and high-quality communications services. Enterprises require reliable and easy-to- use solutions in order to consistently improve their operations, drive innovation in an agile and sustainable way, and enhance interactions with customers and employees. And developers, looking to create new enterprise and consumer applications, require easy access to globally available, advanced network capabilities so they can create innovative new use cases. Our steadfast commitment to addressing these needs is a cornerstone of our strategy. Through our products and solutions, we drive relentless efficiency in order to minimize our customer’s total cost of ownership (TCO) while accelerating their revenue growth in an increasingly open world. This includes addressing the need for spectrum, greater energy efficiency and superior performance. We are also ensuring that our customers are well prepared for future opportunities by embracing open and programmable networks. 8 Business strategy Financial report 2023 Leadership in mobile networks We have industry-leading solutions for mobile networks that encompass radio, core, transport and antennas along with OSS-BSS, network deployment and support services. We are consistently ranked as a leader in third-party assessments in areas such as performance and sustainability. In business area Networks we are constantly evolving networks with the best performance, security, and energy efficiency at the lowest total cost of ownership (TCO). This includes delivering a sustainability-focused portfolio that will help break the energy curve of mobile networks and reduce customers’ energy use, costs and carbon emissions. We are also leading the shift to open, cloud- native networks, which is an opportunity for us to increase our footprint. Our strategic priorities in this area include building high-performance programmable networks, industrializing Open RAN, pursuing cloud-native migration and bringing competitive hardware and software products, supported by advanced engineering services to the market. Ericsson is playing an active role in shaping the industry landscape by providing a credible and realistic path to Open RAN, at scale. This will increase the value of connectivity, fostering new service growth which in turn will drive investments into network infrastructure. At the end of 2023, we signed a historic deal with AT&T to modernize and transform their network into a programmable open network – driving a strategic shift in the industry. In business area Cloud Software and Services, our solutions equip CSPs to excel in business agility, service experience, and operational efficiency while helping them transform to, and reap the benefits of cloud operations. Ericsson continues to invest in the network abstraction layer so that advanced network capabilities are easy to expose to developers and other third parties. This is a key enabler of the Global Network Platform. Ericsson has a strong position and is a market leader in 5G Core, network manage- ment, network design and optimization and managed network services. In 2023, our focus was on reaching at least EBITA1) break-even. Having delivered on our commitment to the market, we continue to increase commercial discipline, automation and delivery efficiency, focusing on long-term sustainable profitability. Be first in critical innovation and capture strategic business opportunities Our strategy is to invest in technology leadership and to be the first to develop leading capabilities and innovations that create new business oppor- tunities. Proof of our strategy execution includes our agreement with AT&T to lead the commercial deployment of Open RAN in the United States and the collaboration with Deutsche Telecom on the world-first commercialization of network APIs. Our technology leadership builds upon proven and industry-leading research from Ericsson Research, as well as development and innovation occurring across all business areas. Focused expansion into enterprise Enterprise Wireless Solutions Global Communications Platform With 5G, we are in the early stages of wide- spread enterprise digitalization – creating significant additional value for industrial applications such as mining, airports, and manufacturing. We continue to build an enterprise busi- ness with a strategy that is organized around two pillars. The first, Enterprise Wireless Solutions, is where we are driving business transformation through seamless and secure network solutions. The second, Global Communications Platform, is where we will help customers monetize 5G in new ways by transforming how network capabilities – such as high speed and low latency – are globally exposed, consumed and paid for. 1) Excluding restructuring charges. We are developing wireless solutions for businesses with leading reliability, security and easy-to-manage operations. Through business area Enterprise Wireless Solutions – which includes Cradlepoint and Private Networks – we are accelerating the digital transformation of businesses, industries, communities and governments. The portfolio for this area includes Private Cellular Networks (PCN), Wireless-WAN (WWAN) and Cloud Security (Security Services Edge – or SSE) solutions. These solutions are primarily delivered via a unified management, policy, and security framework to enterprises, Managed Service Providers (MSPs) and CSPs. The business area continues to expand its portfolio. In April 2023, Cradlepoint acquired Ericom Software including their advanced enterprise cloud security platform to solidify its Secure Access Service Edge (SASE) and zero-trust offerings for hybrid 5G and wire- line environments. The second pillar of our enterprise strategy is powered by our acquisition of Vonage and the formation of business area Global Communications Platform. Our ambition is to accelerate the world’s ability to connect and we do this by maintaining a strong position in the market for Communications Platform as a Service (CPaaS) with deep enterprise and developer engagements. In addition, 5G offers programmable and differentiated network performance and capabilities which in turn enables CSPs to provide new revenue-driving uses cases on top of their current subscription offerings. The key to this lies in making network capabilities broadly available – through network APIs – to developers and enterprises. By combining the Vonage platform and developer ecosystem with open and programmable networks, we now have the building blocks to launch a Global Network Platform – making it easy to expose, consume and pay for network APIs. In September 2023, we reached an important milestone together with Deutsche Telecom, announcing a world-first in the commercialization of network APIs. Financial report 2023 Foundation Business strategy 9 Technology leadership A key foundation that we will not waver from is technology leadership. This is critical as the industry is currently in the middle of a major transformation. Our substantial investments in R&D position us to further extend our technol- ogy leadership for cost and energy performance. As part of this, we create, secure, protect, and license a portfolio of patents and have a strong patent portfolio that comprises more than 60,000 granted patents in support our long-term targets. Through substantial contributions to the development of standards and cutting-edge technologies, we will further capitalize on our R&D investments through patent licensing. The IPR portfolio gives us great opportunities to grow our licensing rev- enue, with a continued emphasis on ensuring that the full value is recognized in all contracts. Cost efﬁciency A focus on performance and cost leadership enables us to provide the lowest network cost per gigabit. We also continue to improve productivity and capital efficiency across our supply chain. At the end of 2023, we achieved a gross run rate of SEK 12 billion in cost- savings and we continue to prudently manage our costs, investments and balance sheet while investing responsibly to preserve and enhance our technology leadership, market share and profitability. Data-driven operations A continued focus on digitalization is crucial to our long-term competitiveness. Digitalization plays a pivotal role in expediting workflows and minimizing lead times. By leveraging digital tools, we can achieve significant lead-time reductions across sales, software management and service delivery. Another key area is our investments in auto- mation and AI for telecom. The investments have resulted in significant gains in product enhancements in the areas of power consump- tion, network orchestration and operations and have also contributed towards streamlining of software development lead times and other internal processes. Global skill and scale Our global presence, the skills and expertise of our people, and close interaction with our customers, creates opportunities for us to grow with discipline – leading to increased market footprint and economies of scale. 10 Business strategy Financial report 2023 Ethical, social and environmental leadership our operations and managerial decisions. This further remediated the business process issues that were, in the past, a contributing factor in incidents of misconduct. The Business Critical Transformation initiative deployed cross-functional teams, which were led by us and supported by compliance and internal controls functions, to ensure compliance was fully embedded in the business, was accessible to everyone, and worked effectively in practice. Corporate responsibility extends beyond legal compliance through proactive mitigation and management of risks to people. From a health and safety perspective, Ericsson puts a strong focus on risk controls over project hazards, safety training and supplier management related to field operations. Driving, climbing and working at heights, as well as working with electricity, are high-risk activities which account for almost all fatalities and a signifi- cant portion of major incidents, most of which occur in the supply chain. The focus on people also includes identify- ing and managing human rights risks in our own operations and throughout our value chain, especially in certain high-risk geogra- phies. Ericsson also made significant efforts into improving traceability and visibility in the supply chain, with a focus on high-risk supplier categories beyond the first tier. A governance mechanism for managing findings related to risks of modern slavery in the supply chain was also established. In relation to downstream due diligence, Ericsson has continued to improve the Sensitive Business process (Ericsson’s sales due diligence process) by introducing updated risk indicators to cover human rights aspects tailored to different types of business engage- ments, such as public networks for CSPs as well as private networks for government agencies and enterprises. Additionally, as part of a long-term human rights training plan, an e-learning course was made available to all employees and workshops with the Allegation Management Office were conducted, to heighten awareness of when reported compli- ance concerns should be treated as human rights-related. Sustainability and resilience Ericsson has set an ambitious target to have Net Zero greenhouse gas emissions across our value chain by 2040. Our most important contribution to climate change mitigation is delivering an energy efficient portfolio that will help break the energy curve of mobile networks and reduce customer energy use, energy costs and carbon emissions. Ericsson’s research also shows a substantial potential for information and communication technology (ICT) solutions to support other industries to decarbonize. The development of technologies such as 5G and platforms for data and API management will only increase this decarbonization potential. Ericsson’s mobile networks and other solu- tions also support digital inclusion around the world. We deliver digital skills programs that, so far, have benefited 485,000 students, aid- ing their employability in the digital economy. Ericsson is also supporting access to education by working in public-private partnership with UN agencies, governments and the mobile industry ecosystem to connect every school to the internet by 2030. Within our supply chain, Ericsson strives to have dual supply sources to strengthen supply chain resilience wherever possible. We also invest in strategic buffers to further reduce the risk of disruptions. In addition, Ericsson has a process to monitor disruptive events in real time, which also covers our suppliers. To be an industry leader, market and technol- ogy leadership alone are not enough. Ericsson also needs to be an ethical, social and environ- mental leader. Our focus is on managing our most material impacts on people, communities and the planet, as well as taking a holistic approach to risk management, encompassing environmental social and governance risks in our supply chain, own operations and down- stream value chain. We are continuing to transform our culture and operationalize enhanced governance to enable us to operate responsibly, safely and with integrity. Embedding ethics, compliance and sustainability programs and practices across Ericsson supports resilience in the operations and supply chain, paving the way for long-term value creation. Integrity, ethics and compliance Corporate responsibility and business integrity are embedded in Ericsson’s business and culture, no matter where in the world we oper- ate. Throughout 2023, focus has remained on strengthening Ericsson’s Ethics and Compliance (E&C) program through significant testing of the E&C program’s effectiveness, simplification of policies, procedures and tools, an improved understanding of managing risks in business interactions, and digitalization. With a zero-tolerance policy regarding corruption and financial irregularity, the Code of Business Ethics (CoBE) is consistent with all internationally recognized human rights princi- ples as well as applicable laws and regulations where Ericsson operates and is available in over 40 languages. The refreshed and clarified CoBE sets out our expectations, principles and requirements for employees as they conduct business. It provides the framework for ethical decision-making, and guides employees in making decisions and managing risk as they engage with colleagues, customers, partners, owners, and other stakeholders. Full adherence to the letter and spirit of the CoBE framework is expected from all employees to ensure that Ericsson’s decisions and actions are ethical, and that Ericsson is acting as a positive global force. The CoBE further promotes and supports Ericsson’s Speak-Up Culture and prohibits retaliation for speaking up in any form. In instances where it was determined that indi- viduals breached the CoBE, we implemented corrective and disciplinary actions, including terminations, written warnings, verbal warn- ings, and other appropriate corrective actions. Through an initiative referred to as the Business Critical Transformation, discussed in greater detail in the Ethics & Compliance section of the Corporate Governance Report, Ericsson embedded improved controls into Financial report 2023 Targets Business strategy 11 Long-term targets By executing on our strategy leveraging on our global scale and achieving our long-term financial targets, we generate healthy returns to our shareholders. The financial targets are expressed in terms of sales growth, EBITA margin1) and Free cash flow before mergers & acquisitions (M&A). Important drivers of value creation and competitiveness are efficiency improvements, investments in R&D and sustainable growth. Sales target to outgrow the market Our sales target is to grow faster than the market. The RAN market is expected to be flat in the coming years, and for Networks, RAN market share gains and industrializing Open RAN at scale are key. In Cloud Software and Services, 5G cloud operation technology shifts, are key. In Enterprise, we grow our business by executing on the Global Communications Platform business plan and accelerating growth in Enterprise Wireless Solutions and establishing the network API market. balance sheet strength and to secure financial resilience. Financial discipline and strong focus on profitability are key factors in all decisions. We are committed to deploying capital wisely, supporting the business strategy and value creation. EBITA margin1) target of 15–18% Our goal is to make Ericsson a more profitable company based on a leading position in mobile infrastructure and a high-growth Enterprise business. We aim to reach the EBITA margin target as soon as possible, subject to market mix recovery. Free cash ﬂow (before M&A) of 9–12% of sales The target for Free cash flow before M&A is 9–12% of sales. Our ambition is to safeguard Sustainability and Corporate Responsibility targets We remain fully committed to our sustain- ability targets: achieving Net Zero carbon emissions across the value chain by 2040, to have zero fatalities and lost workday incidents by 2025, as well as to achieve 30% female representation among employees and manag- ers by 2030. Long-term targets Financial and sustainability targets EBITA-margin1) 15–18% of sales Important drivers • Increased IPR revenues • Market mix recovery • Operational leverage Free cash flow (before M&A) 9–12% of sales • Focus on delivering high cash conversion from EBITA Sustainability and Corporate Responsibility • Net Zero carbon emissions across value chain by 2040 2) • Zero fatalities and lost workday incidents by 2025 • 30% female representation among employees and managers by 2030 Free cash ﬂow generation Bridge from EBITA to Free cash flow (illustrative) EBITA excl. restructuring charges − + + Financial net, tax and other Add back depreciation and amortization Add back depreciation of leased assets +/− Changes in working capital 3) − − − Capex Leasing payments Restructuring 4) Free cash ﬂow (before M&A), % of net sales All numbers are in relation to net sales. 1) Excluding restructuring charges. 2) Validated by the Science Based Targets initiative (SBTi). 3) Deﬁned as changes in operating net assets. 4) Restructuring charges as reported in the income statement for each year. 2022 11% −3% 2% 1% 0% −2% −1% 0% 8% 2023 Long-term target 8% −2% 2% 1% −5% −2% −1% −2% 0% 15–18% −4– -5% 2–3% 1% −1% −2% −1% −1% 9–12% 12 Business strategy Financial report 2023 Segments and market areas Ericsson uses the following operating segments and market areas for financial reporting. Segments Mobile Networks – Networks Offering Business model Networks offers multi-technology-capable Radio Access Network (RAN) solutions for all network spectrum bands, including purpose-built and Open RAN-prepared high- performance hardware and software. The offerings also include a Cloud RAN portfolio, a transport portfolio, pas- sive and active antenna solutions and a complete service portfolio, covering network deployment and support. Networks is primarily based on a business model where Ericsson develops, sells, licenses and delivers hardware, software and services. Networks business also includes recurring revenue streams such as customer support and software revenues. Mobile Networks – Cloud Software and Services Offering Business model Cloud Software and Services provides solutions for core networks, business and operational support systems, network design and optimization, and managed network services. Focus is to enable communications service providers (CSPs) to succeed in their transition to cloud operations, intelligent and automated networks. Cloud Software and Services develops, sells, and delivers solutions, and operate customer networks. The software solutions typically include services for deployment projects as well as recurring revenues from software, support and lifecycle management. The Managed Network Services contracts are typically multi-year outsourcing agreements. Enterprise Offering Business model The segment comprises three business areas offering solutions primarily to enterprises: • Enterprise Wireless Solutions, including private wireless networks and wireless WAN (Cradlepoint) pre-packaged solutions. • Global Communications Platform (Vonage), including cloud-based Unified Communications as a Service (UCaaS), Contact Center as a Service (CCaaS) and Communications Platform as a Service (CPaaS). • Technologies and New Businesses, including mobile financial services, security solutions and advertising services. The Enterprise Wireless Solutions portfolio (including Cradlepoint) is sold through a term-based subscription contract, typically a three-year contract with subsequent yearly renewal periods. These subscriptions have up-front payments at the beginning of the contract and at each renewal period. The business model for API services in the Global Communications Platform is transaction based. In this model, Application Service Providers (ASPs) pay a trans- action fee to Ericsson each time an API is used, while the CSPs get paid from Ericsson for providing network capa- bility/capacity. CSPs also benefit from increased revenues from additional traffic going over their network. As the market for Network APIs is still being developed, multiple commercial models may emerge. Other contracts in segment Enterprise such as UCaaS, CCaaS, Private Network etc. are typically as a Service (aaS) or license based, with recurring revenue from soft- ware licenses, services, subscriptions and support. Other Offering Business model Segment Other comprises media businesses as well as other non-allocated business, including Redbee Media, which prepares and distributes live and on-demand video services for broadcasters, sports leagues and CSPs. The segment also includes other non-allocated business. Outsourced broadcast service contracts are generally multi-year agreements while other media contracts are typically aaS or license based with recurring revenue from services, subscriptions and support. Financial report 2023 Business strategy 13 Market areas North America Europe and Latin America Middle East and Africa North East Asia South East Asia, Oceania and India Geographical market areas • North America • Europe and Latin America • Middle East and Africa • North East Asia • South East Asia, Oceania and India Sales in segments Networks and Cloud Software and Services are divided into five geographical market areas. Market areas are responsible for selling and delivering products and solutions that are developed in these business segments, mainly to CSP customers. In line with our strategy, the market areas have the responsibility to ensure that we stay close to our customers while maintaining Group guidelines and governance structures. Market area Other The majority of sales in segment Enterprise is reported in market area Other. To reach the enterprise market with businesses of all sizes, Ericsson has a multi-channel approach, which builds on the enterprise channel from Cradlepoint. This is a global program with access to tens of thousands of reseller partners in Enterprise Wireless Solutions. In order to provide communication APIs and build a Global Net- work Platform, the go-to-market model to reach enterprises, ASPs as well as developers is crucial. The Global Communications Platform (Vonage) has a go-to-market channel with more than 120,000 busi- nesses and a large developer community. IPR licensing revenues from Ericsson’s patents are also reported in Market Area Other. Patents are licensed globally on fair, reason- able, and nondiscriminatory terms (FRAND) to companies that use our technology. The key cellular market segments for our patents are smartphones, Internet of Things (IoT) devices, consumer electronics and automotive. Beyond cellular, other licensed technologies include media technologies and other connectivity standards. Ericsson licenses its patents bilaterally as well as by participating in patent pools covering certain market segments. 14 Letter from the Chair of the Board Financial report 2023 Letter from the Chair of the Board Dear shareholders, The evolving macroeconomic environment and continuing geopolitical disruption is increasing the challenge for global business. We saw tensions rising throughout the Middle East and global transports are being rerouted as attacks by militants are making passage through the Red Sea too dangerous. Russia’s war against Ukraine is showing no sign of ending. Against this backdrop, and with the evolving postures of the world’s largest economies, global business needs to continue adapting to the realities of increasing conflict and geopolitical uncertainties. Ericsson has skilfully minimized the impact of these forces and shown great adaptability to this global volatility. We will continue to diligently execute on our strategic priorities while remaining focused on, and being prepared for, further geopolitical developments. For the Ericsson Board, 2023 was an inten- sive year during which we took many impor- tant actions. To increase efficiency in the Board work and in response to shareholder feedback, we refreshed the board committees, rotated committee members, and reduced the Deputy Board Chair from two to one. I took on the role as Chair in the Remuneration Committee and as Chair in the Finance Committee. To enhance the oversight of the Enterprise business, we expanded and broadened the scope of the former Technology Committee, renaming it the Enterprise Business and Technology Committee. Together with the Chair of the Audit & Compliance Committee we have increased the dialogue with our major Swedish and international shareholders. Strategy It is the Board’s belief that the key to Ericsson’s success is technology leadership and continu- ous innovation. Throughout Ericsson’s history, the expertise and skill of its engineers have formed the cornerstone of the strategy and the foundation for success – driving technology leadership and continuous innovation and shaping the world of communications. Today, Ericsson’s technology leadership is no less important – and perhaps even more important – to its future success as it was when Ericsson was founded. Ericsson’s continued success depends on maintaining our technology lead- ership, and remaining true to its purpose, vision and values. Technology leadership alone is not enough to navigate an uncertain and challenging global environment. Ericsson needs to combine technology and innovation with operational excellence, the best talent and a strong culture. As we face the many complexities of a global technology company – geopolitical change, conflicts, competition, and macroeconomic conditions – Ericsson will define its long-term success through world-leading technology and innovation paired with the right talent, an ethical culture and operational excellence underpinned by world-class governance. Ericsson continues to make substantial contributions to cutting-edge standards and technologies and the Company’s leadership position in 5G is strengthened by its patent portfolio which includes more than 60,000 granted patents. Ericsson is also one of the leading contributors to open, networks stand- ards. This technology leadership is the ultimate competitive advantage as it enables customers to protect their business and drive innovation in the networks. The core of Ericsson continues to be its highly successful mobile infrastructure busi- ness. While focus will continue on our strength in this area, offering high performance, dif- ferentiated networks at the lowest total cost of ownership, critical steps are also being taken to lead the shift to open, cloud-native networks. Open RAN plays an important role in achieving this vision, and Ericsson is leading the industri- alization of Open RAN. In November, Ericsson took an important step in this strategy by exe- cuting a five-year industry-defining agreement with AT&T. This agreement will lead the way in creating an open and programmable network and is anticipated to generate approximately USD 14 billion in revenue. Building on its core business, Ericsson is also expanding into the enterprise space. The enterprise market presents considerable opportunity for Ericsson and its intense focus on this area is an important and long-term strategic step with the potential to reposition the industry. Over the last 30 years, the RAN market has been largely flat, with built-in cyclicality. To find new growth, CSPs need new ways to monetize network investments and APIs are an example of a new area to make this possible while delivering innovative tech- nologies through 5G networks. The acquisition of Vonage, with its platform technology and substantial developer community, plays a key role in the building of this global network platform Capital Structure The Board oversees resource allocation and monitors Ericsson’s capital structure with the aim of safeguarding balance sheet strength. The recent green bond, which is a Euro-denominated, EUR 500 million, 4.5- year bond under its Euro Medium Term Note (EMTN) program, extends the Company’s well- diversified debt maturity profile and reflects the Company’s ambition to integrate sustainability into its funding strategy. The proceeds from this bond will be used to support R&D investments in energy efficiency and will strengthen Ericsson’s competitiveness further. In late 2023, Ericsson recorded a non-cash impairment charge of SEK 32 billion attributed to Vonage, representing 50% of the total amount of goodwill and other intangible assets. The impairment was a consequence of macroeconomic headwinds, including rising interest rates and changing demand trends. These trends have also significantly impacted the market capitalization of Vonage’s publicly traded peers. For the full year of 2023, Ericsson reported net sales of SEK 263 billion and an EBITA margin excluding restructuring charges of 8.1%. Financial report 2023 Letter from the Chair of the Board 15 After a challenging start of the year, free cash flow recovered during the fourth quarter partly driven by seasonality but also strong cash collection and released working capital from conclusion of large roll-out projects. The Board continues to closely monitor cash flow genera- tion with the Company target to generate free cash flow before M&A over net sales of 9–12%, as a critical benchmark. The Board aims for a dividend that is stable to progressive and based on earnings, the financial position and business outlook. For the fiscal year of 2023, the Board of Directors proposes to the Annual General Meeting an ordinary dividend of SEK 2.70 (2.70) per share. Sustainability and corporate responsibility The Board is actively engaged in Ericsson’s ongoing transformation. Strong corporate governance, with the Board’s strategic and independent oversight, enables Ericsson to execute effectively and responsibly on its strategy while promoting transparency and maintaining high ethical standards. Ericsson’s culture continues to be enhanced while imple- menting improved governance and embedding integrity throughout the organization. In March 2023, the Company reached a resolution (Plea Agreement) with the U.S. Department of Justice (DOJ) regarding non-criminal breaches of its 2019 Deferred Prosecution Agreement (DPA). During the year, Nasdaq Stockholm concluded its review of Ericsson’s public disclosure obligations concerning its 2019 internal Iraq investigation report and dismissed the matter, stating that Nasdaq could not conclude that a reasonable investor would have used the content of the report as part of an investment decision. After having reviewed Nasdaq Stockholm’s investigation and conclusion, in June 2023, the Swedish Financial Supervisory Authority also decided to formally close its review of Ericsson’s prior disclosures relating to the 2019 internal Iraq investigation report. In addition, in May of this year, shareholder litigation brought in the U.S. District Court for the Eastern District of New York was dismissed with prejudice, concluding that Ericsson did not violate any disclosure obligation to investors. This shareholder suit is being appealed and will continue to be vigorously defended. In 2023, Ericsson continued to strengthen and enhance its ethics and compliance program and further embed integrity in its ways of working. Preparations are underway to conclude the term of its DOJ resolution and the related monitorship, in June of this year. The Board has been actively involved in overseeing this process. The management team has established an effective compliance program and enhanced internal controls, which have been integrated in the business operations and are subject to rigorous self- monitoring and testing. In parallel, Ericsson has achieved major enhancements in its approach to enterprise risk management and internal accounting controls. A compliance culture is embedded with a keen focus on ethics and integrity that is built to last. We take pride in Ericsson’s long history and believe that it should lead as a positive force in every society in which it operates. In addition to regularly meeting in full, the Board further exercises its oversight responsibilities through its different commit- tees. The Audit and Compliance Committee oversees the Ethics and Compliance (E&C) program and whistleblower procedures, and reviews the Group’s handling of information and cybersecurity, data privacy and its ESG reporting practices. The Finance Committee oversees the promotion of the S&CR strategy into external funding through the application of the Green Financing Framework. As part of its role to prepare and propose rewards and compensation policies that attract and motivate the Company’s executives and align with the Company’s long-term interests, the Remuneration Committee considers the inclusion of E&C criteria in variable compensation plans and monitors the perfor- mance of such criteria. Part of the Enterprise Business and Technology Committee’s role of monitoring the Company’s technology ecosystem, relationships and partnerships involves reviewing matters related to energy and sustainability. The Board is of the unanimous view that Ericsson’s actions in 2023 have strengthened the Company and delivered meaningful value for Ericsson’s customers and all its stakehold- ers. We are confident that the strong ethical culture, continued commitment to robust gov- ernance and risk management, and increased focus on operational excellence will enhance Ericsson’s competitive advantage and strengthen both its performance and global position, creating connections that make the unimaginable possible. People and talent attraction People define success and Ericsson focuses on attracting and retaining the best talent glob- ally. Ericsson sets and maintains high expecta- tions for all employees, continuously reviewing and developing performance management efforts. The competition for talent remains intense. Implementing the Company’s strategy requires the Company to attract, retain, and motivate the right talent and offer competi- tive remuneration. The Board’s remuneration philosophy and principles focus on long-term shareholder value creation in line with strategic goals. At the AGM for 2022, new guidelines for remuneration to group management were resolved, clarifying the mandate, for us as a Board, to define meaningful short-term variable compensation STV targets linked to the business plan. Our goal is to encourage behavior consistent with Ericsson’s culture and core values and allow the Company to have a competitive total compensation mix of fixed and variable pay and benefits. Concluding remarks This year has been a very busy year for Ericsson, and for me, as I now close my first year as Chair of the Board. While it has been a challenging year on many fronts, I am pleased by the way Ericsson has managed the head- winds and a difficult market situation. Looking ahead, we still see an uncertain environment. The mobile infrastructure market continues to be challenged and the macro environment continues to be volatile. However, the Board has full confidence in Ericsson’s ability to execute on its strategy and drive technology leadership. On behalf of the Board, I want to conclude by offering my sincere thanks to Börje Ekholm, the management team and all employees for all their efforts and contributions throughout 2023. Jan Carlson Chair of the Board 16 Board of Directors’ report Financial report 2023 Board of Directors’ report Contents 16 Business in 2023 17 Financial highlights 20 Business results – Segments 22 Business results – Market areas 23 Corporate governance 24 Material contracts 24 Risk management 24 Sourcing and supply 25 Sustainability and Corporate Responsibility 25 Legal proceedings 26 Group structure 26 Parent Company 26 Share information 26 Proposed disposition of earnings 27 Guidelines for Remuneration to Group Management 30 Events after the reporting period 31 Board assurance 2023 highlights – Net sales decreased by −3% to SEK 263.4 (271.5) billion. Sales adjusted for comparable units and currency declined by −10%. – Gross income decreased to SEK 101.6 (113.3) billion due to sales and margin decline in Networks. – EBIT (loss) amounted to SEK −20.3 (27.0) billion, impacted by a non-cash goodwill impair- ment charge of SEK −31.9 billion attributed to Vonage. EBIT margin was −7.7% (10.0%). EBIT margin excluding restructuring charges was −5.2% (10.1%). – Net income (loss) was SEK −26.1 (19.1) billion. Earnings per share (EPS) diluted was SEK −7.94 (5.62). – EBITA amounted to SEK 14.9 (29.1) billion with an EBITA margin of 5.7% (10.7%). EBITA margin excluding restructuring charges was 8.1% (10.9%). – Cash flow from operating activities was SEK 7.2 (30.9) billion. Free cash flow before M&A amounted to SEK −1.1 (22.2) billion. Cash and cash equivalents was SEK 35.2 (38.3) billion on December 31, 2023. Net cash was SEK 7.8 (23.3) billion on December 31, 2023. – The Board of Directors proposes a dividend for 2023 of SEK 2.70 (2.70) per share to the AGM. Net sales SEK billion 300 250 200 150 100 50 0 271.5 263.4 232.3 2021 2022 2023 Net sales EBIT (loss) and EBIT margin SEK billion 35 30 25 20 15 10 5 0 -5 −10 −15 −20 −25 13.7% 31.8 27.0 10.0% −7.7% −20.3 2023 2021 2022 EBIT (loss) EBIT margin % 14 12 10 8 6 4 2 0 −2 −4 −6 −8 −10 Business in 2023 Net sales decreased by −3% to SEK 263.4 (271.5) billion. Sales adjusted for comparable units and currency declined by −10%. Networks sales declined by −11% to SEK 171.4 billion, primarily due to reduced capex investments in North America after record-high investments in 2021 and 2022. Sales adjusted for comparable units and currency decreased by −15%. Cloud Software and Services sales increased by 5% to SEK 63.6 billion, driven by 5G momentum. This increase was, however, partly offset by sales decline in Managed Network Services business as a result of descoping and contract exits. Sales adjusted for comparable units and currency increased by 1%. Enterprise sales increased by 76% to SEK 25.7 (14.6) billion, driven by the acquired Vonage business. Sales adjusted for compa- rable units and currency increased by 11%, driven mainly by Enterprise Wireless Solutions. Gross income decreased to SEK 101.6 (113.3) billion, due to a decline in Networks, while gross income increased in Cloud Software and Services, and in Enterprise. Gross income was impacted by SEK −2.8 (−0.2) billion of restructuring charges. Gross margin decreased to 38.6% (41.7%), driven by the business mix shift in Networks in 2023. Operating expenses increased to SEK −90.2 (−83.0) billion, including restructuring charges of SEK −3.7 (−0.2) billion and a currency effect of SEK −1.6 billion. Research and development (R&D) expenses increased by SEK −3.4 billion to SEK−50.7 billion, including restructuring charges of SEK −2.4 (−0.1) billion and a cur- rency effect of SEK −0.9 billion. R&D expenses increased in segment Enterprise. Selling and administrative (SG&A) expenses increased by SEK −3.6 billion to SEK −39.3 billion, including restructuring charges of SEK−1.3 (−0.2) billion and a currency effect of SEK −0.7 billion. The increase is related to investments in Enterprise Wireless Solutions as well as the impact of the full-year consolidation of Vonage. Other operating income and expenses decreased by SEK −28.6 billion to SEK −31.9 billion driven by a non-cash goodwill impair- ment charge of SEK −31.9 billion, attributed to Vonage. EBIT (loss) was SEK −20.3 (27.0) billion, primarily due to the decline in Other operating income and expenses, as well as the lower operating income. The number of employees decreased to 99,952 (105,529). The decrease was mainly related to cost-reduction activities. Cash flow from operating activities was SEK 7.2 (30.9) billion. Free cash flow before M&A amounted to SEK −1.1 (22.2) billion. Free cash flow was impacted by lower business volumes and lower EBIT coupled with a nega- tive cash flow impact from working capital due to market mix changes towards contracts with longer order-to-cash cycles. Net cash on December 31, 2023 was SEK 7.8 (23.3) billion. Financial report 2023 Board of Directors’ report 17 IPR licensing revenues SEK billion 12 10 8 6 4 2 0 11.1 10.4 8.1 2021 2022 2023 IPR revenues Software, hardware and services: share of Group sales % 100 80 60 40 20 0 20% 20% 22% 46% 44% 38% 34% 36% 40% 2021 2022 2023 Software Hardware Services Gross margin and restructuring charges SEK billion 10 43.5% 43.4% 41.8% 41.7% 0.3 2021 0.2 2022 8 6 4 2 0 % 50 40 30 20 10 0 39.6% 38.6% 2.8 2023 Restructuring charges in cost of sales Gross margin Gross margin excluding restructuring charges Financial highlights Net sales Sales decreased by −3% to SEK 263.4 (271.5) billion. Networks sales decreased by SEK −22.0 billion to SEK 171.4 billion. Cloud Software and Services sales increased by SEK 3.1 billion to SEK 63.6 billion. Enterprise sales increased by SEK 11.1 billion to SEK 25.7 billion. Sales in segment Other decreased by SEK −0.4 billion to SEK 2.5 billion. Sales adjusted for compara- ble units and currency decreased by −10%. IPR licensing revenues increased to SEK 11.1 (10.4) billion, primarily as a result of 5G license renewals, partly offset by expiring license agreements. Networks sales declined by −11% and accounted for 65% (71%) of Group sales. Sales in market area South East Asia, Oceania and India grew by 82%, primarily as a result of 5G contracts in India, while segment sales in mar- ket area Middle East and Africa grew by 10%. Sales declined in the other three market areas, most notably in North America where sales declined by −46% YoY, as operators reduced capex investments after record-high spending in previous years. Networks sales adjusted for comparable units and currency decreased by −15% YoY. Segment Cloud Software and Services sales grew by 5% and accounted for 24% (22%) of Group sales. Sales grew in four of the five market areas. Cloud Software and Services sales adjusted for comparable units and cur- rency increased by 1% YoY. Segment Enterprise sales grew by 76% and accounted for 10% (5%) of Group sales. Sales were primarily driven by the full-year consolidation of the acquired Vonage business. Enterprise sales adjusted for comparable units and currency grew by 11% YoY. Segment Other sales decreased by −14%, mainly due to the divestment of IoT in 2022. The share of hardware in the Group sales mix was 38% (44%), software 22% (20%) and services 40% (36%). Gross income Gross income decreased to SEK 101.6 (113.3) billion with a gross margin of 38.6% (41.7%). Gross income and gross margin were impacted by lower sales and gross margin in Networks, as a result of reduction in capex spend by several operators and a business mix shift from front-runner markets to large deploy- ments in other geographies. Gross income and gross margin improved in Cloud Software and Services, while gross income improved in Enterprise. Gross income excluding restructur- ing charges declined to SEK 104.4 (113.5) billion, resulting in a gross margin of 39.6% (41.8%). Research and Development (R&D) expenses R&D expenses increased to SEK −50.7 (−47.3) billion, including restructuring charges of SEK −2.4 (−0.1) billion and a negative cur- rency effect of SEK −0.9 billion. R&D expenses increased in segment Enterprise, as a result of continued investments in Enterprise Wireless Solutions, as well as the impact of the full-year consolidation of Vonage. Selling and Administrative (SG&A) expenses SG&A expenses increased to SEK −39.3 (−35.7) billion, including restructuring charges of SEK −1.3 (−0.2) billion and a negative cur- rency effect of SEK −0.7 billion. SG&A expenses increased in segment Enterprise through continued investments in the go-to-market activities in Enterprise Wireless Solutions as well as the impact of the full-year consolida- tion of Vonage. Other operating income and expenses Other operating income and expenses was SEK −31.9 (−3.3) billion. In 2023, a non-cash goodwill impairment charge of SEK −31.9 billion attributed to Vonage, was recognized. The impairment did not impact EBITA. 2022 was impacted by a provision of SEK −2.3 billion related to the DPA breach resolution with the U.S. Department of Justice, including expenses for the extended monitorship, and by SEK −1.0 billion due to charges related to the divestment of IoT and other portfolio adjustments. Restructuring charges Restructuring charges increased to SEK −6.5 (−0.4) billion as a result of cost-reduction activities. Earnings before ﬁnancial items and income tax (EBIT) (loss) EBIT decreased to SEK –20.3 (27.0) billion, mainly due to the goodwill impairment attrib- uted to Vonage, as well as the lower operating income. EBIT margin was –7.7% (10.0%). EBIT was positively impacted by lower vari- able incentive accruals YoY, resulting in lower cost of sales and operating expenses. EBIT in 2022 was impacted by charges of SEK −5.5 billion, primarily associated with provisions related to the DPA breach resolution with the U.S. Department of Justice and market exits as well as charges related to the divestment of IoT and exit of subscale agreements and prod- uct offerings in Cloud Software and Services. EBIT excluding impairment of goodwill and restructuring charges decreased to SEK 18.1 (27.4) billion YoY with an EBIT margin of 6.9% (10.1%). 18 Board of Directors’ report Financial report 2023 Net income (loss) and EPS diluted SEK SEK billion 10 8 6 4 2 0 −2 −4 −6 −8 −10 −12 % 16 14 12 10 8 6 4 2 0 25 20 15 10 5 0 −5 −10 −15 −20 −25 −30 23.0 19.1 6.81 5.62 −7.94 −26.1 2023 2021 2022 Net income (loss) EPS diluted EBITA and EBITA margin SEK billion 40 35 30 25 20 15 10 5 0 14.3% 33.3 10.7% 29.1 5.7% 14.9 2021 2022 2023 EBITA EBITA margin Free cash ﬂow SEK billion 40 30 20 10 0 −10 −20 −30 −40 −50 −60 32.1 22.2 0.1 −1.1 −2.1 2021 −51.7 2022 2023 Free cash ﬂow before M&A M&A Working capital days Days 100 90 80 70 60 50 94 88 71 65 93 85 69 61 92 80 75 63 2021 2022 2023 Working capital days Days sales outstanding Inventory days Payable days Financial income and expenses, net Financial income and expenses, net declined to SEK −3.0 (−2.4) billion, mainly due to the impact from increased market interest rates. The currency hedge effect impacted financial income and expenses, net by SEK −0.2 (−0.9) billion. The USD weakened against the SEK between December 31, 2022 (SEK/USD rate 10.38) and December 31, 2023 (SEK/USD rate 10.01). Taxes Taxes were SEK −2.8 (−5.5) billion. The effec- tive tax rate for the full year, excluding the impairment of goodwill related to Vonage, was 32%. The tax rate in 2023 was negatively impacted by lower Group income compared with prior years, reducing the ability to utilize previously impaired withholding tax assets. The tax rate in 2022 was 22%, positively impacted by utilization of previously impaired withholding tax assets in Sweden. Net income (loss) Net income declined to SEK −26.1 (19.1) billion, impacted by impairment of goodwill of SEK −31.9 billion, lower gross income of SEK −9.1 billion, restructuring charges of SEK −6.5 billion and by higher operating expenses related to segment Enterprise. The negative impact was partly offset by lower tax of SEK 2.7 billion YoY. EPS diluted decreased to SEK −7.94 (5.62). Earnings before interest, income tax and amortizations (EBITA) As a result of lower operating income, EBITA declined to SEK 14.9 (29.1) billion with an EBITA margin of 5.7% (10.7%). EBITA was positively impacted by lower variable incentive accruals YoY, resulting in lower cost of sales and operating expenses. EBITA in 2022 was impacted by charges of SEK −5.5 billion. EBITA excluding restructuring charges declined to SEK 21.4 (29.5) billion with an EBITA margin of 8.1% (10.9%). Employees The number of employees on December 31, 2023, was 99,952 (105,529), a total decrease of −5,577 employees in 2023. The decrease was mainly related to cost-reduction activities. Cash ﬂow Cash ﬂow from operating activities Cash flow from operating activities decreased to SEK 7.2 (30.9) billion as a result of lower business volumes and lower EBIT, coupled with a negative cash flow impact from working capital due to market mix changes towards contracts with longer order-to-cash-cycles, partly offset by a reduction in inventories. The change in business mix resulted in an increase in working capital days to 80 (69) days with increased accounts receivable days of sales outstanding to 63 (61) days, slightly decreased inventory turnover days to 92 (93) days and decreased payable days to 75 (85) days. Cash flow in the year was impacted by cash outlays of SEK −2.9 billion related to restructuring. Free cash ﬂow Free cash flow before M&A declined to SEK −1.1 (22.2) billion, mainly due to lower cash flow from operating activities. Free cash flow before M&A as a percentage of sales was −0.4% (8.2%). Capex net and other invest- ing activities was SEK −5.4 (−6.1) billion. Repayment of lease liabilities was SEK −2.9 (−2.6) billion. Cash ﬂow from investing activities Cash flow from investing activities was SEK −8.7 (−34.4) billion, of which M&A activi- ties were SEK −2.1 (−51.7) billion, including the divestment of IoT and acquisition of Ericom. In 2022, Ericsson acquired Vonage with a pur- chase price paid of SEK 51.3 billion. Free cash flow after M&A was SEK −3.2 (−29.5) billion. Cash ﬂow from ﬁnancing activities Cash flow from financing activities was SEK 1.0 (−15.9) billion, including repayment of lease liabilities. The net impact on cash flow from issuance and repayment of borrowings was SEK 11.8 billion. During the year, divi- dends of SEK −9.1 (−8.4) billion were paid to shareholders. Financial position Gross cash was stable YoY at SEK 54.7 (56.2) billion with increased borrowings compensat- ing for negative free cash flow after M&A. Net cash was SEK 7.8 (23.3) billion. Liabilities for post-employment benefits decreased to SEK 26.2 (27.4) billion. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish Government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liabilities for post-employment benefits would have been approximately SEK 14.1 billion, which is SEK 12.1 billion lower than the reported liabilities. The average maturity of long-term borrow- ings was 3.7 years as of December 31, 2023, a decrease from 3.8 years 12 months earlier. In 2023, Ericsson established a new revolving credit facility of USD 1.0 billion, of which USD 0.4 billion was utilized as of year-end. During the year, Ericsson also increased the borrow- ings by SEK 2.0 billion under the commercial paper program. Furthermore, Ericsson signed Financial report 2023 Board of Directors’ report 19 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. Capital expenditures For 2023, capital expenditure was SEK 3.3 (4.5) billion, representing 1.3% of sales. Expenditures are largely related to test sites and equipment for R&D, network opera- tions centers and manufacturing and repair operations. Annual capital expenditures are normally around 2% of sales. This corresponds to the need for keeping and maintaining the current capacity level. The Board of Directors reviews the Company’s investment plans and propos- als. As of December 31, 2023, no material land, buildings, machinery or equipment were pledged as collateral for outstanding indebtedness. Capital expenditures 2021–2023 SEK billion Capital expenditures Of which in Sweden Share of annual sales 2023 3.3 1.2 1.3% 2022 4.5 1.7 1.6% 2021 3.7 1.5 1.6% Capitalized development expenses Capitalized development expenses increased to SEK −2.2 (−1.7) billion, primarily due to 5G development projects and development projects in Global Communications Platform (Vonage). Return on Capital Employed SEK billion 250 200 150 100 50 0 −50 −100 −150 18.4% 184.3 202.9 14.0% 178.0 −10.7% 2021 2022 2023 % 20 16 12 8 4 0 −4 −8 −12 Capital employed end of period Return on Capital Employed Cash position SEK billion 100 80 60 40 20 0 −20 −40 97.6 65.8 56.2 54.7 23.3 7.8 −27.4 −26.2 −36.1 2021 2022 2023 Gross cash Net cash Liability for post employment beneﬁts Long-term debt maturity, Parent Company 1) SEK billion 10 8 6 4 2 0 2.8 3.1 8.3 2.0 5.5 2.7 1.5 5.5 1.5 0.0 5.5 1.1 2024 2025 2026 2027 2028 2029 2030 Notes and bonds Nordic Investment Bank European Investment Bank Swedish Export Credit Corporation 1) Nominal amounts using FX rates per year end 2023. two 7-year loan agreements, one with the European Investment Bank of USD 273 million and one with the Nordic Investment Bank of USD 107 million. In addition, Ericsson issued a EUR 500 million green bond maturing in May 2028. The bond was issued under Ericsson’s Green Financing Framework. The proceeds from the bond and the two bilateral loans will be used to finance parts of Ericsson’s R&D investments in wireless technology between 2023 and 2025 and are linked to the Company’s long-term sustainability targets. Ericsson has an unutilized revolving credit facility of USD 2.0 billion, linked to long-term sustainability targets. Credit ratings and outlooks have been unchanged during the year. Standard & Poor’s (S&P) and Fitch both have a long-term BBB– rating on Ericsson with developing outlook from S&P and a stable outlook with Fitch. Moody’s has a Ba1 rating with stable outlook. The capital turnover remained stable at 1.4 (1.4) times with decreased net sales offset by lower capital employed due to goodwill impair- ment related to Vonage. Return on Capital Employed (ROCE) decreased to −10.7% (14.0%) as a result of negative EBIT. Research and Development, patents and licensing In 2023, R&D expenses amounted to SEK −50.7 (−47.3) billion. R&D expenses were impacted by SEK −2.4 (−0.1) billion of restructuring charges and by a currency effect of SEK −0.9 billion. The number of R&D employees was 28,219 (29,304) and the number of granted patents amounted to more than 60,000. Seasonality Group sales, income and cash flow from opera- tions 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 the Company’s customers. Most recent three-year average seasonality Share of annual Group sales Sequential change, Networks sales Sequential change, Cloud Software and Service sales First quarter Second quarter Third quarter Fourth quarter 22% 24% 25% 30% −25% 8% 1% 19% −34% 13% 3% 33% 20 Board of Directors’ report Financial report 2023 Sales split per segment Business results – Segments Networks 65% Cloud Software and Services 24% 10% Enterprise 1% Other Networks SEK billion 200 150 100 50 0 193.5 167.8 171.4 22.2% 19.9% 37.3 38.5 11.3% 19.4 2021 2022 2023 % 32 24 16 8 0 Net sales EBIT EBIT margin Cloud Software and Services SEK billion 70 60 50 40 30 20 10 0 −10 −20 60.5 63.6 56.2 −2.2 −1.7 −4.0% −2.8% −0.2 −0.3% 2021 2022 2023 Net sales EBIT (loss) EBIT margin % 35 30 25 20 15 10 5 0 −5 −10 Cloud Software and Services Cloud Software and Services represented 24% (22%) of Group net sales in 2023. Cloud Software and Services provides solutions for core networks, business and operational sup- port systems, network design and optimiza- tion, and managed network services. The focus is to enable CSPs to succeed in their transition to cloud operations, intelligent and automated networks. Net sales Sales increased by 5% to SEK 63.6 (60.5) billion in 2023. Sales growth in market areas North East Asia, South East Asia, Oceania and India as well as in North America was driven by 5G momentum but was partly offset by sales decline in the Managed Network Services business as a result of descoping and contract exits. Sales adjusted for comparable units and currency increased by 1%. Gross income Gross income increased by SEK 2.0 billion to SEK 22.1 billion, with a gross margin of 34.7% (33.2%). Gross margin was positively impacted by improved delivery performance. Gross income excluding restructuring charges increased by SEK 2.7 billion to SEK 22.9 billion, with a gross margin of 36.0% (33.3%). EBIT (loss) and EBITA (loss) EBIT was SEK −0.2 (−1.7) billion with an EBIT margin of −0.3% (−2.8%), while EBITA was SEK −0.2 (−1.6) billion with an EBITA margin of −0.3% (−2.6%). EBIT and EBITA were negatively impacted by restructuring charges of SEK −1.9 (−0.1) billion. EBIT and EBITA were positively impacted by sales growth, gross margin improvement and reductions in operating expenses. EBIT and EBITA in 2022 were impacted by SEK −0.8 billion of charges for exit of subscale agreements and product offerings. EBIT excluding restructuring charges was SEK 1.7 (−1.6) billion with an EBIT margin of 2.7% (−2.6%). EBITA excluding restructur- ing charges was SEK 1.7 (−1.5) billion with an EBITA margin of 2.7% (−2.4%). Strategy execution continues, avoiding subscale busi- ness, accelerating automation capabilities and continuing the focus on commercial discipline. Results will vary between quarters. Networks Networks represented 65% (71%) of Group net sales in 2023. Networks offers multi- technology-capable Radio Access Network (RAN) solutions for all network spectrum bands, including purpose-built and Open RAN-prepared high-performance hardware and software. The offerings also include a Cloud RAN portfolio, a transport portfolio, passive and active antenna solutions and a complete service portfolio, covering network deployment and support. Net sales Sales decreased by −11% in 2023 to SEK 171.4 (193.5) billion, primarily due to a sales decline in market area North America of −46% as operators reduced capex investments after record-high investments in 2021 and 2022. The decline was partly offset by sales growth of 82% in South East Asia, Oceania and India, driven by 5G contracts in India. Sales adjusted for comparable units and currency decreased by −15%. Gross income Gross income decreased by −21% to SEK 68.0 (86.4) billion while gross margin decreased to 39.6% (44.6%). Gross margin was nega- tively impacted by the business mix shift in 2023. This shift was caused by a slowdown in investments in 5G front-runner markets, predominately North America, combined with large deployments with an initial dilutive effect on margins in other geographies. Gross income was further impacted by restructuring charges. Gross income excluding restructuring charges decreased by −19% to SEK 69.9 (86.5) billion with a gross margin of 40.8% (44.7%). EBIT and EBITA EBIT decreased to SEK 19.4 (38.5) billion with an EBIT margin of 11.3% (19.9%). EBITA decreased to SEK 19.5 (38.7) billion with an EBITA margin of 11.4% (20.0%) as a result of lower gross income due to lower sales and the business mix shift. The decline in gross income was partly offset by cost-reduction activities as well as lower variable incentive accruals YoY, positively impacting cost of sales and operat- ing expenses. EBIT and EBITA were impacted by restructuring charges of SEK −4.4 (−0.1) billion. EBIT excluding restructuring charges decreased to SEK 23.8 (38.7) billion with an EBIT margin of 13.9% (20.0%), while EBITA excluding restructuring charges declined to SEK 23.9 (38.8) billion with an EBITA margin of 14.0% (20.1%). Financial report 2023 Board of Directors’ report 21 Enterprise SEK billion 30 20 10 0 −10 −20 −30 −40 25.7 14.6 5.5 −1.8 −4.5 −32.2% −30.6% −38.3 −148.9% 20211) 20221) 2023 % 120 80 40 0 −40 −80 −120 −160 Net sales EBIT (loss) EBIT margin 1) Financial information has been restated for 2021 and 2022, due to the divestment of the IoT business that was moved from segment Enterprise to segment Other in 2023. Other SEK billion 4 2 0 −2 −4 −6 −8 2.7 3.0 2.5 −1.5 −5.3 −1.2 −45.5% −54.0% −180.3% 20211) 20221) 2023 Net sales EBIT (loss) EBIT margin % 100 50 0 −50 −100 −150 −200 1) Financial information has been restated for 2021 and 2022 due to the divestment of the IoT business that was moved from segment Enterprise to segment Other in 2023. Other Segment Other represented 1% (1%) of Group net sales in 2023. Segment Other includes the media business and other non-allocated business. Net sales Sales decreased by −14% to SEK 2.5 (3.0) billion. Sales declined mainly due to the divestment of IoT. Sales in the media business remained stable. Gross income Gross income decreased YoY by SEK −0.2 billion to SEK −0.5 (−0.3) billion. The decrease is a result of impairment of fixed assets in the media business of SEK −0.4 billion. Gross income excluding restructuring charges decreased to SEK −0.5 (−0.2) billion. EBIT (loss) and EBITA (loss) EBIT and EBITA were SEK −1.2 (−5.3) billion. The loss improved YoY, due to a provision taken in 2022 of SEK −2.3 billion related to the DPA breach resolution with the U.S. Department of Justice, including expenses for the extended monitorship, and due to charges of SEK −1.0 billion related to the divestment of IoT and other portfolio adjustments. Furthermore, there was an impact of SEK −0.9 billion for a provision in 2022, related to an exit from operations in Russia and a market exit cost of SEK −0.2 billion. The EBIT and EBITA losses in 2023 are a result of the impairment in the media business, the divestment of IoT and revaluation of Ericsson Ventures portfolio. EBIT and EBITA excluding restructuring charges were SEK −1.2 (−5.2) billion. Enterprise Segment Enterprise represented 10% (5%) of Group net sales in 2023. The segment comprises three business areas offering solu- tions primarily to enterprise customers: Global Communications Platform (Vonage), including cloud-based Unified Communications as a Service (UCaaS), Contact Center as a Service (CCaaS) and Communications Platform as a Service (CPaaS); Enterprise Wireless Solutions, including private wireless networks and wire- less WAN (Cradlepoint) pre-packaged solu- tions; and Technologies and New Businesses including mobile financial services, security solutions and advertising services. Net sales Sales increased by 76% to SEK 25.7 (14.6) billion, driven by the acquired Vonage busi- ness. Sales adjusted for comparable units and currency increased by 11% YoY, driven mainly by Enterprise Wireless Solutions. Gross income Gross income increased to SEK 12.0 (7.1) billion, driven mainly by the Vonage acquisi- tion as well as growth in Enterprise Wireless Solutions and in Technologies and New Businesses. Gross margin decreased to 46.7% (48.6%), mainly due to the dilutive effect of Vonage. Gross income excluding restructuring charges was SEK 12.0 (7.1) billion, with a gross margin of 46.7% (48.6%). EBITA (loss) EBITA was SEK −3.3 (−2.7) billion. The decline is due to increased growth investments in Enterprise Wireless Solutions, partly offset by the Global Communications Platform contri- bution. EBITA (loss) excluding restructuring charges was SEK −3.1 (−2.7) billion. EBIT (loss) EBIT was SEK −38.3 (−4.5) billion. EBIT excluding impairment of goodwill and restruc- turing charges was SEK −6.3 (−4.4) billion. 22 Board of Directors’ report Financial report 2023 Sales split per market area Business results – Market areas 25% Europe and Latin America North America 22% South East Asia, Oceania and India 20% 9% North East Asia 9% Middle East and Africa 15% Other Middle East and Africa Sales increased by 5% to SEK 23.7 billion, pri- marily driven by new 5G investments in some Middle East countries and market share gains in certain markets. Sales adjusted for compara- ble units and currency increased by 1%. Other Market area Other primarily includes IPR licensing revenues and a major part of segment Enterprise. Sales grew by 41% to SEK 38.2 billion, primarily as a result of the full- year consolidation of Vonage, as well as higher sales in Enterprise Wireless Solutions and higher IPR licensing revenues. Sales adjusted for comparable units and currency in market area Other increased by 3%. Europe and Latin America Sales decreased by −3% to SEK 64.9 billion, with declines in both Europe and Latin America following high investment levels in 2022. The sales decline in Europe was partly offset by market share gains. Sales adjusted for compa- rable units and currency decreased by −9%. North America Sales decreased by −38% to SEK 59.2 billion as a result of reduced capex spend and inventory levels following high investment levels in 2021 and 2022. Sales adjusted for comparable units and currency decreased by −41%. South East Asia, Oceania and India Sales increased by 62% to SEK 53.3 billion, driven by sales increases in India on the back of substantial market share gains. The market grew significantly in India in 2023. Sales adjusted for comparable units and currency increased by 61%. North East Asia Sales decreased by −10% to SEK 23.9 billion as operators in several markets have finalized the first build-out phase of 5G. Sales adjusted for comparable units and currency decreased by −9%. Reported sales per market area – 2023 compared with 2022 SEK 271.5 billion −38% SEK 263.4 billion +41% +62% −10% −3% +5% 2022 North America North East Asia Europe and Latin America Middle East and Africa Other1) 2023 South East Asia, Oceania and India –41% –9% –9% +1% +61% +3% Sales adjusted for comparable units and currency, growth/decline 1) Market area Other primarily includes IPR licensing revenues and principally all sales from segment Enterprise. Financial report 2023 Board of Directors’ report 23 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. Ericsson’s Corporate Governance Ericsson is committed to maintaining the highest standards of corporate governance and has estab- lished a corporate governance framework that: – Empowers the business, enabling strategic execution and operational excellence; – Promotes and facilitates effective oversight across the organization by the Board of Direc- tors (Board), the President and CEO, the Execu- tive Team and at all levels of the organization; – Ensures high-quality decision-making with clear accountabilities at all levels; and – Instills a robust approach to risk management to effectively identify, manage and mitigate risks and capture opportunities. Ericsson prioritizes an integrity-led culture and compliance with law in everything it does, driv- ing integrity into and across the organization. Ericsson’s governance framework guides its people while building on their strengths – fostering a culture of transparency, collaboration and open dialogue, and ethical business decisions, strong risk management, and cross-functional coordination. Ericsson has implemented practices and procedures that establish clear rules of govern- ance, ranging from matters requiring approval of the Company’s shareholders and members of its Board, to conflicts of interest policies and director and management duties and obligations. More information can be found at https://www.ericsson. com/en/about-us/corporate-governance. Key Corporate Governance Actions in 2023 Ericsson’s intensive work on strengthening and simplifying its corporate governance practices continued throughout 2023, and was pursued in concert with further improvements to its ethics and compliance (E&C) program. In 2023, Ericsson: – Fully embedded the Material Group Risk Pro- tocol and Business Risk Committee (BRC) into the Group’s governance and risk management frameworks, as described further below. – Introduced clarified Group governance and operating principles, to be rolled out in early 2024. – Refreshed and clarified the Company’s Code of Business Ethics (CoBE), which is being re-launched in early 2024. – Updated, streamlined and clarified the Group’s key policies and other guidance documents, including those on contracting, compliance, allegation assessment, investigations and remediation, and human rights. This work will continue into 2024. – Continued to embed various aspects of its compliance program into business operations, through a close partnership with the compli- ance function and stakeholders across the entire organization (as described further below in the Ethics & Compliance section). – Continued to strengthen performance- management at all levels of the organization while also implementing strong remediation measures where misconduct has occurred. Throughout 2023, the BRC, comprising senior executives and chaired by the CLO and CFO, has provided an important forum for escalating and analyzing material risks across the Group, provid- ing appropriate oversight and driving mitigation and accountability by senior executives. The BRC has been particularly impactful in strengthening Ericsson’s approach to managing high levels of risk associated with certain jurisdictions. The heads of each market area have been conducting holistic, ongoing risk assessments of the countries in their purview, and material risks that exist or arise are regularly reviewed and monitored. The BRC applies a “heightened scrutiny” approach in evaluating and mitigating these types of risks, and the organiza- tion has implemented various actions to address these risks, ranging from enhanced contractual protections, changes to the scope or nature of operations, or a decision to responsibly exit the relevant jurisdiction or customer relationship. Ericsson believes that driving integrity into day- to-day decision-making requires constant focus to ensure that compliance processes and related controls are fit for purpose and that they are con- tinuously tested and refined. Through an initiative referred to as the Business Critical Transformation, discussed in greater detail in the Ethics & Compli- ance section of the Corporate Governance report, Ericsson embedded improved anti-corruption controls into its operations and managerial deci- sions, and further remediated the business process issues that were, in the past, a contributing factor in incidents of misconduct. Ericsson combined this work with rigorous testing of the E&C program’s effectiveness, which includes clear expectations for management to understand and address testing results and process adherence within the areas of their responsibility. This approach positions Ericsson to conclude its monitorship related to the DOJ resolution in June 2024, but more importantly, creates a foundation for a well embedded, self- sustaining ethics and compliance program. Continued compliance with the Swedish Corporate Governance Code The Swedish Corporate Governance 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 is committed to complying with best-practice corporate governance standards on a global level. Ericsson does not report any deviations from the rules of the Code in 2023. Business integrity A key step taken in 2023 to enhance the E&C program was to clarify and enhance the Company CoBE, a core governance pillar. The updated CoBE sets out the Company’s expectations, principles and requirements for employees as they conduct business. It provides the framework for ethical decision-making, and guides employees in making decisions and managing risk as they engage with colleagues, customers, partners, owners, and other stakeholders. It further promotes and supports Ericsson’s Speak-Up Culture and prohibits retali- ation for speaking up in any form. All employees are required to confirm their understanding of the CoBE on a regular basis. Full adherence to the letter and spirit of the CoBE framework is expected from all employees to ensure that the Company’s decisions and actions are ethical, and that Ericsson is acting as a positive global force. Board of Directors At the Annual General Meeting (AGM), held on March 29, 2023, Jan Carlson was elected new Chair of the Board, and Jon Fredrik Baksaas, Jan Carlson, Carolina Dybeck Happe, Börje Ekholm, Eric A. Elzvik, Kristin S. Rinne, Helena Stjernholm and Jacob Wallenberg were re-elected as mem- bers of the Board. Jonas Synnergren and Christy Wyatt were elected as new Board members. Ulf Rosberg (replacing Anders Ripa on July 4, 2023), Kjell-Åke Soting and Annika Salomonsson (replacing Torbjörn Nyman on July 31, 2023) were appointed as employee representatives by the unions, with Loredana Roslund, Frans Frejdestedt and Stefan Wänstedt as deputies. Management Börje Ekholm has been President and CEO of the Group since 2017. The President and CEO is sup- ported by 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 promote compliance with applicable laws, listing requirements, governance codes and corporate responsibilities. Discharge from liability vote at the Annual General Meeting 2023 Under the Swedish Companies Act, the AGM of Swedish limited liability companies should include a vote on whether to discharge each individual member of the Board and the President and CEO from legal liability for the previous financial year. If shareholders representing at least 10% of the Com- pany’s share capital vote against this discharge from liability, an action for damages on behalf of the Company may be brought within one year. A vote against the discharge from liability does not predicate or in itself lead to legal action. At Ericsson’s AGM on March 29, 2023, Ericsson shareholders resolved to discharge Carolina Dybeck Happe and Annika Salomonsson from liability for the financial year 2022. Shareholders representing more than 85% of the Company’s share capital also voted for discharging from liabil- ity each of the other members of the Board and the Company’s President and CEO for the financial year 2022 and more than 10% voted against such discharging. At the same AGM, Ericsson’s share- holders voted in favor of re-electing the individuals nominated for Board (including the President and CEO). The Company’s external auditor, Deloitte, recommended that shareholders vote in favor of discharging liability. 24 Board of Directors’ report Financial report 2023 Shareholder engagement As part of Ericsson’s ongoing investor engagement, and in addition to the ordinary course communica- tion between investors and Ericsson’s Investor Relations and management team throughout the year, during the second half of 2023, the Chair of Ericsson’s Board, Jan Carlson, and the Chair of the Audit and Compliance Committee, Eric Elzvik, had dialogues with shareholders and held Company- initiated substantive discussions, with share- holders representing more than 55% of shares outstanding. These have been focused on a broad range of governance topics with the objective to understand and receive shareholder feedback and respond to questions. These discussions centered on the thoughtful, multi-year transformation of the Company’s governance, culture and E&C program alongside sustainability and remunera- tion programs, among other topics. The Audit and Compliance Committee’s (ACC) strong oversight of the compliance function, and the frequent and in depth reporting on the effectiveness of the E&C program to the ACC, was also highlighted during these discussions. Feedback from these discussions has been positive with shareholders appreciating the infor- mation and noting the transformation of the E&C program. Other key topics included: – significant improvements made to Ericsson’s governance framework which has included enhanced Board and management oversight and strong, proactive risk management; – the effective integration of enhanced controls into Ericsson’s operations and decision- making; – emphasis on driving continuous cultural change with a focus on embedding integrity into Ericsson’s ways of working, fostering a culture of transparency, collaboration and open dialogue, sound and ethical business decisions, strong risk management; – implementation of employee training programs and providing Speak-Up resources to drive an integrity-led culture; and – significant testing of the E&C program’s effec- tiveness, simplification of policies, procedures and tools, an improved understanding of managing risks in business interactions, and digitalization. Shareholders also expressed the desire for more frequent disclosure of these E&C improvements, which the Company has strived to meet through periodic updates, presentations and dialogue with investors and other stakeholders. Shareholders also communicated support for Ericsson’s overall executive remuneration philosophy (which now includes an integrity based component; more information on this can be found in the second paragraph of “Integrating Compliance into the Business and Testing Effectiveness” in the Corpo- rate Governance report). The feedback gathered during these conversa- tions helped inform the Board’s discussions on remuneration and other topics for 2024. In direct response to shareholder feedback, the 2024 remu- neration package for the President and CEO will now include a Short-Term Variable (STV) incentive component which aligns with the Company’s Remuneration Guidelines and is described in further detail in the Remuneration Report. 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 President is included in the “Remuneration report” appended to this Financial Report. Guidelines for remuneration to Group management The current Guidelines for remuneration to Group management were adopted by the AGM 2023, included on pages 27–29. Long-Term Variable Compensation Program I 2023 (LTV 2023) for the Executive Team Ericsson has share-based Long-Term Variable Compensation Programs in place for the Executive Team. LTV I 2023 for the Executive Team was appro- ved by the AGM 2023. Details of LTV I 2023 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 produc- tion facilities, purchase contracts for outsourced manufacturing, R&D and IT operations as well as the purchase of components for Ericsson’s own manufacturing. Ericsson is party to certain agreements, 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 financing agreements and certain license agreements. However, considering, among other things, Ericsson’s strong financial position, the Company believes that none of the agreements currently in effect would in and of itself entail any material consequence for Ericsson due to a change in control of the Company Risk management Ericsson maintains a robust approach to risk management. The Company has made significant strides in 2022 and 2023 toward ensuring that strategic, external and internal risks are properly identified, assessed, internally reported, escalated, and effectively addressed. Ensuring accountability for risk management at all levels of the organiza- tion is a key priority. Recent enhancements include the adoption of the Material Group Risk Protocol (MGRP), which governs the analysis and escala- tion of material risks across the Group, and the establishment of the BRC. Ericsson’s Enterprise Risk Management (ERM) framework aims to strengthen the Group’s governance by integrating risk management with strategy-setting and execu- tion. The MGRP, the BRC and Ericsson’s Enterprise Risk Management (ERM) framework operate in a complementary manner to provide the Board and management with a consolidated view of Group risk. The ERM framework is designed to promote bottom-up identification and management of risks that present uncertainty in Ericsson’s ability to achieve its long- and short-term objectives. The framework applies across Ericsson’s opera- tions, covering business areas, market areas and group functions. The framework establishes an enterprise-level baseline for transparency and risk oversight. Each manager is charged with addressing risks within their respective area of responsibility. If the identified risk is judged to be material from a group perspective, MGRP sets out clear requirements for how material risks should be escalated to the Ericsson Business Risk committee (BRC). The BRC is responsible for the oversight of the material risks on group level, and to support the responsible manager with risk assessment, treatment, and escalation as appropriate. The BRC also performs oversight of the overall risk profile of the Ericsson group. The Group Risk Management function (GRM) drives the ERM strategy execution and the ERM operations at the Group level. The head of each group function, market area and business area oversee risk management of the respective unit and establish and maintain processes to identify, assess and escalate risks with one or more enter- prise risk managers within the unit. The Chief Legal Officer (CLO) and the Chief Financial Officer (CFO) are co-chairs of the BRC, and also oversee Group- level ERM activities. The BRC permanently comprises of the CLO, CFO, and Head of Group Risk management. In addition, the BRC comprises of an additional 2–4 members of the Executive Management of the Company, to be agreed and appointed by the co-chairs. In 2023, these members consisted of the Chief Technology Officer, Chief Security Officer, Chief Marketing and Communications Officer and Chief Operating Officer. The CEO, Chief Compli- ance Officer and Head of Corporate and Govern- ment Investigations are invited to the Committee on an as-needed basis. The Board of Directors and the Audit and Compliance Committee have oversight responsi- bility for the Company’s risk management, its ERM framework and the MGRP. 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 judg- ments,” F1 “Financial risk management,” F4 “Inter- est bearing liabilities” and the chapter Risk factors. Sourcing and supply Ericsson’s hardware largely consists of electronics. For manufacturing, Ericsson purchases customized and standardized components and services from global, regional and local suppliers. Ericsson negotiates global supply agreements with its primary suppliers and endeavors to have alternative supply sources to avoid single source Financial report 2023 Board of Directors’ report 25 supply situations, as a means to build resilience in the supply chain. Ericsson made or was responsible for any pay- ments to any terrorist organization. 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 outsourced through production part- ners. Ericsson has internal production sites in USA, Estonia, China, Brazil, Romania and Mexico. Ericsson requires its suppliers to comply with principles set forth in the Ericsson Code of Conduct for Business Partners (CoC). This is enforced through agreements, regular risk assessments, auditing and related actions. The CoC sets forth standards on environmental management, human and labor rights, occupational health and safety, business ethics and anti-corruption as fundamen- tal 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 environmen- tal legislation, permits and reporting requirements. Where the requirements in the CoC are higher than local standards and laws, the requirements of the CoC should be applied. Ericsson works to reduce environmental impacts and emissions in the supply chain and has set a target that the 350 high emitting and strategic suppliers should set emission reduction targets that align with the Paris Agreement’s goal of limiting global warming to 1.5 °C. Sustainability and Corporate Responsibility Sustainability and corporate responsibility are integral parts of Ericsson’s strategy and culture and are embedded across its operations to drive business transformation and create value for the Company’s stakeholders. Ericsson is committed to creating positive impacts for and reducing risks to the Company and its stakeholders throughout its operations and value chain through its technology, solutions and the expertise of its employees. Ericsson strives to minimize the negative impacts of its operations and extended value chain, through circular approaches and by continu- ously working to improve the environmental and energy performance of its products. In accordance with the Swedish Annual Accounts Act, Ericsson has prepared a separate sustainability report titled “Sustainability and Corporate Responsibility Report 2023”, which is appended to the Annual Report. Legal proceedings involving governmental authorities In February 2022, Ericsson publicly disclosed that an internal investigation in 2019 included a review of the conduct of Ericsson employees, vendors and suppliers in Iraq during the period between 2011 to 2019. The investigators could not determine the ultimate recipients of any payments, nor identify that any Ericsson employee was directly involved in financing terrorist organizations. This 2019 internal investigation did not conclude that In March 2022, the DOJ informed Ericsson it had determined that, before entering into the DPA, the Company provided insufficient information to the DOJ about the Company’s 2019 internal investigation into conduct in Iraq. The DOJ also determined that the Company breached the DPA by failing to inform the DOJ about the investigation after entering into the DPA. In June 2022, the SEC informed Ericsson that it opened an investigation concerning matters described in the Company’s 2019 internal Iraq investigation report. Under Ericsson’s consent judgment with the SEC, Ericsson is permanently enjoined from violating the anti-bribery, books and records and internal controls provisions in the Foreign Corrupt Practices Act (FCPA). Violations of the injunction, consent judgment or securities law could subject the Company to new civil and crimi- nal penalties as well as new enforcement actions. On March 2, 2023, the Company reached a resolution (Plea Agreement) with the DOJ regard- ing the non-criminal breaches of the DPA. Under the Plea Agreement, Ericsson pleaded guilty to previously deferred charges relating to conduct that occurred prior to 2017. In addition, Ericsson agreed to pay a fine of USD 206.7 million. The entry of the Plea Agreement brought the DPA to an end. The Company’s internal investigation and its cooperation with authorities in relation to the matters discussed in the 2019 internal Iraq inves- tigation report remain open and ongoing and are not covered by the Plea Agreement. On May 24, 2023, Nasdaq Stockholm con- cluded its review of Ericsson’s public disclosure obligations concerning its 2019 internal Iraq investigation report and dismissed the matter, stating that Nasdaq could not conclude that a reasonable investor would have used the content of the report as part of an investment decision. After having reviewed Nasdaq Stockholm’s investigation and conclusion, on June 8, 2023, the Swedish Financial Supervisory Authority also decided to formally close its review of Ericsson’s prior disclosures relating to the 2019 internal Iraq investigation report. With respect to the matters discussed in the 2019 internal Iraq investigation report, the Com- pany continues to investigate these matters and related matters in full cooperation with the DOJ and the SEC. As additional information continues to be identified and evaluated during the ongoing investigation in continued cooperation with the DOJ and the SEC, it is expected that there will not be any conclusive determinations on the outcome of any such investigation until the process is com- pleted. The scope and duration of the remaining process remain uncertain. 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 inves- tigation. 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 from iBall. Ericsson has challenged CCI’s jurisdiction in these cases before the Delhi High Court. On July 13, 2023, the Division Bench of the Delhi High Court found that in this instance the CCI has no power to conduct the pending investigations against Ericsson. The CCI has appealed this order to the Supreme Court of India. 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 facili- tate the authority’s assessment and conclusions. In case of adverse findings, SAMR has the power to impose behavioral and financial remedies. Legal proceedings not involving governmental authorities On March 3, 2022, Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed on behalf of purchasers of Ericsson ADS in the United States, in the United States District Court for the Eastern District of New York. An amended complaint was filed on September 9, 2022, which added a former Ericsson officer as a defendant. The amended complaint alleged violations of United States securities laws, in connection with allegedly false and misleading statements princi- pally concerning the Company’s adherence with its compliance and anti-corruption policies and obligations and the conduct of its business in Iraq. On May 24, 2023, the court granted Ericsson’s motion to dismiss and dismissed the case with prejudice, concluding that Ericsson did not violate any disclosure obligation to investors. On June 23, 2023, plaintiff filed a notice of appeal to the United States Court of Appeals for the Second Circuit. Oral argument is scheduled for March 22, 2024. All briefing has been submitted, and the matter is pending with the Second Circuit court. Ericsson will continue to vigorously defend this matter. In August 2022, a civil lawsuit was filed in the United States District Court for the District of Columbia against Telefonaktiebolaget LM Ericsson and Ericsson Inc. (collectively, “Ericsson”). The lawsuit was brought by US military service mem- bers, employees of US government contractors and other civilians who were killed or injured in terrorist attacks in Iraq, Afghanistan and Syria from 2005 to 2021, as well as by their family members. The lawsuit asserts claims against Ericsson under the US Anti-Terrorism Act alleging that Ericsson made payments that ultimately aided the terrorist organizations that committed, planned or author- ized the attacks. In November 2022, Ericsson filed a motion to dismiss the complaint. On December 20, 2022, plaintiffs filed an amended complaint, which added additional plaintiffs, including a plaintiff injured in Turkey, and also named Ericsson AB (collectively with Ericsson, the “Ericsson corpo- rate defendants”), CEO Börje Ekholm and a former employee (who has not been served with process) as additional defendants and also asserted 26 Board of Directors’ report Financial report 2023 additional allegations and claims. In March 2023, the Ericsson corporate defendants and Mr. Ekholm filed motions to dismiss the amended complaint. Plaintiffs filed their oppositions to defendants’ motions to dismiss the amended complaint in June 2023, and defendants filed reply briefs in support of their motions to dismiss in July 2023. All briefing has been submitted, and the matter is pending with the District Court. All defendants will continue to vigorously defend this matter. In February 2024, a second civil lawsuit alleg- ing violations of the US Anti-Terrorism Act was filed in the United States District Court for the District of Columbia. The lawsuit was filed by the same law firm and involves substantially similar factual allegations and claims as those made in the Anti-Terrorism Act lawsuit originally filed in August 2022, and similarly names the same Ericsson corporate defendants, CEO Börje Ekholm and a former employee as defendants. The new lawsuit was brought by additional US military service members, employees of US government contrac- tors and other civilians who were killed or injured in terrorist attacks in Iraq, Afghanistan, Syria, Turkey, Niger, and France from 2005 to 2021, as well as by their family members. None of the defendants have been served. The defendants will vigorously defend this matter. Beginning on August 4, 2023, a number of civil lawsuits have been filed against Telefonaktiebola- get LM Ericsson in Solna District Court, Sweden. As of February 27, 2024, 90 claimants have filed suit, which are coordinated and financed by a UK-based litigation funder. The claimants consist of a group of non-Swedish funds and financial institutions that allegedly are or have been shareholders of the Company. Their damages claims are primarily based on alleged inadequate disclosure of the contents of the Company’s 2019 internal Iraq investigation report. Ericsson intends to file its statement of defense on March 8, 2024 and intends to vigorously defend itself against the claims. On October 11, 2023, Ericsson commenced patent infringement proceedings against Lenovo (Beijing) Limited (“Lenovo”) in the Eastern District of North Carolina (EDNC). In the course of the pro- ceedings, Ericsson seeks declarations that Lenovo has lost its right to enforce Ericsson’s FRAND contracts as third-party beneficiaries and that Ericsson has complied with its FRAND commit- ments and with the ETSI IPR Policy. Ericsson has also commenced patent infringement proceedings against Lenovo at the United States International Trade Commission and in other jurisdictions (Brazil and Colombia). In return, Lenovo has filed lawsuits against Ericsson in the High Court of Justice in the UK, at the Unified Patent Court, and has applied for an anti-suit injunction in the EDNC. On 14 February 2024, the EDNC denied the anti-suit injunction. This decision has been appealed. In addition to the proceedings discussed above, the Company is, and in the future may be, involved in various other regulatory investigations, lawsuits, claims and proceedings incidental to the ordinary course of business. Group structure The Ericsson group is comprised of more than 200 legal entities, and approximately 100 branch offices, with representation in approximately 140 countries. Parent Company Telefonaktiebolaget LM Ericsson´s (the Parent Company) business consists mainly of corporate management, holding company functions, internal banking activities and customer credit management. As of December 31, 2023, the Parent Company had 3 (3) branch offices. Financial information Income after financial items was SEK –0.7 (18.4) billion. The Parent Company had no sales in 2023 or 2022 to subsidiaries, while 31% (29%) of total purchases of goods and services were from subsidiaries. Major changes in the Parent Company’s finan- cial position for the year included: – Current and non-current liabilities to subsidiar- ies decreased by SEK 46.8 billion to SEK 47.6 billion. – Current and non-current receivables from subsidiaries decreased by SEK 6.3 billion to SEK 17.8 billion. – Shareholder contributions to subsidiaries of SEK 11.9 billion. – Impairment of investments in subsidiaries and associates of SEK 32.8 billion. – Dividends from subsidiaries and associated companies of SEK 32.5 billion. – Gross cash decreased by SEK 6.5 billion to SEK 34.9 billion. At the end of the year, gross cash: cash and cash equivalents plus interest-bearing securities (current and non-current), amounted to SEK 34.9 (41.4) billion. At the end of the year, non-restricted equity amounted to SEK 27.6 (37.8) billion, and total equity amounted to SEK 75.8 (85.9) billion. Share information As of December 31, 2023, the total number of shares issued was 3,344,151,735, of which 261,755,983 were Class A shares, each carrying one vote, and 3,082,395,752 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 23.75% of the votes (7.98% of the shares), AB Industrivärden with approximately 15.11% of the votes (2.6% of the shares) and AMF Tjänstepension and AMF Fonder AB with approxi- mately 4.52% of the votes (2.14% of the shares). No treasury shares were distributed to emp- loyees or sold in 2023. The holding of treasury stock on December 31, 2023 was 14,009,306 Class B shares. The quotient value of these shares is SEK 5.00, totaling SEK 70.0 million, representing 0.4% of capital stock, and the purchase price amounts to SEK 70.0 million. The Annual General Meeting (AGM) 2023 resolved to issue 10 million Class C shares for the Long-Term Variable Compensation Program (LTV) II 2023, 2022 and 2021 for Ericsson’s executive team and other executives. In accordance with an authorization from the AGM, in the second quarter 2023, 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 5.00, totaling SEK 50.0 million, representing less than 0.3% of capital stock, and the acquisition cost was SEK 50.2 million. Proposed disposition of earnings The Board of Directors proposes a dividend of SEK 2.70 (2.70) 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 1.35 per share with the record date April 5, 2024 (payment date April 10, 2024), and SEK 1.35 per share with the record date October 2, 2024 (payment date October 7, 2024). For the Parent Company’s treasury shares of Class B, no dividend will be distributed. The Board of Directors proposes that earnings be distributed as follows (assuming that no treas- ury shares are held on the record date): Amount to be paid to the shareholders Amount to be retained by the Parent Company Total non-restricted equity of the Parent Company SEK 9,029,209,684 SEK 18,555,216,849 SEK 27,584,426,533 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 Compa- nies Act of the Parent Company’s and the Group’s need for financial resources as well as the Parent Company’s and the Group’s liquidity, financial posi- tion in other respects and long-term ability to meet their commitments. The Group reports an equity ratio of 32.8% (38.1%) and a net cash amount of SEK 7.8 (23.3) billion. The Parent Company’s non-restricted equity would have been SEK 2.91 billion lower if assets and liabilities 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 results 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’ assessment that the proposed dividend is well balanced 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. Financial report 2023 Board of Directors’ report 27 Guidelines for Remuneration to Group Management approved by the Annual General Meeting of shareholders 2023 Introduction These Guidelines for Remuneration to Group Man- agement (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 2027. For employments 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 accom- modated to the largest extent possible. These Guidelines do not cover remuneration resolved by the general meeting of shareholders, such as long- term variable compensation programs (“LTV”). Objective These Guidelines aim to ensure alignment with the current remuneration philosophy and practices applicable for the Company’s employees based on the principles of competitiveness, fairness, trans- parency, 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 for Ericsson. To conduct its responsibilities, the Committee considers trends in remuneration, legislative changes, disclosure rules and the general global executive remuneration environment. Before preparing salary adjustment recommendations for the President and CEO for resolution by the Board and approving any salary adjustments for the other members of Group Management the Committee reviews salary survey data, Company results and individual performance. No employee is present at the Committee’s meetings when issues relating to their own remuneration are being discussed. Simi- larly, 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 Committee 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 pack- age may consist of fixed salary, short-term and long-term variable compensation (STV and LTV), pension and other benefits. Below are the key components of remuneration of Group Management covered by these Guidelines, including why they are used, their operation, oppor- tunity levels and related performance measures. In addition, the AGM has resolved and may in the future decide to implement LTV for Group Manage- ment. 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 com- petitive market through performance-based share related incentives and to encourage 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 resolved separately by the AGM. 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 competi- tive remuneration. These Guidelines 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 short and long-term business plan approved by the Board of Directors. Targets will include financial targets at Group, Business Area and/or Market Area level. In addition, strategic tar- gets, operational targets, employee engagement targets, customer satisfaction targets, sustain- ability and corporate responsibility targets or other lead indicator targets will be applied as deemed appropriate by the Remuneration Committee. The Company operates long-term variable compensation programs for the Group Manage- ment as approved by the Annual General Meeting (“AGM”). Such decisions are not covered by these Guidelines. Details of Ericsson’s current remunera- tion 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. 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 Management. 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 Committee 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 resolution by the Board proposals to the AGM on Guidelines for Remuneration to Group Manage- ment at least every fourth year and on Long-term Variable compensation programs 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. 28 Board of Directors’ report Financial report 2023 Element and purpose Description 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 compensation in a predictable format Short-term variable compensation (STV) STV is a variable compensation plan that shall be measured against targets derived from the business plan 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 opportunity for performance at ﬂexible cost to the Company. 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 retirement arrangements in line with local market practices. 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 compensation in a predictable format. 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. 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., no more than 300% of annual ﬁxed salary). Any existing long-term variable pay-opportunity should be taken into account when determining target opportunity for STV (and vice versa). The STV shall be based on measures linked to the annual business plan and to Ericsson’s long-term strategy and sustainability. Measures will include ﬁnancial targets at Group, Business Area and/or Market Area level (for relevant members of Group Management). Other potential measures may include strategic targets, operational targets, employee engagement targets, customer satisfaction targets, sustainability and corporate responsibility targets or other lead indicator targets. 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 when applicable. 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. The Board and the Committee shall have the right in their discretion to: – deny, in whole or in part, the entitlement 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 restatement of ﬁnancial results due to incorrect ﬁnancial reporting, non-compliance with a ﬁnancial reporting requirement etc. 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 contribution plans unless the individual concerned is subject to deﬁned beneﬁt pension plan under mandatory collective bargaining agreement provisions or mandatory local regulations. For Group Management members in Sweden: – pension beneﬁts shall be granted based on a deﬁned contribution plan except where law or collective bargaining agreement require a deﬁned beneﬁt pension. The pensionable salary shall include ﬁxed salary and, where required by law or collective bargaining agreement, any variable salary. – a supplementary pension contribution can be paid amounting to a maximum of 35% of the ﬁxed annual salary that exceeds any cap in collective pension plans, unless a higher percentage is obliged by law or collective bargaining agreement. – the supplementary pension contribution can, as an alternative to a pension contribution, be exchanged for a cash payment provided that it is done in a way that is cost-neutral for the Company. Members of Group Management employed outside of Sweden may participate in the local market competitive pension arrangements that apply in their home countries in line with what is offered to other employees in the same country. 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 costneutral basis In all cases the annual pension contributions shall be capped at 70% of annual ﬁxed salary. Beneﬁts offered shall consider 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, wellbeing assistance, medical and other insurance beneﬁts, tax support, travel, Company gifts and any international relocation and/or commuting beneﬁts if the indi- vidual is required to relocate and/or commute internationally to execute the requirements of the role. 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. Financial report 2023 Board of Directors’ report 29 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 Man- agement in line with market practice and the higher levels of total compensation applicable at that level. 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. In any case, the fixed salary paid during the notice period plus any severance pay payable will not together exceed an amount equivalent to the individual’s 24 months fixed salary unless otherwise determined by local legislation or collective bargaining agreements. 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 calcu- lated 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 relations 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 Com- merce. Irrespective of the outcome of any arbi- tral award, the Company may, in the relation between the parties, carry all fees and expenses charged by 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 reason- able 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 skills, experience and caliber of the candidate, – 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 reloca- tion allowance is required, – the circumstances of the candidate, – the current external market and salary practice, – internal relativities. 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 pen- sion and benefit entitlements and any outstand- ing 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. 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, – 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. 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 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. 30 Board of Directors’ report Financial report 2023 Ericsson appoints Chaﬁc Nassif Head of Market Area North East Asia On January 29, 2024, Ericsson announced that Chafic Nassif has been appointed as Head of Market Area North East Asia and Senior Vice President, effective February 26, 2024. Effective the same date, he will become a member of the Executive Team, reporting to the President and CEO. Chafic Nassif succeeds Chris Houghton who was appointed Chief Operating Officer of Ericsson in November 2023. Chafic Nassif has held several executive and management positions within Ericsson across various business segments and geographies world- wide. Most recently, he was the Head of Ericsson’s Customer Unit Latin America North within Market Area Europe & Latin America. Before joining Ericsson, Mr. Nassif was active in tech start-ups, as well as IT and business consulting leadership roles in Europe. Ericsson to utilize mandate to transfer shares Ericsson’s (NASDAQ:ERIC) annual general meet- ing on March 29, 2023 authorized the Company’s board of directors to resolve on the transfer of the Company’s own shares. Under the authoriza- tion the Company may, in conjunction with the delivery of vested shares under the long-term variable compensation programs 2019 and 2020 (“LTV 2019” and “LTV 2020”), prior to the annual general meeting in 2024, decide to retain and sell no more than 60% of the vested shares of series B in the Company in order to cover for the costs for withholding and paying tax and social security liabilities on behalf of the participants in relation to the performance share awards for remittance to revenue authorities. Ericsson decided, on February 16, 2024, to utilize the authorization to transfer shares for these purposes. The transfer of own shares may take place on Nasdaq Stockholm during the period from and including February 16, 2024 up to the annual general meeting 2024 at a price within the price interval registered from time to time. Ericsson currently holds 12,932,223 shares of series B in the Company and the maximum number of shares that may be transferred on Nasdaq Stockholm pursuant to the decision to utilize the authorization amounts to 774,889 shares of series B in the Company. Events after the reporting period Ericsson appoints Lars Sandström as Chief Financial Ofﬁcer On January 23, 2024, Ericsson announced the appointment of Lars Sandström as its new Chief Financial Officer, Senior Vice President, and Head of Group Function Finance. Mr. Sandström will replace Carl Mellander, whose departure Ericsson announced in April 2023. Mr. Sandström will join Ericsson on April 1, 2024, and will be based in Sweden. Lars Sandström is currently Chief Financial Officer and member of the executive team at Getinge, a listed global leader within Medtech. Mr. Sandström has been with Getinge since 2017 and holds a Master of Science in Business Adminis- tration. Mr. Sandström has previously held several senior positions at AB Volvo, Scania and Swedish Orphan Biovitrum AB. Ericsson announces changes to the Executive Team On January 24, 2024, Ericsson announced that Senior Vice president Niklas Heuveldop had been appointed as new Head of Business Area Global Communications Platform and CEO of Vonage as of February 1, 2024. Mr. Heuveldop, who has been a member of the Executive Team and headed Market Area North America since 2017, succeeds Rory Read, who will leave Ericsson at the end of the first quarter 2024. Yossi Cohen replaces Mr. Heuveldop as Head of Market Area North America, effective February 1, 2024. Effective the same date, he will become a member of the Executive Team, reporting to the President and CEO. Mr. Cohen previously has been Head of Strategy, Technology, Marketing and Business Development within Market Area North America. Financial report 2023 Board of Directors’ report 31 Board assurance The Board of Directors and the President and CEO declare that the consolidated financial statements 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 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 companies included in the Group. Stockholm, March 5, 2024 Telefonaktiebolaget LM Ericsson (publ) Org. no. 556016-0680 Jan Carlson Chair of the Board Jacob Wallenberg Deputy Chair of the Board Jon Fredrik Baksaas Member of the Board Carolina Dybeck Happe Member of the Board Kristin S. Rinne Member of the Board Börje Ekholm President, CEO and Member of the Board Eric A. Elzvik Member of the Board Helena Stjernholm Member of the Board Jonas Synnergren Member of the Board Christy Wyatt Member of the Board Ulf Rosberg Member of the Board Annika Salomonsson Member of the Board Kjell-Åke Soting Member of the Board Our audit report has been submitted on March 5, 2024 Deloitte AB Thomas Strömberg Authorized Public Accountant 32 Consolidated ﬁnancial statements with notes Financial report 2023 Consolidated ﬁnancial statements with notes Contents Consolidated ﬁnancial statements 33 33 34 35 36 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 39 39 45 47 47 50 50 50 A Basis of presentation A1 Material accounting policies A2 B B1 B2 B3 B4 Critical accounting estimates and judgments Business and operations Segment information Net sales Expenses by nature Other operating income and expenses 50 51 51 51 51 52 52 54 55 56 56 58 58 58 59 59 60 61 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 62 62 67 67 68 69 69 73 75 81 82 82 83 84 84 85 85 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 2023 Consolidated ﬁnancial statements 33 Consolidated ﬁnancial statements Notes B1, B2 F1 B4 B4 B1, E3 B1 F2 F2 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 (loss) before ﬁnancial items and income tax (EBIT) Financial income Financial expenses Net foreign exchange gains/losses Income (loss) after ﬁnancial items Income tax Net income (loss) Net income (loss) attributable to: Owners of the Parent Company Non-controlling interests Other information Average number of shares, basic (million) Earnings (loss) per share attributable to owners of the Parent Company, basic (SEK) Earnings (loss) per share attributable to owners of the Parent Company, diluted (SEK) Consolidated 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 Remeasurements of deﬁned beneﬁt pension plans including asset ceiling Revaluation of borrowings due to change in credit risk Cash ﬂow hedge reserve Gains/losses arising during the period Transfer to goodwill 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 2023 263,351 –161,749 101,602 –50,664 –39,255 –268 –90,187 994 –32,859 124 –20,326 2,145 –4,118 –1,020 –23,319 –2,785 –26,104 –26,446 342 3,330 –7.94 –7.94 2022 271,546 –158,251 113,295 –47,298 –35,692 –40 –83,030 1,231 –4,493 17 27,020 778 –1,930 –1,259 24,609 –5,497 19,112 18,724 388 3,330 5.62 5.62 2021 232,314 –131,565 100,749 –42,074 –26,957 –40 –69,071 1,526 –1,164 –260 31,780 691 –1,674 –1,547 29,250 –6,270 22,980 22,694 286 3,329 6.82 6.81 2023 –26,104 2022 19,112 2021 22,980 905 –667 – – –114 754 1,090 –2,375 59 –10 –380 –738 –26,842 –27,233 391 10,669 1,030 3,703 –3,677 –3,067 –701 280 7,130 –85 49 87 15,418 34,530 34,274 256 3,537 31 – – –682 –542 –96 3,342 46 28 126 5,790 28,770 28,694 76 34 Consolidated ﬁnancial statements Financial report 2023 Consolidated balance sheet SEK million Assets Non-current assets Intangible assets Capitalized development expenses Goodwill Customer relationships, IPRs 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 2023 Dec 31 2022 4,678 52,944 22,667 12,195 6,320 1,150 2,091 1,347 9,931 6,350 22,375 3,705 84,570 26,340 14,236 7,870 1,127 2,074 415 9,164 6,839 19,394 142,048 175,734 36,073 7,999 42,215 5,570 6,395 11,962 9,584 35,190 154,988 297,036 16,722 24,731 6,759 50,461 98,673 –1,265 97,408 26,229 4,927 3,880 29,218 5,220 755 70,229 6,779 17,655 2,235 34,416 27,768 3,561 36,985 129,399 297,036 45,846 9,843 48,413 4,955 7,973 9,688 8,736 38,349 173,803 349,537 16,672 24,731 8,201 85,210 134,814 –1,510 133,304 27,361 3,959 4,784 26,946 6,818 745 70,613 7,629 5,984 2,486 42,251 38,437 2,640 46,193 145,620 349,537 Financial report 2023 Consolidated ﬁnancial statements 35 Consolidated 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 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 Notes 2023 2022 2021 H3 C2 H3, E2 H3, E2 C1 F4 F4 F4 H3 –26,104 51,710 25,606 9,304 –1,708 6,333 –10,037 1,308 –7,088 –10,111 –11,999 1,218 –2,280 –5,368 7,177 –3,297 163 –1,515 –625 –2,173 –15,304 11,739 2,299 –8,713 19,728 –7,884 – –9,104 –2,857 1,124 1,007 –2,630 –3,159 38,349 35,190 19,112 17,638 36,750 –7,740 –1,732 4,766 –1,995 2,339 5,794 –813 619 344 –1,250 –5,600 30,863 –4,477 249 –51,995 307 –1,720 –13,582 40,541 –3,720 –34,397 10,755 –16,029 – –8,415 –2,593 352 –15,930 3,763 –15,701 54,050 38,349 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 36 Consolidated ﬁnancial statements Financial report 2023 Consolidated statement of changes in equity Equity and Other comprehensive income (loss) 2023 SEK million January 1, 2023 Net income (loss) 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 Share issue, net Repurchase of own shares Long-term variable compensation plans Dividends paid 2) Transactions with non-controlling interest December 31, 2023 Capital stock 16,672 – Additional paid in capital 24,731 – Other reserves 8,201 – Retained earnings 85,210 –26,446 Stockholders’ equity Non-controlling interests 134,814 –26,446 –1,510 342 Total equity 133,304 –26,104 – – – – – – – – – – – 50 – – – – – – – – – – – – – – – – – – – – – –667 137 754 1,090 –2,425 59 –10 –380 –1,442 –1,442 – – – – – 16,722 24,731 6,759 906 – –251 – – – – – – 655 906 –667 –114 754 1,090 –2,425 59 –10 –380 –787 –25,791 –27,233 –1 – – – – 50 – – – 49 391 – –50 82 –8,991 1 50,461 50 –50 82 –8,991 1 98,673 – – – –113 –33 –1,265 905 –667 –114 754 1,090 –2,375 59 –10 –380 –738 –26,842 50 –50 82 –9,104 –32 97,408 1) Changes in translation reserves include changes regarding translation of goodwill in local currency of SEK –77 million (SEK 5,070 million in 2022 and SEK 2,646 million in 2021), and realized gains/losses net from divested/liquidated companies, SEK 59 million (SEK –85 million in 2022 and SEK 46 million in 2021). 2) Dividends paid per share amounted to SEK 2.70 (SEK 2.50 in 2022 and SEK 2.00 in 2021). Financial report 2023 Consolidated ﬁnancial statements 37 Equity and Other comprehensive income (loss) 2022 SEK million January 1, 2022 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 Cash ﬂow hedge reserve Gains/losses arising during the period Transfer to goodwill 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 Transfer to retained earnings Transactions with owners Long-term variable compensation plans Dividends paid Transactions with non-controlling interest December 31, 2022 Capital stock 16,672 – Additional paid in capital 24,731 – Other reserves 454 – Retained earnings 66,918 18,724 Stockholders’ equity Non-controlling interests 108,775 18,724 –1,676 388 Total equity 107,099 19,112 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 1,030 3,703 –3,677 –970 –701 280 7,273 –85 49 87 6,989 6,989 758 – – – 16,672 24,731 8,201 10,654 – – – –2,093 – – – – – – 8,561 27,285 –758 89 –8,325 1 85,210 10,654 1,030 3,703 –3,677 –3,063 –701 280 7,273 –85 49 87 15,550 34,274 – 89 –8,325 1 134,814 15 – – – –4 – – –143 – – – –132 256 – – –90 – 10,669 1,030 3,703 –3,677 –3,067 –701 280 7,130 –85 49 87 15,418 34,530 – 89 –8,415 1 –1,510 133,304 38 Consolidated ﬁnancial statements Financial report 2023 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 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 Transactions with owners Sale of own shares Long-term variable compensation plans Dividends paid 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 16,672 24,731 454 Financial report 2023 Notes to the consolidated ﬁnancial statements 39 Notes to the consolidated ﬁnancial statements Section A – Basis of presentation A1 Material 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 provides mobile connectivity solutions to telecom operators and to enterprise customers in various sectors. The consolidated financial statements for the year ended December 31, 2023, have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (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 rapportering), and the Swedish Annual Accounts Act. For the financial reporting of 2023, the Company has applied IFRS as issued by the IASB (IFRS effective as per December 31, 2023). There is no difference between IFRS effective as per December 31, 2023, 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 5, 2024. 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, 2023, and the preparations for the adoption of new standards and interpre- tations not adopted in 2023 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 or loss (FVTPL), financial instruments classified as fair value through other comprehensive income (FVOCI) and plan assets related to defined benefit pension plans. 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. Basis of consolidation and composition of the Group Subsidiaries are all companies for which Telefonaktiebolaget LM Ericsson, directly or indirectly, is the parent. To be classified as a parent, Telefonaktie- bolaget 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. The Company is comprised 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 transaction. For practical reason, the Company uses the closing rate of the previous month end as approximation of the prevailing rate at the date of transaction, although spot rate is used for material one-off transaction where appropriate. Foreign currency 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. Translations of 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. This includes goodwill arising on the acquisition of a foreign entity. Period income and expenses for each income statement are translated at period average exchange rates. For practical reason, the Company uses the closing rate of the previous month end as approximation of the period average exchange rates. All resulting net exchange differences are recognized as a separate compo- nent of Other comprehensive income (OCI), i.e. changes in translation reserves. The Company is continuously monitoring the economies with high inflation, the risk of hyperinflation and their 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 The following paragraphs describe the types of contracts, when performance 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. Standard products and services Products and services are classified as standard solutions as 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 purchase orders to commit to purchases of products and services over the duration of the agreement. For hardware sales, transfer of control and revenue recognition, is usually deemed to occur when the equipment arrives at the customer site. Standard product software is sold as an on-premises software license that provides a right to use the software as it exists when made available to the 40 Notes to the consolidated ﬁnancial statements Financial report 2023 Note A1, cont’d. customer. Control is transferred when software licenses are provided to the customer at a point in time and already activated, or as a released software version, ready to be activated by the customer at a later stage. Revenue is recognized when control of the software is transferred and unconditional right to payment exists. 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 soft- ware revenue based on usage the revenue is recognized upon usage measure- ment and right to invoice. Revenue for installation and integration services is recognized upon completion of the service. Revenue for recurring services such as customer support and managed services is recognized as the services are delivered, pro-rata over time. Transaction price for managed services contracts may include variable consid- eration that is estimated based on performance and prior experience with the customer. Contracts for standard products and services apply to all segments. Enterprise solutions Enterprise solutions comprise mainly of software platform solutions, delivered as-a-service through a cloud delivery model. These are generally sold as sub- scription contracts with revenue recognized pro-rata over time or on a usage basis. Cloud services allow the customer to use hosted software over the contract period without taking possession of the software. Cloud services are highly integrated with the software and the individual components are not consid- ered distinct, hence all revenue is recognized in the period these services are provided. Contract duration ranges from one month to 5 years. Revenue for fixed fee arrangement is recognized on a pro-rata basis over the contract duration. Revenue for fees based on usage is recognized when usage occurs. Services sold through wholesalers or distributors are assessed for principal or agent relationship. Wholesalers are treated as agents for services that are activated upon delivery of equipment to the end users since the Company still has the primary responsibility to the customers for providing the services, hence revenue (in the gross amount) is recognized rateably from activation until the end of the contract. 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’s 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. 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. Prices on standard products and services contracts are usually fixed, and mostly billed upon delivery of the hardware or software, or completion of installation services. A proportion of the transaction price may be billed upon formal acceptance 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. Standard recurring services contracts are billed over time, often on a quar- terly basis. 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. For Enterprise solution fixed fee contracts, billing is typically in advance, resulting in contract liability. For usage-based contracts, billing is in arrears, resulting in a receivable. Typical credit term is 30 to 45 days. IPR contracts are 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 upfront at com- mencement 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. 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 cus- tomer finance credits. Where 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 over the duration of the financing period. Deferred sales commissions The Company has various incremental commission costs for internal sales personnel and channel partners that relate to the acquisition of customer contracts in the Enterprise segment. These costs are capitalized as deferred contract acquisition costs (within Other non-current assets and Other current assets) and amortized on a straight-line basis to selling and administrative expenses over the contract period. The average contract period is 3 years. The Company expenses sales commissions for commission plans related to customer arrangements with a duration of one year or less. The Company periodically assesses for changes in its business or market conditions which would indicate that its amortization period shall be changed or if there are potential indicators of impairment. Segment reporting The segment presentation, as per each segment, is based on the Company’s accounting policies as disclosed in this note. An operating segment is a com- ponent 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 Company’s segment disclosure about geographical areas is based on the country in which transfer of control of products and services occur. For further information, see note B1 “Segment information.” Inventories Inventories are measured at the lower of cost or net realizable value and using cost formula first-in, first-out (FIFO) related to the Company’s owned produc- tion and weighted average cost formula for externally purchased components within the Company’s production units. The cost of inventories related to work in progress is measured at its individual costs. 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. An inventory obsolescence provision is recog- nized as cost of sales in the income statement when identified. 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. 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) expected to benefit from the future 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 the 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. The after-tax amounts, both in relation to cash flows and discount rate, are applied to the calculation because available models for Financial report 2023 Note A1, cont’d. calculating the discount rate include a tax component. The effect of after-tax discount rates applied by the Company is not materially different from a discounting based on before-tax future cash flows and before-tax discount rates, as required by IFRS. Write-downs of goodwill are reported under Other operating expenses in the income statement. 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 combination such as customer relationships, technology (patents), and trademarks. In addition, there are capitalized development expenses and separately acquired intangible assets, mainly consisting of software. At initial recognition, acquired intangible assets relating to busi- ness 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 losses. Research and develop- ment expenses include amortization and impairment losses mainly relating to capitalized development expenses and technology. Selling and administrative expenses include amortization and impairment losses mainly relating to customer relationships and brands. Amortization is charged to the income statement, on a straight-line basis, over the estimated useful life of each intangible asset. Estimated useful lives for customer relationships acquired through the Vonage acquisition are 6 to 9 years. For other acquired intangible assets, such as patents, other customer relationships, trademarks, and software estimated useful lives do not exceed 10 years, and capitalized development expenses usually have a useful life of 3 years. Impairment tests are performed when there is an indication of impairment. Tests are performed in the same way as for goodwill but on an asset level, see above. However, intangible assets not yet available for use are tested annually for impairment. 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, generally, 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. Gains and losses on disposals are reported within Other operating income and expenses in the income statement. Leases The main types of assets leased by the Company are, in order of materiality, real estate, vehicles and IT-equipment. 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. In the assessment of a lease contract the lease components are separated from non-lease compo- nents. The lease term is defined based on the contract lease term and when reasonably certain estimated extension or termination options are included. The average remaining lease term for real estate contracts is around three years. For lease extensions not included in the lease liability there can be multiple options for different periods (overlapping) and they can have different stipulations for how the various options can be applied 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. Notes to the consolidated ﬁnancial statements 41 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 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 determi- nable. 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 penal- ties for termination of contracts. The right-of-use asset is depreciated over the lease term on a straight-line basis. Depreciation and any impairment charges are included in Cost of sales, Research and development expenses or Selling and administrative expenses. 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. When the Company acts as a lessor, it is mainly in relation to real estate sublease, financing and operating. For more information regarding leases, see note C3 “Leases.” Obligations For further disclosure, see the notes under section D. Provisions and Contingent Liabilities 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 commit- ments, 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. Curtailment gains and losses on defined benefit plans are reported as part of the net restructuring costs when the restructuring provision is raised for the underlying program. 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. The loss is calculated based on the lower of the unavoidable costs to fulfill a contract and the exit penalty. The unavoidable cost includes both the incremental and allocated costs to fulfill the contract. Supplier-related provisions relate to contractual commitments mostly relating to inventories. The provision is based on a risk assessment compar- ing the forecasted sales volumes with the committed inventory levels. If the contractually committed inventory is assessed to be at risk of not being met, a provision is raised equal to the best estimate of the expected obsolescence or the contractual fee. 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 pro- grams. Refer to the accounting policy under “Cash-settled plans.” Other provisions relate mainly to patent infringements, litigations, and other provisions which do not fall within the defined categories. 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 monitoring of patent-related cases in the relevant legal systems. In the ordinary course of business, the Company is subject to proceedings, lawsuits, and other unresolved claims. These matters are often resolved over 42 Notes to the consolidated ﬁnancial statements Financial report 2023 Note A1, cont’d. 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. Present or possible obligations that do not meet the provision recognition criteria 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 acquired, 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 liabilities that were not recognized on the acquired entity’s balance sheet, for example, intangible assets such as customer relationships, brands, patents, and financial liabilities. The Company, on an acquisition-by-acqui- sition basis, chooses to measure any 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. The acquired entity is consolidated into the Group results from the date of acquisition. Accordingly, the consolidated stockholders’ equity includes equity in subsidiaries, joint ventures, and associated companies earned only after their acquisition. Associated companies Investments in associated companies is when the Company has significant influence and the ability 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 effective potential voting rights, which stand at least at 20% but not more than 50%. Associated companies are accounted for in accordance with the equity method. Any change in other comprehensive income of the associated com- panies is presented as part of other comprehensive income. If the Company’s interest in an associated company is nil, the Company does not recognize its part of any future losses. Provisions related to obligations for such an interest are recognized. 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. for implied volatility, foreign exchange and interest rates. Where there are no observable market data, fair values are calculated using other inputs such as data from transactions, external evidence on exit price or other analytical techniques. Financial assets at amortized cost Interest bearing assets, including cash equivalents, held with the objective to collect contractual cash flows, are classified as amortized cost assets. These include securities and deposits not managed on a fair value basis and loans to associates. Financial assets at fair value through other comprehensive income (FVOCI) Trade receivables are classified as FVOCI because the business model is primarily to collect, with occasional sales. Sale of trade receivables are made when the liquidity need arises and competitive prices are available for such a sale. 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 offset, and the Company settles on a net basis with the counterparties. Derivatives assets and liabilities (after offset) are classified as current and non-current based on the maturity of the contract, unless they are intended and expected to be settled within 12 months. Interest-bearing assets including investment in securities and money market funds are classified as FVTPL where they are either held in a portfolio managed on a fair value basis or held for short-term liquidity purposes. Customer finance receivables are classified as FVTPL because they are primarily held for sale. These assets are presented on the balance sheet based on their maturity date (i.e., those with a maturity longer than one year are presented as non-current). Investments in shares and participations are classi- fied as FVTPL and presented 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 presented 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. 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. The Company sells its receivables with the expectation that all derecognition criteria are fully satisfied thereby no material asset or liability is retained. 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. 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 avail- able, fair values are calculated using observable inputs such as market prices 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). 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 expectations of future economic conditions. The losses are recognized on a separate line in the income statement. When there is no reasonable expecta- tion 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. If the Company identifies evidence of significant change in credit risk on the assets, lifetime ECL is used to calculate allowance on the asset. Default is deemed if the asset is more than 90 days past due, after which lifetime ECL is also used to calculate allowance on the asset. Financial report 2023 Note A1, cont’d. Notes to the consolidated ﬁnancial statements 43 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. Trade payables Trade payables are recognized as amortized cost liabilities. Some suppliers sell their Ericsson receivables to banks and the Company can if requested introduce a bank interested in purchasing such receivables. The Company 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 the Company’s liabilities because the supplier invoices are considered part of working capital used in the Company’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.” Borrowings Borrowings issued by the Parent Company are designated FVTPL where they are managed on a fair value basis. These are long term borrowings held in an Asset and liability management portfolio where the interest rate risk is man- aged by matching fixed and floating interest rates of interest-bearing balance sheet items. Changes in fair value of this portfolio 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 managed on a fair value basis are classified as amortized cost liabilities. These include revolving credit facilities and commercial papers program which are used for short term liquidity purposes and cash collaterals received. 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. These include gratuity plans, medical plans and leave encashment plans which are expected to be provided to employees over a period longer than 12 months. 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 for such bonds such as Sweden the market yields on government bonds are used. The calculations are based upon actuarial assumptions that are updated annually. 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’. The pension asset is presented as Other Financial assets, non-current. Interest cost on the defined benefit obligation and interest income on plan assets is calculated as a net interest amount and presented within Financial expenses. Curtailment gains and losses due to restructuring programs are recognized as part of the restructuring costs. Settlement events are considered as risk management activities driven by Group Treasury functions, therefore any gains and losses are presented within Financial expenses. Swedish special payroll tax is accounted for as a part of the pension cost, and the pension liability respectively. Borrowings are presented as current liabilities unless the Company has an Payroll taxes related to actuarial gains and losses are included in determin- unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Cash ﬂow hedge accounting The Company has the following recurring hedge programs: a) Certain customer contracts where a fluctuation in the USD/SEK foreign exchange (FX) rate would significantly impact net sales. These contracts are multi-year contracts denominated in USD with highly probable payments at fixed points in time. b) Highly probable forecasted sales denominated in USD in Ericsson AB (EAB) for the next 7 to 18 months are hedged on a monthly rolling basis. For both programs, the Company enters into FX forward contracts that match the terms of the foreign exchange exposure as closely as possible and desig- nates 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. In addition to the recurring hedge programs, cash flow hedge is also des- ignated for certain highly probable acquisition 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. 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 relates to remuneration to employees, including key management personnel and the Board of Directors, and could be settled in either shares or cash. The majority of the granted share-based programs are cash-settled, except for programs for the Executive Team and the long-term variable compensation (LTV) 2023 program. These programs are share-settled. Share-settled plans will be settled in the Parent Company Class B shares provided the market- related and non-market-related vesting conditions are met. Share-settled plans Compensation costs are recognized during the vesting period, based on the fair value of the Ericsson share at the grant date, and considers performance and market-related vesting conditions. All plans have service conditions, while some have performance and market-related vesting conditions. Examples of performance conditions could be revenue and profit targets and market condi- tions relate to the development of the Parent Company’s share price in relation to a group of reference shares. For further detailed information, see note G3 “Share-based compensation.” 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. Cash-settled plans relating to employees’ share-based payment programs have similar vesting criteria to share-settled plans. All plans have service condi- tions, while some have performance and market-related vesting conditions. Up to and including 2022, non-executive directors could elect to receive part of their remuneration as synthetic shares, which will be converted to cash at the end of a specified vesting period based upon the market value of the class B shares in the Parent company at the time of payment. 44 Notes to the consolidated ﬁnancial statements Financial report 2023 Note A1, cont’d. For further detailed information, see notes G2 “Information regarding members of the Board of Directors and Group management” and G3 “Share- based compensation.” 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 do not include VAT, sales/use taxes, or other taxes not based on taxable profits. 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 liability or asset is recognized for the estimated taxes payable or refundable for the current year or prior years. Current income tax and deferred taxes are measured at the tax rate that is expected to be applied based on the tax laws that have been enacted or sub- stantially enacted for the reporting period in the corresponding jurisdiction. Deferred tax is recognized for temporary differences between the book values of assets and liabilities and their tax values for unused tax loss carry- forwards and for unused tax credits. 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, tax loss carry-forwards and tax credits 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 temporary differences when it is probable that the temporary difference will not reverse in the foreseeable future. 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. Statement of cash ﬂows The statement of cash flows is prepared using the indirect method. Cash flows from foreign subsidiaries are translated at the average exchange rate during the period. For practical reasons, the Company uses the closing rate of the previous month end as approximation of the period average exchange rate. 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. Movements in cash collaterals received and bank borrowings less than 3 months (used for short-term liquidity purposes) are presented net within “Other financing activities”. 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. Government grants Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants will be received. Government grants received are mainly recognized in the consolidated income statement as a deduction against the related expense. Climate-related considerations The Company has performed an analysis of how different climate scenarios could affect the Company and its value chain. The analysis did not identify any short-term material financial risks or changes to significant accounting policies and accounting estimates. In the middle to long-term horizon, carbon pricing and potential scarcity in raw materials used in products and equipment affect- ing actors in the upstream value chain, as well as disruptions in supply due to severe weather events have been identified as emerging risks. The Company intends to refine the analysis and assess climate-related financial implications in more granularity in coming years. New accounting standards and interpretations On January 1, 2023, the following amendments issued by the IASB were adopted with no material impact on the results and financial position of the Company. – IFRS 17 Insurance contracts (including the June 2020 and December 2021 amendments to IFRS 17, which establishes principles for the recognition, measurements, presentation and disclosure of insurance contracts) – 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 Liabilities arising from a Single Transaction. – Amendments to IAS 12 Income taxes: International Tax Reform – Pillar Two Model Rules The application of the amendment to IAS 1 above resulted in a reassessment and revision to the of the Company’s existing accounting policies disclosure compared to what was previously disclosed in the 2022 financial statements, taking into consideration the materiality of the related accounting items. On 13 December 2023, the government of Sweden, where the parent company is incorporated, enacted the Pillar Two income taxes legislation effective from 1 January 2024. Under the legislation, the parent company will be required to pay, in Sweden, top-up tax on profits of its subsidiaries that are taxed at an effective tax rate of less than 15 per cent unless this is due and payable locally. Management does not believe that there will be any material impact on the results of the Group’s operations for the year ending 31 December 2024 in any of the main jurisdictions in which Ericsson currently operates. The Group is continuing to assess the impact of Pillar Two income taxes legislation on its future financial performance, however, based on the analysis performed management does not expect the legislation effective in 2024 will have a material impact on the results of operations or cash flows for the year ending 31 December 2024 or the financial position as at that date. A number of new amendments to standards and interpretations are not yet effective for the year ended December 31, 2023, and have not been applied in preparing these consolidated financial statements. The IASB has issued the following new amendments with effective date January 1, 2024: – Amendments to IAS 1 Presentation of financial statements – Classification of liabilities as current or non-current – Amendments to IAS 1 Presentation of financial statements – Non-current liabilities with covenants – Amendments to IFRS 16 Leases – Lease liability in a sale and leaseback – Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments – Disclosures: Supplier Finance Arrangements – These amendments will increase the disclosures for Supplier Finance Arrangements. The Company has finalized the evaluation of any impact on financial results or position from these amendments and concluded that they will not have a material impact on the results and financial position of the Company. The IASB has issued the following new amendment with effective date January 1, 2025: – Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (issued on 15 August 2023) The Company has not finalized the evaluation of any impact on financial results or position from this amendment and its effect on the results and finan- cial position of the Company. Financial report 2023 Notes to the consolidated ﬁnancial statements 45 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 with a change in strategy or restructuring. Judgments for accounting policies to be applied as well as estimates may also be impacted due to this. The 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 material impact on the reported results and financial position. 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 particularly when determining the transaction price and its allocation to performance obligations identified under the contract. Transaction price, including variable considerations, for example volume rebate earnings, is 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. This includes assessment of price concession based on latest available information on contract negotiations that could have retrospective impact on prices for prod- ucts and services already ordered or delivered. The Company uses an adjusted market assessment approach to estimate stand-alone selling prices for its products and services for the purposes of allocating transaction price. 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 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 recog- nized on a contract that did not initially meet the collectability criteria. 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. 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. 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 are classified as low, medium and high. The amount of ECLs is sensitive to changes in the payment patterns, 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. Total allowances for expected credit losses as of December 31, 2023 were SEK 2.6 (2.5) billion or 5% (4%) 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. At December 31, 2023, the fair value of customer finance receivables amounted to SEK 6.9 (5.4) billion. For further detailed information see note F1 “Financial risk management”. 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, prices and inventory balances. Inventory write-downs during the period, amounted to SEK 4.0 (3.9) billion or 10% (8%) of gross inventory at year end. For further detailed informa- tion, see note B5 “Inventories.” Judgments made in relation to accounting policies applied In situations where excess inventory balances are identified, estimates of net realizable values for the excess volumes are made. Allowances for obsolescence in inventory considers aging, historical consumption and judgments around market demands. There may also be judgments around internal and external circumstances, e.g. withdrawal of a product or economic and political changes in the global market. Acquired customer relationships, 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 of this type of asset. After initial recognition, impairment testing is performed when there is an indication of impairment. Additionally, goodwill impairment testing is performed once per year aligned with updated business plans. An indication of impairment may be a material deviation in actual cash flows compared to the business plan as well as new estimates that indicate lower future cash flows. The estimation uncertainty is considered higher for the Enterprise segment than the other segments in the next twelve months. Impairment losses for intangible assets and goodwill amounted to SEK –31.9 (–0.1) billion for 2023. At December 31, 2023, the carrying amount of acquired intangible assets amounted to SEK 75.6 (110.9) billion, including goodwill of SEK 52.9 (84.6) billion. For further discussion on goodwill, see note A1 “Material accounting poli- cies.” Estimates related to acquired intangible assets are based on similar assumptions and risks as goodwill. For more information, see note C1 “Intangible assets.” Judgments made in relation to accounting policies applied At initial recognition and subsequent remeasurement, management judgments are made, both for key assumptions and impairment indicators. Management judgment is required for the purchase price allocation, for example when determining the fair values of acquired intangible assets. Judgment is also required in defining the cash-generating units for impairment testing purposes. Leases Key sources of estimation uncertainty Estimation uncertainty exists due to possible future changes in business operations, which may impact the actual lease term of a contract. For example, if a restructuring program is initiated which could mean termination of existing lease contracts. The determination of the rates at which the lease liabilities are discounted is another uncertainty and this affects the lease liability and inter- est expense amounts. At December 31, 2023, lease liabilities amounted to SEK 7.5 (9.3) billion. For more information, see note C3 “Leases.” 46 Notes to the consolidated ﬁnancial statements Financial report 2023 Note A2, cont’d. Judgments made in relation to accounting policies applied At initial recognition and subsequent remeasurement, management judgment is used for the term applied in a lease contract. The outcome of these judg- ments may turn out not to match the actual outcome of the lease and may have an adverse effect on the right-of-use assets. An incremental borrowing rate is used in discounting of the lease liabilities and requires judgment 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. Provisions and contingent liabilities Key sources of estimation uncertainty The key sources of estimation uncertainty relating to provisions are the assess- ment of the probability of outflow and whether a reliable estimate can be made. Supplier-related provisions require a reliable forecast of sales volumes to estimate the expected usage of the committed inventory purchases. Therefore, estimation uncertainty exists regarding the forecast and expected usage to assess the risk and the provision amount. Estimation uncertainty exists regarding restructuring provisions as the eventual outcome of the program, in terms of costs and actual impacted employees, may differ from the estimates made in the management plan. Estimation uncertainty exists with respect to ongoing internal investigations, proceedings and other matters with government and regulatory authorities. The Company’s internal investigation and its cooperation with authorities in relation to the matters discussed in the 2019 internal Iraq investigation report remain open and ongoing. Estimation uncertainty over the expected settlement relating to litigation and disputes including intellectual property related topics such as patents exists as they may continue over several years and the outcome is unknown. The same estimation uncertainties described above for provisions exist for contingent liabilities. Contingent liabilities mainly relate to estimates for litiga- tion including intellectual property related topics such as patents, tax litigation, losses on customer contracts, 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 the potential settlement value. A contingent liability may exist at year end, and/or expense (provision) may have to be recognized at a later stage based on the latest conditions and progress of the potential obligation. Provisions and contingent liabilities are regularly reassessed based on the latest information available and are adjusted to reflect the Company’s best estimate of the eventual outcome. At December 31, 2023, provisions amounted to SEK 11.7 (11.6) billion. For further detailed information, see note D1 “Provisions.” 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 depth 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, 2023, defined benefit obligations for pensions and other post-employment benefits amounted to SEK 85.5 (83.7) billion and fair value of plan assets amounted to SEK 62.6 (60.5) billion. For more information on estimates and assumptions, see note G1 “Post- employment benefits.” Accounting for deferred tax Key sources of estimation uncertainty 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 and/or tax credits in different tax jurisdictions. All deferred tax assets are subject to annual review of probable utilization. The valuation of temporary differences, tax loss carry-forwards and tax credits are based on management’s estimates of future taxable profits in different tax jurisdictions against which the temporary differences, loss carry- forwards and tax credits may be utilized. These estimates are primarily based on business plans for the Company´s estimated outcome of future taxable profits. At December 31, 2023, the value of deferred tax assets amounted to SEK 22.4 (19.4) billion. For further detailed information see note H1 “Taxes.” 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 income taxes is based upon evaluation of taxable income in all jurisdictions where the profits arise. As prescribed in IFRIC 23, only uncertainty over income tax treatment is considered if and when recognizing and measur- ing income tax items in the financial statements. Assets relating to value added tax, and other taxes are separately assessed At December 31, 2023, contingent liabilities disclosed amounted to for recoverability in each jurisdiction according to the local regulations. SEK 3.0 (3.3) billion. For further detailed information, see note D2 “Contingent liabilities” including a description of contingent liabilities which cannot be quantified. The total complexity of rules related to taxes and the accounting for these require management’s involvement in judgments regarding classification of transactions and in estimates of probable outcomes of claimed deductions and/or disputes. Judgments made in relation to accounting policies applied The nature and type of risks for these provisions and contingencies differ and management applies judgment regarding the nature and extent of the obliga- tions in deciding the probability of the outcome. Further judgment is required in determining the value of the present or possible obligation as this is based on the Company’s best estimate as to the expected future expenditure required to settle the obligation. Climate-related factors Judgments made and key sources of estimation uncertainty The Company has considered the effect of climate-related factors on the financial statements, see references in the notes B5 “Inventories“ and C1 “Intangible Assets“ on measurements of non-financial assets. There are also long-term incentive plans with specific climate-related targets as described in note G3 “Share-based compensation” that impacts the financial statements. There are no significant judgments or estimates made in relation to climate- related effect in all these areas. Financial report 2023 Notes to the consolidated ﬁnancial statements 47 Section B – Business and operations B1 Segment information 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, three operating segments are presented: – Networks – Cloud Software and Services – Enterprise Segment Networks offers multi-technology-capable Radio Access Network (RAN) solutions for all network spectrum bands, including purpose-built and Open RAN-prepared high-performance hardware and software. The offerings also includes a Cloud RAN portfolio, a transport portfolio, passive and active antenna solutions and a complete service portfolio, covering network deploy- ment and support. 82% (82% in both 2022 and 2021) of the IPR licensing revenues are reported as part of segment Networks. Segment Cloud Software and Services provides solutions for core networks, business and operational support systems, network design and optimization, and managed network services. The focus is to enable CSPs to succeed in their transition to cloud operations, intelligent and automated networks. 18% (18% in both 2022 and 2021) of the IPR licensing revenues are reported as part of segment Cloud Software and Services. Segment Enterprise comprises three business areas offering solutions primarily to enterprise customers: Global Communications Platform (Vonage) including cloud-based Unified Communications as a Service (UCaaS), Contact Center as a Service (CCaaS) and Communications Platform as a Service (CPaaS); Enterprise Wireless Solutions, including private wireless networks and wireless WAN (Cradlepoint) pre-packaged solutions; and Technologies and New Businesses including mobile financial services, security solutions and advertising services. Other includes the media business and other non-allocated business. Segment-level information has also been presented for Other. Market areas The market areas are the Company’s primary sales channel with the responsi- bility to sell and deliver Mobile Networks 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. Segment Enterprise has a multi-channel go-to-market distribution model. Sales from segment Enterprise and Other, and the IPR licensing revenues 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 CSPs, the 10 largest customers accounted for 43% (50% in 2022 and 49% in 2021) of net sales. The largest customer accounted for approximately 8% (14% in 2022 and 13% in 2021) and the second largest customer accounted for 7% (10% in 2022 and 9% in 2021) of net sales. These customers were reported under segments Networks and Cloud Software and Services. Segment information 2023 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 (loss) after ﬁnancial items Income tax Net income (loss) Other segment items Share in earnings of JV and associated companies Amortizations Depreciations Impairment losses1) Restructuring charges Gains/losses on investments and sale of operations Networks 171,442 171,442 67,959 39.6% 19,382 11.3% Cloud Software and Services 63,630 63,630 22,088 34.7% –220 –0.3% Enterprise 25,745 25,745 12,016 46.7% –38,336 –148.9% Other 2,534 2,534 –461 –18.2% –1,152 –45.5% Total Segments 263,351 263,351 101,602 38.6% –20,326 –7.7% 83 –1,013 –4,460 –527 –4,437 –24 41 –43 –1,470 –176 –1,924 –39 – –3,401 –274 –31,952 –173 –16 – –1 –495 –77 13 –206 124 –4,458 –6,699 –32,732 –6,521 –285 Group 263,351 263,351 101,602 38.6% –20,326 –7.7% –2,993 –23,319 –2,785 –26,104 124 –4,458 –6,699 –32,732 –6,521 –285 1) Segment Enterprise includes impairment of goodwill of SEK –31.9 billion related to the acquisition of Vonage. For more information, see note C1 “Intangible assets.” 48 Notes to the consolidated ﬁnancial statements Financial report 2023 Note B1, cont’d. Segment information 2022 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 193,468 193,468 86,368 44.6% 38,512 19.9% 30 –1,424 –4,073 –211 –146 253 Cloud Software and Services Enterprise 2) 60,524 60,524 20,106 33.2% –1,689 –2.8% 27 –122 –1,792 –91 –96 – 14,597 14,597 7,096 48.6% –4,473 –30.6% – –2,019 –515 –87 –65 111 Other 2) 2,957 2,957 –275 –9.3% –5,330 –180.3% Total Segments 271,546 271,546 113,295 41.7% 27,020 10.0% –40 –12 –185 –12 –92 –108 17 –3,577 –6,565 –401 –399 256 Group 271,546 271,546 113,295 41.7% 27,020 10.0% –2,411 24,609 –5,497 19,112 17 –3,577 –6,565 –401 –399 256 1) Segment Other includes a provision of SEK –2.3 billion related to the DPA breach resolution with the U.S. Department of Justice, including expenses for the extended monitorship, and by SEK –1.0 billion due to charges related to the divestment of IoT and other portfolio adjustments. 2) The segments have been restated to reﬂect the change where the divested IoT business in the ﬁrst quarter 2023 was transferred from segment Enterprise to segment Other. Cloud Software and Services Enterprise 1) 5,513 5,513 3,026 54.9% –1,774 –32.2% Other 1) 2,739 2,739 25 0.9% –1,478 –54.0% Total Segments 232,314 232,314 100,749 43.4% 31,780 13.7% Segment information 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% 40 –1,169 –3,764 –127 –262 14 56,224 56,224 18,829 33.5% –2,234 –4.0% 72 –508 –1,568 –185 –254 –51 – –830 –430 –188 9 998 –372 – –189 –11 –42 – –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 1) The segments have been restated to reﬂect the change where the divested IoT business in the ﬁrst quarter 2023 was transferred from segment Enterprise to segment Other. Products and Services by Segments 2023 Products Services Total 2022 Products Services Total 2021 Products Services Total Networks Cloud Software and Services Enterprise 1) Other 1) Total Segments 131,393 40,049 171,442 147,997 45,471 193,468 128,951 38,887 167,838 21,672 41,958 63,630 21,105 39,419 60,524 19,267 36,957 56,224 5,704 20,041 25,745 4,923 9,674 14,597 3,955 1,558 5,513 –4 2,538 2,534 –1 2,958 2,957 24 2,715 2,739 158,765 104,586 263,351 174,024 97,522 271,546 152,197 80,117 232,314 1) The segments have been restated to reﬂect the change where the divested IoT business in the ﬁrst quarter 2023 was transferred from segment Enterprise to segment Other. Financial report 2023 Note B1, cont’d. Market area 2023 South East Asia, Oceania and India 3) North East Asia 4) North America 2) Europe and Latin America 1) Middle East and Africa Other 1) 2) 3) 4) 6) Total 1) Of which in EU 6) Of which in Sweden 6) 2) Of which in the United States 6) 3) Of which in India 6) 4) Of which in Japan 6) 4) Of which in China 6) Notes to the consolidated ﬁnancial statements 49 Networks Cloud Software and Services 43,235 18,986 44,640 42,298 12,902 9,381 171,442 10,038 4,720 14,199 22,270 10,457 1,946 63,630 Net sales Enterprise 36 37 266 245 378 24,783 25,745 Other 9 189 125 71 2 2,138 2,534 Non-current assets 5) Total 886 1,775 33,214 64,497 174 – 100,546 59,456 58,728 32,133 535 132 1,449 Total 53,318 23,932 59,230 64,884 23,739 38,248 263,351 34,257 1,774 85,313 31,205 10,139 10,716 5) Total non-current assets excluding ﬁnancial instruments, deferred tax assets, and post-employment beneﬁt assets. 6) Including IPR licensing revenue reported under Market area Other 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 2022 South East Asia, Oceania and India 3) North East Asia 4) North America 2) Europe and Latin America 1) Middle East and Africa Other 1) 2) 3) 4) 6) Total 1) Of which in EU 6) Of which in Sweden 6) 2) Of which in the United States 6) 3) Of which in India 6) 4) Of which in Japan 6) 4) Of which in China 6) Networks Cloud Software and Services Enterprise 7) Other 7) Net sales 23,695 22,488 81,917 44,644 11,707 9,017 193,468 9,179 4,015 13,362 21,638 10,472 1,858 60,524 17 8 47 99 368 14,058 14,597 60 222 68 409 24 2,174 2,957 Non-current assets 5) Total 999 3,385 41,065 93,612 –804 – 138,257 92,167 88,057 39,906 519 187 2,068 Total 32,951 26,733 95,394 66,790 22,571 27,107 271,546 35,859 3,239 109,709 10,957 9,965 10,523 5) Total non-current assets excluding ﬁnancial instruments, deferred tax assets, and post-employment beneﬁt assets. 6) Including IPR licensing revenue reported under Market area Other 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. 7) The segments have been restated to reﬂect the change where the divested IoT business in the ﬁrst quarter 2023 was transferred from segment Enterprise to segment Other. Market area 2021 South East Asia, Oceania and India 3) North East Asia 4) North America 2) Europe and Latin America 1) Middle East and Africa Other 1) 2) 3) 4) 6) Total 1) Of which in EU 6) Of which in Sweden 6) 2) Of which in the United States 6) 3) Of which in India 6) 4) Of which in Japan 6) 4) Of which in China 6) Net sales Cloud Software and Services Enterprise 7) Other 7) 8,493 4,405 10,913 21,181 9,726 1,506 56,224 10 1 20 41 309 5,132 5,513 27 251 59 379 7 2,016 2,739 Networks 20,299 24,464 66,464 38,671 10,743 7,197 167,838 Non-current assets 5) Total 1,010 2,700 11,971 52,141 209 – 68,031 50,428 45,997 10,749 484 261 2,202 Total 28,829 29,121 77,456 60,272 20,785 15,851 232,314 31,307 2,349 79,896 7,482 13,678 10,078 5) Total non-current assets excluding ﬁnancial instruments, deferred tax assets, and post-employment beneﬁt assets. 6) Including IPR licensing revenue reported under Market area Other 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. 7) The segments have been restated to reﬂect the change where the divested IoT business in the ﬁrst quarter 2023 was transferred from segment Enterprise to segment Other. 50 Notes to the consolidated ﬁnancial statements Financial report 2023 B5 Inventories Inventories Finished products and components Contract work in progress Inventories, net 2023 2022 24,222 11,851 36,073 31,249 14,597 45,846 Net inventories include SEK 8,287 (11,692) million of components related to third-party service providers. The amount of inventories recognized as expense and included in Cost of sales was SEK 65,042 (68,838) million. During the period, write-downs of inventory to net realizable values were expensed for an amount of SEK 3,994 (3,927) million. Write-downs were reduced by SEK 823 (859) million in respect of reversals. Previous write-downs have been reversed primarily as a result of changes in estimated customer demand. Contract work in progress consists of costs incurred to date on customer projects 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. The Company has had to increase its buffer of vital components to mitigate the supply chain issues affecting electronic components globally. Inventory allowance is reviewed periodically to ensure obsolete components are adequately provided for. The Company’s current climate-related strategy’s aim to have a portfolio of energy efficient products may affect recoverability of inventories as customers push for fast substitution and uptake of volume towards the most energy effi- cient products. The current radio product offering largely reflects the latest and most energy efficient technologies and ongoing improvements are expected in future. These factors have been included in the inventory obsolescence risk assessment at year end. Physical risks of climate changes on manufacturing facilities have also been identified as a potential climate-related risk to the Company’s operations, although these risks are mostly mitigated through having appropriate insur- ance policies for damage to inventories and fixed assets, as well as potential business interruptions. The Company also has a globally spread production capability as well as geographically diverse sourcing channels to mitigate risks of supply interruptions due to natural disasters, including severe weather events. 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 2023 99,642 59,123 104,586 263,351 11,101 125,242 2022 119,215 54,809 97,522 271,546 10,399 153,833 2021 106,399 45,798 80,117 232,314 8,134 140,898 2023 127,214 101,438 11,157 4,996 9,304 –2,173 2022 147,023 89,191 10,142 4,383 –7,738 –1,720 2021 119,787 77,462 8,458 1,456 –5,565 –962 251,936 241,281 200,636 Total restructuring charges in 2023 were SEK 6.5 (0.4) billion, which relates to the cost reduction activities during the year. Restructuring charges are included in the expenses presented above, and consist mainly of employee renumerations. Restructuring charges by function Cost of sales R&D expenses Selling and administrative expenses Total restructuring charges 2023 2,802 2,431 1,288 6,521 2022 195 54 150 399 2021 273 137 139 549 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 2023 2022 2021 17 136 841 994 85 701 445 1,231 – –54 –421 –31,897 –541 –32,859 –445 – –3,994 –4,493 13 1,199 314 1,526 –3 –238 –112 –811 – 1,164 1) Information about divestments is presented in note E2 “Business combinations.” The loss of the divestment of the IoT business is reduced by the release of the provision reported in 2022 as Other operating expenses. 2) 2023 includes an impairment of SEK –31.9 billion related to the acquisition of Vonage. For more information about the impairment of goodwill, see note C1 “Intangible assets.” 3) 2022 includes a provision of SEK –2.3 billion related to the DPA breach resolution with the U.S. Department of Justice, including expenses for the extended monitorship, and by SEK −1.0 billion due to charges related to the divestment of IoT and other portfolio adjustments. Financial report 2023 Notes to the consolidated ﬁnancial statements 51 B6 Customer contract related balances B7 Other current receivables Trade receivables, customer ﬁnance, contract assets, contract liabilities and deferred sales commissions Other current receivables Customer ﬁnance credits 1) Trade receivables 2) Contract assets Contract liabilities 3) Deferred sales commissions 4) 2023 6,917 42,215 7,999 34,416 1,006 2022 5,370 48,413 9,843 42,251 754 Prepaid expenses Advance payments to suppliers Derivative assets 1) Other taxes 2) Other 3) Total 2023 2,552 128 1,851 4,176 3,255 11,962 2022 2,506 473 1,121 3,349 2,239 9,688 1) Of the total Customer ﬁnance credits balance, SEK 5,570 (4,955) million is current. 2) Total trade receivables include SEK 166 (70) million relating to associated companies. 3) The decrease in contract liabilities is mainly due to decreased incentive earnings based on lower sales as well as utilization of incentives in the period. 4) Of the total Deferred sales commissions balance SEK 414 (345) million is current. The non-current balance is presented within Other ﬁnancial assets, non-current (see note F3 “Financial assets, non- current”) and the current balance is presented within Other current receivables (see note B7 “Other current receivables”). Deferred sales commissions amortized in the year is SEK 457 (288) million. For information about credit risk and impairment of customer contract related balances, see note F1, “Financial risk management.” Revenue recognized in the period Revenue recognized relating to the opening contract l iability balance Revenue recognized relating to performance obligations satisﬁed, or partially satisﬁed, in prior reporting periods 2023 2022 32,874 25,601 134 –7 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 period. Transaction price allocated to the remaining performance obligations Aggregate amount of transaction price allocated to unsatisﬁed, or partially unsatisﬁed, performance obligations 2023 2022 133,247 169,609 The Company expects that the transaction price allocated to the remaining performance obligations will be converted into revenue in accordance with the following estimates: 65% in 2024, 15% in 2025 and the remaining 20% in 2026 and beyond. 1) See also note F1 “Financial risk management.” 2) Other taxes mainly includes VAT receivables. 3) Includes items such as loans to associates, deferred sales commissions and deposits paid to third parties. B8 Trade payables Trade payables Trade payables to associated companies and joint ventures Trade payables, excluding associated companies and joint ventures 1) Total 2023 2022 434 179 27,334 27,768 38,258 38,437 1) Of the trade payables amount SEK 8.2 (9.7) billion relates to supplier invoices under Ericsson’s sup- plier payments program. B9 Other current liabilities Other current liabilities Accrued interest Accrued expenses Of which employee-related Of which supplier-related Of which other 1) Derivative liabilities 2) Other 3) Total 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. 2023 439 26,294 13,440 8,009 4,845 1,794 8,458 36,985 2022 335 35,896 19,630 9,849 6,417 2,621 7,341 46,193 52 Notes to the consolidated ﬁnancial statements Financial report 2023 Section C – Long-term assets C1 Intangible assets Intangible assets Capitalized development expenses 21,096 2,173 – –153 –16 –117 22,983 –13,646 –1,137 – 153 70 –14,560 2023 Goodwill 90,914 – 348 – – –77 91,185 – – – – – – Customer relationships, IPR 1), and other intangible assets Capitalized development expenses 82,854 97 306 – 563 – –1,884 80,810 –48,770 –3,321 – 563 1,123 19,158 1,720 – – – 218 21,096 –11,885 –1,586 – – –175 –50,405 –13,646 2022 Goodwill 44,963 – 40,881 – – 5,070 90,914 – – – – – – –3,745 –6,344 –7,744 –3,745 –6,759 – – – –3,745 4,678 – –31,897 – –38,241 52,944 – –19 25 –7,738 22,667 – – – –3,745 3,705 415 – – –6,344 84,570 Cost Opening balance Additions Balances regarding acquired/divested business 2) Disposals Reclassiﬁcations Translation differences Closing balance Accumulated amortizations Opening balance Amortizations Balances regarding divested business 2) Disposals Translation differences Closing balance Accumulated impairment losses Opening balance Balances regarding divested business 2) Impairment losses Translation differences Closing balance Net carrying value 1) Intellectual property rights. 2) For more information on acquired/divested businesses, see note E2 “Business combinations.” Customer relationships, IPR 1), and other intangible assets 55,936 126 23,451 –452 – 3,793 82,854 –44,456 –1,991 22 452 –2,797 –48,770 –7,650 81 –61 –114 –7,744 26,340 The total goodwill for the Company is SEK 52.9 (84.6) billion and is allocated to the operating segments Networks, with SEK 27.8 (28.5) billion, Cloud Software and Services, with SEK 3.5 (3.6) billion and Enterprise, with SEK 21.6 (52.5) bil- lion. Within Enterprise Vonage carries SEK 11.1 (42.0) billion and Cradlepoint SEK 9.0 (9.0) billion. Segment Other does not carry goodwill. More information is disclosed in note B1 “Segment information.” Intangible assets The carrying value of customer relationships, IPR, and other intangible assets is SEK 22.7 (26.3) billion, of which customer relationships, acquired through the Vonage transaction, amounts to SEK 16.1 (18.8) billion with a remaining amortization period of 6 to 9 years. Impairment losses In 2023 an impairment charge of goodwill attributed to the acquisition of Vonage by SEK -31.9 billion was made in the cash generating unit, CGU, Vonage and reported on the line item Other operating expenses in the income statement for segment Enterprise. The reason for the impairment was mainly due to macroeconomic headwinds, including rising interest rates and changing demand trends. The impairment charge represented 50% of the total amount of goodwill and other intangible assets attributed to the Vonage acquisition. For more information, see note E2 “Business combinations.” The recoverable amount for the CGU was SEK 29.5 billion. this amount was determined by value in use and was higher than the value determined by Fair value less costs of disposal. In 2022 there was an impairment loss of intangibles of SEK 61 million in a business related to the Internet of Things in segment Enterprise due to a strate- gic decision to discontinue the business operation, which is reported on the line item Research and development expenses in the income statement. In 2021 there was an impairment loss of SEK 176 million in the restated segment Enterprise and an impairment loss of SEK 137 million in the restated segment Cloud Software and Services. Capitalized development expenses The Company capitalizes 5G radio product development costs and Enterprise platform costs which are amortized over a period of 3 years. In considering the Company’s climate-related aim to have more energy efficient products, the Company continually assesses the impact of future radio product improve- ments on the recoverability of such development costs. The conclusion is that the carrying value at year-end is appropriate as the amortization period and product development lifecycle are relatively short. Goodwill allocation Goodwill allocation has not changed during 2023 but goodwill of SEK 0.3 billion has been added to the CGU Cradlepoint within segment Enterprise from the acquisition of Ericom of SEK 0.3 billion. Goodwill from the Vonage acquisi- tion made in 2022 has been allocated to the Vonage CGU within segment Enterprise. Impairment tests Each of segment Networks and segment Cloud Software and Services is a CGU. There are several CGUs within segment Enterprise. The value in use method has been applied for goodwill impairment testing, which means that the recoverable amounts for CGUs are established as the present value of expected Financial report 2023 Note C1, cont’d. future cash flows based on business plans approved by management. The assumptions are also based on the Company’s market share ambition and 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. 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 2024–2028 for key telecom industry parameters: – By 2028, about 37 years after the introduction of digital mobile technology, it is predicted that there will be 9.1 billion mobile subscriptions (excl. Cellular IoT) compared to 8.5 billion in 2023. Out of all mobile subscriptions, 8.2 billion will be associated with a smartphone. – The number of 5G subscriptions is forecasted to reach 4.7 billion (excluding Cellular IoT) by the end of 2028 compared to 1.6 billion in 2023. – By 2028, about 46 billion connected devices are forecasted compared to 26 billion in 2023, of the 46 billion around 30 billion will be related to Internet of Things, IoT. Connected IoT devices includes connected cars, machines, meters, sensors, point-of-sale terminals, consumer electronics and wearables. – Cellular IoT is predicted to grow from 3.5 billion devices in end of 2024 to 5.5 billion devices in end of 2028. – Mobile data traffic volume is estimated to increase by more than two times in the period 2024–2028. The mobile traffic is driven by smartphone users and video traffic, with mobile video traffic forecasted to grow by almost 25% annually through 2028 to account for more than 70% of all mobile data traf- fic. Fixed Wireless Access is another contributor to mobile traffic, growing with more than 30% annually in the period to account for more than 25% of all mobile data traffic in 2028. Rates per CGU CGU Networks Cloud Software and Services Vonage Cradlepoint iconectiv Emodo Red Bee Media Notes to the consolidated ﬁnancial statements 53 Sales growth in the Enterprise segment is driven by the adoption of 5G and the convergence of 5G and Cloud communications in the enterprise market. The Enterprise Wireless WAN addressable market is expected to grow with a CAGR of 24% 2022–2027. The global CPaaS market is expected to grow with a CAGR of approximately 24% 2023–2026, with the growth mainly driven by the introduction of high-value API’s. The CGUs Vonage and Cradlepoint have assumed a forecasted com- pounded annual growth rate above 15% (20%) over the next five years followed by a gradual decline in growth rates. The assumptions reflect the expected high growth market conditions in which both CGUs are present. Market maturity and market growth at long term sustainable levels (nominal rates described above) are not expected to be reached until after the 5-year forecast period. It is noted that it is more difficult to estimate market conditions the further into the future they are forecasted. The forecasted cash flows to calculate recoverable amounts are based on five-year explicit business plans. For the CGUs Vonage and Cradlepoint an additional two years have been added to reflect the progression towards the steady state cash flow projections. There are no reasonably possible changes that would lead to the carrying value not being recoverable for any CGU, except for Vonage. The recoverable amount of CGU Vonage exceeds the carrying amount by SEK 1.1 billion. This CGU was written down to its recoverable amount in Q3 2023. The current head room comes mainly from the amortization of intangible assets since the write-down. The recoverable amount for CGU Vonage would equal the carry- ing value, if the long-term EBIT margin would be decreased by 1%, or if sales CAGR during the forecast period or terminal growth rate decreased by 1%. Likewise, an increase in the applied WACC would give the same outcome. An after-tax discount rate has been applied for the discounting of projected after-tax cash flows. This discounting is not materially different from a dis- counting based on before-tax future cash flows and before-tax discount rates, as required by IFRS. The higher rates for Vonage and Cradlepoint are partly driven by increased uncertainty and partly by the higher risk-free rate implied by USD treasury bonds, which are used for these CGUs as the cash flows are forecasted in USD. In note A1 “Material accounting policies,” and note A2 “Critical accounting estimates and judgments,” further disclosures are given regarding goodwill impairment testing. The assumptions for 2022 are disclosed in note C1 “Intangible assets” in the Annual Report of 2022. 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. Post-tax discount rates (%) Terminal growth rates (%) 2023 10.0 10.5 11.0 11.0 10.5 14.5 12.5 2022 9.0 10.0 9.5 9.5 10.0 14.5 11.0 2023 2022 2.0 1.5 3.5 3.5 3.5 2.0 2.0 2.0 2.0 3.5 2.0 2.0 2.0 2.0 54 Notes to the consolidated ﬁnancial statements Financial report 2023 C2 Property, plant and equipment Property, plant and equipment 2023 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 Disposals Reclassiﬁcations Translation differences Closing balance Accumulated depreciations Opening balance Depreciations Balances regarding divested business Disposals Reclassiﬁcations Translation differences Closing balance Accumulated impairment losses Opening balance Impairment losses Disposals Translation differences Closing balance Net carrying value 7,523 87 – –443 327 –158 7,336 –4,282 –480 – 395 – 102 3,825 134 – –221 75 –61 3,752 –2,797 –382 – 220 1 60 –4,265 –2,898 –385 –101 40 9 –437 2,634 –114 –114 7 10 –211 643 38,220 1,713 –347 –2,318 627 –498 37,397 –27,606 –3,410 227 2,321 –1 378 –28,091 –1,121 –428 65 38 –1,446 7,860 973 1,363 – –232 –1,029 –17 1,058 – – – – – – – – –19 19 – – 1,058 Contractual commitments for the acquisition of property, plant and equipment as per December 31, 2023, amounted to SEK 632 (510) million. Property, plant and equipment 2022 Cost Opening balance Additions Balances regarding acquired/divested business Disposals Reclassiﬁcations Translation differences Closing balance Accumulated depreciations Opening balance Depreciations Disposals Translation differences Closing balance Accumulated impairment losses Opening balance Impairment losses 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 6,946 47 37 –275 287 481 7,523 –3,741 –502 226 –265 –4,282 –283 –115 44 –31 –385 2,856 3,549 200 – –421 213 284 3,825 –2,678 –373 434 –180 –2,797 –104 –4 3 –9 –114 914 35,009 2,705 138 –1,638 593 1,413 38,220 –24,769 –3,239 1,509 –1,107 –27,606 –1,054 –146 145 –66 –1,121 9,493 705 1,525 11 –253 –1,093 78 973 – – – – – – –9 9 – – 973 Total 50,541 3,297 –347 –3,214 – –734 49,543 –34,685 –4,272 227 2,936 – 540 –35,254 –1,620 –662 131 57 –2,094 12,195 Total 46,209 4,477 186 –2,587 – 2,256 50,541 –31,188 –4,114 2,169 –1,552 –34,685 –1,441 –274 201 –106 –1,620 14,236 Financial report 2023 Notes to the consolidated ﬁnancial statements 55 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 Terminations Translation differences Closing balance Accumulated impairment losses Opening balance Impairment losses Terminations Translation differences Closing balance Financial sublease Opening balance Derecognition for sublease Translation differences Closing balance Net carrying value Real estate Vehicles Other Total Real estate Vehicles Other Total 2023 2022 15,895 1,307 2 –870 –331 16,003 –7,789 –2,146 546 209 –9,180 –374 –93 3 11 –453 –396 –2 13 –385 5,985 998 257 – –489 3 769 –629 –232 373 –1 –489 – – – – – – – – – 280 303 1 – – –4 300 –138 –49 – 3 –184 – –61 – – –61 – – – – 55 17,196 1,565 2 –1,359 –332 17,072 –8,556 –2,427 919 211 –9,853 –374 –154 3 11 –514 –396 –2 13 –385 6,320 13,756 1,650 334 –719 874 15,895 –5,687 –2,141 393 –354 –7,789 –303 –66 27 –32 –374 –345 – –51 –396 7,336 930 168 – –178 78 998 –495 –250 159 –43 –629 – – – – – – – – – 171 136 – – –4 303 –79 –60 – 1 –138 – – – – – – – – – 369 165 14,857 1,954 334 –897 948 17,196 –6,261 –2,451 552 –396 –8,556 –303 –66 27 –32 –374 –345 – –51 –396 7,870 Lease liabilities The lease liabilities amounted to SEK 7,455 (9,304) million, of which SEK 2,235 (2,486) million is classified as current. The remaining contractual maturities as of December 31, 2023, is shown in note D4 “Contractual obligations.” Lease cost The total lease cost amounted to SEK 3,788 (3,775) million, of which deprecia- tion was SEK 2,427 (2,451) million, impairment losses were SEK –154 (–66) million, lease expense relating to low-value assets was SEK 459 (516) million, interest expense was SEK 464 (464) million and variable lease expense was SEK 284 (278) million. Variable lease expense consists mainly of property tax. Future cash outﬂow Future cash outflows from leases not yet commenced in 2023 to which the Company is committed as the lessee is SEK 249 (71) million. Leases with the Company as lessor Lessor leases relate to subleases of real estate. These lease contracts vary in length from 1 to 9 years. Receivables related to subleases in 2023 amounted to SEK 70 (62) million for operating leases and to SEK 75 (75) million for financial leases. Interest income from financial subleases was SEK 5 (8) million. At December 31, 2023, future minimum payment receivables were distributed 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 2023 –2,857 –464 2022 –2,593 –464 –459 –516 –284 –4,064 –278 –3,851 2024 2025 2026 2027 2028 and later Total Financial leases Operating leases 78 13 – – – 91 48 22 19 11 4 104 56 Notes to the consolidated ﬁnancial statements Financial report 2023 Section D – Obligations D1 Provisions Provisions 2023 Opening balance Additions Balances regarding acquired business Reversal of excess amounts Charged to income statement Utilization Reclassiﬁcations Translation differences Closing balance Of which current provisions Of which non-current provisions 2022 Opening balance Additions Balances regarding acquired business 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 669 6,082 –112 –2,866 –14 –39 3 ,720 2, 865 855 639 400 – –54 –338 –21 43 669 448 221 3,093 481 –131 –541 – –45 2 ,857 984 1,873 3,440 1,024 – –585 –824 –31 69 3,093 1,215 1,878 722 849 –416 –138 –57 –6 954 346 608 1,231 561 – –960 –144 32 2 722 198 524 678 831 – –547 – –6 956 705 251 1,074 368 – –120 –646 – 2 678 572 106 985 1,410 –60 –682 – –69 1 ,584 902 682 1,591 303 – –99 –897 – 87 985 642 343 Other 5,441 824 –821 –3,792 7 –24 1 ,635 977 658 1,529 4,129 1,050 –220 –1,724 595 82 5,441 4,554 887 Total 11,588 10,477 – –1,540 8,937 –8,566 –64 –189 11,706 6,779 4,927 9,504 6,785 1,050 –2,038 4,747 –4,573 575 285 11,588 7,629 3,959 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 favorable 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 2023, the total provision value is SEK 11.7 (11.6) billion, of which SEK 4.9 (4.0) billion is classified as non-current. The significant restructuring provision additions of SEK 6.1 billion and utilization of SEK 2.9 billion is due to the cost-reduction activities announced during the year. Other provisions utilization of SEK 3.8 billion includes the payment of USD 206.7 million (approximately SEK 2.2 billion) for the fine in relation to the resolution of previ- ously announced, non-criminal, alleged breaches under the deferred prosecu- tion agreement (DPA) with the United States Department of Justice (DoJ). For more information, see note A1 “Material accounting policies” and note A2 “Critical accounting estimates and judgments” for key estimation uncertainty 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. Restructuring provisions in 2023 relate to the cost-reduction activities that have resulted in fundamental reorganizations of the impacted units. 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 man- agement’s best estimate. The expected timing and amount of outflows are dependent on whether the plan execution is in line with management’s assess- ment. 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 losses on cus- tomer contracts. To measure the customer-related provisions, management estimates the unavoidable costs to fulfill the obligations under the customer contract. If the exit penalty is lower than the estimated costs to fulfill the contract, then the provision value is limited to the exit penalty value. The unavoidable costs to fulfill 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. 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 a forecast of sales volumes, and any excess is provided for based on an assessment of the risk of obsolescence. If the committed inventory is not required to be purchased, but a fee is chargeable by the vendor due to the failure to meet the committed volumes, then the provision is based on the expected fee to be incurred. Estimation uncertainty exists regarding the Financial report 2023 Note D1, cont’d. Notes to the consolidated ﬁnancial statements 57 expected usage and sales volumes forecast and, if applicable, the assessment of the risk of obsolescence, as these are based on management’s expectations. When the committed inventory is purchased, the provision is reclassified from provisions to inventory allowances. 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 over 2 years. 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 within 1 year. 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 under- lying instrument during the service period and expected fulfilment of the service conditions. Share-based payment provisions will be utilized according to the awards’ vesting dates and will be utilized over a period of 3 years. Other provisions Other provisions mostly relate to litigation and patent infringement disputes. Management regularly assesses the likelihood of any adverse outcomes relat- ing to ongoing litigations and disputes, and if deemed probable then a provi- sion 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 litigations are inherently uncertain regarding timing and amount, and there- fore the majority of the provisions are classified as current, but outflows may happen over a number of years depending on when settlement is reached. 58 Notes to the consolidated financial statements D2 Contingent liabilities Contingent liabilities Contingent liabilities Total 2023 3,037 3,037 2022 3,322 3,322 Contingent liabilities mainly relate to, in order of materiality, tax litigations in subsidiaries, other litigations and disputes, including related to intellectual property matters, pension guarantees and losses on customer contracts, which are assessed to be possible obligations for the Company. The Company actively manages its IPR portfolio and its need for third party licenses and is involved from time to time, in the ordinary course of business, in litigation related thereto, as plaintiff, defendant and other capacities. The Company also monitors the performance of obligations due to it by third party vendors and other suppliers and takes appropriate action where necessary to secure such performance. The single largest contingent liability relates to the pension com- mitments in Sweden of SEK 0.6 (0.5) billion. See note G1 “Post-employment benefits” for more information on the pension contingent liability in Sweden. Outflows relating to litigation, both tax and legal, due to their nature are inherently uncertain regarding timing and amount. All ongoing litigations are, therefore, regularly 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. D4 Contractual obligations Contractual obligations, SEK billion 2023 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 2022 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 18.3 2.6 – 18.4 27.8 27.3 1.3 95.7 6.3 3.0 – 17.8 38.4 44.3 0.9 4.9 3.6 0.1 0.7 – 5.7 0.2 15.2 12.9 4.4 0.6 3.1 – 8.6 1.1 Total 53.6 8.6 0.7 19.3 27.8 37.0 1.8 12.0 1.1 – – – – – 13.1 148.8 11.2 1.1 0.1 – – – – 39.5 10.6 0.7 21.1 38.4 54.1 2.6 12.4 167.0 18.4 1.3 0.6 0.2 – 4.0 0.3 24.8 9.1 2.1 – 0.2 – 1.2 0.6 13.2 As part of its defense to a now settled patent infringement lawsuit filed by Total 110.7 30.7 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.” Contractual purchase obligations and trade payables at the end of 2023 were lower than the previous year as supply chain constraints have eased and lower supply volumes. Demand for customer finance arrangements continues to be strong. The outstanding commitment in 2023 decreased as the financing facility was utilized for the business in India during the year. 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. On July 13, 2023, the Division Bench of the Delhi High Court found that in this instance the CCI has no power to conduct the pending investigations against Ericsson. The CCI has appealed this order to 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 case of adverse findings, SAMR has the power to impose behavioral and financial remedies. The above matters relating to Micromax and SAMR are possible obligations which cannot be quantified and are, therefore, not included in the contingent liability amount disclosed in the table. D3 Assets pledged as collateral Assets pledged as collateral Chattel mortgages 1) Bank deposits 2) Marketable securities 2) Total 2023 7,678 547 276 8,501 2022 6,333 604 289 7,226 1) See also note G1 “Post-employment benefits.” 2) As of 2023, “Marketable securities” which was previously disclosed under “Bank deposits” is now presented as a separate line and the comparative year has been adjusted accordingly. Financial report 2023 Financial report 2023 Notes to the consolidated ﬁnancial statements 59 Section E – Group structure E1 Equity Capital stock Capital stock Parent Company December 31, 2023 December 31, 2022 Class A shares Class B shares 1,309 1,309 15,413 15,363 Total 16,722 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. The Annual General Meeting (AGM) 2023 resolved to issue 10,000,000 Class C shares for the Long-Term Variable Compensation Program (LTV II) 2023, 2022 and 2021 for Ericsson’s executive team and other executives. In accordance with an authorization from the AGM, 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 5.00, totaling SEK 50.0 million, representing less than 0.3% of capital stock. The acquisition cost was SEK 50.2 million. At December 31, 2023, the total number of treasury shares was 14,009,306 (4,009,306 in 2022 and 4,009,306 in 2021) Class B shares. Number of shares 2023 As of January 1 As of December 31 2022 As of January 1 As of December 31 Class A shares Class B shares Total 261,755,983 261,755,983 3,072,395,752 3,082,395,752 3,334,151,735 3,344,151,735 Class A shares Class B shares Total 261,755,983 261,755,983 3,072,395,752 3,072,395,752 3,334,151,735 3,334,151,735 Dividend proposal The Board of Directors propose to the Annual General Meeting a dividend to the shareholders of SEK 2.70 per share (SEK 2.70 in 2022 and SEK 2.50 in 2021), representing a total dividend of SEK 9.0 (9.0) billion. The dividend is proposed to be paid in two equal installments, SEK 1.35 per share with the record date April 5, 2024 (payment date April 10, 2024), and SEK 1.35 per share with the record date October 2, 2024 (payment date October 7, 2024). 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 The translation reserves comprise all foreign currency translation reserves arising from the translation of the financial statements of foreign operations to the Group presentation currency and changes regarding revaluation 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 Cash ﬂow hedge reserve Gains/losses arising during the period Transfer to goodwill 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, net of tax Total comprehensive income Transfer to retained earnings Closing balance 2023 2022 Translation reserves Cash ﬂow hedge reserve Revaluation of borrowings Total other reserves Translation reserves Cash ﬂow hedge reserve Revaluation of borrowings Total other reserves 8,443 –719 477 8,201 1,206 –411 –341 454 – – – – – – –2,425 59 –10 – –2,376 –2,376 – 6,067 – – – – 754 1,090 – – – –380 1,464 1,464 – 745 –667 –667 – – – – 137 137 – – – – – – –530 –530 – –53 754 1,090 –2,425 59 –10 –380 –1,442 –1,442 – 6,759 – – – – – – 7,273 –85 49 – 7,237 7,237 – 8,443 – 1,030 1,030 3,703 –3,677 – – 3,703 –3,677 –758 –212 –970 –701 280 – – – 87 –1,066 –1,066 758 –719 – – – – – – 818 818 – 477 –701 280 7,273 –85 49 87 6,989 6,989 758 8,201 60 Notes to the consolidated ﬁnancial statements Financial report 2023 E2 Business combinations Acquisitions Acquisitions 2021–2023 2023 2022 2021 Consideration Purchase price paid on acquisition Deferred consideration/Others 1) Total consideration, all cash and cash equivalents 579 – 51,297 1,972 579 53,269 Net assets (liabilities) acquired Intangible assets Property, plant and equipment Right-of-use of assets Cash and cash equivalents Other assets Provisions, incl. post-employment beneﬁts Other liabilities Total identiﬁable net assets (liabilities) Goodwill Total Acquisition-related costs 2) 306 1 2 7 83 – –168 231 348 579 36 23,554 186 334 521 5,344 –1,050 –16,916 11,973 41,296 53,269 436 256 – 256 –95 1 – – 21 – –348 –421 677 256 11 1) Deferred consideration relates to the pre-combination portion of employee stock awards that were previously granted to Vonage employees, which will be paid out post acquisition according to the original award vesting schedule. 2) Acquisition-related costs are included in Selling and administrative expenses in the consolidated income statement. In 2023, the Company made acquisitions resulting in a negative cash flow effect from business combinations amounting to SEK 1,309 (51,734) million, see also note H3 “Statement of cash flows.” The cash flow effect differs from the total consideration in the above table due to the acquired cash of SEK 7 million from the Ericom acquisition and the current year pay-out of deferred consideration of SEK 737 million relating to the prior year Vonage acquisition. Ericom: On April 3, 2023, Cradlepoint, a wholly owned subsidiary of Ericsson, acquired 100% of the shares in Israel based Ericom Software Limited in an all cash transaction. Ericom, with their advanced enterprise cloud security platform, will solidify Cradlepoint’s SASE (secure access service edge) and zero trust offerings for hybrid 5G and wireline environments. Goodwill in this transaction represents future technology and technology synergies and is not expected to be deductible for tax purposes. The fair values of the assets acquired, and liabilities assumed at the acquisition date, as presented in the table under the column “2023,” are final. Vonage: On July 21, 2022, the Company acquired, in an all cash transaction, all of the shares in Vonage Holdings Corp., a US-based global provider of cloud-based communications. This acquisition provides the Company with an opportunity to access a complementary, substantial and high growth segment. Goodwill in this transaction represents future customers, technology, and synergies and is not expected to be deductible for tax purposes. The intangible assets mainly relate to customer relationships. The fair values of the assets acquired, and liabilities assumed at the acquisition date, were made final in 2022 and are presented in the table under the column “2022.” In the third quarter of 2023, the Company impaired the goodwill related to the Vonage acquisition by SEK 31.9 billion. For more information, see note C1 “Intangible assets.” Acquisitions 2021–2023 Business Ericom Vonage Quortus Axonix Description An Israel based enterprise cloud security platform provider. A US based global provider of cloud-based communications. A UK based mobile core software business with expertise in enterprise 4G/5G technology. A UK based mobile-ﬁrst programmatic advertising exchange business. Transaction date Apr 2023 Jul 2022 Nov 2021 Mar 2021 Financial report 2023 Note E2, cont’d. Divestments Divestments 2021–2023 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 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 Divestments 2021–2023 Business IoT Aerialink Data center Notes to the consolidated ﬁnancial statements 61 In 2023, the Company made divestments with a cash flow effect amounting to SEK –633 (20) million, mainly relating to the divestment of the IoT busi- ness. Net gains/losses from the divestments are presented in Other operating income/Other operating expenses in the income statement, see also note B4 “Other operating income and expenses.” For more information, see note H3 “Statement of cash flow.” 2023 2022 2021 –633 – –633 121 – – – – – 35 156 –789 – –633 20 298 318 – – 82 – 23 –42 –101 –38 356 –298 20 273 – 273 26 7 – –48 51 –30 36 42 231 – 273 Description IoT accelerator and connected vehicle cloud businesses and related assets. A US based company providing premier messaging solutions for business to business communications. A data center business located in the Netherlands. Transaction date Mar 2023 Nov 2022 Nov 2021 E3 Associated companies Equity in associated companies Opening balance Investments Share in earnings Distribution of capital stock Taxes Dividends Divested business Translation differences Closing balance 2023 1,127 – 124 –25 –20 –46 – –10 1,150 2022 941 298 17 –24 –14 –58 –82 49 1,127 The Company owns 49.07% of the shares in Ericsson Nikola Tesla d.d., located in Croatia and 35.6% of the shares in ConcealFab Inc., located in the US. See also note H4 “Related party transactions.” 62 Notes to the consolidated ﬁnancial statements Financial report 2023 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 invest in 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: – Free cash flow before M&A of 9–12% of net sales – Positive net cash position – Investment grade rating by Moody’s (Baa3), S&P Global (BBB–) and Fitch Ratings (BBB–). Capital objectives-related information Free cash ﬂow before M&A as % of net sales 1) Positive net cash (SEK billion) 1) 2023 –0.4% 7.8 2022 8.2% 23.3 Foreign exchange risk The Company is a global company with sales mainly outside Sweden. Sales and costs incurred 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 will impact 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 changes 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 inter- nal transactions is a function of timing and FX volatility, therefore impossible to predict. Currency exposure, SEK billion Sales trans- lation exposure Sales trans- action exposure Cost trans- lation exposure Cost trans- action exposure 1) Sales net exposure Exposure currency USD 2) EUR INR JPY GBP CNY SAR BRL 81.7 40.9 31.2 10.1 9.1 7.8 5.6 5.0 55.6 –0.5 –0.7 – –1.0 – 0.4 – 137.3 40.4 30.5 10.1 8.1 7.8 6.0 5.0 –62.2 –37.3 –19.9 –4.1 –3.6 –5.7 –3.5 –4.1 –42.4 –2.6 0.2 – – 1.1 0.1 1.2 Cost net exposure –104.6 –39.9 –19.7 –4.1 –3.6 –4.6 –3.4 –2.9 Credit rating and outlook Fitch Ratings S&P Global Moody´s BBB–, stable BBB–, stable BBB–, developing Ba1, stable BBB–, developing Ba1, stable 1) External purchases in foreign currency translated to functional currency. 2) Sales transaction exposure in 2023 includes volume in the cash ﬂow hedge of USD 2,462 million. Based on the outstanding cash ﬂow hedge volume at year end, the hedged sales volume that will occur in 2024 is USD 2,467 million. 1) For more information about the measures, see Alternative performance measures and Financial terminology. The ratings and outlooks have remained unchanged throughout 2023. 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. The Company has a Treasury and Customer Finance organization with the principal role to ensure that appropriate financing is in place through loans and committed credit facilities, actively manage the Company’s liquidity as well as financial assets and liabilities, and manage and control financial risk exposures in a manner consistent with underlying business risks and financial policies. The Customer Finance function may support with suitable third-party financ- ing solutions for customers to facilitate 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 risk – 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 “Material accounting policies.” Transaction exposure The Company considers the following transaction exposures. a) Transaction risk impacting net sales and net income 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 the following recurring hedge programs: i) The Company has identified certain customer contracts where a fluctuation in the USD/SEK foreign exchange rate would significantly impact net sales. 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%. ii) The Board of Directors has provided a mandate to the Company to hedge highly probable forecasted sales and purchases denominated in USD in EAB for the next 7 to 18 months, on a monthly rolling basis. 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 strength- ens against SEK, up to 100%. Financial report 2023 Note F1, cont’d. Notes to the consolidated ﬁnancial statements 63 For both programs, 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 items and the hedging instruments. 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 2023 was SEK 1.5 (1.5) million per basis point shift. 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. 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 –1 – –3 – – –1 – 1 – 5 –2 2 4 –3 1 9 –4 2 1) Borrowings are included as they are designated FVTPL. 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 fore- casted sales and purchases in EAB are hedged monthly, whereby forecasted sales (excluding volume in the 7 to 18 month cash flow hedge program) are funded by internal loans and forecasted purchases funded by deposits with its parent company. Cash flow hedge accounting is not designated, therefore the FX impact on revaluation of the internal loan and deposit 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. Since the start of the 7 to 18 month cash flow hedge program in March 2022, the USD sales volume funded by internal loan has steadily reduced, whereas the USD purchases volume reduced to a lesser extent. This resulted in a net deposit balance with its parent company throughout the second half of 2023. The outstanding net deposit at year-end is USD 199 million (loan of USD 149 million), with an average net loan balance of USD 52 million (USD 529 million) over the year. Net realized FX gain recognized is SEK 4 mil- lion and unrealized loss is SEK 211 million, giving a total net loss of SEK 207 million. d) Transaction risk impacting business combination The Company is exposed to FX execution risk on consideration payable for acquisition 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 acquisition 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 income 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), with the limitation that historical data does not necessarily reflect future events. 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 2023 was SEK 15.9 (21.0) million. No VaR limits were exceeded during 2023. Outstanding derivatives Outstanding derivatives Gross amount recognized Net amount presented Related amounts not offset – collaterals Net Offset 1,916 –1,837 –43 43 1,873 –1,794 –1,486 873 387 –921 – –22 – – – –22 – – – –22 Gross amount recognized Net amount presented Related amounts not offset – collaterals Net Offset 1,275 –2,778 –165 165 1,110 –2,613 –277 2,382 833 –231 11 –8 – – 11 –8 – – 11 –8 2023 Currency derivatives 1) Assets Liabilities Interest rate derivatives Assets Liabilities 2022 Currency derivatives 1) Assets Liabilities Interest rate derivatives Assets Liabilities 1) Currency derivatives designated as cash ﬂow hedge of SEK 1,617 (566) million are included in Other current receivables and SEK 679 (1,472) 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 2023 Notional Amount (USD millions) Average forward rate (SEK/USD) < 3 months 1,091 9.81 3 – 12 months 1,376 10.46 > 1 year 1,888 10.03 Total 4,355 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. 64 Notes to the consolidated ﬁnancial statements Financial report 2023 Note F1, cont’d. See note E1 “Equity” for movement in the cash flow hedge reserve. No hedge ineffectiveness was recognized in the income statement in 2023. 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 “Material accounting policies.” 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 limit and risk profile set on the customer. Credit blocks appear if credit limit is reached or if past due receivables are higher than permitted 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 management expec- tations 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. The Company has assessed the recent global economic conditions on the expected credit losses model for trade receivables and updated the provision matrix as appropriate. Trade receivables and contract assets, net of allowance, amounted to SEK 50,214 (58,256) million as of December 31, 2023. Provisions for expected credit losses on trade receivables and contract assets amounted to SEK 2,585 (2,492) million as of December 31, 2023. Total past due more than 360 days has increased, resulting in a higher allowance as a percentage of gross expo- sure at year end. The Company’s write-offs have historically been low. During the year SEK 35 (70) million were written off due to the Company having no reasonable expectation of collection. Movements in allowances for impairment of trade receivables and contract assets Opening balance Balances regarding acquired business Increase in allowance Write-offs Translation difference Closing balance 2023 2,492 –16 268 –35 –124 2,585 2022 2,398 90 40 –70 34 2,492 The distribution of trade receivables and contract assets closely follows the distribution of the Company’s sales, see note B1 “Segment information.” The 10 largest customers represented 47% (45%) of the total trade receivables and contract assets in 2023. Aging analysis of gross values of trade receivables and contracts assets by risk category Days past dues 2023 Not due 1–90 91–180 181–360 >360 Total Country risk :Low 27,431 Country risk: Medium 14,369 3,364 Country risk: High 45,164 Total 2022 2,434 826 512 3,772 445 227 186 858 137 224 197 558 Days past dues Not due 1–90 91–180 181–360 Country risk :Low 32,015 Country risk: Medium 17,731 3,304 Country risk: High Total 53,050 2,090 1,614 610 4,314 165 150 384 699 103 134 295 532 320 605 1,522 2,447 >360 328 585 1,240 2,153 30,767 16,251 5,781 52,799 Total 34,701 20,214 5,833 60,748 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 analyzing 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, 2023, the total amount payable to the Company under customer finance credits was SEK 9,681 (7,758) million. The carrying value of these assets was SEK 6,917 (5,370) million as of December 31, 2023. Customer finance is arranged for infrastructure projects in different geographic markets. As of December 31, 2023, there were a total of 65 (73) customer finance arrangements originated by or guaranteed by the Company. As of December 31, 2023, the five largest facilities, calculated based on gross exposure, represented 86% (74%) of the customer finance exposure. The geographical split of the year end gross exposure is as follows: South East Asia, Oceania and India 38% (18%), Middle East and Africa 22% (30%), Europe and Latin America 21% (27%) and North America 19% (24%). As of December 31, 2023, the Company also had unutilized customer finance commitments of SEK 37,019 (54,086) 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 arranged. “Third-party risk coverage” means that a financial payment guaran- tee 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 invest- ment 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, 2023 and 2022. Financial report 2023 Note F1, cont’d. Outstanding customer ﬁnance credit risk exposure 1) Fair value of customer ﬁnance credits Financial guarantees for third-parties Accrued interest Maximum exposure to credit risk Less third-party risk coverage The Company’s risk exposure, less third-party risk coverage 1) This table shows the maximum exposure to credit risk. 2023 6,917 4 7 6,928 –79 2022 5,370 6 8 5,384 –298 6,849 5,086 Fair value assessment of customer ﬁnance credits Customer finance risk exposures are held at fair value and are classified as Level 3 in 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 loss in the consolidated income statement of SEK 209 million in 2023 (loss of 15 million), of which net loss of SEK 209 million related to credits held as of December 31, 2023 (loss of 17 million). This effect is pre- sented within selling and administrative expenses. Customer ﬁnance fair value reconciliation Opening balance Additions Disposals/repayments Revaluation/amortization of interest Translation difference Closing balance Of which non-current 2023 2022 5,370 49,583 –47,409 –467 –160 6,917 1,347 3,287 37,295 –35,412 –151 351 5,370 415 Due to the 5G buildout, the demand for customer financing arrangements has continued to increase significantly. Most of such financing arrangements have been transferred to banks. 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 concentration. All derivative transactions are covered by ISDA netting agreements to reduce the credit risk. For cross-currency derivatives 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, 2023, 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 0.4 (0.8) 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 short-term commitment on debt in the next 12 months are sufficiently covered Notes to the consolidated ﬁnancial statements 65 by cash and other interest-bearing assets at year end. Ongoing collection from customers are expected to satisfy operational requirements including trade payables and other purchase obligations. Commitments for new customer finance is not expected to have negative short-term effect on collection as majority are sold within a short period. Where required, the Company expects short-term borrowing facilities to be drawn down or rolled over to meet liquid- ity needs. Cash, cash equivalents, interest bearing securities and derivative assets Rating or equi- 2023 valent < 3 M 3–12 M 1–5 Y >5 Y Total Bank deposits Other ﬁnancial institutions Type of issuer: Governments Corporates Mortgage institutes Derivative assets AA/AAA A2/P2 AAA 33,298 181 548 — — — — 33,479 — 548 789 1,510 1,995 445 490 296 5,668 749 1,254 — 8,676 622 — — — 35 2,533 1,806 16,339 1,851 38,585 7,384 10,552 35 56,556 Rating or equi- 2022 valent < 3 M 3–12 M 1–5 Y >5 Y Total Bank deposits Other ﬁnancial institutions Type of issuer: Governments Corporates Mortgage institutes Derivative assets AA/AAA A2/P2 AAA 38,485 166 604 — 7 — — 38,658 — 604 915 1,283 — 323 3,950 — 1,682 385 277 — 8,880 277 — — — 136 5,142 1,283 10,562 1,121 41,610 6,183 9,441 136 57,370 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. The Company mitigates the risk by having diversified funding sources through a mix of bonds, bilateral loans and private placements, with a spread of debt maturing over time. The funding strategy is flexible to enable pre-financing before loan maturities and funding in various currencies. The average maturity of long-term borrowings is 3.7 years (3.8 years) at December 31, 2023. In addition to the long-term funding programs, the Company has a commercial paper program and a committed liquidity revolving credit facility for short-term borrowings. Funding programs 1) Euro Medium Term Note program (USD million) SEC Registered program (USD million) 2) Commercial Paper Program (SEK million) Amount Utilized Unutilized 5,000 — 10,000 2,842 — 2,014 2,158 — 7,986 1) There are no ﬁnancial covenants related to these programs. 2) Program amount indeterminate. In November 2023, the Company issued a 4.5-year EUR 500 million green bond under the Euro Medium Term Note program and Green Financing Framework. During the year, the Company established a new committed liquidity revolving credit facility of USD 1.0 billion, of which USD 0.4 billion was utilized as at year end, and increased the borrowings under the commercial paper program by SEK 2.0 billion. Furthermore, the Company signed two 7-year loan agreements, one with European Investment Bank for USD 273 million and one with Nordic Investment Bank for USD 107 million. 66 Notes to the consolidated ﬁnancial statements Financial report 2023 Note F1, cont’d. Committed credit facilities Multi-currency revolving credit facility (USD million) Liquidity revolving credit facility (USD million) Amount Utilized Unutilized 2,000 — 2,000 1,000 400 600 In September 2023, the Company exercised the second and the last one-year extension option on the USD 2 billion sustainability-linked revolving credit facility. The facility does not have interest rates linked to credit rating or finan- cial covenants but is linked to two of Ericsson’s sustainability KPIs. 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 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 observ- able 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. – 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 (unobservable inputs). Apart from trade receivables and customer finance receivables, this valuation technique mainly applies to investment in shares and other partici- pations whereby valuation input is considered observable if it can be directly observed from transactions in an active market, or if there is compelling exter- nal evidence demonstrating an executable exit price. Using a market approach to valuation, unobservable inputs are generally determined via reference to observable inputs, historical observations or other analytical techniques. Reconciliation of Level 3 fair value of other ﬁnancial asset Opening balance Additions Disposals Gains or losses 1) Translation differences Closing balance Investment in shares and participations 1,986 206 –2 –186 –2 2,002 1) Table shows net gains or losses recognized in Other operating income or expenses, of which SEK 186 million unrealized loss relate to Level 3 assets held at the end of the year. 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. From January 1, 2023, liquidity portfolios in some subsidiaries are managed on a fair value basis, therefore deposits (cash equivalents) held in these port- folios are reclassified as fair value through profit or loss (previously classified as amortized cost). The fair value of assets reclassified from amortized cost to FVTPL is SEK 2.9 billion. The effect on profit and loss account is a gain of SEK 2 million. 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 Parent Company borrowings Financial liabilities at FVTPL Other current liabilities Liabilities at amortized cost Trade payables Borrowings Financial liabilities 2023 2022 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 – – – – – – 0.4 – 0.6 1.0 – – –27.8 –8.9 –36.7 6.9 19.1 17.5 2.1 1.9 42.2 – – – 89.7 – 18.6 0.8 0.1 – – – – – – 0.5 16.7 – 1.9 – – – – –38.0 –23.7 –14.3 –1.8 – – –39.8 – – – –1.8 – – 6.9 – – 2.0 – 42.2 – – – – – – – – – – – – – 0.4 2.9 0.6 3.9 – – –38.4 –3.3 –41.7 5.4 17.5 15.7 2.1 1.1 48.4 – – – 90.2 – 17.5 – 0.1 – – – – – – – 15.7 – 1.1 – – – – –29.6 –16.7 –12.9 –2.6 – – –32.2 – – – –2.6 – – 5.4 – – 2.0 – 48.4 – – – – – – – 1) Total Cash and cash equivalent is SEK 35.2 (38.3) billion, of which SEK 17.5 (18.6) billion relating to Cash equivalents are presented in the table above. Financial report 2023 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 “Material 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 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 shall be sold to generate funds, which also cover social security payments, when shares are delivered to participants at the end of their service period. Notes to the consolidated ﬁnancial statements 67 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.” F2 Financial income and expenses Financial income and expenses Contractual interest on ﬁnancial assets of which on ﬁnancial assets at amortized cost Net revaluation gains and losses on ﬁnancial assets Other ﬁnancial income Financial income Contractual interest on ﬁnancial liabilities of which on ﬁnancial liabilities at amortized cost Net revaluation gains and losses on ﬁnancial liabilities Lease interest expense Net interest on pension liabilities Other ﬁnancial expenses 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 1) Financial liabilities designated at fair value through proﬁt or loss 2023 1,897 403 64 184 2,145 –2,282 –501 –134 –464 –517 –721 –4,118 –1,020 –2,993 885 –1,100 2022 717 251 –146 207 778 –972 –128 379 –464 –361 –512 –1,930 –1,259 –2,411 –2,552 2,847 2021 360 148 10 321 691 –525 –41 67 –426 –262 –528 –1,674 –1,547 –2,530 –534 404 1) Excludes net loss from revaluation of customer ﬁnance receivables of SEK 209 million (net loss of SEK 15 million in 2022 and net gain of SEK 350 million in 2021), reported as Selling and administrative expenses, and net loss on revaluation of investments in shares and participations of SEK 186 million (net loss of SEK 205 million in 2022 and net gain of SEK 784 million in 2021) reported as Other operating income or expenses. F3 Financial assets, non-current Financial assets, non-current Opening balance Additions Disposals/repayments/deductions Amortization Change in value in funded pension plans 2) Revaluation Reclassiﬁcation Translation differences Closing balance Other investments in shares and participations 2,074 206 –2 – – –185 – –2 2,091 2023 Interest- bearing securities, non-current 9,164 12,887 –4,127 – – 269 –8,262 – 9,931 Other ﬁnancial assets, non-current 1) Other investments in shares and participations 6,839 1,899 –816 –457 –1,033 – –65 –17 6,350 2,258 218 –205 – – –205 – 8 2,074 2022 Interest- bearing securities, non-current 30,626 13,583 –29,523 – – 262 –5,784 – 9,164 Other ﬁnancial assets, non-current 1) 6,217 1,249 –481 –288 244 85 –542 355 6,839 1) Includes items such as pension surplus assets, tax credit receivables, deferred sales commissions and loans to associates. 2) This amount includes asset ceiling. For further information, see note G1 “Post-employment beneﬁts.” 68 Notes to the consolidated ﬁnancial statements Financial report 2023 F4 Interest-bearing liabilities As of December 31, 2023, the Company’s outstanding interest-bearing liabili- ties were SEK 46.9 (32.9) billion. Reconciliation of liabilities arising from ﬁnancing activities (including lease obligations) Interest-bearing liabilities (excluding lease obligations) Opening balance 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 2023 2022 8,995 8,660 17,655 29,071 147 29,218 46,873 2,865 3,119 5,984 26,752 194 26,946 32,930 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 New lease contracts Balances regarding acquired business Other non-cash movements Closing balance Notes, bonds, bilateral loans, syndicated loans and commercial papers in the Parent Company 2023 2022 42,234 41,134 19,728 –7,884 1,101 –2,857 –930 667 1,131 1,547 2 –411 54,328 10,755 –16,029 315 –2,593 4,762 –1,030 –2,888 1,986 6,876 –1,054 42,234 Nominal amount Coupon Currency Maturity date Carrying value 2023 Changes in fair value due to changes in credit risk 2023 Cumulative changes in fair value due to changes in credit risk 2023 Carrying value 2022 Issued-maturing Notes and bond loans 2017–2024 2017–2025 1) 2020–2030 1) 2021–2029 2022–2027 2023–2028 500 150 200 500 750 500 1.875% 2.741% 3.020% 1.000% 1.125% 5.375% Total notes and bond loans Bilateral loans and syndicated loans 2017–2023 2) 2019–2024 3) 2019–2025 2) 2021–2028 3) 2023–2030 2) 2023–2030 3) 2023–2024 4) 2023–2024 4) 220 281 150 305 107 273 200 200 Total bilateral and syndicated loans Commercial papers EUR USD USD EUR EUR EUR USD USD USD USD USD USD USD USD Mar 1, 2024 Dec 22, 2025 Dec 30, 2030 May 26, 2029 Feb 8, 2027 May 29, 2028 Jun 15, 2023 July 31, 2024 Dec 18, 2025 Jun 21, 2028 Dec 16, 2030 Dec 18, 2030 Aug 30, 2024 Feb 29, 2024 2023–2024 4) 5) 2,030 SEK Feb–Mar 2024 Total commercial papers 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. 4) Short-term borrowings are classiﬁed as amortized cost liabilities. 5) Commercial papers with weighted average yield of 4.633%. 5,523 1,416 1,736 4,701 7,714 5,798 26,888 – 2,829 1,509 2,976 1,097 2,718 2,002 2,002 15,133 2,014 2,014 –33 –3 69 160 205 141 539 –6 7 9 107 29 –18 – – 128 – – 13 27 87 –152 –2 141 114 – 11 8 –76 29 –18 – – –46 – – 5,392 1,422 1,682 4,196 7,119 – 19,811 2,292 2,925 1,555 2,981 – – – – 9,753 – – To secure long-term funding, the Company uses notes and bond programs together with bilateral research and development loans, as well as private placements. All outstanding notes and bond loans are issued by the Parent Company under its Euro Medium Term Note (EMTN) program. Bonds issued at a fixed interest rate are normally swapped to a floating interest rate using inter- est rate swaps under the Asset and liability management mandate described in note F1 “Financial risk management.” In addition to the long-term funding programs, the Company has a commercial paper program and a committed liquidity revolving credit facility to efficiently manage liquidity needs, further described in note F1 “Refinancing risk.” Total weighted average interest rate cost for parent company funding during the year was 5.15% (2.45%). The global economy continues to face multiple challenges due to geopoliti- cal uncertainty and the threat of economic downturn affecting all major econo- mies. Central banks across the world have raised interest rates in response to inflation. The higher short-term interest rates increased interest payments on long-term borrowings as fixed coupons payments are normally swapped to floating rates. As all long-term borrowings are also denominated in either USD or Euro, interest payments and cost of borrowings in SEK have increased compared to prior years. Financial report 2023 Notes to the consolidated ﬁnancial statements 69 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 Company has updated the assumptions used to value the defined ben- efit pension liabilities based on the latest market conditions. Financial assump- tion changes resulted in net actuarial gains on defined benefit obligations of SEK 0.9 billion although this was largely offset by changes in demographic assumptions and experience losses. 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 59% (57%) 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 158% (172%) as of December 31, 2023. The Company’s share of Alecta’s saving premiums is 0.4% and the total share of active members in Alecta is 2.1%. The expected contribu- tion to the plan is SEK 95 million for 2024. 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 pen- sion liability in Sweden. The Company has a pledged business mortgage of SEK 7.4 billion to PRI Pensionsgaranti at year end. PRI continuously measures the Company credit risk levels according to the credit insurance terms and conditions. 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 2023. 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, the duration of payments to retirees could exceed the life expectancy assumed 70 Notes to the consolidated ﬁnancial statements Financial report 2023 Note G1, cont’d. 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’s 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 directors appointed partly by the local company and partly by the plan mem- bers. 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. Amount recognized in the Consolidated balance sheet Amount recognized in the Consolidated balance sheet 2023 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) 2022 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) Sweden US UK Other Total 50,043 29,627 20,416 – 20,416 50,441 28,521 21,920 – 21,920 5,073 4,815 258 255 513 5,365 5,111 254 298 552 10,595 12,410 –1,815 1,889 74 9,866 11,999 –2,133 2,137 4 19,824 15,741 4,083 1,143 5,226 18,019 14,849 3,170 1,715 4,885 85,535 62,593 22,942 3,287 26,229 83,691 60,480 23,211 4,150 27,361 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 755 (584) 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 Sweden US UK Other Total 2023 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 2022 Pension cost for deﬁned contribution plans Pension cost for deﬁned beneﬁt plans Total Total pension cost expressed as a percentage of wages and salaries 2021 Pension cost for deﬁned contribution plans Pension cost for deﬁned beneﬁt plans Total Total pension cost expressed as a percentage of wages and salaries 1,223 2,013 3,236 1,192 2,144 3,336 1,199 1,920 3,119 522 67 589 542 160 702 460 97 557 148 –67 81 128 –22 106 138 –6 132 1,571 1,166 2,737 1,209 1,204 2,413 1,084 931 2,015 3,464 3,179 6,643 7.8% 3,071 3,486 6,557 8.9% 2,881 2,942 5,823 9.3% 1) For the UK plans, negative cost was due to interest income of SEK 626 million exceeding interest cost of SEK 514 million during the year. Financial report 2023 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 Other Closing balance 1) The weighted average duration of DBO is 16.8 (18.3) years. 2) Excludes the impact of the asset ceiling of SEK 62 (55) million in 2023. 3) The expected contribution to the plans during 2024 is SEK 2.3 billion. Present value of the deﬁned beneﬁt obligation 2023 DBO, closing balance Of which partially or fully funded Of which unfunded 2022 DBO, closing balance Of which partially or fully funded Of which unfunded Notes to the consolidated ﬁnancial statements 71 Present value of obligation 2023 1) Fair value of plan assets 2023 Total 2023 Present value of obligation 2022 1) Fair value of plan assets 2022 Total 2022 83,691 –60,480 23,211 113,543 –81,355 32,188 2,291 179 2,839 – 108 5,417 – 2,291 – –2,371 78 –7 –2,300 179 468 78 101 3,117 2,772 311 1,716 – 43 4,842 – 2,772 – –1,475 62 1 –1,412 311 241 62 44 3,430 – –663 –663 – 14,135 14,135 267 –943 347 –329 – – – –663 267 –943 347 –992 1,118 –29,031 3,236 –24,677 – – – 14,135 1,118 –29,031 3,236 –10,542 –179 110 –69 3,381 –3,297 84 –1,737 350 –1,294 –488 104 85,535 –594 –342 1,292 488 –104 –2,331 8 –1,302 334 –2 – – –1,806 –10,759 135 –652 –325 1,806 10,755 –135 –1,954 9 – –4 – –62,593 22,942 83,691 –60,480 23,211 Sweden US UK Other Total 50,043 50,043 – 50,441 50,441 – 5,073 4,560 513 5,365 4,812 553 10,595 10,595 – 9,866 9,866 – 19,824 16,702 3,122 18,019 14,417 3,602 85,535 81,900 3,635 83,691 79,536 4,155 72 Notes to the consolidated ﬁnancial statements Financial report 2023 Note G1, cont’d. Asset allocation by asset type and geography 1) 2023 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 2022 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) 271 7,311 14,335 5,461 2,016 – 233 29,627 – – 1,151 6,803 14,114 5,577 917 – –41 28,521 – – 181 361 3,591 – 834 – –152 4,815 – – 184 419 3,646 – 789 – 73 5,111 – – 681 769 5,681 – 2,346 2,437 496 12,410 – – 449 1,113 5,818 199 2,417 1,872 131 11,999 – – 133 1,873 9,285 544 1,829 1,679 398 15,741 – – 88 2,791 8,539 603 578 1,717 533 14,849 – – 1,266 10,314 32,892 6,005 7,025 4,116 975 62,593 – – 1,872 11,126 32,117 6,379 4,701 3,589 696 60,480 – – 22% 27% 21% 100% 69% 100% 38% 6% 50% 28% 100% 74% 100% 15% 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 invest in an asset class. 2) Unquoted refers to assets classiﬁed as fair value level 2 and 3. 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 2023 2022 Sweden 2.1% 2.0% 2.5% 23 US 5.0% 2.5% 4.0% 23 UK 4.8% 3.0% – 23 Sweden 2.0% 2.3% 2.8% 23 US 5.4% 2.5% 3.0% 22 UK 4.9% 3.1% – 23 Actuarial assumptions are assessed on a quarterly basis. See also note A1 “Material 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, 2023, the discount rate applied in Sweden was 2.1% (2.0%). If the discount rate had been based on Swedish covered mortgage bonds, the discount rate as of December 31, 2023 would have been 3.5% (3.9%). If the discount rate based on Swedish covered mortgage bonds had been applied for the pension liability calculation, the DBO at December 31, 2023 would have been approximately SEK 12.1 (16.5) 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. 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 2023 538 –87 454 905 2022 8,943 127 1,599 10,669 Sensitivity analysis of signiﬁcant actuarial assumptions, SEK billion 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 2023 Sweden US UK 5.2 –4.6 –4.4 4.9 –1.4 1.5 –2.1 2.1 0.3 –0.2 – – – – –0.1 0.1 0.8 –0.7 –0.1 0.6 – – –0.3 0.3 Financial report 2023 Notes to the consolidated ﬁnancial statements 73 G2 Information regarding members of the Board of Directors and Group management Remuneration to the Board of Directors Remuneration to members of the Board of Directors Number of synthetic shares/portion Value at grant date of synthetic shares allocated SEK Board fees of Board fee 4) in 2023 4) Board member Jan Carlson Jacob Wallenberg Börje Ekholm Carolina Dybeck Happe Christy Wyatt Eric A. Elzvik Helena Stjernholm Jon Fredrik Baksaas Jonas Synnergren Kristin S. Rinne Kurt Jofs 5) Nora Denzel 5) Ronnie Leten 5) Employee Representatives Kjell-Åke Soting Annika Salomonsson 6) Ulf Rosberg 7) Loredana Roslund (deputy) Frans Frejdestedt (deputy) 8) Stefan Wänstedt (deputy) 8) Torbjörn Nyman 9) Anders Ripa 10) 4,500,000 1,140,000 – 1,140,000 1,140,000 1,140,000 1,140,000 1,140,000 1,140,000 1,140,000 – – – 54,750 54,750 54,750 54,750 29,250 29,250 25,500 23,250 Total 13,946,250 – – – – – – – – – – – – – – – – – – – – – – A – – – – – – – – – – – – – – – – – – – – – – Number of previously allocated synthetic shares outstanding 34,041 34,041 – 10,003 – 11,345 22,693 25,391 – 16,913 11,427 11,345 63,985 – – – – – – – – Net change in value of synthetic shares 1) B –837,475 –837,475 – –166,650 – –279,111 –558,274 –619,545 – –458,693 –239,336 –279,111 –1,784,460 – – – – – – – – Committee fees Total fees paid in cash 2) C 4,920,000 1,325,000 – – 1,325,000 1,635,000 1,325,000 1,635,000 1,610,000 1,510,000 – – – 76,950 69,150 63,750 54,750 29,250 29,250 37,200 30,150 420,000 185,000 – – 185,000 495,000 185,000 495,000 470,000 370,000 – – – 22,200 14,400 9,000 – – – 11,700 6,900 241,184 –6,060,130 2,869,200 15,675,450 Total remunera- tion 2023 (A+B+C) Total remunera- tion 2022 4,082,525 487,525 – –166,650 1,325,000 1,355,889 766,726 1,015,455 1,610,000 1,051,307 –239,336 –279,111 –218,839 –493,839 – 609,182 – 983,791 97,535 –214,424 – 305,308 1,275,090 688,791 –1,784,460 2,258,226 76,950 69,150 63,750 54,750 29,250 29,250 37,200 30,150 9,615,320 3) 58,500 28,500 43,500 43,500 – – 66,000 55,500 5,586,321 1) The difference in value as of the time for payment, compared to December 31, 2022, for synthetic shares allocated in 2018 (for which payment was made in 2023). The difference in value as of December 31, 2023 compared to December 31, 2022, for synthetic shares allocated in 2019, 2020, 2021 and 2022. Calculated on a share price of SEK 63.11. The value of synthetic shares allocated in 2019, 2020, 2021 and 2022 includes respectively SEK 1.50, SEK 2.00, SEK 2.50 and SEK 2.70 per share in compensation for dividends resolved by the Annual General Meetings 2020, 2021, 2022 and 2023, and the value of the synthetic shares allocated in 2018 includes dividend compensation for dividends resolved in 2019, 2020, 2021 and 2022. 2) Committee fee and cash portion of the Board fee. 3) Excluding social security charges in the amount of SEK 2,077,206. 4) None of the Board members participated in the synthetic share program during 2023. 5) Resigned from the Board of Directors in connection with the AGM held on March 29, 2023. 6) Appointed employee representative Board member as of July 31, 2023, previously deputy employee representative Board member. 7) Appointed employee representative Board member as of July 4, 2023, previously deputy employee representative Board member. 8) Appointed deputy employee representative Board members as of September 1, 2023. 9) Resigned as employee representative Board member as of July 31, 2023. 10) Resigned as employee representative Board member as of July 4, 2023. Comments to the table – The Chair of the Board was entitled to a Board fee of SEK 4,500,000. – The other Directors elected by the Annual General Meeting were entitled to a fee of SEK 1,140,000 each. – The Chair of the Audit and Compliance Committee was entitled to a fee of SEK 495,000 and the other non-employee members of the Audit and Compliance Committee were entitled to a fee of SEK 285,000 each. The Chairs of the Finance, Remuneration and Enterprise Business and Technology Committees were entitled to a fee of SEK 210,000 each and the other non-employee members of these Committees were entitled to a fee of SEK 185,000 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 2,250 per attended Board meeting and SEK 1,800 per attended Committee meeting. – The Annual General Meeting 2023 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, 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. If the Board members would have chosen synthetic shares, the number of synthetic shares allocated would have been 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 74 Notes to the consolidated ﬁnancial statements Financial report 2023 Note G2, cont’d. interim report for the first quarter 2023; SEK 55.34. The number of synthetic shares would then have been 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 2028. The amount payable shall be 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 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 2018 occurred in 2023. The amounts paid in 2023 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 2022: SEK 59.91 and totaled SEK 6,350,763, excluding social security charges. The payments made do not constitute a cost for the Company in 2023. 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 2023, 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, 2023, the total outstanding number of synthetic shares under the programs is 241,184 and the total accounted debt is SEK 16,690,551. 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 salary, short- and long-term variable compensation, pension and other benefits. These remuneration elements are based on the guidelines for remu- neration to Group management (the Guidelines) as approved by the Annual General Meetings (AGM) of shareholders held in 2020 and 2023. Remuneration costs for the President and CEO and other members of the 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 Social charges and taxes President and CEO 2023 President and CEO 2022 President and CEO 2021 Other members of ET 2023 3) Other members of ET 2022 3) Other members of ET 2021 Total 2023 Total 2022 Total 2021 19,520,568 – 19,154,852 – 18,208,859 – 135,208,734 – 132,945,295 25,503,967 110,043,431 154,729,302 – – 152,100,147 128,252,290 – 25,503,967 – – – 48,399,226 90,908,181 52,507,185 48,399,226 90,908,181 52,507,185 31,708,587 41,125,015 43,701,650 30,547,582 43,688,149 48,260,833 62,256,169 84,813,164 91,962,483 10,151,804 828,287 19,546,145 9,856,121 135,743 22,079,378 9,569,049 555,688 22,633,474 24,607,643 19,575,733 45,222,286 42,248,588 20,167,043 60,745,133 40,886,802 11,199,631 57,469,705 34,759,447 20,404,020 64,768,431 52,104,709 20,302,786 82,824,511 50,455,851 11,755,319 80,103,179 Total 81,755,391 92,351,109 94,668,720 303,561,204 416,206,356 320,367,587 385,316,595 508,557,465 415,036,307 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) Does not include cash compensation paid to Rory Read of USD 32.76 million in 2022 and USD 10.64 million in 2023. The total amount was reported separately as ‘Deviations from adopted Guidelines for remuneration to Group Management’ in Remuneration Report 2022 as compensation for acceleration of pre-existing long-term share based variable incentive program of restricted and performance stock units (RSU and PSU) in Vonage. 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 2023. Information regarding Fredrik Jejdling is included in the group “Other members of ET.” The details of Fredrik Jejdling’s remuneration in 2023 can be found in the Remuneration report 2023. 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 mem- bers of the ET includes vacation pay paid during 2023, as well as other contracted compensation expenses in 2023. – “Long-term variable compensation provision” refers to the compensation – The group “Other members of ET 2023” comprises the following costs for full year 2023 for all outstanding share-based plans. persons: MajBritt Arfert, Scott Dresser, Erik Ekudden, Moti Gyamlani, Niklas Heuveldop, Chris Houghton, Fredrik Jejdling, Stella Medlicott, Carl Mellander, Nunzio Mirtillo, Per Narvingar, Fadi Pharaon, Rory Read and Åsa Tamsons. In addition, Jenny Lindqvist joined ET on February 1, 2023, and George Mulhern left ET effective November 1, 2023. – The group “Other members of ET 2022” comprises the following persons: MajBritt Arfert, Scott Dresser, Erik Ekudden, Niklas Heuveldop, Chris Houghton, Fredrik Jejdling, George Mulhern, Moti Gyamlani, Per Narvingar, Stella Medlicott, Carl Mellander, Nunzio Mirtillo, Fadi Pharaon, Rory Read and Åsa Tamsons. In addition, Xavier Dedullen left ET effective March 21, 2022 and Arun Bansal, Jan Karlsson and Peter Laurin left ET effective June 1, 2022. – The group “Other members of ET 2021” comprises the following persons: MajBritt Arfert, Arun Bansal, Xavier Dedullen, Erik Ekudden, Niklas 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, 2023, for other members of ET under IAS 19 amounted to 2023: SEK 35.4 million, 2022: SEK 37.6 million of which 2023: SEK 28.3 million, 2022: SEK 30.0 million refers to the ITP and early retirement, and the remaining 2023 SEK 7.1 million, 2022 SEK 7.7 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. Financial report 2023 Notes to the consolidated ﬁnancial statements 75 G3 Share-based compensation Accounting treatment of Long-Term Variable Compensation Programs In note A1” Material 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 or 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. To reinforce a strong alignment between our shareholders and our Executives the LTV 2023 for Executives will grant, vest and be delivered in Ericsson Class B-shares. Until LTV 2022 Executive Performance Plan (EPP), the granting and vesting has been in synthetic shares with the outcome LTV and EPP performance criteria delivered as a cash settlement. With this action the new Long-Term Variable Compensation Program (LTV) for the Executive Team (ET) and the Executive Performance Plan (EPP) for senior managers have merged into one plan. All programs are share-based payment programs as defined by IFRS 2 “Share-based Payment,” either share- or cash-settled. The significant share- based payment programs are described below. Share-Settled Programs Long-Term Variable Compensation Program for the Executive Team The Long-Term Variable Compensation Program for the ET and Executives as approved by the shareholders, is designed to provide long-term incentives for members of the ET and Executives, to incentivize the Company’s performance creating long-term value. 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 Target Criteria Weight Performance Period Vesting Opportunity (linear pro-rata) Range (SEK billion): 26.4 - 40.4 45% Jan 1, 2023–Dec 31, 2023 0%–200% Achievement SEK 21.4 billion 2) Achieved Vesting Level 0% 2023 Group operating income (EBITA) Absolute TSR Relative TSR Group Environmental, Social and Governance (“ESG”) 2022 Group operating income (EBIT) Absolute TSR Relative TSR Group Environmental, Social and Governance (“ESG”) Range: 6%-14% Ranking of Ericsson: 6–2 CO2e emissions (ktonnes): 142–121 CO2e emissions (ktonnes): 132–113 CO2e emissions (ktonnes): 122–104 Increasing the representation of women leaders in the Ericsson Group: Range 23%–25% Range (SEK billion): 24.1–34.1 Range: 6%-14% Ranking of Ericsson: 6–2 CO2e emissions (ktonnes): 265–200 Increasing the representation of women leaders in the Ericsson Group: Range 22%–24% 25% 20% Jan 1, 2023–Dec 31, 2025 Jan 1, 2023–Dec 31, 2025 0%–200% 0%–200% 1) 1.66% Jan 1, 2023–Dec 31, 2023 0%–200% 121.9 ktonne CO2 193.72% 1.66% Jan 1, 2024–Dec 31, 2024 0%–200% 1.68% 5% Jan 1, 2025–Dec 31, 2025 Jan 1, 2023–Dec 31, 2025 0%–200% 0%–200% 100% 45% 25% 20% 5% Jan 1, 2022–Dec 31, 2022 Jan 1, 2022–Dec 31, 2024 Jan 1, 2022–Dec 31, 2024 Jan 1, 2022–Dec 31, 2024 0%–200% 0%–200% 0%–200% 0%–200% 1) 0%–200% 5% Jan 1, 2022–Dec 31, 2024 0%–200% SEK 32.2 billion 2) 162.76% 2021 Group operating income (EBIT) Absolute TSR Relative TSR 2020 Group operating income (EBIT) Absolute TSR Relative TSR Range (SEK billion): 15.0–24.0 Range: 6%–14% Ranking of Ericsson: 6–2 Range (SEK billion): 19.1–27.9 Range: 6%–14% Ranking of Ericsson: 6–2 100% 50% 30% 20% 100% 50% 30% 20% 100% Jan 1, 2021–Dec 31, 2021 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 0%–200% 0%–200% 0%–200% 0%–200% 1) 0%–200% 0%–200% 0%–200% 0%–200% 1) 0%–200% SEK 27.4 billion 2) -16.17% 12 out of 11 SEK 29.1 billion 3) –6.65% 12 out of 11 200% 0.00% 0.00% 100.00% 200% 0.00% 0.00% 100.00% 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 2023, 2022, 2021 and 2020. 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) / U.S. Securities and Exchange Commission (SEC) resolution, including payments required pursuant to the DOJ Plea Agreement announced by the Company on March 2, 2023. Program Year 2023 2023 2023 2023 2023 Total 2022 2022 2022 2022 2022 Total 2021 2021 2021 2021 Total 2020 2020 2020 2020 Total 76 Notes to the consolidated ﬁnancial statements Financial report 2023 Note G3, cont’d. and achieved vesting levels for the ones where 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. 2023 Long-Term Variable Compensation Program for the Executive Team (LTV 2023) LTV 2023 was approved at the Annual General Meeting (AGM) of shareholders held in 2023 and includes all members of the ET and Executives, a total of 176 members in 2023, including the President and CEO. The participants were granted Performance Share Awards on May 18, 2023. 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 fol- lowing the publication of the Company’s interim report for the fourth quarter of 2022. Having evaluated the ongoing long-term variable compensation programs and considering investor input obtained, the Remuneration Committee and the Board of Directors proposed to the Annual General Meeting of share- holders 2023 a long-term variable compensation program 2023 similar to the long-term variable compensation program 2022 adjusting the Group Environmental, Social and Governance performance criterion (“ESG”) on reducing carbon dioxide equivalent (“CO2e”) emissions in the Ericsson Group’s own activities from one to three annual targets. The purpose is to further strengthen Ericsson’s commitment to long-term sustainability and responsible business. Hence again a one-year Group operating income (EBITA) target measured over the period January 1, 2023 to December 31, 2023 was included as a performance condition for LTV 2023 in addition to the standard three-year total shareholder return (TSR) performance conditions, which were also used for LTV 2022, LTV 2021 and LTV 2020 however with different weights. The performance criteria relating to TSR are absolute TSR development and relative TSR development for the Ericsson B share over the period January 1, 2023 to December 31, 2025 (the performance period). The criteria related to ESG are split into two sub-components: reducing carbon dioxide equivalent (“CO2e”) emissions in the Ericsson Group’s own activities and increasing the representation of women leaders in the Ericsson Group. The ESG performance criteria are being measured over the period January 1, 2023 to December 31, 2025 (the performance period), where the reducing carbon dioxide equivalent (“CO2e”) emissions in the Ericsson Group’s own activities is split into 3 annual targets. The Remuneration Committee and the Board decided to propose a long- term variable remuneration program for 2024 with a similar structure as the long-term variable remuneration program for 2023 to the 2024 Annual General Meeting. The performance criteria for LTV 2023 along with the details on how the performance criteria will be calculated and measured are explained in minutes from the AGM 2023 under Item 16. The Board of Directors resolved on the achieved vesting level for the 2023 Group operating income (EBITA) performance criteria as 0% for this portion of the Performance Share Awards granted based on the 2023 Group operating income (EBITA) outcome. The Board of Directors resolved on the achieved vesting level for the 2023 ESG performance criteria being measured over the period January 1, 2023 to December 31, 2023 (the performance period), where the reducing carbon dioxide equivalent (“CO2e”) emissions in the Ericsson Group’s own activities performance criteria as 193,72% for this p ortion of the Performance Share Awards granted based on the 2023 Group ESG outcome. 2022 Long-Term Variable Compensation Program for the Executive Team (LTV 2022) LTV 2022 was approved at the Annual General Meeting (AGM) of shareholders held in 2022 and includes all members of the ET, a total of 15 ET members in 2022, including the President and CEO. The participants were granted Performance Share Awards on May 18, 2022. 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’ respective 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 imme- diately following the publication of the Company’s interim report for the fourth quarter of 2021. Having evaluated the ongoing long-term variable compensation programs and considering investor input obtained, the Remuneration Committee and the Board of Directors proposed to the Annual General Meeting of shareholders 2022 a long-term variable compensation program 2022 for the Executive Team similar to the long-term variable compensation program 2021 adding a Group Environmental, Social and Governance performance criterion (“ESG”). The purpose is to further strengthen Ericsson’s commitment to long-term sus- tainability and responsible business. Hence again a one-year Group operating income (EBIT) target measured over the period January 1, 2022 to December 31, 2022 was included as a performance condition for LTV 2022 in addition to the standard three-year total shareholder return (TSR) performance condi- tions, which were also used for LTV 2021, LTV 2020 and LTV 2019 however with different weights. The performance criteria relating to TSR are absolute TSR development and relative TSR development for the Ericsson B share over the period January 1, 2022 to December 31, 2024 (the performance period). The criteria related to ESG are split into two sub-components: reducing carbon dioxide equivalent (“CO2e”) emissions in the Ericsson Group’s own activities and increasing the representation of women leaders in the Ericsson Group. The ESG performance criteria are being measured over the period January 1, 2022 to December 31, 2024 (the performance period). The Remuneration Committee and the Board decided to propose a long- term variable remuneration program for 2023 with a similar structure as the long-term variable remuneration program for 2022 to the 2023 Annual General Meeting. The performance criteria for LTV 2022 along with the details on how the performance criteria will be calculated and measured are explained in minutes from the AGM 2022 under Item 16. The Board of Directors resolved on the achieved vesting level for the 2022 Group operating income (EBIT) performance criteria as 162.76% for this portion of the Performance Share Awards granted based on the 2022 Group operating income (EBIT) outcome. 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 Financial report 2023 Note G3, cont’d. Notes to the consolidated ﬁnancial statements 77 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. The Board of Directors also resolved on the achieved vesting levels for the absolute and relative TSR development performance criteria as 0.00% and 0.00% based on the achievement results of – 16.17% absolute TSR and 12th ranking for relative TSR respectively, which resulted in an overall achieved vesting level of 100.00% for LTV 2021 as illustrated in the table LTV and EPP Performance Criteria on page 75. 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 following 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. The Board of Directors also resolved on the achieved vesting levels for the absolute and relative TSR development performance criteria as 0.00% and 0.00% based on the achievement results of -6.65% absolute TSR and 12th ranking for relative TSR respectively, which resulted in an overall achieved vesting level of 100.00% for LTV 2020 as illustrated in the table LTV and EPP Performance Criteria on page 75. Accordingly, the Board have approved vesting for LTV 2020 (which expired in 2023). Planned vesting date will be during Q1 2024. 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) / U.S. 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 page 75. Accordingly, the Board have approved vesting for LTV 2019 (which expired in 2022). Planned vesting date will be during Q1 2024. Cash-Settled Plans Executive Performance Plans (EPP) No new EPP plan was issued in 2023 as the eligible executives were offered the LTV 2023 share granted and vested Plan. The running Executive Performance Plans (EPP) continue to run over the performance period until vesting as is. 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 78 Notes to the consolidated ﬁnancial statements Financial report 2023 Note G3, cont’d. 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 2022 (EPP 2022) 165 senior managers were selected to participate in EPP 2022. The regular award level is set at 15% and the high award level is set at 25% for all countries except for the USA/Canada. The regular and high award levels are set at 35% and 45% respectively in the USA/Canada. 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 USA. 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%. The awards under EPP 2019 were paid in 2022 at the end of the vesting period and EPP 2019 was officially closed. 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 vest- ing date, and this final amount is paid to the participant in cash gross before tax. Key Contributor Plans 2023 (KC Plan 2023) 10,154 employees were selected to participate in KC Plan 2023. There are at multiple levels between 10%–50% 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). In addition, Vonage has issued a retention plan to 87 participants with a two-year service period, no performance criteria and the vesting is 50%/50% on each annual anniversary. Key Contributor Plan 2022 (KC Plan 2022) 7,704 employees were selected to participate in KC Plan 2022. There are at multiple levels between 10%–40% 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). Cradlepoint Key Contributor Conversion Plan 2022 (KC Conversion Plan 2022) The KC Conversion Plan is a cash-settled retention plan with 95 participants. The plan has a closed participation group and there will not be any new participants. There is a two-year service period, no performance criteria, (February 2022–February 2024) for receiving the award in full. The payout is distributed over the two-year period: 50% of the award was paid March 2023: USD 4.8 million and 50% of the award to be paid March 2024. The value of each payout is based on the share price of Ericsson B shares at vesting date. 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) and was officially closed in 2022. 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 performance conditions, are displayed in the below table, together with the number of synthetic shares for the EPP and KC plans. Claw back policy In 2023, the Board of Directors of the Company adopted a written clawback policy for the purpose of recovering certain incentive compensation from executive officers in the event of a required accounting restatement, and to disclose any recovered compensation. This policy is applicable in parallel to the clawback rights contained in the guidelines for remuneration to Group management, and ongoing compensation programs (which are connected to breaches of Ericsson’s Code of Business Ethics). Financial report 2023 Note G3, cont’d. Number of shares and synthetic shares Notes to the consolidated ﬁnancial statements 79 (million) Share-settled programs LTV 2023 LTV 2022 LTV 2021 LTV 2020 LTV 2019 Total LTV 2023 LTV 2022 LTV 2021 LTV 2020 LTV 2019 Total Executive programs1) 2) Of which the President and CEO Maximum shares required Granted shares Outstanding number of shares beginning of 2023 Exercised during 2023 Forfeited during 2023 Increase/decrease due to performance condition 2023 Outstanding number of shares end of 2023 4.1 3.7 – – – 2.0 0.7 0.9 – – 2.1 0.6 0.9 – –0.1 –1.7 – –0.3 2.0 0.9 0.5 2.5 0.9 0.9 – – – 0.9 3,0 0.6 0.8 – – 13.7 6.5 3.5 – –0.1 – 0.6 – – – – 0.3 0.4 – – – 0.3 0.5 – – – –2.0 –0.3 – –0.2 0.8 5.1 0.3 0.4 0.3 – 0.4 0.4 – – – 0.4 – 0.3 0.3 – – – 1.9 1.6 — — – –0.5 0.3 1.7 1) LTV 2023 includes Executive Team and Executives 2) LTV 2019 and 2020 actual share delivery in 2024 can deviate due to reduced or cancelled vesting and withholding of shares. Cash-settled plan Synthetic shares Executive performance program EPP 2022 EPP 2021 EPP 2020 1.1 0.7 – Total 1.8 KC 2023 KC 2022 KC 2021 KC 2020 30.2 7.5 3.4 – Total 41.1 Key contributors plans 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, the ET and Executives during 2023 was SEK 82 million. The compensation expense for the EPP and the KC Plans during 2023, which are cash settled, was SEK 39 million and SEK 1,250 million respectively as shown in the table Compensation expense for LTV 2020-2023 below. Compensation expense for LTV 2020–2023 The total compensation expense during 2023 amounted to SEK 1,371 (450) million. The total provision for the cash-settled plans amounted to SEK 1,584 (985) million, including social charges of SEK 153 (120) million, at the end of 2023. Share-settled programs LTV 2023 1) LTV 2022 LTV 2021 LTV 2020 LTV 2019 Total share-settled programs Of which the President and CEO Cash-settled plans EPP 2022 EPP 2021 EPP 2020 Total executive performance plans KC 2023 KC 2022 KC 2021 KC 2020 Total key contributor plans Total cash-settled plans Total compensation expense 1) LTV 2023 includes Executive Team and Executives. 2023 2022 2021 2020 Total 25 20 31 6 – 82 32 20 16 3 39 811 330 91 18 1,250 1,289 1,371 – 12 36 31 10 89 41 12 15 –19 8 – 280 89 5 374 382 471 – – 24 31 28 83 38 – 17 56 73 – – 355 376 731 804 887 – – – 23 28 51 24 – – 34 34 – – – 523 523 557 608 25 32 91 91 66 305 135 32 48 74 154 811 610 535 922 2,878 3,032 3,337 80 Notes to the consolidated ﬁnancial statements Financial report 2023 Note G3, cont’d. Fair value (FV) The compensation expense for the share-settled plans is based on FV and the number of shares. The FV for the LTV programs includes 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 (EBITA) as per fiscal year 2023 and Group operat- ing income (EBIT) as per fiscal years 2022 and 2021. The FV for the Group operating income (EBITA and EBIT) performance criteria is calculated 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, how- ever 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 have three FVs 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/ Executives programs Share price at grant Fair value Absolute TSR Fair value ESG – Environmental (1,2,3) Fair value ESG – Social Fair value Relative TSR Fair value Group operating income (EBITA and EBIT) Executive performance plans Fair value Absolute TSR Fair value ESG – Environmental Fair value ESG – Social 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 Payout of Cash-settled Plan During 2023 four plans vested: EPP 2020, KC Plan 2020 tranche 3, KC Plan 2021 tranche 2 and KC Plan 2022 tranche 1 (vesting February 18). The share price for the plan that vested February 18 was SEK 60.31 and the accumulated payout to the participants amounted to SEK 604.4 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. At the end of 2023 the plan is implemented in 77 countries to approximately 77,700 eligible employees. 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 77,748 77 Number of participants 14,030 Take-up rate – percent of eligible employees 18.0% LTV 2019 90.70 87.92 – – 94.63 86.94 LTV 2023 55.59 32.75 47.80 47.80 39.40 47.80 EPP 2023 – – – – – KC 2023 61.12 58.40 55.81 LTV 2022 78.88 41.18 71.45 71.45 54.48 71.45 LTV 2021 116.66 113.47 – – 108.61 110.70 EPP 2022 2.30 EPP 2021 – 58.42 58.42 2.40 58.42 KC 2022 60.31 61.13 58.42 – – – 61.13 KC 2021 94.13 60.31 61.13 LTV 2020 78.88 54.69 – – 98.06 74.22 EPP 2020 – – – – 60.31 KC 2020 109.80 94.13 60.31 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 Class B share from the shareholders at a strike price of SEK 80 per share (to be recalculated to neutralize the effects of dividend payments during the option period) after a seven-year period. The exercise period is one year with the possibility to be extended for up to one year in the event that the holder is unable to exercise the option during the exercise period due to a regulatory restriction or prohibition. 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 during the option period and will not be recognized during the remaining part of the exercise 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, the former Chair of the Board of Directors, entered into such a call option agreement with Investor AB with respect to Ericsson Class B shares. 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 Class 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) after a four-year period starting February 5, 2019. The exercise period is one year with the possibility to be extended for up to one year in the event that the holder is unable to exercise the option during the exercise period due to a regulatory restriction or prohibition. Due to the fact that the call options were purchased on market terms as described above, no compensa- tion expense has been recognized by the Company during the option period and will not be recognized during the remaining part of the exercise period. Financial report 2023 Notes to the consolidated ﬁnancial statements 81 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 2023 Women Men 6,035 4,293 2,720 11,772 886 25,706 8,900 3,393 21,625 8,403 8,546 33,740 3,624 75,938 25,564 10,224 Total 27,660 12,696 11,266 45,512 4,510 101,644 34,464 13,617 2022 Women Men 5,700 4,376 2,471 12,017 883 25,447 9,006 3,408 20,902 8,711 8,415 34,637 3,629 76,294 26,259 10,635 Total 26,602 13,087 10,886 46,654 4,512 101,741 35,265 14,043 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 Number of employees by gender and age at year-end 2023 Under 25 years old 25–35 years old 36–45 years old 46–55 years old Over 55 years old Percent of total Women 1,378 9,222 8,093 5,019 2,265 26% 2023 27,016 12,331 10,744 45,380 4,481 99,952 34,763 13,977 Men 2,063 19,196 26,681 17,809 8,226 74% 27,761 13,207 11,993 48,023 4,545 105,529 36,594 14,481 Percent of total 3% 29% 35% 23% 10% 100% Employee movements Headcount at year-end Employees who have left the Company Employees who have joined the Company Temporary employees 2023 99,952 13,362 7,785 433 2022 105,529 13,028 17,235 627 2022 (SEK million) Wages and salaries Social security expenses Of which pension costs 2023 84,996 16,442 6,175 2022 73,526 15,665 6,316 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) 2023 459 109 36 2022 477 90 34 1) Pension costs are over and above any social security charges and taxes. Board members, Presidents and Group management by gender at year end 2023 2022 Women Men Women Men Parent Company Board members and President Group Management Subsidiaries Board members and Presidents 38% 25% 62% 75% 36% 19% 64% 81% 21% 79% 20% 80% 82 Notes to the consolidated ﬁnancial statements Financial report 2023 Section H – Other H1 Taxes The Company’s tax expense for 2023 was SEK –2,785 (–5,497) million or –11.9% (22.3%) of income after financial items. The tax rate may vary between years depending on business and geographical mix. 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 2023 –4,289 118 1,406 2022 –7,353 253 1,617 2021 –6,110 –337 188 –20 –14 –11 –2,785 –5,497 –6,270 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% (20.6% in 2022, 20.6% in 2021), on the consolidated income before taxes, is shown in the table below. In 2023 the tax rate is negatively impacted by the effect on the non-tax deductible goodwill impairment related to Vonage of SEK 31.9 billion. In 2022 taxes were positively impacted by SEK 411 (969 in 2021) million as a result of utilization of previously expensed withholding tax assets in Sweden and negatively impacted by the tax effect of the provision for the Department of Justice (DOJ) settlement of SEK 450 million. Reconciliation of Swedish income tax rate with effective tax rate 2023 2022 2021 Calculated tax expense at Swedish tax rate of 20.6% 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 Recognition of previously expensed 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 4,804 –884 118 –28 394 –217 – –7,311 335 4 –2,785 –11.9% –5,070 –605 –6,025 –324 253 –49 15 – 411 –760 327 –19 –5,497 22.3% –337 –175 220 – 969 –975 392 –15 –6,270 21.4% 2023 Intangible assets and property, plant and equipment RoU lease assets and similar assets Current assets Post-employment beneﬁts Provisions RoU lease liabilities and similar liabilities Deferred tax credits Other Loss carry-forwards Deferred tax assets/liabilities Netting of assets/liabilities Deferred tax balances, net 2022 Intangible assets and property, plant and equipment RoU lease assets and similar assets Current assets Post-employment beneﬁts Provisions RoU lease liabilities and similar liabilities Deferred tax credits Other Loss carry-forwards Deferred tax assets/liabilities Netting of assets/liabilities Deferred tax balances, net Changes in deferred taxes, net Deferred tax balances Deferred tax assets and liabilities are derived from the balance sheet items as shown in the table below. The table includes the IAS 12 amendments on deferred tax arising from a single transaction effective January 1, 2023 and the comparables have been updated accordingly. Tax effects of temporary differences and tax loss carry-forwards Deferred tax liabilities Deferred tax assets Net balance 1,195 – 3,413 5,297 3,980 1,337 5,453 2,095 6,158 7,193 1,272 1,313 477 – – – 178 – 28,928 –6,553 22,375 10,433 –6,553 18,495 3,880 18,495 1,098 – 3,605 5,558 5,215 1,394 2,081 1,837 5,190 25,978 –6,584 19,394 8,136 1,311 1,055 571 – – – 295 – 11,368 –6,584 4, 784 2023 14,610 1,406 –631 –57 3,249 –82 18,495 14,610 14,610 2022 22,225 1,617 –2,099 –3,911 –3,586 364 14,610 Opening balance, net Recognized in net income Recognized in other comprehensive income Balances regarding acquired/divested businesses Deferred tax credits increase (+) / utilization (–) Translation difference Closing balance, net Total tax reported in other comprehensive income (OCI) amounted to SEK –494 (–2,980) million, of which actuarial gains and losses related to pensions constituted SEK –251 (–2,093) million, revaluation of borrowings SEK 137 (–212) million, cash flow hedges SEK –380 (–671) million and non-controlling interests SEK 0 (–4) million. Of the total tax effect reported in OCI, SEK –631 (–2,099) million is deferred tax and SEK 137 (–881) million is current tax. As a result of parent company exemptions from tax on dividends from subsidiaries and on capital gains on disposal, there are no significant taxable temporary differences associated with investments in subsidiaries, branches, associates and joint ventures. Financial report 2023 Note H1, cont’d. Notes to the consolidated ﬁnancial statements 83 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 the recognized tax loss carry-forwards pertains to Sweden, US, Brazil and Mexico. These countries have long or indefinite periods of utili- zation. Of the total SEK 6,158 (5,190) million recognized deferred tax assets related to tax loss carry-forwards, SEK 4,172 (3,508) million relates to Sweden. Future income projections support the conclusion that the deferred tax assets will be utilized in the foreseeable future. As of December 31, 2023, the recognized tax loss carry-forwards amounted to SEK 27,666 (23,438) million. The tax value of the tax loss carry-forwards is reported as a tax asset based on the utilization periods and the expectation that the group will realize a significant taxable income to offset these loss carry-forwards. Tax loss carry-forwards of SEK 8,918 (8,490) million at a tax value of SEK 1,819 (1,777) million 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 both recognized and unrecognized tax loss carry-forwards have an expiration date in excess of five years. The major- ity of unrecognized tax loss carry-forwards pertains to US, UK and Ireland. The final years which the recognized and unrecognized tax loss carry-forwards can be utilized are shown in the following table. Tax loss carry-forwards Year of expiration 2024 2025 2026 2027 2028 2029 or later (also includes unlimited carry-forwards) Total Recognized tax loss Unrecognized tax loss Tax loss carry-forwards 15 16 124 1,101 1,688 24,722 27,666 Tax value 3 3 31 281 373 5,467 6,158 Tax loss carry-forwards 159 153 151 92 100 8,263 8,918 Tax value 20 20 25 10 13 1,731 1,819 Deferred tax credits In addition to deferred tax credits of SEK 5,453 (2,081) million recognized in 2023, unused deferred tax credits, relating mainly to R&D tax credits, for which no deferred tax asset was recognized in the consolidated balance sheet amounted to SEK 1,148 (1,296) million. The ﬁnal years in which the tax credits can be utilized are shown in the below table. Risk assessment 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 might need to be impaired. Deferred tax credits Year of expiration 2024 2025 2026 2027 2028 2029 or later Total Recognized deferred tax credits Tax Value Unrecognized deferred tax credits Tax Value 99 938 46 1,778 1,521 1,071 5,453 135 108 125 133 8 639 1,148 The Group has applied the temporary exception issued by the IASB in May 2023 from the accounting requirements for deferred taxes in IAS 12. Accordingly, the Group neither recognises nor discloses information about any deferred tax assets or liabilities related to Pillar Two income taxes. See also note A1 “Material accounting policies” for more information. H2 Earnings per share Earnings per share Basic Net income (loss) attributable to owners of the Parent Company (SEK million) Average number of shares outstanding, basic (millions) Earnings (loss) per share, basic (SEK) Diluted Net income (loss) 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 (loss) per share, diluted (SEK) 2023 2022 2021 –26,446 18,724 22,694 3,330 –7.94 3,330 5.62 3,329 6.82 –26,446 18,724 22,694 3,330 – 3,330 –7.94 3,330 4 3,334 5.62 3,329 3 3,332 6.81 84 Notes to the consolidated ﬁnancial statements Financial report 2023 H3 Statement of cash ﬂows Cash and cash equivalents include cash of SEK 17,686 (19,746) million and cash equivalents of SEK 17,504 (18,603) 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, 2023, include SEK 1,115 (2,246) 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 or be used to pay normal business expenditures in the local jurisdictions for the next 12 months. Adjustments to reconcile net income to cash Property, plant and equipment Depreciations Impairment losses Total Right-of-use assets Depreciations Impairment losses Total Intangible assets Amortizations Capitalized development expenses Customer relationships, IPRs and other intangible assets Total amortizations Impairments Customer relationships, IPRs 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 2023 2022 2021 4,272 662 4,934 2,427 154 2,581 4,114 274 4,388 2,451 66 2,517 3,674 198 3,872 2,277 – 2,277 1,137 1,586 1,343 3,321 4,458 1,991 3,577 1,164 2,507 19 31,897 31,916 36,374 61 – 61 201 112 313 3,638 2,820 43,889 10,543 3,189 5,383 46 –104 268 4,422 58 –3 –287 1,944 8,969 6,576 90 270 –971 2,209 51,710 17,638 17,143 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. For information about reconciliation of liabilities arising from financing activities, see note F4 “Interest-bearing liabilities.” Acquisitions/divestments of subsidiaries and other operations Acquisitions Divestments 2023 Cash ﬂow from business combinations 1) Acquisitions/divestments of other investments Total 2022 Cash ﬂow from business combinations 1) Acquisitions/divestments of other investments Total 2021 Cash ﬂow from business combinations 1) Acquisitions/divestments of other investments Total 1) See also note E2 “Business combinations.” –1,309 – 206 –1,515 –51,734 –261 –51,995 –256 –133 –389 –633 8 –625 20 287 307 273 175 448 H4 Related party transactions Related party transactions, SEK billion Sales to Ericsson Nikola Tesla Purchases from Ericsson Nikola Tesla Loans to MediaKind (Leone Media Inc.) 2023 0.4 1.6 0.6 2022 2021 0.3 1.5 0.6 0.4 1.2 0.5 IAS 24, “Related Party Disclosures” requires disclosure of related party rela- tionships, transactions and outstanding balances. During 2023, 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 related to Ericsson Nikola Tesla d.d located in Croatia, where Ericsson holds 49.07% of the shares and to MediaKind (Leone Media Inc.) located in US, where Ericsson holds 45.5% 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.” Financial report 2023 Notes to the consolidated ﬁnancial statements 85 H5 Fees to auditors H6 Events after the reporting period Fees to auditors 2023 Audit fees Audit-related fees Tax fees All other fees Total 2022 Audit fees Audit-related fees Tax fees All other fees Total 2021 Audit fees Audit-related fees Tax fees All other fees Total Deloitte Others 164 6 12 – 182 163 7 2 1 173 132 9 2 1 144 8 — 13 37 58 7 2 11 22 42 8 1 6 2 17 Total 172 6 25 37 240 170 9 13 23 215 140 10 8 3 161 At the 2023 Annual General Meeting, Deloitte was appointed auditor for the period until the 2024 Annual General Meeting. The audit-related services include quarterly reviews and assurance regard- ing 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. Ericsson appoints Lars Sandström as Chief Financial Ofﬁcer On January 23, 2024, Ericsson announced the appointment of Lars Sandström as its new Chief Financial Officer, Senior Vice President, and Head of Group Function Finance. Mr. Sandström will replace Carl Mellander, whose departure Ericsson announced in April 2023. Mr. Sandström will join Ericsson on April 1, 2024, and will be based in Sweden. Lars Sandström is currently Chief Financial Officer and member of the execu- tive team at Getinge, a listed global leader within Medtech. Mr. Sandström has been with Getinge since 2017 and holds a Master of Science in Business Administration. Mr. Sandström has previously held several senior positions at AB Volvo, Scania and Swedish Orphan Biovitrum AB. Ericsson announces changes to the Executive Team On January 24, 2024, Ericsson announced that Senior Vice President Niklas Heuveldop had been appointed as new Head of Business Area Global Communications Platform and CEO of Vonage as of February 1, 2024. Mr. Heuveldop, who has been a member of the Executive Team and headed Market Area North America since 2017, succeeds Rory Read who will leave Ericsson at the end of the first quarter 2024. Yossi Cohen replaces Mr. Heuveldop as Head of Market Area North America, effective as of February 1, 2024. Effective the same date, he will become member of the Executive Team, reporting to the President and CEO. Mr. Cohen previously has been Head of Strategy, Technology, Marketing and Business Development within Market Area North America. Ericsson appoints Chaﬁc Nassif Head of Market Area North East Asia On January 29, 2024, Ericsson announced that Chafic Nassif has been appointed as Head of Market Area North East Asia and Senior Vice President, effective as of February 26, 2024. Effective the same date, he will become a member of the Executive Team, reporting to the President and CEO. Chafic Nassif succeeds Chris Houghton who was appointed Chief Operating Officer of Ericsson in November 2023. Chafic Nassif has held several executive and management positions within Ericsson across various business segments and geographies worldwide. Most recently, he was the Head of Ericsson’s Customer Unit Latin America North within Market Area Europe & Latin America. Before joining Ericsson, Mr. Nassif was active in tech start-ups, as well as IT and business consulting leadership roles in Europe. Ericsson to utilize mandate to transfer shares Ericsson’s annual general meeting on March 29, 2023 authorized the Company’s board of directors to resolve on the transfer of the Company’s own shares. Under the authorization the Company may, in conjunction with the delivery of vested shares under the long-term variable compensation programs 2019 and 2020 (“LTV 2019” and “LTV 2020”), prior to the annual general meeting in 2024, decide to retain and sell no more than 60% of the vested shares of series B in the Company in order to cover for the costs for withholding and paying tax and social security liabilities on behalf of the participants in relation to the performance share awards for remittance to revenue authorities. Ericsson decided, on February 16, 2024, to utilize the authorization to transfer shares for these purposes. The transfer of own shares may take place on Nasdaq Stockholm during the period from and including February 16, 2024 up to the annual general meeting 2024 at a price within the price interval registered from time to time. Ericsson currently holds 12,932,223 shares of series B in the Company and the maximum number of shares that may be transferred on Nasdaq Stockholm pursuant to the decision to utilize the authorization amounts to 774,889 shares of series B in the Company. 86 Parent Company ﬁnancial statements with notes Financial report 2023 Parent Company ﬁnancial statements with notes Contents Parent Company ﬁnancial statements 87 Parent Company income statement and statement of comprehensive income 88 Parent Company balance sheet 90 Parent Company statement of cash ﬂows 91 Parent Company statement of changes in stockholders’ equity Notes to the Parent Company ﬁnancial statements Material accounting policies Other operating income and expenses Financial income and expenses Taxes Intangible assets 92 P1 93 P2 93 P3 93 P4 94 P5 94 P6 95 P7 96 P8 97 P9 98 P10 Receivables and liabilities – subsidiary companies 98 P11 Other current receivables 98 P12 Equity and other comprehensive income 99 P13 Contributions 99 P14 Post-employment beneﬁts 100 P15 Other provisions 100 P16 Interest-bearing liabilities 101 P17 Financial risk management and ﬁnancial instruments 102 P18 Other current liabilities 102 P19 Trade payables 103 P20 Assets pledged as collateral 103 P21 Contingent liabilities 103 P22 Statement of cash ﬂows Property, plant and equipment 103 P23 Leases Financial assets Investments Trade receivables and customer ﬁnance 103 P24 Information regarding employees 104 P25 Related party transactions 104 P26 Fees to auditors 104 P27 Events after the reporting period Financial report 2023 Parent Company ﬁnancial statements 87 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 (loss) after ﬁnancial items 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 Cash ﬂow hedge reserve Gains/losses arising during the period Transfer to investments Tax on items that will not be reclassiﬁed to proﬁt or loss Total other comprehensive loss, net of tax Total comprehensive income (loss) Notes P2 P3 P13 P4 2023 –203 –1,615 –1,818 3,606 1,788 –2,496 –708 –81 –789 –382 –1,171 2022 –298 –1,194 –1,492 691 –801 19,213 18,412 –7,272 11,140 631 11,771 2021 –470 –350 –820 1,770 950 8,399 9,349 –1,526 7,823 –167 7,656 2023 –1,171 2022 11,771 2021 7,656 – – – – –1,171 3,703 –3,677 –758 –732 11,039 –26 – – –26 7,630 88 Parent Company ﬁnancial statements Financial report 2023 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 Interest-bearing securities, current 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 2023 2022 – 344 4 380 106,534 628 2,059 6,635 150 561 26 9,930 128,638 628 2,039 15,414 222 586 36 9,157 126,867 157,104 6 81 17,839 84 4,423 9,355 15,640 47,428 11 322 24,180 12 3,139 8,540 23,731 59,935 174,295 217,039 Financial report 2023 Parent Company ﬁnancial statements 89 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) 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 Total stockholders’ equity, provisions and liabilities Notes P12 P14 P15 P16 P16 P10 P16 P19 P10 P18 2023 2022 16,722 20 31,472 48,214 28,755 –1,171 27,584 75,798 3 272 275 20,975 8,096 – 79 29,150 15,578 435 47,585 5,474 69,072 174,295 16,672 20 31,472 48,164 25,982 11,771 37,753 85,917 – 2,435 2,435 19,712 7,040 – 83 26,835 2,814 542 94,401 4,095 101,852 217,039 90 Parent Company ﬁnancial statements Financial report 2023 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 Share issue 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 2023 2022 2021 –1,171 34,369 33,198 313 –1,717 –3 –2,161 1,033 –2,535 3,786 –4,310 -337 29,802 –83 – – –12,031 1,227 1,908 –12,887 9,845 –12,021 11,771 8,382 20,153 242 –5 243 2,142 –1,068 1,554 1,708 –1,542 –259 21,614 –81 – – –58,586 552 –3,634 –13,583 40,541 –34,791 7,656 2,202 9,858 135 94 –124 –50 519 574 759 –634 –94 10,463 –62 – – –6,657 2,076 66 –35,415 20,114 –19,878 17,781 –13,177 –9,415 72,081 –51,527 15,989 –3,333 50 –50 –8,991 –7,272 –41,387 –24,440 –1,432 –8,091 23,731 15,640 57,291 –53,716 7,777 –9,993 – – –8,325 –1,526 7,353 –1,139 919 –13,397 37,128 23,731 144,574 –150,656 7,574 –5,066 – 42 –6,658 –1,540 30,375 18,645 –877 8,353 28,775 37,128 Financial report 2023 Parent Company ﬁnancial statements 91 Parent Company statement of changes in stockholders’ equity Revaluation reserve Statutory reserve Total restricted equity Disposition reserve Cash ﬂow hedge reserve SEK million January 1, 2023 Capital stock 16,672 Total comprehensive income (loss) Transactions with owners Share issue, net Repurchase of own shares Long-term variable compensation plans Dividends paid December 31, 2023 January 1, 2022 Total comprehensive income Transfer to Other retained earnings Transactions with owners Share issue, net Repurchase of own shares Long-term variable compensation plans Dividends paid – 50 – – – 16,722 16,672 – – – – – – 20 – – – – – 20 20 – – – – – – 31,472 48,164 100 – – – – – – 50 – – – 31,472 31,472 48,214 48,164 – – – – – – – – – – – – – – – – – 100 100 – – – – – – December 31, 2022 16,672 20 31,472 48,164 100 Other retained earnings 37,653 Non- restricted equity 37,753 Total 85,917 –1,171 –1,171 –1,171 – –50 43 –8,991 27,484 34,910 – –50 43 –8,991 27,584 34,984 50 –50 43 –8,991 75,798 83,148 11,771 11,039 11,039 –758 – – – – 55 –8,325 37,653 – – 55 –8,325 37,753 – – 55 –8,325 85,917 – – – – – – – –26 –732 758 – – – – – 92 Notes to the Parent Company ﬁnancial statements Financial report 2023 Notes to the Parent Company ﬁnancial statements P1 Material 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 subsidiary company is performed in the fourth quarter, or when there is an indi- cation of impairment. An impairment loss is recognized if the carrying amount of an investment exceeds the sum of the subsidiary’s equity and related good- will, 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 guar- antees and revaluation of borrowings due to change in credit risk. Financial guarantees are included in Contingent liabilities according the exception allowed in RFR 2. Revaluation of borrowings due to change in credit risk are reported in the Income statement. 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 lease income are recognized when incurred. Direct expenses incurred when a lease 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 in accounting policies On January 1, 2023, the following amendments issued by the IASB were adopted with no material impact on the results and financial position of the Parent Company. – IFRS 17: Insurance contracts – IAS 1: Presentation of Financial Statements and IFRS Practice Statement 2 – Disclosure of Accounting policies – IAS 8: Accounting policies, Changes in Accounting Estimates and Errors – Definition of Accounting Estimates – IAS 12: Income Taxes, Deferred Tax related to Assets and Liabilities arising from a Single Transaction – IAS 12: Income Taxes,International Tax Reform – Pillar Two Model Rules A number of new amendments to standards and interpretations are not yet effective for the year ended December 31, 2023, and have not been applied in preparing the Parent Company financial statements. The IASB has issued amendments with effective date January 1, 2024, relating to “IAS 1 Presenta- tion of financial statements”, “IFRS 16 Leases”, “IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments”. The amendments are not estimated to have a material impact and there are no additions or exceptions allowed in RFR 2. Among the amendments issued by IASB with effective date January 1, 2025, are “Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability.” There are no additions or exceptions in RFR2 relating to this amendment and it is not expected to have any material impact, but to consider is the already existing rule in RFR 2 regarding reporting cur- rency. For the changes in IFRS standards, more details can be found in the Consolidated Financial Statements, note A1” Material accounting policies.” Financial report 2023 Notes to the Parent Company ﬁnancial statements 93 P2 Other operating income and expenses P4 Taxes Other operating income and expenses Income taxes recognized in the income statement License revenues and other operating revenues Subsidiary companies Other operating income/expenses Total 2023 2022 2021 3,468 138 3,606 2,956 –2,2651) 691 2,573 –803 1,770 Current income taxes for the year Current income taxes related to prior years Deferred tax income/expense (+/–) Tax income/expense 2023 –113 –244 –25 –382 2022 758 –294 167 631 2021 –72 –64 –31 –167 1) 2022 includes a provision of SEK –2.3 billion related to the DPA breach resolution with the U.S. Department of Justice, including expenses for the extended monitorship. P3 Financial income and expenses 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 Result from participations in other companies Net gains on participations Interest income from subsidiary companies Interest income from others 2023 2022 2021 32,422 78 19,412 19 8,602 12 45 59 121 2,838 1,076 96 1,465 147 72 718 886 41 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% (20.6% in 2022 and 2021), 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 investments in subsidiary companies Utilization of previous years’ tax losses Tax income/expense 2023 163 –244 –291 6,739 –6,753 4 –382 2022 –2,295 –294 –668 4,186 –298 – 631 2021 –1,605 –64 –190 1,962 –270 – –167 Income taxes recognized in Other retained earnings 2023 – – 2022 –758 –758 2021 – – Total 36,580 21,198 10,331 Tax expense/income Current income taxes for the year Financial expenses Losses on sales of participations in subsidiary companies Write-down of investments in subsidiary companies 1) 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 2) 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 liabilities designated at FVTPL –5 – –8 –32,783 –1,446 –1,300 Deferred tax balances Deferred tax assets are derived from the balance sheet items as shown in the table below. – –557 – Tax effects of temporary differences –299 –2,858 –2,054 –695 –209 –712 –368 948 – –30 –304 –179 Current assets Post-employment beneﬁts Provisions Other –38,694 –2,344 –1,821 Deferred tax assets –382 –2,496 359 19,213 –111 8,399 Changes in deferred taxes Opening balance Reclassiﬁcation Recognized in net income (loss) Closing balance –900 –2,563 –543 –1,100 2,847 404 2023 2022 388 35 30 108 561 348 34 48 156 586 2023 2022 586 0 –25 561 507 –88 167 586 1) For information about write-downs in 2023 see note P7 “Financial assets.” 2) Revaluation of borrowings due to change in credit risk in 2023: SEK - 667 million (SEK 1,030 million in 2022 and SEK 31 million in 2021). Interest expenses on pension liabilities are included in the interest expenses shown above. 94 Notes to the Parent Company ﬁnancial statements Financial report 2023 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 Closing balance Net carrying value 2023 2022 5,086 – – 5,086 –4,134 –4 – –4,138 –948 – –948 – 5,086 – – 5,086 –4,130 –4 – –4,134 –948 – –948 4 The balances are mainly related to Radio Frequency technology. P6 Property, plant and equipment Property, plant and equipment 2023 Accumulated acquisition costs Opening balance Additions Sales/disposals Reclassiﬁcations Closing balance Accumulated depreciation Opening balance Depreciation Sales/disposals Closing balance Net carrying value 2022 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 1,972 8 –84 67 1,963 –1,618 –117 82 –1,653 310 1,948 26 –45 43 1,972 –1,548 –115 45 –1,618 354 26 79 –4 –67 34 – – – – 34 13 59 –3 –43 26 – – – – 26 Total 1,998 87 –88 – 1,997 –1,618 –117 82 –1,653 344 1,961 85 –48 – 1,998 –1,548 –115 45 –1,618 380 Financial report 2023 Notes to the Parent Company ﬁnancial statements 95 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 Subsidiary companies Associated companies 2023 128,638 150 11,857 –1,028 –32,783 –300 106,534 2022 72,009 2,244 55,835 – –1,446 –4 128,638 2023 628 – – – – – 628 2022 1,184 298 – – –791 –63 628 1) In 2023 write-downs of investments in subsidiary companies were made by SEK 32.8 (2.2) billion, whereof SEK 31.9 billion was related to the investment in Vonage. The reason for the write-down of the invest- ment in Vonage was mainly macroeconomic headwinds, including rising interest rates and changing demand trends. Other write-downs were mainly a result of devaluation of currency and lowered expectation on future proﬁtability for a few entities. For impairment test in 2023 of investments in subsidiary and associated companies a discount rate of 11.0% (9.0%) was applied. For high inﬂation countries individual dis- count rates ( 12.0-24.0%) were applied. At the time of the write-downs the recognized amounts in the balance sheet related to each impacted subsidiary company were 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 2023 2022 2023 2022 2023 2022 2023 2022 2,039 206 –1 – –185 – 2,059 2,175 168 –96 –1 –207 – 2,039 9,157 12,887 –4,233 –8,152 271 – 9,930 30,615 13,583 –29,666 –5,632 257 – 9,157 36 – – –10 – – 26 544 – – –588 80 – 36 15,414 11,517 –10,804 –8,026 – –1,466 6,635 13,284 5,963 –5,189 – – 1,356 15,414 96 Notes to the Parent Company ﬁnancial statements Financial report 2023 P8 Investments The following listing shows certain shareholdings owned directly and indirectly by the Parent Company as of December 31, 2023. 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 Datacenter i Rosersberg AB Datacenter i Mjärdevi Aktiebolag Aktiebolaget Aulis Other (Sweden) Ericsson Austria GmbH Ericsson Danmark A/S Oy L M 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 Sp. z o.o. Ericsson España, S.A.U. Ericsson Ltd. Other (Europe, excluding Sweden) Ericsson Holding II Inc. Ericsson Smart Factory Inc. Ericsson Global Network Platform Holding Inc. Compañía Ericsson S.A.C.I. Ericsson Canada Inc. Ericsson de Colombia S.A.S. Ericsson Telecom S.A. de C.V. Other (United States, Latin America) Teleric Pty Ltd. Ericsson (China) Company Ltd. P.T. Ericsson Indonesia Ericsson India Private Limited Ericsson Kenya Limited Ericsson-LG Co., Ltd. Ericsson (Malaysia) Sdn Bhd Ericsson South Africa (Pty) Ltd. Ericsson Taiwan Ltd. Ericsson (Thailand) Ltd. Ericsson Telekomünikasyon A.Ş. Other countries (the rest of the world) Total Joint ventures and associated companies ConcealFab,Inc. Leone Media Inc. Ericsson Nikola Tesla d.d. Total 556056-6258 556251-3266 556895-3748 556366-2302 556030-9899 Sweden Sweden Sweden Sweden Sweden Austria Denmark Finland France Germany Germany Hungary Ireland Italy The Netherlands Norway Poland Spain United Kingdom United States United States United States Argentina Canada Colombia Mexico Australia China Indonesia India Kenya Korea Malaysia South Africa Taiwan Thailand Turkey 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 95 1) 100 97 1) 100 – 100 100 95 100 100 75 100 70 90 49 2) 100 – 36 46 49 50 361 – 10 14 4 90 13 21 2 1 1,301 4 44 222 75 4 28 53 – – – 193 – 701 1,439 20 65 9,531 291 – 285 3 – 270 90 5 – 134 65 20,731 2,216 74 69 6 706 94 216 196 524 21 1,816 120 34 2,429 2,983 114 412 14 1,957 709 34,295 424 30,674 10 221 176 576 435 100 475 614 51 10 2,279 131 94 36 17 150 325 106,534 298 – 330 628 1) Through subsidiary holdings, total holdings amount to 100% of Compañía Ericsson S.A.C.I. and Ericsson de Colombia S.A.S. 2) Through subsidiary holdings, total holdings amount to 74% of Ericsson (Thailand) Ltd. Financial report 2023 Note P8, cont’d. Shares owned by subsidiary companies Company Subsidiary companies Emodo Inc. Ericsson Telekommunikation GmbH Ericsson GmbH Ericsson Telecommunicatie B.V. Ericsson Inc. Vonage Holdings Corp. Ericsson Wireless Ofﬁce Inc. Cradlepoint Inc. Iconectiv, LLC. Ericsson Telecomunicações LTDA. Ericsson Australia Pty. Ltd. Ericsson (China) Communications Co. Ltd. Nanjing Ericsson Panda Communication Co. Ltd. Ericsson Japan K.K. Notes to the Parent Company ﬁnancial statements 97 Reg. No. Domicile Percentage of ownership United States Germany Germany The Netherlands United States United States United States United States United States Brazil Australia China China Japan 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 2023 2022 24 –18 6 – 6 231 231 29 –19 10 1 11 544 544 Opening balance Additions Utilization Reversal of excess amounts Translation difference Closing balance Outstanding customer ﬁnance credit risk exposure 1) Customer Finance Fair Value Reconciliation 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 shows the maximum exposure to credit risk. 2023 2022 231 81 4 7 242 – 242 185 544 322 6 8 558 – 558 412 Opening balance Additions Disposals/repayments Revaluation Translation difference Closing balance 100 100 100 100 100 100 100 100 83 100 100 100 51 100 Trade receivables 2023 2022 19 – – – –1 18 16 – – – 3 19 2023 544 292 –388 –217 – 231 2022 786 53 –288 –7 – 544 98 Notes to the Parent Company ﬁnancial statements Financial report 2023 P10 Receivables and liabilities – subsidiary companies P11 Other current receivables Receivables and liabilities – subsidiary companies Other current receivables Non-current receivables Financial receivables Current receivables Trade receivables Financial receivables Total Non-current liabilities Financial liabilities Current liabilities Trade payables Financial liabilities Total Payment due by period < 1 year 1–5 years >5 years Total 2023 Total 2022 – 6,635 2,408 15,431 17,839 – 316 47,269 47,585 – – – – – – – – – – – – – – – 6,635 15,414 2,408 15,431 17,839 1,662 22,518 24,180 – – 316 47,269 47,585 230 94,171 94,401 Prepaid expenses Accrued revenues Derivative assets Other Total 2023 315 123 3,326 659 4,423 2022 353 105 2,017 664 3,139 P12 Equity and other comprehensive income Capital stock 2023 Capital stock at December 31, 2023, consisted of the following: Capital stock Class A shares 1) Class B shares 1) Total Number of shares Capital stock 261,755,983 3,082,395,752 3,344,151,735 1,309 15,413 16,722 1) Class A shares (quotient value SEK 5.00) and Class B shares (quotient value SEK 5.00). The Annual General Meeting (AGM) 2023 resolved to issue 10,000,000 Class C shares for the Long-Term Variable Compensation Program (LTV II) 2023, 2022 and 2021 for Ericsson’s executive team and other executives. In accord- ance with an authorization from the AGM, 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 5.00, totaling SEK 50.0 million, representing less than 0.3% of capital stock. The acquisition cost was SEK 50.2 million. The Board of Directors proposes a dividend of SEK 2.70 (2.70) 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 1.35 per share with the record date April 5, 2024 (payment date April 10, 2024), and SEK 1.35 per share with the record date October 2, 2024 (payment date October 7, 2024). Holders of the Class B treasury shares are not entitled to receive a dividend. All Class B treasury shares are held by the Parent Company. 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 Amount to be paid to the shareholders Amount to be retained by the Parent Company Total non-restricted equity of the Parent Company 9,029,209,684 18,555,216,849 27,584,426,533 Equity and other comprehensive income 2023 January 1, 2023 Net income (loss) Total other comprehensive income, net of tax Total comprehensive income (loss) Transactions with owners Share issue,net Repurchase of own shares Long-term variable compensation plans Dividends paid December 31, 2023 Capital stock Revaluation reserve Statutory reserve Total restricted equity Disposition reserve 16,672 20 31,472 48,164 100 – – – 50 – – – – – – – – – – – – – – – – – – – – 50 – – – – – – – – – – 16,722 20 31,472 48,214 100 Other retained earnings 37,653 –1,171 – –1,171 – –50 43 –8,991 27,484 Non- restricted equity 37,753 –1,171 – –1,171 – –50 43 –8,991 27,584 Total 85,917 –1,171 – –1,171 50 –50 43 –8,991 75,798 Financial report 2023 Note P12, cont’d. Equity and other comprehensive income 2022 January 1, 2022 Net income Other comprehensive income (loss) Items that will not be reclassiﬁed to proﬁt or loss Cash ﬂow hedge reserve Gains arising during the period Transfer to investments Tax on items that will not be reclassiﬁed to proﬁt or loss Total other comprehensive loss, net of tax Total comprehensive income Transfer to Other retained earnings Transactions with owners Share issue,net Repurchase of own shares Long-term variable compensation plans Dividends paid December 31, 2022 P13 Contributions Notes to the Parent Company ﬁnancial statements 99 Capital stock Revaluation reserve Statutory reserve Total restricted equity Disposition reserve Cash ﬂow hedge reserve Other retained earnings Non- restricted equity 16,672 – – – – – – – – – – – 20 – – – – – – – – – – – 31,472 48,164 – – – – – – – – – – – – – – – – – – – – – – 100 – – – – – – – – – – – 16,672 20 31,472 48,164 100 –26 34,910 34,984 Total 83,148 – 11,771 11,771 11,771 3,703 –3,677 –758 –732 –732 758 – – – – – – – – – 11,771 –758 – – 55 –8,325 37,653 3,703 –3,677 –758 –732 11,039 3,703 –3,677 –758 –732 11,039 – – – – – – 55 –8,325 37,753 55 –8,325 85,917 Contributions to Swedish subsidiaries amount to SEK 81 (7,272) million. There were no contributions from Swedish subsidiaries in 2023 and 2022. 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. Deﬁned beneﬁt obligation – amount recognized in the Balance sheet 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 2023 1,659 2022 1,491 –1,821 –1,753 –162 165 3 –262 262 0 1) The total deﬁned beneﬁt obligation is considered to be secured in the pension trust but not wholly funded. The defined benefit obligations are calculated based on the actual salary levels at year-end and based on a discount rate of 2.85% (2.85%) regarding ITP2 and 1.0% (0.2%) for other pension liabilities. Weighted average life expectancy after the age of 65 is 24.7 (24.7) years for women and 23.5 (23.5) years for men. The Parent Company utilizes no assets held by the pension trust. Return on plan assets was 3.9% (–4.5%). 2023 of which unquoted 2022 of which unquoted Plan assets allocation Cash and cash equivalents Equity securities Debt securities Real estate Derivatives Investment funds Total Of which Ericsson securities 0% 38% 20% 100% 87% 100% 17 449 881 336 14 124 1,821 – 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 Closing balance provision for pensions 71 418 867 343 –2 56 1,753 – 2023 0 250 –82 –165 3 0% 41% 19% 100% 100% 100% 2022 0 266 –72 –194 0 Estimated pension payments for 2024 related to defined benefit obligations are SEK 93 million. 100 Notes to the Parent Company ﬁnancial statements Financial report 2023 Note P14, cont’d. Total pension cost and income recognized in the Income statement P15 Other provisions Deﬁned beneﬁt obligations Costs excluding interest and taxes Interest cost Return of plan assets Total cost deﬁned beneﬁt plans excluding taxes Deﬁned contribution plans Pension insurance premium Total cost deﬁned contribution plans excluding taxes Credit insurance premium 2023 2022 2021 Other provisions 211 39 –165 233 33 –194 85 59 59 2 72 67 67 0 64 39 –32 71 70 70 2 Opening balance Additions Reversal of excess amounts Cash out/utilization Reclassiﬁcations Closing balance Of which current provisions Of which non-current provisions Restructuring Other Total 2023 Total 2022 – 232 – 2,435 29 – –58 –2,366 1) – – 174 97 77 98 98 – 2,435 261 – –2,424 – 272 195 77 293 2,338 –60 –136 – 2,435 2,424 – 1) Includes a payment of USD 206,7 million (approximately SEK 2.2 billion) for the ﬁne in relation to the previously announced, non-criminal, alleged breaches under the deferred prosectution agreement (DPA) with the United States Department of Justice (DoJ). Total cost, net excluding taxes 146 139 143 Of the total pension cost, SEK 271 (300 in 2022 and 136 in 2021) million is included in operating expenses and SEK –125 (–161 in 2022 and 7 in 2021) million in the financial net. P16 Interest-bearing liabilities As of December 31, 2023, the Parent Company’s outstanding interest-bearing liabilities, excluding liabilities to subsidiaries, stood at SEK 44.6 (29.6) 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 2023 2022 8,947 6,631 15,578 20,975 8,096 29,071 44,649 2,814 – 2,814 19,712 7,040 26,752 29,566 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 Closing balance 2023 29,566 15,989 –3,333 1,503 –870 667 1,127 44,649 2022 31,421 7,777 –9,993 – 4,041 –1,030 –2,650 29,566 To secure long-term funding, the Company uses notes and bond programs together with bilateral research and development loans, as well as private placements. All outstanding notes and bond loans are issued by the Parent Company under its Euro Medium Term Note (EMTN) program or under its U.S. 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 management.” Total weighted average interest rate cost for the long-term funding during the year was 5.15% (2.45%). The borrowings issued by the Parent Company are held at fair value with changes in value recognized in the Income statement. See note P1 “Material Accounting Policies.” For detailed information about Notes, bonds, bilateral loans, syndicated loans and commercial papers, see notes to the Consolidated Financial State- ments, note F4 “Interest-bearing liabilities.” Financial report 2023 Notes to the Parent Company ﬁnancial statements 101 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 2022 Gross amount recognized Offset Net amount presented Related amounts not offset – collaterals 2023 Currency derivatives Assets Liabilities Interest rate derivatives Assets Liabilities 3,392 –4,241 –43 43 3,349 –4,198 –1,487 874 1,862 –3,324 – –23 – – – –23 – – – –23 Currency derivatives Assets Liabilities Interest rate derivatives Assets Liabilities 2,171 –2,727 –165 165 2,006 –2,562 –277 2,382 Net 1,729 –180 11 –8 – – 11 –8 – – 11 –8 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. Cash, cash equivalents, interest bearing securities and derivative assets 2023 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 2022 Rating or equivalent < 3 M 3–12 M 1–5 Y > 5 Y Total 14,488 548 – 1,510 1,995 1,920 – – – – 490 296 5,668 749 1,254 – 8,676 622 – 14,488 – 548 1,744 – – 1,806 – 16,339 Bank deposits Other ﬁnancial institutions Type of issuer: Governments Corporates Mortgage institutes 35 3,326 Derivative assets AAA A2/P2 AAA 24,252 604 500 1,283 – 951 – – – – – 24,252 – 604 3,950 – 1,682 93 277 – 8,880 837 4,727 – – 1,283 – 10,562 136 2,017 20,461 7,203 10,552 35 38,251 Total 27,590 5,725 9,994 136 43,445 AAA A2/P2 AAA 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) Commercial Paper Program (SEK million) Amount Utilized Unutilized 5,000 – 10,000 2,842 – 2,014 2,158 – 7,986 1) There are no ﬁnancial covenants related to these programs. 2) Program amount indeterminate. In November 2023, the Company issued a 4.5-year EUR 500 million green bond under the Euro Medium Term Note program and Green Financing Frame- work. During the year, the Company established a new committed liquidity revolving credit facility of USD 1.0 billion, of which USD 0.4 billion was utilized as at year end, and increased the borrowings under the commercial paper program by SEK 2.0 billion. Furthermore, the Company signed two 7-year loan agreements, one with European Investment Bank for USD 273 million and one with Nordic Investment Bank for USD 107 million. Committed credit facilities Multi-currency revolving credit facility (USD million) Liquidity revolving credit facility (USD million) Amount Utilized Unutilized 2,000 1,000 – 2,000 400 600 In September 2023, the Company exercised the second and the last one-year extension option on the USD 2 billion sustainability-linked revolving credit facility. The facility does not have interest rates linked to credit rating or finan- cial covenants but is linked to two of Ericsson’s sustainability KPIs. The following table shows analysis of financial liabilities by contractual maturity: 2023 Trade payables Borrowings and loans Derivative liabilities Total 2022 Trade payables Borrowings and loans Derivative liabilities Total < 1 Y 435 15,578 3,681 19,694 < 1 Y 542 3,133 868 4,543 1–3 Y – 3,472 211 3,683 1–3 Y – 12,835 1,091 13,926 3–5 Y – 16,489 306 16,795 3–5 Y – 8,992 611 9,603 > 5 Y Total – 435 9,110 44,649 4,198 – 9,110 49,282 > 5 Y Total – 542 11,144 36,104 2,570 – 11,144 39,216 102 Notes to the Parent Company ﬁnancial statements Financial report 2023 Note P17, cont’d. The Company has a Treasury and Customer Finance organization with the principal role to ensure that appropriate financing is in place through loans and committed credit facilities, actively manage the Company’s liquidity as well as financial assets and liabilities, and manage and control financial risk exposures in a manner consistent with underlying business risks and financial policies. The Customer Finance function may support with third-party financing solu- tions for customers to facilitate 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. 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 of other ﬁnancial assets Opening balance Additions Disposals Gains or losses 1) Closing balance Other investments in shares and participations 1,952 206 –2 –186 1,970 1) Table shows net gains or losses recognized in Financial income or expenses, of which SEK 186 million unrealized loss relate to Level 3 assets held at the end of the year. 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 receivables 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 2023 Fair value hierarchy level 2022 Fair value hierarchy level Amortized cost Fair value Level 1 Level 2 Level 3 Amortized cost Fair value Level 1 Level 2 Level 3 – – – – – – 0.2 – 0.6 22.1 22.9 – – –0.4 –6.6 –47.3 –54.3 0.2 19.1 10.1 2.1 3.3 0.0 – – – – 34.8 – 18.6 – 0.1 – – – – – – – – 0.5 10.1 – 3.3 – – – – – – –38.0 –23.7 –14.3 –4.2 – – – –42.2 – – – – – –4.2 – – – – 0.2 – – 2.0 – 0.0 – – – – – – – – – – – – – – – – – 0.2 – 0.6 39.6 40.4 – – –0.5 –0.0 –94.4 –94.9 0.5 17.5 15.3 2.0 2.0 0.0 – – – – 37.3 – 17.5 – 0.1 – – – – – – – – – 15.3 – 2.0 – – – – – – –29.6 –16.7 –12.9 –2.6 – – – –32.2 – – – – – –2.6 – – – – 0.5 – – 1.9 – 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 15.6 (23.7) billion, of which SEK 10.1 (15.3) billion relating to Cash equivalents are presented in the table above. P18 Other current liabilities Other current liabilities Accrued interest Accrued expenses Of which employee related Of which other Derivative liabilities Other current liabilities Total 2023 429 482 326 156 4,198 365 5,474 2022 251 965 388 577 2,570 309 4,095 P19 Trade payables Trade payables Trade payables excluding associated companies and joint ventures Associated companies and joint ventures Total 2023 2022 432 3 435 542 – 542 Financial report 2023 Notes to the Parent Company ﬁnancial statements 103 P20 Assets pledged as collateral Assets pledged as collateral Leases with the Parent Company as lessor The operating lease income is mainly income from the subleasing of real estate. At December 31, 2023, future minimum payment receivables were Bank deposits Other Total 2023 823 229 1,052 2022 893 234 1,127 distributed as follows: Future minimum payment receivables Other includes pledged capital insurances for pension agreements to employees. P21 Contingent liabilities Contingent liabilities Total contingent liabilities 2024 2025 2026 2027 2028 2029 and later Total 2023 28,417 2022 24,811 P24 Information regarding employees Contingent liabilities include pension commitments of SEK 28,272 (24,680) million. Average number of employees P22 Statement of cash ﬂows Adjustments to reconcile net income to cash Europe and Latin America 1) Total 1) of which in EU 2023 2022 2021 of which in Sweden 2023 2022 Men Women Total Men Women Total 170 170 170 170 165 165 165 165 335 335 335 335 177 177 177 177 179 179 179 179 356 356 356 356 Operating leases 9 2 – – – – 11 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 Other non-cash items Total adjustments to reconcile net income to cash P23 Leases 117 117 4 4 121 382 32,888 81 897 115 115 4 4 119 –631 2,097 7,272 –475 110 110 18 18 128 160 578 1,526 –190 34,369 8,382 2,202 Remuneration Wages and salaries and social security expenses Wages and salaries Social security expenses of which pension costs Wages and salaries per region Europe and Latin America 1) Total 1) of which in EU of which in Sweden 2023 2022 597 311 184 557 327 178 2023 2022 597 597 597 597 557 557 557 557 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-settled plan amounted to SEK 7.3 (2.0) million and the cost for share-settled program amounted to SEK 44.4 (54.8) million. See notes to the consolidated financial statements, note G3, “Share-based compensation.” Leases with the Parent Company as lessee The Parent Company has the following types of lease contracts: lease of real estate and vehicles. 2023 costs for real estate amounted to SEK 675.8 (633.4) million and vehicles to SEK 4.2 (4.9) million. The Parent Company had varia- ble lease expenses of SEK 49.9 (51.6) million in 2023 related to property taxes. At December 31, 2023, future payment obligations for leases were distributed as follows: Future payment obligations for leases 2024 2025 2026 2027 2028 2029 and later Total Operating leases 624 564 451 160 68 28 1,895 104 Notes to the Parent Company ﬁnancial statements Financial report 2023 P25 Related party transactions P26 Fees to auditors IAS 24, “Related Party Disclosures” requires disclosure of related party relationships, transactions and outstanding balances. During 2023, 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 2023 2022 5 45 – 5 59 5 The Parent Company does not have any contingent liabilities, assets pledged as collateral or guarantees toward Ericsson Nikola Tesla d.d. Leone Media Inc. Leone Media Inc., operating under the brand name MediaKind, includes plat- forms for compression video processing and storage. 51% of the MediaKind business was divested February 1, 2019. After the t ransaction, the Parent Company held 49% of the shares. During 2022, Leone Media Inc. launched a share-based incentive program for its employees, which reduced the Parent Company holding to 45.5% of the shares. The Parent Company has provided a loan to Leone Media Inc. of SEK 0.6 (0.6) billion. Leone Media Inc. Related party transactions License revenues Dividends Related party balances Receivables 2023 2022 – – – – 594 615 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 3.9 (3.8) 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 2023 Audit fees Audit-related fees Tax services fees Other fees Total 2022 Audit fees Audit-related fees Tax services fees Other fees Total 2021 Audit fees Audit-related fees Tax services fees Other fees Total Deloitte Others Total 90 3 – – 93 94 2 – – 96 90 – – – 90 1 – – 9 10 – – – 7 7 3 – 9 1 13 91 3 – 9 103 94 2 – 7 103 93 – 9 1 103 The allocation of fees to the auditors is based on the requirements in the Swedish Annual Accounts Act. At the 2023 Annual General Meeting, Deloitte was appointed auditor for the period until the 2024 Annual General Meeting. 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 The impact of inﬂation on the deﬁned beneﬁt obligations PRI non-profit association decides on the indexation of ITP 2 every year, which means that pensions are increased to provide compensation for i nflation. The level of the indexation as of January 1, 2024 was decided by PRI non-profit association on November 14, 2023. PRI non-profit association followed Alecta’s decision, which involves an indexation of 6.48%, which corresponds to the increase in the consumer price index from September 2022 to September 2023. Ericsson to utilize mandate to transfer shares Ericsson’s annual general meeting on March 29, 2023 authorized the Compa- ny’s board of directors to resolve on the transfer of the Company’s own shares. Under the authorization the Company may, in conjunction with the delivery of vested shares under the long-term variable compensation programs 2019 and 2020 (“LTV 2019” and “LTV 2020”), prior to the annual general meeting in 2024, decide to retain and sell no more than 60% of the vested shares of series B in the Company in order to cover for the costs for withholding and paying tax and social security liabilities on behalf of the participants in relation to the performance share awards for remittance to revenue authorities. Ericsson decided, on February 16, 2024, to utilize the authorization to transfer shares for these purposes. The transfer of own shares may take place on Nasdaq Stockholm during the period from and including February 16, 2024 up to the annual general meeting 2024 at a price within the price interval registered from time to time. Ericsson currently holds 12,932,223 shares of series B in the Company and the maximum number of shares that may be transferred on Nasdaq Stockholm pursuant to the decision to utilize the authorization amounts to 774,889 shares of series B in the Company. For other events after the reporting period, see notes to the Consolidated Financial Statements, note H6, ”Events after the reporting period”. Financial report 2023 Risk factors 105 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 its 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, opera- tions, future performance, revenues, operating and after-tax results, profit margins, financial condition, cash flow, liquidity, credit rating, market share, reputation, brand and/or its 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 its business. Furthermore, Ericsson’s operating results may have a greater variability than in the past and Ericsson may have difficulties in accurately predicting future developments. See also “Forward-Looking Statements”. Contents 105 Risks related to business activities and industry 112 Risks related to Ericsson’s ﬁnancial condition 113 Legal and regulatory risks 116 Cybersecurity risks 118 Environmental, social and business conduct risks 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 Ericsson’s business, operations, and ability to meet its targets. Geopolitical alliances are shifting as global tensions, including between US and China over trade, influence and the status of Taiwan, drive growing economic, technological, military, and political competition across the world. At the same time, there are numerous ongoing local and regional conflicts, including the ongoing military conflicts between Ukraine and Russia and in the broader Middle East. While the ultimate impact of these dynamic tensions is unclear, the uncertainty they create is expected to continue. These geopolitical developments, including trade or security restrictions and export controls, enhanced sanctions measures, vendor consolidation, and increased safeguards for national security purposes, can impact global market conditions, including market share, access and position. The current environment continues to be challenging for global supply chains in general and ICT supply chains in particular, while also increasing costs. These uncertainties include the effects of trade disputes and other political tensions involving, among others, the governments of the European Union, the US, China, India, South Korea and Japan. There are particular uncertainties for the future bilateral trading relationship between China and a number of countries as a result of the restrictions imposed on Chinese vendors or components in 5G networks that have been adopted in many countries, and access to hardware and software products and components may be constrained. Of special relevance for Ericsson in this context is the trade relationship between Sweden and China. Although Ericsson is a global company with a global presence, it has its headquarters in Sweden and therefore risks being affected by any deterioration of the Swedish-Chinese relationship. In addition, the Company has business operations in China, and further changes in economic and political policies in or relating to China could have a material adverse effect on the Company’s business. During the last few years, Ericsson has observed sustained challenges to the global free trade system, 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 manufactur- ing and R&D or use of local suppliers or production, as well as their digital counterparts (including data localization of IT-infrastructure and restrictions on data flows), has been steadily growing, motivated by protectionism, indigenous industrial policies and national security concerns. Geopolitical uncertainty has led to reduced efficiency in R&D, including restrictions on use of R&D resources, and opportunities to scale or grow with increasing logistical and administrative burdens, while polarization of the industry and fragmentation of global standards continues to develop (e.g., O-RAN). There is a risk of moves away from global value chains and towards more regional or national alternatives. Governments may continue to impose conditions that require the use of local suppliers and local production or partnerships with local compa- nies for R&D and IT-infrastructure, require the license or other transfer of intellectual property, or engage in other efforts to promote local busi- nesses and local competitors, which could have a significant adverse impact on Ericsson’s ability to pursue a business globally. Additionally, political instability, strict requirements on localization of data, manufacturing and R&D, or use of local suppliers or production in the regions in which the Company operates may further increase the risk of possible legal or regulatory violations by Ericsson or its employ- ees. Any violation by Ericsson or its employees could cause severe reputational harm to the Company and have 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, including with certain customers, such as government bodies or those in certain regulated sectors (e.g. telecommunications). The continually evolving global geopolitical situation has had and will continue to have consequences for the entire ICT industry, with the possibility of further industry splits, separation of global value chains and separation of global standards for mobile telecommunications. These developments have also led to several countries evaluating how to ensure uninterrupted access to telecommunication network infra- structure, for example through promoting disaggregation of the Radio 106 Risk factors Financial report 2023 Access Network and support of national communication network infra- structure champions as alternatives 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 global sup- ply chains and necessitate a flexible and adaptive organizational setup, therefore impacting its profitability and business as a whole. 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. Challenging global economic conditions, including due to downturns in the global economy, political unrest and uncertainty, labor and sup- ply shortages, increasing inflation and rising interest rates or a period of elevated interest rates, health epidemics, or geopolitical risks and trade frictions may have adverse, wide-ranging effects on demand for Ericsson’s products and for the products and services 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, in turn, result in signifi- cantly reduced expenditures for the Company’s products and services, including network infrastructure. This reduced demand for products and services could result in increased price competition or deferrals of purchases, leading to lower revenues not fully offset by reduced costs. Reduced demand could also result in excess and obsolete inventories and excess manufacturing capacity, which would have an adverse impact on Ericsson’s cost base. Some operators and other customers, in particular in markets with weak currencies, may encounter funding difficulties and slower traffic development, which may negatively affect their investment plans and cause them to purchase fewer of the Company’s products and services. Increased inflation may impact the Company’s cost base through increased costs of labor and supply of material, products and services. Ericsson is particularly exposed to these risks in certain key geographies where its largest customers are located, such as the United States and India. It may not be possible to fully compensate for such increased costs through increased sales prices to the Company’s customers, lead- ing to lower margins and decreased financial performance. Challenging macroeconomic conditions could also lead to financial difficulties or failures among Ericsson’s customers or suppliers, increased demand for customer finance, difficulties in collection of accounts receivable and an increased risk of counterparty failures. Macroeconomic volatility can also lead to increased difficulties in forecasting sales and financial results, as well as increased volatility in Ericsson’s reported results and potential impairment losses related to Ericsson’s intangible assets as a result of lower forecasted sales of certain products. Should any of the foregoing factors persist or worsen, the adverse impacts on Ericsson’s business and financial condition could become more pronounced. 1.3 Ericsson’s business depends upon the continued growth of mobile communications and the success of Ericsson’s existing and targeted customer base, which can impact customer demand, as well as Ericsson’s product mix and margins. 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 communications service providers fail to increase the number of subscribers and/or usage does not increase, or if they fail to capitalize on opportunities created through technological evolution, Ericsson’s business and operating results could be materially adversely affected. If communications service providers 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 existing 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, and financial condition. During 2023, macroeconomic conditions, including inflationary pressures, were more challenging than expected, which has led to reduced volumes and pace of investment by many of Ericsson’s custom- ers. The timing and magnitude of market recovery, particularly in North America, has been slower than expected. There can be no assurance as to when levels of market investment will recover. Traffic development on cellular networks could be further affected if more traffic is offloaded to WI-FI networks, which would have profound effects on operator voice/ broadband/SMS revenues with possible reduced capital expenditures as a consequence. Additionally, new technologies such as satellite could be further developed and launched. Ericsson’s strategy depends on the development and success of global standards. This could be adversely affected in the future by industry forces more interested in de-facto standards or geopolitical forces leading to fragmentation of standards and increased difficulties in creating economies of scale. Fixed and mobile networks converge and new technologies, such as IP and broadband, enable communications service providers to deliver services in both fixed and mobile networks. Ericsson is depend- ent on the uptake of such services and the outcome of regulatory and standardization activities such as spectrum allocation. Delays in uptake, standardization or regulation could adversely affect Ericsson’s business, operating results, and financial condition. In addition, Ericsson’s sales volumes and gross margin levels can be reduced by an unfavorable mix and order time of Ericsson’s prod- ucts 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 focus for sales going for- ward. 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 con- sequence, Ericsson’s reported gross margin in a specific period will be affected by the overall mix of products and services as well as the rela- tive content of third-party products. In the Company’s Cloud Software and Services and Other segments, third-party products and services rep- resent 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 a 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 the potentially restricted market availability of certain components caused by supply chain delays. Short-term variation could have a material adverse effect on Ericsson’s business, operating results, financial condition and cash flow. Financial report 2023 Risk factors 107 1.4 Ericsson may not be successful in implementing its key strategies, including improving profitability, capturing 5G market opportunities, capitalizing on the GNP and Enterprise opportunity, or achieving expected benefits from restructuring activities. There can be no assurance that Ericsson will be able to successfully implement its strategy to achieve future profitability, growth or create shareholder value. When deemed necessary, Ericsson has undertaken and expects 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 improvements in Ericsson’s earnings. Furthermore, this Annual Report includes certain estimates with respect to addressable markets as well as with respect to growth rates in the operating segments in which Ericsson operates, including Networks, Cloud Software and Services, Enterprise 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 pre- sented in this Annual Report. Ericsson’s 5G market opportunity will depend on availability of attractive 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 mar- ket. In addition, the operator usage of this spectrum could be restricted by regulatory authorities for shorter or longer time and in different geographical areas, due to unforeseen circumstances such as interfer- ence with other electronic equipment at sensitive locations, e.g. airports. The Company cannot guarantee that it will not become the subject of related liability claims (such as product liability or claims associated with the configuration or installation of equipment), all of which could have a material adverse impact on Ericsson’s business and reputation. Operator speed and scale to adopt 5G could also be changed due to market conditions, including resolution of M&A transactions as well as government incentives to deploy 5G. Operator 5G deployment plans could also be delayed by operational issues such as site access, permits, 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. The timing, size and technol- ogy choices of market opportunities beyond enhanced mobile broad- band, such as fixed wireline access, industrial IoT and private networks, may materialize differently than estimated. Ericsson or its suppliers may encounter unforeseen technical challenges that can affect Ericsson’s ability to develop, supply or deploy 5G networks. Ericsson’s future growth is partly dependent on enterprises in several industries that are digitalizing and increasingly utilizing cellular wireless solutions (including Private Cellular Networks), as well as increasingly utilizing and offering automated services, which are growth drivers for GNP. Ericsson can provide no assurance regarding the timing or magnitude of growth of its GNP. Competing technologies, such as Wi-Fi, macroeconomic headwinds, and customers’ unwillingness to pay for services might slow down this development. Legal and regulatory restrictions such as Net neutrality can also slow down or restrict global expansion of this business. Furthermore, access to devices, sensors, and spectrum might also impact the pace and ability for enterprises to adopt cellular wireless technology. In addition, as described in Risk Factor 3.3 below, Vonage and Ericsson are engaged in a remediation process relat- ing to ongoing compliance with obligations under the National Security Agreement (NSA) entered into in connection with Ericsson’s acquisition of Vonage. The ongoing compliance efforts and related remediation may adversely affect the Vonage business, including changes required to business structure and additional compliance costs. Furthermore, the Company may not achieve some or all of the expected benefits of its restructuring activities, and the Company’s restructuring may adversely affect its 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, restructuring activities can result in 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 its products and services, and there is no assurance that any ongoing or future restructuring efforts will be successful or generate expected cost savings. Factors that may impede a successful implementation include the retention of key employees, the impact of regulatory matters, and adverse market and macroeconomic conditions. If Ericsson fails to achieve some or all of the expected ben- efits of its restructuring initiatives, the Company’s competitive position, business, financial condition, operating results, cash flows, reputation and share price could all be negatively impacted. 1.5 Ericsson engages in acquisitions and divestments that may be disruptive and require the Company to incur significant expenses, and Ericsson may not be successful in consummating such transac- tions, protecting the value of acquisitions during integration, or creating the value anticipated from the acquisition. In addition to in-house innovation efforts, Ericsson makes acquisitions to obtain various benefits, such as reduced time-to-market, access to technology and competence, increased scale or a broadened product portfolio or customer base. Recent examples are the acquisitions of Vonage and Cradlepoint. Acquisitions could result in the incurrence of material contingent liabilities or an increase in amortization expenses related to intangible assets or impairment of goodwill, which could have a material adverse effect on Ericsson’s business, operating results, finan- cial condition and liquidity. Ericsson has recorded impairment charges related to acquisitions in the past, including a non-cash impairment charge of SEK 31.9 billion in the third quarter of 2023 related to goodwill and other intangible assets attributed to Vonage and may record addi- tional impairment charges in future. Further risks Ericsson could face with respect to acquisitions include: – Inability to consummate acquisitions that it considers important to the future of its business. – Underperformance of the acquired company, failure to realize expected benefits and synergies and/or inability to deliver on antici- pated business plans to the extent or in the timeframe anticipated. – Insufficiencies of technologies and products acquired, including unexpected quality problems. – Difficulties in the full or partial integration of the operations, tech- nologies, products and personnel of the acquired company to mate- rialize expected synergies or to maintain independent operations in these companies at a risk appropriate level. – Risks of entering markets in which the Company has no or limited prior experience, or in creating such market or eco-system as envi- sioned in e.g., the Vonage and Cradlepoint examples. 108 Risk factors Financial report 2023 – Potential loss of key employees. – Diversion of management’s attention away from other business concerns. – Risks and expenses of any disclosed, undisclosed or potential legal liabilities of or other adverse financial impacts on the acquired company, including failure to comply with laws or regulations or other requirements or conditions, e.g., from foreign direct investment reviews and decisions such as the Committee on Foreign Investment in the United States (CFIUS) review process. See Risk Factor 3.3 for further information related to the CFIUS review process. From time to time, Ericsson also divests parts of its business to opti- mize 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-downs. 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. – Impairment losses or write-downs of the carrying value of the rel- evant assets. – Expenses of any undisclosed or potential legal liabilities of the busi- ness divested. The risks associated with acquisitions and divestments could have a material adverse effect upon Ericsson’s business, operating results, financial condition, and liquidity. 1.6 Ericsson has entered into Joint Venture (JV) and partnership arrangements, and in the future may enter into additional JV or partnership arrangements, 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, an inability to take action without the approval of Ericsson’s partners, difficulties in implementing business plans, or the lack of capabilities or financial 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. In addition, any adverse regulatory, governmental or authority decision towards a partner could negatively impact Ericsson or the JV, and Ericsson’s brand or reputation could also be harmed if a partner does not adhere to Ericsson’s Code of Conduct for Business Partners, including compliance rules. Additionally, Ericsson’s share of any losses from or commitments to contribute additional capital or borrowings to such JV and partnership arrangements may adversely affect Ericsson’s business, operating results, financial condition and cash flow. 1.7 Ericsson may not be able to properly respond to market trends in the industries in which it operates, including virtualization of network functions and fluctuations in investments in the telecom- munications industry. Ericsson is affected by market conditions and trends in the industries in which the Company operates, including the convergence of the IT and telecommunications industries. Technological developments largely drive convergences enabling digitalization and a move from dedicated hardware to software and cloud-based services. This also includes a disaggregation 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 affects Ericsson’s objective-setting, risk assessment and strategies. The change makes access to market easier for new competi- tors, including new competitors to Ericsson’s business that have entered and may continue to enter the market, and negatively impacts Ericsson’s market share in selected areas. If Ericsson fails to understand or antici- pate market trends and developments or fails 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. The telecommunications industry has historically experienced down- turns in which operators substantially reduced their capital spending on new equipment. Uncertainty surrounding global economic growth and geopolitical impacts may materially harm actual market conditions, which could have a material adverse effect on Ericsson’s business. Moreover, market conditions are subject to substantial fluctuation and could vary geographically and across technologies. Uncertainties can have an impact on both the CAPEX driven market as well as the OPEX market, e.g., Managed Services. Ericsson’s strategy is based on an expansion towards the Enterprise segment, which is a market that is more affected by the overall economic conditions than the operator mar- kets. 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 may be adversely affected. If capital expenditures by operators and other customers are weaker than anticipated, the Company’s rev- enues, operating results 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 telecom- munication industry, as well as in the ICT industry, accurately forecast- ing revenues, results, and cash flow remains difficult. With 5G volume at scale shifting from early 5G markets into markets with higher volatility and as Ericsson is establishing business relation- ship with new customers, the levels of uncertainty and fluctuation can increase going forward. For example, both sales and profit can be impacted due to a significant variation in underlying market and/or product and services mix. Furthermore, Ericsson might fail to anticipate customer demand properly, leading to an over or under supply of com- ponents, production capacity and deployment capabilities. 1.8 Ericsson faces intense competition from the Company’s exist- ing competitors as well as new entrants, including vendor consolida- tion resulting in stronger competitors. 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. Additionally, Ericsson faces competition from more diverse vendors, many of which are better able to cross-subsidize. Ericsson’s operator customers, which represent the main part of Ericsson’s business, are also large and highly sophisticated and exercise significant buying power through the com- mon use of a competitive bidding process. Ericsson also encounters increased competition from new market entrants and alternative Financial report 2023 Risk factors 109 technologies as industry standards evolve. In addition, if Ericsson chooses to enter a new market segment, it might underestimate the skills and practices of the relevant competitors. The Company’s competi- tors may implement new technologies before Ericsson does, offer more attractively priced or enhanced products, services or solutions, or offer other incentives that Ericsson does not provide. Some of the Company’s competitors may also have greater resources in certain business seg- ments 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 and increased research and devel- opment costs, as well as increased sales and marketing expenses, which could have a material adverse effect on Ericsson’s business, operating results, financial condition and market share. Additionally, Ericsson operates in markets in which the technology and the manner in which it is being brought to market is rapidly chang- ing. This has resulted and may continue to result in continuous price pressure on Ericsson’s products and services, especially in light of global macroeconomic uncertainty. 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. In addition, vendor consolidation may lead to stronger competitors who are able to benefit from integration, scale and greater resources, which could increase competition in Ericsson’s market. Industry convergence and consolidation among equipment and services suppliers could potentially result in stronger competitors that are competing as end-to-end suppliers, as well as competitors more specialized in particular areas, which could, for example, impact certain of Ericsson’s segments such as Cloud Software and Services and Other. If established actors in adjacent markets acquire players with new tech- nologies in Ericsson’s markets, new strong competitors could emerge. Consolidation may also result in competitors with greater resources and market position than Ericsson has. Both of these events could have a materially adverse effect on Ericsson’s business, operating results, financial condition and market share. 1.9 Ericsson relies on a limited number of third-party suppliers, which exposes the Company to supply chain risks. 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, R&D and IT services, and other vital services on competitive terms, including from single-source suppliers in some instances, or in the case of the development and supply of, for example, key ASIC and FPGA compo- nents, printed circuit boards, standard electronics or semiconductors (including foundry node availability) from very few suppliers, on which Ericsson depends. Some of these suppliers have very limited geographi- cal redundancy, making them vulnerable to natural disasters, macro- economic impacts, conflicts or other potentially disruptive events. Due to the current tensions between the US and China as well as China and Taiwan, this risk has increased. In addition, for certain suppliers Ericsson faces risks related to continued supplier concentration. 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. This is particularly critical in connection with large projects like the cur- rent 5G rollout in India. Failure by the Company or any of the Company’s suppliers could delay or interrupt Ericsson’s products or services supply or operations and significantly limit sales or increase Ericsson’s costs, for example through damages. In the event of a supply chain disruption, it may take significant time to find an alternative supplier or redesign products to replace components, 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, experi- enced interruptions of supply, and the Company may experience such interruptions in the future, which could hamper Ericsson’s ability to procure adequate supplies at commercially reasonable prices, or at all. 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 capacity 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 acquiring the needed products. This factor could limit Ericsson’s ability to supply 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 scrapping 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 and financial condition. 1.10 A significant portion of Ericsson’s revenue is currently gener- ated from large, multi-year agreements with a limited number of key customers, and operator consolidation may increase Ericsson’s dependence on key customers and key markets. Ericsson derives most of its business from large, multi-year agreements with a limited number of significant customers, many of whom are concentrated by industry or product. 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 purchase volumes and may include commitments to future price reductions, requiring the Company to constantly manage and control its cost base. However, there can be no assurance that Ericsson’s actions to reduce costs, particularly with increasing inflation and interest rates, 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 and financial condition. In 2023, Ericsson’s largest customer represented approximately 8% of the Company’s net sales, and its ten largest custom- ers accounted for 43% of net sales. 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. This concentration also subjects Ericsson to increased risks regarding the quality of the contractual arrangements it has in place with key customers. 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. If the Company’s customers’ financial conditions deteriorate, Ericsson will be exposed to increased credit and commercial risks. Challenging financial conditions have impacted some of Ericsson’s customers’ ability to pay their invoices, and the Company may encounter difficulty col- lecting accounts receivables and could be exposed to risks associated with uncollectable accounts receivable. Ericsson has also experienced demand 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 110 Risk factors Financial report 2023 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 experience losses in excess of reserves, which could have a material adverse effect on its operating results and financial condition. In addition, during the past decade, communications service providers have undergone significant consolidation, resulting in fewer operators with activities in several countries. This trend is expected to continue due to 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 equipment and fewer associated services may be required. Network investments could be delayed by the consolidation process, which may include, among others, actions relat- ing 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 equipment. Accordingly, operator consolidation may have a material adverse effect on Ericsson’s business, operating results, market share and financial condition. In addition, some of the communications service providers may become more willing to partner with hyperscalers to build and run the telecom’s access networks. Ericsson risks having more complex rela- tions wherein new relationships with its customers or competitors could appear, e.g., Ericsson’s customers could also become its competitors by selling telecommunications cloud solutions to operators, or Ericsson’s competitors could also become its partners when its software would potentially run on their hardware run-time environment. Moreover, com- munications service providers including Ericsson’s key customers may be adversely impacted by new competition, especially in rural mobile broad- band growth affected by the emerging competition from the greenfield satellite broadband sector. Accordingly, Ericsson’s business may experi- ence a material adverse effect, including impacts on Ericsson’s operating sales, operating results, market share and financial condition. 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 or damages. Sales contracts normally include warranty undertakings for faulty products and often include provisions regarding penalties and/or termination 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 busi- nesses. Ericsson’s quality assurance measures may be unable to prevent certain issues related to reliability, product and service quality, security, privacy or service performance, which may negatively affect Ericsson’s reputation, business, operating results 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, security, privacy or quality issues with Ericsson’s products, solutions or services, Ericsson’s operating results, reputation 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, adapting or creating a replacement service, delays in collecting accounts receivable or declining sales to existing and new customers. 1.11 Ericsson may not be successful in maintaining technology leadership, including developing new products and enhancements to existing products. Ericsson depends upon the development of new products and enhance- ments to the Company’s existing products, and the success of Ericsson’s substantial research and development investments is uncertain. Rapid technology and market changes in Ericsson’s industry require the Company to make significant investments in research and develop- ment to be innovative. Ericsson invests significantly in new technology, products and solutions, e.g. related to 5G, machine learning, and AI. To be successful, those technologies, products 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 commercially successful could have adverse effects on Ericsson’s business, operating results and financial condition. If Ericsson invests in the development of technolo- gies, 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 requirements and unforeseen problems. Delays in production and research and development may increase the cost of research and development efforts and put Ericsson at a disadvantage compared to Ericsson’s competitors. These could have a material adverse effect upon the Company’s business, customer relationships, operating results and financial condition. Ericsson may be unable to meet its Cloud Software and Services business objectives, and several risks related to market, technology and operations can impact the plan. 5G market development and subscriber growth, as well as the uptake of cloud native technologies and conse- quent adoption of Ericsson’s new offerings, and automated delivery and life-cycle-management of the products 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 to and adopt new technologies like AI and machine learning to drive more automation in products, solutions and services. The trans- formation to the cloud native solutions that 5G core standards are built on could also include greater complexity and take longer than expected. In addition, the increasing influence of open-source initiatives could drive a best of breed approach in Ericsson’s customers, driving prices down and adversely impact the Company’s full suite of offerings. For managed services, most contracts span more than one year, with a 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. In the operational dimension, Ericsson may be unable to successfully execute on continued end-to-end efficiency measures to simplify the operating model, as well as being unable to mitigate risks in the customer projects, which could have a material adverse effect on Ericsson’s business. Ericsson incorporates Artificial Intelligence (AI) technology in certain of its products and services and in its business operations. The research and development of such technology remains ongoing. AI presents risks, challenges, and unintended consequences that could affect Ericsson’s and its customers’ adoption and use of this technology. AI algorithms and training methodologies may be flawed. Additionally, AI technologies are complex and rapidly evolving, and the Company faces significant competition in the market and from other compa- nies regarding these technologies. Ericsson may be unsuccessful in identifying or resolving AI-related ethical and legal issues before they arise. Regulation of AI technology is nascent and rapidly changing, Financial report 2023 Risk factors 111 complicating both compliance and development efforts. AI-related issues, deficiencies and/or failures could give rise to legal and/or regula- tory action, including with respect to proposed legislation regulating AI in certain jurisdictions, such as the European Union, which evolves from time to time, and as a result of new applications of existing data protec- tion regulation, which could damage Ericsson’s reputation or otherwise materially harm its business. 1.12 Ericsson’s ability to benefit from intellectual property rights (IPRs), 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, infringe- ment claims brought against the Company by competitors and others and changes in the area of open standards when it comes to licensing of open standard essential patents. There can be no assurance that the Company’s patents will not be challenged, invalidated, or circumvented, or that any rights granted in relation to Ericsson’s patents will in fact provide the Company with competitive advantages. Ericsson’s use of 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 IPRs, 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 limited, if any, protection of IPRs. The Company’s solutions may also require it to license technologies from third parties. It may be necessary in the future to seek or renew licenses, and there can be no assurance 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. 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 asser- tions 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 material adverse effect on Ericsson’s business, reputation, operating results and financial condition. Ericsson holds a leading patent portfolio in open standards and possible changes regarding such a portfolio may materi- ally affect Ericsson’s reputation, business, operating results and financial condition. Ericsson’s ability to benefit from IPRs 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 negotiations, particularly in conjunc- tion with technology shifts and the introduction of new standards, such as 5G. Such renewals and negotiations may take time to resolve, sometimes involve litigation and may have material adverse impacts 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 may increase the uncertainty around the direction of the global cellular eco-systems and standards, which could have adverse effects on Ericsson’s IPR licensing revenues as well as on the ability to acquire licenses. 1.13 Ericsson may not be successful in continuing to attract and retain the highly qualified employees necessary 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. Many key aspects of telecommunications and data network technol- Competition for highly qualified people in the industries in which the 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 IPRs also increases, which has been the case with the introduction of 5G technology. In addition to industry-wide stand- ards, 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 Ericsson or against Ericsson’s custom- ers, alleging infringement of their IPRs. Defending such claims may be expensive, time-consuming and divert the efforts of Ericsson’s manage- ment 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 compensa- tion, develop non-infringing products/technology or enter into royalty or licensing agreements. However, the Company cannot be certain that such licenses will be available to the Company on commercially reason- able terms or at all, and such judgments could have a material adverse effect on Ericsson’s business, reputation, operating results and financial Company operates remains intense. This competition is only further increased by the fact that other industries are looking for similar talent. The Company’s ability to succeed depends in part on maintaining a favorable corporate reputation that can be adversely impacted by many factors, including ongoing litigation, investigations, and adverse media reports. 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. 1.14 Unforeseen risks and disruptions, whether due to natural or man-made events, may be highly damaging to the operation of Ericsson’s business. Ericsson’s operations are complex, and several critical operations are centralized in a single location. The Company’s business operations and those of its suppliers and customers are vulnerable to interruption by fire, earthquake, hurricane, flood or other natural disasters, power loss, secu- rity incidents, systems failure, telecommunications failure, pandemics, such as the COVID-19 pandemic, quarantines, national catastrophes, terrorist activities, war and other events beyond the Company’s control. If any disaster were to occur, Ericsson’s or its suppliers’ and customers’ 112 Risk factors Financial report 2023 ability to operate could be seriously impaired, and Ericsson could experience material harm to its business, operating results 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, security incidents, natural disasters, power outages and other events. Ericsson also has a concentration of operations on certain sites, includ- ing R&D, production, manufacturing, workforce concentrated areas, network operation centers, ICT centers and logistic centers and shared services centers, where business interruptions could cause material damage and costs. In addition, these disasters could significantly disrupt Ericsson’s business by, among other things, reducing demand for its products and services, impairing its customers’ ability to purchase or pay for its products or services, delaying or preventing its suppliers from providing the Company with critical components, damaging or destroying inventory, preventing operators from upgrading their wireless networks to meet new technology standards, or preventing a significant number of its employees, including those who perform critical functions, from performing their duties. Interruptions to Ericsson’s systems and communications may have an adverse effect on the Company’s opera- tions and financial condition. Furthermore, employees and sub-contractors may be put at risk in areas where Ericsson operates due to these unforeseen risks and disruptions. Ericsson’s commitment to bring connectivity to the world involves operations in areas of high risk related to local conflicts, war- fare, criminality, authoritarian rule, man-made accidents or naturally caused crises, such as flooding, earthquakes, tsunamis or other natural disasters. Such situations may risk the lives or welfare of employees, subcontractors’ employees, or their families, as well as trigger liabilities under International Humanitarian Law. Ericsson’s internal frameworks, contractual agreements, protective measures, and emergency response plans may not be enough to protect employees or subcontractors’ employees from harm. If Ericsson is found to not have done enough to provide protection or support in such situations, it could have adverse material effects on its business and reputation and can lead to litigation and sanctions. 2 Risks related to Ericsson’s ﬁnancial condition 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 flex- ibility in planning for, or reacting to, changes in Ericsson’s business and industry. As of December 31, 2023, Ericsson’s outstanding debt was SEK 46.9 billion and the Company is rated investment grade by S&P Global (BBB-) and Fitch Ratings (BBB-) and one step below investment grade by Moody’s (Ba1). This degree of debt and the credit ratings could have important adverse 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 indebtedness, thereby reducing Ericsson’s ability to use its cash flow to fund the Company’s operations, capital expenditures and future business opportunities. – Restricting Ericsson from making strategic acquisitions or causing Ericsson 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 Ericsson 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 indebtedness and may be forced to take other actions to satisfy Ericsson’s obligations 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. If Ericsson’s financial performance were to deteriorate significantly, the Company might be unable to main- tain a level of cash flows from operating activities sufficient to permit Ericsson 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 Ericsson 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 mate- rial assets or operations to meet the Company’s debt service and other obligations. Furthermore, 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 on unreasonable terms, Ericsson’s business, financial condition and cash flow may materially suffer. Ericsson’s business requires a signifi- cant 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 financial 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 reasonable terms or at all. If the Company can- not access capital on a commercially viable basis, Ericsson’s business, financial condition and cash flow could materially suffer. Financial report 2023 Risk factors 113 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. Ericsson incurs a significant portion of the Company’s expenses in SEK. As a result of Ericsson’s international operations, Ericsson gener- ates, 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 Impairment of goodwill, other intangible assets, property and equipment (PP&E) and right-of-use (RoU) assets leased by the Company have impacted and may continue to negatively impact Ericsson’s financial condition and operating results. 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 an 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 signifi- cant. 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 Ericsson 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 and financial condition. For example, in the third quarter of 2023, Ericsson recorded a non-cash impairment charge of SEK 31.9 billion related to goodwill and other intangible assets attrib- uted to Vonage due to the significant drop in the market capitalization of Vonage’s publicly traded peers, increased interest rates and overall slowdown in Vonage’s core markets. 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. Other impairment indicators, such as the impact of increased interest rates, inflation, macroeconomic conditions, and other market events can also lead to the recognition of impairment charges. Non-cash impairment charges reduce the Company’s non-restricted equity. The impairment charge referred to above represented 50% of the total amount of goodwill and other intangible assets attributed to Vonage. The impairment was reported in segment Enterprise as an item affecting comparability. Estimates require management judgment as well as the definition of cash-generating 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 risks 3.1 Ericsson could experience penalties and adverse rulings in enforcement or other proceedings, breach of contract claims and/ or loss of revenue for non-compliance with laws, rules and regula- tions governing its business. Compliance with existing or changed laws, rules or regulations may subject Ericsson to increased costs or reduced products and services demand and may adversely affect Ericsson’s development efforts. Ericsson is subject to applicable laws, rules and regulations in multiple jurisdictions. 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 and its customers, including its reputation, business, financial condition, operations, research and development, operating results, cash flows, prospects or its current or future customer relationships, including both private and government customers. While Ericsson strives for compliance, the burden of monitor- ing and maintaining compliance across global operations in a rapidly changing world and evolving industry is significant. 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. Ericsson’s non-compliance with laws, rules and regulations may also affect its customers’ compliance requirements and/or lead to actual or perceived breach of Ericsson’s contractual obligations to its customers resulting in contract claims and loss of revenue. It may also impact Ericsson’s ability to gain new customers. Further changes in laws, rules or regulations could subject Ericsson to liability, increased costs, or reduced products and services demand, market access restrictions, inability to deliver products of certain origin and have a material adverse effect on Ericsson, including its reputation, business, financial condition, operating results, 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 planning 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 commer- cial launch and success of these networks. Similarly, tariff and roaming laws, regulations or rules on network neutrality could also affect com- munications service providers 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 allocation between different types of usage may adversely affect communications service provider spending or force Ericsson to develop new products to be able to compete. Furthermore, the rapid develop- ment and deployment of tools that leverage AI is also causing govern- ments to consider regulation of AI, even for AI that does not pertain to personal data. 114 Risk factors Financial report 2023 Further, Ericsson develops many of its products and services based on existing laws, rules, regulations and technical standards. Changes to existing laws, rules, regulations and technical standards, or the imple- mentation of new laws, rules, regulations, restrictions and technical standards relating to products and services not previously regulated, could adversely affect Ericsson’s development or supply efforts by increasing compliance costs and causing delay or disruptions. Demand for those products and services could also decline. Regulatory changes related to e.g. license fees, environment, health and safety, security, data localization, 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 operations 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 or its products. 3.2 Ericsson’s substantial international operations are subject to uncertainties that could affect the Company, including its reputa- tion, business, financial condition, operating results, 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 global operations subject the Company to additional risks on many fronts, 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 that 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 or introduce requirements for local content in their respective markets at the expense of foreign competitors or introduce other requirements impacting how Ericsson can provide products and services to its cus- tomers. The implementation of such measures could adversely affect Ericsson’s sales, Ericsson’s market share and its ability to purchase or supply critical products or components. Compliance with applicable export control regulations and sanc- tions or other trade embargoes in force is paramount for the Company. The geopolitical situation in parts of the world, particularly in Russia/ Ukraine, parts of the Middle East and China, remains uncertain, and the level of export controls and sanctions is still relatively high from a historical perspective. This level could even increase, thus significantly impacting Ericsson’s operations where such increase occurs, including in these markets. The most recent increase in export controls has par- ticularly targeted China’s ability to develop advanced super computers and artificial intelligence, including the semiconductors needed for those operations. A universal element of the sanctions 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 few 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 agree- ments. 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 governmental poli- cies that could limit Ericsson’s operations and decrease Ericsson’s profit- ability. Furthermore, export control regulations, sanctions 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, an escalation of trade tensions between the US and China has resulted in additional trade restrictions including export controls, and increased tariffs, which if further negatively developed could harm the Company’s ability to compete effectively in Chinese markets or with Chinese com- panies and negatively impact Ericsson’s operations in the country. The need to terminate activities as a result of further trade restrictions may also expose Ericsson to customer claims and other inherent risks. The export control and sanctions 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 regulations 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, operating results, cash flows, or prospects and could constitute a violation of the Plea Agreement (as defined below) or the consent judgment with the US Securities and Exchange Commission (SEC). Ericsson’s business operations are complex, involving the develop- ment, production and delivery of telecommunications solutions to customers in a very large number of jurisdictions. Each jurisdiction has its own tax laws, rules and regulations subject to updates or changes in interpretation or enforcement, 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 in 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 the risk of being taxed for the same income in more than one jurisdiction (double taxation). This could have adverse effects on Ericsson, includ- ing its reputation, business, financial condition, operating results, 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 actual or potential violation of human rights, among others. This may adversely affect the telecommunications busi- ness 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, operating results, cash flows, or prospects. Financial report 2023 Risk factors 115 3.3 Ericsson is subject to certain US and other anti-corruption (including anti-bribery, anti-money-laundering, sanctions, terror finance and anti-terrorism) laws, rules and regulations and other regulatory requirements or conditions imposed as a result of foreign direct investment reviews and decisions. Ericsson may be subject to further adverse consequences under the Plea Agreement with the United States Department of Justice (DOJ) and the injunction issued in connection with the 2019 settlement with the SEC, as well as other investigations by governmental authorities. Ericsson is, from time to time, involved in legal proceedings and regula- tory investigations, and is subject to certain other regulatory require- ments, conditions and agreements. If any of these lawsuits or legal proceedings are determined unfavorably against the Company or it is determined that the Company is not in compliance with any of these regulatory requirements, conditions or agreements, the Company could be required to pay substantial damages, fines and/or penalties, be sub- ject to public scrutiny, negative reputational consequences, or become subject to additional enforcement actions, regulatory review and/or adverse decisions. Ericsson could face potential debarment from gov- ernment contracting in the United States and elsewhere, reputational risk, as well as potential counterparty reluctance to continue business relationships. In addition, these ongoing matters and investigations require significant resources and costs for investigation, compliance and remediation that could lead to adverse financial and reputational consequences. For example, in connection with the acquisition of Vonage by Ericsson, and as a condition to CFIUS’s approval of the acquisition, Vonage, Ericsson and the DOJ and the US Department of the Treasury, in their capacity as CFIUS monitoring agencies (CMAs), entered into a NSA in July 2022, which imposes restrictions on access to certain types of sensitive data, equipment and systems. Vonage and Ericsson are engaged and cooperating with the CMAs in relation to ongoing compli- ance with the NSA restrictions, related remediation efforts to address concerns raised by the CMAs regarding such access, and the CMAs’ requests for information. The ongoing compliance efforts and related remediation may adversely affect the Vonage business, including changes required to business structure and additional compliance costs. In addition, violations of a CFIUS mitigation agreement, such as the NSA, can result in an enforcement action imposing monetary penalties or other remedies. determinations on the outcome of any such investigation until the process is completed. The scope and duration of the remaining process remains uncertain. If Ericsson fails to meet its continuing obligations and is found to have breached the Plea Agreement, the Company could face further adverse consequences, including additional costs and liability result- ing from ongoing compliance liabilities with the Plea Agreement and extended monitorship, including prosecution for additional federal criminal violations, as well as other investigations by governmental authorities. For additional information regarding certain of the legal proceedings and inquiries in which Ericsson is involved, see “Legal proceedings” in the Board of Directors’ Report. 3.4 Ericsson is involved in lawsuits, legal proceedings and regula- tory investigations, which, if determined unfavorably, could require the Company to pay substantial damages, fines and/or penalties. Ericsson is involved in legal proceedings in the ordinary course of its business. These proceedings include matters such as commercial disputes, intellectual property rights disputes, labor disputes and any government or authority inquiry or investigation, e.g., antitrust and tax, disputes. Legal proceedings can be expensive, lengthy and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a par- ticular matter could have a material adverse effect on Ericsson’s busi- ness, operating results, 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 securi- ties laws, stock market regulations or other laws, regulations or require- ments. Whether or not there is merit to such claims, the time and costs incurred to defend the Company and its officers and the potential settle- ment or compensation to the plaintiffs could have significant impact on Ericsson’s reported results and reputation. 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 or other 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 operating results. In addition, as previously reported, the Company reached a resolu- For additional information regarding certain of the legal proceedings tion (Plea Agreement) in March 2023 with the DOJ regarding the non-criminal breaches of its DPA. Under the Plea Agreement, Ericsson pleaded guilty to previously deferred charges relating to conduct prior to 2017. In addition, Ericsson agreed to pay a fine of USD 206.7 million. The entry of the Plea Agreement brought the DPA to an end. As set forth in the Plea Agreement, Ericsson has certain continuing obliga- tions through June 2024, including cooperation, reporting evidence or allegations of potential Foreign Corrupt Practices Act (FCPA) violations, continuing to engage an independent compliance monitor and continu- ing to improve its compliance program and internal controls. The Company’s 2019 internal Iraq investigation did not conclude that Ericsson made or was responsible for any payments to any terrorist organization. With respect to the matters discussed in the 2019 internal Iraq investigation report, the Company continues to investigate these matters and related matters in full cooperation with the DOJ and the SEC. As additional information continues to be identified and evaluated during the ongoing investigation in continued cooperation with the DOJ and the SEC, it is expected that there will not be any conclusive and inquiries in which Ericsson is involved, see “Legal proceedings” in the Board of Directors’ Report. 3.5 Ericsson is subject to a broad range of rapidly evolving privacy, security and data localization regulations, as well as corresponding contractual obligations, and may be subject to regulatory penalties and/or breach of contract claims for failure to comply. Ericsson and certain of its third-party providers receive, store, handle, transmit, use and otherwise process proprietary information belonging to the Company’s business and information about actual and prospec- tive customers, end users, employees and service providers, including personal information (collectively, “Confidential Information”). More stringent privacy, security and data localization regulations are develop- ing at a rapid pace in many countries and markets in which Ericsson operates, including the General Data Protection Regulation (EU/UK), and national privacy regimes in India, China and some states of the United States (such as the California Consumer Privacy Act and similar laws in other states). These regulations require subject entities to, 116 Risk factors Financial report 2023 among other things, notify individuals about how personal information is used and provide individuals certain rights with respect to such infor- mation, including rights to access, correct and delete such information and to opt-out of certain uses and disclosures of such information. In addition, cybersecurity regulatory requirements are evolving, including regulations and laws related to cybersecurity incident notifications, supply chain security, and baseline cybersecurity requirements in the EU, US, UK and India, which may be applicable to Ericsson’s internal opera- tions, portfolio and customers’ operations. Ericsson is also subject to contractual obligations to its customers and third parties relating to privacy, security and use of data generally, which, amongst other things, requires Ericsson to ensure appropriate security and limit the use of customer data, including personal informa- tion. While Ericsson strives to comply with applicable privacy, security and data localization regulations and its contractual obligations, the complexity, uncertainty, pace of implementation of new laws, chal- lenges in applying the concepts to new technologies and contradictions in local and regional privacy, security and data localization regulations may mean that Ericsson is found to be non-compliant with these requirements or its contractual obligations, and subject to penalties and breach of contract claims, along with potential damage to Ericsson’s brand and reputation. Ericsson continues to periodically review its privacy and cybersecurity compliance across its global operations to comply with these varied global and ever-changing requirements, which does and will continue to require significant investments and resources. For example, as part of this review cycle, Ericsson is reviewing data management in connection with its customer support function and is in the process of identifying and implementing certain changes, for exam- ple, changes to data access and amendments to customer contracts and policies and procedures. Due to the diverse nature worldwide of privacy, security and data localization regulations, any single incidence of non- compliance, or serious breach of confidentiality or disruption of secure operations, by Ericsson may lead to regulatory agencies in various juris- dictions levelling separate penalties or judgments against Ericsson. Due to the nature of Ericsson’s business, which often involves telecommuni- cations and critical infrastructure, and the amount of personal informa- tion of which Ericsson is the controller or processor, such an event could have far-ranging consequences, such as orders to change its operations or cease processing personal information, even if it was accidental or caused by a third party outside of the control of Ericsson. Consequences could include large fines, as well as significant damage claims and the loss of trust of customers, end users and employees, which may have material adverse effects on Ericsson’s business, reputation, financial condition and operating results and may require it to change its business practices and potentially the services, features, integrations and other capabilities of its offerings. 3.6 Ericsson may be found non-compliant with existing, new and emerging human rights and environmental due diligence regulations and may be subject to administrative penalties and/or civil liability. The regulatory landscape addressing corporate conduct in relation to human rights and environmental impacts is rapidly evolving. New legis- lation, imposing more stringent due diligence requirements (for example the US Uyghur Forced Labor Prevention Act (UFLPA), the Norwegian Transparency Act, the UK Modern Slavery Act, France’s Duty of Vigilance Law, the German Supply Chain Due Diligence Law), has already entered into force and requires Ericsson to assess risks from a full supply chain perspective, beyond first-tier suppliers. Additionally, emerging legislation from the European Union (the Corporate Sustainability Due Diligence Directive and the Forced Labor Ban Regulation) will put additional significant requirements on Ericsson to adopt and refine additional mechanisms to identify, address, prevent and mitigate certain human rights and environmental risks in its operations and business relationships and on Ericsson’s Board of Directors to oversee these matters. Because of this existing and future regulation, Ericsson may be expected to engage in increasingly more detailed due diligence with respect to its third parties, such as customers, suppliers and employees, some of which may not have the controls and data necessary to assist Ericsson with its compliance. Due to the global reach of these legisla- tions, impacts in any country of operation or where Ericsson engages with suppliers, customers or other third parties may lead to non-com- pliance and thereby potential administrative penalties or civil or other liability or reputational harm. Moreover, the UFLPA and the upcoming EU Forced Labor Ban Regulation, enable customs authorities to seize and destroy shipments that include components produced with forced labor, unless the company in question provides credible evidence of full supply chain due diligence efforts that prove the absence of forced labor. Such actions by law enforcement would have significant financial and reputational impacts on Ericsson’s operations and business relation- ships. In order to comply with the relevant legislation, Ericsson needs to endeavor to increase supply chain transparency and knowledge of supplier base and material content. Ericsson might also need to shift its supply chains from high-risk countries, which could have adverse financial implications, including increasing the total costs associated with its businesses. 4 Cybersecurity risks 4.1 Vulnerabilities (and threat actors exploiting vulnerabilities), including in Ericsson’s products, services and operations may lead to compromise of identities, target of work force, misuse of accounts, network disruption, cybersecurity incidents, and material harm to Ericsson or Ericsson’s customers, any of which may have a material adverse effect on Ericsson’s business, operations, financial perfor- mance, customer and vendor relationships, reputation and brand, and may lead to significant penalties or litigation, or to regulatory investigations or actions. Ericsson relies on computer systems, hardware, software, technology infrastructure and networks for both internal and external operations that are critical to its business (collectively, “IT Systems”). Ericsson develops, owns and manages some of these IT Systems but also relies on third parties for a range of IT Systems and related products and services, including but not limited to cloud computing services. Ericsson faces numerous and evolving cybersecurity risks, including from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and hacktivists, as well as through diverse attack vectors, such as social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error, and as a result of bugs, misconfigurations or exploited vulnerabilities in software or hardware. Cyberattacks and security incidents are expected to accelerate in both frequency and impact as attacks are increasingly sophisticated and utilize tools and techniques that are designed to circumvent controls, Financial report 2023 Risk factors 117 avoid detection, and remove or obfuscate forensic evidence, which means that Ericsson may be unable to detect, investigate, contain or recover from future attacks or incidents in a timely or effective manner. For example, the presence of vulnerabilities in Ericsson’s products, services or operations, may not be detected during product develop- ment 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 or “zero-day” vulnerabilities. As almost any modern software can contain open source and third-party components, so does software in networks, and unmitigated security exposures can put Ericsson cus- tomers at varying levels of risk and expose Ericsson to liabilities or loss of business. Moreover, threat actors exploiting vulnerabilities in Ericsson’s IT Systems, processes or personnel due to insufficient implementa- tion of controls, such as lack of access management or use of more sophisticated attack techniques could result in security incidents that may impact the confidentiality, availability or integrity of Ericsson’s IT Systems, Confidential Information, personnel, products, services, or solutions. These incidents may include data breaches, intrusions, espio- nage, disruptive attacks utilizing malware (such as ransomware or other extortion-based tactics), exploitation of hardware or software vulner- abilities, bugs, hardware or software misconfigurations in Ericsson’s IT Systems, data privacy infringements, leakage of Confidential Information, unauthorized or accidental usage or modification of data or accounts and general malfeasance. For example, in 2023, an anonymous individual or group of individuals obtained and exploited unlawful access to a system Ericsson uses to interface externally with its customers to remove a small number of non-sensitive materials from that system. While Ericsson did not experience significant financial loss, data theft, encryption or any significant disruptions to normal business operations, by reason of the incident, Ericsson further fortified security measures in the impacted system in response to the intrusion. Ericsson utilizes third parties to a large extent to whom the Company has outsourced significant aspects of Ericsson’s IT Systems, product development, services, finance and other internal and external-facing operations. Events or incidents caused as a result of vulnerabilities in their operations or products could have a material adverse effect on Ericsson, Ericsson’s business, potentially disrupting operations, leaking valuable or sensitive information, personal data or damaging Ericsson’s products that have been installed in the Company’s custom- ers’ networks. Furthermore, Ericsson has acquired and continues to acquire companies that may have cybersecurity vulnerabilities and/or unsophisticated security measures, which may expose the Company to significant cybersecurity, operational, and financial risks. 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 uninten- tional inclusion of vulnerabilities in components or software, and cyber- security incidents which prevent a supplier from being able to fulfil com- mitments to Ericsson. In the past few years, widely publicized incidents involving third parties such as SolarWinds and Apache’s Log4j software are examples of situations in which cyberattacks on supply chain players affected companies that utilized their products and services. Any cybersecurity incident including unintended use, misconfigura- tion, or unintended actions, involving Ericsson’s operations, supply chain, product development, services, third-party providers or installed product base, could cause severe harm to Ericsson. For example, a misconfiguration incident in 2023 led to a data breach that Ericsson reported to certain EU data protection authorities as well as certain customers and employees. Ericsson’s IT Systems and storage and other business applications, and the systems, storage and other business applications maintained by the Company’s third-party providers, have been in the past, and are expected to be in the future, subject to cybersecurity incidents. Ericsson expects continued attempts to gain unauthorized access to breach Ericsson’s IT Systems and/or Confidential Information, and other forms of malfeasance and disruptive attacks. In some cases, such incidents are difficult to anticipate or to detect immediately and the damage caused thereby. Ericsson also cannot guarantee that a material incident will not occur in the future. If an actual or perceived breach of security occurs in Ericsson’s net- work 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 security incidents. Ericsson cannot guarantee that the Company’s cybersecurity program and processes will be fully implemented, complied with or effective in protecting Ericsson’s IT Systems and Confidential Information. Any insurance that Ericsson carries may be partially or wholly insufficient to cover losses or costs associated with responding to and remediating any or all cybersecurity incidents that the Company may experience. In addition, insiders may steal or monitor Confidential Information or disrupt networks related to Ericsson or its customers, through techno- logical or non-technological means. To gain strategic access or to steal specific information, competitors or governments may induce insiders or recruit employees who sell information or services for personal gain. Any insider incident could cause severe harm to Ericsson. If identities in Ericsson are misused or compromised, it can be difficult to differentiate authorized parties undertaking normal account activi- ties 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 customers’ networks, and any limitation of this capability would adversely impact Ericsson’s ability to offer services and products to Ericsson’s customers. Furthermore, 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. Additionally, remote and hybrid working arrangements at Ericsson (and at many third-party providers) also increase this risk due to the challenges associated with managing 118 Risk factors Financial report 2023 remote computing assets and security vulnerabilities that are present in many non-corporate and home networks. The forgoing risks are increasing and rapidly evolving, and any of the above could result in a material adverse effect on Ericsson’s business, operations, financial performance, customer and vendor relationships, reputation and brand and result in financial penalties, litigation, regula- tory investigations and other governmental actions. 5 Environmental, social and business conduct risks 5.1 Failure to comply with environmental, social and business conduct regulations and laws in applicable jurisdictions may expose Ericsson to significant penalties and other sanctions or liabilities. Ericsson is subject to environmental, social and business conduct laws, rules and regulations as well as related requirements, which apply to Ericsson’s operations, facilities, products and services. Ericsson expects these laws, rules and regulations and the burdens associated with com- plying with them to increase as governments impose new laws, rules, regulations and other requirements. Ericsson’s measures for managing compliance with these laws, rules, regulations and other requirements may not be effective at avoiding potential liabilities arising from Ericsson’s current, historical and future processes and operations. Ericsson has failed to comply with these laws, rules, regulations and other requirements in the past, and if it fails to comply in future, the Company could be subject to significant penalties and other sanctions or liabilities that could have a material adverse effect on Ericsson. The Company’s suppliers’ adherence to Ericsson’s Code of Conduct for Business Partners and laws related to environmental, social and busi- ness conduct is also subject to risk. If suppliers do not adhere to the Code of Conduct for Business Partners and laws related to environmental, social and business conduct, this could also have a material adverse effect on Ericsson. 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 appli- cable laws and regulations or to undertake any necessary remediation. Future regulations or judgments could have a significant adverse effect on Ericsson. These changing rules, regulations, and stakeholder expec- tations have resulted in, and are likely to result in, increased general and administrative expenses and increased management time and atten- tion. For example, developing and acting on environmental, social and business conduct initiatives, and collecting, measuring, and reporting environmental, social and business conduct information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards. Failure to manage the foregoing risks could have an adverse impact on Ericsson’s business, operating results, financial condition, reputation and brand. There is also an increased demand from external stakeholders, for example non-governmental organizations and investors, on transpar- ency about environmental, social and business conduct issues that might be difficult to fulfil, including expectations that the Company make commitments. If Ericsson fails to adequately meet these expecta- tions or timely meet any related goals or commitments, its business and reputation may be adversely affected. In addition, the Company’s disclosures regarding such matters may make the Company the target of activists, regulators and others who want the Company to take dif- ferent approaches on such matters or provide additional disclosures or commitments, and such engagement could result in increased costs or reputational damage. Certain of Ericsson’s disclosures and com- mitments regarding such matters may be based in part or in whole on third-party information or third-party performance, and Ericsson cannot assure the quality of third-party information nor assure third-party performance. To the extent that Ericsson’s required and voluntary disclo- sures about sustainability matters increase, Ericsson could be criticized for the accuracy, adequacy, or completeness of such disclosures. Climate change and the potential environmental impact resulting therefrom may also result in new environmental, health and safety laws, rules and regulations that may affect the Company, its suppliers, and its customers. Such laws, rules or regulations could cause Ericsson to incur additional direct costs for compliance, including costs associated with changes to manufacturing processes, or costs associated with the procurement of raw materials and components used in Ericsson’s products, as well as increased indirect costs resulting from its customers, suppliers or both incurring additional costs that are passed on to us. These costs may adversely impact the Company, including its reputa- tion, business, financial condition, operating results, cash flows, or pros- pects. 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 the Company’s manufacturing facilities or its suppliers’ facilities, cause disruptions in its upstream and downstream logistic flows, and conse- quently increase operating costs and/or cause business interruptions. It is difficult to reasonably estimate the future impact of environmental matters, such as climate change and extreme weather events, including potential liabilities. 5.2 Potential health risks related to radiofrequency electro-mag- netic fields may subject Ericsson 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 Ericsson through a reduction in sales or through liability claims. Although Ericsson’s products are designed to comply with currently applicable safety standards and regu- lations regarding radio frequency electromagnetic fields, the Company cannot guarantee that Ericsson will not become the subject of product liability claims. Ericsson also cannot guarantee that the Company will not be held liable for such claims or be required to comply with future changed regulatory requirements. Ericsson may, in addition, be affected by regulatory or other restrictions imposed on the Company’s custom- ers use of radio equipment that may have a material adverse effect on Ericsson’s business, operating results, financial condition, reputation and brand. Financial report 2023 Risk factors 119 5.3 Regulations related to “conflict minerals” may cause Ericsson to incur additional expenses and may make Ericsson’s supply chain demands more complex. In 2012, the SEC adopted a rule requiring disclosures of specified minerals (“conflict minerals”) that are necessary to the functionality or production of products manufactured 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 par- ties. Ericsson may incur material costs to comply with the disclosure requirements and underlying due diligence. These requirements could adversely affect the sourcing, availability and pricing of minerals used in the manufacture of certain of Ericsson’s products, which may have a material adverse effect on its business. In addition, since Ericsson’s supply chain is complex, the Company may not be able to sufficiently verify the origins for these minerals contained in its products through the due diligence procedures that Ericsson implements, which may harm its reputation and its business. Ericsson may also encounter challenges if customers request that all Ericsson’s product components be certified as “conflict-free”. Ericsson acknowledges that similar challenges exist for other mineral and metals, outside the scope of the SEC disclosure rule. In addition, in March 2023, the European Commission announced a proposed Critical Raw Materials Act, which would seek to improve the EU’s access to a secure and sustainable supply of certain raw materials that are to be designated strategic or critical. The European Parliament and European Council reached a political agreement on the Critical Raw Materials Act in November 2023, and it is anticipated that the Critical Raw Materials Act will enter into force in early 2024. The legislative initiatives under the Critical Raw Materials Act may impact Ericsson’s current supply chains in relation to the sourcing of certain materials, and such impact may therefore have an adverse effect on its business. 120 Auditor’s report Financial report 2023 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, 2023–December 31, 2023. The annual accounts and consolidated accounts of the company are included on pages 16–119 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 December 31, 2023 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The con- solidated 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 December 31, 2023 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 consistent 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 com- pany 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 accord- ance 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 par- ent 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 c ompany 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 primarily from sales of hardware, software, and services to its customers. The majority of these revenues are related to large multi-year framework agreements with customers which often include discounts and incentives arrangements. The customers associated with those issue purchase orders under these framework agreements that in combination constitute a contract and commitment to purchases of products and services over the duration of the agreement with the customer. These large contracts may give rise to a risk of mate- rial misstatement due to incorrect identification of performance obliga- tions and timing of revenue recognition for the respective obligation, 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 contract are distinct and accordingly identified as performance obligations. The amount and timing of revenue recognized is determined in relation to the individual performance obligations of the contract. Transaction prices includ- ing variable 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 performance obligation by reference to their standalone selling prices. We identified revenue recognition from large contracts with custom- ers as a key 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. Our audit procedures related to the amount and timing of revenue recognized in relation to significant contracts included, but were not limited to the following: – We tested the effectiveness of the Company’s controls over revenue recognition with particular focus on the controls related to the identification of performance obligations within large contracts with customers and determination of the timing of recognition for each revenue obligation. – We tested a sample of large contracts with customers to assess man- agement’s judgments and estimates related to the identification of performance obligations and determination of the timing of recogni- tion 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 contract terms such as, delivery terms, transaction prices including variable considerations, discounts and incentive agreements. – We tested a sample of ongoing negotiations with existing customers and analysed reversals of revenue subsequent to year end for indica- tors of unrecorded discounts and concessions during the period. Financial report 2023 Auditor’s report 121 Valuation of Goodwill related to Vonage, Cradlepoint, and Cloud Software and Services Goodwill is a significant asset in the consolidated balance sheet and 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. The Company’s assessment of the recoverable amount is based on discounted future cash flow models derived from internal business plans covering five years followed by a terminal value or with a declining growth period before terminal value. The assessment requires management to make significant estimates and assumptions regarding forecasts of future sales growth, operating income, working capital and capital expenditure requirements, as well as assumptions on discount rates. In Q3 2023 Ericsson recorded an impairment charge of SEK 31.9 billion attributed to the cash generating unit Vonage mainly due to macroeconomic headwinds, including rising interest rates and changing demand trend. We identified valuation of the Vonage, Cradlepoint, and Cloud Software and Services goodwill as a key audit matter due to the significant judgments and estimates used in determining the forecasts of future sales growth, operating income, working capital and capital expenditure requirements, as well as assumptions on discount and terminal growth rates. Changes in these assumptions could have a significant impact on either the recoverable amount, the amount of any impairment charge, or both. The assessment of management’s assump- tions regarding recoverable amount requires a high degree of auditor judgment, including an increased extent of complexity and the need to involve our valuation specialists. Our audit procedures related to the assumptions regarding recover- able amount included, but were not limited to the following: – We tested the effectiveness of the Company’s controls over good- will impairment evaluation and determination of the recoverable amount with particular focus on the controls over management’s preparation and review of assumptions for future sales growth, operating income, working capital, capital expenditure requirements and method for determining the discount rate used. – We evaluated management’s ability to accurately forecast future sales growth, operating income working capital and capital expendi- ture requirements 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 valuation specialists, we evaluated the discount 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 dis- count rates selected by management. – With the assistance of our valuation specialists, we further evaluated the company’s sensitivity analysis by comparing to our own sensitiv- ity analysis to corroborate the disclosures around assumptions that are most sensitive to a reasonably possible change that could cause the carrying amount to exceed its recoverable amount for a cash generating unit. 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 1–15 and 124–139 in the Financial report, 1–11 in the Remuneration report, 1–49 and 51–52 in the Sustainability and corporate responsibility report. The Board of Directors and the Managing Director are responsi- ble 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 consoli- dated 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 accord- ance 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 preparation 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 company’s financial reporting process. 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 misstatement, 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 reasonably 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 judgment 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 opinions. The risk of not detecting a material mis- statement 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. 122 Auditor’s report Financial report 2023 – Obtain an understanding of the company’s internal control relevant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opin- ion on the effectiveness of the company’s internal control. – Evaluate the appropriateness of accounting policies used and the reasonableness 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 preparing the annual accounts and consolidated accounts. We also draw a conclusion, 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 inadequate, 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 disclo- sures, 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 direction, 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 signifi- cant audit findings during our audit, including any significant deficien- cies 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 inde- pendence, and to communicate with them all relationships and other matters that may reasonably 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 precludes 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) for the financial year January 1, 2023 – December 31, 2023 and the proposed appropriations 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 inde- pendent of the parent company and the group in accordance with pro- fessional 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. Responsibilities of the Board of Directors and the Managing Director The Board of Directors is responsible for the proposal for appropria- tions of the company’s profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable consider- ing 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 requirements, 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 accounting, management of assets and the company’s financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administra- tion 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 manage- ment of assets in a reassuring manner. 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 guar- antee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appro- priations 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 standards 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 Financial report 2023 Auditor’s report 123 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 circumstances 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 support- ing 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 consoli- dated 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 January 1, 2023–December 31, 2023. Our examination and our opinion relate only to the statutory requirements. In our opinion, the Esef report has been prepared in a format that, in all material respects, enables uniform electronic reporting. Basis for opinion We have performed the examination in accordance with FAR’s recom- mendation RevR 18 Examination of the Esef report. Our responsibility under this recommendation is described in more detail in the Auditors’ responsibility section. We are independent of Telefonaktiebolaget LM Ericsson (publ) in accordance with professional ethics for account- ants 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 Bord 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. 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 reasonable 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 firm applies International Standard on Quality Management 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compli- ance with ethical requirements, professional standards and applicable legal and regulatory requirements. The examination involves obtaining evidence, through various pro- cedures, 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 assessment of the risks of material misstatement in the report, whether due to fraud or error. In carrying out this risk assess- ment, 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 validation that the Esef report has been prepared in a valid XHMTL format and a reconciliation of the Esef report with the audited annual accounts and consolidated accounts. Furthermore, the procedures also include an assessment of whether the consolidated statement of financial performance, financial position, changes in equity, cash flow and disclosures in the Esef report have been marked with iXBRL in accordance with what follows from the Esef regulation. Deloitte AB, was appointed auditor of Telefonaktiebolaget LM Ericsson (publ) by the general meeting of the shareholders on the 2023-03-29 and has been the company’s auditor since 2020-03-31. Stockholm March 5, 2024 Deloitte AB Thomas Strömberg Authorized public accountant 124 Auditor’s report Financial report 2023 Forward-looking statements This Annual Report includes forward-looking statements, including statements reflecting the Company’s current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, includ- ing, in particular the following: – Potential material additional costs and liability resulting from our ongoing future compliance with the terms of the Plea Agreement with the DOJ and extended monitorship – Potential to become a target for public scrutiny as a result of enter- ing into the Plea Agreement with the DOJ, which could damage our reputation and materially and adversely affect our business and prospects – Risks resulting from entering into the Plea Agreement, including potential debarment from government contracting in the United States and elsewhere, reputational risk, as well as potential counter- party reluctance to continue business relationships – Potential material additional liability resulting from past conduct, including allegations of past conduct that remains unresolved or unknown in multiple jurisdictions including Iraq, which remains the subject of ongoing investigations by Ericsson and US governmental authorities – Risks related to internal controls and governance, including the potential to incur material liability in connection with internal con- trols surrounding payments made to third parties in connection with past conduct in multiple jurisdictions, including Iraq which remains the subject of ongoing investigations by Ericsson and US govern- mental authorities – The risk that the ongoing investigations by Ericsson and US governmental authorities result in a conclusion by Ericsson or US governmental authorities that the Company’s past conduct included making or having responsibility for making payments to a terrorist organization or other improper payments, which could lead to mate- rial additional liability – Risks related to our ongoing compliance with obligations under the National Security Agreement entered into in connection with Ericsson’s acquisition of Vonage, which may adversely affect the Vonage business and subject the Company to additional liabilities – Our goals, strategies, planning assumptions and operational or financial performance expectations – Macroeconomic conditions, including inflationary pressures and effects on customer investments, market recovery and growth – Ongoing geopolitical and trade uncertainty, including challenging global economic conditions, market trends and pandemics such as COVID-19 – Risks related to cybersecurity and privacy – Industry trends, future characteristics and development of the markets in which we operate – Our ability to comply with legal and regulatory requirements internationally – Our future liquidity, capital resources, capital expenditures, cost savings and profitability – The expected demand for our existing and new products and ser- vices as well as plans to launch new products and services, including research and development expenditures – Our ability to deliver on future plans and achieve future growth – The expected operational or financial performance of strategic coop- eration activities and joint ventures – Risks related to acquisitions and divestments, including our ability to successfully consummate such transactions, protect the value of acquisitions during integration, or achieve the value anticipated with an acquisition – Trends related to our industry, including our regulatory environment, competition and customer structure – Other factors included in our filings with the U.S. Securities and Exchange Commission (the “SEC”), including the factors described throughout this report, included in the section Risk Factors, as updated by subsequent reports filed with the SEC. 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 the Company’s strategy, future financial performance, expectations, projections or other characteri- zations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements are based on management’s expectations as of the date of this report, unless an earlier date is specified, including expectations based on third-party information and projections that management believes to be reputable. 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 and adversely 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 throughout this Annual Report, including in the section Risk factors. These forward- looking statements also represent our estimates, assumptions and expec- tations only as of the date that they were made, and to the extent they represent third-party data, we have not undertaken to independently verify such third-party data and do not intend to do so. Financial report 2023 Forward-looking statements 125 Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Annual Report and in other documents we file from time to time with our regulators that disclose risks and uncertainties that may affect our business. Unless specifically indicated otherwise, the forward-looking statements in this Annual Report do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed as of the date of this report. 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. This Annual Report includes websites or references to additional company reports. These are intended to provide inactive, textual references only. The information on websites and contained in those reports is not part of this report and not incorporated by reference in this report. This Annual Report contains statements based on hypothetical scenarios and assumptions as well as estimates that are subject to a high level of uncertainty, and these statements should not necessarily be viewed as being representative of current or actual risk or performance, or forecasts of expected risk or performance. In addition, historical, current, and forward-looking environmental and social-related statements may be based on standards for measuring progress that are still developing and on internal controls and processes that continue to evolve. While certain matters discussed in this Annual Report may be significant, any signifi- cance should not be taken, or otherwise assumed, as necessarily rising to the level of materiality used for purposes of complying with Ericsson’s public company reporting obligations pursuant to the U.S. federal securi- ties laws and regulations, even if the report uses the words “material” or “materiality.” 126 Five-year summary – Financial information Financial report 2023 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 Operating expenses EBIT Net income (loss) Cash ﬂow from operating activities Year-end position, SEK million Total assets Property, plant and equipment Stockholders’ equity Non-controlling interests Per share indicators Earnings (loss) per share, basic, SEK Earnings (loss) per share, diluted, SEK Dividends per share, SEK 1) Dividends per share, USD 1) 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 as percentage of net sales Inventory turnover days Alternative Performance Measures (APMs) 2) Sales growth adjusted for comparable units and currency Gross margin Gross margin excluding restructuring charges EBIT margin EBIT margin excluding restructuring charges EBIT margin excluding restructuring charges and goodwill impairment EBITA margin EBITA margin excluding restructuring charges Restructuring charges, SEK million Free cash ﬂow before M&A, SEK million Free cash ﬂow after M&A, SEK million Free cash ﬂow before M&A as percentage of net sales Capital employed, SEK million Return on equity Return on capital employed Equity ratio Capital turnover Adjusted working capital, SEK million Gross cash, SEK million Net cash, SEK million Statistical data, year-end Number of employees of which in Sweden Export sales from Sweden, SEK million 2023 Change 2022 2021 2020 2019 263,351 –90,187 –20,326 –26,104 7,177 297,036 12,195 98,673 –1,265 –7.94 –7.94 2.70 0.25 3,330 3,330 3,337 –3% 9% –175% –237% –77% –15% –14% –27% –16% –241% –241% 0% 0% 0% 0% 0% 271,546 –83,030 27,020 19,112 30,863 349,537 14,236 134,814 –1,510 5.62 5.62 2.70 0.25 3,330 3,330 3,334 232,314 –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 3,332 232,390 –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 3,297 –26% 4,477 3,663 4,493 4,934 2,924 36,374 50,664 19.2% 92 –10% 38.6% 39.6% –7.7% –5.2% 6.9% 5.7% 8.1% 6,521 –1,084 –3,224 –0.4% 177,965 –22.7% –10.7% 32.8% 1.4 45,479 54,705 7,832 99,952 13,977 125,242 12% –96% 900% 7% –1% – – – – – – – – – –105% –89% – –12% – – – 0% 25% –3% –66% –5% –3% –19% 4,388 66,178 3,638 47,298 17.4% 93 3% 41.7% 41.8% 10.0% 10.1% 10.1% 10.7% 10.9% 399 22,196 –29,492 8.2% 202,899 15.4% 14.0% 38.1% 1.4 36,653 56,249 23,319 105,529 14,481 153,833 3,872 1,723 2,820 42,074 18.1% 88 4% 43.4% 43.5% 13.7% 13.9% 14.0% 14.3% 14.6% 549 32,056 32,115 13.8% 184,283 23.2% 18.4% 35.0% 1.3 59,667 97,608 65,777 101,322 14,183 140,898 4,114 11,817 2,126 39,714 17.1% 78 5% 40.3% 40.6% 12.0% 12.5% 12.5% 12.5% 13.1% 1,306 22,261 12,663 9.6% 161,990 20.7% 17.0% 31.4% 1.4 45,613 72,045 41,885 100,824 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% 5.0% 5.1% 5.5% 798 7,633 6,128 3.4% 165,273 2.6% 6.7% 29.6% 1.4 48,821 72,192 34,496 99,417 12,730 120,822 1) For 2023, as proposed by the Board of Directors. 2) A reconciliation to the most directly reconcilable line items in the ﬁnancial statements for 2023 and four comparison years is available on pages 128–132. Financial report 2023 Five-year summary – Non-ﬁnancial information 127 Five-year summary – Non-ﬁnancial information For additional information and definitions, see the Consolidated sustainability notes, found on pages 10–49 of the Sustainability and Corporate Responsibility report 1). Five-year summary 2) Employees Employee headcount at year-end Average number of employees Employees who have left the Company Employees who have joined the Company Employees by age group Under 25 25–35 36–45 46–55 Over 55 Share of women All employees Line managers Executive population Executive Team Board of Directors Occupational health and safety Fatalities – Employees Fatalities – Suppliers, subcontractors and third parties Lost workday incidents – Employees Lost workday incidents – Suppliers and subcontractors and third parties Facility energy consumption Energy consumption in own operations (GWh) Share of renewable energy in own operations Energy intensity (GWh/net sales SEK billion) Waste, product take-back and water Waste generated in own operations (metric tons)3) of which recycled Product take-back (metric tons) of which recycled or re-used Water consumption (Mm3) Green House Gas Emissions (kiloton CO2e) Direct emissions – Scope 1 Indirect emissions – Scope 2 (market based) Other indirect emissions – Scope 33) 4) Emissions intensity (kiloton CO2e / net sales SEK million) Scope 1 Scope 2 (market based) 2023 Change 2022 2021 2020 2019 99,952 101,644 13,362 7,785 –5% 0% –7% –55% 105,529 101,741 14,381 17,235 101,322 100,757 11,631 12,129 100,824 98,589 7,839 9,246 99,417 94,503 11,078 15,136 3% 29% 35% 23% 10% 26% 23% 31% 25% 38% 1 9 53 44 690 70% 2.6 7,182 48% 3,869 94% 0.9 27 42 37,182 0.10 0.16 – – – – – – – – – – – 13% –45% 26% 0% – 0% –12% – –20% – –14% –30% –7% 21% –29% –6% 4% 30% 34% 23% 10% 26% 22% 35% 19% 36% 0 8 96 35 693 67% 2.6 8,130 47% 4,825 97% 1.1 38 45 30,844 0.14 0.17 3% 31% 34% 23% 9% 25% 21% 36% 20% 23% 1 13 77 68 631 62% 2.7 6,777 67% 5,389 96% 1.2 38 58 28,023 0.16 0.25 3% 33% 34% 22% 8% 25% 21% 32% 20% 23% 0 7 90 53 628 62% 2.7 6,916 49% 6,079 95% 1.5 40 74 30,035 0.17 0.32 3% 35% 32% 22% 8% 25% 20% 32% 20% 23% 0 11 180 87 664 50% 2.9 11,013 44% – – 1.5 49 124 – 0.22 0.55 1) The Sustainability and Corporate Responsibility report is not to be considered incorporated by reference due to being referenced here. 2) Ericsson continuously develops its methodologies for measuring and reporting environment, social and governance (ESG) performance data. As methodologies evolve it is not always possible to re-calculate performance data for previous periods. Where this is the case this is indicated with a “-” in the table below. 3) Scope and/or measurement methodologies have been updated in 2023 wherefore data for previous periods have been restated. See note O3 in the Sustainability and Corporate Responsibility Report for more information. 4 ) See note E1 in the Sustainability and Corporate Responsibility report for more information on the Scope 3 categories included and Ericsson’s GHG accounting methodologies. 128 Alternative performance measures Financial report 2023 Alternative performance measures 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. The Company decided to include EBIT and EBIT margin excluding restructuring charges and goodwill impairment to better explain the financial performance. Free cash flow before M&A as percentage of net sales (%) is added since it is used by the Company as one of the long- term targets. Adjusted earnings per share is removed as an APM since it is no longer used by the Company. The APMs presented in this report may differ from similarly titled measures used by other companies. Adjusted working capital SEK million Current assets Current non-interest-bearing provisions and liabilities Provisions, current Contract liabilities Trade payables Current tax liabilities 1) Other current liabilities 1) Adjusted working capital 2023 154,988 –6,779 –34,416 –27,768 –3,561 –36,985 45,479 2022 173,803 –7,629 –42,251 –38,437 –2,640 –46,193 36,653 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 1) 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 2019 the current tax liabilities is included in other cur- rent 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. Capital employed SEK million Total assets Non-interest-bearing provisions and liabilities Provisions, non-current Deferred tax liabilities Other non-current liabilities Provisions, current Contract liabilities Trade payables Current tax liabilities 1) Other current liabilities 1) Capital employed 2023 297,036 4,927 3,880 755 6,779 34,416 27,768 3,561 36,985 177,965 2022 349,537 3,959 4,784 745 7,629 42,251 38,437 2,640 46,193 202,899 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 1) 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 2019 the current tax liabilities is included in other cur- rent liabilities. Deﬁnition Total assets less non-interest-bearing provisions and liabilities (which includes non-current provisions, deferred tax liabilities, contract liabilities, other non-current liabilities, current provisions, trade payables, current tax liabilities and other current 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. Financial report 2023 Alternative performance measures 129 Capital turnover SEK million Net sales Average capital employed Capital employed at beginning of period Capital employed at end of period Average capital employed Capital turnover (times) 2023 263,351 202,899 177,965 190,432 1.4 2022 271,546 184,283 202,899 193,591 1.4 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 Deﬁnition Net sales divided by average capital employed (based on the amounts at January 1 and December 31). Reason to use Capital turnover indicates how effectively investment capital is used to generate revenues. EBIT and EBIT margin / EBIT and EBIT margin excluding restructuring charges / EBIT and EBIT margin excluding restructuring charges and goodwill impairment SEK million EBIT (loss) Net sales EBIT margin (%) Restructuring charges EBIT (loss) excluding restructuring charges EBIT margin excluding restructuring charges (%) Impairment of goodwill EBIT excluding restructuring charges and goodwill impairment EBIT margin excl. restructuring charges and goodwill impairment (%) 2023 –20,326 263,351 –7.7% 6,521 –13,805 –5.2% 31,897 18,092 6.9% 2022 27,020 271,546 10.0% 399 27,419 10.1% – 27,419 10.1% 2021 31,780 232,314 13.7% 549 32,329 13.9% 112 32,441 14.0% 2020 27,808 232,390 12.0% 1,306 29,114 12.5% – 29,114 12.5% 2019 10,564 227,216 4.6% 798 11,362 5.0% – 11,362 5.0% Deﬁnition Earnings (loss) before financial items and income tax. EBIT as a percentage of net sales. Earnings (loss) before financial items and income tax excluding restructuring charges. EBIT excluding restructuring charges as a percentage of net sales. Earnings before financial items and income tax excluding restructuring charges and goodwill impairment. EBIT excluding restructuring charges and goodwill impairment 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 and goodwill impairment gives a fair view of the profitability of the ongoing business. EBITA and EBITA margin / EBITA and EBITA margin excluding restructuring charges SEK million Net income (loss) Income tax Financial income and expenses, net Amortizations and write-downs of acquired intangible assets EBITA Net sales EBITA margin (%) Restructuring charges EBITA excluding restructuring charges EBITA margin excluding restructuring charges (%) 2023 –26,104 2,785 2,993 35,238 14,912 263,351 5.7% 6,521 21,433 8.1% 2022 19,112 5,497 2,411 2,051 29,071 271,546 10.7% 399 29,470 10.9% 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% Deﬁnition Earnings (loss) before interest, income tax, amortizations and write-downs of acquired intangible assets. EBITA as a percentage of net sales. EBITA excluding restructuring charges. EBITA 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. Additionally, Ericsson provides forward-looking targets for EBITA margin excluding restructuring charges and free cash flow before M&A, which are non-IFRS financial measures. Ericsson has not provided quantitative reconciliation of these targets to the most directly comparable IFRS measures because certain information needed to reconcile these non-IFRS financial measures to the most comparable IFRS financial measures are dependent on specific items or impacts that are not yet determined, are subject to incarcerating and variability in timing and amount due to their nature, are outside of Ericsson’s control or cannot be predicted, including items and impacts such as currency exchange rate changes, acquisitions and disposals, and charges such as impairments or acquisition related charges. Accordingly, reconciliation of these non-IFRS forward-looking financial measures to the most directly comparable IFRS financial measures are not available without unreasonable efforts. Such unavailable reconciling items could significantly impact our results of operations and financial condition. 130 Alternative performance measures Financial report 2023 Equity ratio SEK million Total equity Total assets Equity ratio (%) 2023 97,408 297,036 32.8% 2022 133,304 349,537 38.1% 2021 107,099 305,614 35.0% 2020 85,177 271,530 31.4% 2019 81,878 276,383 29.6% Deﬁnition Equity expressed as a percentage of total assets. Reason to use 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 investments 1) 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 Net sales Free cash ﬂow before M&A as percentage of net sales (%) 2023 7,177 –3,297 163 –2,173 –97 –2,857 –1,084 –1,515 –625 –3,224 263,351 –0.4% 2022 30,863 –4,477 249 –1,720 –126 –2,593 22,196 –51,995 307 –29,492 271,546 8.2% 2021 39,065 –3,663 115 –962 –131 –2,368 32,056 –389 448 32,115 232,314 13.8% 2020 28,933 –4,493 254 –817 801 –2,417 22,261 –9,657 59 12,663 232,390 9.6% 2019 16,873 –5,118 744 –1,545 –331 –2,990 7,633 –1,753 248 6,128 227,216 3.4% 1) Other investments is part of the line item Other investing activities in the Consolidated cash ﬂow statement. The difference is movements in other interest-bearing assets which is not part of the deﬁnition of Free cash ﬂow. Deﬁnition 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). 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 as a percentage of net sales. Gross cash SEK million Cash and cash equivalents Interest-bearing securities, current Interest-bearing securities, non-current Gross cash 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. Free cash flow before M&A as a percentage of net sales is used by the Company as one of the long-term targets. 2023 35,190 9,584 9,931 54,705 2022 38,349 8,736 9,164 56,249 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 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. Financial report 2023 Alternative performance measures 131 Gross margin and Gross margin excluding restructuring charges 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 (%) Deﬁnition Gross income as a percentage of net sales. Gross income excluding restructuring charges as a percentage of net sales. Net cash SEK million Cash and cash equivalents + Interest-bearing securities, current + Interest-bearing securities, non-current – Borrowings, current – Borrowings, non-current Net cash 2023 101,602 263,351 38.6% 2,802 104,404 39.6% 2022 113,295 271,546 41.7% 195 113,490 41.8% 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% 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. 2023 35,190 9,584 9,931 17,655 29,218 7,832 2022 38,349 8,736 9,164 5,984 26,946 23,319 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 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 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 2023 –90,187 2,431 1,288 –86,468 2022 –83,030 54 150 –82,826 2021 –69,071 137 139 –68,795 2020 –66,280 411 170 –65,699 2019 –64,215 344 117 –63,754 Deﬁnition Operating expenses excluding restructuring charges. Reason to use Restructuring charges vary between years and in order to analyse trends in reported expenses over time, restructuring charges are excluded. Return on capital employed SEK million EBIT (loss) Average capital employed Capital employed at beginning of period Capital employed at end of period Average capital employed Return on capital employed (%) 2023 –20,326 202,899 177,965 190,432 –10.7% 2022 27,020 184,283 202,899 193,591 14.0% 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% Deﬁnition EBIT (loss) as a percentage of average capital employed (based on the amounts at January 1 and December 31). 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. 132 Alternative performance measures Financial report 2023 Return on equity SEK million Net income (loss) attributable to owners of the Parent Company Average stockholders’ equity Stockholders’ equity, beginning of period 1) Stockholders’ equity, end of period Average stockholders’ equity Return on equity (%) 1) For 2019, adjusted opening balance due to implementation of IFRS 16 “Leases.” 2023 2022 2021 2020 –26,446 18,724 22,694 17,483 134,814 98,673 116,744 –22.7% 108,775 134,814 121,795 15.4% 86,674 108,775 97,725 23.2% 82,559 86,674 84,617 20.7% 2019 2,223 86,729 82,559 84,644 2.6% Deﬁnition 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). 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 (%) 2023 263,351 –9,048 –9,421 244,882 271,373 –10% 2022 271,546 –7,015 –25,968 238,563 232,314 3% 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% 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 2023 The Ericsson share 133 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 2023, approximately 2.1(2.0) billion Class B shares were traded on Nasdaq Stockholm and approximately 2.5 (2.3) billion ADS were traded in the United States (including Nasdaq New York). A total of 4.6 (4.3) 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 increased by approximately 6% on Nasdaq Stockholm and increased by approximately 6% in the United States when compared to 2022. 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, following a series of merger and acquisitions among trading venues, trading has become more concentrated. According to Nasdaq, total trading in Ericsson B shares on all venues combined has increased over the past five years from 7.6 billion shares in 2019 to 10.2 billion shares in 2023. Over the same period, trading of Ericsson ADS in the US has increased from 1.5 billion shares in 2019 to 2.5 billion shares in 2023. Share trading on different market places (B shares and ADS) Shares, millions 12,000 10,000 8,000 6,000 4,000 2,000 0 2019 2020 2021 2022 2023 Stockholm US Other Source: Nasdaq 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, 2023 ICB (Industry Classiﬁcation Benchmark) 1) Both classes of shares have the same rights of participation in the net assets and earnings. 3,344,151,735 261,755,983 3,082,395,752 14,009,306 SEK 5.00 SEK 211 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 2019–2023 2019 2020 2021 2022 2023 2023 December 31 December 31 December 31 December 31 May 2, new issue (Class C shares, later converted to Class B shares) 1) December 31 Number of shares Share capital (SEK) 3,334,151,735 3,334,151,735 3,334,151,735 3,334,151,735 10,000,000 3,344,151,735 16,670,758,678 16,670,758,678 16,670,758,678 16,670,758,678 50,000,000 16,720,758,678 1) The Annual General Meeting 2023 resolved to issue 10,000,000 Class C shares for the Long-Term Variable Compensation Programs LTV II 2023, LTV 2022 and LTV 2021 for Ericsson’s Executive Team and other executives. In accordance with an authorization from the AGM, 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 50 million, representing less than 0.3% of capital stock. The acquisition cost was approximately SEK 50.2 million. Share performance indicators Earnings (loss) per share, diluted (SEK) 1) Dividend per share (SEK) 2) Total shareholder return (%) P/E ratio 1) Calculated on average number of shares outstanding, diluted. 2) For 2023 as proposed by the Board of Directors. 2023 –7.94 2.70 8 –8 2022 5.62 2.70 –36 11 2021 6.81 2.50 4 15 2020 5.26 2.00 22 19 2019 0.67 1.50 6 122 For deﬁnitions of the ﬁnancial terms used, including a description of alternative performance measure, see Glossary and Financial Terminology. 134 The Ericsson share Financial report 2023 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 (Jan 12, 2023) Class A low (Oct 17, 2023) Class B at last day of trading Class B high (Jan 12, 2023) Class B low (Oct 30, 2023) 2023 63.80 2022 2021 2020 66.00 100.20 105.40 2019 85.40 73.00 118.40 128.80 119.00 96.80 50.00 63.11 63.50 60.90 91.90 99.79 64.10 99.98 74.70 81.56 68.50 117.32 121.80 110.15 96.74 48.53 58.81 91.00 59.54 74.02 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 12, 2023) ADS low (Oct 27, 2023) 2023 6.30 6.43 4.33 2022 5.84 12.78 5.16 2021 10.87 15.32 9.93 2020 11.95 12.20 6.15 2019 8.78 10.46 7.58 Source: Nasdaq New York Share prices on Nasdaq Stockholm and Nasdaq New York Period Annual high and low 2019 2020 2021 2022 2023 Quarterly high and low 2022 First Quarter 2022 Second Quarter 2022 Third Quarter 2022 Fourth Quarter 2023 First Quarter 2023 Second Quarter 2023 Third Quarter 2023 Fourth Quarter Monthly high and low August 2023 September 2023 October 2023 November 2023 December 2023 January 2024 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 96.80 119.00 128.80 118.40 73.00 118.40 97.00 88.30 77.00 73.00 70.00 63.00 64.70 58.70 60.40 56.20 55.90 64.70 67.00 74.70 64.10 91.90 63.50 50.00 78.50 76.00 66.30 63.50 60.40 56.40 53.10 50.00 55.10 53.10 50.00 52.00 53.00 59.70 96.74 110.15 121.80 117.32 68.50 117.32 94.77 81.32 73.56 68.50 62.66 59.62 64.28 57.29 58.62 55.51 53.92 64.28 65.33 74.02 59.54 91.00 58.81 48.53 72.56 72.60 64.12 58.81 54.96 53.36 49.79 48.53 52.39 51.76 48.53 49.86 51.41 58.72 10.45 12.61 15.32 12.78 6.43 12.78 9.80 7.81 6.82 6.43 6.04 5.75 6.36 5.24 5.29 4.96 5.07 6.36 6.28 7.58 6.15 9.93 5.16 4.33 5.16 7.26 5.65 5.16 5.22 5.01 4.74 4.33 4.83 4.74 4.33 4.39 4.86 5.62 Source: Nasdaq Stockholm and Nasdaq New York. Financial report 2023 Shareholders As of December 31, 2023, the Parent Company had 413,786 shareholders registered at Euroclear Sweden AB (the Central Securities Depository – CSD), of which 744 holders had a US address. According to information provided by the Company’s depositary bank, Deutsche Bank, there were 299,256,666 ADSs outstanding as of December 29, 2023, and 2,756 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 31, 2024, the total number of bank, broker and/or nominee accounts holding Ericsson ADSs was 188,834. According to information known at year-end 2023, approximately 88.1% of the Class A and Class B shares were owned by institutions, Swedish and other international institutions. 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 corporation, 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 of December 31, 2023. 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 (31 persons) For individual holdings, see Corporate Governance report. 0 2,464,565 0.4% The Ericsson share 135 Geographical ownership breakdown of share capital including retail shareholders and treasury shares Percent of capital Sweden United States United Kingdom Norway Denmark 2023 40.85% 25.42% 12.31% 5.50% 1.20% 2022 40.53% 26.96% 9.21% 4.68% 1.55% Other countries 14.72% 17.07% Source: Nasdaq Ownership breakdown by type of owner Percentage of voting rights Swedish institutions Of which: – Investor AB – AB Industrivärden – AMF Tjänstepension and AMF Fonder Foreign institutions Swedish retail investors Other 2023 58.32% 23.75% 15.11% 4.52% 2022 58.07% 23.79% 15.14% 4.87% 29.76% 28.28% 5.52% 6.4% 5.41% 8.24% Source: Nasdaq 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, 2023 2) No. of shareholders 326,620 38,509 39,367 5,301 1,398 733 1,857 413,786 No. of A shares 1,424,814 968,303 2,800,106 1,151,118 378,550 344,628 254,688,464 261,755,983 No. of B shares Percentage of share capital Percentage of voting rights Market value (MSEK) 41,017,663 28,288,228 83,213,686 37,095,706 16,863,538 12,793,236 2,862,378,791 3,082,395,752 1.27% 0.87% 2.57% 1.14% 0.52% 0.39% 93.21% 100% 0.97% 0.67% 1.95% 0.85% 0.36% 0.28% 94.90% 100% 2,682 1,849 5,436 2,417 1,089 830 197,091 211,441 1) Source: Euroclear. 2) Includes a nominee reporting discrepancy of 744,904 shares. The following table shows share information as of December 31, 2023 with respect to the 15 largest shareholders ranked by voting rights as well as their percentage of voting rights as of December 31, 2023, 2022 and 2021. Largest shareholders December 31, 2023 and percentage of voting rights December 31, 2023, 2022 and 2021 Identity of person or group 1) Investor AB AB Industrivärden AMF Tjänstepension and AMF Fonder Cevian Capital BlackRock Institutional Trust Company, N.A. Fidelity International AFA Försäkring AB Swedbank Robur Fonder AB (EX Folksam) The Vanguard Group, Inc. PRIMECAP Management Company Norges Bank Investment Management (NBIM) Livförsäkringsbolaget Skandia, ömsesidigt Tredje AP Fonden Handelsbanken Asset Management State Street Global Advisors (US) Others Total 1) Source: Nasdaq 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 2023 Voting rights percent 2022 Voting rights percent 2021 Voting rights percent 120,762,803 86,052,615 20,650,000 339,228 0 0 11,555,100 7,695 1,161,057 0 123,410 4,143,458 4,250,736 18,246 1,143 12,690,492 261,755,983 145,982,932 46.14 1,000,000 32.88 50,892,267 7.89 152,218,174 0.13 137,894,228 0.00 202,719,471 0.00 3,805,747 4.41 107,105,167 0.00 96,697,401 0.44 54,905,971 0.00 39,008,009 0.05 26,301,905 1.58 16,580,931 1.62 63,430,978 0.01 0.00 53,442,698 4.85 1,930,409,873 100 3,082,395,752 4.74 0.03 1.65 4,94 4.47 6.58 0.12 3.47 3.14 1.78 1.27 0.85 0.54 2.06 1.73 62.63 100 7.98 2.60 2.14 4.56 4.12 6.06 0.46 3.20 2.93 1.64 1.17 0.91 0.62 1.90 1.60 58.10 100 23.75 15.11 4.52 2.73 2.42 3.56 2.09 1.88 1.90 0.96 0.71 1.19 1.04 1.12 0.94 36.09 100 23.79 15.14 4.87 2.72 2.41 2.16 2.14 1.97 1.87 1.45 1.25 1.19 1.08 1.06 0.95 35.95 100 23.79 15.14 4.36 2.72 2.41 1.05 2.05 2.24 1.56 1.86 0.89 1.20 1.02 0.93 0.95 37.83 100 136 The Ericsson share Financial report 2023 Share trend In 2023, Ericsson’s total market capitalization increased by 3.9% to SEK 211 billion, from SEK 204 billion in 2022 (which represented a decrease by 39.0% against 2021). In 2023, the index, OMX Stockholm, on Nasdaq Stockholm increased by 15.4%, the Nasdaq composite index increased by 41.1% and the S&P 500 Index increased by 24.2%. Earnings (loss) per share, diluted SEK 8 7 6 5 4 3 2 1 0 −1 −2 −3 −4 −5 −6 −7 −8 6.81 5.26 5.62 0.67 −7.94 2019 2020 2021 2022 2023 Earnings (loss) per share, diluted Dividend per share SEK 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2.70 2.70 2.50 2.00 1.50 2019 2020 2021 2022 2023 1) 1) For 2023 as proposed by the Board of Directors. Share turnover and price trend, Nasdaq Stockholm Class A shares, SEK 150 125 100 75 50 25 0 2019 2020 2021 2022 2023 Class B shares, SEK 150 125 100 75 50 25 0 2019 2020 2021 2022 2023 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 28 24 20 16 12 8 4 0 2019 2020 2021 2022 2023 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 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Financial report 2023 Shareholder information 137 Shareholder information Telefonaktiebolaget LM Ericsson’s Annual General Meeting of shareholders 2024 will be held on Wednesday, April 3, 2024 at 1 p.m. CET at Ericsson’s premises: Open Box, Grönlandsgatan 8, Kista/Stockholm, Sweden. Shareholders 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 the Company’s website www.ericsson.com. Dividend proposal The Board of Directors proposes to the Annual General Meeting a dividend to the shareholders of SEK 2.70 (2.70) per share for the financial year 2023, representing a total dividend of approximately SEK 9.0 (9.0) billion. The dividend is proposed to be paid in two installments, SEK 1.35 per share with the record date April 5, 2024, and SEK 1.35 per share with the record date October 2, 2024. Should the Annual General Meeting decide in favor of the proposal, payment of the dividend is expected to be made on April 10, 2024, and on October 7, 2024. Financial information from Ericsson 2023 Form 20-F for the US market: – March 12, 2024 Interim reports 2024: – Q1, April 16, 2024 – Q2, July 12, 2024 – Q3, October 15, 2024 – Q4, January 25, 2025 Annual Report 2024: – March, 2025 138 Financial terminology Financial report 2023 Financial terminology 1) EBITA Earnings (loss) before interest, income tax, amor- tizations and write-downs of acquired intangible assets. 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 (based on the amounts at January 1 and December 31). 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 attrib- utable to stockholders of the Parent Company 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. EBIT Earnings before financial items and income tax. EBIT margin EBIT as a percentage of net sales. EBITA margin Earnings (loss) before interest, income tax, amor- tizations and write-downs of acquired intangible assets as a percentage of net sales. Equity ratio Equity expressed as a percentage of total assets. Financial income and expenses, net Financial income, Financial expenses, and Net foreign exchange gains/losses. Also named as Financial net. 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 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. OPEX Operating expenses. 1) For additional information of certain ﬁnancial terms, see Alternative performance measures on pages 128–132. 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 EBIT as a percentage of average capital employed (based on the amounts at J anuary 1 and Decem- ber 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 & Administrative 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 2023 2022 11.47 11.09 10.62 10.01 10.61 11.08 10.04 10.38 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 2023 Glossary 139 Glossary 4G/LTE Forth generation mobile systems, also known as LTE. 5G The fifth generation of mobile systems. An evolu- tion of 4G/LTE. 5G Core 5G Core Network is responsible for managing the flow of data in a 5G network and ensures that the network can meet the demands of the 5G services and applications. 6G Sixth generation mobile system. An evolution of 5G. AI Artificial Intelligence. The ability of a machine to perform tasks commonly associated with intel- ligent beings. API Applications Programming Interface. An API is a set of protocols and routines for building software applications, enabling communication and access to services or data of other software programs. BSS Business Support Systems, the IT-systems that a communications 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. CCaaS Contact Center as a Service. A cloud-based solution for managing customer interactions, providing businesses with a virtual call center environment. Cloud When data and applications reside in accessible data centers. Cloud native Cloud native is the software approach of building, deploying, and managing modern applications in cloud computing environments. CO2e The amount of a particular greenhouse gas, expressed as the amount of carbon dioxide that gives the same greenhouse effect. Mobile broadband Wireless high-speed internet access using the HSPA, LTE, CDMA2000EV-DO and 5G technologies. 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 pandemic The global spread of the disease caused by the coronavirus (SARS-CoV-2). CPaaS Communications Platform as a Service. A cloud-based solution that provides businesses with tools and APIs for integrating real-time communication capabilities, such as voice, video, and messaging, into their applications. CSP A Communication Services Provider (CSP) is a company or entity that offers various communica- tion-related services, such as telecommunications, internet, and messaging services, to individuals, businesses, or other organizations. FWA Fixed Wireless Access is a high-speed internet technology using wireless communication instead of cables. 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. Managed services Management of operator networks and/or hosting of their services. OSS Operations Support Systems, IT-systems used by communications service providers to manage their networks. They support management func- tions such as network inventory, service provision- ing, 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 of radio base stations that handsets and devices can connect to. SASE Secure Access Service Edge. It is a network architecture that combines network security functions with WAN capabilities to support the dynamic, secure access needs of organiza- tions, often delivered as a cloud-based service. Time-bound latency Time-bound latency refers to the time delay between when a device sends a request and when it receives a response from the network. UCaaS Unified Communications as a Service. A cloud- based solution that integrates various communi- cation tools, such as voice, video, messaging, and collaboration, into a single platform. WAN Wide Area Network. A WAN connects remote networks for communication and resource sharing. XR Extended Reality. A technology that includes virtual reality (VR), augmented reality (AR), and mixed reality (MR), enabling users to experience and interact with computer- generated simulations. The terms “Ericsson”, “the Company”, “the Group”, “us”, “we”, and “our” all refer to Telefonaktiebolaget LM Ericsson and its subsidiaries. Corporate Governance report Part of Ericsson Annual Report 2023 Annual Report 2023 Financial report Corporate Governance report Remuneration report Sustainability and Corporate Responsibility report ericsson.com Contents Corporate Governance report 2023 Introduction and Key 2023 Governance Updates Regulation Governance Structure and Core Values Ethics & Compliance Risk Management 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 Cybersecurity Members of the Executive Team Auditor Internal control over ﬁnancial reporting Auditor’s report on the Corporate Governance report 2 3 3 5 6 8 8 9 11 13 14 18 19 20 25 25 28 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 hereto. Corporate Governance report 2023 1 Corporate Governance report 2023 The Board is actively engaged in Ericsson’s ongoing transformation. Strong corporate governance, with the Board’s strategic and indepen- dent oversight, enables Ericsson to execute effectively and respon- sibly on its strategy while promoting transparency and maintaining high ethical standards. Ericsson’s culture continues to be enhanced while implementing improved governance and embedding integrity throughout the organization. Throughout Ericsson’s history, the expertise and skill of its engineers have formed the cornerstone of the strat- egy and the foundation for success – driving technology leadership and continuous innovation, and shaping the world of communications. Today, Ericsson’s technology leadership is no less important – and perhaps even more important – to its future success as it was when Ericsson began. Ericsson’s continued success depends on maintaining our technology leadership and remain- ing true to its purpose, vision and values. Technology leadership alone is not enough to navi- gate an uncertain and challenging global environment. Ericsson needs to combine technology and innovation with operational excellence, the best talent and a strong culture. As we face the many complexities of a global technology company – geopolitical change, conflicts, competition and macroeconomic conditions – Ericsson will define its long-term success through world leading technology and innovation paired with the right talent, an ethical culture and operational excellence under- pinned by world-class governance. In addition, Ericsson has continued to strengthen and enhance its ethics and compliance program and further embed integrity in its ways of working. Preparations are underway to conclude the term of our DOJ resolution, and the related monitorship, in June of this year. The Board has been actively involved in overseeing this process. The management team has established an effective compliance program and enhanced internal controls, which have been integrated in the business operations and are subject to rigorous self-monitoring and testing. In parallel, Ericsson has achieved major enhancements in its approach to enter- prise risk management and internal accounting controls. A compliance culture is embedded with a keen focus on ethics and integrity that is built to last. We take pride in Ericsson’s long history and believe that it should lead as a positive force in every society in which it operates. The Board is of the unanimous view that Ericsson’s actions in 2023 have strengthened the Company and delivered meaningful value for Ericsson’s customers and all its stakeholders. We are confident that the strong ethical culture, continued commitment to robust governance and risk management, and increased focus on operational excellence will enhance Ericsson’s com- petitive advantage and strengthen both its performance and global position, creating connections that make the unimaginable possible. Jan Carlson Chair of the Board 2 Corporate Governance report 2023 Introduction and Key 2023 Governance Updates Ericsson’s Corporate Governance Ericsson is committed to maintaining the highest standards of corporate governance and has established a corporate governance framework that: – Empowers the business, enabling strategic execution and operational excellence; – Promotes and facilitates effective oversight across the organization by the Board of Directors (Board), the President and CEO, the Executive Team and at all levels of the organization; – Ensures high-quality decision-making with clear accountabilities at all levels; and – Instills a robust approach to risk management to effectively identify, manage and mitigate risks and capture opportunities. Ericsson prioritizes an integrity-led culture and compliance with law in everything it does, driv- ing integrity into and across the organization. Ericsson’s governance framework guides its peo- ple while building on their strengths – fostering a culture of transparency, collaboration and open dialogue, sound and ethical business decisions, strong risk management, and cross-functional coordination. Ericsson has implemented prac- tices and procedures that establish clear rules of governance, ranging from matters requiring approval of the Company’s shareholders and members of its Board, to conflicts of interest policies and director and management duties and obligations. More information can be found at https://www.ericsson.com/en/about-us/ corporate-governance. Key Corporate Governance Actions in 2023 Ericsson’s intensive work on strengthening and simplifying its corporate governance practices continued throughout 2023, and was pursued in concert with further improvements to its ethics and compliance (E&C) program. In 2023, Ericsson: – Fully embedded the Material Group Risk Protocol and Business Risk Committee (BRC) into the Group’s governance and risk man- agement frameworks, as described further below. – Introduced clarified Group governance and operating principles, to be rolled out in early 2024. – Refreshed and clarified the Company’s Code of Business Ethics (CoBE), which is being re-launched in early 2024. – Updated, streamlined and clarified the Group’s key policies and other guidance docu- ments, including those on contracting, compli- ance, allegation assessment, investigations and remediation, and human rights. This work will continue into 2024. – Continued to embed various aspects of its compliance program into business opera- tions, through a close partnership with the compliance function and stakeholders across the entire organization (as described further below in the Ethics & Compliance section). – Continued to strengthen performance- management at all levels of the organization while also implementing strong remediation measures where misconduct has occurred. Throughout 2023, the BRC, comprising senior executives and chaired by the CLO and CFO, has provided an important forum for escalating and analyzing material risks across the Group, provid- ing appropriate oversight and driving mitigation and accountability by senior executives. The BRC has been particularly impactful in strengthening Ericsson’s approach to managing high levels of risk associated with certain jurisdictions. The heads of each market area have been conduct- ing holistic, ongoing risk assessments of the countries in their purview, and material risks that exist or arise are regularly reviewed and moni- tored. The BRC applies a “heightened scrutiny” approach in evaluating and mitigating these types of risks, and the organization has imple- mented various actions to address these risks, ranging from enhanced contractual protections, changes to the scope or nature of operations, or a decision to responsibly exit the relevant jurisdic- tion or customer relationship. Ericsson believes that driving integrity into day-to-day decision-making requires constant focus to ensure that compliance processes and related controls are fit for purpose and that they are continuously tested and refined. Through an initiative referred to as the Business Critical Transformation, discussed in greater detail in the Ethics & Compliance section of this Report, Ericsson embedded improved anti-corruption controls into its operations and managerial decisions. This further remediated the business process issues that were, in the past, a contribut- ing factor in incidents of misconduct. Ericsson combined this work with rigorous testing of the E&C program’s effectiveness, which includes clear expectations for management to under- stand and address testing results and process adherence within the areas of their responsibility. This approach positions Ericsson to conclude its monitorship related to the DOJ resolution in June 2024, but more importantly, creates a foundation for a well embedded, self-sustaining ethics and compliance program. Shareholder Engagement on Governance Topics As part of Ericsson’s ongoing investor engage- ment, and in addition to the ordinary course communication between investors and Ericsson’s Investor Relations and management team throughout the year, during the second half of 2023, the Chair of Ericsson’s Board, Jan Carlson, and the Chair of the Audit and Compliance Committee, Eric Elzvik, had dialogues with share- holders and held Company-initiated substantive discussions, with shareholders representing more than 55% of shares outstanding. These have been focused on a broad range of governance topics with the objective to understand and receive shareholder feedback and respond to questions. These discussions centered on the thoughtful, multi-year transformation of the Company’s governance, culture and E&C pro- gram alongside sustainability and remuneration programs, among other topics. The Audit and Compliance Committee’s (ACC) strong oversight of the compliance function, and the frequent and in depth reporting on the effectiveness of the E&C program to the ACC, was also highlighted during these discussions. Feedback from these discussions has been positive with shareholders appreciating the information and noting the transformation of the E&C program. Other key topics included: – significant improvements made to Ericsson’s governance framework which has included enhanced Board and management oversight and strong, proactive risk management; – the effective integration of enhanced controls into Ericsson’s operations and decision-making; – emphasis on driving continuous cultural change with a focus on embedding integrity into Ericsson’s ways of working, fostering a culture of transparency, collaboration and open dialogue, sound and ethical business decisions, strong risk management; – implementation of employee training pro- grams and providing Speak-Up resources to drive an integrity-led culture; and – significant testing of the E&C program’s effectiveness, simplification of policies, proce- dures and tools, an improved understanding of managing risks in business interactions, and digitalization. Shareholders also expressed the desire for more frequent disclosure of these E&C improve- ments, which the Company has strived to meet through periodic updates, presentations and dialogue with investors and other stakehold- ers. Shareholders also communicated support for Ericsson’s overall executive remuneration philosophy (which now includes an integrity based component; more information on this can be found in the second paragraph of “Integrating Compliance into the Business and Testing Effectiveness” below). The feedback gathered during these conver- sations helped inform the Board’s discussions on remuneration and other topics for 2024. In direct response to shareholder feedback, the 2024 remuneration package for the President and CEO will now include a Short-Term Variable (STV) incentive component which aligns with the Company’s Remuneration Guidelines and is described in further detail in the Remuneration Report. Corporate Governance report 2023 3 Regulation Governance Structure and Core Values The members of the Executive Team lead the External Rules As a Swedish public limited liability company with securities traded on Nasdaq Stockholm as well as on Nasdaq New York, Ericsson is subject to a variety of rules that affect its govern- ance. The primary external rules applicable to Ericsson’s governance include: – The Swedish Companies Act. – Applicable EU regulations. – The Swedish Corporate Governance Code (the Code). – The Nasdaq Stock Market Rules, including the Nasdaq Nordic Main Market Rules for Issuers of Shares and 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 and Policies Ericsson’s articles of association and the work procedure for the Board of Directors (and its respective Committees) establish the foundation for Ericsson’s internal corporate governance, including its decision making. In addition, to promote compliance with legal and regulatory requirements and the high standards that Ericsson has set, Ericsson has established core governance pillars for the Group and has adopted a range of policies and proce- dures that include, among others: – The Code of Business Ethics. – The Code of Conduct for Business Partners. – Material Group Risk Protocol. – A set of core Group policies necessary to operate the Group’s business and satisfy its internal and relevant external standards. Each policy establishes the requirements and expectations for Ericsson and its employees. Compliance with securities market regulations Compliance with the Swedish Corporate Governance Code The Swedish Corporate Governance 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 is committed to complying with best-practice corporate governance standards on a global level. Ericsson did not report any devia- tions from the rules of the Code in 2023. Compliance with applicable 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 2023. Governance structure Ericsson’s organizational governance structure is comprised of the following: Ericsson Shareholders Ericsson Board of Directors Group CEO Executive Team Business Operations and Strategy Execution Under the Swedish Companies Act, Ericsson’s shareholders retain certain decision-making rights, including any matters that do not expressly fall within the exclusive competence of another corporate body. Shareholder decision- making rights include, among other things, the power to elect the Board of Directors, approval of any amendments to the articles of association and certain corporate restructurings. The Board consists of members elected annu- ally at the General Meeting, as well as employee representatives and their deputies (which the unions have the right to appoint under Swedish law). The Board is ultimately responsible for the organization of Ericsson and the management of Ericsson’s operations, and is thus ultimately responsible for overseeing the Company’s strategy, organization and operations, and has established four Committees: (1) the Audit and Compliance Committee, (2) the Finance Committee, (3) the Remuneration Committee and (4) the Enterprise Business and Technology Committee. The President and CEO is appointed by the Board and is responsible for the day-to-day man- agement of the Group in accordance with the Swedish Companies Act, as well as in accordance with guidelines from the Board. The President and CEO updates the Board regularly on issues of importance to Ericsson, including matters of business development, results, financial position and liquidity. The President and CEO is supported by the Executive Team. The Executive Team consists of the President and CEO, the Chief Legal Officer (the CLO), the Chief Financial Officer (the CFO), the Chief Operating Officer (the COO), the Chief People Officer (the CPO), the Chief Technology Officer (the CTO), the Chief Marketing and Corporate Relations Officer (the CMO), the Head of Group Operations, and the Heads of business areas and market areas. corporate center of the Group which, led by the President and CEO, is responsible for: (1) defining Group strategies and policies, driving the corpo- rate strategy and establishing and maintaining the corporate culture; (2) Group-wide oversight and ensuring an effective framework for risk management and decision-making (including through the implementation of effective govern- ance, a strong compliance program and related internal controls); (3) managing and executing on “central” corporate matters (ranging from managing Ericsson’s capital structure, financing and other corporate transactions, listing compli- ance and disclosure obligations); (4) Group financial management and reporting (includ- ing determining targets for operational units, allocating resources and monitoring market area and business area performance); and (5) leading on operational excellence, performance management and realizing global synergies through efficient organization of the Group. The Executive Team is primarily responsible for steering the Group, ensuring global alignment on strategic priorities, optimizing competitiveness, and overseeing effective decision making and risk management. The executive leaders set the tone for the entire organization by promoting high standards of performance and critical think- ing, exemplifying collaboration and maintaining the “birds’ eye” view for the entire organization. Ericsson’s organizational structure consists of central Group functions (including Finance, Legal Affairs and Compliance, Technology, People, Marketing and Corporate Communications and Operations), together with five business areas and five geographical market areas. The central Group functions are focused on managing corporate and Group aspects of the organization, including corporate governance, financial reporting and capital markets, as well as necessary corporate and risk management controls. The central Group functions also provide relevant expertise through the Group (including on legal, mergers and acquisitions, finance, compliance, technology, communications, secu- rity, sustainability, health and safety, and people matters). Business areas are responsible for develop- ing competitive product-led business solutions, including both products and services and for investing in research and development for tech- nology and cost leadership, as well as strategic pricing. Heads of business areas are also part of the Executive Team and are responsible for managing the business of their respective busi- ness area. Market areas are responsible for selling and delivering customer solutions and engaging with customers to establish leading positions, particularly in critical markets. Heads of market areas are also part of the Executive Team and responsible for managing the business of their respective market area. 4 Corporate Governance report 2023 Ownership structure As of December 31, 2023, the Parent Company had 413,786 registered shareholders, of which 401,331 were resident or located in Sweden (according to the share register kept by Euroclear Sweden AB). Swedish institutions held approximately 58.32% of the votes. The largest shareholders, as of December 31, 2023, were Investor AB with approximately 23.75% of the votes (7.98% of the shares), AB Industrivärden with approximately 15.11% of the votes (2.6% of the shares) and AMF Tjänstepension and AMF Fonder with approximately 4.52% of the votes (2.14% 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 (acting on behalf of underlying shareholders). This means that the actual shareholder is not displayed in the share register kept by Euroclear Sweden AB or included in the shareholding statistics. More information on Ericsson’s shareholders can be found in the chapter “The Ericsson share” in the Financial Report. Shares and voting rights The share capital of the Parent Company con- sists 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. 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 General Meeting of shareholders Annual General Meeting/Extraordinary General Meeting Nomination Committee Shareholders Ownership percentage (voting rights) Unions Board of Directors Directors elected by the General Meetings of shareholders 3 Directors and 3 Deputies appointed by the Unions External Auditors Audit and Compliance Committee Finance Committee Remuneration Committee Enterprise Business and Technology Committee President and CEO Management Head of Internal Audit Chief Compliance Ofﬁcer Swedish institutions: Of which: – Investor AB – AB Industrivärden – AMF Tjänstepension and AMF Fonder Foreign institutions Swedish retail investors Others Source: Nasdaq 58.32% 23.75% 15.11% 4.52% 29.76% 5.52% 6.40% Contact the Board of Directors Telefonaktiebolaget LM Ericsson The Board of Directors Secretariat SE-164 83 Stockholm, Sweden boardsecretariat@ericsson.com Annual General Meeting 2024 Ericsson’s AGM 2024 is expected to be held on April 3, 2024. Further information is available on Ericsson’s website. Corporate Governance report 2023 5 Professionalism Integrity Ericsson’s core values Respect Perseverance Ethics & Compliance Ethics and Compliance (E&C) Program Ericsson has invested significant resources and energy to strengthen its E&C program, imple- menting and maintaining strong systems, con- trols and policies to effectively prevent and detect wrongdoing, including in the areas of ethics, anti-bribery and corruption, conflicts of interests, anti-money laundering and competition law. Importantly, as discussed above, this effort has been underpinned by work across the organiza- tion to transform the Company’s culture and operationalize enhanced governance to enable it to operate responsibly and with integrity. A key step taken in 2023 to enhance the E&C program was to clarify and enhance the Company CoBE, a core governance pillar. The updated CoBE sets out the Company’s expecta- tions, principles and requirements for employees as they conduct business. It provides the frame- work for ethical decision-making, and guides employees in making decisions and managing risk as they engage with colleagues, customers, partners, owners, and other stakeholders. It fur- ther promotes and supports Ericsson’s Speak-Up Culture, and prohibits retaliation for speaking up in any form. All employees are required to confirm their understanding of the CoBE on a regular basis. Full adherence to the letter and spirit of the CoBE framework is expected from all employees to ensure that the Company’s decisions and actions are ethical, and that Ericsson is acting as a positive global force. Integrating Compliance into the Business and Testing Effectiveness During 2023, led by the CEO and Executive Team, the Company drove its Business Critical Transformation initiative which deployed cross- functional teams which were led by the business owners and supported by compliance and internal controls functions to ensure compliance was fully embedded in the business, accessible to everyone, and working effectively in practice. Incorporating extensive training, monitoring, testing and continuous feedback, the Business Critical Transformation strengthened underlying business and functional processes, improving the overall effectiveness and sustainability of Ericsson’s core values The Company’s core values are the touchstones 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. As Ericsson executes its strategy, people are the foundation–embracing and carrying forward the core values of professionalism, perseverance, respect and integrity. At Ericsson, the satisfaction and well-being of employees is both consistent with its core values and a key element of its ability to compete and succeed in future. Ericsson’s E&C program. Self-testing of the E&C program’s effectiveness was conducted in close coordination with the independent monitorship related to the DOJ resolution. This testing focused heavily on the priorities identified through the Business Critical Transformation, with additional focus on simplification of policies, procedures and tools, an improved understanding of managing risks in business interactions, and digitalization. Leaders were, and are, expected to know the testing results of their area of responsibility, and oversee the status of actions to ensure any needed enhancements or remediation. This approach to testing and continuous improvement has been integrated into Ericsson’s ways of work- ing and is a cornerstone of the E&C program. The Company’s management and Board are commit- ted to continuing to embed the E&C program in the business operations so that it remains both effective and sustainable, and fit for purpose as the business continues to evolve. With the pro- gress made to date, and considering the program to be effective as indicated by the program’s testing results, Ericsson expects a successful conclusion of its monitorship in June 2024. As it looks to the future, the Company continues to promote a culture of integrity, which ultimately provides a competitive advantage. A key tenet of the Business Critical Transformation was that the business is the first line responsible and accountable for conducting business in a manner consistent with Ericsson’s values and the E&C program. To further drive accountability throughout the organization, all employees who are eligible for an STV pay-out may be denied all or part the entitlement if they act in breach of Ericsson’s CoBE. In addition, top executives are subject to evaluation according to a set of pre-defined integrity criteria, which relate to compliance training, third party management, allegation management and other items tied to the Company’s E&C program. Underperformance against these pre-defined criteria can reduce STV pay-out by up to 100%, while exceptional performance may justify an additional incentive of up to a maximum of 10% of the executive’s annual base salary. In 2023, the Company also continued to invest in digital capabilities to (i) enable employ- ees, line managers and compliance professionals to work more efficiently, by accessing more easily compliance-relevant data, and (ii) simplify the E&C program processes, in each case helping employees making integrity-driven decisions. The digital landscape continues to evolve, with emphasis on AI and analytics to further enhance management of anti-bribery and corruption risks. These advancements, which will remain a focus for the Company, facilitate enhanced monitor- ing and testing activities, which in turn result in continuous improvement of the E&C program. Compliance Reporting Framework and Investigations The Company promotes transparency through the maintenance of the Ericsson Compliance Line, a dedicated communication channel for employees and external stakeholders to report any compliance concerns. The Ericsson Compliance Line is operated by a third party and is available 24/7, 365 days per year, and enables reporting from multiple countries in many lan- guages, anonymously if chosen. Employees are expected to report concerns related to corruption, fraud, accounting, internal controls, human rights matters or other matters that could constitute a breach of law, or that could harm the business or reputation of Ericsson, its employees and share- holders. Where applicable, Ericsson employees and external stakeholders have the option to report certain matters via local channels, which have been implemented in accordance with the European Union Directive on the protection of persons who report breaches of Union law. Ericsson’s Allegation Management Office is responsible for the overall process from the time an allegation of potential misconduct is reported to the remediation of any substantiated violation of Ericsson policy. The Corporate and Government Investigations (CGI) team is respon- sible for appropriately investigating allegations of potential compliance violations and disclosing allegations to regulators as required. The CGI team also regularly reports on investigations to the ACC. The Company has increased the frequency at which it publishes its Speak Up Newsletter, featuring anonymized examples of actual misconduct and the way any such misconduct was addressed by the Company. The Speak Up 6 Corporate Governance report 2023 Newsletter also includes short stories highlight- ing situations in which employees facing difficult choices choose to do the right thing. Progress in the Speak Up culture in recent years can be seen in the increased raising of compliance questions and potential concerns by Ericsson’s employees. The willingness by Ericsson’s employees to speak up is an essential safeguard to ensure that the Company conducts business with integrity. The Company saw a 10% increase in the number of reported potential compliance concerns in 2023, which it views as an indicator of continued confidence by employees and third parties in Ericsson’s allegation management and investi- gation processes and the seriousness with which the Company treats potential misconduct. More information on reporting compliance concerns can be found on page 39–40 of the Sustainability and Corporate Responsibility report. Sustainability and Corporate Responsibility The Board oversees Ericsson’s sustainability and corporate responsibility (S&CR) strategy and receives reports on developments and performance annually, or more often as needed. In addition to the primary oversight exercised by the Board, each of the Committees of the Board is involved in Ericsson’s S&CR strategy. The ACC oversees Ericsson’s E&C program and whistle- blower procedures, and reviews the Group’s handling of information and cybersecurity, data privacy, and its environmental, social and gov- ernance (ESG) reporting practices. The Finance Committee oversees the promotion of the S&CR strategy in external funding through the application of the Green Financing Framework. As part of its role to prepare and propose rewards and compensation policies that attract and motivate the Company’s executives and align with the Company’s long-term interests, the Remuneration Committee considers the inclusion of ESG criteria in variable compensation plans and monitors the performance of such criteria. Part of the Enterprise Business and Technology Committee’s role of monitoring the Company’s technology ecosystem, relationships and part- nerships involves reviewing matters related to energy and sustainability. The Executive Team, led by the President and CEO, is responsible for approving S&CR strategies and related Group targets, and regularly receives reports on the implementation of strategies and progress made on 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. In 2023, the Executive Team played a significant role in validating the double materiality analysis that will underpin Ericsson’s future reporting. properly identified, assessed, internally reported, escalated, and effectively addressed. Ensuring accountability for risk management at all levels of the organization is a key priority. Recent enhancements include the adoption of Ericsson’s Material Group Risk Protocol, which governs the analysis and escalation of material risks across the Group, and the establishment of the BRC. The BRC is co-chaired by the Chief Legal Officer and the Chief Financial Officer. The BRC now serves as a fully embedded risk escalation and oversight forum which has strengthened management’s decision making and handling of risks. The BRC process and Group-wide assessment of risk has enhanced Ericsson’s insights into enterprise risk and has increased alignment and the ability to effectively address risk which impact various parts of the organization. In particular, the BRC reviews potential risk matters with material impact (including risks which arise in “high risk” jurisdictions) and provides an internal manage- ment forum for monitoring and assessing risks identified in the enterprise risk management system. Financial risk management is overseen by the Finance function. For further information on financial risk management, please see Notes to the consolidated financial statements – note F1 “Financial risk management” in the Financial Report. The Material Group Risk Protocol, the BRC and Ericsson’s Enterprise Risk Management (ERM) framework operate in a complementary manner to provide the Board and management with a consolidated view of Group risk. The ERM framework is designed to promote bottom-up identification and management of risks that present uncertainty in Ericsson’s ability to achieve its long- and short-term objectives. The framework comprises the five elements described below. The framework applies across Ericsson’s operations, covering business areas, market areas and Group functions. The frame- work establishes an enterprise-level baseline for transparency and risk oversight. Governance and Culture Strategy Monitoring ERM Framework Assessment and Treatment Communication and Reporting Risk Management Ericsson maintains a robust approach to risk management. The Company has made signifi- cant strides in 2022 and 2023 toward ensuring that strategic, external and internal risks are Risk Governance Each manager is charged with addressing risks within their respective area of responsibility. The Group Risk Management function drives ERM strategy execution and ERM operations at the Group level. The head of each Group function, market area and business area oversee risk man- agement of the respective unit and establish and maintain processes to identify, assess and esca- late risks with one or more enterprise risk manag- ers within the unit. The CFO and CLO serve as co-chairs of the BRC and also oversee Group- level ERM activities. The Board of Directors and the Audit and Compliance Committee have oversight responsibility for the Company’s risk management and its ERM framework. Risk Culture Ericsson has embedded the culture of risk ownership within Ericsson’s organizational ethos. Ericsson’s management emphasizes the importance of identifying and addressing risk in its decision-making at all levels. Ericsson strives to ensure that risk is appropriately assessed, transparently considered, and escalated within the organization as circumstances warrant. The BRC drives these objectives and promotes accountability by providing a forum for assessing and managing potentially material risks. Embedding Risk Management into Ericsson’s Strategy Risk management is an important element of strategic decision-making and value creation. Ericsson strives to capture the opportunities and threats relating to the Company’s strategic objectives. Ericsson’s risk management activities operate in tandem with the development and deployment of Ericsson’s business plans and operational strategies. Assessment and Mitigation Ericsson’s ERM process provides a system for assessment and mitigation of risks across the Group and for all roles with responsibilities for risk management activities. This process seeks to ensure that Group functions, market areas and business areas consider risk in relation to strategic objectives and decision-making, while ensuring escalation of risks to the BRC. Throughout 2023, the Company has bolstered its transactional controls and data analytics, including increased due diligence and monitoring of third-party relationships. Ericsson has also expanded anti-corruption risk assessments to address country-specific compliance risks, developed a State-Owned Entities (SOE) Map to identify public officials and state-owned customers, expanded on-the-ground, in-country compliance officers and increased personnel levels in both compliance and other gate-keeper functions. Further Details on Risk Assessment Risk assessment includes the maintenance of a risk register for each business unit and regular assessment by the Group Risk Management function, which has responsibility for escalat- ing potentially material risks to the BRC when appropriate. The Group Risk Management function maintains a consolidated risk register of enterprise-level risk. Corporate Governance report 2023 7 Risks within the scope of accountability for the Group function, market area and business area are identified in a bottom-up risk identification process. The relevant business leadership team and other personnel in the unit, supported by the unit enterprise risk manager, identify and consider risks including material Group-level risks. Material risks are then escalated to the BRC in accordance with the Material Group Risk Protocol. In a parallel top-down risk identification, the Group Risk Management function collaborates with the Strategy Unit and coordinates with senior management and outside experts to identify and define the risks Ericsson faces. Risk analysis focuses on the impact of an identified risk across four dimensions: (1) finan- cial impact, (2) strategic impact, (3) occupational health and safety impact, and (4) reputational impact. Each unit’s key risks are documented in the ERM risk register, based on risk ownership, alignment with managerial responsibility and functional responsibility. The Group Risk Management function analyzes the risks in Ericsson’s risk register to identify possibilities for consolidating risks across units based on commonalities such as overlap- ping mitigation plans or root causes. The Group Risk Management function also confirms the consolidation with Enterprise Risk Managers for applicable units, which are responsible for further analysis and mitigation of identified risks. Further Details on Risk Mitigation For all material risks in each unit’s risk register, management considers risk mitigation options. These options may include risk responses or other actions, such as avoiding or accepting the risk, mitigating the probability or impact of the risk, transferring the risk management or potential impact to a third party, or increasing strategic business risk in order to pursue an opportunity. Based on the specific response, a manage- ment plan and course of action for keeping the probability and impact within the Company’s risk appetite is defined and described. After implementation of the risk management plan, its effectiveness is assessed on an ongoing basis to facilitate corrective actions when appropriate. Communication and Reporting Risk Communication Effective communication is important to enable employees to share information, collaborate, and support each other in managing risks in the business. The enterprise risk management community 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, chaired by the Head of Group Risk Management and in which all enterprise risk managers participate. Risk Reporting The enterprise 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. The Heads of market areas and business areas report on the material risks to their business on a quarterly basis to the BRC. The Head of Group Risk Management consolidates and summarizes the risks reported to the BRC in a Group risk report on a quarterly and annual basis. Monitoring The Group Risk Management function monitors the efficiency and effectiveness of the ERM Framework. This is done with the help of a risk management tool and through self-assessments, as well as by providing assessment requirements regarding risk management to the ISO 9001 internal assessment process and follow up on the internal assessment results. The Group Risk Management function also reviews internal and external audit results to address identified weak- nesses as part of the continuous improvements of the ERM framework. ERM Process Group Risk Management Risk Assessment Top down Risk Identification Group Risk Consolidation Material Group Risks Group Function/Market area/Business area Scope Definition Bottom up Risk Identifi cation Risk Analysis Risk Evaluation Risk Treatment Risk Sign-off Ericsson Business and Financial Planning Process 8 Corporate Governance report 2023 – Approval of a share issue of and authorization to the Board to buy back 4,100,000 shares for the LTV 2021 and LTV 2022. The minutes from the AGM 2023 are available on Ericsson’s website at https://www.ericsson. com/en/about-us/corporate-governance/share- holder-meetings/annual-general-meeting-2023. For the AGM 2024, Ericsson plans to publish the detailed results of the resolutions at AGM 2024 as voting units will be used for all resolu- tions. Note that Ericsson has not published the detailed results of the resolutions at AGM 2023 as historically it has only used voting units for qualified majority resolutions. Nomination Committee A Nomination Committee is appointed each year by the major shareholders in accordance with the Instruction for the Nomination Committee adopted by the AGM. The Instruction for the Nomination Committee includes the tasks of the Nomination Committee and the procedures for appointing its members. The Instruction applies until the AGM resolves otherwise. Under the Instruction, the Nomination Committee shall consist of representatives of the four largest shareholders by voting power by the end of the month in which the AGM was held, and the Chair of the Board of Directors. The Nomination 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 reasonable expenses related to the assignment of the Nomination Committee. Members of the Nomination Committee The current Nomination Committee members are: – Johan Forssell (appointed by Investor AB), Chair of the Nomination Committee. – Bengt Kjell (replaced Karl Åberg on November 30, 2023) (appointed by AB Industrivärden). – Anders Oscarsson (appointed by AMF Tjänstepension and AMF Fonder). – Christer Gardell (appointed by Cevian Capital Partners Limited). – Jan Carlson (the Chair of the Board of Directors). 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 the case of a resolution on amendments to the articles of association or a 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 Kista, Stockholm. The date and venue for the meeting are announced on the Ericsson website no later than 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 shareholders 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 simultane- ously translated into English. Documentation provided by the Company is available in both Swedish and English. The AGM gives attending shareholders the opportunity to raise questions relating to the operations of the Group. Normally, the majority of the members of the Board of Directors and the Executive Team are present to answer such questions. The external auditor is present at the AGM. Ericsson’s AGM 2023 Including shareholders represented by proxy, 2,537 shareholders were represented at the AGM held on March 29, 2023, representing approxi- mately 70% of the votes. The AGM 2023 was held in Kista, Stockholm. The shareholders were also able to exercise their voting rights by post before the meeting. In addition to the shareholders, the meeting was attended by members of the Board of Directors, members of the Executive Team, members of the Nomination Committee and the external auditor. Decisions of the AGM 2023 included: – Discharge of Carolina Dybeck Happe and Annika Salomonsson from liability for the financial year 2022. Shareholders represent- ing more than 85% of the Company’s share capital also voted for discharging from liability for each of the other members of the Board and the Company’s President and CEO for the financial year 2022. More than 10% voted against such discharging. – Payment of a dividend of SEK 2.70 per share to be paid in two installments. – Election of Jan Carlson as new Chair of the Board of Directors. – Re-election of the following members of the Board of Directors: Jon Fredrik Baksaas, Jan Carlson, Carolina Dybeck Happe, Eric A. Elzvik, Börje Ekholm, Kristin S. Rinne, Helena Stjernholm and Jacob Wallenberg. – New election of the following members of the Board of Directors: Jonas Synnergren and Christy Wyatt. – Approval of Board of Directors’ fees, in accordance with the Nomination Committee’s proposal: – Chair: SEK 4,500,000 (previously SEK 4,375,000) – Other non-employee Board members: SEK 1,140,000 each (previously SEK 1,100,000) – Chair of the Audit and Compliance Committee: SEK 495,000 (previously SEK 475,000) – Other non-employee members of the Audit and Compliance Committee: SEK 285,000 each (previously SEK 275,000) – Chairs of the Finance Committee, the Remuneration Committee and the Enterprise and Technology Committee: SEK 210,000 each (previously SEK 205,000) – Other non-employee members of the Finance Committee, the Remuneration Committee and the Enterprise and Technology Committee: SEK 185,000 each (previously SEK 180,000) – Approval for part of the Board members’ fees to be paid in the form of synthetic shares. – Re-appointment of Deloitte AB as auditor for the period up until the end of the AGM 2024 and approval of the auditor fee. – Implementation of the Long-Term Variable Compensation Programs (LTV) I and II 2023, including a share issue of and authorization to the Board to buy back 5,900,000 shares for the LTV II 2023. 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 Nomination Committee. Further infor- mation is available on Ericsson’s website. Corporate Governance report 2023 9 The tasks of the Nomination Committee The main task of the Nomination Committee is to propose Board members for election by the AGM. As a member of the Nomination Committee, the Chair of the Board of Directors fulfils an impor- tant role in keeping the Nomination Committee informed of the Company’s strategy and future challenges. Such insights are necessary for the Nomination Committee to be able to assess the competence and experience that is required by the Board. In addition, the Nomination 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 Board mem- bers elected by the AGM and remuneration of the auditor. – Appointment of auditor, whereby candidates 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 2024 The Nomination Committee started its work by reviewing the list of its duties under the Code and the Instruction for the Nomination Committee and by setting a timeline for its work. The com- plete proposals of the Nomination Committee were presented in connection with the notice convening the AGM 2024. A thorough understanding of Ericsson’s busi- ness and strategy is important for the Nomination Committee. To facilitate this, both the Chair of the Board and the President and CEO presented their views to the Nomination Committee on the Company’s strategy and challenges. The Nomination Committee has analyzed the required competencies in the Board and has considered 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 Code, section 4.1, as diversity policy. The Nomination Committee aims to propose a composition of Board members with complementing experiences and competencies to make it possible for the Board to contribute to the positive development of Ericsson. The Nomination Committee searches for potential Board member candidates with both a long-term and a short-term perspective and always focuses on diversity to facilitate the inclusion of different perspectives into the Board work and considera- tions. The Nomination Committee also considers the need for renewal and carefully assesses whether the proposed Board members have the capability to devote necessary time and care to the Board’s work. In 2023, 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 regarding 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 28, 2024, the Nomination Committee has held four meetings. Board of Directors The Board of Directors is ultimately responsible for the organization of Ericsson and the man- agement of Ericsson’s operations. The Board appoints the President and CEO, who is respon- sible for managing the day-to-day operations in accordance with guidelines from the Board. The President and CEO updates the Board regularly on issues of importance to Ericsson, including matters of business development, results, finan- cial position and liquidity. Board members 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 as a Director of the Board (and Börje Ekholm is currently a Director) but may not be elected Chair of the Board under the Swedish Companies Act. Conﬂicts of interest Ericsson maintains rules and procedures regard- ing conflicts of interest. Ericsson employees are required to promptly disclose any situations that may constitute a conflict of interest and are asked periodically to certify that they have disclosed any relevant situations. Board members 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 trans- actions. The Audit and Compliance Committee has also implemented 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 Board members elected by the shareholders at the AGM 2023 for the period until the close of the AGM 2024. The Board of Directors also consists of three employee representatives and three deputies, appointed by the trade unions for the same period of time. The Nomination Committee advised before the AGM 2023 that it had applied the Code, section 4.1, as diversity policy with the aim to propose a composition of Board members with complementing experiences and competencies The Board’s annual work cycle 2023 The annual cycle applied to the Board’s work allows the Board to appropriately address its duties during the year. It also facilitates the organization in aligning its global processes to allow appro- priate 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 Q4 Dec Jan Q1 Nov Feb Oct Sep Mar Apr Board meeting (incl. statutory matters) First interim report meeting – Q1 Financial report Aug May Q3 Jul Jun Q2 Strategy meeting Strategy meeting Second interim report meeting – Q2 Financial report – Financial outlook 10 Corporate Governance report 2023 that is also diverse in terms of age, gender and cultural/geographical background. The current Board composition is the result of the work of the Nomination Committee prior to the AGM 2023. The Board consists of Board members with experiences from different cultural/geographic areas, competencies from different industry sectors and, excluding the President and CEO, 44% of the shareholder-elected Board members are women. 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 formally 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, US Securities and Exchange Commission (SEC) rules and the Nasdaq Stock Market Rules as a foreign private issuer. Ericsson can rely on exemptions from certain US and SEC requirements and may decide to follow Swedish practices in lieu of some Nasdaq Stock Market independence rules. The composition of the Board of Directors meets all applicable independence criteria. The Nomination Committee concluded before the AGM 2023 that, for purposes of the Code, at least seven of the nominated Board members were independent from Ericsson, its senior management and its major shareholders. These were Jon Fredrik Baksaas, Jan Carlson, Carolina Dybeck Happe, Eric A. Elzvik, Kristin S. Rinne, Jonas Synnergren and Christy Wyatt. 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 Board members. 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 conference, and resolutions may be taken per capsulam (unanimous written consent). Such resolutions are accounted for as Board/Committee meetings. The 2023 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 that focused on the financial results of the entire year 2022 and handled the fourth-quarter financial report. – Board meeting (including statutory matters) A Board meeting was held in connection with the AGM 2023. Members of each of the Board Committees were appointed and the Board resolved on signatory powers. – First interim report meeting 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 particu- lar strategic matters in further detail. At Board meetings where the Board members – Second interim report meeting meet in person, a non-executive session is normally held without Ericsson management present. At the second interim report meeting, the Board addressed the interim financial report for the second quarter of the year and the financial outlook. – Strategy meeting A Board meeting was held, in essence dedi- cated to short-term and long-term strategies of the Group, with particular focus on merger and 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. – Financial targets meeting A Board meeting was held for the Board to address the financial targets. At this meeting, the results of the Board evaluation were presented to and discussed by the Board. Training New Board members 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-dive sessions into issues of importance for the Group, including business area and market area deep-dive sessions. Board members’ knowledge in these fields is crucial to allow well-founded Board resolutions, and to allow the Company to take due advantage of the different competencies of the Board members. Auditor involvement At the AGM 2023, 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 observations. The auditor provides reports to management 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 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 Organization of the Board work Number of Committee members as of December 31, 2023 Board of Directors 13 Board members Audit and Compliance Committee (4 Board members) Finance Committee (4 Board members) Oversight of ﬁnancial reporting Finance strategy Oversight of internal control Oversight of auditing Oversight of the Group’s Ethics and Compliance program Oversight of risk management Remuneration Committee (4 Board members) Guidelines for remuneration to Group management Long-Term Variable Remuner ation Executive remuneration Enterprise Business and Technology Committee (4 Board members) Enterprise business and technol- ogy strategy and planning Technology ecosystem and partnerships Science direction Corporate Governance report 2023 11 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 2023 In 2023, the Board held 27 meetings. For attend- ance at Board meetings, see the table on page 13. In addition to the Board meetings 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, key customer transactions, ethics and compliance, geopolitics and regula- tory matters, are among the matters that have been in focus with the Board during the year. Compliance, strategy and risk management are always high on the Board’s agenda as well as S&CR, which are integrated into the business strategy. The Board continuously monitors inter- national developments and their possible impact on Ericsson. Board work evaluation A key objective of the Board work evaluation is to ensure that the Board is functioning effectively. This includes gaining an understanding of the issues that the Board thinks warrant greater focus, as well as determining areas where addi- tional competence is needed within the Board and whether the Board composition is appropri- ate. 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 corporate advisory firm have been retained by the Company to assist in developing questionnaires, carrying out surveys and summarizing responses. In 2023, Board members responded to a written questionnaire covering the Board’s 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 Enterprise Business and Technology Committee. In addition, each Director responded to a questionnaire on the Director’s individual performance. As part of the evaluation process, the Chair of the Board also had individual discussions with each of the Board members. The results from the evaluations were presented to the Board and were thor- oughly discussed. The Nomination Committee was informed of the results of the Board work evaluation. 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 Enterprise Business and Technology Committee. Members of each Committee are appointed for one year from among the Board members. The main task of the Committees is, and the Board has authorized each Committee, to provide focused Board oversight on their relevant subject matters, and to review such matters prior to any resolution by the Board. The Board may also, on occasion, resolve on an extended authorization for one or several Committee(s) to resolve on additional specific matters outside of the ordinary authorization. If deemed appropri- ate, 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 Board members 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 correctness of the financial statements – Compliance with legal and regulatory requirements – Internal control over financial reporting – Risk management – The effectiveness, appropriateness and implementation of the Group’s compliance programs, including the 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 Members of the Committees as of December 31, 2023 Members of the Committees of the Board of Directors 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. The Head of Ericsson´s internal audit function has in camera sessions with the Audit and Compliance Committee without the presence of anyone from the management and unrestricted access to the Audit and Compliance Committee in her discre- tion and at least quarterly. 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 and auditor fees for resolution by the AGM. It also monitors the ongoing performance and independence 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 CLO, the Chief Compliance Officer and the Head of Corporate and Government Investigations. The CLO has a direct reporting line to the Audit and Compliance Committee on compliance matters that fall outside the scope of the E&C Program, and on the holistic management of legal, compliance, ethical and associated reputational risks arising in the Company’s operations. In addition to reporting to the CLO, the Chief Compliance Officer has a further independent reporting line to the Audit and Compliance Committee on the areas of the E&C Program. The Chief Compliance Officer regularly reports to the Audit and Compliance Committee on the effective operation of the E&C Program, including information of actual or suspected serious CoBE violations, insights from investigations outcomes and remedia- tion activities, the identification of patterns of failures, and emerging risks and changes in the legal and regulatory environment. Such reports enable proper oversight over the identification of emerging risks or risk patterns and the adequacy of corresponding activities to prevent, detect and remediate such risks in a risk appropriate manner. In addition to the above, the Chief Compliance Officer has in camera sessions with the Audit and Audit and Compliance Committee Finance Committee Remuneration Committee Eric A. Elzvik (Chair) Jon Fredrik Baksaas Annika Salomonsson Jonas Synnergren Jan Carlson (Chair) Ulf Rosberg Helena Stjernholm Jacob Wallenberg Jan Carlson (Chair) Kristin S. Rinne Kjell-Åke Soting Jonas Synnergren Enterprise Business and Technology Committee Jon Fredrik Baksaas (Chair) Ulf Rosberg Kristin S. Rinne Christy Wyatt 12 Corporate Governance report 2023 Compliance Committee, without the presence of anyone from the management, and unrestricted access to the CEO as well as to the Audit and Compliance Committee in their discretion and at least quarterly. However, the Audit and Compliance Committee has met more frequently with the Chief Compliance Officer over the course of 2023. The Head of Corporate and Government Investigations has an extraordinary reporting line to the Audit and Compliance Committee in the event she is impeded or obstructed in fulfilling 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 cybersecurity as well as data privacy, and the Group’s ESG reporting and performance. On an annual basis, the Audit and Compliance Committee receives training on topics of special relevance to the Audit and Compliance Committee, within areas such as finance, legal, compliance and security. During 2023, the Audit and Compliance Committee received training on several topics, including accounting principles, tax and specifically Base Erosion and Profit Shifting (BEPS), Digital Finance (including AI), ESG reporting and compliance with sustainability- related regulation. 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 2023: Eric A. Elzvik (Chair), Jon Fredrik Baksaas, Annika Salomonsson (replaced Torbjörn Nyman on July 31, 2023) (employee representative) and Jonas Synnergren. 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 Eric A. Elzvik is an “audit committee financial expert”, as defined under the SEC rules and regulations, and that he qualifies as financially sophisticated under the applicable Nasdaq listing rules and is familiar with the accounting practices of an international company, such as Ericsson. Work of the Audit and Compliance Committee in 2023 The Audit and Compliance Committee held 13 meetings in 2023. Board members’ attend- ance is reflected in the table on page 13. During the year, the Audit and Compliance Committee reviewed the scope and results of external financial audits and the independence of the external auditor. Prior to publishing, the Audit and Compliance Committee also reviewed and discussed each interim report and the annual report with the external auditor. The Audit and Compliance Committee also monitored the exter- nal audit fees and approved non-audit services performed by the external auditor in accordance with such policies and procedures. The Audit and Compliance 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 Audit and Compliance Committee also received and reviewed updates and reports to the Ericsson Compliance Line and from other internal report- ing channels, including updates on-going investi- gations within the Group. The Audit and Compliance Committee monitored the continued compliance with the Sarbanes-Oxley Act as well as the internal control and risk management process and monitored and evaluated the effectiveness and appropriateness of Ericsson’s E&C Program. In 2023, the Audit and Compliance Committee also reviewed and approved the double materiality analysis which will underpin Ericsson’s future reporting. Finance Committee The Finance Committee is responsible for prepar- ing for resolution by the Board, matters related to the finance strategy, such as capital structure, capital targets, funding strategy and treasury operations. Members of the Finance Committee The Finance Committee consists of four Board members appointed by the Board in connection with the AGM 2023: Jan Carlson (Chair), Ulf Rosenberg (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 2023 The Finance Committee held five meetings in 2023. Board members’ attendance is reflected in the table on page 13. During 2023, the Finance Committee assessed the Company’s financial 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 responsibilities include: – Reviewing and preparing, for resolution by the Board, proposals on salary and other remu- neration, including retirement compensation, 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 compen- sation, 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 consid- ers 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 2023 consists of four Board members: Jan Carlson (Chair), Kristin S. Rinne, Jonas Synnergren and Kjell-Åke Soting (employee representative). The Board has appointed shareholder elected Board members to the Committee with experiences from different markets of relevance to the Group. During the year 2023, Peter Boreham from Mercer advised and assisted the Remuneration Committee as an independent expert. Work of the Remuneration Committee in 2023 The Remuneration Committee held 13 meetings in 2023. Director’s attendance is reflected in the table on page 13. The Remuneration Committee reviewed and prepared a proposal for LTV 2023 for the Executive Team, for resolution by the Board and further approval by the AGM 2023. It further approved salaries and STV 2023 for the members of the Executive Team (other than the President and CEO), reviewed the vesting results for LTV 2020 and result of the 2022 EBIT (Group operating income) performance condition for LTV 2022, and prepared proposals regarding remuneration to the President and CEO for resolution by the Board. It reviewed the implementation of Guidelines for remuneration to Group management in 2023. It also proposed the Remuneration Report 2022 to be approved by the Board and subsequently referred to the AGM 2023 for adoption. For further information on fixed and variable 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. Corporate Governance report 2023 13 The Enterprise Business and Technology Committee The responsibilities of the Enterprise Business and Technology Committee include: – Reviewing and preparing for consideration and/or resolution by the Board proposals on the enterprise business and technology matters of key importance to the Board of Directors. – Reviewing and preparing for consideration and/or resolution by the Board proposals for overall direction of the technology and indus- try strategy for the Group to ensure technology leadership and world class R&D. – Reviewing and preparing for consideration and/or resolution by the Board, matters related to science direction and influence on a geopolitical level. The Committee changed name and scope in April 2023. The Committee was previously known as Technology and Science Committee and had less focus on Enterprise Business aspects. Members of the Enterprise Business and Technology Committee The Enterprise Business and Technology Committee consists of four Board members appointed by the Board in connection with the AGM 2023: Jon Fredrik Baksaas (Chair), Kristin S. Board members’ attendance and fees 2023 Rinne, Christy Wyatt and Ulf Rosberg (employee representative). The Board has appointed Board members to the Committee with extensive experi- ence within technology. Work of the Enterprise Business and Technology Committee in 2023 The Enterprise Business and Technology Committee held four meetings in 2023. Board members’ attendance is reflected in the table below. The Enterprise Business and Technology Committee has, during the year, reviewed selected focus areas from technology, business and market perspectives: – Radio and core network evolution – Enterprise networking and security solutions – Application programming interfaces (API) for telecom networks – Artificial Intelligence – Ericsson Research and Development status and direction Remuneration to Board members Remuneration to non-employee Board members is proposed by the Nomination Committee for resolution by the AGM. The AGM 2023 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 2023, please refer to Notes to the consolidated financial statements – note G2 “Information regarding members of the Board of Directors and Group management” in the Financial Report. The shareholders at the AGM 2023 also approved the Nomination Committee’s proposal 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 that corresponds to the market value of a Class B share in Ericsson at the time of payment. The Board members’ 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 Board members’ interests with shareholder interests. For more information on the terms and conditions of the synthetic shares, please refer to the notice convening the AGM 2023 and to the minutes from the AGM 2023, which are available at Ericsson’s website. Board member Jan Carlson Jacob Wallenberg Jon Fredrik Baksaas Nora Denzel 4) Carolina Dybeck Happe Börje Ekholm Eric A. Elzvik Kurt Jofs 4) Ronnie Leten 4) Kristin S. Rinne Helena Stjernholm Jonas Synnergren 5) Christy Wyatt 5) Torbjörn Nyman 6) Anders Ripa 7) Ulf Rosberg 8) Kjell-Åke Soting Annika Salomonsson 9) Loredana Roslund Frans Frejdestedt 10) Stefan Wänstedt 10) Total number of meetings Fees resolved by the AGM 2023 Number of Board/Committee meetings attended in 202311) Board fees, SEK 1) Committee fees, SEK Audit and Compliance Committee Finance Committee Board Remuner- ation Com- mittee Enterprise Business and Technology Committee 4,500,000 1,140,000 1,140,000 – 1,140,000 – 2) 1,140,000 – – 1,140,000 1,140,000 1,140,000 1,140,000 25,500 3) 23,250 3) 54,750 3) 54,750 3) 54,750 3) 54,750 3) 29,250 29,250 420,000 185,000 495,000 – – – 495,000 – – 370,000 185,000 470,000 185,000 11,700 3) 6,900 3) 9,000 20,400 3) 14,400 – – – 27 25 27 6 27 25 27 9 9 25 27 19 19 14 13 27 27 27 27 13 13 27 3 9 13 3 10 7 8 13 4 5 1 5 2 3 5 9 4 4 4 9 9 11 13 1 3 1 4 3 2 2 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 2,250 per attended Board meeting and SEK 1,800 per attended Committee meeting. Until March 2023, the compensation was SEK 1,500 per attended Board meeting and SEK 1,500 per attended Committee meeting. 4) Resigned from the Board of Directors in connection with the AGM held on March 29, 2023. 5) Elected member of the Board of Directors at the AGM held on March 29, 2023. 6) Resigned as employee representative Board member as of July 31, 2023. 7) Resigned as employee representative Board member as of July 4, 2023. 8) Appointed employee representative Board member as of July 4, 2023, previously deputy employee representative Board member. 9) Appointed employee representative Board member as of July 31, 2023, previously deputy employee representative Board member. 10) Appointed deputy employee representative Board members as of September 1, 2023. 11) This table reﬂects the attendance of Board members who are formal members of the Committee at the relevant Committee meetings. 14 Corporate Governance report 2023 Members of the Board of Directors Board members elected by the AGM 2023 Jan Carlson Chair of the Board of Directors since 2023, Chair of the Finance Committee and of the Remuneration Committee Jacob Wallenberg Deputy Chair of the Board of Directors, Member of the Finance Committee First elected 2017 Born 1960 Education Master of Science degree in Engineering Physics and Electrical Engineering, Linköping University, Sweden. Nationality Sweden Board Chair Autoliv Inc. Board Member AB Volvo Holdings in Ericsson 7,900 Class B shares 1) and 34,041 synthetic shares 2) Principal work experience and other information Chair and President and CEO of Veoneer Inc. (2018-2022). 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. Honorary Doctor at the Technical faculty of Linköping University. 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 and the Confederation of Swedish Enterprise Deputy Board Chair ABB Ltd., FAM, Patricia Industries and Wallenberg Investments AB Board Member The Knut and Alice Wallenberg Foundation Holdings in Ericsson 427,703 Class B shares 1) and 34,041 synthetic shares 2) 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 Management School. Jon Fredrik Baksaas Chair of the Enterprise Business and Technology Committee, Member of the Audit and Compliance Committee First elected 2017 Born 1954 Education Master of Science in Economics (Siviløkonom), NHH Norwegian School of Economics and Business Administration, Norway. Carolina Dybeck Happe Member of the Board First elected 2022 Born 1972 Education Master of Science in Business and Economics, Uppsala University, Sweden. Nationality Norway Board Chair DNV GL Group AS Nationality Sweden Board Chair – Board Member Svenska Handelsbanken AB Board Member – Board Member – Board Member Board Member Landis+Gyr Group AG and AB Volvo Synchronoss Holdings in Ericsson 25,391 synthetic shares 2) 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). Holdings in Ericsson 36,100 Class B shares 1) and 10,003 synthetic shares 2) Principal work experience and other information SVP of GE since 2020, CFO of GE (2020 – 2023). Group CFO of A.P. Moller - Maersk A/S (2019–2020). Group CFO of ASSA ABLOY (2012–2018) as well as CFO for Europe, the Middle East and Africa (2007–2011) and CFO for Central Europe (2002–2006). Group CFO of Trelleborg Group (2011–2012). CFO of Establish (2000–2002). Various positions at EF Education First (1996–1999). President, CEO and Member of the Chair of the Audit and Compliance Member of the Remuneration Member of the Finance Committee Kristin S. Rinne Helena Stjernholm Committee and of the Enterprise Business and Technology Committee Börje Ekholm First elected Board 2006 Born 1963 Education INSEAD, France. Nationality Sweden and USA Board Chair Trimble Inc. Eric A. Elzvik Committee First elected 2017 Born 1960 Education Nationality Sweden and Switzerland Board Chair Global Connect Group and Deutsche Glasfaser Group First elected 2016 Born 1954 Education Nationality USA Board Chair – First elected 2016 Born 1970 Education Nationality Sweden Board Chair – Master of Science in Electrical Master of Business Administration, Bachelor of Arts, Washburn Engineering, KTH Royal Institute of Stockholm School of Economics, University, USA. Technology, Stockholm, Sweden. Sweden. Master of Business Administration, Master of Business Administration, Stockholm School of Economics, Sweden. Holdings in Ericsson Holdings in Ericsson 260,351 Class B shares, 1,009,000 10,000 Class B shares 1) ADS 1) and 2,000,000 call options 3) and 11,345 synthetic shares 2) 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 Holdings in Ericsson 16,913 synthetic shares 2) Principal work experience and other information Previously Senior Vice President, Network Technology, Network Industries, a division within Investor Discrete Automation & Motion AB (2015–2017). President and CEO (2010–2012) and division CFO of Investor AB (2005–2015). Former Automation Products Division (2007–2014). CTO of Cingular Wireless (2005–2007) and VP Technology and New Product Partners (2008–2015). Investment Manager at IK Investment Partners (1998–2008). Previous experience Head of Investor Growth Capital (2006–2010). Previous positions Development of Cingular Wireless as consultant for Bain & Company Inc. and New Investments. Previous within the ABB Group since 1984, (2000–2005). Previous positions (1997–1998). Architecture and Planning, at AT&T the private equity ﬁrm IK Investment Industrivärden since 2015. Partner in Board Member AB Industrivärden, AB Volvo and Sandvik AB Holdings in Ericsson 20,000 Class B shares 1) and 22,693 synthetic shares 2) Principal work experience and other information President and CEO of AB positions at Novare Kapital AB and including senior management within Southwestern Bell and SBC McKinsey & Co Inc. Holds honorary positions within ﬁnance, M&A and (1976–2000). Trustee of Washburn Doctorate at KTH Royal Institute of new ventures. Currently, senior University Foundation. Member of Technology, Sweden. Since 2017, industrial advisor to EQT. the Advisory Board of Link Labs. Honorary Doctorate of Science, Washburn University, USA. 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. The Board memberships and holdings in Ericsson reported above are as of December 31, 2023. 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 13 for further information. Corporate Governance report 2023 15 Jan Carlson Jacob Wallenberg Jon Fredrik Baksaas Carolina Dybeck Happe Chair of the Board of Directors since Deputy Chair of the Board of Directors, Chair of the Enterprise Business and Member of the Board 2023, Chair of the Finance Committee Member of the Finance Committee Technology Committee, Member of and of the Remuneration Committee the Audit and Compliance Committee Börje Ekholm President, CEO and Member of the Board Eric A. Elzvik Chair of the Audit and Compliance Committee Kristin S. Rinne Member of the Remuneration Committee and of the Enterprise Business and Technology Committee Helena Stjernholm Member of the Finance Committee 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 Trimble Inc. First elected 2017 Born 1960 Education Master of Business Administration, Stockholm School of Economics, Sweden. First elected 2016 Born 1954 Education Bachelor of Arts, Washburn University, USA. First elected 2016 Born 1970 Education Master of Business Administration, Stockholm School of Economics, Sweden. Nationality Sweden and Switzerland Board Chair Global Connect Group and Deutsche Glasfaser Group Nationality USA Board Chair – Nationality Sweden Board Chair – Board Member AB Volvo The Knut and Alice Wallenberg Svenska Handelsbanken AB Board Member Board Member Board Member – Board Member Landis+Gyr Group AG and AB Volvo Board Member Synchronoss Holdings in Ericsson 260,351 Class B shares, 1,009,000 ADS 1) and 2,000,000 call options 3) 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). Former 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. Holdings in Ericsson 10,000 Class B shares 1) and 11,345 synthetic shares 2) 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, M&A and new ventures. Currently, senior industrial advisor to EQT. Holdings in Ericsson 16,913 synthetic shares 2) Principal work experience and other information Previously Senior Vice President, Network Technology, Network Architecture and Planning, at AT&T (2007–2014). CTO of Cingular Wireless (2005–2007) and VP Technology and 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. Honorary Doctorate of Science, Washburn University, USA. Board Member AB Industrivärden, AB Volvo and Sandvik AB Holdings in Ericsson 20,000 Class B shares 1) and 22,693 synthetic shares 2) 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). Investment Manager at IK Investment Partners (1998–2008). Previous experience as consultant for Bain & Company (1997–1998). Master of Science degree in Bachelor of Science in Economics Master of Science in Economics Master of Science in Business and Engineering Physics and Electrical and Master of Business Administration, (Siviløkonom), NHH Norwegian Economics, Uppsala University, Engineering, Linköping University, Wharton School, University of School of Economics and Business Sweden. Pennsylvania, USA. Ofﬁcer of the Administration, Norway. First elected 2017 Born 1960 Education Sweden. Nationality Sweden Board Chair Autoliv Inc. First elected 2011 Born 1956 Education First elected 2017 Born 1954 Education Nationality Norway Board Chair Investor AB and the Confederation of DNV GL Group AS Reserve, Swedish Navy. Nationality Sweden Board Chair Swedish Enterprise Deputy Board Chair Board Member Foundation ABB Ltd., FAM, Patricia Industries and Wallenberg Investments AB First elected 2022 Born 1972 Education Nationality Sweden Board Chair – – Holdings in Ericsson Holdings in Ericsson Holdings in Ericsson 7,900 Class B shares 1) and 34,041 427,703 Class B shares 1) and 34,041 25,391 synthetic shares 2) synthetic shares 2) Principal work experience and other information synthetic shares 2) Principal work experience and other information Principal work experience and other information Holdings in Ericsson 36,100 Class B shares 1) and 10,003 synthetic shares 2) Principal work experience and other information Chair and President and CEO of Chair of the Board of Investor AB since President and CEO of Telenor Group SVP of GE since 2020, CFO of GE Veoneer Inc. (2018-2022). President 2005. President and CEO of SEB in 1997 (2002–2015). Previous positions (2020 – 2023). Group CFO of A.P. and CEO of Autoliv Inc. (2007– and Chair of SEB’s Board of Directors within the Telenor Group since 1989, Moller - Maersk A/S 2018) and Chair of Autoliv Inc. since (1998–2005). Executive Vice President including Deputy CEO, CFO and CEO (2019–2020). Group CFO of ASSA 2014. Previous positions within the and CFO of Investor AB (1990–1993). of TBK AS. Positions before Telenor ABLOY (2012–2018) as well as Autoliv Group since 1999, including Honorary Chair of IBLAC (Mayor of include CFO of Aker AS, ﬁnance CFO for Europe, the Middle East and President Autoliv Europe, Vice Shanghai’s International Business director of Stolt Nielsen Seaway AS Africa (2007–2011) and CFO for President Engineering of Autoliv Leaders Advisory Council) and member and controller at Det Norske Veritas, Central Europe (2002–2006). and President Autoliv Electronics. of the steering committee of the Norway and Japan. Member of the Group CFO of Trelleborg Group Previous positions include President European Round Table of Industrialists, GSMA Board (2008–2016) and Chair (2011–2012). CFO of Establish of Saab Combitech and of Swedish Deputy Chair of the Swedish-American of the GSMA Board (2014–2016). (2000–2002). Various positions at EF Education First (1996–1999). Gate Array. Honorary Doctor at Chamber of Commerce US, member the Technical faculty of Linköping of the International Advisory Board of University. the Atlantic Council, Washington DC, member of the International Business Council of the World Economic Forum, Trilateral Commission and the Advisory Board of Tsinghua Management School. The Board memberships and holdings in Ericsson reported above are as of December 31, 2023. 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 13 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). 16 Corporate Governance report 2023 Board members elected by the AGM 2023, cont’d. Jonas Synnergren Member of the Audit and Compliance Committee and of the Remuneration Committee Christy Wyatt Member of the Enterprise Business and Technology Committee First elected 2023 Born 1977 Education Master of Science in Business and Economics, Stockholm School of Economics, Sweden Nationality Sweden Board Chair – Board Member Nordea Oyj Holdings in Ericsson – Principal work experience and other information Senior Partner at Cevian Capital AB since 2020. Various positions within Cevian Capital AB since 2007, including Head of Cevian’s Swedish ofﬁce since 2012. Various positions at The Boston Consulting Group AB (2000–2006). First elected 2023 Born 1972 Education Diploma, Scientiﬁc Computer Programming Technology, College of Geographic Sciences, Canada Nationality Canada and USA Board Chair – Board Member Silicon Laboratories Inc. and Absolute Software Corporation Holdings in Ericsson – Principal work experience and other information President and CEO Absolute Software since 2018, which was recently taken private 4). President and CEO of DTEX Systems (2016–2018). President and CEO (2013–2015) as well as Chair (2014–2015) of Good Technology (now BB). Global Head, Consumer eBusiness and Mobile Technology at Citigroup (2012). Various positions at Motorola (2005–2011), including SVP, Ecosystem and GM, Enterprise Business. Director, Developer Relations at Apple (2003–2005). Various positions at Palm (1999–2003), at Sun Microsystems JavaSoft (1995–1999) and at Esri (1994–1995). Member of the Board in Quotient (2018–2022). Ronnie Leten, Nora Denzel and Kurt Jofs resigned from the Board of Directors in connection with the AGM 2023 on March 29, 2023. Börje Ekholm was the only Director who held an opera- tional management position at Ericsson in 2023. The Board memberships and holdings in Ericsson reported above are as of December 31, 2023. 4) Completion of the take-private acquisition of Absolute Software by an afﬁliate of Crosspoint Capital Partners was announced on July 27, 2023. Corporate Governance report 2023 17 Board members and deputies appointed by the trade unions Ulf Rosberg Employee representative since July 4, 2023 (former Deputy), Member of the Finance Committee and of the Enterprise Business and Technology Committee First appointed 2021 Born 1964 Appointed by PTK Nationality Sweden Holdings in Ericsson 110 Class B shares 1) Employed since 1985 Working as System Developer within R&D, Business Area Networks Kjell-Åke Soting Employee representative, Member of the Remuneration Committee Annika Salomonsson Employee representative since July 31, 2023 (former Deputy), Member of the Audit and Compliance Committee First appointed 2016 Born 1963 Appointed by PTK Nationality Sweden Holdings in Ericsson 10,065 Class B shares 1) Employed since 1996 Working as Global SQA Manager within Business Area Networks First appointed 2022 Born 1972 Appointed by LO Nationality Sweden Holdings in Ericsson 1,998 Class B shares 1) Employed since 1997–2003 and since 2005. Working as Veriﬁcation Engineer Loredana Roslund Employee representative – Deputy Frans Frejdestedt Employee representative – Deputy since September 1, 2023 Stefan Wänstedt Employee representative – Deputy since September 1, 2023 First appointed 2017 Born 1967 Appointed by PTK Nationality Sweden Holdings in Ericsson 2,422 Class B shares 1) Employed since 1994 Working as Project Manager within R&D, Business Area Networks First appointed 2023 Born 1979 Appointed by PTK Nationality Sweden Holdings in Ericsson – Employed since 2008 Working as R&D manager within Business Area Cloud Software and Services First appointed 2023 Born 1964 Appointed by LO Nationality Sweden Holdings in Ericsson 3,235 Class B shares 1) Employed since 1999 Working as a Senior Researcher 1) The number of shares reﬂects ownership as of December 31, 2023 and includes holdings by related persons, if applicable. Anders Ripa was employee repre- sentative until July 4, 2023. Torbjörn Nyman was employee representative until July 31, 2023. 18 Corporate Governance report 2023 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 Executive Team members are pre- sented on pages 20–24. The Executive Team is responsible for: – Defining Group strategies and policies, driv- ing the corporate strategy and establishing and maintaining the corporate culture. – Group-wide oversight and ensuring an effective framework for risk management and decision-making (including through the implementation of effective governance, a strong compliance program and related internal controls). – Managing and executing on “central” corporate matters (ranging from managing Ericsson’s capital structure, financing and other corporate transactions, listing compli- ance and disclosure obligations). – Group financial management and report- ing (including determining targets for operational units, allocating resources and monitoring market area and business area performance). – Leading on operational excellence, perfor- mance management and realizing global synergies through efficient organization of the Group. Guidelines for remuneration to Group manage- ment were approved by the AGM 2023 and are expected to remain in place until the AGM 2027. For further information on fixed and var- iable remuneration, see the Remuneration Report and note G2, “Information regarding members of the Board of Directors and the Group management” in the Financial Report. Organizational Structure Ericsson’s organizational structure is summa- rized above in “Governance Structure and Core Values – Governance Structure” at pages 3–5. 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. Audits, assessments, and certiﬁcation The purpose of assurance activities, such as audits and assessments, is to determine the level of compliance and to provide valuable information for understanding, analyzing, and continually improving performance, to ensure that the Ericsson Group Management System (EGMS) is adequate and effective in managing Ericsson´s operations. Management monitors compliance 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 stakeholders, Ericsson takes conscious deci- sions on certification. Certification means that Ericsson’s interpretation of standards or requirements are confirmed by a third party via an assessment activity. ISO certificates are issued by a third-party certification body proving that the system is efficient throughout the operations as well as compliant to the ISO standards in scope. Ericsson’s operations are currently certified to ISO 9001 (Quality), ISO 14001 (Environment), ISO 45001 (Health and 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). Through 2022, ISO/management system assessments were performed by BSI (British Standards Institution). In 2023, the assessment was performed by DNV (Det Norske Veritas). 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, including rules with which suppliers to the Ericsson Group must comply. Ericsson’s external finan- cial 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. The Ericsson Group Management System To ensure transparency and consistency across the organization regarding operational expec- tations and requirements relating to govern- ance, decision-making and risk management, among other things, Ericsson maintains the EGMS. EGMS ensures that selected ISO stand- ards and certifications are effectively main- tained and that the Company’s operations are continually evaluated and improved. EGMS is founded on ISO 9001 (inter- national standard for quality management systems) and is designed as a dynamic system to enable Ericsson to adapt to evolving demands and expectations, including new Organizational Structure CEO Business Areas Networks Cloud Software & Services Technologies & New Businesses Enterprise Wireless Solutions Global Communications Platform Other Group Functions Finance & Common Functions Legal Affairs & Compliance Technology & Strategy Global Operations People Marketing & Corporate Relations Market Areas North America Europe & Latin America Middle East & Africa South East Asia, Oceania & India North East Asia Corporate Governance report 2023 19 and changing regulation and legislation as well as customers’ and other stakeholders’ requirements. As noted, Group-wide policies, directives and instructions govern how the organization works, and Ericsson’s approach to risk management is summarized in the section titled “Risk Management”. Further, Ericsson maintains specific accounting and reporting procedures to fulfill external report- ing requirements. Ericsson’s strategy process includes the whole chain from business intelligence and strategic forecasting to deployment of devel- oped strategies into targets and programs in coordinated cycles, capturing the overall strategic direction, market development and progress of strategy execution. Ericsson busi- ness 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 busi- ness processes offer capabilities to translate customer requirements into defined hardware, software, solutions, and services offered by Ericsson. Cybersecurity Cybersecurity Risk Management and Strategy Every year Ericsson identifies and manages numerous cyber-attack attempts, vulner- abilities, and cybersecurity incidents. In 2023, Ericsson detected and resolved cybersecurity incidents effectively, none were considered to be material. Ericsson faces certain ongoing risks from advanced threat actors that, if real- ized and not timely detected and mitigated, are reasonably likely to materially affect the Company, including its operations, business strategy, results of operations, or financial condition. See Risk Factor 4.1. Ericsson has developed and implemented cybersecurity programs intended to protect the confidentiality, integrity, and availability of its critical systems and information as well as its products and services. Ericsson is globally certified to ISO/ECN 27001 for Information Security Management Systems (ISMS), which is integrated into the EGMS and encompasses Ericsson’s security requirements, including for third parties, as well as practices to assess security posture and performance. Ericsson has a central threat intelligence team and multiple security risk managers responsible for assessing security threats and vulnerabilities and identifying cybersecurity risks, including third party risks. Ericsson’s Cyber Defense Center works to monitor, detect, respond, and limit any cyber- security attacks from expanding in severity or scale. The incident management team is operational 24/7 and includes security and computer forensics specialists responsible for escalating and investigating incidents. If needed, business continuity plans are in place to help recover from the effects of a cybersecurity incident. Internal adherence to frameworks and processes is achieved through quantitative and qualitative measurements, including regular external and internal audits, and regularly recurring training, including on security awareness. To secure Ericsson’s products and services, Ericsson’s Security Reliability Model (SRM) mandates product and feature risk assess- ments, secure design, secure coding principles, use of analysis tools, and supply-chain security requirements to avoid vulnerabilities. To mitigate security risks, Ericsson maintains a catalogue of externally developed components or code used in its products and thorough test- ing is performed to ensure high product quality. Continuous training is provided to the work- force about the SRM and its included tasks and activities. The Product Security Incident Response Team (PSIRT) coordinates remedia- tion for customers affected by vulnerabilities or security incidents in Ericsson products, and actively monitors vulnerabilities in third-party software and alerts the relevant product development organization. Ericsson’s product development and lifecycle processes have been successfully audited to GSMA Network Equipment Security Assurance Scheme since 2020. Several products are also externally evaluated against 3GPP Security Assurance Specification. Ericsson’s cybersecurity programs do not imply that it meets technical specifications or requirements at all times, but that the afore- mentioned frameworks help to identify, assess, and manage cybersecurity risks relevant to its business. Cybersecurity Governance The Board considers cybersecurity risks as part of its risk oversight function and has delegated the specific oversight of cybersecurity risks to the ACC, which receives regular briefings from the Chief Security Officer (CSO) on cybersecu- rity matters. Ericsson’s President and CEO sets the overall direction for cybersecurity by approving its Security Strategy and its Security Policy. In addition, the Executive Team regularly receives briefings on cybersecurity risks, posture, investments and strategy execution and has established, the Group Enterprise Security and Privacy Board (GESB), which manages the oversight of enterprise security, including cybersecurity, and privacy. The Chair of GESB is the COO, and GESB’s agenda is driven by the CSO. GESB assembles executives and other senior business leaders a minimum of five times a year to review, recommend and endorse high-level security plans and monitor risks and security strategy execution. Ericsson’s cybersecurity program is under the direction of the CSO, who is responsible for enterprise security and reports to the COO. The CTO is responsible for Product Security and Privacy and has delegated the handling of security requirements, standards and architecture, related to product development and product management to the Chief Product Security Officer (CPSO). The respective Group function, market area and business area head is responsible for the implementation of security controls into Ericsson’s business processes and operations, which is mandated by the CSO, the CTO or the CPSO, or through local laws, regulations or cus- tomer requirements. The CSO and the CPSO regularly receive briefings and reports from the business areas, market areas and relevant Group functions on identified cybersecurity risks, vulnerabilities, and posture. Maj.Gen.(Ret) Fredrik Robertsson serves as Ericsson’s CSO and Head of Group Security. His diverse experience includes former roles at the Swedish Armed Forces Headquarters, such as Director of Plans, Chief Information Officer, and CISO, which included directing and developing the Swedish Armed Forces’ cyber capability and cyber defense. He holds a Mas- ter of Science degree in Political Science with a specialization in Security Studies. Additionally, Maj.Gen.(Ret) Robertsson has been an active member of the Swedish Contingencies Agency Cyber Security Council and serves as a board member for Sectra AB. Mikko Karikytö is Ericsson’s CPSO and Head of Product Security and was previously Head of Network Security and Head of Product Security Incident Response Team. Additionally, Mr. Karikytö is engaged in industry collaboration through organizations like ETIS (a collabora- tion community for the European Telecom industry), Forum of Incident Response and Security Teams, and EU Commission work groups. He has provided subject matter expertise for committee hearings of the UK parliament and the German Bundestag in connection with 5G security. 20 Corporate Governance report 2023 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) MajBritt Arfert Senior Vice President, Chief People Ofﬁcer (CPO) (since 2017) Yossi Cohen Senior Vice President Market Area North America (since February 2024) Functions President and CEO and Head of Segment Enterprise Functions Head of Business Area Networks and Head of Segment Networks Functions Head of Group Function People Functions Head of Market Area North America Born 1963 Born 1969 Born 1963 Born 1971 Education Master of Science in Electrical Engineering, KTH Royal Institute of Technology, Sweden. Master of Business Administration, INSEAD, France. Education Master of Science in Economics and Business Administration, Stockholm School of Economics, Sweden. Education Bachelor of Human Resources, University of Gothenburg, Sweden. Education Bachelor of Business Administration, University of West London. Diploma in Electronic Technical Engineering from Mosenson Elite academy, Israel. Nationality Sweden and USA Nationality Sweden Board Member: Telefonaktiebolaget LM Ericsson and Trimble Inc. (Chair) Board Member Teknikföretagen and the Confederation of Swedish Enterprise Nationality Sweden Board Member – Nationality Israel and USA Board Member MediaKind Holdings in Ericsson 1) 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 Ericsson 1) 74,126 Class B shares. Holdings in Ericsson 1) 53,218 Class B shares. Holdings in Ericsson 1) - 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. 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 Communications at Sony Ericsson Germany. Background Until January 31, 2024, Head of Strategy, Technology, Marketing and Business Development of Ericsson North America. Previous management positions within Ericsson Business Area and Market Area organizations include Head of Customer Unit Verizon in USA , Global Head of Radio Sales and Business Management in Sweden, Head of Global Customer Unit Softbank based in Japan, Key Account Manager Bezeq Group and CTO for Ericsson Israel. Previous positions outside Ericsson include roles in telecommunication technology-centric startup as well as mobile operator. The Ericsson holdings reported above are as of December 31, 2023. 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). Corporate Governance report 2023 21 Scott Dresser Senior Vice President, Chief Legal Ofﬁcer, and secretary of the Board of Directors of Telefonaktiebolaget LM Ericsson (since 2022) Erik Ekudden Senior Vice President, Chief Technology Ofﬁcer (CTO) (since 2018) Moti Gyamlani Senior Vice President, Group Function Global Operations (since 2022) Functions Head of Group Function Legal Affairs and Compliance Functions Head of Group Function Technology Functions Head of Group Function Global Operations Niklas Heuveldop Senior Vice President, Business Area Global Communications Platform and CEO of Vonage (since February 2024), Head of Market Area North America (2017–January 2024) Functions Head of Business Area Global Communications Platform and CEO of Vonage Born 1967 Born 1968 Born 1973 Born 1968 Education Juris Doctorate, Vanderbilt University Law School, Bachelor of Science Business Administration and Finance, University of New Hampshire, USA. Nationality USA Board Member BirdLife International, Cambridge UK; member of Advisory Board Holdings in Ericsson 1) – Background Previously Group General Counsel at VEON and General Counsel of Virgin Media. Has held senior leadership positions with BirdLife International, White Mountains Re and Conservation International. Started professional career in New York in private practice with law ﬁrms Lord Day & Lord and Morgan Lewis, and specialized in corporate law, governance, and M&A. Education Master of Science in Electrical Engineering, KTH Royal Institute of Technology, Sweden. Education Master of Business Administration, Arizona State University, USA, and Bachelor of Mechanical engineering, MIT, India. Education Master of Science in Industrial Engineering and Management, Linköping Institute of Technology, Sweden. Nationality Sweden Board Member ASSA ABLOY AB Nationality USA Board Member – Holdings in Ericsson 1) 32,594 Class B shares and 9,857 ADS. 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 vice chairman of IVA’s Näringslivsråd. Holdings in Ericsson 1) 4,877 Class B Shares Background Head of Group Sourcing (2019– 2022). Previous position as Chief Procurement and Supply Chain Ofﬁcer and Chief Cost Transformation Ofﬁcer of Airtel (2012–2019). Leadership positions include Group Vice President Global Supply Chain and Sourcing at General Electric Power Conversion, Vice President Global Sourcing at Honeywell, and Executive Director at General Motors. Lived and worked in multiple countries and markets, including USA, France, Mexico, and India. Board advisor to eSmartMobility. Nationality Sweden Board Member The Swedish-American Chamber of Commerce New York and CTIA – US wireless industry trade association Holdings in Ericsson 1) 82,729 Class B shares and 14,744 ADS. Background Head of Market Area North America (2017 until January 31, 2024), Chief Strategy Ofﬁcer and Head of Group Function Technology and 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. The Ericsson holdings reported above are as of December 31, 2023. 1) The number of shares and ADS includes holdings by related persons, if applicable. 22 Corporate Governance report 2023 Members of the Executive Team, cont’d. Chris Houghton Senior Vice President, Chief Operating Ofﬁcer (COO), Business Area Technology & New Businesses (since November 2023), Market Area North East Asia (2017–February 2024) Functions Head of Business Area Technology & New Businesses and Chief Operating Ofﬁcer Jenny Lindqvist Senior Vice President, Market Area Europe and Latin America (since February 2023) 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 Market Area Europe and Latin America Functions Head of Group Function Marketing and Corporate Relations Functions Head of Group Function Finance and Common Functions Born 1966 Born 1982 Born 1969 Born 1964 Education Bachelor of Law, Huddersﬁeld Polytechnic, United Kingdom. Education Master of Science in Business and Economics, Stockholm School of Economics, Sweden. Education Bachelor 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 United Kingdom and Sweden Board Member – Nationality Sweden Board Member TechSverige Nationality United Kingdom Board Member – Nationality Sweden Board Member International Chamber of Commerce (ICC) Sweden and Grönskär Gruppen AB Holdings in Ericsson 1) 96,963 Class B shares. Holdings in Ericsson 1) 824 Class B shares. Holdings in Ericsson 1) 8,126 Class B shares. Holdings in Ericsson 1) 94,856 Class B shares. Background Head of Market Area North East Asia (2017 until February 25, 2024). 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. Background Head of Northern and Central Europe within Market Area Europe and Latin America. Previous management positions within Ericsson Business Area and Market Area organizations include Head of Global Customer Unit Telia Company, Head of Solution Line Intelligent Transport Systems, Key Account Manager Telenor, Managed Services Engagement Lead and Business Manager Multimedia. Previous positions outside Ericsson include roles in management consulting in France and Sweden, as well as in Pharmaceuticals in the Philippines. 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, Chief Marketing Ofﬁcer at Red Bee Media, which was acquired by Ericsson in May 2014. Has over 25 years of marketing experience in major IT, telecoms and media companies including two years at Technicolor as VP Marketing and 10 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 defense industry. The Ericsson holdings reported above are as of December 31, 2023. 1) The number of shares and ADS includes holdings by related persons, if applicable. Corporate Governance report 2023 23 Nunzio Mirtillo Senior Vice President, Market Area South East Asia, Oceania and India (since 2017) George Mulhern Former Senior Vice President, Business Area Enterprise Wireless Solutions and CEO of Cradlepoint (2022–October 2023) Per Narvinger Senior Vice President, Business Area Cloud Software and Services (since 2022) Chaﬁc Nassif Senior Vice President, Market Area North East Asia (since February 2024) Functions Head of Market Area South East Asia, Oceania and India Functions Former Head of Business Area Enterprise Wireless Solutions and CEO of Cradlepoint Functions Head of Business Area Cloud Software and Services and Head of Segment Cloud Software and Services Functions Head of Market Area North East Asia Born 1961 Born 1956 Born 1974 Born 1981 Education Master in Electronic Engineering, Sapienza University, Italy. Education Bachelor of Science and Master of Business Administration, San Jose State University (USA). Education Master of Science in Electrical Engineering, KTH Royal Institute of Technology, Sweden. Education Master of Science in ICT Entrepreneurship and Master of Science Wireless Systems, KTH Royal Institute of Technology, Sweden. Nationality Italy Board Member – Nationality USA Board Member Regence Blue Shield of Idaho, Cambia Health Solutions and Focus IP, Inc. dba Tracer. Nationality Sweden Board Member – Nationality Sweden Board Member – Holdings in Ericsson 1) 83,276 Class B shares. Holdings in Ericsson 1) – Holdings in Ericsson 1) 9,070 Class B shares. Holdings in Ericsson 1) 5,944 Class B shares 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 CEO of Cradlepoint when it was acquired by Ericsson in 2020. Previously general partner at Highway 12 Ventures, a venture capital ﬁrm making investments in early-stage technology companies. Held various leading positions during a long tenure at Hewlett Packard Company, including senior vice president, leading the LaserJet Global Business Unit. Background Head of Product Area Networks, Business Unit Networks (2018– 2022). Head of Customer Unit Northern and Central Europe, Market Area Europe and Latin America (2017–2018). Has held a variety of senior management positions in Ericsson since 1997, spanning R&D line management, Head of Customer Solutions (Australia and Spain) and Product Management. Background Previously Head of Customer Unit North Latin America & Caribbean within Market Area Europe & Latin America with responsibility across 41 countries. Has held various senior positions in Ericsson spanning over four continents, including President and Board Member of Ericsson Taiwan, Key Account Manager in Germany, VP Business Development and Head of TV & Enterprise Segments for Global Customer Unit Vodafone based out of the UK, and Head of TV & Media Sales for EMEA. Prior to Ericsson, he held roles in consulting and business development in the technology industry in Sweden and the Nordics. The Ericsson holdings reported above are as of December 31, 2023. 1) The number of shares and ADS includes holdings by related persons, if applicable. 24 Corporate Governance report 2023 Members of the Executive Team, cont’d. Fadi Pharaon Senior Vice President, Market Area Middle East and Africa (since 2019) Functions Head of Market Area Middle East and Africa Rory Read Former Senior Vice President, Business Area Global Communications Platform and CEO of Vonage (2022–February 2024) Åsa Tamsons Senior Vice President, Business Area Enterprise Wireless Solutions and CEO of Cradlepoint (since November 2023). Functions Former Head of Business Area Global Communications Platform and CEO of Vonage Functions Head of Business Area Enterprise Wireless Solutions and CEO of Cradlepoint Born 1972 Born 1961 Born 1981 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. Nationality Sweden and Lebanon Board Member – Holdings in Ericsson 1) 355 Class B shares and 1,206 ADS. Background Vice President of Networks and Managed Services (presales and commercial management) within Market Area Europe and Latin America. Previous management positions within Ericsson include Head of Presales and Strategy for Ericsson Region South East Asia and Oceania, and Country Manager for Ericsson Singapore and Brunei. Education Bachelor of Information Sciences, Hartwick College, New York, USA. Education Master of Business Administration, Stockholm School of Economics, Sweden. Nationality USA Board Member – Nationality Sweden Board Member CNH Industrial Holdings in Ericsson 1) 56,614 Class B shares. Holdings in Ericsson 1) 35,756 Class B shares. Background Has more than three decades of global technology industry experience and became CEO of Vonage in July 2020. Vonage was acquired by Ericsson in July 2022. Previously, was Chief Operating Executive of Dell Technologies, CEO and President of Dell’s Virtustream, and EVP of Dell Boomi. Also served as Chief Integration Ofﬁcer of the USD 67 billion merger of Dell and EMC. Earlier, was CEO, President and Board member of Advanced Micro Devices and Chief Operating Ofﬁcer and President at Lenovo following 23 years at IBM. Background Head of Business Area Technology and New Businesses (2018 until November 2023). IPR & Licensing (November 2018–November 2023), Group Strategy & M&A (April 2018- March 2020). 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 USA, Brazil, France, Sweden and Singapore. Changes in the Executive Team during 2023 and 2024 Effective February 1, 2023, Jenny Lindqvist was appointed new Senior Vice President and Head of Market Area Europe and Latin America, replacing Stefan Koetz. Åsa Tamsons was appointed Head of Business Area Enterprise Wireless Solutions and CEO of Cradlepoint replacing George Mulhern, who left his position to become advisor to Business Area Enterprise Wireless Solutions. Effective November 1, 2023, Chris Houghton was appointed Chief Operating Ofﬁcer includ- ing Head of Business Area Technology & New Businesses. Effective February 1, 2024, Niklas Heuveldop was appointed Head of Business Area Global Communications Platform and CEO of Vonage replacing Rory Read, who left his position on February 1, 2024. Effective February 1, 2024, Yossi Cohen was appointed Senior Vice President and Head of Market Area North America replacing Niklas Heuveldop. Effective February 26, 2024, Chaﬁc Nassif was appointed Senior Vice President and Head of Market Area North East Asia replacing Chris Houghton. The Ericsson holdings reported above are as of December 31, 2023. 1) The number of shares and ADS includes holdings by related persons, if applicable. Corporate Governance report 2023 25 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 2023 for a period of one year, i.e., until the close of the AGM 2024. Deloitte AB has appointed Thomas Strömberg, Authorized Public Accountant, to serve as auditor in charge. 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 require- ments 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 report- ing and to meet the requirements of SOX, the Company has implemented detailed documented controls and testing, and report- ing procedures based on the internationally established 2013 COSO framework for inter- nal control. The COSO framework is issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Man- agement’s internal control report, according to SOX, will be included in Ericsson’s Annual Report on Form 20-F and filed with the SEC. 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 activi- ties, information and communication and monitoring. The control framework is updated regularly to reflect items such as relevant changes in processes, tools usage, outcome of risk assess- ments and changes in legislation. Continuous enhancements 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. Control environment The Company’s internal control structure is based on the division of tasks between the Board of Directors, 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 and regulations, including 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. For larger acquisitions, the main finance functions and the control execution of the acquired entity remain at the entity and enter into close col- laboration with the Group finance functions. 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. In the financial closing and reporting process there are controls regarding recognition, measure- ment, and disclosure. These include the application of critical accounting policies and estimates, in individual subsidiaries as well as in the consolidated accounts. 26 Corporate Governance report 2023 Regular analyses of the financial results for each subsidiary, region and business unit cover the significant elements of assets, liabilities, revenues, costs and cash flow. Together with further analysis of the consolidated financial statements performed at Group level, these procedures are designed to ensure 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 or opera- tional units. Detailed process controls and documentation of controls 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, governance and risk management in the areas of legal entity accounting and taxation, as well as securing funding and equity levels, the Com- pany operates through Company Control and Business Shared Services Hubs/Centers, cover- ing 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. 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 management, and relate to corruption, questionable accounting, deficiencies in the internal control of accounting or auditing mat- ters, or otherwise seriously affect vital interests of the Group or personal health and safety. 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 includes comprehensive information about the Group, including an archive of annual and interim reports and access to recent news. Disclosure controls and procedures Ericsson has controls and procedures in place to allow for timely disclosure in accordance with applicable laws and regulations, includ- ing the (EU) Market Abuse Regulation, 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 also has an Insider Committee, which makes 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. 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. 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, 2023. Corporate Governance report 2023 27 Monitoring The Company’s process for financial reporting is reviewed annually by management. This forms a basis for evaluating the internal man- agement system and internal steering docu- ments 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 (and of the companies handled outside 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 Commit- tees of the Board fulfill important monitoring functions regarding remuneration, loans, investments, customer finance, cash manage- ment, 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 5, 2024 Telefonaktiebolaget LM Ericsson (publ) Org. no. 556016-0680 28 Corporate Governance report 2023 Auditor’s report on the Corporate Governance statement 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 govern- ance statement for the financial year January 1, 2023 – December 31, 2023 on pages 1-28 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 5, 2024 Deloitte AB Thomas Strömberg Authorized public accountant Remuneration report Part of Ericsson Annual Report 2023 Annual Report 2023 Financial report Corporate Governance report Remuneration report Sustainability and Corporate Responsibility report ericsson.com Contents Remuneration report 2023 Introduction from the Chair of the Remuneration Committee Introduction Remuneration 2023 at a glance Total remuneration to the President and CEO and Executive Vice President Variable remuneration Short-term variable compensation (STV) Long-term variable compensation (LTV) Information on guidelines for shareholdings by Executive Team Deviations from adopted Guidelines for remuneration to Group Management Comparative information on changes in remuneration and the Company’s performance 1 2 3 5 6 6 6 10 10 11 The report has been prepared in accordance with Chapter 8, Sections 53a and 53b of the Swedish Companies Act (2005:551) and the Rules on Executive Remuneration and Incentive Schemes (January 1, 2021) administered by the Swedish Stock Market Self- Regulation Committee. Information required by Chapter 5, Sections 40–44 of the Annual Accounts Act (1995:1554) is included in note G1–G4 in the Financial report. Information on the work of the Remuneration Committee in 2023 can be found on page 12 in the Corporate Governance report. Remuneration report 2023 1 Remuneration report 2023 Introduction from the Chair of the Remuneration Committee On behalf of the Board, I am pleased to present Ericsson’s Remuneration report for the finan- cial year 2023. The Remuneration report describes how the Guidelines for Remunera- tion to Group Management, adopted at the Annual General Meetings in 2020 and 2023, have been complied with in 2023. The Remu- neration report also contains information on the long-term variable remuneration programs for 2023 for executives and the Executive Team. Ericsson is executing on a strategy to achieve a higher growth trajectory to be a more profitable company. This is achieved by combining technology and innovation with operational excellence, top talent and a strong culture. Remuneration is a key strategic lever to drive execution of our strategy. Ericsson can only achieve its long-term targets under strong leadership, consisting of individuals with a wide range of backgrounds, skills, and abili- ties. This requires that the Company attracts, retains and motivates the right people and offers globally competitive remuneration. That is why Ericsson’s remuneration philosophy and practices are based on the principles of competitiveness, fairness, transparency and impact. The overall aim is to create long-term value for shareholders in order to realize the Company’s strategy and sustainable long-term interests, including consideration of a defined Ethics & Compliance criteria. The Guidelines for Remuneration to Group Management (including both the guidelines approved by the Annual General Meeting 2020 and the guidelines amended and approved by the Annual General Meeting 2023) have steered the Remuneration Committee’s work. Remuneration during the year was determined and paid in accordance with the Guidelines. In the annual review of total remuneration, each remuneration element (at target level) has been compared with the external local and global markets where Ericsson competes for employees. In response to investor feedback for 2024, the remuneration package for the President and CEO will include a short-term incentive (STV) component which aligns with the Remuneration Guidelines. The Remuneration Committee and the Board evaluate the effectiveness of the long-term variable remu- neration programs for the Executive Team and executives yearly. In addition, the Committee has evaluated the potential to increase the long-term focus of the Executive Team and to ensure it is in line with the long-term expecta- tions and interests of shareholders. The long- term variable remuneration programs were introduced in 2017 for the Executive Team. The one-year performance condition regarding the Group’s operating income (EBITA) was added in the 2018 year LTV program. In LTV 2022, the LTV plan for the Executive Team was further strengthened by introducing the ESG related targets, namely reduction of CO2 emissions and increase of female leaders. After evaluating the current long-term vari- able remuneration programs and taking into account feedback from investors, as well as the fact that 50% of Ericsson’s LTV program is based on company performance over a 3 year performance period, the Remuneration Com- mittee and the Board have resolved to propose a 2024 long-term variable remuneration program for the Executive Team and Executives to the Annual General Meeting 2024. The proposed 2024 LTV remuneration program is similar to the 2023 long-term variable remuneration program. The aim is to further strengthen Ericsson’s commitment to long- term sustainability and responsible business practices. Finally, I would like to extend the Remu- neration Committee’s appreciation to the Executive Team and all employees worldwide for Ericsson’s performance during the year. Thank you, everyone! Jan Carlson Chair of the Remuneration Committee 2 Introduction This Remuneration report provides a summary of how the Guidelines for Remuneration to Group Management (the “Guidelines”) of Telefon- aktiebolaget LM Ericsson (“Ericsson” or the “Company”), adopted by the Annual General Meeting 2020 (applicable until March 28, 2023) and by the Annual General Meeting 2023 (applicable from March 29, 2023), have been complied with during the financial year 2023. The report also contains infor- mation on the total remuneration, including fixed and variable remuneration, of Ericsson’s President and CEO and Executive Vice President. In addition, the report contains a summary of the Company’s current short-term and long-term variable remuneration programs for the Executive Team. During 2023, the Board of Directors proposed amended Guidelines, which were approved by the Annual General Meeting 2023. The 2023 Guidelines are intended to remain in place for four years until the Annual General Meeting 2027. The remuneration of the President and CEO and the Executive Vice P resident disclosed in the report represents their total remuneration, regardless of whether it is paid through the Company or by another group company. The Guidelines, adopted by the Annual General Meeting 2023, can be found on pages 27–29 of the Financial report. The Auditors’ report on the Company’s compliance with the Guidelines is available on Ericsson’s web- site, www.ericsson.com. This report does not include remuneration to the Board of Directors. Board remuneration is approved annually by the Annual General Meeting and is disclosed in Note G2 on pages 73–74 of the Financial report for 2023. Summary Information on Ericsson’s performance during the financial year is included in the Financial report 2023. As part of Ericsson’s business strategy implementation and safeguarding the sustainable long-term interests of the Company, Ericsson must attract, retain, and motivate employees with the right skills and offer them competitive remuneration. Long-term shareholder value creation and performance-based remuneration are the basis for remuneration at Ericsson. The Guidelines aim to ensure that remuneration is consistent with Ericsson’s current remuneration philosophy and practices for the Company’s employees based on the princi- ples of competitiveness, fairness, transparency, and performance. The main objectives of the Guidelines are to: – attract and retain highly competent, performing, and motivated people who 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 appro- priate 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 for Ericsson. The Guidelines also aim to enable the Company to offer attractive and glob- ally competitive total remuneration to the Executive Team. According to the Guidelines, the remuneration to the Executive Team must be in line with market conditions and should consist of the following components: fixed salary, variable remuneration, pension and other bene- fits. In addition to remuneration covered by the Guidelines, the shareholders have decided to implement long-term variable remuneration (“LTV”) pro- grams. The LTV 2021, LTV 2022 and LTV 2023 programs are still ongoing. In 2023, there has been one deviation from the Guidelines (see section “Deviations from adopted Guidelines for remuneration to Group Manage- ment”). There has been no clawback of remuneration in 2023. In 2023, the following key decisions were made by the Remuneration Committee and the Board of Directors regarding remuneration: – The achievement for LTV 2021 was set at 100% of target, based on pre-determined performance conditions: group operating income and relative and absolute total shareholder return (TSR). Remuneration report 2023 – The level of achievement of the performance condition for the Group’s operating income for LTV 2023 was set at 0%. – To include STV in the remuneration package for the President and CEO from January 1, 2024 in alignment with the Remuneration Guidelines and in direct response to investor feedback. Börje Ekholm was appointed as CEO of Ericsson on January 16, 2017, and since then, his compensa- tion structure has been base salary, pension allowance and long-term variable compensation. The current business strategy is focused on a combination of short-, mid- and long-term achievements on leadership in mobile networks, focused expansion into enterprise and to establish lasting cultural transformation. The external market typically offers CEOs a combination of long-term and short-term variable pay. From January 1, 2024, the variable compensation for the President and CEO, will be 50% target opportunity for short-term variable pay and 150% target opportunity for long-term variable pay i.e., total 200% of annual base pay. This is an increase in the total variable pay at target opportunity from 190% to 200% of annual base salary compared with 2023. – To further drive accountability throughout the organization, all employees who are eligible for an STV pay-out may be denied all or part the entitle- ment if they act in breach of Ericsson’s Code of Business Ethics (CoBE). In addition, top executives are subject to evaluation according to a set of pre-defined integrity criteria, which relate to compliance training, third party management, allegation management and other items tied to the Company’s Ethics and Compliance Program (E&C). Underperformance against these pre-defined criteria can reduce STV pay-out by up to 100%, while exceptional performance may justify an additional incentive of up to a maximum of 10% of the executive’s annual base salary. The Remuneration Committee and the Board of Directors continuously evaluate the effectiveness of the LTV programs in achieving the objective of supporting the Company’s strategic goals and sustainable long-term interests. In addition, the LTV programs potential to increase the long-term focus of the Executive Team and to link their interests with the long-term expectations and interests of shareholders is evaluated. – After evaluating the ongoing LTV programs for the Executive Team, the Remuneration Committee and the Board of Directors concluded that the ongoing LTV programs for 2021 and 2022, as well as the completed programs for 2018, 2019 and 2020, enabled the Company to attract, retain and motivate Executives and offer them globally competitive remuneration. Although the performance condition for the Group’s operating income (EBITA) has a one-year performance period, it has a three-year vesting period which is the same as the vesting period of the performance conditions relating to absolute and relative Total Shareholder Return (TSR), which is in line with the objectives of the LTV programs. This means that participants cannot redeem any of the Per- formance Share rights granted before the end of the three-year vesting period and that participants are fully exposed to share price movements during the three-year period. – LTV programs for 2018, 2019, 2020, 2021 and 2022 have supported the long-term targets, and the Remuneration Committee and the Board of Directors proposed at the Annual General Meeting 2023 to approve an LTV program to the Executive Team with the same structure as previ- ous LTV programs with targets to further strengthen Ericsson’s and the Executive Team’s commitment to long-term sustainability and responsi- ble business practices. – Also, for 2024 the Remuneration Committee and the Board of Directors propose to include other Executives in LTV 2024 in order to be covered by a plan that delivers in shares. This is to further reinforce the alignment between shareholders and Group Management. In addition to complying with its formal legal and regulatory obligations with respect to trading restrictions, from time to time the Company may elect to temporarily restrict trading in Ericsson shares by board members, the Execu- tive Team or the Company as a prudential measure. Remuneration report 2023 3 Remuneration 2023 at a glance Total remuneration The table below summarizes how the remuneration elements set out in the guidelines have been applied in relation to the President and CEO and the Executive Vice President (EVP). The table also summarizes information on renumeration as approved by the shareholders. Purpose and link to strategy Arrangement in brief Fixed salary Attract and retain the executive talent required to implement Ericsson’s strategy. Pay a portion of the annual remuneration in a predictable manner. Deliver part of the annual compensation in a predictable format. Salaries are normally reviewed to be effective in January, taking into account: – Ericsson’s overall business performance – The business performance of the unit that the employee manages – Employee performance over time – External economic conditions – The scope and complexity of the position – External market data – Pay and conditions of other employees in countries considered relevant to the role. When determining ﬁxed salaries, the impact on total remuneration must also be taken into account. Implementation during the ﬁnancial year ending December 31, 2023 President and CEO: ﬁxed annual salary of SEK 18,799,636 corresponding to an increase of 3% since 2022. EVP and Head of Business Area Networks: ﬁxed annual salary of SEK 9,280,189, corresponding to an increase of 7% since 2022. Other beneﬁts Attract and retain the executive talent required to implement Ericsson’s strategy. Beneﬁts are aligned with competitive market practices in the individual’s country of employment. President and CEO: other beneﬁts to the value of SEK 828,287. Deliver part of the annual compensation in a predictable format. EVP and Head of Business Area Networks: other beneﬁts to the value of SEK 28,600. The beneﬁts amount to a maximum of 10% of the annual ﬁxed salary for members the Executive Team in Sweden. Beneﬁts for members of the Executive Team on international long-term assignment (“LTA”) in a country other than the country of original employ- ment, are determined in line with the Company’s global policy on international mobility. Such bene- ﬁts may include, but are not limited to, commuting or moving expenses, increased cost of living, hous- ing costs, travel home, educational allowances, and tax and social security beneﬁts. Pension Provide long-term ﬁnancial security and planning for retirement by offering compet- itive pension solutions that are in line with local market practice. The pension plans follow competitive practices in the individual’s home country. The pension plans for the President and CEO and the EVP are deﬁned contribution plans. Company pension contributions: – President and CEO: SEK 10,151,804. – EVP and Head of the Networks Business Area: SEK 2,728,761. Short-term variable remuneration (STV) Setting clear and relevant objectives for the Executive Team that are in line with Ericsson’s strategy and sustainable long-term interest. Offer an individual earning opportunity linked to performance at a ﬂexible cost to the Company. The President and CEO’s compensation in 2023 did not include an STV component. For the Executive Vice President the target level is 50% of the ﬁxed salary, and the maximum is 100% of the ﬁxed salary. Performance conditions, weightings and target l evels are set annually. Subject to malus and clawback. Outcome for STV 2023: – EVP and Head of the Networks Business Area: 0% of the maximum level. Long-term variable remuneration (LTV) Creating a common ownership interest between Executive Team and shareholders. Remuneration is awarded after approval by the Annual General Meeting. LTV 2021 target achievement level of 100%. Remuneration based on long-term perfor- mance in line with Ericsson’s business strategy. Provide individuals with long-term remuner- ation for long-term commitment and value creation in accordance with the interests of shareholders. Remuneration levels are determined as a percent- age of the ﬁxed salary. – For the President and CEO, 190% of the fixed salary. – For the Executive Vice President, 50% of the fixed salary. Performance conditions, weightings and target levels are taken to the AGM for approval. Three- year vesting period. Subject to malus and clawback. 4 Remuneration report 2023 Remuneration earned in 2023 Börje Ekholm President and CEO Fredrik Jejdling EVP and Head of Business Area Networks and Head of Segment Networks Remuneration earned – Fredrik Jejdling SEK million SEK million 80 70 60 50 40 30 20 10 0 36.6 24.0 19.4 9.6 9.9 0.6 18.2 0.1 19.2 10.2 19.5 0.8 2021 2022 2023 40 35 30 25 20 15 10 5 0 4.1 4.3 6.7 9.1 0.0 2.7 5.1 6.3 9.5 2.4 2.7 10.2 0.0 0.0 0.2 2021 2022 2023 Fixed salary Beneﬁts Pension LTV Fixed salary Beneﬁts STV Pension LTV STV The information presented for 2023 covers the financial year 2023 and the information for 2022 and 2021 covers the financial years 2022 and 2021, respectively. LTV The information presented for 2023 includes information on the LTV 2021, which expired in 2023. Information presented for 2022 and 2021 includes information on LTV 2020 and LTV 2019 that expired in 2022 and 2021, respectively. Performance outcome in 2023 STV 2023 outcome 2023 Short Term Variable Compensation outcome LTV 2021 outcome 2020 Long Term Variable Compensation outcome LTV 2021 TSR development (2021–2023) vs peer group % 100 80 60 40 20 0 100 60 40 Opportunity 0 Outcome Fredrik Jejdling EVP and Head of Business Area Networks and Head of Segment Networks Economic Proﬁt: Business Area/Market Area as % of maximum opportunity Economic Proﬁt: Group as % of maximum opportunity Economic Proﬁt means operating income less cost of capital. % 100 80 60 40 20 0 100 20 30 50 50 50 0 Opportunity Outcome Relative TSR: As % of maximum opportunity Absolute TSR: As % of maximum opportunity Group Operating income (EBIT): As % of maximum opportunity % Motorola Solutions 132.52 IBM Cap Gemini CGI Group Juniper Cisco Systems 87.69 83.14 76.52 69.68 69.09 F5 Networks 33.47 Cognizant QUALCOMM Nokia Corning Ericsson 17.45 17.24 12.49 8.59 −41.06 –50–25 0 25 50 75 100 125 150 Absolute TSR –16,17% CAGR achieved vesting level 0.0% Relative TSR ranking below all companies in the peer group achieved vesting level 0.0% To support the execution of Ericsson’s business strategy and the achievement of the Group’s financial targets, the Company’s variable remunera- tion program focuses on targets related to financial profitability, the Group’s operating income (EBITA) and TSR. The variable remuneration is thus designed to create incentives to contribute to Ericsson’s short- and long-term strategic plan and business objectives. Remuneration report 2023 5 Total remuneration to the President and CEO and Executive Vice President The table below sets out the total remuneration in SEK between 2021 and 2023 for Ericsson’s President and CEO and Executive Vice President. Fixed remuneration Variable remuneration Financial year Fixed salary (including holiday pay) Other beneﬁts 1) One-year variable remune- ration 2) Multiannual variable remune- ration 3) Additional agree- ments 4) Pension 5) Total remuneration 6) Share of ﬁxed remuneration 7) Share of v ariable remuneration 8) 2023 2022 2021 2023 2022 2021 19,520,568 828,287 19,154,852 135,743 18,208,859 555,688 10,154,237 28,600 – 19,371,871 – 24,034,229 – 36,630,457 – 2,399,101 – 10,151,804 49,872,530 – 9,856,121 53,180,945 – 9,569,049 64,964,053 – 2,728,761 15,310,698 9,515,305 151,452 6,251,115 2,746,240 – 5,061,846 23,725,958 9,129,087 14,980 6,671,595 4,092,344 – 4,314,186 24,222,193 61% 55% 44% 84% 62% 56% 39% 45% 56% 16% 38% 44% Name and position Börje Ekholm President and CEO Fredrik Jejdling Executive Vice President and Head of Business Area Networks 1) For further information about other beneﬁts, see table regarding the implementation of ﬁxed remuneration and pension for the President and CEO and the Executive Vice President. 2) The amounts represent STV earned during the ﬁnancial year and paid in the following year, i.e., for 2023 the amounts represent STV 2023, for 2022, the amounts represent STV 2022 and for 2021, the amounts represent STV 2021. 3) Amounts represent LTVs for which all performance periods expired during the ﬁscal year. For 2023, the amounts represent LTV 2021, for 2022, the amounts represent LTV 2020 and for 2021, the amounts represent LTV 2019. For LTV 2019, LTV 2020 and LTV 2021, the amounts are calculated based on the number of Performance Shares that will vest during 2024 multiplied by the volume weighted average of the last ﬁve trading days of each ﬁnancial year. 4) Amounts represent additional discretionary arrangements approved by the Remuneration Committee or the Board of Directors and entered into during the ﬁnancial year. 5) Amounts represent cash payment in lieu of pension (for the President and CEO) or pension premium (for the Executive Vice President) paid during the ﬁnancial year. 6) The amounts represent the sum of ﬁxed remuneration, variable remuneration, additional agreements 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 agreements divided by total remuneration. Implementation of ﬁxed remuneration and pension for the President and CEO and the Executive Vice President The table below shows the implementation of fixed remuneration and pension for the President and CEO and the Executive Vice President. Fixed salary Other beneﬁts Pension Börje Ekholm President and CEO During the annual review of the total remuneration, the Board of Directors decided on a salary increase of 3% of the ﬁxed salary as of January 1, 2023 for the President and CEO. The increase reﬂects the performance of the President and CEO until the end of 2022. The ﬁxed salary level for 2023 is considered appropriate in relation to the responsibility of being the President and CEO of a leading global provider of ICT solutions, compared to the remuneration packages for the position of President and CEO of comparable international companies. According to the Company’s Swedish beneﬁts policy, Börje Ekholm is entitled to a company car or equivalent cash remunera- tion and other beneﬁts as other employees in Sweden. Since Börje Ekholm is a resident of the US, he is also eligible for health insur- ance in the US and tax advice regarding his tax return. Börje Ekholm receives a cash payment instead of a deﬁned contribution pension, as it is not possible to enroll him in the Swedish deﬁned contribution pension plan (ITP1) as he is a resident in the US. The cash payment is treated as salary for tax and social security purposes and is made in a way that is cost neutral for Ericsson. According to his employment contract, the pension supplement shall include an additional premium on top of the ﬁxed annual salary to take into account an assumed achieved target level of STV. Fredrik Jejdling Executive Vice President and Head of Business Area Networks The salary level reﬂects Fredrik Jejdling’s responsibility as head of Ericsson’s largest business area, Networks. The salary level is considered competitive in the external market for both other VPs on leading ICT solution providers and for the position of President and CEO of smaller companies. According to the Company’s Swedish beneﬁts policy, Fredrik Jejdling is entitled to a company car or equivalent cash remunera- tion and other beneﬁts as other employees in Sweden. In accordance with Ericsson’s pension guide- lines, Fredrik Jejdling participates in the ITP1 deﬁned contribution plan. He is also entitled to supplementary pension contribution at 30% of base salary parts exceeding the cap in ITP1 (30 income base amounts). 6 Remuneration report 2023 Variable remuneration Ericsson believes that, where possible, variable remuneration should be encouraged as an integral part of total remuneration. The aim is to link performance and pay by reconciling the employees’ interests with Ericsson’s strategic business objectives, sustainable long-term and relevant unit performance. All variable remuneration programs have defined maximum grant and vesting levels. The short-term variable remuneration depends on a combination of performance of the company at Group level and the relevant unit of the employee while the long-term variable remuneration depends on Ericsson’s performance at Group level. Short-term variable remuneration (STV) Annual short-term variable remuneration is paid through cash-based programs that depend only on financial performance targets. The con- crete business objectives are calculated on the basis of the annual busi- ness plan approved by the Board of Directors, which in turn is based on the Company’s long-term strategy. Ericsson strives for industry-leading operating margins and return on investment as well as good cash gen- eration, and therefore the starting point is to have a financial profitability target, which is a measure of operating profitability net of capital costs. The financial profitability targets are defined for the Executive Team: – At group level for heads of group functions – As a combination of group level and business area level for business area managers – As a combination of group level and market area level for market area managers. To further drive accountability throughout the organization, all employ- ees who are eligible for an STV pay-out may be denied all or part the entitlement if they act in breach of Ericsson’s CoBE. In addition, top executives are subject to evaluation according to a set of pre-defined integrity criteria, which relate to compliance training, third party man- agement, allegation management and other items tied to the Compa- ny’s E&C program. Underperformance against these pre-defined criteria can reduce STV pay-out by up to 100%, while exceptional performance may justify an additional incentive of up to a maximum of 10% of the executive’s annual base salary. The President and CEO’s compensation in 2023 did not include an STV component. The Remuneration Committee decides on and approves all objectives set for the other members of the Executive Team. These objec- tives are broken down into unit-related objectives across the Group, where applicable. The Remuneration Committee monitors the appropriateness and fairness of the target levels for the Group, Business Areas and Market Areas throughout the performance year and has the power to revise them if they are no longer relevant, or if they no longer contribute to shareholder value. The 2023 weighting for the Executive Vice President is made up of 40% Economic Profit for the Group and 60% Economic Profit for business area Networks. The tables below describe the STV 2023 outcome for the Executive Vice President, which is determined by evaluating performance against the applicable financial metrics. Executive Vice President and Head of Business Area Networks – Fredrik Jejdling (STV 2023) Performance measures Weighing Group Economic Proﬁt 1) Economic Proﬁt Business Area Networks 1) Total 40% 60% 1) Economic proﬁt means operating income minus cost of capital. Threshold level (in % of target) Target level Maximum level (in % of target) Outcome (% of target) SEK outcome at threshold performance SEK outcome at target performance SEK outcome at maximum performance SEK actual performance outcome 47% 0 77% 0 0 100% 1,856,038 100% 2,784,057 4,640,095 140% 3,712,076 115% 5,568,113 9,280,189 0% 0 0% 0 0 Long-term variable remuneration (LTV) The current LTV programs have been designed to encourage long- term commitment and value creation in line with Ericsson’s long-term strategic goals and shareholders’ interests. They form part of an overall remuneration package and normally extend over at least three years. As these are variable remuneration programs, it is not possible to predict the outcome when they are launched, and the remuneration depends on long-term personal commitment, the Company’s performance, the share price performance and the Company’s performance against relevant ESG (Environmental, Social, and Governance) metrics. The LTV programs launched at Ericsson consist of share-based remuneration for members of the Executive Team and Executives. The objective of the LTV programs is to attract, retain and motivate executives in a competitive market through performance-based and share-based incentives, and to encourage the building of a significant shareholding, in order to create a common ownership interest between the Executive Team and shareholders. Awards under LTV 2018, 2019, 2020, 2021, 2022 and 2023 (Performance Share Rights) are made free of charge and entitle participants, subject to the achievement of certain performance targets, to receive a number of shares free of charge after the expiry of a three-year vesting period for each program. Awards of shares under the Performance Share Rights are made upon the achievement of challenging performance conditions, which are defined for each year’s program at the time of its launch. The portion of the LTV Performance Share Rights that will potentially vest will be determined at the end of the relevant performance period based on whether the predefined criteria for this year’s LTV program have been met, with the performance period being one to three years. It is a general requirement that the participants remain employed for three years from the date of grant of the Performance Share Rights in order to be eligible to receive the outcome. Provided that the performance conditions have been met during the performance period and the participant has continued to be employed (except in exceptional circumstances) during the vesting period, shares will be awarded as soon as possible after the vesting period has expired. When deciding on the final exercise level of the Performance Share Rights, the Board of Directors considers whether the exercise level is reasonable in light of the Company’s financial performance and position, stock market conditions and other circum- stances. Otherwise, the Board of Directors reserves the right to reduce the level of outputs to a lower level deemed appropriate. The Board may, at any time up to the last day of the vesting period, reduce (including cancel) the number of shares to which the Performance Share Rights are entitled, to the extent deemed appropriate in view of: – the Company’s financial performance and position; – stock market conditions; and/or – such other circumstances and reasons as the Board of Directors considers relevant. Remuneration report 2023 7 In addition, to drive accountability throughout the organization and support the integration of Ethics and Compliance into all aspects of its business, the Company has the right to unilaterally decide to withhold all or part of such awards for a participant in respect of years in which the participant has violated Ericsson’s Code of Business Ethics. The Company also has the right to unilaterally decide to demand repayment, in whole or in part, of awards relating to years in which a participant has violated Ericsson’s Code of Business Conduct. The details of each of the ongoing long-term variable remuneration programs at Ericsson, including the programs for other employees, are described in the notes to the consolidated financial statements – note G3, “Share-based compensation”, on pages 75–80 of the Financial report. Long-Term Variable Remuneration Program 2023 (LTV 2023) LTV 2023 was approved at the Annual General Meeting 2023 and covers all members of the Executive Team, a total of 16 members in 2023, including the President and CEO. Participants were awarded Performance Shares on May 18, 2023. The Performance Share Awards granted to the President and CEO and the Executive Vice President are summarized in the table below. Award information, Long-Term Variable Remuneration 2023 (LTV 2023) program Participants Börje Ekholm Fredrik Jejdling Allocation value 1) 35,719,309 4,640,094 Allocation value as a percentage of annual basic salary 2) Number of Performance Shares granted 3) Percentage of the award to which performance conditions apply 4) Maximum number of Performance Shares that can be earned 5) 190% 50% 596,216 77,451 100% 100% 1,192,432 154,902 1) The amount represents the basic amount in SEK. 2) The ﬁgures represent basic amounts as a percentage of annual basic salary at the date of award. 3) Calculated as the respective grant value divided by the volume weighted average price of Ericsson’s B-shares on Nasdaq Stockholm during the ﬁve trading days immediately following the publication of the Com- pany’s fourth quarter report for 2022. 4) All Performance Shares are subject to challenging performance conditions. These are measured over pre-deﬁned performance periods spanning one to three years. Performance conditions for LTV 2023 are: (1) Group operating income target (weighted at 45%) measured over the period January 1, 2023 to December 31, 2023, (2) absolute TSR performance (weighted 25%) in the range 6%-14% annual growth rate, (3) relative TSR performance (weighted 20%) of Ericsson’s B-share, ranked 6-2 against 11 peers, measured over the period January 1, 2023 to December 31, 2026, (4) reduction of CO2 emissions (weighted 5%) in the Company’s own facilities and (5) increased proportion of female leaders (weighted 5%) within the Company. Performance conditions for LTV 2023 and details of how performance conditions will be calculated and measured are set out in the minutes of the 2023 AGM under item 16. 5) The maximum number of shares that can be allotted will result in a dilution of approximately 0.1% of the total number of outstanding shares. The effect on key ratios is marginal. LTV 2021 performance outcome and LTV 2023 Group operating income target LTV 2021 and LTV 2023 had targets with performance periods ending on December 31, 2023, which are summarized in the tables below. LTV 2021 will expire in 2024, as all performance periods under the program have now expired. LTV 2023 will not expire until 2026, but the performance period for the one-year Group operating income (EBITA) target and Group CO2 emissions for LTV 2023 expired on December 31, 2023. Performance conditions for LTV 2023 Target Conditions Weight Performance period Possible outcome (Linear distribution) Outcome Target achievement level 1) Group Operating income (EBITA) 2023 Range (billion SEK) 26.4–40.4 Absolute TSR Range 6%–14% Relative TSR Reduction of CO2e 2023 Reduction of CO2e 2024 Reduction of CO2e 2025 Ericsson’s ranking 6–2 ktonne CO2e 142–121 ktonne CO2e 132–113 ktonne CO2e 122–104 Percentage of female managers Range 23%–25% Jan 1, 2023– Dec 31, 2023 Jan 1, 2023– Dec 31, 2025 Jan 1, 2023– Dec 31, 2025 Jan 1, 2023– Dec 31, 2023 Jan 1, 2024– Dec 31, 2024 Jan 1, 2025– Dec 31, 2025 Jan 1, 2023– Dec 31, 2025 45% 25% 20% 1,66% 1,66% 1,68% 5% 100% 0%–200% 21,4 billion SEK 2) 0%–200% 0%–200% – – 0% – – 0%–200% 121,9 ktonne CO2 193,72% 0%–200% 0%–200% 0%–200% 0%–200% – – – – – – LTV 2023 Female managers Total Program LTV 2023 LTV 2023 LTV 2023 LTV 2023 1) The Board decided that the target achievement level for the performance condition for the Group’s operating income 2023 was 0% for the part of the Performance Share Rights that are granted based on the out- come of the Group’s operating result in 2023. Furthermore, the target achievement level for the performance condition for the CO2 2023 was approved to be 193,72%. Further information regarding the number of Performance Share Units earned by each of the President and CEO and the Executive Vice President is provided in the table Long-Term Variable Compensation (LTV) to the President and CEO and to the Execu- tive Vice President. The performance share rights vest at the end of the vesting period in 2026. 2) Excluding restructuring charges and other items not included in the performance condition. Performance conditions for LTV 2021 Program LTV 2021 LTV 2021 LTV 2021 Total Target 1) Conditions Weight Performance period Possible outcome (Linear distribution) Outcome Target achievement level 2) Group Operating income (EBIT) 2021 Range (billion SEK) 15.0–24.0 Absolute TSR Range 6%–14% Relative TSR Ericsson's ranking 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 200.00% 1) 0%–200% 0%–200% 0%–200% -16,17% Ranking below all companies in the peer group 0% 2) 0% 2) 100% 1) As announced in the 2021 Annual Report, the Board decided that the target achievement level for the performance condition for the Group’s 2021 operating income was 200% for the part of the Performance Share Rights based on an outcome of the Group’s 2021 operating income. 2) The Board of Directors decided that the target achievement level for the performance conditions development of absolute TSR and relative TSR amounted to 0% and 0% respectively, based on the achievements of -16,17% absolute TSR and ranking 12 (lower than all companies in the peer group) for relative TSR, resulting in an overall achieved target achievement level of 100% for LTV 2021. Performance shares vest at the end of the vesting period in 2024. For further information on the number of Performance Share Units earned by each of the President and CEO and the Executive Vice President, please refer to the table Long-Term Variable Remuneration (LTV) of the President and CEO and the Executive Vice President. 8 Remuneration report 2023 Long-term variable remuneration (LTV) to the President and CEO and the Executive Vice President The table below sets out relevant information of LTV 2019, 2020, 2021, 2022 and 2023 with regards to the President and CEO and the Executive Vice President. Long-term variable remuneration (LTV) to the President and CEO and to the Executive Vice President Main conditions for share-based plans Information concerning the reported ﬁnancial year End date of the perfor- mance period 4) End date of vesting period 5) Performance share rights granted (value in SEK) 6) Maximum number of Performance Shares that can be Awarded (value in SEK) 7) Balance beginning of at the year (value in SEK) 8) Performance share rights earned during the year (value in SEK) 9) Performance share rights still subject to performance conditions (value in SEK) 10) Date of award 2) Perfor- mance period 3) Performance share rights forfeited and paid out in shares during the year (value in SEK) 11) Balance at year-end, Performance shares earned but not forfeited (value in SEK) 12) 18/5/ 2023 1 year 31/12/ 2023 18/5/ 2026 268,297 (16,073,673) 536,594 (32,147,346) 0 (0) 0 (0) 18/5/ 2023 3 years 31/12/ 2025 18/5/ 2026 268,297 (16,073,673) 536,594 (32,147,346) 536,594 (33,714,201) Name and position Program LTV 2023 Target (weight) 1) Group Operat- ing income (EBITA) (45%) TSR performance conditions (45%) ESG targets (10%) 18/5/ 2023 3 years 31/12/ 2025 18/5/ 2026 59,622 (3,571,954) 119,244 (7,143,908) 19,172 (1,204,577) 99,450 (6,248,444) Group Operating income (EBIT) (45%) TSR performance conditions (45%) 18/5/ 2022 1 year 31/12/ 2022 18/5/ 2025 137,994 (15,605,741) 275,988 (31,211,483) 224,599 (13,853,266) 18/5/ 2022 3 years 31/12/ 2024 18/5/ 2025 137,991 (15,605,402) 275,982 (31,210,804) ESG targets (10%) 18/5/ 2022 3 years 31/12/ 2024 18/5/ 2025 30,664 (3,467,792) 61,328 (6,935,584) LTV 2022 Börje Ekholm CEO and President 275,982 (17,339,949) 61,328 (3,853,238) Group Operating income (EBIT) (50%) TSR performance conditions (50%) Group Operating income (EBIT) (50%) TSR performance conditions (50%) Group Operating income (EBIT) (50%) TSR performance conditions (50%) LTV 2021 LTV 202013) LTV 2019 13) Total 3/5/ 2021 1 year 31/12/ 2021 3/5/ 2024 154,161 ( 16,834,381) 308,322 ( 33,668,762) 308,322 (19,017,301) 3/5/ 2021 3 years 31/12/ 2023 3/5/ 2024 154,162 (16 834 490) 308,324 (33,668,981) 1/4/ 2020 1 year 31/12/ 2020 1/4/ 2023 194,830 (15,188,947) 389,660 (30,377,894) 389,660 (24,034,229) 1/4/ 2020 3 years 31/12/ 2022 1/4/ 2023 194,830 (15,188,947) 389,660 (30,377,894) 18/5/ 2019 1 year 31/12/ 2019 18/5/ 2022 146,087 (13,808,143) 292,174 (27,616,286) 292,174 (18,021,292) 18/5/ 2019 3 years 31/12/ 2021 18/5/ 2022 146,087 (13,808,143) 292,174 (27,616,286) 76,974 (4,747,756) 1,291,729 (79,673,845) 19,172 (1,204,577) 973,354 (61,155,832) 19,172 (1,204,577) 224,599 (14,111,555) 308,322 (19,371,871) 389,660 (24,482,338) 292,174 (18,357,292) 76,974 (4,836,276) 1,310,901 (82,363,910) 1) TSR performance conditions include both absolute and relative performance conditions for each program. 2) The date of allocation represents the date on which the original allocation was made. 3) Performance period represents the period over which the performance conditions are measured. 4) The end date of the performance period represents the date on which the performance period ends. 5) The Vesting Period End Date represents the date on which any Performance Shares will vest and entitle participants to receive shares. 6) The ﬁgures represent the original number of Performance Share Rights granted on the grant date. Values in SEK represent the corresponding value on the date of award. 7) The ﬁgures represent the maximum number of Performance Share Units that can be earned for each performance condition. Values in SEK represent the corresponding value on the date of award. 8) Figures represent the balance at the beginning of the year, which includes Performance Share Units earned for prior years that have not yet been awarded. Values in SEK are calculated as the number of vested Performance Share rights multiplied by the volume weighted average share price for the last ﬁve trading days of the previous ﬁnancial year. 9) The ﬁgures represent the number of Performance Share Units earned that had a performance period that expired during the ﬁnancial year. Values in SEK are calculated as the number of Performance Share Units earned multiplied by the volume weighted average share price for the last ﬁve trading days of the ﬁnancial year. 10) The ﬁgures represent the maximum number of outstanding Performance Shares that are still subject to an ongoing performance period. Values in SEK are calculated as the number of outstanding Performance Shares still subject to a performance period multiplied by the volume weighted average share price for the last ﬁve trading days of the ﬁnancial year. 11) The ﬁgures represent the number of Performance Share Units that had a vesting period expiring during the ﬁnancial year and that entitled the participant to receive shares free of charge. Values in SEK represent the fair value of shares granted to the participant at the end of the vesting period. 12) The ﬁgures represent the balance at the end of the year, which includes Performance Share Units earned during the ﬁnancial year as well as previous Performance Share Units earned but not forfeited. Values in SEK are calculated as the number of Performance Share Units earned multiplied by the volume weighted average share price for the last ﬁve trading days of the ﬁnancial year. 13) The Board of Directors have approved vesting for LTV 2019 and 2020 (which expired in 2022 and 2023, respectively). Planned vesting date will be during Q1 2024. Remuneration report 2023 9 Long-term variable remuneration (LTV) to the President and CEO and to the Executive Vice President, cont’d. Main conditions for share-based plans Information concerning the reported ﬁnancial year End date of the perfor- mance period 4) End date of vesting period 5) Performance share rights granted (value in SEK) 6) Maximum number of Performance Shares that can be Awarded (value in SEK) 7) Balance beginning of at the year (value in SEK) 8) Performance share rights earned during the year (value in SEK) 9) Performance share rights still subject to performance conditions (value in SEK) 10) Date of award 2) Perfor- mance period 3) Performance share rights forfeited and paid out in shares during the year (value in SEK) 11) Balance at year-end, Performance shares earned but not forfeited (value in SEK) 12) Name and position Program Fredrik Jejdling Executive Vice President and Head of Business Area Networks LTV 2023 LTV 2022 LTV 2021 LTV 202013) LTV 2019 13) Total Target (weight) 1) Group Operat- ing income (EBITA) (45%) TSR performance conditions (45%) 18/5/ 2023 1 year 31/12/ 2023 18/5/ 2026 34,852 (2,087,983) 69,704 (4,175,966) 0 (0) 18/5/ 2023 3 years 31/12/ 2025 18/5/ 2026 34,853 (2,088,043) 69,706 (4,176,086) 69,706 (4,379,628) ESG targets (10%) 18/5/ 2023 3 years 31/12/ 2025 18/5/ 2026 7,746 (464,062) 15,492 (928,125) 2,491 (156,510) 12,920 (811,764) 34,510 (2,168,263) 7,668 (481,780) Group Operating income (EBIT) (45%) TSR performance conditions (45%) 18/5/ 2022 1 year 31/12/ 2022 18/5/ 2025 17,257 (1,951,594) 34,514 (3,903,188) 28,087 (1,732,406) 18/5/ 2022 3 years 31/12/ 2024 18/5/ 2025 17,255 (1,951,368) 34,510 (3,902,736) ESG targets (10%) 18/5/ 2022 3 years 31/12/ 2024 18/5/ 2025 3,834 (433,587) 7,668 (867,174) 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%) 3/5/ 2021 3/5/ 2021 1/4/ 2020 1/4/ 2020 1 year 31/12/ 2023 3/5/ 2024 19,092 ( 2,084,846) 38,184 (4,169,693) 38,184 (2,355,189) 3 years 12/31/ 2023 3/5/ 2024 19,092 ( 2,084,846) 38,184 (4,169,693) 1 year 12/31/ 2020 1/4/ 2023 22,262 (1,735,546) 44,524 (3,471,091) 44,524 (2,746,240) 3 years 12/31/ 2022 1/4/ 2023 22,263 (1,735,623) 44,526 (3,471,247) 18/5/ 2019 1 year 31/12/ 2019 18/5/ 2022 16,321 (1,542,661) 32,642 (3,085,322) 32,642 (2,013,359) 18/5/ 2019 3 years 31/12/ 2021 18/5/ 2022 16,322 (1,542,755) 32,644 (3,085,511) 8,600 (530,448) 152,037 (9,377,642) 2,491 (156,510) 124,804 (7,841,435) 0 (0) 2,491 (156,510) 28,087 (1,764,706) 38,184 (2,399,101) 44,524 (2,797,443) 32,642 (2,050,897) 8,600 (540,338) 154,528 (9,708,994) 1) TSR performance conditions include both absolute and relative performance conditions for each program. 2) The date of allocation represents the date on which the original allocation was made. 3) Performance period represents the period over which the performance conditions are measured. 4) The end date of the performance period represents the date on which the performance period ends. 5) The Vesting Period End Date represents the date on which any Performance Shares will vest and entitle participants to receive shares. 6) The ﬁgures represent the original number of Performance Share Rights granted on the grant date. Values in SEK represent the corresponding value on the date of award. 7) The ﬁgures represent the maximum number of Performance Share Units that can be earned for each performance condition. Values in SEK represent the corresponding value on the date of award. 8) Figures represent the balance at the beginning of the year, which includes Performance Share Units earned for prior years that have not yet been awarded. Values in SEK are calculated as the number of vested Performance Share rights multiplied by the volume weighted average share price for the last ﬁve trading days of the previous ﬁnancial year. 9) The ﬁgures represent the number of Performance Share Units earned that had a performance period that expired during the ﬁnancial year. Values in SEK are calculated as the number of Performance Share Units earned multiplied by the volume weighted average share price for the last ﬁve trading days of the ﬁnancial year. 10) The ﬁgures represent the maximum number of outstanding Performance Shares that are still subject to an ongoing performance period. Values in SEK are calculated as the number of outstanding Performance Shares still subject to a performance period multiplied by the volume weighted average share price for the last ﬁve trading days of the ﬁnancial year. 11) The ﬁgures represent the number of Performance Share Units that had a vesting period expiring during the ﬁnancial year and that entitled the participant to receive shares free of charge. Values in SEK represent the fair value of shares granted to the participant at the end of the vesting period. 12) The ﬁgures represent the balance at the end of the year, which includes Performance Share Units earned during the ﬁnancial year as well as previous Performance Share Units earned but not forfeited. Values in SEK are calculated as the number of Performance Share Units earned multiplied by the volume weighted average share price for the last ﬁve trading days of the ﬁnancial year. 13) The Board of Directors have approved vesting for LTV 2019 and 2020 (which expired in 2022 and 2023, respectively). Planned vesting date will be during Q1 2024. 10 Remuneration report 2023 Deviations from adopted Guidelines for remuneration to Group Management The Guidelines adopted by the Annual General Meeting 2020 and as applicable until March 28, 2023, prescribed a minimum weighting of short-term variable compensation (“STV”) targets of 40% to be defined at Group level. At the Annual General Meeting 2023, The Guidelines where amended and expected to be applicable through the Annual General Meeting 2027. One of the purposes of the Guidelines adopted by the Annual General Meeting 2023 was to clarify the mandate for the Board of Directors and Remuneration Committee to define meaningful STV targets linked to Ericsson’s business plan. This enables STV targets to be defined and weighted differently for different parts of the business given the phase in the business lifecycle they are in as required by the business strategy. Therefore, detailed requirements for mandatory weighting and defini- tion of STV targets have been removed. In line with the purpose of the new Guidelines and upon recommenda- tion from the Remuneration Committee, the Board of Directors resolved on February 8, 2023, on a 20% weighting STV targets for 2023 on Group level for the Executive Team member George Mulhern. This was a deviation from the then applicable Guidelines during the period from January 1, 2023, to March 28, 2023. The rationale behind the decision to deviate from the then applicable Guidelines was to provide greater priority to unit targets, and to drive growth in revenue and profits, as appropriate for the current business lifecycle of Cradlepoint. There has been no deviation from the decision-making procedures as described in the Guidelines. Information on guidelines for shareholdings by Executive Team The Board has adopted the following shareholding guidelines to apply to current and future members of the Executive Team as of January 1, 2019, to encourage management to build and maintain a shareholding to create a common ownership interest between the Company’s share- holders and the members of the Executive Team: – The President and CEO must build-up and maintain a shareholding equivalent to at least 200% of the annual fixed salary. – Other members of the Executive Team must build up and maintain a shareholding equivalent to at least 75% of their respective annual fixed salary. The current members of the Executive Team shall have the opportunity to build up the required shareholding over a period of five years starting from January 1, 2019. In the event that new members of the Executive Team are appointed, they are expected to meet the shareholding requirement on the anniversary date five years after they are granted their first Performance Shares under the LTV Plans. For current mem- bers of Executive Team, the requirement date is extended for one year as a part of the self-imposed trading recommendations for ET members and due to the company’s decision to apply net delivery of shares for all LTV plans during the years 2017–2020. The Board of Directors considers the following for the purpose of meeting the shareholding requirement: – Holdings of Ericsson Class B-shares held or acquired by the Executive Team member – Vested but unexercised options (value calculated after tax and after utilization costs) – Share rights held by the member of the Executive Team, for which performance and/or employment conditions have been met, but which must be held for a certain period of time (value calculated after tax). Shares, synthetic shares, or options that are subject to performance conditions and continued employment, but which have not vested, should not be counted under the shareholding guidelines. The Remuneration Committee shall monitor compliance with the shareholding guidelines and regularly report to the Board of Directors and inform the members of the Executive Team on the extent to which the shareholding guidelines have been complied with. The holdings of each of the members of the Executive Team are disclosed on pages 20–24 of the Corporate Governance report. Remuneration report 2023 11 Comparative information on changes in remuneration and the Company’s performance Comparison table of the change in remuneration and the Company’s performance over the last three ﬁnancial years reported Remuneration to the President and CEO and to the Executive Vice President Börje Ekholm President and CEO Fredrik Jejdling Executive Vice President and Head of Business Area Networks Average remuneration of employees converted to full-time equivalents 3) 2023 (% change) 2022 (% change) 2021 (% change) Fixed remuneration 1) 20,348,855 (5%) 10,182,837 (5%) 1,016,295 (5%) Variable remuneration 2) – 6,251,115 (–6%) 176,279 (–24%) Fixed remuneration 1) 19,290,595 (3%) 9,666,757 (6%) 966,031 (8,5%) Variable remuneration 2) – 6,671,595 (–54%) 230,928 (−22%) Fixed remuneration 1) 18,764,547 (1%) 9,144,067 (15%) 889,538 (13%) Variable remuneration 2) Comments 88,782,271 (22%) LTV 2018 expired and shares were transferred in May 2021. LTV 2019 and 2020 expired in 2022 and 2023 respectively but vesting postponed. 14,626,469 (122%) LTV 2018 expired and shares were transferred in May 2021. LTV 2019 and 2020 expired in 2022 and 2023 respectively but vesting postponed. 295,193 (−1%) In 2021, the delayed salary revision for 2020 took place with a company-sponsored retroactive effect, which increased the remuneration of other employees. A majority of employees do not have variable remuneration. Ericsson’s performance Group operating income (EBIT) SEK million Group Net Sales SEK million Share price at December 31 for the ﬁnancial year –20,326 (–175,23%) 263,351 (–3,02%) 63,11 (3,63%) 27,020 (10%) 271,546 (17%) 60.9 (–38,97%) 31,780 (14%) 232,314 (–0.03%) 99.79 (2.20%) 1) Fixed remuneration includes ﬁxed salary and other beneﬁts. 2) Variable remuneration for the CEO and President and to the Executive Vice President includes applicable STV and LTV. For the Company’s employees, variable remuneration includes short-term and long-term variable remuneration. For the sake of comparison, variable remuneration represents ﬁgures accrued and paid during the ﬁnancial year. This is because performance reviews and long-term variable remuneration programs for other employees with performance periods expiring in ﬁscal year 2023 have not yet been completed. 3) Employees of Telefonaktiebolaget LM Ericsson, excluding the CEO and President and other members of the Executive Team employed by the Company. Board of Directors Stockholm, March 5, 2024 Telefonaktiebolaget LM Ericsson (publ) Org. no. 556016-0680 Sustainability and Corporate Responsibility reportPart of Ericsson Annual Report 2023Annual Report 2023Financial reportCorporate Governance reportRemuneration reportSustainability and Corporate Responsibility reportericsson.comContents Sustainability and Corporate Responsibility report 2023 Introduction Strategy and targets 2023 highlights Environment Social Governance Notes to the Sustainability and Corporate Responsibility report Environment Social Governance Other Assurance report Glossary 1 2 4 4 6 8 10 11 25 37 46 50 51 This Sustainability and Corporate Responsibility report is rendered as a separate report added to the Financial Report in accordance with the Annual Accounts Act (SFS 1995:1554, chapter 6, section 10 and 11). An assurance report from the Company’s auditor is appended hereto. Forward-looking statements This Sustainability and Corporate Responsibility Report includes forward-looking statements, including statements reflecting the Company’s current views relating to performance goals and targets, future trends, events, commitments or results, future market or financial condition, and expected operational and financial performance. 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 the Company’s strategy, future financial performance, expectations, projections or other characteri- zations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements are based on management’s expectations as of the date of this report, unless an earlier date is specified, including expectations based on third-party information and projections that management believes to be reputable. 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 and adversely 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 throughout this Sustainability and Corporate Responsibility Report, including in the section Risk factors. These forward-looking statements also represent our estimates, assumptions and expectations only as of the date that they were made, and to the extent they represent third-party data, we have not undertaken to independently verify such third-party data and do not intend to do so. Given these risks and uncertainties, readers are cautioned not to place undue reli- ance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Sustainability and Corporate Respon- sibility Report and in other documents we file from time to time with our regulators that disclose risks and uncertainties that may affect our business. Unless specifically indicated otherwise, the forward-looking statements in this Sustainability and Cor- porate Responsibility Report do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed as of the date of this report. 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 Sustainability and Corporate Responsibility Report, to reflect events or changes in circumstances or changes in expectations or the occur- rence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation. This Sustainability and Corporate Responsibility Report includes websites or references to additional company reports. These are intended to provide inactive, textual references only. The information on websites and contained in those reports is not part of this report and not incorporated by reference in this report. This Sustainability and Corporate Responsibility Report contains statements based on hypothetical scenarios and assumptions as well as estimates that are subject to a high level of uncertainty, and these statements should not necessarily be viewed as being representative of current or actual risk or performance, or forecasts of expected risk or performance. In addition, historical, current, and forward-looking environmental and social-related statements may be based on standards for meas- uring progress that are still developing and on internal controls and processes that continue to evolve. While certain matters discussed in this report may be significant, any significance should not be taken, or otherwise assumed, as necessarily rising to the level of materiality used for purposes of complying with Ericsson’s public company reporting obligations pursuant to the U.S. federal securities laws and regulations, even if the report uses the words “material” or “materiality.” Sustainability and Corporate Responsibility report 2023 Introduction 1 Integrity and sustainability for long-term value creation Ericsson was founded on the belief that com- munication is a basic human need. And for over 145 years, the Company has been a part of transforming lives, industries and society for the better. The Company puts focus on embed- ding sustainability programs and practices across the organization to deliver positive impact to stakeholders and continues a cul- tural transformation of integrity-led business. Integrity-led business With a global presence, Ericsson operates in markets with varying degrees of complexity in terms of business culture, geopolitical stability and maturity of institutions. Within all these contexts, integrity serves as the foundation for Ericsson’s ability to create value and reduce risks to the Company and its stakeholders. Ericsson is driving a cultural transformation to build operational excellence and enhanced governance to promote responsible decision- making. Across its operations, Ericsson maintains the same high standards of ethical business – from equal opportunity for all and respect for human rights, to anti-corruption and health and safety. Ericsson takes a holistic approach to risk management and is committed to act with integrity across its value chain. This is a continuous journey, and Ericsson is dedicating significant energy towards strengthening policies, procedures and processes to provide clarity and ensuring a foundation of respon- sible business. Delivering impact Ericsson’s vision, a world where limitless connectivity improves lives, redefine business and pioneer a sustainable future, is built on the power of open mobile connectivity to deliver positive impact for communities and enterprises. Mobile technology is already one of the most inclusive technologies globally, with 8.5 billion subscriptions1). The next wave of digitalization will see the benefits of connec- tivity extended at scale into enterprises and broader society. Mobile connectivity, artificial intelligence (AI) and cloud will be increasingly viewed as the enabling technologies to realize this next wave, and without mobile connectiv- ity the other two cannot be deployed at scale. This kind of ubiquitous connectivity is critical for low-carbon future. Driving digital inclusion About 2.6 billion people – a third of the global population – do not have a fast and reliable broadband connection, due to lack of afford- ability and accessibility2). Solutions like Fixed Wireless Access are in many cases the only option to deliver broadband to unserved and underserved areas, including households, businesses and institutions in developing and developed markets. Financial inclusion is an important driver for attaining social inclusion and enabling micro, small and medium enterprises to grow. Today the Ericsson Wallet Platform supports about 85 million active users – many of whom were previously unbanked – with mobile financial services. In addition to its commercial offerings, Ericsson is actively working to ensure that meaningful connectivity supports essential societal needs, such as access to education. Working with with UNICEF and ITU Giga public private partnership, which aims to connect every school worldwide to the internet by 2030, Ericsson has provided its extensive experience of connecting schools over the past decade. Ericsson is also a leading private sector partner in the Digital Transformation Collaborative led by UNESCO, advising governments on the digital transformation of education. Catalyzing Net Zero The digital transformation of society and industry is also a low-carbon one. The telecom industry is leading the race to Net Zero green- house gas (GHG) emissions both in terms of Net Zero pledges and by being one of the largest purchasers of renewable energy3). Ericsson has set an ambition to be Net Zero across its value chain by 2040. Ericsson’s most important contribution to climate change mitigation is delivering energy- efficient products and solutions that will help break the energy curve of mobile networks, reducing customer energy use, energy costs and carbon emissions. Ericsson also works with suppliers to provide relevant tools and frameworks for business partners to set and achieve their own 1.5 °C-aligned targets. Enabling industry transformation While the Information and Communications Technology (ICT) sector is responsible for only 1.4% of the global carbon footprint4), it has the potential to enable a 15% reduction of emissions across industries by 2030 through connectivity solutions such as smart building management systems and connected electric vehicle charging infrastructure5). Exponential technologies such as 5G, AI and the internet of things (IoT) have the potential to significantly increase productivity and efficiency. As an open innovation platform, 5G will have a direct impact on a range of societal infrastructure and industry sectors including transport, manufacturing, energy utilities and public safety, to name a few. In summary, the networks, software and services Ericsson delivers to its customers support the digital transformation of industry and society. With 5G, high performance will act as engines for economic growth, a funda- mental lever for ﬁghting climate change and an enabler of social inclusion. 1) Ericsson Mobility Report (2023) 2) Measuring digital development - Facts and Figures 2023 (2023), ITU Publications 3) Mobile Net Zero: State of the Industry on Climate Action 2022 (2022), GSM Association 4) Malmodin et al. (2023) ICT sector electricity consumption and greenhouse gas emissions – 2020 outcome, SSRN Electronic Journal 5) Malmodin & Bergmark (2015) Exploring the effect of ICT solutions on GHG emissions in 2030, Atlantis Press 2 Strategy and targets Sustainability and Corporate Responsibility report 2023 Strategy and targets A business strategy delivering positive impacts By extending leadership in mobile networks business and through a focused expansion into the enterprise market, Ericsson aims to create value for all stakeholders. Ericsson’s sustain- ability and corporate responsibility programs and practices underpin its business strategy. Leadership in mobile networks 5G is significantly more energy efficient than previous generations, supporting both cost and emissions reductions. 5G networks are also playing a multiplier role in addressing climate change by reducing not only the ICT industry’s own emissions, but also enabling other sectors to transition toward a low-carbon economy. Ericsson is driving energy-efficient network development through hardware moderniza- tion, new software features, network energy optimization services and the use of AI- enabled automation and digital twin technologies. Mobile broadband is one of the most cost- efficient technology options to connect society, and Fixed Wireless Access is an efficient and scalable alternative to wired connections to create universal and meaningful connectivity, in both emerging and developed markets. Focused expansion into enterprise Through agreed standards that bring global interoperability and enable economies of scale, 5G brings new levels of resilience and efficiency to industrial operations. These connected systems enable improved ana- lytic insights through massive, distributed data collection combined with AI as well as enhanced automation possibilities supported by extended reality and IoT technologies. Together they support the transformation of industrial applications in areas such as logistics and manufacturing, renewable energy systems, low-carbon transportation and many other sectors. This makes mobile infrastructure, in particular 5G, an enabler of decarbonization across industries. Integrity-led business Technology leadership alone is not enough to navigate an uncertain and challenging global environment. Ericsson faces many global complexities, including geopolitical change and conflicts, competition and macroeconomic conditions, and the long-term success of the Company will be defined by its ability to pro- vide world-leading technology and innovation paired with attraction and retention of the right talent, an ethical culture and operational excel- lence, all underpinned by strong governance. Ericsson is committed to the UN Global Compact’s ten principles and has made signifi- cant investments in building a strong culture of ethics and integrity, as well as health and safety, as a foundation for responsible busi- ness and value creation. Ericsson aims to make a positive impact within and beyond its value chain, built on the potential of its technology deployed and used in a responsible way. Business Leadership in mobile networks By investing in technology leadership for performance, security as well as sustainability and through high performance program- mable automated cloud-native networks and operations, and advanced network services. – Continuously improve portfolio energy performance – Efficient use of resources and transition to a circular economy – Offer scalable connectivity solutions where fixed broadband connectivity is not a viable option. Focused expansion into enterprise Through seamless and secure wireless network solutions and through transforming how network features are exposed, consumed and paid for via the Global Communications Platform. – Provide ICT solutions that enable increased efficiency and decarbonization – Enabling technologies supporting the transformation of industries, including small- and medium sized enterprises. People and planet Positive impacts 2.4 million children and youth connected to the internet through the Giga initiative 85 million consumers accessing financial services though the Ericsson Mobile Wallet Platform every month At least 0.8% growth in GDP for every 10% increase in mobile broadband adoption Potential for 15% reduction of global GHG emissions enabled by ICT solutions Sustainability and Corporate Responsibility report 2023 Strategy and targets 3 Performance on goals and targets Below is a summary of the performance and current status of Ericsson’s Sustainability and Corporate Responsibility goals and targets. Commentary on performance highlights is presented on pages 4–9, and target specifics and detailed performance data can be found in the notes to this report on pages 11–49. Goals and performance targets Base year1) Target year 2023 performance Climate change mitigation Net Zero GHG emissions across the value chain, covering scope 1, 2 and 32) (SBTi3) validated) Emission reductions Reduce total GHG emissions in the value chain by 50%, and scope 1 and 22) by 90%. (SBTi3) validated) Portfolio energy performance Reduce the energy consumption of typical new radio base station sites by 40% (New target) Supply chain engagement Have 350 high-emitting and strategic suppliers set their own 1.5 °C-aligned emissions reduction targets 2020 2040 2020 2030 Total value chain emissions: +24%4) Scope 1 and 2 emissions: -38%4) 2021 2025 30% reduction4) 2020 2025 237 suppliers with accepted targets Health and safety Zero fatalities and lost workday incidents 2020 2025 Fatalities: 10 Lost workday incidents: 97 Diversity and inclusion 30% share of women among all employees, line managers and executive population 2021 2030 All employees: 26% Line managers: 23% Executive population: 31% Ethics and Compliance Strengthen and enhance the Ethics and Compli- ance program to help ensure an effective and sustainable anti-bribery and corruption program 2019 2024 Implementation in progress t n e m n o r i v n E l a i c o S e c n a n r e v o G 1) For targets tracked using a relative performance metric compared to a set baseline the base year is shown. For targets not tracked through a relative metric, the year the target was set (start year) is shown. 2) Explanations of the boundaries for Scope 1, 2 and 3 emissions are included in the glossary on page 51. Detailed GHG accounting principles can be found in note E1. 3) Science Based Targets initiative 4) Compared to the target base year Enabling achievement of the Sustainable Development Goals Ericsson’s products and solutions can contrib- ute to the achievement of many of the United Nations Sustainable Development Goals (SDGs). Ericsson places strategic importance in meeting SDG 9 – Industry, innovation and infrastructure) and SDG 17 – Partnership for the goals) as their combined power helps to generate positive impact at scale. Delivering open, resilient and sustainable networks are core to Ericsson’s role as a technology and industry leader. By creating and orchestrating ecosystems and working across trusted partnerships, Ericsson gener- ates positive impact at scale to meet the global challenges of today and tomorrow. Ericsson engages and collaborates with its customers and business partners, as well as international institutions and civil society, in a connected ecosystem to catalyze climate action and support digital inclusion. Ericsson’s indirect positive impacts include, among other things, alleviating poverty through mobile financial services, improved access to education through connected schools and digital learning, and reduced GHG emissions in its supply chain and portfolio as well as through digital data-driven solutions across industries. 4 2023 highlights – Environment Sustainability and Corporate Responsibility report 2023 2023 highlights Environment Value chain carbon footprint Million metric tons of CO2e/% 40 35 30 25 20 15 10 5 0 37 31 28 90% 92% 94% 15 9% <1% 8% <1% 6% <1% 2021 2022 2023 Scope 1 and 2 Scope 3 Upstream Scope 3 Downstream 2030 target Explanations of the boundaries for Scope 1, 2 and 3 emissions are included in the glossary on page 51. Detailed GHG accounting principles can be found in note E1. Radio base station energy consumption % 0 –10 –20 –30 –40 –50 –7 –30 –40 2021 2022 2023 Achieved reductions 2025 target Net Zero by 2040 Ericsson’s long-term target is Net Zero GHG emissions across its value chain by 2040, with a near-term target to halve total value chain emissions and reduce Scope 1 and 2 emissions by 90% by 2030 compared to a 2020 baseline. The targets are 1.5 °C aligned and have been validated by the SBTi. In 2023, total value chain GHG emissions were about 37 (31) million tonnes. 94 (92)% of the footprint occurred downstream1) in the value chain, primarily derived from the energy use of sold network equipment. 6 (8)% occurred upstream1) in the value chain. Emis- sions from Ericsson’s own operations (Scope 1 and 2) accounted for less than 1 (<1)% of total emissions. Ericsson addresses emissions in all stages of its value chain, but the largest reduc- tion potential comes from continued improve- ments in the portfolio’s energy performance, followed by reducing upstream emissions through supplier engagement, product design and material choices. The increase in total GHG emissions compared with 2022 is largely explained by an increase in downstream emissions in the use-phase of sold products. There has been a geographical shift in sales to markets, such as India, where a relatively larger share of elec- tricity is generated using fossil fuels. This has led to a net increase in total downstream emis- sions despite higher energy efficiency in the Company’s delivered solutions and Ericsson’s customers buying more renewable electricity. Reported downstream emissions from the use of sold products in one year is the sum of the estimated total lifetime emissions from network equipment sold in that same year, and are not accrued over the products’ estimated lifetime. Shifts in the market mix such as that seen in 2023 can therefore result in significant variances in downstream emissions year- over-year. Ericsson has continued to implement its Net Zero strategy, setting milestones for areas and activities with larger impact, such as product design and radio site energy consumption. Under this umbrella, the carbon footprint calculation and tracking project has continued, focusing on improving the accuracy of GHG accounting across Ericsson which will enable the fact-based decisions necessary to deliver on the Company’s climate targets. Portfolio energy performance Downstream emissions, mainly from products in use, represented 94 (92)% of total value chain emissions. This makes continuous improvement in portfolio energy performance key to reaching the Company’s emission reduc- tion targets. Higher efficiency also creates financial value for customers as it contributes to reduced energy-related operational expen- ditures. During 2023 Ericsson has continued to improve the energy performance of its port- folio, delivering increasing mobile broadband capacity in relation to the energy consump- tion of its solutions. In 2022, the Company achieved both of its previous portfolio targets, and is now pursuing a target to reduce the average energy consumption of typical new radio base station sites by 40% by 2025 compared to a 2021 baseline. By year-end, the Company achieved a reduction of 30 (7)% and is on track to achieve this new target. Ericsson has continued to implement AI and machine learning solutions in its networks. This allows the service providers to operate their networks more intelligently to meet traffic demand and deliver the best user experience with the lowest energy use. An example is the Ericsson Predictive Cell Energy Management solution, which in 2023 was awarded the Net- work Sustainability Award for best intelligent automation solution for network sustainability and energy efficiency by FutureNet World. In November, Ericsson issued a EUR 500 million green bond. The bond was issued under the Company’s Green Financing Framework, which was put in place to finance investments in energy efficiency and renewable energy. The proceeds from the bond will be allocated to R&D aimed at enhancing the energy perfor- mance of both existing and future solutions. Enabling effect of ICT Ericsson’s research2) shows that the potential for ICT solutions to support other industries to decarbonize is substantial and much more significant than the sector’s own carbon foot- print. Technologies such as electric charging infrastructure, smart grids and building man- agement systems all depend on connectivity and communication network infrastructure to reach their full potential. 1) Explanations of what constitutes the upstream and downstream parts of a company’s value chain are included in the glossary on page 51. 2) Malmodin & Bergmark (2015) Exploring the effect of ICT solutions on GHG emissions in 2030, Atlantis Press Sustainability and Corporate Responsibility report 2023 2023 highlights – Environment 5 Supplier climate engagement No. 400 300 200 100 0 350 237 225 121 2021 2022 2023 Suppliers with accepted targets 2025 target Scope 1 & 2 emissions Kiloton CO2e 300 250 200 150 100 50 0 260 112 69 2016 // 2020 // 2023 11 Scope 1 Scope 2 (market-based) 2030 target Share of renewable electricity and energy at facilities % 100 80 60 40 20 0 82 67 84 70 75 62 2021 2022 2023 Share of renewable electricity Share of renewable energy In addition, through the development of technologies such as 5G and platforms for data and API management, the decarbonization potential is assessed to be even greater1). Throughout 2023, Ericsson has continued to explore this topic, including publishing a report based on the ITU2) standard on digitali- zation and Net Zero transition of industries that showed potential energy and emission savings in buildings enabled by ICT solutions3). Supply chain climate action Supply chain emissions represented 6 (8)% of the total value chain carbon footprint. As part of its Net Zero target, Ericsson is working to reduce these emissions through supplier engagement, design improvements, and trans- port efficiency. The Company has continued to explore and implement ways to reduce the weight and size of products, and taken initia- tives targeting carbon intense materials and processes such as aluminum. Climate-related criteria were also introduced into supplier scorecards, showing to what extent a supplier’s climate commitments support Ericsson’s Net Zero target. Ericsson has a 2025 target to have 350 high emitting and strategic direct suppliers set their own emission reduction targets aligned with the 1.5 °C ambition, which shall include a halving of emissions by 2030. These suppliers, together with their supply chains, represent a majority of Ericsson’s upstream carbon foot- print. By year end, 237 (225) suppliers had set accepted targets, which puts the Company on track to achieve the 2025 target. As an increas- ing number of suppliers have made qualifying commitments, Ericsson has introduced more stringent requirements for targets to be accepted, including providing a credible decar- bonization plan. This in part explains why the year-over-year increase in aligned suppliers is smaller compared to previous years. Climate action in own activities Scope 1 emissions, primarily related to the service vehicle fleet, decreased to 27 (38) thousand tonnes. Part of the reduction is a result of a late 2023 shift in North America to subcontractors for network rollout and man- aged services, meaning emissions have moved from Scope 1 to Scope 3. Scope 2 emissions decreased to 42 (45) thousand tonnes, pri- marily driven by larger volumes of purchased renewable electricity. The share of purchased renewable electricity increased to 84 (82)%, which represented 70 (67)% of total facility energy consumption. Since the 2016 baseline of Ericsson’s first SBTi validated emissions reduction target, yearly Scope 1 and 2 emis- sions have decreased by about 190 thousand tonnes. While emissions from business travel increased to 53 (25) thousand tonnes, they remain lower compared with pre-pandemic levels. Ericsson has set a cap on business travel to limit these emissions to no more than 50% of pre-pandemic 2019 levels. The company has continued to integrate sustainability KPIs into internal management reporting for more frequent monitoring. Focus areas for the coming year include automation of data management and exploring additional possibilities to further increase the share of renewable energy used in facilities. Transition to circular economy Work to increase product take-back volumes and the sale of refurbished equipment continued during the year. This included the development of a training for selected employ- ees to raise their knowledge and awareness of e-waste, the take-back program and producer responsibilities. Reuse and product take-back was also added to the customer engagement framework, with the aim to increase aware- ness on these matters both internally and among customers. Ericsson has also advocated for recycled material content to be added to the IEC4) standard for declaring a product’s material composition that is used throughout the elec- tronic manufacturing industry. This will enable better tracking of the share of recycled input material in electronic equipment. Activities contributing to the transition to a circular economy, including manufacturing of electronic equipment, were added to the EU Taxonomy for Sustainable Activities in 2023. This has meant that Ericsson’s share of Taxonomy-eligible turnover has increased to 38 (0)%. During 2024 Ericsson will assess to what extent its eligible activities also meet the criteria for alignment with the Taxonomy. More information available in the notes to the S&CR report p. 11 p. 17 p. 18 p. 18 p. 20 E1 – Climate change E2 – Pollution E3 – Water E4 – Resource use and circular economy E5 – Reporting according to article 8 of the EU Taxonomy regulation p. 24 E6 – Environmental management 1) The enablement effect: The impact of mobile communications technologies on carbon emission reductions. (2019), GSM Association 2) International Telecommunication Union (ITU) - a United Nations specialized agency for information and communication technologies 3) Case Study on the Avoided Emissions from a Building Heating Management System Using an AI Steering Function (2023), The Carbon Trust 4) International Electrotechnical Commission - a NPO publishing standards for infrastructure and trade in electrical and electronic goods. 6 2023 highlights – Social Sustainability and Corporate Responsibility report 2023 Social Lost workday incidents and fatalities No. 150 125 100 75 50 25 0 145 131 97 14 8 10 2021 2022 2023 Lost workday incidents Fatalities Breakdown of fatalities by cause No. 15 10 5 0 14 3 6 5 10 1 4 5 8 4 4 2021 2022 2023 Other 1) Fall from heights Trafﬁc/driving accident 1) Detailed information in note S2. Share of women per employee category % 40 30 20 10 0 35.6 25.2 21.3 35.0 25.5 21.7 31.4 26.0 22.7 2021 2022 2023 Exec. population All employees Line managers 2030 target Health, safety and well-being In 2023 the number of reported fatalities increased to 10 (8) and primarily involved site service suppliers and third parties. One employee was also fatally injured. The causes of the fatalities were driving accidents, climbing or working at heights, and working with electricity. At the same time, lost workday incidents for both suppliers and employees decreased compared to the previous year to 97 (131) and primarily involved slips, trips and falls, site installations, climbing and working at heights and manual lifting and handling. Ericsson firmly believes that all fatalities and incidents are preventable and has a target to have zero fatalities and lost workday incidents. Working towards this target, Ericsson has strengthened processes and governance and has continued embedding safety in its company culture. A major action taken during 2023 was assessing the maturity of site services suppliers against Ericsson’s safety requirements. These assessments covered 61% of all site service suppliers and main improvement areas identi- fied were strengthening project hazard and risk assessments, controlling high risk activities and managing subcontractors. In 2024, assess- ments of remaining suppliers will continue. As part of the consequence management process, when there is a non-conformity or fatality, yel- low and red cards are issued to the supplier with related consequences such as monetary fines or contract termination. Root cause analyses of the fatal incidents show that lack of risk awareness, poor super- vision, inadequate risk assessment and unsafe behaviors are major contributors to these inci- dents. To address these deficiencies, Ericsson has put programs in place to proactively enhance site safety, emphasized the criticality of the site supervisor role and implemented the Stop Work Authority standard, in addition to promoting the Company’s rules for safe working practices. The Stop Work Authority standard both requires and empowers people to immediately stop work when unsafe working conditions are identified and is a key measure to mitigate risks of incidents as soon as they are identified. Diversity and inclusion Ericsson drives a broad diversity and inclusion agenda to support all employees to realize their full potential. Within this, there is a particular focus on gender balance, with a target to achieve at least 30% representation of women at all levels of the Company by 2030. To support this target, part of the variable compensation to executives is linked to a per- formance criteria where the share of women in line manager positions is to increase to 23% by 2024. During the year, the share of women line managers increased to 22.7 (21.7)%. Among all employees, the share increased slightly to 26.0 (25.5)% while decreasing to 31.4 (35.0)% within the executive population. Ericsson has a fifty-fifty gender balance goal for early career and graduate hires as part of the strategy to attract candidates from all backgrounds. In 2023 progress was made, with women representing 31 (27)% of all external hires. Work towards pay equity has continued with Ericsson putting additional efforts into measuring and better understanding the reasons behind gender pay gaps. Ericsson has made inclusive leadership one of the critical skills for its workforce to further embed inclusiveness in the company culture. This is supported by a bespoke training that com- bines the latest academic insight with online simulations. Ericsson also supports a network of 42 employee resource groups that cover a wide range of identities and characteristics, and also provides career accelerator programs to help remove barriers to progression for high performing talent, including from underrepre- sented groups. Talent attraction, retention and development Ericsson’s talent acquisition strategy is built on three key focus areas: demand planning and capacity; identifying key talent markets; and attracting and retaining talent with critical skills. The Company continues to prioritize the development of future critical skills connected to its strategy. By year end, over 50,000 people had been upskilled or reskilled across critical skill areas such as Cloud Native, Power Skills and AI, in which 300 experts in 2018 acted as a catalyst to upskilling more than 30,000 employees as of year-end 2023. Nearly all employees use Degreed as the main digital learning experience platform for skill-building and learning completions, with many desig- nating their own focus skills aligned to their career ambitions. After a slight reduction last year, 2023 saw a 59% increase in learnings completed through Degreed, reaching over 4.8 (3.0) million, which is the highest level to date. Employees are also encouraged to gain experience through internal job moves. This is supported by an open talent market as well as targeted succession planning, with increasing emphasis on putting critical skills to work. During 2023, Ericsson has enhanced its sourcing capacity, improved recruiter capabilities and invested in new technology to Sustainability and Corporate Responsibility report 2023 2023 highlights – Social 7 Employee satisfaction eSAT score 100 80 60 40 20 0 81 73 81 77 80 74 2021 2022 2023 Ericsson employees Benchmark Digital education – Connect to Learn Thousands 500 400 300 200 100 0 485 43 400 36 296 30 2021 2022 2023 No. 50 40 30 20 10 0 Impacted children and youth, thousands Countries deployed, no. Ericsson Mobile Wallet accounts and active users Million 500 400 300 200 100 0 457 379 80 85 314 65 2021 2022 2023 Accounts Monthly active users reduce complexity and provide a better hiring experience. A global recognition program has been created to drive engagement and recognize impact. Since 2021 Ericsson has an employee share purchase plan in place to encourage employees to take an individual stake in achieving the Company’s goals. At the end of 2023 the plan was implemented in 79 countries and available to about 88,000 employees, with a participation rate of 17.1 (18.9)%. Employee satisfaction scores remained high at 80 (81) points and continues to be above the benchmark value for comparable companies in the industry, which is 74 (77). Human rights Ericsson has continued to strengthen its human rights due diligence practices. As part of a long-term human rights training plan, an e-learning course was made available to all employees and workshops with the Allega- tion Management Office were conducted, to heighten awareness of when reported compli- ance concerns should be treated as human rights-related. The risk indicators used in the Sensitive Business process were also updated to cover human rights aspects tailored to dif- ferent types of business engagements, such as public networks for communication service providers (CSPs) as well as private networks for government agencies and enterprises. Full integration of these will be completed in 2024. 895 (683) sales opportunities were reviewed in the Sensitive Business process and 636 (435) cases resulted in either technical or contractual limitations to mitigate identified risks. 7 (13) sales opportunities were dismissed entirely as sufficient mitigating actions were not possible to enact. Relevant decisions also informed the work of the Business Risk Committee in their oversight of Group-wide human rights risk management. Matters concerning labor rights, in par- ticular working hours and adequate wages, continued to make up a significant part of non-conformities identified in supplier audits. All identified non-conformities are required to be addressed by time-bound corrective action plans. Ericsson also made significant efforts into improving traceability and visibility in the supply chain, with a focus on high-risk supplier categories beyond the first tier. A governance mechanism for managing findings related to risks of modern slavery in the supply chain was also established. During 2023, Ericsson has not, through its reporting channels, been made aware of any adverse human rights impacts in which the Company has been involved. Corporate citizenship Ericsson continued to invest in connected reforestation projects and planted 100,000 mangroves and 20,000 fruit bearing plants through a project in India, which complements existing projects in Malaysia and the Philip- pines. Ericsson Response and the Refugee Emergency Telecom Cluster in Zimbabwe distributed connectivity to RETS1) partner offices that support more than 14,000 refu- gees and asylum seekers in the Tongogara refugee camp. Ericsson Response also sup- ported the WFP-led ETC2) efforts to respond after the devastating earthquake in Turkey in February. Preparedness is key for reducing the impact of natural disasters and during the year Ericsson Response supported WFP to help the Philippine Department of ICT to strengthen communication resilience after typhoons. Digital inclusion The Ericsson Mobile Wallet Platform sup- ported 457 (379) million registered mobile wallet accounts. About 85 (80) million active consumers use mobile financial services powered by the platform every month, many of whom were previously unbanked. The platform has enabled many businesses and organiza- tions to accept digital payments accelerating the growth of cash-light digital economies. Ericsson was the first private sector partner of UNICEF3) and ITU’s Giga initiative, and over the past two years it has supported Giga in connecting more than 6,000 schools and 2.4 million children and youth to the internet. To date, Ericsson has positively impacted 485,000 children and young adults in 43 countries by providing access to digital learning and skills development programs through its Connect To Learn initiative. More information available in the notes to the S&CR report p. 25 p. 29 p. 31 p. 34 p. 35 S1 – Human Capital S2 – Health, safety and well-being S3 – Human rights S4 – Corporate citizenship S5 – Digital inclusion 1) Refugee Emergency Telecommunications Sector, led by the United Nations High Commissioner for Refugees (UNHCR). 2) World Food Programme – Emergency Telecommunications Cluster. 3) United Nations Children’s Fund. 8 2023 highlights – Governance Governance Completion rates for ethics and compliance trainings % 100 80 60 40 20 0 97 93 90 99 98 97 99 82 70 2021 2022 2023 Foundational ABC training Enhanced ABC training Ethics training for leaders Reported and substantiated compliance concerns No. 1,250 1,000 750 500 250 0 1,201 91 Reported1) Substantiated2) 1) All reported cases received in 2023. 2) All cases concluded and deemed as substantiated during 2023, some of which were received in previous years. Corrective and disciplinary actions taken1) No. 0 25 50 75 100 125 Termination 112 Written warning 58 Verbal warning 28 Resignation 1 Other 2 Total: 201 1) Actions taken as a result of substantiated breaches of Ericsson’s Code of Business Ethics. Each corrective action represents a unique individual meaning the total of actions shown here cannot be directly compared to the number of substantiated cases shown above, as each case may involve several individuals. An individual can be subject to several corrective actions but is only counted once in these statistics, with the most severe consequent determining classification in the above presentation. Ethics and compliance Ericsson is committed to maintaining the high- est standards of corporate governance, prior- itizing an integrity-led culture and compliance with laws in everything it does, driving integrity into and across the organization. The Company has invested significant resources and energy to strengthen its Ethics and Compliance (E&C) program, implementing and maintaining strong systems, controls and policies to effectively prevent and detect wrongdoing, including in the areas of ethics, anti-bribery and corruption, conflicts of interests, anti-money laundering and competition law. There is more information on this on pages 23-24 of the Financial report, in the Corporate Governance report and in note G2 of this report. Ericsson believes that driving integrity into day-to-day decision-making requires constant focus to ensure that compliance processes and related controls are fit for purpose and that they are continuously tested and refined. Through an initiative referred to as the Busi- ness Critical Transformation, discussed in greater detail in the Ethics & Compliance section of the Corporate Governance report, Ericsson has embedded improved anti-corrup- tion controls into its operations and manage- rial decisions, and further remediated the business process issues that were, in the past, a contributing factor in incidents of misconduct. Ericsson combined this work with rigorous testing of the E&C program’s effectiveness, which includes clear expectations for manage- ment to understand and address testing results and process adherence within their areas of responsibility. This approach positions Ericsson to conclude its monitorship related to the DOJ resolution in June 2024, but more importantly, sets the foundation for a well embedded, self- sustaining ethics and compliance program. To drive further accountability throughout the organization, all employees who are eligible for a short-term variable compensation (STV) pay-out may be denied all or part of the entitlement if they act in breach of Ericsson’s Code of Business Ethics (CoBE). In addition, senior executives are subject to evaluation according to a set of pre-defined integrity cri- teria, which relate to compliance training, third party management, allegation management and other items tied to the Company’s E&C program. Underperformance against these criteria can reduce STV pay-out by up to 100%, while exceptional performance may justify an additional incentive of up to a maximum of 10% of the executive’s annual base salary. Corporate contributions are an essential aspect of corporate responsibility and help demonstrate Ericsson’s support for various communities and causes. They are also impor- tant for stakeholder engagement, marketing, research and development, and employer branding. In 2023, Ericsson replaced the exist- ing process to evaluate, control, and manage contribution activities with a comprehensive new approach. The new process provides additional assurance that contributions are consistent with the Company’s values, free from conflicts of interest, and in full compliance with all applicable anti-bribery and corruption (ABC) laws, regulations, and internal rules and policies. Ericsson employees are obligated to act swiftly and transparently to disclose anything that may constitute a conflict of interest. To help employees fulfill this obligation, the Company initiated a global campaign in 2023 in which all employees have been asked to certify that they have disclosed all situations that may constitute a conflict of interest. Third-party management and supplier audits The process for vetting and oversight of the third parties has continued to develop to enable Ericsson to choose parties that meet the Company’s expectation of zero tolerance for bribery and corruption. Through the global Third-Party Management (TPM) Program, Ericsson identifies and mitigates corruption and integrity-related risks in the context of third-party relationships. Business Partner Review Boards, comprised of senior business professionals and guided by compliance leaders evaluate third parties with higher risk, approve or reject interactions and monitor the risk landscape in the geographies where Ericsson conducts business. TPM works with businesses to obtain transactional assurance and helps ensure compliant payments. Audits of suppliers as part of Ericsson’s Responsible Sourcing program has continued where a risk-based approach is used to make the yearly selection of which suppliers to audit. 123 (114) audits based on the requirements in the Code of Conduct (CoC) for Business Partners were conducted in 2023. Critical non- conformities were identified at 1 (6)% of the audited suppliers and concerned health and safety standards and management. Ericsson also conducted 19 (15) Contract Compliance (CC) audits. No critical nonconformities were identified at these audits. Each audit is seen as an opportunity for improvement and corrective action plans are established together with the suppliers Sustainability and Corporate Responsibility report 20232023 highlights – Governance 9 to address non-conformities. The corrective action rate for all non-conformities identified at CoC audits was 79 (73)% and the correspond- ing figure for CC audits was 65 (69)%. Training and awareness raising Ericsson has continued to provide mandatory training on topics critical for driving behavioral change and promoting integrity within the Company such as ABC, health and safety, and security awareness. At year end, mandatory foundational ABC training had been completed by 99 (93)% of the workforce. Enhanced ABC training for people in high risk roles had a 98 (97)% completion rate and 97 (90)% of people in executive leadership roles had completed training in workshop format that covered topics such as ethical decision-making and handling of ethical dilemmas. Reported compliance concerns In 2023, the number of reported compliance concerns was 1,201 (1,092). The Company views this increase as an indicator of continued confidence by employees and third parties in Ericsson’s allegation management and investigation processes and the seriousness with which the Company treats potential misconduct. Out of the reported concerns, 125 (215) cases were referred for further investi- gation. 1,076 (877) cases were not referred for investigation as they were inquiries of a general nature, not deemed to be related to misconduct or breaches of the Code of Busi- ness Ethics, or deemed low-risk and not war- ranting dedication of investigation resources. 582 of the reported concerns not referred for investigation were referred to other functions, such as the People function or Sourcing, to be addressed in accordance with their processes. During the year, 91 (118) cases were con- cluded and found to be substantiated. At year end, 78 (209) cases were still under investiga- tion. This figure includes cases reported both in 2023 and in 2022. More details, including reported cases broken down by category, are available in note G2. During the year, 201 (178) corrective and disciplinary actions involving individuals found to have acted in breach of the company’s Code of Business Ethics were taken. 112 (39) of these actions resulted in terminations, and 58 (74) in written warnings. Interactions with governmental authorities Ericsson is and has been involved in legal pro- ceedings involving governmental authorities in different jurisdictions. Further information about current proceedings is included in the Financial report on pages 25–26 Security and privacy Ericsson has continued to execute its security and data privacy strategies with the goal to strengthen its operational and portfolio resilience. There is more information on these topics on pages 19–20 of the Corporate Gov- ernance report. Advocacy and policy influence Ericsson has continued to advocate for policies that encourage and incentivize the digital ecosystem to deploy and use transformational connectivity. Ericsson acts as a trusted partner for policy makers, sharing its expertise and knowledge to address policy dilemmas. The Company is an active member of industry organizations and partnerships that develop policies and thought leadership. Examples include the European CEO Alliance, where Ericsson promotes projects focused on digitalization and energy supply, and Digital Europe, where it drives climate and environ- mental topics. Ericsson also contributed to an international training program, ICT Regulation – Policy and Practice, commissioned by the Swedish International Development Coopera- tion Agency. Ericsson has hosted frequent government visits to its Imagine Studio in Stockholm to both engage in dialogue and demonstrate 5G use cases. All material policy-influencing interac- tions with public officials are documented for internal audit purposes and declared according to local regulations and practices. More information available in the notes to the S&CR report p. 37 p. 38 p. 41 G1 – S&CR Governance G2 – Compliance and business ethics G3 – Supply chain and responsible sourcing p. 44 G4 – Advocacy and policy influence Board of Directors Stockholm, March 5, 2024 Telefonaktiebolaget LM Ericsson (publ) Org. no. 556016-0280 Sustainability and Corporate Responsibility report 202310 Consolidated sustainability notes Sustainability and Corporate Responsibility report 2023 Notes to the Sustainability and Corporate Responsibility report1) Contents Environment 11 17 18 18 20 24 E1 E2 Climate change Pollution E3 Water E4 E5 E6 Resource use and circular economy Reporting according to Article 8 of the EU Taxonomy Regulation Environmental management Social 25 S1 29 31 34 35 S2 S3 S4 S5 Human capital Health, safety and well-being Human rights Corporate citizenship Digital inclusion Governance 37 G1 Sustainability and corporate responsibility governance 38 41 44 G2 G3 G4 Compliance and business ethics Supply chain and responsible sourcing Advocacy and policy inﬂuence Other – Basis for preparation 46 O1 Stakeholder engagement and materiality 48 49 O2 O3 Reporting principles, scope and external assurance Restatements of information 1) When "material," "materiality," or the like is used in these Notes, the term is meant to refer to material under emerging European sustainability reporting regulation, and is not necessarily material under US securities or other laws. Sustainability and Corporate Responsibility report 2023 Consolidated sustainability notes 11 Section E – Environment E1 Climate change Impacts, risks and opportunities Ericsson has identified material impacts related to climate change both upstream and downstream in its value chain, as well as in its own operations. The ICT sector represents a relatively small share1) of GHG emissions, with emissions primarily being derived from the sector’s energy consumption. The vast majority of GHG emissions in Ericsson’s value chain2), approximately 90% in recent years, occur downstream, primarily from electricity consumption in the use phase of sold products. Upstream emissions, which include both resource extraction and processing, manufacturing activities and transportation rep- resent around 10% of total value chain emissions but this share is expected to increase as more renewable energy is deployed and used in the downstream portion of the value chain, reducing emissions from the use phase of sold products. While emissions from Ericsson’s direct operations (Scope 1 and 2) represent less than 1% of the total carbon footprint, they are still considered material since all sectors of the economy need to reduce emissions in order to reach global agreements on climate mitigation. In the past, with the rollout of each new generation of mobile network stand- ards (such as 2G, 3G and 4G), new equipment has been added, which over time has increased total energy consumption across global mobile networks. The increases have been stable across each mobile generation. Ericsson’s own research3) shows that it is the surface coverage and the installation of new equipment when deploying new generations of mobile networks that has driven increased energy usage, rather than increased data traffic. While the ICT sector must address its own carbon footprint, it can also play an important role in enabling other sectors in their decarbonization efforts. Many of the solutions needed in other sectors to reduce emissions, such as management systems and smart meters in buildings, smart electrical grids, telematics, and storage and inventory management solutions in enterprises, are all dependent on ICT solutions and infrastructure to function. Ericsson’s own peer-reviewed 2015 research4) suggests that ICT solutions have the potential to enable decarbonization of up to 15% in other sectors by 2030, and poten- tially even higher when including the enabling potential of 5G and the Internet of Things. As part of its overall climate strategy and 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 scenarios: Net Zero 2050 and Current Policies. The main conclusions from this analysis are presented below. A summary of the assessment methodology and assumptions under the two scenarios used is included at the end of this note. The results of the scenario analysis were incorporated into Ericsson’s materiality analysis when identify- ing material climate-related risks and opportunities. Expansion of network energy performance offering (opportunity – products and services) Under the Net Zero 2050 scenario, both emission reduction targets and higher energy prices drive further efforts by communications service providers to increase energy performance in mobile networks. The combination of these two factors creates opportunities for Ericsson to expand its offering of network energy performance solutions. Enabling emission reductions in enterprise sectors (opportunity – markets) As other more emission-intense sectors – such as power and utilities, transport and manufacturing – rapidly increase efforts to decarbonize in the Net Zero 2050 scenario, significant investments are made to achieve decarbonization goals. These investments, such as the 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 sectors. Increased demand for equipment with lower embodied emissions (opportunity – products and services) In the Net Zero 2050 scenario, the price of carbon emissions increases substantially. Simultaneously, Ericsson’s customers rapidly increase the share of renewable energy used to power the networks, meaning the relative share of their upstream emissions increases. To address these embodied, and increasingly costly, emissions, customers’ demand for low-carbon products, meaning equipment made from less carbon-intense materials and processes, is expected to increase, which can mean new business opportunities for Ericsson. Increased costs due to carbon emissions pricing (transition risk – policy) In the Net Zero 2050 scenario, the price of carbon emissions increases sub- stantially, leading to increased costs for actors in Ericsson’s value chain. While direct impacts are limited, indirect impact upstream in the value chain is more significant, assuming emissions stay the same and costs are passed through to Ericsson from affected suppliers. Disruptions caused by severe weather events (acute physical risk) In the Current Policies scenario, the frequency and intensity of severe weather events, as well as coastal and riverine flooding, increases. This leads to height- ened risks for long-term business interruptions as well as damage to inventory and fixed assets in the supply chain at both outsourced manufacturing sites and at Ericsson’s own sites, such as production facilities and IT centers. Policies Ericsson’s Sustainability Policy sets out the Company’s foundational principles on environmental sustainability, including climate change mitigation. Ericsson uses life-cycle analysis (LCA) methodology to determine its significant envi- ronmental aspects and to assess the environmental impact of ICT, reduce the negative environmental impact of its own operations and take a precautionary approach to environmental challenges, applying design to ensure continuous environmental improvements with a life-cycle perspective on its portfolio. Ericsson also advocates the use of ICT to mitigate and adapt to climate change and to create low carbon economies of the future. Ericsson’s Code of Conduct (CoC) for Business Partners requires the com- pany and its business partners, including suppliers, to develop and implement plans and targets to reduce their GHG emissions. Business partners must adopt, and publicly disclose, their targets for reducing emissions in alignment with the science-based 1.5 °C ambition and actively work toward achieving them, which includes public reporting on progress made on an annual basis. The CoC is based on the Responsible Business Alliance Code of Conduct and the UN Global Compact 10 principles, but also includes Ericsson-specific requirements and is part of standard-supplier contracts. It is available in multiple languages on the Company’s website. For suppliers of hardware components or products, construction work, supply services, field maintenance and network rollout operations, as well as those with high environmental risks, where their operations significantly impact the environment, Ericsson has additional environmental requirements. If energy consumption and/or GHG emissions are identified as significant environmental aspects, the supplier must calculate its carbon footprint, using the GHG proto- col for its Scope 1, Scope 2 and, if applicable, for its Scope 3 emissions. Management approach Group climate strategy and targets are coordinated and driven by the central Sustainability and Corporate Responsibility unit. On an operational level, climate action strategies and policies are integrated across business and mar- ket areas, as well as Group functions, with each organization being responsible for executing on its respective strategies and targets. 1) Malmodin et al. (2023) ICT Sector Electricity Consumption and Greenhouse Gas Emissions – 2020 Outcome, SSRN Electronic Journal 2) See page 15 for a description of Ericsson’s GHG emissions accounting methodology. 3) Ericsson Mobility Report (2015) 4) Malmodin & Bergmark (2015), Exploring the effect of ICT solutions on GHG emissions in 2030, Atlantis Press 12 Consolidated sustainability notes Sustainability and Corporate Responsibility report 2023 Note E1, cont’d. Executive variable remuneration A portion of the variable remuneration to executives is determined by perfor- mance on selected elements of the Company’s GHG emission reduction targets. See page 7 of the Remuneration report for further information. Net Zero transition plan Ericsson has a SBTi validated target to achieve Net Zero1) value chain emis- sions by 2040, with a near-term target to reduce total value chain emissions by 50% from a 2020 baseline by 2030. The most significant actions that the Company plans to take to reach this target are described below. ktCO2e 40,000 50% reduction across value chain Net Zero across value chain –5,000 2020 2021 2022 2023 2030 2040 // // Reported value chain emissions (covering Scope, 1, 2 and 3) 2030 target 2040 target Negative emissions through, for example, Carbon Capture and Storage (CCS) Total value chain emissions as shown in the graph above should be considered illustrative of Ericsson’s Net Zero transition plan, as they include forward-looking estimates of future emissions. Scope 1 direct emissions Ericsson is working to replace its fleet of internal combustion engine service vehicles with a low-emission fleet. The transformation will take place gradually, with some countries and market areas expected to transition faster than others due to differences in availability of low- or zero-tailpipe emissions vehicles and market conditions. In addition, the Company plans to increase the coverage and use of fleet management systems and telematics to optimize fleet utiliza- tion and reduce unnecessary trips, where feasible. Backup generators and local heating using fossil fuels at facilities will be phased out or replaced with low-emitting alternatives wherever possible. Technical building requirements specify limits on the maximum global warming potential for refrigerants used at facilities. Scope 2 indirect emissions Ericsson aims to source 100% renewable energy at its facilities by 2030. In addition, Ericsson works together with facility management companies to improve the energy efficiency of its facilities. The majority of facilities Ericsson occupies are leased. Scope 3 upstream emissions2) Ericsson engages with its high-emitting and strategic first-tier suppliers to have them set their own 1.5 °C aligned emission reduction targets. For targets to be accepted by Ericsson, they need to include a commitment to halving emissions in relevant scopes by 2030, and the supplier must make them public as well as commit to report on progress toward the targets publicly and at least annually. Ericsson continues to engage with those suppliers who have not yet set quali- fying targets. To reduce the emissions embodied in hardware products, Ericsson applies other measures such as product design and material choice, substitution and recycling. To prevent emissions from business travel from returning to their pre- pandemic levels, Ericsson has set a cap on business travel emissions at 50% of their 2019 levels, with each business and market area, Group function and subunits being allocated yearly emission budgets for business travel. Scope 3 downstream emissions2) Ericsson’s approach for reducing indirect downstream emissions from the use of products and services is through improved energy performance of the Company’s solutions, which includes hardware, software and service solutions. A focal point is to ensure that the rollout of 5G does not result in an increase in the energy consumption of customers’ mobile networks, as has been the case with rollouts of previous generations of mobile communication networks. This involves: – Investments in R&D to increase the energy performance of the portfolio. – Planning networks both from a performance and an energy usage perspective. – Providing guidance on when and how to modernize equipment and operat- ing networks intelligently by using artificial intelligence, machine learning and other features to reduce energy use during times of low network load. To further reduce these emissions, customers also need to transition to low- carbon and renewable energy sources. Reducing energy demand, and subse- quent consumption, are important steps in making the transition to renewable energy sources easier and more financially viable. Besides improved energy efficiency, Ericsson can support customers with the integration of on-site renewable energy generation such as solar and wind energy at base station sites. By using the same management system to control the radio-access network and the renewable energy sources, the energy supply and demand can be optimized for the site conditions. More details on how Ericsson is aiming to reduce energy consumption of mobile networks are avail- able in the Breaking the Energy Curve report on the Company’s website. For emissions related to product transport, Ericsson is utilizing increased data visibility to optimize transport planning and thereby reduce emissions. Carbon removals Ericsson plans to use carbon removal technologies, such as carbon capture and storage, to neutralize the unavoidable part of value chain emissions to reach its 2040 Net Zero targets. When such technologies are employed, they will not represent more than 10% of the base year carbon footprint and must adhere to high standards to ensure the effectiveness and trustworthiness of any Net Zero claims. Internal price on carbon Ericsson has an internal shadow carbon price of USD 100 per metric ton of carbon dioxide equivalent applicable to equipment transportation. The shadow price is included in the landed cost model when calculating the total price of outgoing deliveries of certain hardware product categories. The aim is to visu- alize the cost of carbon related to downstream transportation when calculating and deciding on transport routes for outgoing shipments sourced by Ericsson. Product energy certiﬁcations The majority of the product portfolio, made up of communication network hardware such as radios and antennas, is currently not covered by any third- party managed certification scheme for energy efficiency. Products eligible for certification, such as servers, constitute a smaller part of the product portfolio. These are currently not certified according to any such scheme. 1) Implying emission reductions of at least 90% within the set timeframe in the selected scopes. 2) See note O2 on page 41 for an explanation on limitations regarding value chain reporting and disclosures. Sustainability and Corporate Responsibility report 2023 Consolidated sustainability notes 13 Note E1, cont’d. Enablement strategy For many sectors, cellular technology has accelerated the digitalization process and proven to create value through improved productivity, safer workplaces and more environmentally sustainable operations. As an example, cellular connectivity helps accelerate the transformation of utility companies in an environment where energy costs as well as demand for electricity are increas- ing. Cellular technology has the potential to further provide companies in this sector with real-time data exchange, automatic grid fault detection, distribu- tion automation, connected electric vehicle charging and building energy management and optimization. Ericsson will continue to assess the use of ICT solutions in reducing GHG emissions of other sectors following the International Telecommunication Union’s (ITU) standards and methodologies for making such assessments and quantifications. This requires companies to assess all types of effects, including the rebound effect1). Research and contributions to standardization Ericsson conducts research into the direct and indirect environmental impacts of the ICT sector and has for several years used LCAs to understand its port- folio’s carbon and environmental footprint. In addition, the Company contrib- utes to the development of methodologies for assessing these impacts. One example is the ITU’s Net Zero standard, which guides companies in the sector on setting Net Zero targets, to which Ericsson contributed. Training and awareness raising Climate action is one of nine critical skills identified for Ericsson’s workforce. A framework has been developed to upskill all employees based on the level of needs in their respective roles. Introductory and fundamental levels are currently available to all employees. Collaborations and partnerships As a general principle, any climate-related commitment or collaboration that Ericsson partakes in must be based on a scientific approach for the Company to consider endorsement. On the right, the most significant external collabora- tions related to climate change mitigation are listed. Organization Description 1.5 °C Supply Chain Leaders CEO Alliance for Europe European Green Digital Coalition Exponential Roadmap Initiative Pathways Coalition We Don’t Have Time Members of the 1.5°C Supply Chain Leaders work together to drive climate action through global supply chains and support small and medium-sized enterprises (SMEs) through the SME Climate Hub. The partnership aims to support suppliers in halv- ing emissions before 2030 and achieving Net Zero emissions before 2050. The CEO Alliance for Europe is a cross-sector collaboration between 12 companies, with over 1.5 million employees and EUR 500 billion in annual revenue working for a more sustain- able and resilient Europe, with a focus on digitalization and decarbonization. The European Green Digital Coalition is an initiative by a group of ICT companies, supported by the European Commission and the European Parliament, which aims to promote and harness the enabling emission-reducing potential that digital solutions can have in other sectors. The Exponential Roadmap Initiative brings together innova- tive and transformative businesses taking action in line with limiting global warming to 1.5°C. The purpose is to accelerate exponential climate action and solutions, integrate climate in business strategies and inﬂuence climate action in society, with the mission to halve emissions before 2030. The initiative is an accredited partner to the UN Climate Change High-Level Champions’ Race to Zero campaign. The Pathways Coalition aims to accelerate the decarboniza- tion of heavy transport with member companies committing to the vision of the coalition: to reach zero CO2 emissions by no later than 2050. We Don’t Have Time provides a platform for the dissemination of knowledge, discussion and rating of businesses and public individuals from a climate perspective. Together with Ericsson, the partnership broadcasts Exponential Climate Action Sum- mits to increase awareness of the need for climate action. We Don’t Have Time is a member of the UN-backed Race To Zero campaign and the Exponential Roadmap Initiative. World Economic Forum – Alliance of CEO Climate Leaders The Alliance of CEO Climate Leaders is a global community of Chief Executive Ofﬁcers who work towards climate action across all sectors and engage with policymakers to help deliver the transition to a Net Zero economy. 1) The reduction in expected gains from new technologies that increase the efﬁciency of resource use because of behavioral or other systemic responses. 14 Consolidated sustainability notes Sustainability and Corporate Responsibility report 2023 Note E1, cont’d. Metrics and targets Targets Emission reductions – long-term Net Zero value chain emissions by 2040. This implies at least a 90% reduction of emissions in Scope 1, 2 and relevant Scope 3 categories1) 2) 3) from a 2020 base- line, and the potential use of carbon removal and storage technology for the remaining unavoidable maximum 10% of emissions. This target has been validated as 1.5 °C aligned by the Science Based Targets initiative (SBTi). Emission reductions – near-term Halving of total value chain emissions by 2030, including a 90% reduction in Scope 1 and 2, and a 50% reduction of overall relevant Scope 3 categories1) 2) 3). The Scope 3 component of the target is disaggregated as shown below. Emissions covered Scope Category(ies) Target scope Scope 1 & 2 Market-based Scope 3 Total 6 & 7 1) 1–5, 9 & 12 2) 11 3) Company-wide 2020 Base year (BY) BY emissions (tCO2e) Target year (TY) TY change vs.BY (%) 111,889 65,432 2,576,861 27,281,138 30,035,3206) 2030 – 90 + 485) – 50 – 50 – 50 TY emissions (tCO2e) 11,200 97,000 1,288,400 13,640,600 15,037,200 2023 change vs. BY (%) – 38 + 55 – 21 + 29 + 24 2023 emissions (tCO2e) 69,280 101,599 2,023,358 35,057,200 37,251,437 Use of CRT/CCS4) SBTi status Potentially Validated (1.5 °C) 1) Business travel and Employee commuting 2) Purchased goods and services, Capital goods, Fuel- and energy-related activities, Upstream transportation, Downstream transportation, End-of-life treatment of sold products and Waste generated in operations 3) Use of sold products and services 4) Carbon removal technology / Carbon capture and storage 5) As the target baseline coincides with the COVID-19 pandemic, Ericsson foresees an increase in business travel and employee commuting compared to the extraordinary low volumes observed in the baseline year. 6) Nominal differences comp. to previously reported emissions for the same period due to alignment with the SBTi methodology. See note O3 for more information. Portfolio energy performance Reduce energy consumption at radio base station sites by 40% Scope Typical new radio base station site 2021 2025 Base year Target year Target energy reduction (%) 40 2023 energy reduction (%) SBTi status 30 Not validated This target supports the Net Zero target by addressing downstream GHG emissions through reducing the energy consumption of customers’ mobile networks. The target entails reducing the energy consumption of radio base station type sites by 40% by 2025 compared with a 2021 baseline. The energy consumption is measured in kWh and target performance is expressed as the average of potential reductions for modeled type sites in rural, suburban and urban locations for a service provider operating in Europe. The target is intended to track the Company’s capability to provide energy-efﬁcient solutions to its customers. For this reason, it measures energy consumption reduction, compared with the base year, from the best performing solution of software and hardware available in the target and reporting year, respectively. These values should be understood as the maximum potential energy savings possible in each respective year. Supply chain engagement Have 350 suppliers set 1.5 °C aligned emission reduction targets Scope First-tier suppliers Base year Target year 2020 2030 Targeted alignment (No.) 350 Aligned in 2023 (No.) SBTi status 237 Not validated This target supports the Net Zero target, addressing upstream GHG emissions by having 350 high-emitting and strategic direct suppliers set their own 1.5 °C aligned emission reduction targets, which shall include a commitment to halve emissions in relevant scopes to 2030. Targets must be made public, be accompanied by a credible transition plan, and the supplier must report at least annually on the progress to Ericsson for the targets to be accepted as aligned. Metrics Energy consumption in own operations Energy consumption and mix 1) (MWh) Fossil sources Fuel consumption from coal and coal products Fuel consumption from oil and petroleum products 2) Fuel consumption from natural gas Fuel consumption from other fossil sources Purchased or acquired electricity Purchased or acquired heat Purchased or acquired steam Purchased or acquired cooling A. Total fossil energy consumption3) Share of fossil sources in total energy consumption (%) Share of fossil sources in total electricity consumption (%) Nuclear sources Fuel consumption from nuclear sources Purchased or acquired electricity B. Total nuclear energy consumption3) Share of nuclear sources in total energy consumption (%) Share of nuclear sources in total electricity consumption (%) 2023 2022 2021 (MWh) 2023 2022 2021 − − 63,525 103,692 44,772 45,127 − − 76,047 19,090 − 51,534 − 123,445 23,720 − 92,201 126,926 25,693 24,188 − − 51,453 55,996 255,323 316,306 355,780 47 24 40 16 34 13 Renewable sources Fuel consumption from renewable sources Purchased or acquired electricity Purchased or acquired heat Purchased or acquired steam Purchased or acquired cooling Consumption of self-generated non-fuel renewable energy C. Total renewable energy consumption Share of renewable sources in total energy consumption (%) Share of renew. sources in total electricity consumption (%) − − − − 1,621 − 478,866 466,208 − − − 1,001 480,487 467,209 59 82 64 84 − 389,553 − − − 1,000 390,553 52 75 D. Total energy consumption (A+B+C) 749,716 794,303 752,593 − 13,906 13,906 2 2 − 10,788 10,788 1 2 − 6,260 6,260 1 1 1) Measured energy consumption at facilities (ofﬁces, production sites, warehouses, data centers and labs) represents approximately 81 (85) % 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) Fuel consumption is primarily related to the service vehicle ﬂeet and is estimated partially based on vehicle telematics data and partially on contracted yearly mileages for leased vehicles without t elematics installed. 3) Energy data for previous reporting periods have been restated. See note O3 for more information. Sustainability and Corporate Responsibility report 2023 Consolidated sustainability notes 15 Note E1, cont’d. Energy intensity (MWh/net sales MSEK) Facility energy Fuel for service vehicles Total Product transportation Product transportation by mode1) (Ktonnekm) Air Road Sea Rail Total 2023 2.62 0.23 2.85 2022 2.55 0.37 2.93 2021 2.71 0.53 3.24 2023 2022 2021 94,536 169,090 169,407 170 136,027 153,956 155,086 179,790 119,725 152,230 2,877 5,865 433,203 416,703 488,853 1) Data covers outbound emissions of goods transported from a manufacturing site to either a supply hub or a customer warehouse. Transported distances are estimated based on linear routes between locations. Greenhouse gas emissions GHG emissions by scope and category (metric tons of CO2e) Scope 1 direct GHG emissions Fuel for service vehicle ﬂeet Facility stationary combustion and refrigerants Total gross Scope 1 emissions Scope 1 emissions under regulated ETSs (%) Scope 2 indirect GHG emissions Purchased energy (gross location-based) Purchased energy (gross market-based) Scope 3 other indirect GHG emissions Upstream Purchased goods and services Capital goods Fuel- and energy-related activities1) Upstream transportation1) 2) Waste generated in operations Business travel2) Employee commuting (incl. teleworking) Downstream Downstream transportation1) 2) Use of sold products and services1) End-of-life treatment of sold products 2023 2022 2021 16,039 10,990 27,029 0 27,689 10,713 38,402 0 32,176 6,066 38,242 0 136,628 42,251 141,636 45,258 138,985 57,685 1,751,600 37,800 19,700 164,800 1,000 52,599 49,000 2,199,900 39,200 36,600 206,200 1,200 25,469 34,500 2,313,000 42,000 23,200 215,300 800 9,255 26,800 7,090 21,158 7,082 35,057,200 28,262,400 25,352,500 33,000 31,800 27,300 Total gross Scope 3 emissions 37,182,157 30,844,359 28,022,937 Total gross GHG emissions (location-based) 37,345,814 31,024,397 28,200,164 Total gross GHG emissions (market-based) 37,251,437 30,928,019 28,118,864 1) Emissions in previous reporting periods have been restated. See note O3 for more information. 2) Emissions reported do not consider the so-called high-altitude effect of emissions from air travel and air transport as there is still signiﬁcant uncertainty as to how large this effect is and how it should be calculated. For reference purposes only, the high-altitude effect in 2023 is estimated to correspond to emissions of 108,000 metric tons of CO2e. Share of GHG emissions by scope (%) Scope 1 Scope 2 (market-based) Scope 3 upstream Scope 3 downstream 2023 2022 2021 0.1 0.1 5.6 94.2 0.1 0.1 8.2 91.5 0.1 0.2 9.4 90.3 Emissions intensity by scope (metric tons of CO2e/net sales MSEK) Scope 1 Scope 2 (location-based) Scope 2 (market-based) Scope 3 upstream categories Scope 3 downstream categories All scopes (market-based) Supply chain engagement 2023 0.10 0.52 0.16 7.88 133.30 141.45 2022 0.14 0.52 0.17 9.37 104.22 113.90 2021 0.16 0.60 0.25 11.32 109.30 121.04 Suppliers with 1.5 °C aligned emissions reduction targets (No.) Suppliers 2023 237 2022 225 2021 121 GHG accounting methodology Emissions are reported according to the GHG Protocol using financial control as the basis for consolidation. Emissions are reported in CO2e and include the following gases and chemicals: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs) and perfluorochemicals (PFCs). Measurement periods are aligned to the fiscal year and based on the latest available data at cut-off date, supplemented with extrapolated estimates for periods where no measured data is available. Scope 1 Consumed volumes of fuels and refrigerants are multiplied by applicable emission factors to derive emissions. Fuel consumption in the service vehicle fleet is estimated partially based on vehicle telematics data and partially on contracted yearly mileages for leased vehicles without telematics installed. Scope 2 Purchased energy volumes are multiplied by country average emission factors for location-based emissions. For market-based emissions, the residual energy mix and purchased renewable energy instruments are the source of the emis- sion factors used in the calculations. Part of the energy consumption at facili- ties is estimated. See the footnote to the energy table above for details. Scope 3 Emission factors used to calculate emissions in the categories Purchased goods and services, Capital goods, Fuel- and energy-related activities, Waste generated in operations, and End-of-life treatment of sold products are based on internal studies and Ericsson’s LCAs of the carbon footprint of its products, multiplied with relevant activity metrics to derive yearly emissions. Emissions in the category Upstream transportation are calculated using a combination of calculations based on spend-based data, and calculations based on measured weights and transported distances of outbound shipments paid for by Ericsson. The majority of emissions in the category Business travel are based on data reported by travel agencies, with a smaller part including hotel nights being esti- mated based on travel spend. Emissions in category Employee commuting are estimated based on a survey of employees’ commuting and teleworking habits. Emissions in the category Use of sold products and services are calculated and reported in their entirety in the year a product is sold and not accrued over its expected lifetime. For the purpose of calculating these emissions, the average expected lifetime of products sold is assumed to be 10 years. Emission factors relevant to the use phase have been estimated using the current energy mix in the grids of markets served, or the latest available customer-specific energy mix data where that is stated in the public domain. Future changes in grid factors or customer-specific energy mixes that may occur over the expected lifetime of sold products is not factored into the calculations. The majority of emissions in the category Downstream transportation are calculated using the weight and distances of transported products where the transport has been paid for by the customer. Emissions in the remaining Scope 3 categories have been assessed as not material and are therefore not reported on. Estimating Scope 3 emissions is associated with inherent uncertainties due to limitations in availability and accuracy of primary data, which is why the reported figures should not be regarded as exact measurements. The table below summarizes Ericsson’s Scope 3 accounting methodologies and the estimated levels of uncertainty of reported figures by category. 16 Consolidated sustainability notes Sustainability and Corporate Responsibility report 2023 Note E1, cont’d. Scope 3 category Purchased goods and services Capital goods Fuel- and energy-related Upstream transportation Business travel Employee commuting Downstream transportation Use of sold products and services End-of-life treatment of sold products Emission factors used in consolidation Source Purchased energy Electricity from fossil sources Electricity from nuclear sources Electricity from renewable sources District cooling District heating, Sweden District heating, other Fuels and refrigerants Natural gas (local heating) Diesel Gasoline Refrigerants Travel Air Road Transport Air Road Sea Rail Spend-based emissions Accounting method Level of uncertainty (±%) Average data Average data Average data Distance- and spend-based Distance- and spend-based Average data and distance-based Distance-based Direct use-phase emissions through a hybrid method Average data 30 30 30 30 10 30 10 10 30 GWP (kg CO2e) Measured by Source 0.01 – 1.35 0.00 0.00 0.00 – 0.41 0.04 0.04 – 0.26 0.20 0.26 0.25 466 – 14,800 0.09 – 0.57 0.00 – 0.40 0.78 – 1.19 0.10 0.03 0.04 0.05 – 0.21 kWh kWh kWh kWh kWh kWh kWh kWh kWh kg pkm pkm tonnekm tonnekm tonnekm tonnekm USD IEA/US EIA/AIB/Supplier speciﬁc IEA Supplier speciﬁc IEA Supplier speciﬁc Country averages DEFRA DEFRA DEFRA IPCC 4th assessment report DEFRA Country averages DEFRA (adjusted) DEFRA (adjusted) DEFRA (adjusted) DEFRA (adjusted) Ericsson-speciﬁc Scenario analysis for climate-related risks and opportunities Scenarios analyzed Net Zero 2050 – Ambitious mitigating actions introduced imminently – Net-zero global GHG emissions around 2050 – 50% chance of limiting global warming to below 1.5 °C by the end of the 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 the end of the century – High physical risks but lower transitional impacts. Assessment methodology Initially, more than 30 potential climate-related risks and opportunities were considered in the analysis. The items on this 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. Risks and opportunities upstream and downstream in the value chain, as well as in own operations were considered. Physical risks were mainly assessed using the assumptions under the Current Policies scenario, whereas transitional risks and opportuni- ties were primarily analyzed in the context of 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 horizons, 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. For the purpose of this analysis, Ericsson defined short-, medium-, and long-term time horizons as up to 2025, 2025-30, and beyond 2030, respectively. The more long-term impacts of risks and opportuni- ties, stretching beyond 2030, were primarily assessed in a qualitative fashion. Under the Current Policies scenario, the impacts of physical risks are expected to become more severe after 2030. Sustainability and Corporate Responsibility report 2023 Consolidated sustainability notes 17 E2 Pollution Impacts, risks and opportunities Ericsson has identified potential material impacts related to pollution both upstream and downstream in its value chain. As regards the upstream value chain, all manufacturing of electronic equipment today requires small volumes of substances of concern and sometimes substances of very high concern. Downstream in the value chain, negative impacts can also occur if end-of-life products are not properly disposed of or recycled. Ericsson’s own manufactur- ing processes primarily involve assembling products and components manu- factured by other actors upstream in the value chain. Hence, no significant amounts of such substances are used in Ericsson’s own operations. Fossil fuel energy generation is a significant source of air pollution. It is an indirect environmental impact from the electricity consumption of network equipment, which is especially relevant in markets where fossil energy sources make up a significant share of the energy mix. Increasing regulation on the use of certain substances may drive increased compliance costs as well as increased costs to research and develop alterna- tive solutions and substances, exemplified with the recent proposal on restrict- ing the use of PFAS1) in the European Union. In addition, the availability of alternatives may be limited, meaning they could come at a higher price than substances currently used. Policies Ericsson’s Code of Conduct (CoC) for Business Partners requires suppliers to identify the environmental aspects and associated impacts and minimize adverse effects on the community, environment and natural resources within their operations, while safeguarding the health and safety of the public. The CoC is based on the Responsible Business Alliance Code of Conduct but also includes Ericsson-specific requirements and is part of standard-supplier contracts. It is available in multiple languages on the Company’s website. For suppliers of hardware components or products, construction work, supply services, field maintenance and network rollout operations, as well as those with high environmental risks where their operations significantly impact the environment, Ericsson has additional environmental requirements. Among others, these require the suppliers to comply with the requirements in the Ericsson Lists of Banned and Restricted Substances related to substances used in production processes. The requirements are applicable when designing, purchasing and manufacturing components and products, including batteries and packaging. Substitution of substances under observation is recommended as a precautionary approach. Management approach Ericsson strives to minimize the environmental impact of its products through- out all life-cycle stages. For information on portfolio energy performance, see note E1. Material declarations Ericsson collects material declarations from its suppliers. Upon request, sup- pliers are expected to declare the full material content of products delivered to Ericsson. This includes substances on the REACH2) candidate list and declarations of the use of certain critical raw materials (as defined in the EU Critical Raw Materials List). In addition, there is a SCIP (Substances of Concern In articles, as such or in complex objects (Products)) reporting process in place to fulfill requirements in the EU Waste Framework Directive. All electronic products may contain small traces of declarable substances through impurities that are near impossible to eliminate, and which fall below the threshold for what needs to be declared. Ericsson continuously works to avoid inclusion of harmful substances in products and components. Product take-back program See note E4 for information about Ericsson’s product take-back program, which is part of the Company’s extended producer responsibility. Metrics While not related to any identified material impacts, risks or opportunities, Ericsson discloses emissions of air pollutants derived from its own operations, as this information is frequently asked for by external stakeholders. Other emissions to air1) (metric tons) NOx SOx Particle matters 2023 2022 2021 38 62 11 49 61 12 54 63 13 1) Emission data for previous reporting periods have been restated. See note O3 for more information. 1) Per- and Polyﬂuorinated Substances (PFAS) are a group of chemicals used to make ﬂuoropolymer coatings and products that resist heat, oil, stains, grease and water, and can be found in a variety of products, including electric equipment and electronics. 2) REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) is the regulation and system governing the manufacture and import of chemicals in the EU. 18 Consolidated sustainability notes Sustainability and Corporate Responsibility report 2023 E3 Water Impacts, risks and opportunities Material impacts related to water have been identified upstream in the value chain, primarily linked to the manufacturing of semiconductors and extraction of natural resources such as minerals used in electronic hardware. Semiconductor manufacturing requires high quality water. Often freshwater is used, which may cause impact on the water availability in adjacent com- munities if not managed properly. Mining of minerals can impact water in several stages of the mining process, which may impact both the availability of freshwater as well as the quality of the water. Ericsson has not identified any material water-related impacts in its own operations or downstream in the value chain. Ericsson does not use water in its assembly processes, meaning water used at facilities is primarily used for sanitary purposes and comes from municipal water supplies. Freshwater is not directly drawn from ground or surface water sources. Ericsson’s products and services do not consume water in their use phase. As water is a key input in certain parts of Ericsson’s upstream value chain, water shortages affecting these parts of the value chain could lead to supply chain disruptions. Under the Current Policies scenario considered as part of Ericsson’s climate scenario analysis (see further details in note E1), several regions where Ericsson suppliers are located, including manufacturers of semiconductors in Southeast Asia, are at risk of high-water stress in the future, which could cause shortages of manufacturing inputs. Policies Ericsson’s Code of Conduct (CoC) for Business Partners requires suppliers to reduce the use of natural resources, including water. The CoC is based on the Responsible Business Alliance Code of Conduct with additional Ericsson- specific requirements and is part of standard-supplier contracts. It is available in multiple languages on the Company’s website. For suppliers of hardware components or products, construction work, supply services, field maintenance and network rollout operations, as well as those with high environmental risks where their operations significantly impact the environment, Ericsson has additional environmental requirements. Among others, these require the supplier to measure and control emissions to water and ensure proper treatment of all effluents of wastewater. Further, suppliers shall control and measure their water usage. If water consumption is identified as a significant environmental aspect, the business partner must develop a water management plan to minimize the overall water consumption, recycle used water or by any other means reduce their impact. Management approach Ericsson conducts audits of first-tier suppliers to verify adherence to the CoC. Currently, the focus of the CoC audits as relates to water is on assessing sup- pliers’ wastewater management practices. In 2023, no major nonconformities related to water management were identified. Metrics While not related to any identified material impacts, risks or opportunities, Ericsson discloses water consumption and intensity metrics for its own opera- tions, as this information is frequently asked for by external stakeholders. Water consumption 1) (m3) Own operations 2023 2022 2021 906,800 1,053,200 1,150,000 1) Out of total reported water consumption, approximately 37% of the Group’s headcount is covered by measured data, with the remaining part being estimated based on extrapolations of the measured volumes. Water consumption intensity (m3/net sales MSEK) Own operations 2023 3.44 2022 3.88 2021 4.95 E4 Resource use and circular economy Impacts, risks and opportunities Material impacts related to resource use and the transition to a circular economy have been identified upstream in the value chain, primarily linked to manufacturing of electronic equipment, as well as downstream in the value chain, related to the recovery and treatment of end-of-life electronic equip- ment. Network equipment is manufactured using finite natural resources such as steel, aluminum, copper and rare earth minerals, as well as plastics. Metals are recycled to a high degree, in general, while rare earth metals and plastics have low recycling rates. Downstream in the value chain, the recovery and recycling rates of network equipment varies across regions. Product take-back levels are low because of the second-hand value of products, and the fact that the ownership resides with Ericsson’s customers. A large share of the network equipment is assumed to be resold and reused through informal second-hand markets. A smaller share is assumed to be recycled through substandard processes. In its own operations, Ericsson primarily assembles parts and components from suppliers, which generates comparatively little material waste. Ericsson can, however, through product design, steer what materials are used by suppli- ers to enable higher rates of recyclability, use of non-virgin materials and longer lifetimes of its products. Redesigning products to meet customer or regulatory demands using alternative or non-virgin materials could lead to increased R&D costs. Scarcity of certain raw materials, including both virgin and non-virgin minerals, paired with increased demand in several industries for the same materials, could lead to higher costs of input materials and components used in electronic hardware. Increased requirements on product take-back collection rates may lead to increased cost of sales. Policies Ericsson’s Sustainability policy states that life-cycle assessment methodology shall be used to determine significant environmental aspects, and reduce the negative environmental impacts of its own operations and take a precaution- ary approach to environmental challenges. Ericsson shall also apply design to ensure continuous environmental improvements with a life-cycle perspective on the portfolio. In addition, the policy states that Ericsson shall provide product take-back services and assist customers in end-of-life management of products and solutions. Ericsson’s Code of Conduct (CoC) for Business Partners requires suppliers to identify their environmental aspects and associated impacts, and minimize adverse effects on the community, environment, and natural resources within their operations, while safeguarding the health and safety of the public. The CoC is based on the Responsible Business Alliance Code of Conduct but also includes Ericsson-specific requirements and is part of standard-supplier contracts. It is available in multiple languages on the Company’s website. For suppliers of hardware components or products, construction work, supply services, field maintenance and network rollout operations, as well as those with high environmental risks where their operations significantly impact the environment, Ericsson has additional environmental requirements. Among others, these require the supplier to reduce, where possible, the presence of dangerous goods, chemicals, hazardous waste and other substances or materi- als posing a hazard to humans or the environment, as well as implement a systematic approach to identify, manage, reduce and responsibly dispose of or recycle non-hazardous solid waste. The supplier is also required to conserve the use of natural resources, including water, fossil fuels, minerals and virgin forest products, by practices such as modifying production, maintenance and facility processes, materials substitution, reuse, conservation and recycling. Sustainability and Corporate Responsibility report 2023 Consolidated sustainability notes 19 Note E4 , cont’d. Management approach Product design principles Ericsson utilizes the Design for the Environment principles and has generic product requirements in this area that apply to all product design processes. These include specific requirements on ease of dismantling and disassembly of products to facilitate recycling. In addition, products are designed to be durable and have a high longevity, which is part of the quality process. The list of banned and restricted substances and the material declarations (see further details in note E2) are also important tools to design products that have a high grade of recyclability. The recyclability of products taken back has historically been high, averaging above 90% in recent years. Ericsson works to reduce the weight and size of products and is looking at more sustainable material choices. This is part of the Net Zero initiative but will also contribute to more efficient resource use and circularity. Refurbish, reuse and repair services The Support Services portfolio includes a structured approach to refurbish, reuse and recycle used equipment. Shared warehouses and spare parts reduce the need to produce and store spare parts. Automatic hardware fault analysis is conducted to avoid unnecessary hardware replacements. Ericsson offers repair services, and as a complement to new sales also offers reuse of old equipment. Packaging Traditionally, packaging designed by Ericsson mainly consists of fiber-based materials and inserts made from plastics. Ericsson is piloting alternative pack- aging with inserts that are fully recyclable and reduce the total plastic content of the packaging from 20% to less than 1%. Product take-back program Ericsson offers a global product take-back program, through collaboration with third-party vendors, where end-of-life (EoL) products can be collected from customers and subsequently dismantled and recycled in a way that minimizes the environmental impact. A limited number of group companies participate in other collective take-back schemes. As the equipment is the property of the customer, take-back volumes are dependent on their utilization of the programs. Waste from own operations The waste generated from Ericsson’s own operations is primarily office waste. Waste generated at production sites is managed according to local legislation by contracted waste management companies. Metrics Resource inﬂows Ericsson’s hardware is manufactured using natural resources, and products pri- marily consist of metals such as aluminum, iron, copper and silicon. Hardware also contains small amounts of materials found on the EU list of Critical Raw Materials. The hardware also contains polymers (including plastics) such as polycarbonates, and additives. A typical radio contains about 70% aluminum, 10% iron/steel, 5% copper and 5% silicon. The remaining 10% is made up of smaller amounts of other compounds, including less than 1% of rare earth elements. Externally sourced packaging contains cardboard and plastics. Resource outﬂows Products and materials Physical resource outflows from Ericsson’s production processes, including outsourced production, include network hardware in the form of radios, anten- nas, basebands, power modules, routers and modems, and site materials (such as cables and batteries) as well as packaging in the form of plastics and cardboard. All products are designed according to generic product requirements and Design for the Environment principles as described above. Cradlepoint (now part of Business Area Enterprise Wireless Solutions) has its own product requirements containing similar Design for the Environment principles. Take-back of end-of-life products Collected EoL product volumes by disposal method (metric tons) Reuse Recycling Energy recovery (incineration) Landﬁll Total 2023 36 3,581 151 101 3,869 2022 25 4,636 146 18 4,825 2021 2 5,211 164 12 5,389 Waste from own operations While not related to any identified material impacts, risks or opportunities, Ericsson discloses waste generated in its own operations, as this information is frequently asked for by external stakeholders. Generated waste by disposal method1) 2) (metric tons) Total weight generated (A+B) Waste diverted from disposal Hazardous waste Preparation for reuse Recycling Other recovery operations Non-hazardous waste Preparation for reuse Recycling Other recovery operations A. Total weight diverted from disposal Share diverted from disposal out of total weight generated (%) Waste directed to disposal Hazardous waste Incineration Landﬁll Other disposal methods Non-hazardous waste Incineration Landﬁll Other disposal methods B. Total weight diverted from disposal Share directed to disposal out of total weight generated (%) Weight of non-recycled waste Share of non-recycled waste (%) 2023 7,182 2022 8,130 - 38 5 157 3,435 344 3,979 3 49 - 332 3,831 - 4,215 55 52 43 19 0 1,613 1,528 - 3,203 29 32 - 2,089 1,762 3 3,915 45 48 3,709 52 4,251 52 1) Waste volumes from production sites are based on measured data. Waste volumes from other facili- ties are estimated based on extrapolations of waste generated at the Company's headquarters. Other facilities include ofﬁces, warehouses, data centers and labs. 2) Waste data for previous reporting periods have been restated. See note O3 for more information. 20 Consolidated sustainability notes Sustainability and Corporate Responsibility report 2023 E5 Reporting according to Article 8 of the EU Taxonomy Regulation Accounting policies According to Article 8 of the EU Taxonomy Regulation (the taxonomy), turnover, capital expenditure (CapEx) and operational expenditure (OpEx) are defined as described below. For CapEx and OpEx, these definitions are dif- ferent compared with Ericsson’s financial reporting. The Company’s financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB,) and as endorsed by the EU. The basis of preparation of the financial statements is explained in note A1 to the consolidated financial statements. Data-driven solutions for GHG emissions reductions (Climate change mitigation (CCM) 8.2) Ericsson offers artificial intelligence-powered and data-driven operations solutions, focusing on managing energy assets efficiently through intelligent site measurements and control, enabling customers to improve network energy efficiency, and consequently reducing energy-related greenhouse gas (GHG) emissions. This activity does not currently meet the associated technical screen- ing criteria, and related turnover, CapEx and OpEx are therefore not reported as aligned. Turnover Total turnover corresponds to net sales in the consolidated income statement. 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 but including the effect of business combinations, as specified in notes 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 as presented in the Financial Report, part of the Annual Report. OpEx Total OpEx corresponds to non-capitalized research and development costs, building renovation costs, short-term leases, maintenance and repair costs, as well as other indirect costs for the day-to-day servicing of assets of property, plant and equipment. Eligible turnover, CapEx and OpEx Turnover, CapEx and OpEx in accordance with the above definition and which is associated with eligible activities (see below) constitutes the basis for calculating the share of eligible turnover, CapEx and OpEx. Amounts recorded on product codes related to eligible activities have been used as the basis to calculate amounts of eligible turnover, CapEx and OpEx. A reconciliation of amounts has been performed to avoid any double-counting. Changes in accounting policies or disclosures compared with the previous reporting period The adoption of the Environmental Delegated Regulation in 2023 has supple- mented the taxonomy with additional economic activities. Ericsson has assessed several of these as relevant to include in its disclosures starting from the fiscal year 2023. Comparative data for 2022 related to these activities has not been included. Eligible and aligned economic activities Identifying economic activities relevant for the Company has required interpreta- tions of the taxonomy as well as the delegated regulations. Ericsson’s interpreta- tion is that for an economic activity to be considered taxonomy-eligible, it must: – Be, or be aimed at, generating external turnover – Meet the description of an activity included in one of the annexes to the Climate or Environmental Delegated Regulation, and – Have practically applicable technical screening criteria associated with it. Based on this interpretation, turnover, OpEx and CapEx derived from activities meeting these criteria have been included as taxonomy-eligible in the key performance indicators presented below. Moreover, individually eligible CapEx and OpEx (see below) can also be added to the share of eligible and aligned CapEx and OpEx. However, there remains some uncertainty around how the taxonomy should be applied, and interpretations, as well as reporting practices, are expected to evolve over time. Climate Delegated Regulation Activities in the telecommunication sector are not yet included in the Climate Delegated Regulation of the taxonomy. The European Commission states in the Delegated Regulation that it may consider adding such activities and developing additional technical screening criteria in the future. However, at present most of Ericsson’s commercial offering to its customers, including mobile networks, is not covered by activities included as eligible activities in the Climate Delegated Regulation. Computer programming and related activities (Climate change adaptation (CCA) 8.2) Within all business areas, software development is part of Ericsson’s commer- cial offering to its customers. Should expenditures associated with making this activity more resilient to the effects of climate change be incurred, these will be accounted for as either eligible CapEx or OpEx. Related turnover is not included in the share of eligible turnover since this activity is not classified as an enabling activity, as defined in the taxonomy. Ericsson has not incurred any expenditures of this nature during the report- ing year. Environmental Delegated Regulation As the activities below were added to the taxonomy in 2023, Ericsson is reporting on eligibility but not alignment of related turnover, CapEx and OpEx for the fiscal year 2023, in accordance with the amendments to the Disclosure Delegated Regulation. Manufacture of electrical and electronic equipment (Circular economy (CE) 1.2) Ericsson sells electronic equipment in the form of network hardware such as radios, antennas, basebands, power modules, routers and modems, and site materials such as cables and batteries. The equipment is manufactured both at own manufacturing sites and by third-party electronics manufacturers. Equipment sold as part of a solution, but which Ericsson has not been involved in designing, such as laptops sold as part of a network (so-called third-party equipment), is excluded from eligible turnover as Ericsson does not have any significant influence over choice of input materials or over features such as durability, reusability or recyclability. Repair, refurbishment and remanufacturing (Circular economy (CE) 5.1) Ericsson offers hardware support services to its customers, which includes repairing and refurbishing network equipment. Sale of spare parts (Circular economy (CE) 5.2) Ericsson sells spare parts, including refurbished spare parts, for network equip- ment it has sold to customers. Individually eligible CapEx and OpEx It is permitted to include expenditures for purchases of products and services related to other economic activities than those stated above as eligible and aligned CapEx and OpEx, if these are included in either the Climate or Environmental Delegated Regulation, and if the economic activity of the supplier of the product or service in question is taxonomy-eligible and aligned, as applicable. Ericsson includes expenditures for motor vehicles (CCM 6.5), vehicle charging infrastructure (CCM 7.4), and energy-efficiency measures in buildings (CCM 7.3) as eligible and, where applicable, aligned CapEx and OpEx. As the assessment of alignment of these activities requires detailed information about the suppliers' own taxonomy alignment, Ericsson is currently not able to assess to what extent identified indi- vidually eligible CapEx and OpEx can be considered to also be taxonomy-aligned. Minimum safeguards Minimum safeguards are yet to be assessed in detail. Ericsson’s policies and procedures to prevent bribery, corruption and anticompetitive behavior are detailed in note G2 and its policies and procedures as relates to human and labor rights in notes S1 to S3. Sustainability and Corporate Responsibility report 2023 Consolidated sustainability notes 21 No No No No No No C a t e g o r y t r a n s i t i o n a l a c t i v i t y C a t e g o r y e n a b l i n g a c t i v i t y − − E T Note E5 , cont’d. Nuclear and fossil gas related activities Nuclear energy related activities The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle. The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies. The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades. Fossil gas related activities The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels. The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels. The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels Key performance indicators Turnover Substantial contribution criteria Does no signiﬁcant harm (DNSH) Proportion of Taxonomy aligned (A1) or eligible (A2) turnover 2022 % − − − − 0 - - - 0 0 C l i m a t e c h a n g e m i t i g a t i o n C l i m a t e c h a n g e a d a p t a t i o n l C i r c u a r e c o n o m y P o l l u t i o n W a t e r i i B o d v e r s i t y Propor- tion of turnover 2023 % Yes / No / Not eligible Code1) Turn over SEK million C l i m a t e c h a n g e m i t i g a t i o n C l i m a t e c h a n g e a d a p t a t i o n l C i r c u a r e c o n o m y P o l l u t i o n W a t e r Yes / No i i M n m u m s a f e g u a r d s i i B o d v e r s i t y − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − Economic activities A. TAXONOMY-ELIGIBLE ACTIVITIES A1 Environmentally sustainable activities (Taxonomy-aligned) - Turnover of environmentally sustainable activities (A1) Of which enabling (%) activities Of which transitional (%) activities A2 Taxonomy-eligible but not env. sustainable activities (not Taxonomy-aligned activities) Objective(s) for which activity is eligible2) Data-driven solutions for GHG emission reductions CCM 8.2 48 0 EL N/EL N/EL N/EL N/EL N/EL Manufacturing of electrical and electronic equipment CE 1.2 93,288 35 N/EL N/EL N/EL N/EL Repair, refurbishment and remanufacturing Sale of spare parts CE 5.1 CE 5.2 6,064 929 2 N/EL N/EL N/EL N/EL 0 N/EL N/EL N/EL N/EL EL EL EL N/EL N/EL N/EL Turnover of Taxonomy-eligible but not env. sustainable activities (A2) Turnover of Taxonomy-eligible activities (A1+A2) B. TAXONOMY NON-ELIGIBLE ACTIVITIES Turnover of Taxonomy non-eligible activities Total 100,329 100,329 163,022 263,351 38 38 62 100 Proportion of turnover / Total turnover Taxonomy-aligned per objective Taxonomy-eligible per objective 0 - - - 0 - 0 - - - 37 - (%) Climate change mitigation Climate change adaptation Water and marine resources Pollution prevention and control Circular economy Biodiversity 1) Abbreviated activity codes: CCM: Climate change mitigation CCA: Climate change adaptation CE: Circular economy 2) Eligible (EL) / Non-eligible (N/EL): 22 Consolidated sustainability notes Sustainability and Corporate Responsibility report 2023 Note E5 , cont’d. CapEx Economic activities Substantial contribution criteria Does no signiﬁcant harm (DNSH) C l i m a t e c h a n g e m i t i g a t i o n C l i m a t e c h a n g e a d a p t a t i o n Propor- tion of CapEx 2023 l C i r c u a r e c o n o m y P o l l u t i o n W a t e r % Yes / No / Not eligible Code1) CapEx SEK million i i B o d v e r s i t y C l i m a t e c h a n g e m i t i g a t i o n C l i m a t e c h a n g e a d a p t a t i o n l C i r c u a r e c o n o m y P o l l u t i o n W a t e r Yes / No i i B o d v e r s i t y i i M n m u m s a f e g u a r d s − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − A. TAXONOMY-ELIGIBLE ACTIVITIES A1 Environmentally sustainable activities (Taxonomy-aligned) - − CapEx of environmentally sustainable activities (A1) Of which enabling (%) activities Of which transitional (%) activities A2 Taxonomy-eligible but not env. sustainable activities (not Taxonomy-aligned activities) Purchases and leases of vehicles2) Data-driven solutions for GHG emission reductions Manufacturing of electrical and electronic equipment Repair, refurbishment and remanufacturing Sale of spare parts CapEx of Taxonomy-eligible but not env. sustainable activities (A2) CapEx of Taxonomy-eligible activities (A1+A2) B. TAXONOMY NON-ELIGIBLE ACTIVITIES CapEx of Taxonomy non-eligible activities Total CCM 6.5 CCM 8.2 CE 1.2 CE 5.1 CE 5.2 Objective(s) for which activity is eligible3) 257 0 5 0 EL EL N/EL N/EL N/EL N/EL N/EL N/EL N/EL N/EL N/EL N/EL EL EL EL N/EL N/EL N/EL 2,006 37 N/EL N/EL N/EL N/EL 65 0 2,328 2,328 3,097 5,425 1 N/EL N/EL N/EL N/EL 0 N/EL N/EL N/EL N/EL 43 43 57 100 C a t e g o r y t r a n s i t i o n a l a c t i v i t y C a t e g o r y e n a b l i n g a c t i v i t y − E − T Proportion of Taxonomy aligned (A1) or eligible (A2) CapEx 2022 % − − − − 0 - - - - 0 0 Proportion of CapEx / Total CapEx (%) Climate change mitigation Climate change adaptation Water and marine resources Pollution prevention and control Circular economy Biodiversity Taxonomy-aligned per objective Taxonomy-eligible per objective 0 - - - 0 - 5 - - - 38 - 1) Abbreviated activity codes: CCM: Climate change mitigation CCA: Climate change adaptation CE: Circular economy 2) Full name: Transport by motorbikes, passenger cars and commercial vehicles 3) Eligible (EL) / Non-eligible (N/EL): Sustainability and Corporate Responsibility report 2023 Consolidated sustainability notes 23 C a t e g o r y t r a n s i t i o n a l a c t i v i t y C a t e g o r y e n a b l i n g a c t i v i t y − E − T Proportion of Taxonomy aligned (A1) or eligible (A2) OpEx 2022 % − − − − 0 0 - - - 0 0 Note E5 , cont’d. OpEx Economic activities Substantial contribution criteria Does no signiﬁcant harm (DNSH) C l i m a t e c h a n g e m i t i g a t i o n C l i m a t e c h a n g e a d a p t a t i o n Propor- tion of OpEx 2023 l C i r c u a r e c o n o m y P o l l u t i o n W a t e r % Yes / No / Not eligible Code1) OpEx SEK million i i B o d v e r s i t y C l i m a t e c h a n g e m i t i g a t i o n C l i m a t e c h a n g e a d a p t a t i o n l C i r c u a r e c o n o m y P o l l u t i o n W a t e r Yes / No i i M n m u m s a f e g u a r d s i i B o d v e r s i t y A. TAXONOMY-ELIGIBLE ACTIVITIES A1 Environmentally sustainable activities (Taxonomy-aligned) - − OpEx of environmentally sustainable activities (A1) Of which enabling (%) activities Of which transitional (%) activities − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − − A2 Taxonomy-eligible but not env. sustainable activities (not Taxonomy-aligned activities) Objective(s) for which activity is eligible3) Purchases and leases of vehicles2) Data-driven solutions for GHG emission reductions CCM 6.5 CCM 8.2 56 9 0 0 EL EL N/EL N/EL N/EL N/EL N/EL N/EL N/EL N/EL N/EL N/EL Manufacturing of electrical and electronic equipment CE 1.2 17,070 29 N/EL N/EL N/EL N/EL Repair, refurbishment and remanufacturing Sale of spare parts CE 5.1 CE 5.2 35 0 0 N/EL N/EL N/EL N/EL 0 N/EL N/EL N/EL N/EL EL EL EL N/EL N/EL N/EL OpEx of Taxonomy-eligible but not env. sustainable activities (A2) OpEx of Taxonomy-eligible activities (A1+A2) B. TAXONOMY NON-ELIGIBLE ACTIVITIES OpEx of Taxonomy non-eligible activities Total 17,170 17,170 41,836 59,006 29 29 71 100 Proportion of OpEx / Total OpEx (%) Climate change mitigation Climate change adaptation Water and marine resources Pollution prevention and control Circular economy Biodiversity Taxonomy-aligned per objective Taxonomy-eligible per objective 0 - - - 0 - 0 - - - 29 - 1) Abbreviated activity codes: CCM: Climate change mitigation CCA: Climate change adaptation CE: Circular economy 2) Full name: Transport by motorbikes, passenger cars and commercial vehicles 3) Eligible (EL) / Non-eligible (N/EL): 24 Consolidated sustainability notes Sustainability and Corporate Responsibility report 2023 Land use and biodiversity As part of its analysis of material impacts, risks and opportunities, Ericsson has assessed its impacts on biodiversity and ecosystems. The conclusion of this analysis was that the main drivers of loss of biodiversity and degrada- tion of ecosystems on which Ericsson and its value chain has an impact are climate change, use of natural resources and air pollution. These impacts, and Ericsson’s approach to addressing them, are further described in notes E1 to E4. Other main drivers of biodiversity loss and degradation of ecosystems are changes in land and sea use as well as the introduction of invasive species. Ericsson did not identify any material impacts related to these two drivers in the ICT industry in general or in Ericsson’s value chain in particular through its materiality analysis. Ericsson’s facilities, including offices, data centers, test labs and production sites, are located in urban or semi-urban areas with limited impact on land use and surrounding ecosystems. In some instances, Ericsson supports customers when building telecommunication sites. In such cases, Ericsson’s standard procedures include considering location selection as part of minimizing the environmental impact from land use. Consequently, Ericsson addresses its biodiversity-related impacts through its efforts within climate change mitigation, work to reduce pollution, and its transition to a circular economy. Biodiversity, including ecosystems, is therefore not managed or reported on as a standalone matter. E6 Environmental management Environmental Management System Ericsson’s Sustainability policy is the Company’s foundation for environmental management. The policy articulates, among other things, that Ericsson shall use LCA methodology to determine its significant environmental aspects and to assess the environmental impact of ICT, that it shall reduce the negative environmental impact of its own operations and take a precautionary approach to environmental challenges and apply design to ensure continuous environ- mental improvements with a life-cycle perspective regarding its portfolio. In adherence with the Sustainability policy, Ericsson continuously strives to minimize the negative impacts of its own operations. The Company’s Environmental Management System (EMS) is certified to the ISO 14001:2015 standard, covering management, research, product management, develop- ment and supply, sales and installation, and maintenance of hardware, software, services and solutions for ICT. The EMS, as an integrated part of the Ericsson Group Management System, builds on Group-wide processes such as audits and assessments as well as management reviews. Environmental aspects are assessed to identify those that are significant, which forms the basis for setting targets. Environmental regulation is periodi- cally monitored and evaluated on a country level to ensure that Ericsson meets environmental compliance obligations. In addition to Ericsson´s Enterprise Risk Management (ERM) framework, a specific Environmental Risk Management framework, which is aligned to ERM, is in place. The Company has an incident reporting system through which employees and suppliers are encouraged to report environmental incidents. Incident reporting is part of the environmental requirements for suppliers included in the Ericsson Code of Conduct for Business Partners. Metrics Incidents reported (No.) Signiﬁcant environmental incidents 1) 2023 2022 2021 0 0 0 1) A signiﬁcant environmental incident is deﬁned as an unplanned event that has resulted in, or may result in, severe long-term negative environmental impact, including impact on air, water, land, natural resources, ﬂora and/or fauna. Sustainability and Corporate Responsibility report 2023 25 Section S– Social S1 Human capital Impacts, risks and opportunities With a workforce of around 113,000 people located in more than 110 coun- tries, counting both employees and the external workforce, Ericsson has identi- fied several impacts related to its own workforce. In several of the countries where Ericsson operates and has a significant share of its workforce there are heightened risks of violations of international conventions on labor rights and decent working conditions, as well as weak enforcement of local labor laws such as adequate wages, excessive work- ing time and the right to freedom of assembly and freedom of association. Countries and regions with heightened risks in one or several of these areas include, but are not limited to, China, India, Southeast Asia, the Middle East and Africa, and parts of Latin America. This means Ericsson must ensure its local employment policies and practices provide for secure and fair working condi- tions for its workforce globally and in these markets in particular. While diversity and inclusion are global challenges, several of the aforemen- tioned countries have higher risks of discrimination at work and non-respect of women’s and minority rights. The ICT sector globally has a below average share of women in the workforce as well as in leadership roles. Within Ericsson, women today make up about 26% of all employees and 23% of managers. In recent years, Ericsson has had no substantiated cases of discrimination at work, and Ericsson performs above the benchmark when employees are surveyed on whether they believe the Company provides a workplace where people are given the same opportunities regardless of their background and if they are treated with respect and dignity. Nevertheless, Ericsson must remain vigilant and continue to promote an inclusive culture based on mutual respect, with equal treatment and opportunities for all. Ericsson provides relevant training and development programs to its work- force, ensuring that employees build critical skills and that the company is an attractive employer. This applies to both skilled professionals working in R&D and commercial areas, as well as professionals in many other job roles and functional areas. Impacts related to the health, safety and well-being of Ericsson’s employees are described further in note S2. How Ericsson manages its workforce, and how it is perceived as an employer by current and potential employees, can affect its abilities to attract and retain key talent, which in turn can impact the Company’s competitiveness, ability to innovate and efficiently execute on its strategy. Workforce-related factors such as diversity and inclusion are also increasingly part of customers’ supplier evaluation processes, meaning Ericsson’s performance in this area could have an effect on how the Company is assessed in tenders and proposals. Ericsson’s ability to upskill and reskill its workforce in critical areas can also affect the Company’s ability to secure its strategic priority of technology leadership. Policies Ericsson’s Code of Business Ethics (CoBE), applicable to all people working for Ericsson, outlines the Company’s position on being committed to fostering an inclusive and supportive workplace where people can reach their full potential with respect for the dignity of every human being and in accordance with all internationally recognized human rights, including those outlined in the International Bill of Human Rights and the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work. All forms of dis- crimination are prohibited, even if local law permits it, including discrimination based on factors such as race, color, gender, language, religion, political affili- ation, national or social origin, pregnancy or parental status, disability, marital status, age, sexual orientation, gender identity and/or expression, transgender status, health status, trade union membership or any other characteristic. Anchored on the CoBE is the People Group Policy, which further articulates that Ericsson is committed to equal opportunity in employment, development, compensation, benefits and all other personnel actions without discrimination. The principles set out in the policy include, but are not limited to the idea that every individual’s employment opportunities shall be based on openness and fairness, and that pay and recognition will reward impact and be based on the principles of competitiveness, fairness and transparency. Executive variable remuneration A portion of the variable remuneration to executives is determined by perfor- mance on the Company’s target to increase the share of women in line man- ager positions. See page 7 of the Remuneration report for further information. Management approach 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. Focal points of the strategy are culture and leadership, diversity and inclusion, fair and competitive rewards, career development, and well-being. Ericsson’s People Strategy is governed by Ericsson’s Global People Leadership Team, headed by the Chief People Officer, with the team having responsibility for strategy formulation and execution. Subject matter experts develop Group-wide core processes that are embedded throughout business areas and market areas, and other Group functions by unit people leaders. A global People Services unit supports delivery, ensuring consistent practices across the business. Culture and leadership A strong company culture with defined core values and key behaviors is a pre- requisite for both a positive people experience and for successfully executing on business strategies. The cornerstone of Ericsson’s culture are the following four core values: – Professionalism: Building trust by delivering on promises – Respect: Listening and caring with authenticity – Perseverance: We continually challenge ourselves to be at the forefront of innovation – Integrity: Making transparent, honest and uncompromising decisions. Ericsson’s key behaviors, which are called the Five Focus Areas, were intro- duced as part of a major culture transformation initiative. Each employee is expected to live the core values and demonstrate the Five Focus Areas consist- ently. These Five Focus Areas are: Empathy and humanness A speak-up environment Fostering empathy for different perspectives and approaches, enabling people to bring their unique perspec- tives and humanness. Creating an environment where it is safe to share ideas, ask questions, and speak up if observing compromises on ethics. Cooperation and collaboration Encouraging cross-company cooperation and acting as one Ericsson, with the customer in focus. Executing speedily Moving quickly when needed to seize opportunities. Fact-based, courageous, and ethical decision- making Basing decisions on the right data and being brave to take tough decisions – always with an ethical lens. Engaging with employees Surveys are carried out regularly to understand how employees are experienc- ing work and their perceptions of the Company, its leadership and strategies. Results are summarized on both Group and unit level for managers and leaders to be able to act when and where appropriate. See note S2 for information about occupational health and safety committees in which both employer and employee representatives participate. Channels for raising concerns Employees are expected to report concerns related to corruption, fraud, accounting, internal controls, discrimination and harassment, human rights or other matters that could constitute a breach of law, or that could harm the busi- ness or reputation of Ericsson, its employees and shareholders, directly to their manager, the superior of a manager or to the People or Legal and Compliance departments. In addition, concerns can be raised via the Ericsson Compliance Line, either through a secure website or by telephone at any time, see further details in note G2. 26 Note S1, cont’d. Sustainability and Corporate Responsibility report 2023 Diversity and inclusion Ericsson fosters a work environment based on respect. Treating colleagues with respect, dignity and inclusion brings out the best in everyone and is the right thing to do. At Ericsson, there is no room for harassment, threats, bullying or violence against anyone regardless of their position or seniority, and all forms of harassment, threats and acts of violence are prohibited. Ericsson is committed to creating a diverse and inclusive organization, as this is core to the Company’s values and helps ensure that it attracts the best global talent, fosters innovation, and brings greater value to customers. Accountability for diversity and inclusion sits with all leaders at Ericsson including the CEO and Executive Team, with strategy led by the Global People Leadership Team. Each business area, market area and Group function has a dedicated diversity and inclusion lead responsible for driving strategy execution and performance. Remote and ﬂexible working arrangements Ericsson offers possibilities for remote working in a hybrid model to employees where job role and responsibilities allow for it. When possible, employees are also offered flexible working hours to help them balance work and personal commitments. For more information on approaches to well-being, see note S2. Strategic workforce management Ericsson uses workforce planning and analytics to plan the workforce size and capabilities required to match current and future business needs and ensure that the right resources are in the right place at the right time and at the right cost. A People Analytics and Digital Solutions team provides analytics and insight to support leaders on both Group and unit level in making informed workforce and business decisions. Ericsson aims to achieve a greater gender balance alongside increasing Metrics and targets Targets Gender diversity To further the policy objectives of inclusiveness and equal opportunity, Ericsson has set a target to increase the share of women among all employees, line managers and executive population, as outlined below. Gender diversity Employee category Base year (BY) Target year Share in BY (%) Target share (%) Share in 2023 (%) All employees Line managers Executive population 2021 2030 25.2 21.3 35.6 ≥ 30 26.0 22.7 31.4 Metrics Characteristics of employees in the workforce and diversity metrics the representation of currently underrepresented groups. To achieve this, Ericsson focuses on creating unbiased people processes so that, for example, job advertisements use gender-neutral language, and on upskilling employees in inclusive leadership through training programs. Ericsson supports a network of more than 42 employee resource groups throughout the organization including but not limited to sexual orientation, gender, age, families, health, and well-being. It also provides career develop- ment programs focused on removing barriers to progression for these groups. Compensation and rewards At Ericsson, the guiding principle is that people should be paid in a fair way and be recognized and rewarded for the impact that they create. Consequently, pay and benefits offered are market competitive and relevant to the individual with the aim to provide a broad reward offering to attract and retain talent and to keep employees feeling engaged, supported and rewarded. Ericsson is consistent in its rewards offerings and works to ensure that pay decisions are non-discriminatory, based on the Company’s pay philosophy and always applied using the same criteria. There is a defined and globally consist- ent job leveling and job architecture in place to ensure that pay is competitive and fair. To drive fairness and consistency and promote a culture of apprecia- tion, the Company has put in place a global recognition program and platform. The global job leveling and job architecture enable Ericsson to make mean- ingful comparisons on pay, and the Company continues to refine its review of pay equity to identify where unexplained pay differences may exist. Career and development Ericsson enables its people to develop skills and experience through on the job training and a focus on internal mobility. A set of critical skills areas necessary to execute on the growth strategy of extending leadership in mobile networks, and focused expansion into enterprise have been identified, including technol- ogy, commercial and power skills. Learning and development opportunities connected to these critical skills range from introductory and fundamental, to experienced and advanced training, and are offered to upskill and reskill employees both for their job roles and to prepare for the future. Employees are offered internal job rotation opportunities, and Ericsson often first looks internally for candidates to fill open positions. which gives employees easy access to material and courses, and gives the Company a tool for tracking and analyzing progress and completions for meas- uring skills shifting. Besides training and development programs in the scope of the critical skills areas, employees have access to a broad range of upskilling assets such as online internal and external courses and articles through the digital learning platform. Together with their managers, employees set individual annual and long-term career goals and learning plans. Employees also receive annual individual performance evaluations. The Company further emphasizes and recognizes those who participate in its Teach for Ericsson program, under- standing that a teaching culture is essential to amplifying a learning culture. Employees (Headcount) Executive Team Executive population1) Line managers Technical employees2) Non-technical employees Total Employees by gender (Headcount) Male Female Other/Not reported Total (%) Executive Team Executive population1) Line managers Technical employees2) Non-technical employees All employees 3) Upskilling and reskilling are further facilitated by a digital learning platform, Share of women per employee category 2023 16 175 7,499 74,454 17,808 2022 17 177 7,602 78,789 18,944 2021 15 163 7,241 75,859 18,044 99,952 105,529 101,322 2023 73,919 25,954 79 2022 78,518 26,901 110 2021 75,815 25,480 27 99,952 105,529 101,322 2023 2022 2021 25 31 23 22 46 26 18 35 22 21 46 25 20 36 21 20 47 25 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) 2022 share presented here differs from the share presented in note G4 in the Financial report (26%) due to nominal differences when rounding to the nearest whole percentage point. Sustainability and Corporate Responsibility report 2023 27 Note S1, cont’d. Employees by contract type and gender 2023 (Headcount) Permanent employees Temporary employees Non-guaranteed hours employees Total Full-time employees Part-time employees Total Male Female Other / Not reported 72,686 1,233 - 73,919 73,442 477 73,919 25,503 451 - 25,954 25,482 472 25,954 79 - - 79 79 - 79 Total 98,268 1,684 - 99,952 99,003 949 99,952 Share of employees by age group1) (%) <30 30–50 >50 Employees by country2) (Headcount) India Sweden China Other countries Total 2023 2022 2021 13 66 21 15 65 20 14 67 19 2023 22,848 13,977 9,950 53,177 2022 23,112 14,481 10,791 57,145 2021 21,777 14,183 10,723 54,639 99,952 105,529 101,322 Share of employees by nationality and employee category3) 2023 (%) Indian Chinese Swedish American Mexican Other 2022 (%) Indian Chinese Swedish American Romanian Other All employees Line managers Technical employees4) 26 11 10 5 3 44 20 10 16 6 2 46 30 11 9 4 4 41 All employees Line managers Technical employees4) 25 11 10 6 4 44 20 10 16 6 3 45 29 12 9 5 3 42 1) Data on employees broken down by age groups for previous years has been restated. See note O3 for more information. 2) Country-level data is disclosed for countries representing at minimum 10% of the global headcount. 3) Nationalities disclosed are the top ﬁve nationalities among all employees. 4) Non-managerial employees in job roles within the ﬁelds of science, technology, engineering and mathematics (STEM). Employee movements Turnover (No. / %) Employees who have left the company (No.) Turnover rate (%) Leavers by gender (%) Men Women Other / not reported Leavers by age (%)1) <30 30–50 >50 Hiring (No. / %) Employees who have joined the company (No.) Hiring rate (%) New joiners by gender (%) Men Women Other / not reported New joiners by age (%)1) <30 30–50 >50 Positions ﬁlled by internal candidates (%)2) 2023 13,362 13 2022 14,381 14 2021 11,631 12 74 26 0 23 56 21 74 26 0 30 60 10 76 24 0 29 58 13 2023 7,785 8 2022 17,235 17 2021 12,129 12 68 31 0 49 47 4 49 72 27 0 45 50 5 37 70 30 0 49 47 4 40 1) Data on leavers and new joiners broken down by age for previous years has been restated. See note O3 for more information. 2) 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. Characteristics of non-employees in the workforce Besides employees, Ericsson also has an external workforce that does not have a direct employment relationship with the Company. This workforce is primarily made up of consultants working in the fields of service delivery, product devel- opment and supply. Every year, Ericsson also offers internships to students and new graduates in various parts of the Company. Non-employees in workforce (Headcount) External workforce 2023 2022 2021 13,125 18,088 12,308 Collective bargaining Ericsson respects the right of all employees to form or join independent trade unions as well as the right to collective bargaining. In places where local laws restrict these rights, Ericsson seeks other ways of having a meaningful dialogue with employees. This includes alternative, independent and freely elected forms of employee representation such as employee committees or councils. As for the rights of employees of suppliers, Ericsson’s requirements in this area are set out in its Code of Conduct for Business Partners. These requirements are on par with the rights of Ericsson’s own employees. Collective bargaining agreements (%) Employees covered1) 2023 29 2022 29 1) In 2023 and 2022 Ericsson mapped out the existence and coverage of collective bargaining agree- ments in the 20 countries with the largest employee headcount. These countries cover approximately 87 (86)% of the Group's total headcount. The share of employees covered stated above is based on this mapping, assuming the remaining unsurveyed 13 (14)% of the total headcount is not covered. Comparative ﬁgures for 2021 are not available. 28 Note S1, cont’d. Sustainability and Corporate Responsibility report 2023 Training and skills development metrics Employee satisfaction Average recorded training hours per employee and by gender1) Employee satisfaction by gender (Hours) Men Women All employees Completed learning opportunities by gender1) 2) (Thousands ) Men Women Total 2023 38.6 36.8 38.1 2023 3,598 1,230 4,828 2022 18.9 17.8 18.6 2022 2,283 757 3,040 2021 (eSAT score)1) 19.7 17.0 19.0 Men Women Total 2023 2022 2021 80 80 80 81 81 81 81 81 81 1) Measuring scale: 0–100 with 100 being the most favorable score. Employees of Vonage are excluded from these statistics and employees of Cradlepoint are excluded from the 2021 data. 2021 2,321 823 3,144 Spend on learning and development (SEK thousands) Average per employee 2023 3.2 2022 4.0 2021 3.8 Share of employees receiving performance and career development reviews1)3) (%) Men Women Total 2023 2022 2021 93 92 93 93 91 93 n/a n/a 91 1) Excludes employees of Vonage and Cradlepoint. 2) Refers to learning contents (courses, articles, webinars etc.) consumed and completed through Ericsson’s learning platform and includes both external and Ericsson-internal content. 3) Performance evaluations recorded as of January 31 the following year. Field service personnel excluded. Remuneration metrics Ratio of compensation of women to men1) (%) Base salary Total compensation CEO to employee pay ratio2)3)4) (Ratio) Base salary – Sweden Base salary – Global Total compensation – Sweden Total compensation – Global 2023 2022 2021 85 85 84 82 86 82 2023 2022 2021 27 39 76 103 26 40 75 109 26 48 74 124 1) The ﬁgures presented above reﬂect the average unadjusted pay ratio of women to men for Erics- son’s employees globally. This metric does not take into consideration other factors affecting compen- sation 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 the end of the third quarter of each respective year. Total compensation includes full time annual base salary, short- term variable pay (STV) / sales incentive plan (SIP) target entitlement, and long-term variable (LTV) pay grants given in the current year. The ﬁgures for total compensation ratios exclude Field Service Organization employees in certain companies that follow local STV plans making it difﬁcult to make relevant comparisons (about 1,100, 1,600 and 7,000 individuals in 2023, 2022 and 2021 respec- tively). The total compensation ratio includes employees of Vonage (now part of business area Global Communication Platform) from the year 2023 and employees of Cradlepoint (now part of Business Area Enterprise Wireless Networks) from the year 2022. 2 ) 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 President on page 5 in the Remuneration report, which includes holiday pay. 3) For comparison reasons, Total Compensation in this context is based on STV/SIP target level entitle- ment and LTV granted for each respective year (including for the CEO) and therefore differs from the information presented in the table Total Remuneration to the President and CEO and Executive Vice President, on page 5 in the Remuneration report, which shows actual earned STV and vested LTV. The total compensation ratio includes employees of Vonage (now part of business area Global Communi- cation Platform) from the year 2023 and Cradlepoint (now part of Business Area Enterprise Wireless Networks) from the year 2022. 4) Ratios for previous reporting periods have been restated. See note O3 for more information. Sustainability and Corporate Responsibility report 2023 29 S2 Health, safety and well-being Impacts, risks and opportunities Ericsson has identified material impacts within health, safety and well-being related to both its employees and employees of suppliers such as contractors and site services suppliers. In recent years, Ericsson has recorded several fatali- ties among supplier employees, particularly within field operations, and two fatalities among its own employees. The two primary causes of these fatalities have been falling when working at heights and road traffic accidents, with the latter sometimes also involving fatal injuries to third parties such as members of the public. The same causes, together with manual handling and lifting, and working with electricity, represent most of the lost workday incidents recorded in recent years. These incidents have involved both own employees as well as supplier employees. For the workforce not involved in field service-related activities, the main identified risks related to health and well-being are mental health problems caused by stress, anxiety and poor work-life balance, and musculoskeletal illnesses caused by, for example, repetitive or static work patterns or lifting objects. Ericsson has a responsibility to ensure the health, safety and well- being of all people working for the Company. Work environment conditions such as health and safety are commonly included in customers’ supplier evaluation processes, meaning Ericsson’s performance in this area could affect how the Company is assessed in tenders and proposals. Policies Ericsson’s approach and commitments are set out in its Health, Safety, and Well-being policy, which states that the Company shall apply a risk-based approach to prevent, control and mitigate work-related hazards and risks, and continually improve its processes. Ericsson shall comply with customer and other applicable health and safety requirements that extend beyond legal compliance, even when these requirements exceed local legislation. Further, Ericsson shall design workplaces and work processes, and provide tools that promote and support the health, safety and well-being of workers. The Company shall provide necessary training and engage and consult with employees and other stakeholders to get input for continuous improvement of the health, safety and well-being management system. Additionally, through its Code of Conduct (CoC) for Business Partners, Ericsson sets requirements for occupational health and safety (OHS) for itself and its business partners, including suppliers. These requirements include taking a risk-based approach to health and safety, that employees are appro- priately educated, trained and have the right experience to perform their tasks, and that appropriate incident reporting and investigation procedures are in place. For suppliers supplying construction, field maintenance, network rollout, warehouse services, or where otherwise included in the supplier contract, Ericsson has additional and more detailed OHS requirements in place to mitigate risks. Management approach Health, safety and well-being is governed globally by two forums. The Global OHS Board, chaired by the Chief Marketing and Communications Officer, makes decisions and provides guidance on the OHS strategy and global programs. The Major Incidents and Performance Review Board, co-chaired by executives in the Managed Services and Networks organizations, reviews fatal and major incidents, root causes and actions taken, and follows up on performance and compliance. Both forums are mirrored in the market areas to promote consistency, alignment and accountability across the Group. Ericsson drives a proactive agenda that goes beyond legal compliance, international standards and customer requirements to prevent work-related injuries and illnesses. The Ericsson Care program is the company’s overarching approach for its health, safety and well-being efforts to reach Ericsson's target of zero fatalities and lost workday incidents. See below for more information about this target. Annual health, safety and well-being risk and opportunity assessments are conducted to identify strategic risks as well as the recurring 1) International Organization for Standardization risks and opportunities. These assessments are aligned to the Enterprise Risk Management framework. OHS Management System The Company’s OHS management system is a part of the Ericsson Group Management System and is designed to mitigate health, safety and well-being risks, as well as capture and implement opportunities for improvement in these areas across Ericsson’s business and processes. It is certified to ISO1) 45001, the international standard for OHS management. Stop Work Authority All people working for Ericsson are provided with the authority, responsibility and obligation to stop their own work or intervene in other’s work in situations where there is a belief that there is imminent danger of life-threatening injury or serious illness. Such cases shall be reported using the incident reporting process described below. Work shall only recommence once the risk has been mitigated and the workplace is safe. People applying Stop Work Authority shall not be criticized or penalized in any way. Ericsson does not accept any form of retalia- tion toward a person stopping their work or reporting a related case. Incident reporting and investigation Ericsson has a global incident reporting tool for reporting hazards, near misses and incidents involving employees, suppliers and anyone working on behalf of Ericsson supporting its operations. Concerns related to remote working can also be reported through this tool. Reported incidents are investigated by per- forming a root-cause analysis to remedy any damage and prevent recurrence. Supplier management Ericsson has specific OHS requirements for suppliers that are part of contracts, and it is continuously strengthening its processes to improve safety perfor- mance in its supply chain. The Company has introduced a supplier safety maturity assessment process to qualify suppliers against a set of predefined criteria. Based on the maturity assessment, an improvement plan is developed and shared with the supplier. Completion of actions in the improvement plan is aimed at helping suppliers improve their safety performance and maturity, and each supplier should complete assigned actions within set timelines. Ericsson applies consequence management to suppliers who do not close their actions in time or refuse to complete or be part of the assessment. Site services suppliers failing to adhere to Ericsson’s health and safety requirements are handled through a consequence management process. To mitigate the risk of repeated failure of suppliers to follow rules and procedures, Ericsson imposes consequences such as financial penalties, reduction of busi- ness volumes, more quality inspections and audits, and written warnings. In severe cases, supplier relationships can be terminated. Employee consultation and participation Ericsson has established OHS committees that include managers and employ- ees, or employee representatives where such exist. The committees meet on a regular basis, follow up on OHS performance, and discuss and decide on actions for improvement of the OHS management system and its processes. Communication around health, safety and well-being targets, performance, programs and training is available for all employees through internal channels such as the intranet and newsletters. Employees are asked yearly about health, safety and well-being through an annual employee survey, which includes questions about their perceptions of the Company’s efforts within health, safety and well-being, as well as their perceived work-life balance. Health and well-being Ericsson has a dual approach for well-being made up of a combination of organizational components and individual areas. The organizational compo- nents draw on the growing understanding of the conditions that enable health and well-being and the benefits of good work and include: 30 Note S2, cont’d. Sustainability and Corporate Responsibility report 2023 – Supportive workplace environment: An inclusive environment in which jobs Metrics are designed to consider physical, social and emotional well-being – Leadership advocacy: Safety and well-being behaviors role-modeled by Health and safety leaders to drive accountability at all levels of the Company. Fatalities by involved party The individual areas are interrelated and comprise: – Physical: Maintaining healthy habits in fitness, nutrition, disease prevention and rest – Emotional: Good mental health and work-life balance, taking time to discon- nect and recover, managing stress, and adapting to and coping with change – Financial: Being financially resilient, educated and confident to make financial decisions so that employees are prepared for the unexpected and on track for their future plans – Social: Sense of belonging, respect and feeling of purpose in career and life. Ericsson allows for hybrid and flexible working arrangements, which facilitates greater autonomy for employees on where and when they perform their work. A home furniture package is provided to improve ergonomics for hybrid work- ing employees, aimed at preventing musculoskeletal ill-health caused by poor posture. Ericsson offers confidential counselling and well-being support online or via telephone through an external employee assistance program provider. Training and awareness raising All Ericsson employees and employees of site services suppliers are required to take health, safety and well-being induction training. Additional training is required based on a person’s role and risk exposure to ensure adequate competence needs are met. Further, targeted web-based training that covers safe driving awareness and lifesaving rules1) is available to all employees and suppliers. Ericsson has a safety leadership training program for leaders within three levels of the CEO including Executive Team members and selected key roles that have a direct impact on operational safety. Ericsson’s Walk the Talk guide also encourages all leaders to conduct regular safety and well-being walks by personally visiting a site and having a conversa- tion exclusively about health, safety and well-being. (No.) Ericsson employees Suppliers and subcontractors1) Third parties2) Total Fatalities by cause (No.) Fall from heights Driving/trafﬁc accident Electric accident Slip and fall Hit by falling object Total Lost workday incidents by involved party3) (No.) Ericsson employees Suppliers and subcontractors1) Third parties2) Total Employee fatality and lost workday incident rate (per 500 FTEs)4) 5) Fatality rate Lost workday incident rate 2023 2022 2021 1 8 1 10 0 6 2 8 1 11 2 14 2023 2022 2021 4 5 1 - - 10 4 4 - - - 8 6 5 1 1 1 14 2023 2022 2021 53 43 1 97 96 30 5 131 77 66 2 145 2023 0.00 0.26 2022 – 0.44 2021 0.00 0.35 There is a mental health awareness and well-being training program in Lost workdays and reported near misses place which comprises: – An online course on musculoskeletal health available to all employees on the importance of behaviors that alleviate injuries. – An online course aimed at line managers and those in select key roles to improve their understanding of how to manage mental health in the workplace. – Webinars available to all employees on how to improve self-care for mental health and well-being, information on prevalent diseases such as cardio- vascular and diabetes, and financial well-being. – A learning guide aimed at leaders on the connection between well-being and productivity, safety and performance, and how leaders can enhance well-being in their teams. Metrics and targets Targets Fatalities and lost-workday incidents Ericsson has a target to have zero work-related fatalities and lost workday incidents caused by either physical injuries or work-related illnesses by 2025. The target scope covers both Ericsson's own workforce and employees of field service suppliers. Target Zero Category Base year Target year No. in base year Targeted no. Fatalities Lost workday incidents 2020 2025 7 143 0 No. in 2023 10 97 (No.) Lost workdays6) Near misses 2023 1,679 11,004 2022 3,040 9,716 2021 2,390 6,699 1) Primarily site service suppliers and subcontractors. 2) Third parties refer to any person not working for Ericsson either as an employee or as a supplier or subcontractor, such as a member of the public, who is affected by an incident assessed to be within the Company's control. 3) Incidents resulting in one or more lost workdays. 4) Indicates the rate of fatalities/ lost workday incidents occurring in a year per 500 full-time equivalents (FTEs), using 1,000,000 hours as the standardized average number of hours worked by 500 FTEs in one year. Total hours worked is estimated based on standard annual working hours for active employ- ees and sums to 206 (220) (217) million hours. Due to limitations in data availability, data for suppli- ers and subcontractors is not available. 5) Rates for previous reporting periods have been restated. See note O3 for more information. 6) Ericsson is currently only able to collect information with satisfactory accuracy on the number of lost workdays for its own employees. Supplier consequence management Warnings by type of ﬁnding1) (No). Working at heights Incorrect use of PPE2) Insufﬁcient incident and resource management Lack of adherence to driving/vehicle standards Lack of required and certiﬁed competence Lack of risk assessment/ Safe working conditions Total 2023 2022 2021 Red cards Yellow cards Red cards Yellow cards Red cards Yellow cards 72 51 29 6 41 44 243 8 25 2 9 16 24 84 47 40 8 3 15 83 16 32 17 4 17 86 196 172 24 20 3 2 11 22 82 18 29 26 0 18 74 165 1) Eight basic lifesaving rules that apply to the entire workforce, covering driving, seatbelts, wearing helmets, alcohol and drug use, personal protective equipment, working in drop zones and at heights, and electricity. 1) Red cards and yellow cards indicate the severity of the consequence issued to a supplier after a viola- tion of our Health and Safety Standards. Red cards are used for serious breaches and carry signiﬁcant consequences. 2) Personal Protective Equipment. Sustainability and Corporate Responsibility report 2023 31 Note S2, cont’d. Well-being Employee perceptions (Survey results) Balance 1) Well-being commitment 2) 2023 2022 2021 79 80 77 85 76 87 1) Scoring of aggregated employee responses to the statement "I am able to successfully balance my work and personal life" measured on a scale of 0–100 with 100 being the most favorable result. Cradlepoint employees are not included in 2021 statistics. Vonage employees are not included. 2) Scoring of aggregated employee responses to the statement "Ericsson takes a genuine interest in employees' well-being" measured on a scale of 0–100 with 100 being the most favorable result. Cradlepoint employees are not included in 2021 statistics. Vonage employees are not included. S3 Human rights Impacts, risks and opportunities Ericsson has identified material impacts related to human rights in both its upstream and downstream value chain, as well as in its own operations. The analysis of impacts has been informed by Ericsson’s prior stakeholder con- sultations, due diligence practices and analysis of business relationships. The material impacts related to human rights identified and described below are largely the same as the identified salient human rights issues across Ericsson’s value chain. Ericsson has an extensive supply chain with a global presence. Many sup- pliers and subcontractors are found in countries and regions including, but not limited to, Asia, the Middle East and Africa, and Latin America, where there are heightened risks of workers not being paid an adequate wage or having secure employment conditions, working excessive hours, not being provided with adequate housing, or their right to freedom of association not being respected. Similarly, in largely the same geographies, there are heightened risks of discrimination and harassment of women and other underrepresented groups or minorities in the workplace. Beyond its first-tier suppliers, Ericsson has also identified heightened risks of forced and child labor, in particular for activities involving the extraction of natural resources used in Ericsson’s hardware, as well as electronics manufacturing in certain parts of the world including, but not limited to China, India, Brazil and Malaysia. Ericsson also has its own workforce and works with suppliers and subcon- tractors in several countries with heightened risk to personal security caused by conflicts, civil unrest, criminality or authoritarian rule. Downstream in the value chain, the material impacts identified relate to how misuse of the company’s technology and solutions could create risks of nega- tive impacts on the right to privacy of end users, through functionalities where governments and authorities can intercept private communications, so-called lawful intercept. While Ericsson, as a network vendor company, does not hold a license and does not receive requests directly from authorities, it could be obliged by authorities to shut down networks where it operates these on behalf of service providers, which could impact people’s right to exercise their freedom of expression. The potential severity and likelihood of both these impacts correlate with the strength of rule of law, the regulatory environment and robustness of democratic institutions in the countries where Ericsson deploys and operates networks. Ericsson is involved in the development of new technologies such as 6G and artificial intelligence (AI). The application and unintended effects on people and communities of such technologies are under increasing scrutiny, govern- mental regulation, litigation, and the subject of public debate. Ericsson has therefore identified technology ethics as another human rights-related area with potentially material impacts. In addition to the material impacts described here, additional identified impacts related to Ericsson’s own workforce are described in note S1, health and safety-related impacts in note S2, and impacts related to labor rights in the supply chain in note G3. More details on human rights risks and considerations in Ericsson’s value chain can be found in the 5G Human Rights Assessment, available on the Company’s website. Existing and emerging legal requirements on companies to ensure respect for human rights across their value chains, in particular mandatory due diligence provisions such as those included in the US anti-forced labor import laws and the anticipated Corporate Sustainability Due Diligence directive in Europe, require companies to strengthen their measures in the area, which can increase compliance-related costs. Failure to demonstrate compliance can have both legal and financial consequences, as well as affect Ericsson’s access to certain markets. Human rights-related factors are also increasingly included in custom- ers’ supplier evaluation processes, meaning Ericsson’s performance in this area could have an effect on how the Company is assessed in tenders and proposals. Policies Ericsson’s Business and human rights statement describes the Company’s commitment to respect internationally recognized human rights, including those outlined in the International Bill of Human Rights and the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, and how the Company works to embed the UN Guiding Principles on Business and Human Rights (UNGPs) throughout its business operations. The statement also describes Ericsson’s commitment to providing grievance mechanisms in line with the UNGP's effectiveness criteria and access to rem- edy in cases when Ericsson has caused or contributed to adverse human rights impacts, engaging with stakeholders and rights holders to identify and mitigate potential adverse impacts in the development of new technologies and services, undertaking external assessments of the implementation of human rights principles and generally tracking the effectiveness of the Company's actions, and providing for transparent reporting. It also clarifies Ericsson’s commitment to invest in training and awareness on human rights for both employees and business partners. The commitment to respect internationally recognized human rights is further incorporated in Ericsson’s Code of Business Ethics (CoBE) available to the Company’s workforce in more than 40 languages. While the Business and human rights statement outlines the process of human rights due diligence, the CoBE specifically addresses Ericsson's most salient human rights issues includ- ing non-discrimination, just and favorable conditions of work such as living wages and adequate rest and leisure, the right to form and join trade unions and bargain collectively, the company’s prohibition of forced labor, child labor and human trafficking, and the right to privacy and freedom of expression. As a member of the Global Network Initiative (GNI), Ericsson is committed to the GNI Principles on Freedom of Expression and Privacy. Ericsson’s Code of Conduct (CoC) for Business Partners requires Ericsson and its business partners to respect all internationally recognized human rights standards, including the International Bill of Human Rights and the principles concerning fundamental rights set out in the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work. The CoC is based on the Responsible Business Alliance Code of Conduct but also includes Ericsson-specific requirements and is a part of standard supplier contracts. It is available in several languages on the Company’s website. 32 Note S3, cont’d. Management approach The area of business and human rights is managed by the Sustainability and Corporate Responsibility (S&CR) unit. Within the S&CR unit sits human rights subject matter experts, responsible for developing the Company’s human rights strategy and for supporting the business and market areas and Group functions in the implementation of the strategy and commitments. Human rights due diligence To operationalize its commitments to respecting human rights, the Company has integrated human rights due diligence across its business operations. The aim is to ultimately provide better outcomes for people across the value chain and ensure the Company’s technology is a force for good, by preventing and mitigating intended and unintended misuse. Ericsson’s S&CR strategy, part of its wider business strategy, incorporates its commitment to the UNGPs and compliance to existing and emerging regulation in the area of human rights. Human rights risks are also included in Ericsson’s Enterprise Risk Management Framework and overseen by the Business Risk Committee. In addition to the information below, additional details on Ericsson’s human rights due diligence efforts and prioritized areas can be found in Ericsson’s Business and Human Rights Statement, available on the Company’s website. Sales opportunities – Sensitive Business Framework In order to assess, prevent and mitigate potential misuse of Ericsson’s technol- ogy, human rights due diligence is integrated into the sales process through the Sensitive Business Framework. The framework aims to ensure that Ericsson’s solutions are used in accordance with international human rights standards. The Sensitive Business Framework is managed on an operational level by a dedicated team of sensitive business experts and governed by a cross- functional forum with representatives from the business and market areas, and Group functions. Decisions, and the rationale behind those decisions, can be escalated to the Business Risk Committee when deemed necessary. Four main factors are considered when assessing the potential human rights risks in a given sales opportunity. Portfolio All technology in the engagement is evaluated based on the amount of personally identiﬁable information that it processes and how this infor- mation will be accessed and stored. Customer The type and ownership structure of the customer. Purpose The purpose and context in which the cus- tomer intends to use the product, service or solution. Country The country-speciﬁc risk with regards to human rights. A third-party risk analytics ﬁrm is used to assess countries based on risks related to the right to privacy and freedom of opinion and expression. When the initial risk screening identifies risks in a sales opportunity that is to be pursued, the market area shall submit an approval request, which is evaluated according to the Sensitive Business risk methodology and may be approved, approved with conditions or rejected. Conditional approvals include technical and/or contractual mitigations. Implementation of these mitigations by the relevant market area is monitored to ensure adherence. Described below are examples of cases reviewed in this process during the reporting year. The Sensitive Business Framework can also trigger further due diligence measures (for example, a review of legal frameworks in a country, or heightened human rights due diligence concerning the customer or country) before a decision is taken on the opportunity. Supply chain See note G3 for a description of how environmental, social and governance factors, including human rights, are considered in Ericsson’s supply chain management approach. Mergers and acquisitions (M&A) Human rights issues are included as one aspect in Ericsson’s due diligence process for M&A. The focus is on evaluating main human rights risks of the target company, as well as to what extent the target company has sufficient due diligence frameworks in place to identify and address such human rights risks. In case red flags or gaps are identified, a mitigation plan including appropriate remediations is required either as a precondition or as part of the integration post closure. Sustainability and Corporate Responsibility report 2023 Enhanced measures When conducting business in conflict-affected areas or when human rights risks are otherwise considered elevated, enhanced due diligence is conducted. Measures taken in such situations include engaging with external stakehold- ers, including potentially affected stakeholders or their intermediaries and representatives. In conflict-affected or high-risk contexts, it may be difficult to reach out directly to impacted stakeholders. In such circumstances, Ericsson tries to leverage its engagement in forums such as the GNI and the Business Network on Civic Freedoms and Human Rights Defenders to identify ways of engaging with external stakeholders that ensure their personal security and safety. This can involve sharing information about current and future business activities and practices, potential human rights risks and mitigating measures, and how to establish meaningful communication channels with concerned stakeholders. A standalone human rights impact assessment can also be triggered by factors such as reentry into a market, reports about deteriorating human rights situations in a specific country, new product developments or identified actual adverse impacts. The methodology used for conducting human rights impact assessments is aligned with the UNGPs. Protection of workforce in high-risk areas Ericsson has operations in areas of high risk where, for example, armed conflicts, criminality and authoritarian rule can lead to situations that expose employees and the external workforce to heightened risk to their personal security. Ericsson monitors geopolitical and security threats worldwide and maintains security risk ratings for areas hosting Ericsson operations. The Company’s security strategy articulates the criticality of proactively and effec- tively mitigating and managing such risk, which is operationalized through the deployment of a global framework for Security in High-Risk Areas. The objec- tive of this framework is to enable business operations in high-risk areas while safeguarding employees, suppliers and anyone working on behalf of Ericsson supporting its operations through adequate and risk-based personal protection measures, for example: – Procedures, training and precautionary actions to minimize the risk of becoming the target of criminal activity. – Requirements on travel routes and transportation arrangement (e.g., timing, travelling in convoys, use of armed security escorts, security precautions at stops, tracking of movements). – Use of satellite telephones in remote locations. – Physical security requirements for accommodation and work locations. Technology ethics Ericsson is involved in the development of new technologies such as 6G and AI, and its human rights-related policies and commitments apply also to the devel- opment of new technologies. Ericsson adheres to the EU’s Ethics Guidelines for Trustworthy AI and has incorporated the guidelines in development and governance processes, including AI development guidelines and design rules. The principles cover topics such as explainability, non-bias, non-discrimination and possibility of human oversight. Apart from the implementation of trustwor- thy AI by design, Ericsson is also committed to ensuring that the company itself uses trustworthy AI. Grievance mechanism Internal and external stakeholders can report suspected violations of laws, regulations or company policies, including human rights violations, through the Ericsson Compliance Line. Reporting through this channel can be done anony- mously. Ericsson does not require persons that report compliance concerns to waive their rights to bring claims through a judicial process as a condition to participating in the grievance process. As part of reporting a compliance con- cern, either via a manager or through the Ericsson Compliance Line, Ericsson does not require the reporter to sign a non-disclosure agreement. The reporter is, however, asked not to share any communication relating to an ongoing matter, in order to protect the integrity of the process. More information can be found in note G2. Sustainability and Corporate Responsibility report 2023 33 Note S3, cont’d. Collaborations and partnerships Ericsson leverages its efforts through collaborations and partnerships with other organizations. Listed below are the most significant external collabora- tions, partnerships and commitments related to human rights. Organization Description Business Network on Civic Freedoms and Human Rights Defenders Global Network Initiative Shift Business Learning Program UN B-tech Project A group of companies committed to identifying ways that businesses and society can beneﬁt from increased support from the private sector for the pro- tection of civic freedoms and human rights defenders. An initiative addressing Freedom of Expression and Right to Privacy in the ICT sector. Participants are internet and telecommunications companies, human rights and press freedom groups, investors, and academics and academic institutions. The Business Learning Program supports companies working to integrate principles on business and human rights. Shift is a nonproﬁt, mission-driven organization working with businesses, ﬁnancial insti- tutions and standard setters to drive business respect for human rights according to the UNGPs. A project led by UN Human Rights to provide an authoritative and broadly accepted roadmap for applying the UNGPs in the ICT sector. The Tech Com- pany Community of Practice, in which Ericsson par- ticipates, is an initiative of the UN Human Rights B-Tech Project to advance business respect for human rights in the technology industry. Training and awareness raising Ericsson provides human rights training accessible to all employees. Targeted training and capacity building for key job roles and functions is also offered. All market areas have an appointed single point of contact responsible for Sensitive Business. Each such person is onboarded by the Sensitive Business Unit at Group level and is responsible for informing the relevant functions, such as account managers within their respective market areas, of recent develop- ments and decisions. Senior members of the Sensitive Business Core Team receive onboarding as well as continuous updates by the Sensitive Business Council. Metrics Human rights related incidents During 2023, Ericsson has not, through its reporting channels, been made aware of any adverse human rights impacts in which the Company has been involved. Consequently, no remediation actions have been undertaken. See note G2 for more information on reported compliance concerns. Sensitive business due diligence Cases reviewed by outcome (No.) Approved Approved with conditions Rejected Total 2023 2022 2021 252 636 7 895 235 435 13 683 286 432 4 722 Sensitive Business case examples Decision Approved Customer Description Rationale Local communications service provider A customer in a high-risk country requested an expansion of its network. The solution requested was assessed by the Sensitive Business team and was found to not process any personally identiﬁable data. Based on that assessment, there was a low risk of potential adverse human rights impacts. The engagement was approved. Approved Local reseller A customer requested to buy and resell a private net- work for smart manufacturing. The solution could include support for video cameras, connected vehi- cles and connected robots for manufacturing. Personal identiﬁable information, such as call logs, was to be pro- cessed in the network. Considering that the intended use of the tech- nology was related to manufacturing and in a low-risk country from a human rights risk perspective, the engagement was approved. Approved with conditions Multinational communications service provider Within the scope of a frame agreement, potentially covering several local operators, a customer asked Ericsson to provide a ﬁnancial services technology where the end users are private consumers. Approved with conditions Government entity The customer requested Ericsson to modernize its existing private network, including both radio and core network. Dismissed Local communications services provider An operator requested a new core network solution, in a country were Ericsson had no previous presence. The solution processed personal identiﬁable information and the local operators were operating in countries with different risk lev- els. Considering the potential human rights-related risks, contrac- tual mitigations limiting the use of the Ericsson solution in certain markets were agreed with the customer. The intended use of the private network was for internal commu- nication (voice and data) within the customer’s organization. In order to restrict the use to the requested purpose, contractual miti- gations limiting how the private network can be used were included in the agreement with the customer. The assessment by Sensitive Business identiﬁed regulatory requirements giving authorities wide-ranging access to user data from the solution. This ﬁnding led to further due diligence concern- ing the regulatory environment and country-related risks. It was concluded that the identiﬁed risks could not be mitigated, and the opportunity was therefore dismissed. Not pursued1) Local operator A customer, which was a subsidiary of a multinational company, requested as part of an engagement that Ericsson provide a speciﬁc monitoring solution which was said to be required by the authorities. During early-stage discussions, risks related to the monitoring solution were identiﬁed, and the decision to scope out the identi- ﬁed part of the opportunity was taken ahead of formally submit- ting the opportunity for assessment. 1) Sales opportunities that are “not pursued” are not included in Sensitive Business Framework statistics shown above, as the circumstances were such that they were dismissed without the need for a decision by the Sensitive Business Board. Described here is an example of such a case. 34 Sustainability and Corporate Responsibility report 2023 S4 Corporate citizenship Impacts, risks and opportunities Ericsson and its technology have the potential to positively impact people and communities in a multitude of ways, from facilitating access to education for children and young people, to providing necessary communications infra- structure to support humanitarian response in crisis situations. In addition to the benefits to the receiving parties, meaningful community engagement also contributes to enhancing the employee experience for the people working for Ericsson and can positively impact the Company’s brand and reputation. Ericsson Volunteers Ericsson Volunteers is one way through which the Company delivers a meaningful employee experience and contributes to positive impacts on communities and broader society. Every employee is given one paid day per year when they can apply their skills and time to volunteering. A volunteering framework sets the direction for activities applicable for volunteering, including the five cause categories as well as activities for extended volunteering, such as Connect To Learn and Ericsson Response. Policies To achieve wanted impacts, Ericsson’s efforts are aligned to five cause catego- ries: humanitarian response, education & digital skills, climate & environment, community capacity building, with diversity & inclusion underpinning all of these. Ericsson does not make donations to political or religious causes. Certain subsidiaries have their own guiding principles for their work with corporate citizenship that may deviate from the Group’s. Management approach Ericsson leverages its core competencies in connectivity technology to support, develop and create a positive impact for stakeholders in the communities in which it operates. Described in this section are Group-wide programs and initiatives through which Ericsson engages with local communities and stake- holders on a non-commercial basis. In addition to these Group-wide initiatives, there are local initiatives driven by the market areas not described here. Initiatives related to digital education are described in note S5. Group level operational responsibility over the initiatives and programs described on the next page is delegated to Ericsson’s Sustainability and Corporate Responsibility unit, often in collaboration with the market areas. Volunteering activities are managed together with Ericsson’s human resources department and the heads of Marketing and Communication in the market areas through the Volunteer Program Board, chaired by the Head of Sustainability and Corporate Responsibility. Due diligence of partner organizations So that Ericsson only partners with organizations that share similar values and ethical standards, systematic evaluations of partners for sponsorship and donations are applied. The compliance function is responsible for evaluating all sponsorships and donations, with regard to potential misuses, ensuring appropriate due diligence of receiving parties and recommending necessary mitigation measures to be adhered to when necessary. More information on third-party management can be found in note G2. Monitoring and controls Execution of all donations and sponsorships must follow predefined proce- dures using a dedicated application with a built-in approval flow. All required documentation is subsequently stored in the same application for traceability and verifiability. Donations, proﬁt distribution and sponsorships Ericsson makes donations, both in the form of company-matched employee donations as well as direct donations, to selected causes and organizations. Donations can be in the form of monetary or in-kind payments and can be done either directly to a beneficiary or via a third party. In certain markets, most notably in India and South Africa, Ericsson is subject to mandatory profit distribution rules, where a portion of the local entity’s profits are to be spent on community investments. Ericsson engages in monetary and in-kind sponsorships of activities that are aligned with Ericsson’s values and brand strategy. Sponsorships should benefit all involved parties, and lead to a result that can be measured against predefined financial objectives. Ericsson Response Ericsson Response is a global volunteer program founded by employees in 2000. Together with partners, Ericsson Response utilizes the Company’s technology and the skills of its employees to provide connectivity where local services are not sufficient, for example after natural disasters or in refugee situations. It is a partner of the World Food Program-led UN Emergency Tele communications Cluster, a global network of partners to fill connectivity gaps for humanitarians and populations affected by disasters. Ericsson is a partner to the United Nations High Commissioner for Refugees (UNHCR), the UN Refugee Agency, and contributes to the reach and impact of the Refugee Emergency Telecommunications Sector (RETS) to provide vital communica- tions to the humanitarian response community in support of its activities. Collaborations and partnerships Ericsson leverages its impacts through collaborations and partnerships with other organizations. Below a select number of external collaborations are listed. Organization Description 1t.org International Red Cross and Red Crescent Movement United Nations High Com- missioner for Refugees (UNHCR) United Nations Children's Fund (UNICEF) World Food Programme (WFP) Metrics Ericsson contributes to 1t.org, part of the World Economic Forum’s work to accelerate nature-based solutions through our pledge on Connected Mangroves, which is a reforesta- tion project in Malaysia, the Philippines and India that lever- ages connected technologies such as solar-powered sensors and real-time camera footage to collect and analyze critical data on mangrove wetlands. The projects offer the local communities a platform to check on water, soil and humidity conditions, and remotely monitor any intrusion on the site. The organized International Red Cross and Red Crescent Movement is a humanitarian movement with staff and vol- unteers worldwide. It was founded to protect human life and health, to ensure respect for all human beings, and to pre- vent and alleviate human suffering. Ericsson contributes with donations during emergencies to the Red Cross / Red Crescent humanitarian work. UNHCR, the UN Refugee Agency, is a global organization dedicated to saving lives, protecting rights, and building a better future for refugees, forcibly displaced communities and stateless people. Ericsson Response provides critical equipment and surge capacity to enable the delivery of vital communication services in refugee emergencies through UNHCR’s RETS. UNICEF works in over 190 countries and territories to pro- tect the rights of children. Ericsson supports UNICEF-led efforts through donations, employee volunteering and humanitarian response action in disaster-stricken areas. In addition, Ericsson is a partner to UNICEF on the Giga initia- tive for school connectivity, see more information in note S5. The WFP is the leading humanitarian organization saving and changing lives, delivering food assistance in emergen- cies and working with communities to improve nutrition and build resilience. Ericsson contributes through the Ericsson Response and WFP partnership. Community investments (SEK million) Donations and sponsorships1) 2023 89 2022 115 2021 113 1) Includes donations, mandatory proﬁt distributions, and sponsorships made by Ericsson Group companies during the reporting year. Sponsorships include those with activity start date January 1 to December 31, or multiyear contracts that were active during the reporting year. Sponsorships related to general marketing and brand building activities, including those related to sports and recreation are not included. Sustainability and Corporate Responsibility report 2023 35 S5 Digital inclusion Impacts, risks and opportunities The number of internet users has increased from a few million to almost 5 bil- lion within 30 years. This growth has enabled a digital transformation that is reshaping societies and economies. Research shows that, on average, a 10% increase in mobile broadband adoption can increase economic growth by up to 0.8% , with the effect being significantly larger in low-income countries1). Moreover, a 2022 study commissioned by Ericsson in 15 countries in Asia, Africa and Latin America also showed that 5G rollout can generate overall economic benefits (in terms of GDP growth) three-to-seven times higher than the incremental cost of extending coverage2). Similarly, increases in school connectivity can have significant effects of economic growth, with potential double-digit additions to GDP if low-income countries achieve the same levels of connectivity as the most connected economies3). While there was improve- ment between 2022 and 2023, the potential of the internet for social and economic growth remains largely untapped, as 2.6 billion people or roughly one-third of the world’s population remains offline, and many among the two-thirds of the people online lack meaningful connectivity4). The connectivity gap is twofold and consists of both a gap in overall cover- age, meaning access to any type of mobile broadband connection, and a gap in terms of lacking a mobile broadband connection that is good enough to allow full participation in the digital economy, such as access to at least 4G cover- age. The challenge in bridging both these gaps is primarily a financial, rather than a technological, one with a need for new business models to evolve to enable meaningful connectivity at lower cost. Through solutions such as Fixed Wireless Access (FWA), Ericsson contributes to increased affordability, which is one enabler for connecting the unconnected and closing the digital divide. Nearly one-quarter of the world’s adult population lacks access to formal banking and financial services, according to World Bank Findex. However, the majority of the unbanked population owns a mobile phone that can help them access formal financial services. Mobile financial services offer the possibility to bring millions of financially underserved people into the formal economy, improving individual livelihoods and transforming economies. In addition, without sufficient digital literacy people cannot fully partake in the digital economy regardless of whether they have a meaningful connection or not, which is why digital upskilling is another key enabler to achieve broad digital inclusion in society. Through its digital education program, Connect To Learn, Ericsson works with governments, communication service providers, non-gov- ernmental organizations (NGOs) and international/UN agencies to accelerate access to digital connectivity for schools and learning centers, and to empower the next generation with digital skills to enhance industry-ready education and make students more attractive on the job market. Policies Ericsson’s Sustainability policy states that the Company shall engage in activi- ties that have a positive social, environmental and economic impact on people, business and society and promote digital inclusion. In addition, Ericsson’s Human Rights policy articulates that the Company shall proactively promote human rights by working toward fulfillment of the positive potential of ICT for realizing and sustaining human rights. Management approach Ericsson’s approach is based on the belief that technology developed and deployed responsibly can help bridge the digital divide and ensure that the benefits of the digital economy and society are enjoyed by all. The Company works toward this goal through digital inclusion initiatives, which cover the portfolio, business cases, advocacy and on-the-ground efforts. Business models for affordable connectivity Ericsson continues to explore how its portfolio and offerings can be used to develop cost-efficient and profitable business offerings targeting regions with no or low internet penetration. The scope of these efforts includes radio and power management solutions as well as business cases and use case scenarios. FWA is one example of an efficient and scalable alternative to wired connections and a portfolio solution that can benefit institutional coverage, such as, for example, in schools. In recent years, a substantial share of new 5G FWA launches has been in emerging markets. Financial inclusion Ericsson’s Mobile Wallet Platform enables leading communications service providers and financial institutions to provide easy to use, affordable and secure mobile financial services to financially underserved people worldwide, helping them lead a financially empowered life. It allows unbanked people to save and transfer money, receive financial aid and salary, pay bills and mer- chants, top up mobile services, get instant loans, as well as access insurance and other financial services. Digital education Ericsson’s commitment to bridging the digital divide includes a focus on access to education and digital skills development. This is carried out through Ericsson’s global flagship education program, Connect To Learn, a non-profit program delivered in collaboration with governments, communications service providers, NGOs and international/UN agencies, with the ambition to: – Accelerate access to digital connectivity for schools and community learning centers and, ultimately, all learners around the globe and their communities. – Empower the next generation with digital skills, essential for their socio- economic development and enhance industry-ready education to make students employment ready. Key non-proﬁt education offerings that Ericsson deploys globally in collabora- tion with partners are: Ericsson Educate A digital skills development program designed for university students covering key topics related to emerging technologies such as: telecommunications and 5G, AI, data science, automation and the Internet of Things. Ericsson Digital Lab An educational program designed to inspire children aged 11–16 to explore new technologies and develop their problem-solving skills. The Digital Lab is a place where instructors from Ericsson and partnering organizations can share their interest in technology with students, and includes courses on robotics, game development, electronics and artificial intelligence. In 2020, Ericsson became the first private sector partner to make a multi- million-dollar commitment to support the joint UNICEF-ITU5) Giga initiative for global school connectivity with the aim to connect every school to the internet and every young person to information, opportunity and choice. With support from Ericsson, Giga maps schools and their connectivity levels to help target investment to where it is most needed and to measure progress toward increasing internet access. Ericsson’s financial and in-kind support has contrib- uted to Giga’s achievements to date in connecting nearly 6,000 schools and over 2.4 million students. 1) Edquist et al. (2018) How important are mobile broadband networks for the global economic development? Information Economics and Policy 2) Stewart et al. (2022) Future Value of mobile in emerging markets. Analysys Mason 3) Birdwell et al. (2021) Connecting learners: Narrowing the educational divide. The Economist Intelligence Unit. 4) The State of Broadband 2023 – Digital Connectivity: A Transformative Opportunity (2023) International Telecommunication Union and United Nations Educational Scientiﬁc and Cultural Organization Broad- band Commission for Sustainable Development 5) International Telecommunication Union Sustainability and Corporate Responsibility report 2023 Metrics Connect To Learn (No. cumulative) Impacted children and youth Countries covered Ericsson Mobile Wallet (No. in millions) Registered accounts Active users1) 2023 2022 2021 485,200 43 400,163 36 296,079 30 2023 457 85 2022 379 80 2021 314 65 1) Active users are deﬁned as those having used the service in the past 30 days from the reporting cut-off date. 36 Note S5, cont’d. Collaborations and partnerships Ericsson leverages its efforts through collaborations and partnerships with other organizations. Described below is a select number of external collabora- tions around digital inclusion. Organization Description ITU/UNESCO Broadband Commission for Sustaina- ble Development The Digital Transforma- tion Collaborative The World Economic Forum/EDISON Alliance Whitaker Peace & Development Initiative Technovation Ericsson’s CTO is a Commissioner on the Broadband Com- mission for Sustainable Development, a multi-stakeholder, high-level platform for developing policy recommendations and thought leadership on universal meaningful connectiv- ity and the importance of broadband on the global sustaina- ble development agenda. The Commission envisions and works toward realizing a fully connected world that harnesses the power of broadband to achieve the UN’s Sustainable Development Goals (SDGs) by 2030. The Digital Transformation Collaborative is a tech-focused public-private partnership led by UNESCO that aims to mobilize resources at national scale in collaboration with governments to advance their visions for leveraging sustain- able digital transformation in education to achieve SDG 4. Ericsson is a member of the Digital Transformation Collaborative steering group. The World Economic Forum-aligned EDISON Alliance 1 Billion Lives Challenge brings together digital inclusion commitments from governments, companies and other organizations globally. The members, including Ericsson, are committed to prioritizing digital inclusion as foundational to the achievement of the UN’s SDGs so that every person can fully participate in the digital economy and society. Ericsson is a long-standing partner to the Whitaker Peace & Development Initiative aimed at supporting youth and women from underprivileged backgrounds to develop skills as leaders, peacemakers, entrepreneurs and community builders. The partners recognize the important role of ICT in education and pursue joint efforts to develop peacebuilding and livelihood programs using ICT as a tool to foster resilience, peace and sustainability in communities affected by conﬂict, violence and poverty. Ericsson is partnering with education nonproﬁt Technova- tion in a global mentorship program with the objective to inspire girls to be leaders and tech entrepreneurs. With the support of volunteer mentors and parents, girls work in teams to code AI-based and mobile apps that address real- world problems. Ericsson employees support as mentors to enrolled participants. Sustainability and Corporate Responsibility report 2023 37 Section G – Governance G1 Sustainability and corporate responsibility governance Governance of Sustainability and Corporate Responsibility (S&CR) follows the Company’s overall governance structure. The Board of Directors, Executive Team and management’s respective roles and responsibilities with regards to S&CR are described below. Board of Directors Audit and Compliance Committee Finance Committee Remuneration Committee Enterprise Business and Technology Committee President and CEO Management Sustainability-related steering boards and committees Business areas Market areas Group functions Group Sustainability and Corporate Responsibility unit Board of Directors The Board of Directors oversees Ericsson’s S&CR strategy and receives reports on developments and performance annually, or more often as needed. The Board approves the annual S&CR report as part of the Company’s statutory Annual Report. Board committees In addition to the primary oversight exercised by the Board, each of the committees of the Board is involved, to some degree, in Ericsson’s S&CR strategy. The Audit and Compliance Committee oversees Ericsson’s Ethics and Compliance program and whistleblower procedures, and reviews the Group’s handling of information and cybersecurity, data privacy, and its environmental, social and governance (ESG) reporting practices. The Finance Committee oversees the promotion of the S&CR strategy in external funding through the application of the Green Financing Framework. As part of its role to prepare and propose rewards and compensation policies that attract and motivate the Company’s executives and align with the Company's long-term interests, the Remuneration Committee considers the inclusion of ESG and Ethics & Compliance criteria in variable compensation plans and monitors the performance of such criteria. Part of the Enterprise Business and Technology Committee’s role of monitoring the Company’s technology ecosystem, rela- tionships and partnerships involves reviewing matters related to energy and sustainability. President and CEO and the Executive Team The Executive Team, led by the President and CEO, is responsible for approving S&CR strategies and related Group targets, and regularly receives reports on the implementation of strategies and progress made on targets and mile- stones. Its members are also part of dedicated steering boards and committees that provide more frequent strategic guidance and oversight of S&CR-related matters. Ericsson maintains a robust approach to risk management. The Company has made significant strides toward ensuring that strategic, external and internal risks are properly identified, assessed, internally reported, escalated, and effectively addressed. As part of its enhanced approach to risk manage- ment, Ericsson has established the Group Business Risk Committee (BRC) which is co-chaired by the Chief Financial Officer and the Chief Legal Officer. The BRC now serves as a fully embedded risk escalation and oversight forum which has strengthened management’s decision making and handling of risks. The BRC applies a “heightened scrutiny” approach in evaluating and mitigating these types of risks, and the organization has implemented various actions to address these risks, ranging from enhanced contractual protections, changes to the scope or nature of operations, or decisions to responsibly exit relevant jurisdictions or customer relationships. Steering boards and committees Chaired by Business Risk Committee Group Compliance Committee Group Enterprise Security and Privacy Board Product Security Board Global People Leadership Team Global OHS Board Chief Financial Ofﬁcer and Chief Legal Ofﬁcer Chief Legal Ofﬁcer Chief Financial Ofﬁcer Chief Technology Ofﬁcer Chief People Ofﬁcer Chief Marketing and Communications Ofﬁcer Executive remuneration A portion of the variable remuneration to executives is determined by envi- ronmental, social and integrity criteria, including compliance with the Code of Business Ethics (CoBE). See pages 6–7 of the Remuneration report for further details. Operational management A dedicated S&CR unit, reporting to the Chief Marketing and Communications Officer, is accountable for developing and implementing strategies, policies, steering documents, targets and processes related to S&CR. Responsibility for executing on S&CR strategies and progressing on targets lies with the Group functions, business and market areas, often in cross-functional collaborations. Policies During 2023, Ericsson enhanced and clarified its Code of Business Ethics (CoBE), which is a core governance pillar. The updated CoBE sets out the Company’s expectations, principles and requirements for employees as they conduct business. It provides the framework for ethical decision-making, and guides employees in making decisions and managing risk as they engage with colleagues, customers, partners, owners, and other stakeholders. Ericsson’s Code of Conduct (CoC) for Business Partners outlines expectations on Ericsson, its suppliers and other business partners in key areas such as business ethics and anti-corruption, labor and human rights, occupational health and safety, environment and climate change. It is a binding requirement for all business partners. Additional ESG-related policies are listed below. The main contents of the two codes and other policies as relates to material impacts, risks and opportunities are described in the topic-specific notes to this report. The CoBE is approved by the Board and the CoC and Group-wide policies are approved by the President and CEO. Ericsson expects employees and encourages external stakeholders to report concerns of violations of either of the codes through the Ericsson Compliance Line, see more information in note G2. Foundational policies and steering documents Code of Business Ethics Code of Conduct for Business Partners Sustainability Policy Business and Human Rights Statement Group People Policy Health, Safety & Well-being Policy Security Policy Privacy Policy Government and Advocacy Policy Group management system and risk management Ericsson has a global management system, the Ericsson Group Management System (EGMS). The EGMS aims to ensure that Ericsson’s business is well- managed and has the ability to fulfill the objectives of major stakeholders within established risk limits and with reliable internal control. The EGMS also aims to promote compliance with applicable laws, listing requirements, gov- ernance codes and corporate responsibilities. 38 Note G1, cont’d. Sustainability and Corporate Responsibility report 2023 EGMS is founded on ISO 9001 (international standard for quality manage- ment systems) and is designed as a dynamic governance system to enable Ericsson to adapt the system to evolving demands and expectations, including new and changing regulation and legislation as well as customers’ and other stakeholders’ requirements. ISO certificates are issued by a third-party certi- fication body proving that the system is efficient throughout the operations as well as compliant to the ISO standards in scope. Ericsson’s operations are currently certified to ISO 9001 (Quality), ISO 14001 (Environment), ISO 45001 (Health and Safety) and ISO 27001 (Information Security). Selected Ericsson units are also certified to TL 9000 (telecom-specific standard). The EGMS is also assessed within the scope of the audit plan of Ericsson’s internal audit function (Corporate Audit). Identification and treatment of ESG-related risks is an integrated part of the Enterprise Risk Management (ERM) framework, which is a part of the EGMS. There are also dedicated risk management frameworks aligned with the ERM framework that cover specific areas of risks such as anti-corruption, environment, health and safety, and information security. More information on the EGMS and ERM framework can be found on pages 23–24 in the Financial report and on pages 16–17 in the Corporate Governance report. External commitments and endorsements In addition to topic-specific commitments and endorsements described in this report, Ericsson is a founding member of the UN Global Compact and continues to support its ten principles. Ericsson’s President and CEO is a member of the World Economic Forum’s Alliance of CEO Climate Leaders, a global community of chief executive officers who work toward climate action across industry sec- tors and engage with policymakers to help deliver the transition to a Net Zero economy. Ericsson’s CEO is a member and incoming chair (2024) of the CEO Alliance for Europe, a cross-sector action tank, working toward a more prosper- ous, sustainable and resilient Europe. Ericsson’s Chief Technology Officer is a commissioner on the ITU/UNESCO1) Broadband Commission for Sustainable Development, which develops and advocates policy recommendations to advance broadband connectivity and digital inclusion. 1) International Telecommunication Union / United Nations Educational, Scientiﬁc and Cultural Organization G2 Compliance and business ethics Impacts, risks and opportunities Corruption, bribery and unethical business practices are an obstacle to economic and social development, and often disproportionally affect fragile communities and undermine democratic institutions. They erode the trust that people and businesses have in institutions, and damage the business environ- ment, causing long-term barriers to efficient economic activities in countries and regions where they occur, leading to lower levels of investments and reduced growth. Ericsson is a large multinational company with approximately 100,000 employees worldwide, and customers in more than 180 countries. With its global reach, Ericsson is present in emerging markets in Asia, Latin America, Eastern Europe, the Middle East, and Africa, including many countries with weaker institutions and that have a higher risk of bribery and corruption. As described in more detail below, there have been historical instances where Ericsson failed to properly mitigate bribery and corruption risks. As a result, the Company incurred significant costs related to investigations, legal actions, compliance monitorship and fines, and suffered damage to its brand and reputation. Further violations of applicable anti-bribery and anti-corrup- tion laws and regulations could have severe financial and reputational conse- quences. Since 2019, Ericsson has made significant investments to strengthen its Ethics and Compliance (E&C) infrastructure, enhance its approach to governance and risk management and improve its corporate culture, overseen by the Board of Directors and the Executive Team. Interactions with US authorities and other governmental authorities Ericsson is and has been involved in legal proceedings involving governmental authorities in different jurisdiction. Further information about current proceed- ings is included in the Financial report on pages 25–26. Policies The Company’s foundational values and principles are set out in the Code of Business Ethics (CoBE) available in over 40 languages. The CoBE articulates the Company’s commitment to conduct business with integrity and zero toler- ance for bribery and corruption. It emphasizes that employees must disclose potential conflicts of interest, not partake in anti-competitive practices and only engage with vetted third parties who abide by the same standards of integrity as Ericsson. In addition to the CoBE, specific policies on: anti-corruption; gifts, entertainment and hospitality; third-party management; conflicts of interest; anti-money laundering; anti-trust law; and insider rules, among others, are in place to support Ericsson's employees in conducting business in compliance with applicable laws and regulations. These policies are supported by relevant internal controls and recurrent internal testing to ensure end-to-end oversight and an effective E&C program that reduces the probability of risks occurring and mitigates the adverse effects if they do. Ericsson’s Code of Conduct (CoC) for Business Partners articulates the Company’s expectations and anti-bribery and corruption (ABC) requirements for its business partners. It also makes clear that Ericsson expects its business partners to foster a culture of integrity based on transparency, compliance and ethical business practices. The CoC is based on the Responsible Business Alliance Code of Conduct but also includes Ericsson-specific requirements and is part of standard-supplier contracts. It is available in several languages on the Company’s website. Executive variable remuneration Short-term variable compensation of the Company’s executives includes an evaluation of performance criteria related to integrity. See further information on page 2 of the Remuneration report. Management approach Ericsson focuses on driving continuous cultural change with a focus on embed- ding integrity into its ways of working, fostering a culture of transparency, collaboration and open dialogue, sound and ethical business decisions and strong risk management. Ericsson requires that each employee complies with the CoBE, seeks assistance when unsure of the right course of action and speaks up when there are violations or suspected violations of the CoBE. In turn, it expects that executives will drive the culture of integrity and compliance, encourage open discussions about ethics and compliance, and anticipate and mitigate potential compliance issues. As part of this effort to set the tone at the top, the CEO frequently sends email communications to all employees in which practical compliance challenges and related solutions are highlighted. Ericsson’s E&C program consists of ten hallmarks – ranging from leadership and culture to mergers and acquisitions, rewards and sanctions – based on the expressed expectations of leading authorities with jurisdiction over Ericsson. Ericsson’s Group Business Risk Committee, co-chaired by the Chief Legal Officer (CLO) and the Chief Financial Officer, serves as a fully embedded risk escalation and oversight forum which has strengthened management’s deci- sion making and handling of risks. The BRC process and Group-wide assess- ment of risk has enhanced the Company’s insights into enterprise risk and has increased alignment and the ability to effectively address risks which impact various parts of the organization. In particular, the BRC reviews potential risk matters with high impact (including risks which arise in “high risk” jurisdictions) and provides an internal management forum for monitoring and assessing risks identified in the enterprise risk management system. The Audit and Compliance Committee (ACC) of the Board of Directors oversees matters relating to compliance risk and regularly receives reporting on compliance related matters from the CLO, the Chief Compliance Officer (CCO) and the Head of Corporate and Government Investigations. The Compliance Sustainability and Corporate Responsibility report 2023 39 Note G2, cont’d. Office function at Ericsson is led by the CCO, who reports to the CLO. In addition to reporting to the CLO, the CCO has a further independent reporting line to the ACC on the areas of the E&C Program. The CCO regularly reports to the ACC on the effective operation of the E&C Program, including information of actual or suspected serious CoBE violations, insights from investigations outcomes and remediation activities, the identification of patterns of failures, and emerging risks and changes in the legal and regulatory environment. In addition, the CLO has a direct reporting line to the ACC on compliance matters that fall outside the scope of the E&C program, and on the holistic management of legal, compliance, ethical and associated reputational risks arising in the Company’s operations. The compliance organization consists of compliance officers at Group level and local compliance officers supporting the line organization. In 2022, Ericsson created a standalone Competition and Antitrust Unit. Originally part of the Compliance Office, in 2023 the Competition and Antitrust unit became part of the newly created Global Risk and Regulatory Policy unit. Risk assessments, monitoring and controls Ericsson conducts bribery and corruption risk assessments using a risk-based, multitiered approach across multiple regions to identify areas of heightened risk. This typically includes document collection, review and analysis, on-site or remote interviews of key personnel, and financial transaction testing for select markets and units. Focus areas include but are not limited to leadership and culture, sales, third-party management, gifts, entertainment and hospitality, conflicts of interest, government relations, policies and procedures, corporate contributions, and joint ventures and partnerships. Further, end-to-end testing and monitoring of the E&C program is performed in cooperation between different assurance functions, such as the Control Monitoring Center within the Finance function, a Monitoring and Testing unit within the Compliance Office, and a dedicated unit within Corporate Audit. Digitalization and operational efﬁciency Over the last few years, the Company has invested in digital capabilities to enable the employees, line managers and compliance professionals to work more efficiently, get easier access to compliance data and simplify the E&C program processes. Examples of the tools deployed include the E&C Portal (facilitating controls for conflict of interest, and gifts, entertainment and hospitality, includ- ing benefits provided to and from third parties, particularly public officials), the Allegation Case Management System (handling the allegation management process end-to-end from intake to remediation) and third-party management (TPM) risk management tools. The digital landscape is continuously evolving, with emphasis on AI and analytics to further enhance risk management of ABC risks. Third-party management Ericsson maintains a global, risk-based and integrated TPM program to prevent, detect and manage bribery and corruption risks in the Company’s relationships with its third parties. The management of third-party compliance risk is integrated into business processes, and business leaders, managers and individual contributors are all expected to act as owners of compliance risk. Components of the TPM program are managed by a central team of due diligence experts and data specialists. Key elements include a risk-based due diligence process to assess bribery and corruption risk exposure and potential liability that may result from relationships with third parties. A risk mitigation toolbox includes a broad range of measures that can be used to mitigate identi- fied risks such as training, certifications, financial transaction preapprovals, or, in extreme cases payment blocks and rejections. TPM increasingly utilizes advanced data analytics and reviews business rationale at the transaction level, whilst focusing on monitoring risks through- out the life cycle of business relationships. Business Partner Review Boards, comprised of senior business leaders and compliance professionals, regularly monitor the third-party risk landscape and provide approvals and mitigating actions on high-risk third parties on both market area and global levels. The effectiveness of underlying processes in each geography is continuously measured and strengthened, when necessary. Training and awareness raising The purpose and objectives of Ericsson’s E&C training plan are to develop a robust risk-based training strategy for all employees, establish a sustainable model for face-to-face training initiatives, and provide employees with training on the Company’s compliance-related policies and procedures. Training clari- fies to people working for the company what is expected in their roles, educates them on how to recognize bribery and corruption risks, and guides them on how to handle dilemma situations that arise in the course of their work. To achieve these objectives, Ericsson has considered various learning styles to engage people and has created multiple training platforms, training material and communication assets to allow diverse and interactive training experience tailored to specific target groups and based on the level of risk exposure. All employees and external workforce must complete foundational online ABC training courses every second year. Ericsson also provides mandatory enhanced ABC training for approximately 15,000 employees in high-risk roles, many of whom are also line managers. About 200 executives, including the Executive Team, are also provided with training in ethical dilemmas in a work- shop format. The same type of training is also provided to other leaders on an ongoing basis as part of broader leadership training or as standalone training for intact teams. The CoBE promotes and supports Ericsson’s Speak-Up Culture and prohibits retaliation for speaking up in any form. All employees are required to confirm their understanding of the CoBE on a regular basis. Employee perceptions and performance evaluations Employees are regularly asked about how they perceive Ericsson’s commit- ment to compliance, business ethics and anti-bribery and corruption. The annual employee survey includes questions about their perception of the Company’s commitment to ethical and responsible business practices, as well as whether they feel free to speak their mind without fear of negative consequences. All employees have a goal related to acting with integrity, which encom- passes a number of specific actions that must be satisfied annually. Failure to meet any of these specific requirements has a negative impact on the outcome of an employee’s annual performance evaluation. Prevention of anticompetitive behavior As part of the commitment to a compliance culture, Ericsson has a standalone Competition and Antitrust Unit driving the Company’s Competition and Antitrust program, which is currently being strengthened after an antitrust audit. Employees are asked to recognize competition (antitrust) laws and comply with them. Given the complexity of competition laws, employees are encouraged to consult with the competition law attorneys in the Company’s Legal department in case of any questions. Reporting compliance concerns Employees are expected to report concerns related to corruption, fraud, accounting, internal controls, human rights matters or other matters that could constitute a breach of law, or that could harm the business or reputation of Ericsson, its employees and shareholders directly to their manager, the superior of a manager or to the People or Legal and Compliance departments. In addi- tion, the Company promotes transparency through the maintenance of the Ericsson Compliance Line, a dedicated communication channel for employees and external stakeholders to report any compliance concerns either by a secure website or by phone. The Ericsson Compliance Line is operated by a third party and is available 24/7, 365 days per year, and enables reporting from multiple countries in several languages, and anonymously if so chosen. Where applicable, Ericsson employees and external stakeholders have the option to report certain matters via local channels, which have been implemented in accordance with the European Union Directive on the protection of persons who report breaches of Union law. The process for receiving and handling compliance concerns is designed to help maintain an appropriate degree of independent assessment. Ericsson does not accept any discrimination of, or retaliation against, individuals who report compliance concerns in good faith. In addition, the Company has increased the frequency at which it publishes its Speak Up Newsletter, featuring anonymized examples of actual misconduct and the way any such misconduct was addressed by the Company. The Speak Up Newsletter also includes short stories highlighting situations in which employees facing difficult choices chose to do the right thing. Progress in the Speak Up culture in recent years can be seen in the increased raising of compli- ance questions and potential concerns by Ericsson’s employees. The willing- ness by Ericsson’s employees to speak up is an essential safeguard to ensure that the Company conducts business with integrity. 40 Note G2, cont’d. Sustainability and Corporate Responsibility report 2023 Ericsson’s Allegation Management Office is responsible for the overall process from the time an allegation of potential misconduct is reported to the remediation of any substantiated violation of Ericsson policy. The Corporate and Government Investigations (CGI) team is responsible for appropriately investigating allegations of potential compliance violations and disclosing allegations to regulators as required. The CGI team also regularly reports on investigations to the ACC. Among other misconduct, the team investigates allegations that individuals may have offered or provided things of value to public officials, company customers and other private parties, including gifts, entertainment or travel. Findings and remediation plans for cases are presented to Ericsson’s Group Remediation Committee or Market Area Remediation Committees. Metrics and targets Target Strengthen Ericsson’s E&C program to help ensure an effective and sustainable anti-bribery and anti-corruption program by 2024. Metrics Training and awareness raising Ethics and compliance training – completion rates (%)1) Target audience Audience size2) 2023 2022 2021 CoBE acknowl- edgement Foundational ABC training Enhanced ABC training Ethics training for leaders Employees and external work- force Employees and external work- force Employees in high-risk roles Executive population 106,000 106,000 15,000 200 98 99 98 97 99 93 97 90 99 99 82 70 1) Completion rates are calculated by dividing the number of individuals having completed training at the reporting year cut-off date with the number of individuals having been assigned the same training. 2) The (rounded) headcount of the respective target audience groups by year end of the current reporting year. The size of a group may change over time as deﬁnitions and scopes are revised. Employee perceptions (Survey results) Ethical and responsible business practices1) 2023 89 2022 88 2021 87 1) Scoring of aggregated employee responses to the statement "Ericsson shows a commitment to ethical and responsible business practices" measured on a scale of 0–100 with 100 being the most favorable result. Cradlepoint employees are not included in 2021 statistics. Vonage employees are not included. Compliance concerns reporting and corrective actions The table below shows the number of compliance concerns received, the number investigated, the number concluded in the reporting year which were found to be substantiated, and the number of open investigations at year-end. As the length of an investigation varies depending on case complexity, not all cases are concluded in the same year as they are reported. Hence, the number of substantiated cases and cases under investigation also includes cases received in prior reporting periods but which were concluded during the report- ing year. Many matters reported are not referred for investigation. These are often inquiries of a general nature or other matters which are not deemed to be related to misconduct or breaches of the CoBE. When applicable, these cases were referred directly to the relevant units to address in accordance with their processes. Reported, investigated and substantiated compliance concerns1) (No.) Concern intake and investigation Reported Not referred for investigation2) Referred for investigation Status at year end Substantiated3) Under investigation Reported concerns by category (No.) Fraud, corruption and regulatory breach Conﬂicts of interest Human resources Discrimination Human rights Operations Other4) Total 2023 2022 1,201 1,076 125 1,092 877 215 91 78 118 209 2023 2022 153 86 475 6 – 183 298 177 69 429 20 – 125 272 1,201 1,092 1) The process for categorizing compliance concerns underwent signiﬁcant transformation in 2022 such that comparative ﬁgures for 2021 are not available. 2) Cases received but not investigated as they pertained to inquiries of a general nature or other matters not deemed to be related to misconduct or breaches of the Code of Business Ethics. 3) Cases closed and concluded to be substantiated during the reporting year, some of which were reported in previous reporting years. 4) Includes reported concerns related to environmental sustainability, health and safety, as well as con- cerns which were assessed as not constituting compliance concerns, such as product quality issues, employees testing the Compliance Line, or comments of a general nature. When applicable, these cases were referred directly to the relevant units to address in accordance with their processes. Corrective and disciplinary actions by type1) (No.) Termination Demotion Written warning Verbal warning Resignation Other Total 2023 2022 2021 112 – 58 28 1 2 201 39 4 74 46 8 7 97 2 89 22 19 4 178 233 1) Actions taken as a result of substantiated breaches of Ericsson’s CoBE. Each action represents a unique individual, meaning the sum of actions shown in this table cannot be directly compared to the number of substantiated cases shown above, as each case may involve several individuals. An individ- ual may receive several corrective actions. In the above table, only the most severe action determining category classiﬁcation is counted. Sustainability and Corporate Responsibility report 2023 41 G3 Supply chain and responsible sourcing Ericsson’s supply chain Ericsson has a global supply chain with around 20,000 first-tier suppliers. About 2,000 of these make up more than 90% of the supplier spend, and around 200 suppliers of the total supplier base are providers of hardware to Ericsson’s production. The global electronics supply chain is long and complex. In simple terms, it begins with the extraction of natural resources used in electronics manufactur- ing, which are then sold and transported to smelters and refiners for processing. The refined materials are traded and exchanged, and subsequently used in the manufacturing of parts and components, which are assembled into finished products. Manufacturing and assembly of Ericsson’s electronic hardware takes place both at Ericsson’s own sites and at third-party electronic manufacturing services sites. In addition, a limited number of modules are manufactured by original/joint design manufacturing suppliers supporting specific market and business requirements. Ericsson’s supply hubs are regional distribution centers for logistics opera- tions to serve customer orders and customer projects efficiently with activities like the collection of deliveries from production units and suppliers, warehous- ing, co-packing, order configuration and transport optimization. Regional inbound (component) hubs consolidate material from component suppliers, and these are a central point of component supply to the production sites, creating resilience and flexibility in the inbound supply chain. Manufacturing sites and hubs (No.) Manufacturing sites Own sites Third-party sites Hubs Supply Component Share of production (%) 1) Own sites Outsourced 2023 2022 6 11 9 2 6 9 9 2 2023 2022 14 86 17 83 1) Calculated based on the number of units delivered in the reporting year. Shares ﬂuctuate over time due to factors such as demand forecasts and type of hardware that is p roduced. Impacts, risks and opportunities Ericsson contributes and is linked to several impacts through its business and supplier relationships. Material environmental impacts related to the upstream value chain are primarily greenhouse gas (GHG) emissions from resource extraction, manufacturing and transportation, use of natural resources and possible inclusion of banned or restricted substances in Ericsson’s hardware, as well as freshwater use in primarily resource extraction activities as well as in semiconductor manufacturing. More information on these impacts is available in notes E1 to E4. Manufacturing sites and supply chain hubs 1 20 4 15 16 18 17 3 11 13 9 6 22 21 7 14 10 8 2 5 19 12 Manufacturing sites Hubs Ericsson manufacturing site Third-party manufacturing site Supply Component Locations 1. Borås 2. Dallas 3. Dubai 4. Duisburg 5. Guadalajara 6. Hong Kong 7. Hsinchu City 8. Kuala Lumpur 9. Nanjing 10. Penang 11. Pune 12. São José dos Campos 13. Suzhou (2) 14. Tainan City 15. Tallinn 16. Tczew 17. Timisoara 18. Tiszaújváros 19. Tlaxcala 20. Venlo 21. Wuxi 22. Yancheng 42 Note G3, cont’d. Sustainability and Corporate Responsibility report 2023 For social factors, the main material impacts identified upstream in the supply chain relate to equal treatment and opportunities, occupational health and safety (OHS), freedom from discrimination, forced and child labor, substandard working conditions as well as the security of workers in the value chain. More information on these impacts is available in notes S2 and S3. Additionally, with a complex and global supply chain come risks of a part- ner's business conduct not being aligned to a company’s own values, principles and standards. Ericsson has identified material impacts relating to corruption and bribery in its upstream value chain. More information on this is available in note G2. Policies Ericsson’s Code of Conduct (CoC) for Business Partners is the foundation for the Company’s work with responsible sourcing. The CoC covers four main areas: anti-corruption and business ethics, human and labor rights, safe and healthy working conditions, and environmental management. In addition, and covering all these areas, there is a requirement on suppliers to have an estab- lished management system. Business partners must also ensure and monitor that their suppliers and subcontractors comply with the CoC, or other agreed equivalent standards. The CoC is based on the Responsible Business Alliance (RBA) Code of Conduct but also includes Ericsson-specific requirements and is part of standard-supplier contracts. It is available in several languages on the Company’s website. More detailed descriptions on the requirements in the CoC relating to identified material impacts are included in notes E1 to E4, S2 and S3 to this report. Alongside the CoC, specific environmental and OHS requirements on business partners and suppliers involved in certain activities with higher environmental impact or with higher risks to workers' health and safety are also part of relevant supplier contracts and can also be accessed through the Company’s website. Management approach Supplier segmentation and business continuity Ericsson segments its supplier base to efficiently manage and prioritize supplier relationship management activities, optimize value from the supplier base as well as manage risks. Suppliers are segmented into one of four categories based on a combination of the following four aspects: spend, risk, dependency and value. Suppliers in the top two categories are considered business critical. Ericsson strives to have dual supply sources to strengthen the supply chain resilience wherever possible. The company also invests in strategic buffers to further reduce the risk of disruptions. In addition, the Company monitors disruptive events in real time and offers suppliers to be visualized in the moni- toring process. In case such an event occurs, Ericsson will be notified of which suppliers may be impacted. The risks and potential severity are subsequently assessed, and based on supplier input about its impacts and internal insights into the supply chain, mitigation activities for the specific event will be enacted. The real-time monitoring can be extended to integrate a supplier’s business continuity plans, enabling additional granularity in the analysis of the supplier’s vulnerability. Responsible sourcing Within Ericsson’s sourcing organization, a dedicated unit is responsible for driving sustainability-related initiatives and with a focus on supplier alignment with environmental and OHS expectations, as well as adherence to the CoC in the supply chain. The scope of the Responsible Sourcing program mirrors the topics covered in the CoC. This work is aligned with the Sustainability and Corporate Responsibility strategy and is an integrated part of the supply chain strategy. Supplier adherence to standards and requirements is verified through two audit programs, one based on the CoC and the other on contract compliance. Due diligence and supplier screening Ericsson has a process for assessing its first-tier suppliers for risk of non- conformity with its CoC. A modular supplier sustainability risk assessment based on the supplier category's risk profile is triggered during the supplier onboarding process and for selected active suppliers. The scope of each assessment is predefined based on the type of products or services the supplier provides. Once a supplier has been selected for assessment, one or several self-assessment questionnaires covering environmental, OHS and human rights management are sent to the supplier for completion. The supplier shall also provide supporting documentation for its responses. Suppliers are subse- quently rated as having high, medium, or low risk, depending on how well they meet Ericsson’s criteria in the assessed area(s). Based on this rating, a recom- mendation to either approve, not approve , or approve the supplier with certain conditions to address gaps (or the equivalent recommendations in the case of an active supplier) will be issued. Monitoring Suppliers’ environmental performance and audit findings closure status are monitored via supplier performance cards together with other criteria such as quality and timely deliveries. Supplier performance evaluations are primarily done for top segmented suppliers as a recurrent activity to drive performance improvements. Ericsson has implemented a consequence management pro- cess for site services suppliers, where OHS incidents are most frequent. There is more information on this in note S2. Code of Conduct for Business Partner audits Suppliers in focus of this program are first-tier suppliers and primarily those making up the top 90% of Ericsson’s supplier spend. The inherent risk of these suppliers – based on factors such as purchase volume, country, type of service or product supplied and time since the last audit – is assessed and forms the basis for audit selection. The audits are performed by a contracted third-party audit firm and are done primarily on-site, with remote audits being an option for high-risk countries. The overall audit criteria is adherence to the CoC, with specific criteria including, but not being limited to, employment conditions such as working hours, wages and management dialogue, OHS matters such as accident and incident prevention, chemical handling as well as communication of requirements to sub-suppliers and contractors. Non-conformities are required to be addressed through time-specific correc- tive action plans. Since the CoC is part of standard supplier contracts, suppliers failing to adhere to it may have their contracts terminated. Ericsson does not conduct unannounced audits. Contract compliance audits Ericsson also conducts audits to verify compliance to contractual agree- ments between suppliers and Ericsson. These are performed by Ericsson’s internal auditors and follow the principles of ISO 9011 Guidelines for Auditing Management Systems. Besides the CoC, other criteria such as trade compli- ance, business continuity management and security are in the scope of these audits. Non-conformities are required to be addressed through time-specific corrective action plans. Responsible Business Alliance (RBA) Ericsson is a member of the RBA and is working to increase the share of participating suppliers, and to make further use of its audit programs and other assets. Training and awareness raising Ericsson offers free training through its website to its suppliers and business partners. Besides general training on the CoC, targeted content covering anti- corruption, human rights, conflict minerals and OHS is also available via the Company’s website. For suppliers in scope of the supplier engagement target, Ericsson offers training on climate change mitigation. A set of training modules has been created for all sourcing employees focus- ing on environmental requirements and how to guide suppliers to drive climate action. Direct access to the United Nation Global Compact and Sustainable Development Goals training academies is available to employees in the sourc- ing organization as well as to suppliers via Ericsson’s website. Conﬂict minerals due diligence Ericsson bases its approach on sourcing of minerals and metals on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. This process covers the metals tin, tantalum, tungsten and gold (3TGs), as well as cobalt, and from 2023 mica. As there are often several tiers of suppliers between Ericsson and smelters or refineries, the Company does not normally have a direct purchasing relation- ship with these. More information on this topic can be found in Ericsson’s annual Conflict Minerals report, available on the Company’s website. Sustainability and Corporate Responsibility report 2023 43 Note G3, cont’d. Grievance mechanism The Ericsson Compliance Line, available to internal as well external stakehold- ers, including suppliers and their employees, can be used to report concerns about violations of the CoC, policies, laws or regulations. See further informa- tion in note G2. Metrics1) Supplier audits Conducted audits (No.) Code of Conduct for Business Partner audits Contract Compliance audits 2023 123 19 2022 114 15 2021 124 24 Code of Conduct for Business Partners audits Contract Compliance audits (%) Audit ﬁndings 2) Suppliers with non-conformities Suppliers with critical non-conformities Corrective action rate 3) All non-conformities Critical non-conformities 2023 2022 (%) 85 1 79 100 97 6 73 63 Audit ﬁndings Suppliers with non-conformities Suppliers with critical non-conformities Corrective action rate All non-conformities Critical non-conformities 2023 2022 100 - 65 - 100 - 69 - Audit ﬁndings per category (2023) Audit ﬁndings per category (2023) (%) Access and transparency4) Employment conditions Environmental management Anti-corruption measures OHS management Sub-supplier communication5) Total All non- conformities Critical non- conformities (%) All non- conformities Critical non- conformities 0 42 4 3 48 3 100 - - - - 100 - 100 Code of Conduct for Business Partners Quality Management Systems Security Sourcing Business Continuity Management Other Total 36 20 9 9 7 19 100 - - - - - - - 1) See note O2 for an explanation on limitations regarding value chain reporting and disclosures. 2) Calculated as the number of audited suppliers with identiﬁed non-conformities /critical non-conformities divided by the total number of audited suppliers in the preceding 12-month period. 2022 data was based on ﬁndings in the preceding 24-month period due to a change in data collection processes. 3) Calculated as the number of non-conformities/critical non-conformities addressed and closed within 12 months from the time of identiﬁcation, divided by the total number of identiﬁed non-conformities/critical non-conformities in the same period. 2022 data was based on ﬁndings in the preceding 24-month period due to a change in data collection processes. The corrective action rates are calculated based on the rate at which ﬁndings identiﬁed in the reporting period have been addressed and closed during the same period. For this reason, ﬁndings identiﬁed late in the reporting period may not have been addressed and closed by the reporting year cut-off date which is December 31. 4) Access to facilities and documentation necessary to conduct the audit. 5) Communication of Ericsson's requirements, such as those in the CoC, to sub-suppliers where this is required. Conﬂict minerals due diligence Smelters and reﬁneries RMAP1) participation and conformity by minerals in scope2) 2023 (No.) Cobalt Gold Tantalum Tin Tungsten Total Identiﬁed Participating Conformant 84 186 43 112 62 487 47 111 34 69 38 299 36 95 34 63 37 265 Conformity rate (%) 3) 77 86 100 91 97 2022 (No.) Cobalt Gold Tantalum Tin Tungsten 89 Total Identiﬁed Participating Conformant 63 171 36 77 46 393 47 116 35 63 44 305 29 98 35 54 40 256 Conformity rate (%) 3) 62 84 100 86 91 84 1) Responsible Minerals Assurance Process 2) Numerical information presented here corresponds to information included in the most recent Conﬂict Minerals Report submitted to the US Securities and Exchange Commission for each respective year. 2022 data has been restated as a result of this. See note O3 for more information. 3) Out of RMAP participating smelters. 44 Sustainability and Corporate Responsibility report 2023 G4 Advocacy and policy inﬂuence Impacts, risks and opportunities The telecommunications sector in which Ericsson operates is highly regulated and increasingly politicized. National and transnational sector-specific policies affect the behavior and investment decision of service providers, which, in turn has implications on the services offered to consumers. Consequently, Ericsson’s policy and advocacy activities can have an indirect impact on people’s access to connectivity and the affordability of those services. Ericsson’s market is highly regulated, and its evolving technology is increas- ingly on the agenda of developing geopolitical alliances. The prominence of global open standards has enabled economies of scale, making mobile connec- tivity the fastest-ever scaling technology solution globally. Policy, regulation and new geopolitical alliances can significantly impact Ericsson’s addressable market and have an influence on its supply chain and research and develop- ment clusters. At the same time, engaging policymakers, either directly or via intermediary organizations, to influence policy outcomes must be conducted in a manner that enhances Ericsson’s reputation and mitigates corruption risks. Policies Ericsson’s Group Policy on Government and Policy Advocacy (GPA) states that, Ericsson needs to anticipate, analyze, manage and mitigate political, regula- tory, reputational and sensitive technology risks, drawing from several param- eters to so support its business objectives. It further articulates the Company’s commitment to conducting government and policy advocacy with transpar- ency, integrity and ethics. A more detailed Group Directive on Policy Advocacy and Interaction sets forth the binding requirements applicable to managing advocacy activities with public officials and industry representatives. These rules of engagement are mandatory for all GPA advocacy activities. Ericsson is a member of national and transnational trade associations relevant to its business and also participates in organizations with a more general industrial and business focus. Ericsson only participates in intermediary organi- zations that are aligned with the Company’s values and uses its position to try and maintain consistency on policy positions as they are developed. Ericsson does not contribute directly or indirectly to political parties or individual politicians, as stipulated by the Company’s Code of Business Ethics. Exempt from this policy is support of voluntary employee contributions permit- ted under local law and supported by public reporting regulations. Management approach Ericsson’s purpose and vision focuses on the power of mobile connectivity to deliver positive change, and the role that Ericsson will play in shaping that change. Its advocacy activities aim to achieve positive and sustainable long-term conditions for the Company and the broader information and com- munications technology sector. Accordingly, Ericsson acts as a trusted advisor, offering its expertise to policymakers to help deepen their understanding of the sector and its interplay across the economy in order to effectively achieve their policy objectives. Only employees trained and individually authorized may engage in policy advocacy activities. All material policy-influencing interactions with public officials are documented for internal audit purposes and declared according to local regulation and practices. Further, Ericsson has implemented a policy on gifts, entertainment and hospitality, which dictates rules of engagement toward public officials. Due diligence Ericsson only participates in trade and industry associations that share its ethical values. It does not engage in any advocacy efforts that would under- mine Ericsson’s commitment to ethical business practices. Any new or existing memberships due for renewal are subject to specific compliance review requirements and conditions. The same general principles apply when any employee participates in advocacy activities under the umbrella of any one of these associations. Climate policy alignment The Company’s memberships and involvement in multilateral industry organi- zations also cover climate-related advocacy efforts. It is central to Ericsson to only engage in partnerships that share the Company’s position on a science- based climate perspective, not conflicting with the Paris Agreement, and partnerships are evaluated on a case-by-case basis. Signiﬁcant policy topics Below is a summary of the most significant topics on which Ericsson is engaging with industry and policymakers, and the Company’s position on those topics. Theme Topic Objective Connectivity & Infrastructure Investment Connectivity agenda Deployment barriers Tax incentives Promoting ambitious objectives for transformational connectivity Speeding up the permission and lowering of site access costs Encouraging horizontal incentives for productivity enhancing capital expenditure Competition policy Evolving to sustainable market structures Open Innovation Digital Transformation, Trust & Inclusion Public funding Net neutrality Spectrum supply Spectrum pricing Global standards Open standards 6G research and collaboration Cross-border data ﬂows Artiﬁcial intelligence Privacy Demand-side stimulation Digital transformation Security & Cyber Resilience Security of deployed mobile networks Supply chain security Sustainability Carbon abatement Energy efﬁciency Amplifying private investment in areas of clear market failure Enabling network-based innovation Ensuring a future roadmap of spectrum Encouraging investment-friendly approaches Safeguarding scale economies through harmonized standards Promoting market-based approaches consistent with the World Trade Organization's Technical Barriers to Trade principles Catalyzing research collaboration across geographies Advocating for harmonized rules to promote trust and secure use of data Promoting a risk-based and proportionate approach that safeguards use of AI in networks Balancing personal data protection with ﬂexibility to innovate Encouraging digital skills and incentivizing economy-wide take-up of the digital transformation Promoting digitalization across industry verticals and public services Ensuring the Ericsson Security Trust Stack is used holistically Implementing Ericsson’s Security Reliability Model throughout the supply chain Incentivizing the use of connectivity-enabled digitalization to lower carbon emissions Promoting the use of new technologies to increase energy efﬁciency Sustainability and Corporate Responsibility report 2023 45 Note G4, cont’d. In addition to the areas listed above, Ericsson also advocates for: Digital inclusion Universal internet coverage and for digital inclusion through affordability and digital literacy efforts. The focus is on low-income countries and countries with low internet penetration. This is done through organizations such as The Broadband Commission for Sustainable Development and the International Telecommunication Union. Ericsson also advocates the use of 5G for broad- band connectivity in rural areas in developed countries, for example, in Europe. Environment and climate change mitigation Ericsson contributes to consultations and hearings on strategies and legislative proposals in the area of environment and climate. The Company’s approach is to advocate clear environmental legal requirements that are effective, based on science and that promote the environmental performance of the sector. Ericsson is also advocating for the benefits of digitalization and 5G in the transition to a Net Zero future. Human rights Ericsson is engaged in consultations for legislative proposals and policy devel- opments, and it supports legislation in line with international human rights standards that ensure companies across value chains are covered by the same responsibilities, in particular in relation to the right to freedom of expression and privacy. Memberships Ericsson is a member of several associations, which to varying degrees advocate and/or exercise influence over public policy development. Below are the most significant memberships maintained on a Group level. Memberships maintained by subsidiaries and local entities are not included, which is why the list should not be considered exhaustive. Ericsson is also a member of several chambers of commerce on a national level. – African Telecommunications Union – Alliance Française des Industries du Numérique – Association of Providers of Telecommunications and Value-Added Services (VATM) – Associazione Civita – Assonime – Australian Tech Council – Bitkom – BusinessEurope – CTIA The Wireless Association – Digital Connectivity Forum – Digital Europe – Digitales – European Roundtable for Industry – European Telecommunications Network Operators Association – Fondazione Astrid – Global Business Alliance – Groupe Speciale Mobile Association (GSMA) – Information Technology Institute – International Institute of Communications – Istituto per la Competitività – Näringslivets Internationella Råd – Official College of Telecommunication Engineers – Stockholms Handelskammare – Studieförbundet för Näringsliv och Samhälle – Svenska International Chamber of Commerce – Svenskt Näringsliv - Teknikföretagen – Sweden-India Business Council – Tech UK – Telecommunication Development Sector (ITU-D) – Telecommunications Industry Association – US Telecom – The Broadband Association 46 Sustainability and Corporate Responsibility report 2023 Section O – Other – Basis for preparation O1 Stakeholder engagement and materiality Stakeholder engagement Ericsson continuously engages with its stakeholders through different channels to understand their expectations, requirements and concerns about current and emerging environmental, social and governance (ESG) matters. The table below contains a non-exhaustive list of examples of stakeholder engagements taking place over the past year, and the main ESG-related topics and concerns raised by different stakeholder groups. Stakeholder group Examples of engagements Main topics and concerns raised Employees Customers – Employee surveys – Employee resource groups – Dialogues with union representatives –Training and awareness-raising initiatives – Individual customer meetings and dialogues – Customer ESG assessments – Joint research and development. Investors and analysts – Investor dialogues and Capital Markets Day – Analyst inquiries and meetings – ESG ratings and rankings Suppliers – Responsible Business Alliance – 1.5 °C Supply Chain Leaders – Supplier assessments and audits – Supplier training, seminars and workshops. Regulators and international institutions Academia and business Civil society, NGOs and other – Policy advocacy toward regulators – Partnerships with: - UNICEF/UNHCR/UN World Food Programme - UN B-tech Project - World Health Organization - ITU Broadband Commission for Sustainable Development. – Joint research and research funding – Development of technology curriculum – Participation in standardization bodies – Membership of industry associations – European CEO Alliance. – Participation in/partnerships with: - World-Wide Fund for Nature - Exponential Roadmap Initiative - Global Network Initiative - Shift Business Learning Program Materiality assessment During 2023, Ericsson undertook a materiality assessment to update its under- standing of its material sustainability-related impacts, risks and opportunities. The scope of the assessment was the operations of the Ericsson Group and its upstream and downstream value chain, with a focus on the electronics manufacturing supply chain when analyzing upstream impacts. The geograph- ical scope of the assessment was global, but with a focus on the countries and regions in which the company has a significant number of employees, suppliers and customers, also factoring in the Company’s presence in geographies with known heightened risks of human rights violations and substandard working conditions. The assessment was carried out in the following main phases: A. Definition of the universe of environment, social and governance (ESG) matters in scope of the assessment B. Initial assessment of impacts, risks and opportunities C. Validation with key internal stakeholders and subject matter experts D. Validation with selected external experts E. Review and approval by the Executive Team and Audit and Compliance Committee of the Board of Directors A. The universe of ESG matters assessed was based on matters found in ESG reporting frameworks, supplemented by input from benchmarking of mat- ters included in industry peers' and customers’ external ESG disclosures, as well as matters covered in the assessment methodologies of a select number of ESG rating agencies. – Business ethics and anti-corruption – Health, safety and well-being of workforce, including working in hybrid working models – Diversity and inclusion – Learning and development – Business ethics and anti-corruption – Portfolio energy performance and circularity – Product security and quality features – Role of industry and digitalization in society – Supplier management with a focus on labor rights and working conditions – Business ethics and anti-corruption – Corporate governance – Portfolio sustainability – Supplier management with a focus on labor rights and working conditions – Business ethics and anti-corruption – Health, safety and well-being of workforce – Labor rights and working conditions – Environmental and climate requirements – Conﬂict minerals, and materials and product traceability – Environmental and human rights impacts of ICT sector – Digital inclusion, education and connectivity – Humanitarian relief efforts – Radio waves and health. – Environmental impacts of ICT sector – Enablement effect of ICT in mitigating climate change – Radio waves and health. – Collective climate action – Protection of right to privacy and freedom of expression – Digital inclusion and education – Supplier management with a focus on labor rights and working conditions – Operating in conﬂict-affected and high-risk countries B. After scoping out matters with no apparent relation to Ericsson and its value chain, remaining matters were analyzed in more detail to identify actual and potential negative and positive impacts, as well as actual and potential risks and opportunities. Ericsson’s current understanding of impacts, risks and opportunities, based on the Company’s peer-reviewed research into the environmental impacts of its products and solutions, existing human rights due diligence processes, risk management framework, as well as ongoing stakeholder engagements, were incorporated in this phase of the assessment. Additional sources of information used included, but were not limited to, external scien- tific research, industry and non-governmental organization reports, third- party ESG risk intelligence tools, results of employee surveys, conducted supplier audits, internal risk assessments and information about cases reported via the Ericsson Compliance Line. Negative impacts were assessed based on their severity (scale, scope and irremediable character) and positive impacts were assessed based on their scale and scope. For potential impacts, the likelihood of the impact occurring was also considered. When assessing impacts downstream in the value chain, in relation to customers and end-users, impacts with a con- nection to Ericsson’s portfolio were considered. Impacts occurring within customers’ operations or value chains but with no or minimal connection to Ericsson’s products, solutions or technology were not considered relevant for the assessment. While numerical scales were used to quantify scale, scope and irremedi- ability in the initial stages of the assessment of all impacts, the thresholds applied for ultimately determining if a matter should be considered material or not were largely qualitative and involved varying degrees of subjective and professional judgement. Sustainability and Corporate Responsibility report 2023 47 Note O1, cont’d. Risks and opportunities were assessed based on their magnitude and likeli- hood of occurrence. Where relevant, existing conclusions and thresholds in Ericsson’s enterprise risk management process were factored into the assessment. C. The preliminary results were reviewed with internal subject matter experts and business representatives to both validate the assessment of material- ity, as well as to embed understanding of impacts, risks and opportunities across the Company. D. Subsequently, a not-for-profit organization with expertise in the area of human rights was consulted for a review of identified impacts related to human and labor rights. This review was intended to function as external subject matter expert input. While it is not an affected stakeholder, the organization had the opportunity to highlight impacts that affected stake- holders would expect to see analyzed and managed. E. The consolidated results were reviewed and approved by the Executive Team and the Audit and Compliance Committee of the Board of Directors. The results of the materiality assessment are presented below. The table shows where material impacts occur, or may occur, in the value chain and not where actions to manage impacts take place, which in most cases would be by Ericsson through its own operations. While the assessment scope included risks and opportunities, these will need to be further analyzed and incorporated into other business processes to ensure consistent treatment with other risk factors and to enable a more refined analysis of potential financial implications, going forward. More detailed descriptions of identified impacts, risks and opportuni- ties, as well as Ericsson’s policies and actions to manage these can be found in the topic-specific notes to this report. Changes in material matters compared with previous reporting periods The 2023 materiality assessment was done on a more granular level compared with previous assessments, meaning several of the matters presented below were previously part of broader topics assessed. This does not mean that their inherent significance has changed, only how they are presented in the list of material topics. Matters which were previously not considered material, or which were not included in previous assessments, but which are now included due to the full value chain being considered include: water resources, air pollu- tion, adequate housing, security of people, technology ethics, supplier relation- ships & payment terms, and responsible marketing. Material impacts, risks and opportunities Sustainability matters t n e m n o r i v n E l a i c o S e c n a n r e v o G Climate change and energy Air pollution Substances of concern and very high concern Water resources Natural resources and circularity Training & skills development Diversity & inclusion Gender equality and equal pay Discrimination & harassment Freedom of assembly & association Adequate wages & secure employment Working time Work-life balance Occupational health & safety Forced & child labor Adequate housing Freedom of expression & right to privacy Security of people Technology ethics Corporate citizenship & emergency response Digital education Socioeconomic impacts of ICT Corruption & bribery Anti-competitive behavior Supplier relationships & payment terms Data privacy & cybersecurity Political engagement & advocacy Responsible marketing Upstream (extended supply chain) Impact Own operations Downstream (customers and end-users) Potential risks and opportunities Details in note / section E1 E2 E2 E3 E4 S1 S1/G3 S1/G3 S1/G2/G3 S1/G3 S1/G3 S1/G3 S1/S2 S2/G3 S3/G3 S3/G3 S3 S3 S3 1) S4 S5 S5 G2 G2 – 2) Corp. Gov. report p. 19 G4 – 2) 1) In this year’s report Ericsson includes information about its position on responsible use of AI. Technology ethics in a wider context will be addressed in coming reports. 2) Matter not addressed in this year’s report. These will be addressed in coming reports. 48 Sustainability and Corporate Responsibility report 2023 O2 Reporting principles, scope and external assurance This Sustainability and Corporate Responsibility Report ("the report", "this report"), published on March 6, 2024, constitutes Ericsson’s annual statutory sustainability report and contains information about material environmental, social and governance (ESG) related impacts, risks and opportunities, as well as governance and policies, management approaches, metrics and targets relevant to these matters. A description of Ericsson’s strategy and business model can be found on pages 7-12, and a description of financial and non- financial risk factors on pages 105-119 of the Financial Report, which is also part of Ericsson’s Annual Report. Reporting principles and frameworks The report has been prepared in accordance with the Global Reporting Initiative (GRI) standards. Ericsson has, in the preparation of the report, applied reporting principles as prescribed in the standard GRI 1: Foundation (2021). The report has also been prepared in accordance with the UN Guiding Principles on Business and Human Rights reporting framework. The report also includes climate-related disclosures included in the rec- ommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD) as well as relevant disclosures in applicable Sustainability Accounting Standards Board (SASB) standards. Ericsson is also reporting on the core disclosures of the Stakeholder Capitalism Metrics developed and endorsed by the International Business Council and the World Economic Forum. As a supplement to the report, an ESG reporting reference index is published on the ESG section of the Investor Relations pages on Ericsson’s website. The index contains detailed references to applied reporting frameworks and standards and includes the GRI content index. Scope and boundaries Unless otherwise stated, the information and data provided pertain to the period January 1 to December 31. The report covers the Ericsson Group, which is the parent company Telefonaktiebolaget LM Ericsson and its subsidiaries as presented in note P8 to the parent company’s financial statements in the Financial Report. The report does not include environmental and social data related to associated companies or joint ventures. These constitute a limited share of the Group’s headcount and operations. In 2022, Ericsson acquired Vonage, now part of Business Area Global Communications Platform, and in 2020, Cradlepoint, now part of Business Area Enterprise Wireless Solutions. For a limited number of ESG disclosures, primarily people-related, these companies have not yet been fully consolidated into this report. At year-end 2023, these companies had a combined headcount of about 4,200 employees, equal to 4,2% of the Group’s total employee headcount. Where the scope of a disclosure excludes one or both of these companies, this is indicated in a footnote. As a general principle, baselines for Group ESG targets are recalculated when the effect of a merger, acquisition or divestment on the performance of a target key performance indicator is assessed as significant. In other cases, baselines or data pertaining to previous reporting periods are not restated. Information on restatements made in the reporting year can be found in note O3. The report contains disclosures related to the Company’s upstream and downstream value chain including suppliers, vendors, customers and other business partners. There are inherent uncertainties to the completeness, accuracy and verifiability of this information, as it relates to performance and activities that are beyond the Company’s direct influence and control. External assurance The report has been subject to assurance procedures by the Company’s statu- tory auditors in accordance with the assurance standard ISAE 3000. The report as a whole has been subject to limited assurance procedures. Additionally, information on GHG emissions in Scope 1, 2 and Scope 3 categories Business travel and Downstream transportation, presented in note E1, as well as infor- mation on the share of women per employee category, presented in note S1, have been subject to reasonable assurance procedures. The assurance report can be found on page 50. Related reporting and disclosures Ericsson publishes other ESG-related statements and reports on its website, such as the annual CDP Climate Change questionnaire response, a Modern Slavery and Human Trafficking Statement, and a Conflict Minerals Report. Sustainability and Corporate Responsibility report 2023 49 – Information in note E4 about waste generated in operations broken down by disposal method has been restated for the years 2022 and 2021 to align with emerging disclosure regulation. The total amount of waste generated has not been restated but the breakdown per recovery and disposal method is now presented with more granularity compared to previous years. – Information in note S1 about employees, new hires and turnover broken down by age groups has been restated for the years 2022 and 2021 to align with emerging disclosure regulation. Prior to 2023, the age brackets used were: under 25, 25-35, 36-45, 46-55 and over 55 years old. As of 2023, the brackets used are: under 30, 30-50 and over 50 years old. – Information in note S1 about the CEO to employee pay ratio for the years 2022 and 2021 has been restated to align with emerging disclosure regula- tion. Prior to 2023 the mean employee salary and mean total compensation was used to calculate this metric. As of 2023, the median employee salary and median total compensation is used to calculate this metric. – Information in note S2 about fatality and lost-time incident rates has been restated for the years 2022 and 2021 to align with emerging disclosure regu- lation. Prior to 2023 these rates were calculated using the assumed number of hours worked by 100 FTEs in a year (200,000) as the normalization factor. As of 2023 the normalization factor is the assumed number of hours worked by 500 FTEs which is 1,000,000 hours. – Information in note G3 about the number of smelters, their RMAP participa- tion and RMAP conformity status has been restated for the year 2022 to align with information presented in Ericsson’s Conflict Minerals Report filed with the US Securities and Exchange Commission. In previous years the information presented in the Sustainability and Corporate Responsibility Report reflected a snapshot of information available at the reporting year cut-off date, meaning the period covered was not the same as the period covered in the Conflict Minerals Report. O3 Restatements of information The following information in the Sustainability and Corporate Responsibility Report has been restated: – Information in note E1 about purchased non-renewable electricity has been restated for the years 2022 and 2021 to align with emerging disclosure regulation. The total amount of purchased non-renewable electricity has not been restated but is from 2023 presented with a breakdown on electric- ity from fossil sources and electricity from nuclear sources which was not included in previous years. – Information in note E1 about Scope 3 GHG emissions for the years 2022 and 2021 has been restated. In the process to validate Ericsson’s emis- sion reduction targets by the SBTi, emissions in the categories Upstream transportation, Downstream transportation, and Fuel- and energy-related activities were reclassified within the same three categories to align with the SBTi methodology, including a change in the application of well-to-wheel and tank-to-wheel emission factors. In short, this has meant an increase of emissions reported in the category Upstream transportation, and a decrease in emissions reported in the categories Downstream transportation and Fuel- and energy-related activities, compared to what was reported in previous years. In addition, emissions in the category Use of sold products and services for the year 2022 have been restated due the correction of an identified calculation error. The resulting changes are presented below. Consequently, total GHG emissions, the share of the value chain carbon footprint and emissions intensity broken down per scope for the years 2022 and 2021 reported in note E1 have also been restated. GHG emissions (metric tons) After restatements Prior to restatements 2022 2021 2022 2021 Fuel- and energy-related activities 36,600 23,200 77,700 79,000 Upstream transportation Downstream transportation Use of sold products and services 206,200 215,300 7,082 N/A 7,090 28,262,400 36,600 49,000 116,176 119,169 N/A 25,048,000 – Information in note E2 about other emissions to air has been restated for the years 2022 and 2021, as Ericsson has redefined the scope of this disclosure. The new scope is aligned to the boundaries of direct Scope 1 emissions as set forth by the GHG Protocol. Previously, the scope included indirect sources of emissions, including purchased energy at facilities, business travel, com- muting and transport. The resulting changes are presented below. Other emissions to air (metric tons) After restatements Prior to restatements NOx SOx Particle matters 2022 2021 49 61 12 54 63 13 2022 682 657 71 2021 645 694 77 50 Assurance report Sustainability and Corporate Responsibility report 2023 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 2023. The Company has defined the scope of the Sustainability Report on page 48 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 48 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 assurance engagement in accordance with ISAE 3000 (revised) 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 information consisting of GHG emissions in Scope 1, 2, and Scope 3 categories Business travel and Downstream transportation disclosed on page 15, as well as information on the share of women per employee category, disclosed on page 26 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 assur- ance engagement consists of making inquiries, primarily of persons responsible for the preparation of the Sustainability Report, and apply- ing 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 assur- ance 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 International Standard on Quality Management 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compli- ance 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 accord- ance 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 5 March 2024 Deloitte AB Thomas Strömberg Authorized Public Accountant Lennart Nordqvist Expert Member of FAR Sustainability and Corporate Responsibility report 2023 Glossary 51 Glossary 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. 4G Fourth generation mobile systems, also known as LTE. 5G The fifth generation of mobile systems. An evolution of 4G/LTE. ABC Anti-bribery and corruption. AI Artificial intelligence. The ability of a machine to perform a task commonly associated with intelligent beings. API Application programming interface. A software intermedi- ary for two or more computer programs to communicate with each other. Cloud native Software approach of building, deploying, and managing modern applications in cloud computing environments. CO2e Carbon dioxide equivalents. 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 corona- virus (SARS-CoV-2). Downstream in value chain / Downstream emissions Activities (and related greenhouse gas emissions) occur- ring post manufacturing/production, primarily associated with a product's distribution, use and end-of-life phases. ESG Environment, Social, and Governance. Refers to the three overarching themes for assessing non-financial factors which can impact a company’s value-creating abilities. GHG Greenhouse gases. Naturally occurring and man-made gases that trap heat in the atmosphere, contributing to the greenhouse effect warming the earth. GHG (Greenhouse gas) protocol A framework and de facto standard for measuring, accounting and managing greenhouse gas emissions. Global Reporting Initiative (GRI) Standards The first and most widely adopted global standards for sustainability reporting. GRI is an independent inter- national organization that has pioneered sustainability reporting since 1997. GSM Global System for Mobile Communications. Second generation mobile system. ICT Information and Communication Technology. IoT Internet of things. A common name for technologies enabling objects with built-in electronics and internet connection to be controlled or to exchange data over a network. ITU International Telecommunication Union. LCA Life-Cycle Assessment. An approach for calculating the environmental impact of a product or service across all its lifecycle phases, ranging from extraction of raw materials and manufacturing to usage and end-of-life management. LTE Long-Term Evolution. 4G; the evolutionary step of mobile technology beyond 3G HSPA, allowing data rate above 100 Mbps. LWI Lost workday incidents. An incident resulting in one or more lost workdays. Mobile broadband Wireless high-speed internet access using the HSPA, LTE, CDMA2000EV-DO and 5G technologies. Net Zero A state in which no net additions of greenhouse gases are released into the atmosphere. Organizations can achieve this primarily by reducing their emissions as well as using certain accepted carbon capture, removal and storage technologies to neutralize any unavoidable remaining emissions. Own Activities Cover GHG emissions in Scope 1, 2, and Scope 3 catego- ries Business Travel and Employee Commuting. SASB Sustainability Accounting Standards Board. An organiza- tion publishing sustainability reporting standards. Now part of the IFRS (International Financial Reporting Standards) Foundation. SBTi The Science Based Target initiative, A partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) that defines and promotes best practice in emissions reductions and net-zero targets in line with climate science, including providing a second opinion on the ambition level of targets set by corporates and other entities. Scope 1 Direct GHG emissions derived from assets/sources that are owned or controlled by an organization, typically through combustion of fossil fuels. Scope 2 Indirect GHG emissions derived from the energy purchased and consumed, but not generated by, an organization, typically from acquired electricity, heating and cooling. Scope 3 Other indirect GHG emissions which are a consequence of the activities of the company but are derived from sources not owned or controlled by the company. These include emissions occurring in the supply chain as well those occurring when customers use a company’s products and services. 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. TCFD Task force on Climate related Financial Disclosures. A framework for disclosing on an organization's strategies, targets and risk management approaches as regards climate change. The Paris Agreement A legally binding international treaty on climate change, adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris 2015. The Paris Agreement sets out a global framework to avoid dangerous climate change by limiting global warming to well below 2 °C and pursuing efforts to limit it to 1.5 °C. 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 United Nations Guiding Principles on Business and Human Rights. The companies' responsibility to protect and respect human rights are defined in the UN's guiding principles for business and human rights UNHCR RETS United Nations High Commissioner for Refugees – Refugee Emergency Telecommunications Sector. RETS is the mechanism through which UNHCR coordinates the communications technology response in emergencies. UNICEF United Nations children’s fund, established in 1946, and responsible for providing humanitarian and developmen- tal aid to children worldwide. Upstream in value chain / upstream emissions Activities (and related greenhouse gas emissions) occur- ring in an organization’s supply chain, including extraction of raw materials, manufacturing, assembly and distribu- tion of purchased products and components, and other acquired services. WEF World Economic Forum. WFP-led ETC Emergency Telecommunications Cluster led by World Food Programme (WFP). The terms “Ericsson”, “the Company”, “the Group”, “us”, “we”, and “our” all refer to Telefonaktiebolaget LM Ericsson and its subsidiaries. 52 More information Sustainability and Corporate Responsibility report 2023 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 For printed publications Contact details for ADR program Ericsson Annual Report 2023 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 For registered ADR Holders Deutsche Bank Shareholder Services American Stock Transfer & Trust Company Email: DB@amstock.com Toll-free number: +1 800 937 5449 Direct Dial: +1 718 921 8124 Project management Ericsson Investor Relations Design and production SAFIR Communication Photos of Board of Directors and Executive Team Glenn Røkeberg Per Myrehed Printing Larssons Offset 2024 Printed on Amber Graphic Order a hard copy of the Annual Report – online: https://www.ericsson.com/en/investors/financial-reports/order-annual-report Order a hard copy of the Annual Report – phone: Strömberg Distribution Phone: +46 8 449 88 16 DIC S W AN EC O L A B E L R O N Printed matter 3041 0298 About Ericsson Ericsson is a leading provider of mobile connectivity solutions to telecom operators as well as enterprises in various sectors. Together with our customers and partners in the ecosystem, we are leading the next wave of digitalization in society. We provide high-performance, differentiated and programmable networks and make advanced network capabilities available to developers around the world. Through world-leading research, we drive new standards and are instrumental in the development of the next-generation mobile communications infrastructure, software, and services. The Company has approximately 100,000 employees, and customers in around 180 countries. Ericsson is headquartered in Stockholm, Sweden. Our shares are listed on Nasdaq Stockholm and our American Depositary Shares (ADS) are listed on Nasdaq New York. Ericsson’s vision is a world where limitless connectivity improves lives, redefines business and pioneers a sustainable future. Telefonaktiebolaget LM Ericsson SE-164 83 Stockholm, Sweden Telephone +46 10 719 00 00 www.ericsson.com EN/LZT 138 2392 R1A © Telefonaktiebolaget LM Ericsson 2024

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