AAK AB

Driving progress on sustainability

AAK's sustainability work is implemented through existing structures to embed our commitments and targets and to manage risks and opportunities from plant to brand. Our work demonstrates the interconnection between our corporate governance model and our operational model – the House of Sustainability – in relation to the material topics defined in our materiality analysis. Together they represent the organizational model for driving progress and ensuring board and management accountability and oversight.

Our corporate governance model AAK's sustainability strategy
Our approach to sustainability is integrated at every level, starting with our internal operations and employees.

The main responsibility for AAK's sustainability strategy and management lies with the President of Global Sourcing & Trading and Sustainability, who is a part of AAK's Executive Committee. The Director of Sustainability reports to the President of Global Sourcing & Trading and Sustainability and leads the Global Sustainability Leadership Team across the different functional areas: operations, people, commercial development & innovation, reporting & compliance, IR & communications, and finance. This structure provides a holistic approach to our commitments and targets as defined in our operating model.

Board of Directors
The tasks of the Board are regulated in the Swedish Companies Act and AAK's Articles of Association. In addition, the work of the Board is regulated by the practices it adopts each year. AAK's Board of Directors has overall responsibility for the company's sustainability progress and performance. The Board of Directors is informed regularly about sustainability Issues, including climate-related performance and AAK's progress against set commitments, targets, risks, and opportunities. The Board of Directors also approves the Sustainability Report, materiality assessment results, and our policy commitments. Board members are informed about our sustainability approach and progress through regular update meetings.

We are reviewing Board and management oversight processes to further strengthen sustainability governance at AAK.

The performance of the Board is evaluated annually through a process that is initiated and managed by the Chairman of the Board. See the Annual Report for more details.

For more details regarding the Board's structure, composition and role, see the AAK Corporate Governance Report, part of the Annual Report.

Nomination and selection of the highest ­governance body
The owners and Chair of AAK are responsible for the nomination and selection of the highest governance body. The Chair also secures that conflicts of interest within the Board are prevented and mitigated. The chair of the Board is not a senior executive in the company.

Audit Committee
The Audit Committee deals with risk management evaluation and the integration of AAK Group ­procedures as well as monitoring and following up on policies and codes and their implementation throughout the organization. Instances of noncompliance with policies, codes, and corrective actions taken are presented to the Audit Committee when relevant.

Remuneration Committee
The main role of the Remuneration Committee is to assist and advise the Board on matters relating to the remuneration of the Board and senior management. This ensures that we can retain our executives and that AAK can attract the best talent in the market. In 2021, ESG targets became a qualifier for the Executive Committee's remuneration. For more information on our remuneration policies and the process for determining remuneration, see our Annual Report.

CEO and Group Management
The CEO and Group Management (Executive Committee) have operational responsibility for AAK's sustainability progress and performance. The responsibility for ESG-related commitments and targets is delegated from Board level down to Group Management level and further cascaded to management. Regular Executive Committee meetings are held to review progress and actions related to sustainability. These meetings are part of the regular Executive Committee meeting structure and not held separately.

Grievance Committee
The grievance committee is responsible for managing any potential breaches or violations of our respons­ible sourcing policy and supplier code of conduct. The committee consists of key sustainability team members, including the President of Global Sourcing & Trading and Sustainability, the Director of Sustainability, relevant sourcing and trading teams for different raw materials, and regional personnel who manage supply chain engagement.

Driving progress on sustainability

AAK's sustainability work is implemented through existing structures to embed our commitments and targets and to manage risks and opportunities from plant to brand. Our work demonstrates the interconnection between our corporate governance model and our operational model – the House of Sustainability – in relation to the material topics defined in our materiality analysis. Together they represent the organizational model for driving progress and ensuring board and management accountability and oversight.

Our corporate governance model AAK's sustainability strategy
Our approach to sustainability is integrated at every level, starting with our internal operations and employees.

The main responsibility for AAK's sustainability strategy and management lies with the President of Global Sourcing & Trading and Sustainability, who is a part of AAK's Executive Committee. The Director of Sustainability reports to the President of Global Sourcing & Trading and Sustainability and leads the Global Sustainability Leadership Team across the different functional areas: operations, people, commercial development & innovation, reporting & compliance, IR & communications, and finance. This structure provides a holistic approach to our commitments and targets as defined in our operating model.

Board of Directors
The tasks of the Board are regulated in the Swedish Companies Act and AAK's Articles of Association. In addition, the work of the Board is regulated by the practices it adopts each year. AAK's Board of Directors has overall responsibility for the company's sustainability progress and performance. The Board of Directors is informed regularly about sustainability Issues, including climate-related performance and AAK's progress against set commitments, targets, risks, and opportunities. The Board of Directors also approves the Sustainability Report, materiality assessment results, and our policy commitments. Board members are informed about our sustainability approach and progress through regular update meetings.

We are reviewing Board and management oversight processes to further strengthen sustainability governance at AAK.

The performance of the Board is evaluated annually through a process that is initiated and managed by the Chairman of the Board. See the Annual Report for more details.

For more details regarding the Board's structure, composition and role, see the AAK Corporate Governance Report, part of the Annual Report.

Nomination and selection of the highest ­governance body
The owners and Chair of AAK are responsible for the nomination and selection of the highest governance body. The Chair also secures that conflicts of interest within the Board are prevented and mitigated. The chair of the Board is not a senior executive in the company.

Audit Committee
The Audit Committee deals with risk management evaluation and the integration of AAK Group ­procedures as well as monitoring and following up on policies and codes and their implementation throughout the organization. Instances of noncompliance with policies, codes, and corrective actions taken are presented to the Audit Committee when relevant.

Remuneration Committee
The main role of the Remuneration Committee is to assist and advise the Board on matters relating to the remuneration of the Board and senior management. This ensures that we can retain our executives and that AAK can attract the best talent in the market. In 2021, ESG targets became a qualifier for the Executive Committee's remuneration. For more information on our remuneration policies and the process for determining remuneration, see our Annual Report.

CEO and Group Management
The CEO and Group Management (Executive Committee) have operational responsibility for AAK's sustainability progress and performance. The responsibility for ESG-related commitments and targets is delegated from Board level down to Group Management level and further cascaded to management. Regular Executive Committee meetings are held to review progress and actions related to sustainability. These meetings are part of the regular Executive Committee meeting structure and not held separately.

Grievance Committee
The grievance committee is responsible for managing any potential breaches or violations of our respons­ible sourcing policy and supplier code of conduct. The committee consists of key sustainability team members, including the President of Global Sourcing & Trading and Sustainability, the Director of Sustainability, relevant sourcing and trading teams for different raw materials, and regional personnel who manage supply chain engagement.

###### Sustainability governance

Driving progress on Sustainability

AAK's sustainability work is implemented via existing structures to embed our commitments and targets and manage risks and opportunities from plant to brand. Here we demonstrate the interconnection between our Corporate Governance model and our Operational model – the House of Sustainability – in connection to the material topics, defined in our materiality analysis. Together they represent the organizational setup to drive progress and ensure board and management responsibility and oversight.

###### The Corporate Governance Model

The Board of Directors
AAK's Board of Directors has the overall responsibility for the company's sustainability progress and performance. The Board of Directors is informed regularly on sustainability, including climate-related performance, and AAK's progress against set commitments, targets, risks, and opportunities. The Board of Directors also approves the Sustainability Report. Board members are educated about our sustainabilty approach and progress in the regular update meetings. Formal training is planned for 2023.

The performance of the board is evaluated annually through a systematic process. The evaluation process is initiated and managed by the Chairman of the board.

###### Nomination and selection of the highest ­governance body
The owners and the Chair of AAK are responsible for the nomination and selection of the highest gover­ nance body. The Chair also secures that conflicts of interest within the Board are prevented and mitigated.

###### The Audit Committee
The Audit Committee deals with risk management evaluation, the integration of AAK Group procedures as well as with monitoring and following up on policies and codes and their implementation in the organization. Instances of non-compliance with policies, codes, and corrective actions taken are presented to the Audit Committee when relevant.

###### The Remuneration Committee
The main role of the Remuneration Committee is to assist and advise the Board on matters relating to the remuneration of the Board and senior management. This ensures that we can retain our executives and that AAK can attract the best talent in the market. In 2021, ESG targets became a qualifier for the Executive Committee's remuneration.

###### CEO and Group Management
The CEO and Group Management (Executive Com­ mittee) has the operational responsibility for AAK's ­sustainability progress and performance. The responsibility for ESG related commitments and targets is ­delegated from Board-level down to Group Management level and further cascaded to the management of the organization. Regular Executive Committee meetings are held to review progress and actions related to sustainability.

###### Strategy & Sustainability
Sustainability at AAK is truly embedded and integrated

Strategy, governance and targets

across the business, the regions and the different functions that have a role to play to deliver on our sustainability commitments that support our purpose Making Better Happen. This is also reflected in our model for sustainability governance. The main responsibility for AAK's sustainability strategy and management is led by the President Global Sourcing & Trading and Sustainability, who is a part of AAK's Executive Committee. The Director of Sustainability reports to this role and heads the sustainability leadership team across the different functional areas; of operations, people, solutions, reporting & compliance, and finance. This updated structure truly embeds sustainability across functions and provides a holistic approach to our commitments and targets as defined in our operating model.

AAK's sustainability management framework has three key parts:

- AAK's sustainability priorities and commitments, which have been defined based on a materiality assessment.

- Sustainability goals and performance indicators to measure and drive progress.

- The House of Sustainability, which is our framework to drive progress to deliver on our sustainability commitments.

###### Evaluating our governance approach
Overall, the effectiveness of our current governance approach has proven instrumental in driving progress, supported by our framework – the House of ­Sustainability. However, during 2021 AAK identified a key opportunity to strengthen the corporate ­compliance control program. During 2022 there has been focus on this and the risk council as a supporting key function. Going forward, ESG related matters are to be further embedded in the risk council to improve capacity and capability to assess risk and drive positive impact even further.

###### Sustainability governance\n\n Driving progress on Sustainability\n\nAAK's sustainability work is implemented via existing structures to embed our commitments and targets and manage risks and opportunities from plant to brand. Here we demonstrate the interconnection between our Corporate Governance model and our Operational model – the House of Sustainability – in connection to the material topics, defined in our materiality analysis. Together they represent the organizational setup to drive progress and ensure board and management responsibility and oversight.\n\n###### The Corporate Governance Model\n\n The Board of Directors\nAAK's Board of Directors has the overall responsibility for the company's sustainability progress and performance. The Board of Directors is informed regularly on sustainability, including climate-related performance, and AAK's progress against set commitments, targets, risks, and opportunities. The Board of Directors also approves the Sustainability Report. Board members are educated about our sustainabilty approach and progress in the regular update meetings. Formal training is planned for 2023.\n\nThe performance of the board is evaluated annually through a systematic process. The evaluation process is initiated and managed by the Chairman of the board.\n\n###### Nomination and selection of the highest ­governance body\nThe owners and the Chair of AAK are responsible for the nomination and selection of the highest gover­\nnance body. The Chair also secures that conflicts of\ninterest within the Board are prevented and mitigated.\n\n###### The Audit Committee\nThe Audit Committee deals with risk management\nevaluation, the integration of AAK Group procedures as\nwell as with monitoring and following up on policies\nand codes and their implementation in the organization. Instances of non-compliance with policies, codes,\nand corrective actions taken are presented to the Audit\nCommittee when relevant.\n\n###### The Remuneration Committee\nThe main role of the Remuneration Committee is to\nassist and advise the Board on matters relating to the\nremuneration of the Board and senior management.\nThis ensures that we can retain our executives and\nthat AAK can attract the best talent in the market. In\n2021, ESG targets became a qualifier for the Executive\nCommittee's remuneration.\n\n###### CEO and Group Management\nThe CEO and Group Management (Executive Com­\nmittee) has the operational responsibility for AAK's\n­sustainability progress and performance. The responsibility for ESG related commitments and targets is\n­delegated from Board-level down to Group Management level and further cascaded to the management\nof the organization. Regular Executive Committee\nmeetings are held to review progress and actions\nrelated to sustainability.\n\n###### Strategy & Sustainability\nSustainability at AAK is truly embedded and integrated\n\nStrategy, governance and targets\n\nacross the business, the regions and the different\nfunctions that have a role to play to deliver on our\nsustainability commitments that support our purpose\nMaking Better Happen. This is also reflected in our\nmodel for sustainability governance. The main responsibility for AAK's sustainability strategy and management is led by the President Global Sourcing & Trading\nand Sustainability, who is a part of AAK's Executive\nCommittee. The Director of Sustainability reports to\nthis role and heads the sustainability leadership team\nacross the different functional areas; of operations,\npeople, solutions, reporting & compliance, and finance.\nThis updated structure truly embeds sustainability\nacross functions and provides a holistic approach\nto our commitments and targets as defined in our\noperating model.\n\nAAK's sustainability management framework has three\nkey parts:\n\n- AAK's sustainability priorities and commitments,\nwhich have been defined based on a materiality\nassessment.\n\n- Sustainability goals and performance indicators to\nmeasure and drive progress.\n\n- The House of Sustainability, which is our framework\nto drive progress to deliver on our sustainability\ncommitments.\n\n###### Evaluating our governance approach\nOverall, the effectiveness of our current governance approach has proven instrumental in driving\nprogress, supported by our framework – the House\nof ­Sustainability. However, during 2021 AAK identified a key opportunity to strengthen the corporate\n­compliance control program. During 2022 there has\nbeen focus on this and the risk council as a supporting\nkey function. Going forward, ESG related matters are\nto be further embedded in the risk council to improve\ncapacity and capability to assess risk and drive positive\nimpact even further.

Describe the process(es) your organization has in place to ensure that your engagement activities are consistent with your overall climate change strategy[…]Our House of Sustainability helps us to prioritize our actions and live up to our ambitions and commitments. It has a strong connection to those of the UN Sustainable Development Goals that are critical for our business, and to our ambition of fulfilling the Paris Agreement. The framework is supported by a clear structure for governance and accountability, based on three focus areas: Better Sourcing, Better Operations, and Better Solutions.
Our overall ambition is to manage ESG risks and create a positive sustainability impact that goes beyond the scale of our operations and value chain. Each year, we engage with key stakeholders and review upcoming legislation to understand what is important and to ensure we have the right level of ambition.
Each focus area includes three commitments followed by ambitions that demonstrate how we prioritize our activities for sustainable development. Our commitments are aligned with our most material topics and the SDGs to make sure we drive progress and manage both risks and opportunities.

Does your organization have a public commitment or position statement to conduct your engagement activities in line with the goals of the Paris Agreement?[…]No, and we do not plan to have one in the next two years