SKF Care – policies and practices

BeyondZeroSKFCare

Business Care

Environmental Care

Employee Care

Community Care

Drivers•Profitability

•Quality

•Innovation

•Speed

•Sustainability

Values •High ethics

•Empowerment

•Openness

•Teamwork

SKF Care – policies and practices

SKF’s missionTo be the preferred company...

for our customers, distributors and suppliers:

delivering industry-leading, high value products, services and knowledge-engineered solutions;

for our employees:

creating a satisfying work environment where efforts are recognized, ideas valued, and individual rights respected;

for our shareholders:

delivering shareholder value through sustainable earnings growth.

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SKF and sustainability

It is the minimum requirement from our stakeholders that we are accountable for the social and environmental impact of our actions, whilst continuously delivering excellent and sustainable financial performance.

Our approach to sustaining growth while meeting envi-ronmental and social challenges is to work determinedly to integrate the long-term sustainable development approach into our business practices and processes, as well as to the products and solutions we offer to the market and industry.

SKF Care – defining Sustainability in SKF and turning it into practical actions

SKF Care defines our approach. It incorporates four funda-mental cornerstones: business, the environment, employees and the community which serve as critical factors by which we sustain our success and growth over the long-term.

BeyondZeroSKFCare

Business Care

Environmental Care

Employee Care

Community Care

• Business Care is built on a clear and dedicated custom-er focus and on delivering a strong, sustainable, financial performance and the right returns for shareholders. These results should be achieved in accordance with the highest standards of ethical behaviour.

• Environmental Care focuses on the Group’s responsi-bility to continually strive to reduce the negative impact on the environment from our own and our suppliers op-erations. SKF BeyondZero combines this with the strat-egy to improve customers’ environmental performance through products, solutions and services that improve energy efficiency and reduce environmental impact. These are defined, measured and verified through inclu-sion in the SKF BeyondZero portfolio.

• Employee Care assures a safe working environment and promotes the health, education and wellbeing of our employees.

• Finally, Community Care defines our intention to make positive contributions to the communities in which we operate.

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SKF has participated in the Global Compact since September 2006. This means that SKF not only commits to the defined Ten Principles in the areas of human rights, labour, environment and anti-corruption, but also commits to communicate its progress accountably and transparently via its annual Communication on Progress report – which is our annual report.

United Nations Global Compact

SKF endorses and works to adhere to the OECD Guidelines for Multinational Compa-nies. By doing this SKF commits to conducting business responsibly in a global context consistent with applicable laws and internationally recognized standards.

OECD Guidelinesfor multinationals

SKF has endorsed the ICC Charter since 1992 and consequently apply its principles in all its business activities.

As required by the ICC Charter, SKF applies a precautionary approach to the provision and calculations of products and services.

ICC CharterFor sustainable development

SKF adheres to the ILO Declaration on Fundamental Principles and Rights at Work. By doing so SKF is committed to uphold basic human values – vital to our social and economic lives. The four fundamental principles for rights at work are:

• Freedom of association and right to collective bargaining• Elimination of all forms of forced or compulsory labour• Effective abolition of child labour• Elimination of discrimination

ILO DeclarationConcerning multinational companies

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External principles and charters

United Nations Global Compact

SKF endorses both the Global Compact and the Universal Declaration of Human Rights. The Global Compact is an international voluntary initiative instituted by the United Nations to realize the vision of having a more sustainable and inclusive global economy. Both the private and public sectors are encouraged to work together to identify and implement solutions to the challenges of globalization.

SKF has participated in the Global Compact since Sep-tember 2006. As a participating company, SKF not only commits to the defined ten principles on human rights, labour, environment and anti-corruption, but also to com-municate its progress accountably and transparently via our annual report.

SKF is also a signatory to the Caring for Climate initiative driven by the Global Compact and aimed towards promoting the role of business in climate change mitigation.

Furthermore, SKF adheres to ILO’s Declaration concider-ing multinational companies, and works to adhere to the OECD Guidelines for Multionational Enterprices.

Business Charter for Sustainable Development by ICC

More than 20 years ago, the International Chamber of Commerce (ICC) developed the Business Charter for Sustainable Development. The objective is to encourage business organizations and enterprises to take action which combats the increasing scarcity of natural resources and deterioration of the environment.

Sixteen principles for environmental management were defined. By endorsing the ICC Charter, companies are required to apply these principles.

To date, more than 2,300 companies have signed up to the Charter and SKF was one of the first companies to commit itself to the principles. As required by the ICC Charter, we apply a precautionary approach to the provision of products and services. Regular assessment of environmental risks and programmes for preventive action are a feature of our environmental management system.

Social standards benchmarkSKF has, on numerous occasions, been recognized for high social standards by external assessments. Improving social standards goes a long way back in our history, but in 2002 our Code of Conduct was written to formally support what we strive for. Social Accountability International is used as an external benchmark when assessing our own operations and our suppliers.

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Implementation of the SKF Code of ConductAll employees have an obligation to follow the Code of Conduct and no one in the organi-zation has the mandate to authorize exceptions from the Code of Conduct.

It is the responsibility of each manager within the SKF organization to ensure that employees are fully informed about the Group’s Code of Conduct and to ensure that this Code is implemented and followed. Managers should behave in such a way that their actions provide an example of the Code of Conduct in action.

Group Management will regularly supervise the observance of the Code of Conduct.

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SKF Code of Conduct

Responsibility towards customers, distributors and suppliers

To gain and maintain business by continuous development and research and to be able to provide products, services and solutions that meet customers’ expectations regarding quality, safety and environmental care, while always applying the highest standards of business ethics.

Responsibility towards employees

To respect employees and their rights, to offer safe and good working conditions, to offer non-discriminatory conditions and to continuously develop skills and compe-tencies to enable the individual’s satisfaction and career possibilities.

Responsibility towards society

To manage the business as a responsible member of society, showing respect for laws, customs and needs of the different countries where we are present, as well as respecting the protection of internationally proclaimed human rights.

The aim of our environmental and social responsibility initiatives is to actively contribute to a sustainable development.

Responsibility towards shareholders

To protect the shareholders’ investments and strive for a sustainable and improving return.

Code of Conduct auditingSKF’s internal auditing of compliance with the Code of Conduct at its units is integrated into the ISO 14001/OHSAS 18001 audit process, and units were inspected at a two-yearly interval by corporate audit teams. In 2008 the audit process was improved by introducing a non-financial risk assessment. This incorporates human rights principles, ethics, environmental issues plus health and safety risks. The objective is to vary the audit’s frequency according to risk, putting more focus on high risk (such as newly acquired units), and less on long-established units that have shown a good perfor-mance. The nominal audit frequency remains two-yearly, but may vary from annually to once every three years, depending on the assessed risk.

In over 130 countries and across our entire organization, SKF strives to do business as economically, socially and responsibly as possible. The SKF Code of Conduct highlights how we apply our core values – high ethics, empowerment, openness and teamwork – across four areas of responsibility to our stakers.

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SKF’s first environmental policy was issued in 1989. The policy is reviewed regularly and describes the company’s commitment to both short- and long-term contributions to protecting the environment and was updated in 1994, 1999 and 2012. The policy was also revised in 2001 to increase the emphasis on health and safety. SKF’s Environmental, Health and Safety Policy describes the company’s commitment to both short- and long-term contributions to protecting the environment, as well as providing a safe working en-vironment for employees.

The minimum requirement is for laws and regulations to be upheld in relation to envi-ronmental, health and safety matters. Nonetheless, the policy also requires SKF’s units to take these vital issues into consideration during all business activities and decision making.

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Environment Health and Safety Policy

The SKF Group is a global supplier of products, solutions and services within rolling bearings, seals, mechatronic and lubrication systems. Sustainability is a strategic driver for the Group, defined as SKF Care, including Business, Environmental, Employee and Community Care.

The SKF Group shall continually improve EHS perfor-mance through the prevention of work place accidents and pollution, the promotion of employee health and well being and the reduction of environmental impacts, including those from energy consumption and use.

In order to meet these commitments, all SKF units shall:1 ensure that top priority is always given to the health

and safety of all employees.2 consider applicable laws, regulations and other

commitments to which SKF subscribes as minimum requirements.

3 proactively assess health and safety risks, environmental and energy impacts and systematically define, document and implement improvement plans.

4 provide well designed and attractive work places and facilities.

5 utilize best practice EHS related technology and man-agement to improve EHS performance through the purchase and design of efficient equipment and services and the adoption of improved organizational approaches.

6 develop and offer products and services which provide customer value in terms of improved EHS performance throughout the complete life cycle.

7 require suppliers and sub-contractors to adopt the principles of this policy.

8 define objectives and targets and provide the resources, information, training and management attention needed to achieve these and to comply with this policy.

9 ensure that EHS performance and compliance to this policy is monitored, documented and communicated in a clear and transparent way towards employees, authorities and other stakeholders.

10 ensure that EHS impacts are analysed for all business decisions.

This Group Policy shall be considered as a source of signifi-cant and long term competitive advantage for the SKF Group. All SKF employees have a responsibility to act upon this Group Policy.

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Delivering value to our customers in the most effective and efficient ways possible is fundamental to us. The continual support, trust, and loyalty granted by our customers are what made us successful over the years. We gain the confidence with our customers by offering better products and solutions, which in turn help to improve their operational or product performances.

This is the essence of Business Care.

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Business Care

Business Care encompasses the development of sharehold-er value, delivering high quality products and services to customers, ethical business conduct, responsible demand chain and environmental technology development. SKF’s overall financial objective is to create value for its shareholders.

For more information on the many ways in which the Group works to achieve these objectives please refer to SKF’s annual report.In parallel to defining what the busi-ness shall deliver – to customers, shareholders and other stakeholders. Business Care also defines the way in which these these objectives must be delivered.

Business care requires that business is always conducted in a highly ethical way, where all parties are treated fairly, with respect and in full accordance with applicable laws and business norms. These ethical requirements are set out in SKF’s code of conduct and related policies and following section covers the processes in place to enforce SKF’s code of conduct and other Group-defined policies at SKF and with its business partners.

Business ethicsBesides the SKF Code of Conduct the SKF Group Antitrust Policy, the SKF Group Anti-Corruption and Anti-Fraud Poli-cy and the SKF Group Policy on the Use of Gifts and other Favours to Promote Business Contacts and Relationships are in place to promote free and fair trade as well as to en-dorse honesty and integrity in business relations. All poli-cies are governed by the legal department.

SKF’s Anti-fraud and Anti-corruption programme seeks to eliminate the occurance of both fraud and corruption in the Group. It consists of policies and instructions, risk as-sessment on local unit level, training and awarness crea-tion as well as audits, Fraud risk assessments are carried out annually by Group Audit. These are based on the cor-ruption index issued by Transparency International as well as other internally determined fraud risk parameters. The fraud risk assessment is mainly used for determining the legal units to be audited.

SKF’s antitrust compliance programme seeks to first and foremost create awareness on antitrust and the implication non-compliances to antitrust can have, both due to legal action and reputation. Based on SKF’s antitrust policy, training in the forms of e-learnings and classroom training is made available to the Group by SKF’s legal and compli-ance department. Pricing audits are also carried out using a risk based approach. The progress of SKF’s business eth-ics programme is reported to SKF executive management team via the Senior Vice President of Group Legal and Sustainability.

For any issue related to business conduct or fraud, the Code of Conduct helpline is an internal whistle blowing function made possible to use when traditional ways of es-calation cannot be used. All allegations and complaints submitted are taken seriously. Assessments and investiga-tions are carried out immediately. For more significant cas-es, external auditors are assigned to the investigation.

If cases of fraud occur, these are disclosed in our annual reports after investigations have been closed.

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Responsible sourcingAs a global company with manufacturing and sales operations across the world, we rely on our suppliers to enable us to deliver quality products to our customers on time. We also expect and require that our suppliers understand and act in accordance with our code of conduct.

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Responsible sourcing

To ensure a responsible sourcing and demand chain, SKF has taken a number of steps in recent years to ensure that suppliers are aware of SKF’s Code of Conduct. SKF’s Code of Conduct for Suppliers and Sub-contractors is part of SKF’s general conditions of purchase as well as supplier re-quirements being defined in the SKF Quality Standard for Suppliers. By adhering to this standard, suppliers confirm the adoption of SKF’s Code of Conduct, Environment, Health and Safety and the Zero Defects concepts.

Major suppliers are also expected to develop manage-ment systems according to international standards ISO 14001 (Environment) and OHSAS 18001 (Occupational Health and Safety). Since 2006, major suppliers are also required to issue their own code of conduct in line with SKF’s.

SKF has a number of tools and procedures to support the progress of responsibility among suppliers, these are:

• The Supplier Quality Audit system, to ensure that the Code of Conduct and environmental, health and safety aspects are regularly evaluated at on-site audits for major suppliers, along with other critical aspects.

• Specific requirements related to energy management and carbon dioxide emissions defined for energy inten-sive suppliers.

• A risk assessment process which allows targeted audit-ing of higher risk suppliers from SKF’s complete supplier base (larger as well as smaller suppliers). The process ranks the risk of environmental or human rights issues based on variables such as location, organization, size and manufacturing/supply processes.

• SKF use various methods to assess supplier and sub-contractor performance in these areas. The adherence to the SKF Code of Conduct for Suppliers and Sub-con-tractors must primarily be based on trust, but SKF does, from time to time, perform audits (both announced and unannounced), requests supplier self-assessments and regular information or data related to supplier and sub-contractor performance.

• If a supplier or sub-contractor deviates from the require-ments of the Code, appropriate corrective and preventa-tive action has to be taken.

SKF’s Responsible Sourcing Committee is managing and communicating the progress and finding to SKF’s executive management team. Chairman of the committee is SKF’s Senior Vice President, Group Purchasing. The committee has the authority to take immediate action when deviations from the Code of Conduct are identified at our suppliers.

Please read about the progress of SKF’s responsible sourcing programme in the latest annual report and at skf.com.

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Designed for environmentFirstly, we design products that have a specific improved environmental performance in and of themselves when applied. A good example is the SKF Energy Efficient (E2) bearing family, for which we received the 2009 Swedish Innovation Award and which offers a minimum of a 30% reduction in friction compared to conventional bearings, translating directly to energy savings for customers.

– It is designed to bring environmental benefits.

Electrical motor with SKF E2 deep groove ball bearing

Environmental benefits*• Reduced energy use• Reduced CO2 emissions• Reduced waste associated with maintenance/

replacement

* Compared to SKF standard bearings, in specific light-to-medium load applications.

Applied for environmentSecondly, we apply knowledge engineering solutions that enable customer technologies with reduced envir-onmental impact – such as our solutions for the wind industry or solutions developed for vehicle automatic stop/start systems.

Stop/start turns off the engine when the vehicle stops at a red light or slows down in congested traffic situations, then restarts the engine quickly and silently when the driver releases the brake or engages a gear. An integral component of stop/start is the SKF Rotor Positioning Bearing.

In dense urban traffic, stop/start can reduce fuel consumption and CO2 emissions up to 15%, compared to a car without stop/start. The SKF Rotor Positioning Bearing is applied to enable environmental benefit.

SKF Rotor Positioning Bearing

Environmental benefits• Reduced CO2 emission• Increased fuel economy• Reduced system noise

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SKF BeyondZero

Working proactively to protect our ecosystem is not only a responsibility; it has created an important business oppor-tunity. Simultaneously addressing our environmental re-sponsibilities as a consumer and the significant opportuni-ties we have to reduce our customers’ environmental impact is something we call SKF BeyondZero. It consists of two simultaneous goals:

• To reduce the negative environmental impact from our operations. Read more about how we take action to reduce environmental impact from our own operation in the section Environmental Care on pages 14–25.

• To innovate and offer new technologies, products and services with enhanced environmental performance characteristics. In order to quantify, drive and communicate the positive side of SKF BeyondZero, we have developed the SKF BeyondZero port-folio, through which we offer products, services and solutions that bring significant environmental benefits to our customers.

The SKF BeyondZero portfolioThe SKF BeyondZero portfolio was launched in connection with the announcement that SKF had joined the WWF Climate Savers programme in London in May of 2012. The SKF BeyondZero portfolio was created from a customer perspective. It includes products and solutions from SKF which bring significant environmental benefits to our customers.

Solutions within the SKF BeyondZero portfolio must provide significant environmental benefits without ser-ious environmental trade-offs, from a life cycle perspective.

They need to address one or more defined environmental challenges, such as, climate change, natural resource use and the avoidance of various types of environmental con-tamination. This can be done in one of two ways.

The solutions can be either “Designed for environ, or, they can be “Applied for environment”, please refer to the examples on page 14.

SKF’s complete business within the renewable energy industry, as well as SKF’s emerging business in the full electric vehicle industry is included in the SKF BeyondZero portfolio under the “Applied for environment” category. These industries are included because it is widely acknowl-edged that they are technologically critical to reducing fossil fuel use and therefore addressing climate change. The benefits are derived from a comparison of the environ-mental performance of SKF’s solution to that of a defined baseline.

The portfolio continues to grow with the inclusion of new solutions and specific segments, the development of new customer solutions and by establishing more knowledge on how SKF contributes to reducing resource use, reusing capital equipent and recycling materials.

Once a solution is in the portfolio, the revenue from this solution will be included in the total SKF BeyondZero port-folio annual revenue reporting. Where applicable, the avoided greenhouse gas emissions enabled by the SKF so-lution will also be established and reported.

The SKF BeyondZero portfolio revenue is part of SKF’s climate strategy. In order to assure the accuracy and cred-ibility of the portfolio, the general approach, process and reported results have been reviewed by our external auditors.

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Services

Bearings and units

Seals

Mechatronics

Lubrication systems

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SKF’s products and servicesHealth and safety, marketing and communication

Health and safety effects are also critical in the provision of our products and services. The effects are taken into con-sideration when developing new products. For certain industries such as aerospace, automotive and rail, we have to meet stringent industry and customer requirements for quality and product safety.

Our products are subject to regular customer and third party certification audits as well as numerous laboratory and field tests, meeting various industries’ standards such as ISO/TS 16949, IRIS, and AS 9100. Safety information and procedures in handling our products are detailed and documented in various ways such as in the SKF Bearing Maintenance Handbook, provided to customers not only for safety reasons, but also for reaching optimum product performance.

Products and solutions – marketing and communications

To ensure trustworthiness and credibility, we have a Group Communication Policy covering our responsibility to provide consistent, factual information to stakeholders.

Specific communication instructions relating to advertising and publicity, crisis communication, marketing communi-cation and sponsorship, are available via the intranet. All information from the SKF Group, and our acquired brands, must conform to local laws and regulations, as well as gen-erally accepted ethical and cultural standards.

As required by the ICC Charter, we apply a precautionary approach to the provision of products and services. Apply-ing this precautionary approach also means that calcula-tions and technical claims made regarding product or operational performance shall be based on conservative assumptions.

In addition to the Group Communication Policy and the specific communication instructions, there are the SKF Group Trademark Policy, the SKF Branding Policy and the Internet Policy. All SKF operations are subject to the SKF Brand Identity audit, conducted at the same time as the internal audit on ISO 14001, ISO 18001 and OHSAS 18001 and SKF Code of Conduct.

The SKF brand is one of our most important assets and the goals are to strengthen the image of the company as a top-quality brand, and to ensure that the brand represents not only SKF’s products, services and solutions, but also the knowledge engineering company.

Services

Bearings and units

Seals

Mechatronics

Lubrication systems

...In order to meet these commitments, all SKF units shall develop and offer products and services which provide customer value in terms of improved EHS performance throughout the complete life cycle.

(Quote from SKF’s Environment, Health and Safety Policy)

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Every stage in the value chain presents the possibility to reduce environmental impact. Doing so not only addresses SKF’s responsibility towards society and future generations, it also enhances industry’s ability to do more with less and so creates sustained competitive advantage.

Environmental Care seeks to illustrate how we work with implementing and integrating environmental life cycle management into core business processes.

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Environmental Care

A company like SKF can have an important impact on the environment. Everything from the raw materials selected, how these are utilized and processed, the energy used by SKF’s products when running in customers’ installations, to the way in which products are disposed of when they come to the end of their useful life.

To SKF this means that every stage in the value chain presents the possibility to reduce environmental impact. Doing so not only addresses SKF’s responsibility towards society and future generations, it also enhances industry’s ability to do more with less and so creates sustained com-petitive advantage.

That is why SKF’s environmental approach is based on the implementation and integration of environmental life cycle management into core business processes.

The SKF BeyondZero strategy reflects this. It requires action to reduce the impacts resulting from SKF’s opera-tions and those of suppliers (reducing the negatives) while at the same time providing customers with SKF BeyondZero portfolio solutions that deliver reductions in the impact of their products (increasing the positives), read more about the SKF BeyondZero portfolio on pages 14–15.

Environmental Care started in our own backyard, focusing on our own operations by issuing the Environmental, Health and Safety policy in 1989. SKF became the first international bearing manufacturer to receive global certification according to the ISO 14001 Environmental Management System in 1998.

Since then, we have been building on these foundations by continually taking steps which address environmental impact at different stages of our products’ life cycle, and our entire value chain. The steps we have taken and plan to take in the future are underpinned by a solid understanding of environmental life cycle management. This is something we have invested in and built up over the last ten years through numerous life cycle assessments and focused applied research and development in this area.

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Raw material and components100% of SKF’s energy intensive major suppliers to be certified according to ISO 50001 Energy Management Standard by 2016.

Products and solutionsQuadruple the revenue from the SKF BeyondZero port-folio from 2.5 billion SEK in 2011 to 10 billion SEK by 2016.

SKF’s own operationsReduce the total annual energy use of the SKF Group by 5% below the 2006 level by 2016.

Reduce the energy use per production output by 5% year-on-year

Transport and distributionReduce CO2 emissions/tonne-kilometre for all transports managed by SKF Logistics Services by 30% below 2011 by the end of 2016.

Climate strategy

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Climate change

SKF has been acting with a clear focus on climate change mitigation for many years and since 2002 we have reported in detail on the initiatives we have taken and the progress we have made to reduce green house gas emissions.

The motivation for our continued commitment to addressing climate change can be summarized in three points.1 Climate change presents a critical long-term challenge

to humanity and the natural environment. Failure to address it will have catastrophic long-term consequences for both.

2 Energy prices are likely to increase, SKF’s ability to run its activities in a highly energy- and carbon-efficient way, will increasingly bring competitive advantage.

3 We are uniquely positioned to contribute to climate change mitigation through the products and solutions SKF provides and in so doing create considerable value for customers and investors.

Climate strategy

SKF’s climate strategy is built on SKF BeyondZero and tack-les the significant greenhouse gas impacts in the full life cy-cle and the full value chain of our products and solutions. Aggressive targets have been established which aim at re-ducing the greenhouse gases in four aspects of our value chain:

• Suppliers• SKF’s manufacturing operations• Transports• Customer solutions

WWF Climate SaversWe have worked hard to make sure that our strategy and targets are world-class, but we do not make this claim on our own. The WWF has recognized these targets as industry leading by including SKF in an ex-clusive group of the world’s leading companies acting on climate change – the WWF Climate Savers. Climate Savers is a programme for companies,suppliers and partners to implement innovative so-lutions for a clean, low-carbon economy.

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Reducing environmental impact – the remanufacture and reuse of SKF products

We have established a global network of facilities specializing in remanufacture and inspection of used bearings. Our bearing remanufacturing concept creates customer value through increasing service life and reliability of machines and reducing costs.

From an environmental perspective, bearing remanufacturing realizes reduced material and energy requirements compared to replacement with a completely new bear-ing. SKF also remanufactures other products such as machine spindles, housings and railway bearing units.

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Product development – Environmental design guidelines

There are many sound reasons why environmental issues should be considered in the design and product development process. They help us meet customer and legislative require-ments. They put us in a stronger competitive and commercial position. They play a major part in ensuring that we continue to provide innovative solutions. But most of all, they help us achieve our ambition of reducing the overall environ-mental impact of our products across their life cyle. For these reasons, SKF is working proactively towards the goal of integrating environmental considerations into product development at every level.

Supported by design guidelines and tools for environ-mental assessment, a development process that takes us all the way from scoping through to validation and hand-over has been devised. Within this framework, key issues including weight, recyclability, legislative requirements, biodegradability and much more are considered. From this process, concepts can be defined and then chosen to reflect environmental targets before design optimization work starts.

All SKF companies shall maintain long-term environmental, health and safety (EHS) plans which shall be continually adapt-ed to developments, new discoveries, and experiences related to EHS.

Operations shall be conducted in a manner that protects the health of our employees, protects the environment and con-serves energy and natural resources. EHS performance shall be continually improved.

EHS effects shall be taken into account when business decisions are made.

Quote from SKF’s Environment, Health and Safety Policy

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Focus area Background History Target Actions Results

Energy and related CO2

Reducing energy use (and related CO2 emission) is the most important direct contribution which SKF can make to climate change mitigation within our own manufacturing operations.

From 2006–2011 the target has been to reduce CO2 by 5% in absolute terms annually.

Current targets

• Improving the energy efficiency by 5% year-over-year 2012–2016.

• An absolute reduction of the annual energy use in SKF’s facilities by 5% below 2006 level by the end of 2016, irrespective of production growth.

Focus on energy reduction at local SKF units by:

• practicing sound energy management• driving behavioural change• investment in new technologies• new production methods

SKF Group’s absolute annual energy requirements have been reduced by 15% between 2002 and 2013 when our business (net sales) grew by around 45%.

For updated figures and actions, read the latest annual report, available on www.skf.com/investors

Material use SKF uses various types of materials such as metal, rubber, solvents, hydraulic oil and grease.

Steel is the main raw material used by SKF. Much of the steel we purchase comes from remelted steel scrap as this provides favourable material properties and is widely available.

Reduce use and handling of direct materials

Reduce waste

Reduced energy and use of indirect materials

SKF is driving the development of a number of solutions aimed at achieving near-net-shape solutions across the full range of SKF’s products.

Cost and quality improvements, significant environmental benefits associated with reduced use and handling of direct and indirect materials, waste, energy. Detailed information is available on SKF.com and in our latest annual report under Sustainability notes.

Chemicals Solvents – referred to as volatile organic compounds (VOCs) form vapours which can be damaging to health and the environment.

Solvent reduction target 2002–2007: Reduce 25% in relation to production volumes. Target successfully achieved in 2007 with a drop of 29% compared to 2002’s level, while the production volume rose by more than 30%.

Reduce VOCs by 50% from 2007–2016. From 1600 tonnes to 800 tonnes. (adjusted for acquisitions and divestments).

New production methods, new technologies, substitution of solvents.

General decrease in absolute terms. Year-over-year data and information are available on SKF.com and in our latest annual report under Sustainability notes.

ODSOzone depl.

substances

ODSs are substances believed to be responsible for ozone depletion. The Montreal Protocol is a treaty to reduce ODSs ratified by almost 200 states and the EU.

SKF has been monitoring its consumption of ozone depleting substances for many years by referring to the Montreal Protocol.

Eliminate use of ODSs Consumption has steadily fallen over the years, supported by a number of local phase-out projects.

Overall, the most harmful ODSs have either been substituted with less harmful ones or the usage has been totally eliminated due to production process changes in manufacturing.

Water Water is used in many industrial manufacturing processes.

As the majority of SKF’s factories are located in industrial zones, water, to a large extent, is supplied by municipalities. Thus, SKF monitors total water consumption at operating units and not according to water withdrawal by source.

SKF sites located in areas of high scarcity risk have established specific targets for reducing water consumption.

As part of the SKF’s global ISO 14001 management system, all operating units are obliged to follow local rules and regulations. This includes waste water handling. Many units have also introduced closed-loop water consumption or installed waste water treatment facilities,

Year-over-year data and information are available on SKF.com and in our latest annual report under Sustainability notes.

Waste All SKF units are aiming to minimize waste and increase recycling, for both environmental and cost reasons.

All scrap metal from SKF’s operations is recycled. A normal waste product from SKF’s manufacturing process is grinding swarf. The target was to reach a level of 80% recycling rate of our grindning swarf by 2012.

This target was reached in 2013. Variations in regional legislation, volatile scrap prices and other aspect mean that this level continues to be very challanging. The will therefore be to maintain 80% recycling rate up to 2016.

Improved separation of water oil and metal particles. Facilitate regeneration and reuse in different ways.

Year-over-year data and information on all residual material from the Group as well as the recycling rate are available on SKF.com and in our latest annual report under Sustainability notes.

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Environmental impact from our operations

As of 2013, SKF has over 160 manufacturing-, logistics- and technical centre sites in over 30 countries around the world, including logistics centres and technical centres. Our direct ownership and management of these facilities means we have the absolute responsibility as well as the direct power to minimize their environmental impact.

That is why we deployed the ISO 14001 environmental management system, and why we constantly strive to in-vest in our processes and evolve our behaviour to achieve a constinual improvement in our manu facturing environ-mental performance, above and beyond our legal obligations.

The purpose of having global certification is that all SKF’s manufacturing sites, technical and engineering centres as well as logistics centres, are required to maintain and uphold high performance standards regardless of geographical locations or social and economic conditions in the country.

All our manufacturing units, logistics centres and technical centres are encompassed in the auditing scope except for recently acquired companies. New units must establish and

implement plans to ensure inclusion in the scope in a defined and published timeline.

In compliance with the requirement of the ISO 14001 system, we continually demonstrate improvements in our environmental performance.

Targets aimed at reducing our environmental impact have been established and are reviewed annually. These targets are related to issues such as energy (and related CO2

emissions), chemicals, natural resources consumption, and wastes. For annual updates on the progress of these tar-gets, please read our latest annual report available on skf.com.

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Sustainable building design and construction

Delivering value to our customers in the most effective and efficient way possible is fundamental to us. To meet the constantly evolving needs of our diverse global customer base, we need to construct new facilities, such as manufac-turing plants, warehouses, technical centres and SKF Solu-tions Factories in different parts of the world.

Irrespective of the location, we have made the commit-ment that all new facilities must be designed and constructed to world-class standards in terms of environmental perfor-mance; and we do so by adopting the US Green Building Council’s (USGBC) “Leadership in Energy and Environmental Design” (LEED) standard for all our major constructions – major is defined as 1000m2 or an investment over SEK 30 million.

LEED is the most globally recognized standard for sus-tainable building construction. It takes a holistic approach to building sustainability – covering environmental aspects from design to construction and commissioning. Having this as a consistent SKF standard will assure minimized environmental impact and operating costs due to reduced energy and other utility requirements.

The LEED standard is a ‘points based’ system, with some mandatory categories, and others where it is possible to gain points by applying a specific environmental technology or solution. A certain number of points are required to achieve basic certification. Silver, gold and the highest level, platinum, are also possible if sufficient points are verified by the USGBC.

The environmental impacts of specific SKF manufacturing processes and central systems in our factories are poten-tially very significant and therefore, we have internally developed the “Sustainable Factory Rating” (SFR) as a spe-cific “add-on” to the LEED requirements. Use of the SFR, in addition to LEED was made mandatory in 2012 for all major constructions that we undertake.

As with the LEED system, the SFR lists a number of cri-teria which should be addressed by the project team during the design and construction of the facility and the specifi-cation of the manufacturing equipment, to assure the prin-ciples of SKF Care are fully applied, and full alignment with the SKF EHS policy is achieved, when new facilities within SKF are designed, built and taken into operation. The criteria are grouped in 11 categories:

• Health and safety • Process media and process pump systems • Compressed air systems • Process cooling/heaging • Metering, monitoring and targeting capability • Pollution control • Process waste management • Manufacturing equipment • Water • Heat treatment • Commissioning phase

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Jinan Factory, ChinaSKF’s factory in Jinan, China, is built according to Sustainable Factory Rating and has been awarded a LEED gold certificate. Water use and energy use are two of the most considerable good practices found.

Reuse grey waterWater is collected from rainwater harvesting, from condensed water from the air condition system and from hand basins and showers. After purification the water is reused for flushing toilets and landscaping. Together, this result in an estimated 50% reduction in potable water usage compared to traditional systems.

On-site power generation SKF Jinan has also installed a geothermal heating/cooling systemused for climate control and manufacturing process cooling. This system will realize 40% savings on sources heating and cooling per year for the factory.

Mysore IndiaThe SKF factory in Mysore, India, is also built according to Sustainable Factory Rating and has also been awarded LEED gold certification. One of the features of the plant is a roof-top solar installation used for heating water for the phosphating process in the factory. The solar panels are able to preheat the water in the system to 120 ̊ C. This system alone reduced cost from energy sourced by SEK 60,000 per year.

Health and safety during constructions projects

We have established minimum health and safety require-ments and procedures for major construction projects in order to assure a globally consistent approach is also applied in these aspects.

SKF USA’s head office in Lansdale, PA, received its LEED platinum certification in 2010

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Virtual warehouseTo shorten lead times, reduce transport costs and carbon dioxide emissions, SKF has imple-mented a virtual warehouse system for its operations in Germany, France, Italy and Sweden. The system detects where short cuts can be taken to reduce physical transportation.

This way of working makes it possible to avoid unnecessary transportation of goods to a central distribution centre. Instead the goods remain at the manufacturing unit warehouse nearest to the end-user.

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Logistics

Logistics for SKF is the management of the flow of compo-nents and goods in the most effective and efficient way from our suppliers to SKF and from SKF to our customers. It involves integrating information, transportation, material handling, inventory management, warehousing, packaging and security.

In cooperation with our transport providers, SKF Logistics Services strives to devise processes and solutions that will ultimately reduce our carbon footprint.

These include optimizing the ‘fill rate’ of trucks, ensuring they operate at full capacity and using rail transport when-ever possible. The use of trains can have a particularly dramatic effect – an increase in this method of transport between our factory in Gothenburg and distribution centre in Belgium of replenishment goods, resulted in an annual reduction in carbon dioxide emissions of 230 tonnes, which is a 70% reduction in the shipment of these goods.

Finding other environmentally-sound alternatives to transport our goods is an ongoing endeavour. Our partici-pation in the Clean Shipping Initiative and the Swedish network for transport and environment enable us to work together with other like-minded businesses in advocating better environmental performance in the transport industry.

Biogas truckAll truck transportations from the factory in Gothenburg to the harbour are now made using trucks exclusively running on biogas and biodiesel, This has reduced the CO2 emissions related to this task by 70% (calculation indicate 80%, 70% is considering extra precaution in assumptions).

Shift to more efficient transport modesSKF Group and SKF Logistics Services are focusing on a number of key areas to reach the targets set and to reduce total emissions from transportation. Shifting towards more efficient transport modes is one important contribution. For example, SKF Logistics Services has successfully elimi-nated one air shipment per week between the distribution centre in Tongeren, Belgium and warehouse in Moscow, by switching to road transportation.

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Employee Care

The SKF vision is to equip the world with SKF knowledge. The unique strength of the company is the ability to combine pan-industrial segment expertise with understanding and appreciation of local needs where 45,000 employees from more than 50 countries work together to serve our customers.

Our Employee Care programme is built upon our values (empowerment, high ethics, openness, teamwork) and beliefs. To respect and protect the rights of our employees is fundamental and we abide by this commitment with conviction.

Various tools and processes such as the SKF Code of Conduct compliance audits, the SKF Code of Conduct whistle-blower process and works councils were institutionalized at SKF to ensure that this commitment is observed, regardless of where the operation is located.

The Employee Care programme also accentuates the focus as an employer, on schemes that develop our employees’ personal and professional skills, whilst creating a motivating work environment.

Working Climate AnalysisIn addition to the above actions we carry out a group-wide survey annually called the Working Climate Analysis.

The survey measures employee feedback about the company’s performance in relation to its values and key focus areas, such as business, sustainability and knowledge sharing. The anonymous survey also provides an indication in terms of trust, cooperation, personal development and continuous improvement in the teams or departments.

Follow-up discussions are subsequently conducted by managers with their teams to identify and define improve-ment plans.

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Diversity and equality

At the heart of our Employee Care, there is diversity and at the heart of diversity lies equality. We strongly believe that the more diverse our business teams are, the more competitive we are in meeting our customers’ needs. This is because SKF’s knowledge is built on the knowledge, experiences and competences our employees possess.

All employees regardless of their positions in the company, genders, nationalities, races, ages, and religions, shall be treated fairly and equally.

From words to actionsFormulating our principles into official documents such as SKF’s Code of Conduct enables consistent communi-cation and systematic compliance assessment and risk identification in our global organization. To endorse our principles, we have also deployed the following meas-ures in the organization:

• Code of Conduct training (e-learning, classroom training or both) for all employees.

• Code of Conduct compliance audit (first established in 2004) to ensure SKF units globally have sound moni-toring systems in place for complying with the policy. Audits are performed annually on a sample of units throughout the Group.

• A non-financial risk assessment tool (introduced in 2008) to compile information about SKF units’ human rights and labour standards conformance, anti-bribery measures as well as environmental, health and safety performance.

• A strictly confidential whistle-blowing process (in addition to local grievance mechanism) where employees can send anonymous emails for the attention of the Senior Vice President, People and Business Excellence to report behaviour or action breaching the Code of Conduct.

• Regular and open dialogue between SKF management and our World Union Council, where the compliance audit result is also reviewed.

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Learning and development

SKF work hard to be the preffered employer and it is not unusual to meet employees, staff and workers alike, who have been with the company for decades.

One of the reasons this is so may be the fact we help people realize their full potential by offering personal learning and development opportunities. A concrete example is SKF’s Individual Development Plan (IDP) – an entitlement for all our employees.

The IDP serves as the basis for defining skills and com-petence improvement needs and translating these into clear training and development tasks and activities. Our training programmes encompass professional skills such as engineering, sales and marketing, leadership skills, and personal skills such as negotiation or time management.

Making learning more accessible for all our employees, wherever they are in the world, was the driver behind the creation of the SKF College, with campuses in Europe, Asia and North and South America. SKF’s global curriculum has been locally adapted and is provided in local languages at the campuses, reducing the need for long distance travelling and being away from work and family.

SKF also offers various management development pro-grammes to help develop future leaders in the company.

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Zero Accidents and OHSAS 18001

To achieve our goal of having zero accidents at work, we implemented the OHSAS 18001 management system Group-wide. Occupational Health and Safety Assessment Series (OHSAS 18001) is a management system compat-ible to ISO 9000 and ISO 14001, which targets controlling occupational health and safety risks and drives improved performance in this area.

Our main objective with the implementation has been to provide SKF’s units globally with a framework for system-atically working on health and safety and so to create a safe work environment for our employees.

SKF has been certified according to the standard since 2005. Our proactive approach to Employee Care has been emphasized by the fact we were the first major bearing manufacturer to receive OHSAS 18001 certification.

Zero AccidentsSKF launched the Zero Accidents target in 2000 with the commitment to strive for eliminating all workplace accidents at SKF. The belief that accidents are prevent-able and that an accident-free work environment is achievable has resulted in substantial progress over the years.

The vision of this approach is to eliminate work- related accidents at SKF, by focusing and driving home two messages:• that accidents are preventable rather than inevitable,

and that our ambition is highly achievable.

Example of actions to achieve Zero Accidents at work are: • all SKF units must have health and safety committees

established with management and employee representation

• all employees must go through health and safety training

• hazard and risk assessments of working environment must be carried out regularly

• all SKF units are audited every second year, by SKF internal audit teams as well as by a third party, regarding their compliance with the OHSAS 18001 management system

Read about our progress towards Zero Accidents in the latest annual report (available on skf.com)

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Newly acquired companies are given a timeframe for implementing the management system, working towards inclusion in the Group’s certification scope. The schedule for recently acquired companies’ inclusion plan can be found at www.skf.com.

The Group-wide certificate covers manufacturing, tech-nical and engineering centres, as well as logistics centres over 30 countries (2013).

All work-related accidents are preventable

At every SKF facility, health and safety issues are paramount. Our people are our most valuable resource and safeguarding their health and safety is of the utmost importance. Above all, it is the right of every employee to have a safe and motivating work environment. Hence it is our responsibility as employer to protect our employees from work-related hazards and risks.

Performance monitoringAccident data is submitted by EHS Site Coordinators, aggregated to country/Division, and Group level quarterly.

All other social data, is collected by human resource de-partments or assigned Environmental, Health and Safety (EHS) Country Coordinators once a year. The information is reviewed by country HR directors prior to submission to the Group.

In each country where the Group has manufacturing or logistics centres, there is a country coordinator who oversees the environment, health and safety (EHS) at local SKF facili-ties with the EHS site coordinators. Country coordinators also act as liaison officers to the corporate staff and a number of them are members of the corporate EHS audit team, which inspects SKF units to ensure compliance with Group standards and national legislation.

For the latest progress update, please read our latest annual report (available on skf.com)

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SKF Social PolicyIn order to help make clear the role SKF should play through community care, a Group social policy was issued in 2006.

This policy is intended to empower all SKF employees to spend time, energy and resources on developing a relevant strategy and carrying out community care activities for their unit or facility.

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Community Care

SKF is present in more than one hundred locations around the world and our operations affect all the surrounding communities. Our most fundamental responsibility towards those communities and society in general is to manage our business and operations in a responsible and accountable manner.

Our presence in these locations – sales offices, factories, warehouses – contributes to local society by creating safe, meaningful work for people in a respectful and rewarding environment, and through the taxes we pay to the national and local authorities.

However, we believe we can do more than creating jobs and paying taxes. In fact we want to do more. The commu-nities we operate in represent our future market and work-force; when a society grows, SKF grows with it.

Our approach to Community Care is very straightforward – it is planned and executed by our local people at the community level. The SKF Social Policy provides SKF units globally with a simple framework, which guides and supports our local management on how to best engage SKF in worthwhile projects for the benefit of the society and its citizens - education, sport, health or simply extending a helping hand to the less fortunate in times of need.

The policy states:Our ability to profitably manage and grow our business is the foundation by which we meet our social responsibility.

SKF’s management is actively encouraged to find ways and activities by which SKF and its employees can make a positive and lasting impact on the society and the communities in which we operate.

The positive contributions typically come from involve-ment in projects and initiatives which aim at encouraging personal development for less privileged people, sup-porting education and vocational training, supporting local sports and health initiatives and stimulating other voluntary work.

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Over 200 Community Care activities ongoing

With SKF’s social policy, employees around the world are fully empowered to engage with their local communities through various socially beneficial activities and approaches. The commitment demonstrated by SKF’s employees taking up this challenge is impressive. Presently over 200 activities are ongoing around the world. The number and diverse range of community care programmes truly shows how great the demand is from the local society, but also the high motivation which SKF employees have to make a positive change.

Some activities are short-term, sometimes a reaction to natural disasters. Other times the activities are long-term or annually recurring, such as the world’s largest youth football tournament Gothia Cup which is sponsored by SKF. SKF also arranges “Meet the World” bringing qualifying tournaments to locations around the world.

For more examples of Community Care activities please read the latest and previous annual reports. There is also a selection of stories available on skf.com.

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OrganizationSKF Care defines sustainability within the Group at the

highest level. Using the frame of SKF Care, the material is-sues for SKF are identified and addressed by the relevant parts of the business with an integrated approach. This in-tegrated approach means that some aspects as defined by GRI may in fact be covered in more than one of the the four cornerstones of SKF Care.

SKF Corporate Sustainability reports to the Senior Vice President Legal and Sustainability. The primary task for SKF Corporate sustainability is to assure that the principles defined by SKF Care are addressed and integrated into all operations and activities throughout the Group. This means that actual sustainability performance is the responsibility of the operational part of the company, but this must be delivered in accordance with strategic direction and funda-mental requirements at set by Corporate Sustainability. This authority is delegated from Group management and the board of directors who have the ultimate responsibility to state SKFs mission and to ensure that our values and drivers are acted upon accordingly.

SKF Corporate Sustainability is responsible for outlining and shaping policies, strategies and targets related to SKF’s overall sustainable development. It also supports SKF’s or-ganizations in assimilating the SKF Care business practice into all operations, whilst teaming up with others such as Group People and Business Excellence, Group Purchasing, Group Finance and Corporate Development, Group Com-munications and Government Relations, Group Technology Development, etc. for implementing SKF’s values and prin-ciples in its various business processes.

In SKF the implementation of sustainability programmes in the line organisation is driven by the respective SKF business areas, their business units, or by country organi-zations, but also by formal cross-functional decision mak-ing bodies and working-groups such as for example:

•SKFBeyondZerogovernanceboardwhichdecidesabout inclusion and exclusion in the SKF BeyondZero portfolio. •TheResponsibleSourcingCommittee,establishedto

assure that SKF’s Code of Conduct for Suppliers and Sub-contractors is effectively deployed, and that appropriate measures are taken when deviations from the Code of Conduct are identified at our suppliers.

Follow-ups on top indicators for sustainability perfor-mance for the Group are submitted to Group Management on a quarterly basis.This includes accident rates and en-ergy and carbon dioxide emission reports. Group Manage-ment is also updated on an annual basis about SKF’s ISO 14001, OHSAS 18001 management systems and key per-formance indicators. The business area presidents and hu-man resources directors are updated regularly about the Group’s internal audit results on the environment, health and safety, as well as the SKF Code of Conduct.

In each country where the Group has manufacturing or logistics centres, there is a country coordinator who over-sees the environment, health and safety (EHS) at local SKF facilities together with the EHS site coordinators. Country coordinators also act as liaison officers to the corporate staff and a number of them are members of the corporate EHS audit team, which inspects SKF’s units to ensure com-pliance with Group standards and national legislation.

Energy coordinators are nominated at SKF sites with more than 0.2 GWh in annual energy use. Energy coordi-nators are also nominated at business area level and also act as liaison officers to the Group corporate staff. In addi-tion, all three business areas have appointed senior man-agers with responsibility for their individual sustainability performance. Close collaboration is assured through the management system and regular meetings, trainings and cross-functional working groups as explained above.

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Stakeholder dialogueSKF works in different ways to engage with stakeholders such as customers, investors, employee representatives and representatives from wider society. Such engagements help us to better understand different stakeholder perspectives and concerns. Listed below are some examples of how SKF conducts these engagements with various important stakeholders.

CustomersSKF customer input is constantly sought and received via the sales and marketing operations and activities which we carry out - from local and global direct channels for various inquiries, to daily conversations between customer repre-sentatives and SKF’s account managers. In addition, exten-sive customer perception surveys are carried out regularly, or as requested by our individual business areas. The input gained is used at all levels of management and helps the company to continually improve the value we provide to our customers in all dimensions.

Employees and union organizationsSKF holds an annual World Works Council meeting during which employee representatives meet with Group man-agement to discuss business and matters of importance for the our employees. The agreements and conclusions from these meetings are acted upon and followed up. Employee representatives are also members of SKF’s board, which is our highest governance body. In addition, we carry out an employee feedback survey, the SKF Working Climate Analysis (WCA) every eighteen months. The findings from the WCA are used to drive im-provements in the working climate and performance at all levels of our company - from local teams to Group management.

Investors, analysts, shareholdersSKF takes an active approach in communicating the Group’s strategy and performance to existing and potential investors, analysts and financial media. Information is pro-vided through various channels such as the quarterly re-ports, meetings with investors, telephone conferences, the company’s website and press releases. A yearly capital markets day is held with the purpose to explain the busi-ness and SKF also invites shareholders to special discus-sions about its work.

Peers, Non-governmental organizations

SKF is an active participant in various business organiza-tions. We utilize these networks to share experiences and ideas with other companies and develop our thinking and approach on many issues such as sustainable develop-ment, global purchasing practices and human resources.SKF has established working relationships with certain non-governmental organizations (NGOs) such as WWF (the Word Wide Fund for Nature). We invite feedback and input from these NGOs about issues such as climate change and other environmental concerns.

Local communitiesThe communities in which we operate are important stake-holders for the company. Our local SKF organizations inter-act with their surrounding communities through various ac-tivities and initiatives ranging from volunteer work, other charity work and sponsoring, to local environmental network collaborations.

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Material issues for SKF We have identified a number of issues that are of great im-portance for SKF and and our stakeholders and therefore require long-term strategic focus and action. The identifi-cation of these issues is a natural part of the overall strate-gic development process which is driven and overseen by the Group management and is supported by input from stakeholder dialogues (with investors, customers and em-ployee representatives for example).

Based on this, the main material issues – defined as those that are important for the short, medium and long-term success of the Group:• Customersatisfaction• Healthandsafety• Innovation• Businessconduct• Localcommunityrelations• Responsiblesourcing• Labourrelations• EnergyandClimate• Environmentalprotection• Diversity• Talentattractionandretention

Please refer to the SKF Annual Report 2013, on page 13, where these material issues are explained in more detail.

Awards and recognitionDow Jones Sustainability Indexes (DJSI) are recognized globally in providing asset managers with investment in-dexes and benchmarks in the field of sustainability in-vesting. The first DJSI assessment result was published in 1999 and SKF has been included in the Dow Jones Sustainability World Indexes (DJSI World) and the Euro-pean sustainability index (DJSI Europe) every year since the beginning. Only the top 10% of best performing companies in economical, environmental and social performances are selected for inclusion. SKF is included in the IEQ Machinery and electrical equipment. SKF was recognized as sector leader in 2003, 2005 and 2009 and is one of few companies that have been included in the index fourteen consecutive years.

SKF has also been included in the FTSE4Good Index Series since the first result was published in 2001. More over, SKF has been selected for inclusion in the Ethibel Pioneer and Ethibel Excellence Investment Reg-isters (see www.ethibel.org) since 28 January 2005 and reconfirmed in 2014 and is being monitored regarding its corporate social responsibility profile since then.

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Reporting sustainability

History

Timeline 1989 First environmental policy 1994 First environmental report 1998 SKF Group certified according to ISO 14001 2002 Sustainability report included as section of an-

nual report 2011 Fully integrated report: Financial, environmental and social reporting 2013 Integrated report (administration report) subject to reasonable assurance.

SKF started to report environmental data in a separate environmental report in 1994. Since then we have gradually in-creased the scope and content of what we report each year, and have tried to present this information in more relevant and useful formats to our stakeholders. Internally, our approach has been to drive the in-tegration of sustainability (defined by SKF Care) into all our opera-tions, processes and activities. We strive to avoid a “compartmentali-zation” of SKF Care, for it to have lasting and meaningful change it must be owned by the whole organization. Therefore, in order to re-flect this internal development of ever increasing integration, in 2011 we decided to produce our first fully integrated annual report in which economic, social and environmental aspects are presented side by side in a single report, with the sustainability disclosures was giv-en a limited assurance. In 2013, the fully integrated administration report was subject to reasonable assurance by third party.

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Data compilation and reportingAll environmental data reported in SKF’s annual reports is compiled either quarterly or annually using a web-based reporting tool. It covers all the Group’s manufacturing sites, technical and engineering centres and logistics centres. Sales units are included when they are at the same site as manufacturing or logistics. Separate sales offices are excluded due to their minor environmental impact. Joint ventures are included where SKF has management control.

Information is reported at a local operating unit level, aggregated to site, country/business area, and Group level. Data verification is performed at each level before being submitted to external auditors for verification. The reporting of greenhouse gas emissions is done according to the Greenhouse Gas Reporting protocol published by the World Business Council for Sustainable Development and the World Resource Institute.

Health and safety data is also collected quarterly using the web-based reporting tool above. SKF adopts the US Occupational Safety and Health Administration’s standard for defining recordable accidents and its formula for calcu-lating accident rates.

The SKF Group people data published in the Employee Care section is collected annually, compiled and aggregated from local legal entities. Supportive information for the SKF Sustainability Report is available at www.skf.com/in-vestors, under the reference Topics Related to Annual Report. This includes: Articles of Association, SKF’s Code of Conduct, the SKF Environmental Health and Safety (EHS) Policy, carbon dioxide emissions data, environmental per-formance data, Zero Accidents – award winners, productions sites as of 31 December 2013 and the compliance table to GRI G3 Guidelines (GRI Index Table).

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© SKF Group 2014The contents of this publication are the copyright of the publisher and may not be reproduced (even extracts) unless written permission is granted. Every care has been taken to ensure the accuracy of the information contained in this publication but no liability can be accepted for any loss or damage whether direct, indirect or consequential arising out of the use of the information contained herein.

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Certain image(s) used under license from Shutterstock.com.

FTSE Group confirms that SKF Group has been independently assessed according to the FTSE-4Good criteria, and has satisfied the requirements to become a constituent of the FTSE4Good Index Series. Created by the global index company FTSE Group, FTSE4Good is an equity index series that is designed to facilitate investment in companies that meet globally recognized corporate responsibility standards. Companies in the FTSE4Good Index Series have met stringent environ-mental, social and governance criteria, and are positioned to capitalise on the benefits of respon-sible business practice.