Investor Presentaiton

BOARD OF DIRECTORS' REPORT substances. We screen our suppliers' performance in terms of their environmental and social responsibility with our Supplier Sustainability Assessment. The assessment includes the basic criteria that must be met in order to continue doing business with KONE, as well as other, more advanced criteria. Most of KONE's environmental figures for 2021 will be published in the 2021 Sustainability Report during the second quarter of 2022. KONE's offering The majority of the environmental impacts associated with KONE's activities are related to our products over their full life cycle. In 2020, our product-related Scope 3 emissions increased by 0.7% relative to ordered products. This was mainly due to an increased number of products sold especially in the Asia-Pacific region, where the lifetime energy use emissions of our products tend to be higher due to fossil fuel-based energy generation. KONE will publish the carbon emissions from 2021 in the Sustainability Report during the second quarter of 2022. Requirements for smart and sustainable materials, solutions and buildings are increasing. We see these shifts in demand as a growth opportunity and want to be the preferred partner for our customers. To further understand the emerging needs and technologies in sustainable, resilient urban environments and people's behavior in them, we actively participate in large-scale research projects and consortiums. Our innovations can have a significant role in advancing climate action. We support smart and sustainable building through our energy-efficient and innovative offering, functional and sustainable materials, as well as transparent documentation about our products' environmental impacts. Lifetime energy consumption is one of the main considerations in green buildings and it is also the single most significant environmental impact of KONE's products overall. This underlines the importance of eco-efficient solutions. During the year, we obtained seven best in-class energy performance references for our DX elevator models according to the international ISO 25745 standard for the energy performance of lifts, escalators and moving walks. We currently have 31 best-in-class energy efficiency references for our products according to the standard. Several KONE solutions have received external recognition for their environmental performance. During 2021, we received Singapore Green Building Product (SGBP) certifications for the KONE 3000S MonoSpaceⓇ, KONE 3000 Minispace TM and KONE 3000 TranSys TM elevators. KONE currently has seven SGBP-certified solutions and is the first elevator and escalator company to have all certifications with the highest possible ratings. The SGBP-certified solutions are recommended for Green Mark -certified buildings. KONE has also received several approved Byggvarubedömningen (BVB) assessments for its products. During 2021, approved assessments were received for the KONE TranSysTM DX and MonoSpace® 700 DX elevators as well as for the TransitMaster TM 140T escalator. BVB is a nonprofit organization that evaluates solutions for buildings and drives the use of sustainable building materials. During 2021, important achievements were also made in the transparent communication about the environmental and health impacts of our products with Environmental Product Declarations (EPD) published for seven of our solutions. These EPDS included the first escalator EPD in the industry, which was received by the KONE TransitMaster™ 140. In 2021, KONE launched the industry's first carbon neutral maintenance service offering. KONE Care DXT™ maintenance activities will be carbon neutral through CO2e reduction actions that we are implementing to reach the targets of our climate pledge as well as by compensating the remaining CO2e emissions with our third-party certified carbon compensation program. We support carbon offsetting projects in different parts of the world. These projects reduce or avoid CO2e emissions, and are related to, for example, renewable energy such as solar and hydro power, as well as to reforestation or avoiding deforestation. Own operations During the first quarter of 2021, we finalized the calculations of our 2020 carbon footprint. KONE's target was to reduce its operational carbon footprint relative to sales by 3% annually. In 2020, we exceeded our annual target as our overall operational carbon footprint (Scope 1, 2 and selected Scope 3 categories) relative to sales decreased by 8.9 % compared to 2019, with sales growth calculated at comparable exchange rates. Our scope 1 and 2 greenhouse gas emissions relative to sales decreased by 11.8%. KONE's carbon footprint data has been externally assured. Additionally, we have set a long- term target of 0% landfill waste from our manufacturing units by 2030. In 2020, the share of landfill waste in our manufacturing units was 0.6% (2019: 0.9%). We revised our target setting in 2021, both in terms of ambition and scope, to align with our climate pledge. Our long-term target for Scope 1 and 2 emissions is an absolute reduction of 50% by 2030 from the base-year 2018. The respective annual target for 2021 is an absolute reduction of 7%, compared to the base-year 2019 due to the exceptional circumstances in 2020. This target includes our Scope 1 & 2 emissions, extended by selected Scope 3 categories that are closely monitored by KONE: logistics, business air travel and waste. During 2020, the greenhouse gas emissions from our own operations (Scope 1 and 2) reduced by 12.0% in absolute terms compared to 2019. In 2021, we have made good progress in terms of reducing emissions from our own operations. Many KONE subsidiaries are taking steps to renew their vehicle fleets. For example, in our maintenance operations KONE started piloting e-cargo bikes and e- scooters in Austria and replacing old motorcycles with new electric ones in Hong Kong. In terms of our facilities, we expect to reach our short-term target of 50% (2030 target: 100%) of electricity consumption from renewable sources by the end of 2021 thanks to good progress made during the year. Our manufacturing units in the United States, Mexico and China now purchase 100% renewable electricity, and the solar panels we installed in our new manufacturing unit in Chennai, India during 2020 were in operation from the beginning of 2021. The finalized 2021 carbon footprint results will be published in our Sustainability Report in the second quarter of 2022. KONE uses the ISO 14001 environmental management system to enhance its environmental performance. It covers our corporate units, including all R&D, manufacturing units, and 26 major country organizations. Three KONE manufacturing units have ISO 50001 energy management system certification. At the end of 2021, 88% (2020: 90%) of our key suppliers were ISO 14001 certified, our target being 100%. An increasing trend in customer demand is the focus on wooden buildings. To accommodate this, KONE'S manufacturing unit in Finland continues to hold the FSC® (Forest Stewardship Council) Chain of Custody certification, providing credible assurance that elevators manufactured in this unit come with wooden components from environmentally and socially responsible sources. KONE's subsidiaries in Great Britain and Ireland continue to hold the FSC® Chain of Custody certification, meaning that customers can now be provided this assurance for the full delivery chain for elevators 14 KONE ANNUAL REVIEW 2021