ABB Ltd 1/1 — ABB annual reporting 2023 This document includes the following reports: – Integrated Report 2023 – Financial Report 2023 – Corporate Governance Report 2023 – Compensation Report 2023 – Sustainability Report 2023 — Integrated Report 2023 ABB’s purpose is to enable a more sustainable and resource-efficient future with our technology leadership in electrification and automation. Building on over 140 years of excel- lence, our more than 105,000 employ- ees are committed to delivering on our purpose by driving innovations that create success for ABB and all our stakeholders. Together, we address the world’s energy challenges, trans- form industries, reduce emissions, preserve natural resources, promote social progress, and push the frontiers of technology to make things possi- ble that were not possible before. Our solutions connect engineer- ing know-how and software to opti- mize how things are manufactured, moved, powered, and operated. ABB’s purpose is why we are in business and our guiding star. ABB’S PURPOSE We enable a more sustainable and resource-efficient future with our technology leadership in electrification and automation. — About ABB Creating success Leading with technology Addressing the world’s energy challenges Transforming industries Embedding sustainability To enable ABB to deliver on its purpose and cre- ate value for its stakeholders, we build on our decentralized operating model. Our 19 divisions are organized into four business areas: Electrifi- cation, Motion, Process Automation and Robot- ics & Discrete Automation. Our business areas complement each other and pursue opportuni- ties to collaborate. In line with our decentralized operating model, our divisions are the highest operational level within ABB. This allows them to take decisions close to the customer and to work together to provide the best service to our customers. They drive the success of ABB in their daily business. — Our business areas 2 — Electrification (Global no. 2) ABB’s Electrification business area provides a leading port- folio of products, digital solutions and services to electrify the world in a safe, smart and sustainable way. We collabo- rate with customers to improve power delivery and security, and enhance energy management, efficiency and opera- tional reliability, as we aspire to enable a low-carbon society. Our portfolio encompasses digital and connected innova- tions for low- and medium-voltage, including electric vehi- cle (EV) infrastructure, modular substations, distribution automation, power protection, wiring accessories, switch- gear, enclosures, cabling, sensing and control. Divisions: • Distribution Solutions • Smart Power • Smart Buildings • Installation Products • Service — Motion (Global no. 1) ABB’s Motion business area keeps the world turning. As the largest supplier of drives and motors globally, we provide customers with the complete range of electrical motors, generators, drives and services, as well as integrated dig- ital powertrain solutions, enabling our customers to save energy every day to empower a low-carbon future. We serve a wide range of automation applications in transportation, infrastructure and the discrete and process industries and through our domain expertise and technology achieve bet- ter performance, safety and reliability. Divisions: • Drive Products • System Drives • Service • NEMA Motors • IEC LV Motors • Large Motors & Generators • Traction — Robotics & Discrete Automation (Global no. 2) ABB’s Robotics & Discrete Automation business area enables companies to become more resilient, flexible and efficient through our value-added solutions in robotics as well as ma- chine and factory automation. With our integrated automa- tion solutions, our application expertise across a wide scope of industries and our global presence, we deliver tangible customer value. Our focus on innovation includes extensive work in artificial intelligence, as well as an ecosystem of dig- ital partnerships and the expansion of our production and research capabilities. Divisions: • Robotics • Machine Automation — Process Automation (Global no. 2) ABB’s Process Automation business area enables customers to operate some of the world’s largest and most complex industrial infrastructures, writing the future of safe, smart and sustainable operations. We offer a broad range of au- tomation, electrification and digital solutions for process and hybrid industries, including industry-specific integrated control and software as well as measurement and analytics solutions and services. Divisions: • Energy Industries • Process Industries • Marine & Ports • Measurement & Analytics — Corporate and Other ABB’s E-mobility division, formerly part of the Electrification business area, has since January 2023 been an independent business and a separate operating segment and is reported in Corporate and Other. ABB E-mobility is a global leader in electric vehicle charging solutions, with the highest uptime and largest installed base of DC fast chargers in the market. 3 — Key figures at a glance $ in millions, unless otherwise stated FY 2023 FY 2022 Change Comparable 1 FINANCIAL Orders 33,818 33,988 -1% 3% Order backlog (end December) 21,567 19,867 9% 9% Revenues 32,235 29,446 9% 14% Income from operations 4,871 3,337 46% Operational EBITA 1 5,427 4,510 20% 20% 2 as % of operational revenues 16.9% 15.3% +1.6 pts Income from continuing operations, net of tax 3,848 2,637 +46% Net income attributable to ABB 3,745 2,475 51% Basic earnings per share ($) 2.02 1.30 55%3 Dividend per share (in CHF) 0.874 0.84 4% Cash flow from operating activities 5 4,290 1,287 233% Net debt 1 (end December) 1,991 2,779 -28% ENVIRONMENTAL 6 Energy consumption (GWh) 1,298 1,413 -8% Renewable energy consumption (%) 64 52 +12.0 pts Own operations emissions scope 1 and 2 (kilotons CO 2 e) 151 221 -32% Total waste sent to landfill (kilotons) 10.1 10.9 -7% SOCIAL Total number of employees (FTE) 107,900 105,100 3% Women in workforce (%) 7 27.4 27.2 +0.2 pts Women in senior management positions 8 (%) 7 21.0 17.8 +3.2 pts Community spending 11.5 10.2 13% 1 For non-GAAP measures, see chapter Alternative performance measures. 2 Constant currency (not adjusted for portfolio changes). 3 EPS growth rates are computed using unrounded amounts. 4 Proposed by the Board of Directors and subject to approval by shareholders at the Annual General Meeting on March 21, 2024, in Zurich, Switzerland. 5 Amount represents total for both continuing and discontinued operations. 6 Figures are adjusted for portfolio changes. 7 Percentages calculated using headcount data. 8 At ABB, senior managers are defined as employees in Hay grades 1–7, including division presidents. ABB SUSTAINABILITY RATINGS 2023 CDP Climate CDP Supplier Engagement CDP Water S&P Global ESG score EcoVadis ISS ESG MSCI Sustainalytics A A 1 B 65 Gold 75/1002 Prime status B- AAA 15.43 1 The 2023 CDP Supplier En- gagement score will be avail- able in March 2024. 2 EcoVadis Gold medal issued on February 17, 2023. 3 Low risk exposure and man- agement of material ESG is- sues is strong. → Find out more about our sustainability ratings in our Sustainability Report 2023. 4 — ABB in numbers → All data refers to financial year ending December 31, 2023. >105,000 Employees globally $1.3 billion R&D investment >26,000 Number of patents filed 21 % Women in senior management positions 0.13 Lost-time Injury Frequency Rate 76 % Reduction of scope 1 and 2 GHG emissions since 2019 21.1 % ROCE 177 Manufacturing sites globally $32 billion Revenues 16.9 % Operational EBITA margin 173 Nationalities $34 billion Order intake 5 — Table of contents 01 Introduction 07 Chairman’s letter 10 CEO interview 14 Important milestones in 2023 16 The ABB share 18 ABB as an investment 02 Value creation 23 Our value creation model 26 Our business environment 32 Our inputs for value creation 34 Our strategic direction and the ABB Way 38 Risks and opportunities 03 Outputs and outcomes 43 Targets and performance overview 45 We deliver leading financial performance 55 We create value through world-class technology 61 We enable a low-carbon society 66 We preserve resources 70 We promote social progress 76 We embed a culture of integrity and transparency along the extended value chain 04 Good governance 85 Corporate governance 86 Board of Directors 88 Executive Committee 05 Performance-based compensation 91 Extracts from Compensation Committee Chair Letter 93 Board compensation 94 Executive Committee compensation 98 Sustainability considerations in ABB’s compensation 06 Appendix 101 EU Taxonomy disclosures summary 103 Alternative performance measures 106 Key terms 108 About this report 109 ABB annual reporting suite 2023 and financial calendar 6 — Chairman’s letter After a successful transformation, ABB is in more robust health and better prepared for the future than ever before. Our per- formance has improved and we have the right operating and remuneration models in place. Going forward, we are well-pre- pared to realize ABB’s purpose of enabling a more sustainable and resource-efficient future with our leading technologies and fulfill our updated financial and sustainability targets. 7 Dear shareholders, The past four years have been a transformative time for ABB. While dealing with some of the biggest challenges that a business can face – the pandemic, supply chain disruptions and wars in Ukraine and the Middle East – we have put in place a new operating model, improved our performance and prepared our company to help address humanity’s biggest challenge, climate change. As Chairman, I am extremely proud of what we have achieved. We are delivering on our commit- ments to stakeholders. We have strengthened our technology leadership in electrification and automation with many new innovations. And we are operating in a more efficient and transpar- ent way, thanks to our decentralized operating model, which gives our divisions full ownership for their respective businesses. Thanks to our market and technology leader- ship and our new ways of working, we are able to play an important role in helping to meet the energy and resource needs of a growing global population while preserving the natural envi- ronment for future generations. As a global leader with a strong presence in local commu- nities, we are also promoting social progress around the world by being an exemplary em- ployer and responsible corporate citizen. Delivering on our commitments Our achievements show that we are heading in the right direction and that we have the right people and organizational structure to take us forward. In 2023, we took advantage of the positive market environment and strong sec- ular demand drivers to further boost our or- der backlog while delivering record levels for revenues, Operational EBITA and margin with a significantly improved cash flow delivery. In light of this strong result and in line with our policy of paying a rising sustainable dividend per share over time, we will be proposing a div- idend of CHF 0.87 per share to be voted on at the Annual General Meeting on March 21, 2024. We are confident about ABB’s prospects, hence our ambitious new financial and sustainability targets that we presented at our Capital Mar- kets Day in November 2023. Our purpose of enabling a more sustainable and resource-effi- cient future through our technology leadership in electrification and automation fits perfectly with the needs of our customers and society. We are ideally positioned to support the en- ergy transition and help our customers move to low-carbon and circular business models. Creating value now and in the future We are actively managing our business port- folio to ensure that our divisions fit with our company purpose and deliver on our commit- ments to stakeholders. Our divisions must also be able to create more value by being part of ABB than they would elsewhere and serve mar- kets that are profitable and growing. Divisions that do not fulfill these criteria – even if they are strong businesses – are either re- structured or earmarked for exit. In the past three years, we have sold two high-performing businesses and spun off our successful Turbo- charging division (Accelleron). This has allowed us to more closely align the group with our pur- pose and position us in higher growth markets. We have also transformed the way that mergers and acquisitions are done at ABB, empowering our divisions to go out and find targets that will defend their leading market positions and performance. In the past three years, we have seen several small division-led acquisitions. Go- ing forward, we aim to make five to ten small to mid-sized bolt-on acquisitions per year, with six transactions closed in 2023 and several further that we could announce in early 2024. Leading by example ABB’s primary contribution to a low-carbon, resource-efficient future is developing and deploying leading technologies to help our customers optimize, electrify and decarbon- ize their operations. We owe our success to our people, suppliers and the communities in which we operate. We have more than 105,000 em- ployees around the world and a supply chain “As a technology leader in electrification and automation, ABB is ideally placed to support the energy transition and help our customers move to low-carbon and circular business models.” PETER VOSER | CHAIRMAN 8 ABB INTEGRATED REPORT 2023 INTRODUCTION consisting of thousands of companies, each of which has its own suppliers. To secure ABB’s long-term future, we need to lead, both in the market and by example. As a business that means reducing our own green- house gas emissions and adopting circular business practices. As an employer it means pro- viding a safe, fair and inclusive working environ- ment, in which our people can build their careers and are able to contribute to a better future. As a customer, it means helping our suppliers adapt to the fast-changing economic, regulatory and social environment that has driven ABB’s own transformation. As a leading global company it means being actively engaged in our communi- ties through projects and programs that provide education and training, support diversity and in- clusion, and help communities to develop, thrive and contribute to wider societal goals. Committed to ethical business practices Underpinning everything we do is our com- mitment to embedding a culture of integrity and transparency throughout our value chain. In 2023, we updated our ABB Code of Conduct and our Supplier Code of Conduct as well as our Human Rights policy, which reflects our commit- ment to upholding the highest standards along our value chain. We also enhanced our anti-brib- ery and corruption controls in line with a three- year Deferred Prosecution Agreement (DPA) with the United States Department of Justice and Securities and Exchange Commission. ABB’s Board of Directors is responsible for overseeing compliance with the requirements of the DPA, instituted a year ago, which include the engage- ment of an independent Board counsel expert. Facing the future with confidence In 2023, we have made strides in many areas. As Chairman of ABB since 2015, I am convinced that our company is better prepared for the fu- ture than it has ever been. On behalf of the Board of Directors, I want to thank our customers, employees, investors, part- ners, suppliers, and other stakeholders for your commitment and trust. You give us the confi- dence to strive for success, overcome adversity and contribute to a more sustainable, prosperous society. We look forward to continuing the jour- ney with you in 2024 and beyond. Best regards, PETER VOSER Chairman of the Board of Directors 9 — CEO interview ABB’s purpose and the ABB Way operating model are key to our Group’s success. As Björn Rosengren explains, in 2023, they enabled us to deliver a record high Operational EBITA margin and present ambitious financial and sustainability targets at ABB’s Capital Markets Day in November 2023. 10 ABB INTEGRATED REPORT 2023 INTRODUCTION Björn, 2023 was an eventful year. What stood out most for you? I did a lot of travelling and spoke to many of ABB’s customers, employees, investors, part- ners and other stakeholders around the world. What I heard gave me confidence that our mar- ket offering is fully aligned with long-term cus- tomer needs and secular trends. In 2023, it was encouraging to see increases in investments in energy efficiency and decarbon- ization. That’s especially true across the world’s three largest economies – the United States, the European Union and China. The good news is that, according to the Inter- national Energy Agency (IEA), it is still possible to limit global warming to 1.5°C above pre-in- dustrial levels with existing technologies. If the world ramps up renewables, improves energy efficiency, cuts methane emissions, and ex- pands electrification, the IEA estimates that we can deliver more than 80 percent of the emis- sions reductions needed by 2030. That, of course, shows that ABB is in a unique position to seize the opportunities ahead. We are working with our customers to electrify, op- timize and decarbonize their operations. In the process, we are accelerating the energy transi- tion and helping to build a low-carbon society. Most importantly, ABB is at the heart of devel- oping technologies to enable a net-zero future. How did ABB perform in 2023? We delivered a strong performance. Orders were slightly down but up on a comparable ba- sis, and we delivered higher revenues, a record high operational EBITA margin and strong mar- gin improvements in all four business areas. We expanded our earnings per share, cash flow and ROCE (Return on Capital Employed). We were fortunate to be operating in a strong market environment, but I think that this re- sult also confirms that we are in the right mar- ket segments and that our ABB Way operating model with its focus on continuous improve- ment is working. We also made significant progress towards achieving our sustainability goals. In 2023, we reduced greenhouse gas (GHG) emissions in our own operations by 32 percent and helped our customers avoid 74 megatons of emis- sions through our energy efficiency and carbon reduction technologies. We also reduced lost time caused by injuries (LTIFR) by 9 percent to industry-leading levels and increased the num- ber of women in senior management positions to 21.0 percent, up from 17.8 percent a year ago. I am truly proud of the ABB team for deliver- ing such good results and creating value for all our stakeholders. I want to thank everyone for a very strong performance in 2023. In November, you announced ambitious finan- cial and sustainability targets at ABB’s Capital Markets Day. What makes you so optimistic about ABB’s prospects? ABB has a clear purpose. We want to use our technology leadership in electrification and automation to enable a more sustainable and resource-efficient future. Over the past three years, we have transformed ABB. Today, our Group is decentralized and purpose-driven – and we have demonstrated to the markets that we can deliver on our promises. We have achieved a lot: we reshaped our portfolio, ad- dressed profitability and embedded a culture of continuous improvement in the company. These changes put us in a stronger position to address key global trends and opportuni- ties – like the shrinking labor force, the accel- erating need for automation, energy security and efficiency, and the energy transition. That is why we have been able to set ambitious new financial and sustainability targets. Among our key financial targets, we have lifted our target for long-term comparable revenue growth to 5–7 percent (from 3–5 percent) and raised our operational EBITA margin target to 16–19 per- cent (from ≥15 percent). For a complete list of our new targets, see chapter Outputs and outcomes. To guide our ambition of enabling a low-carbon society, we have set new 2030 and 2050 net-zero-aligned targets for our own operations and our value chain. We are aiming to help our customers avoid 600 megatons of GHG emissions through products sold from 2022 to 2030. We also expanded our focus on preserving resources to include water, biodiver- sity and sustainable land-use. ABB wants to lead with a strong culture of integrity and transparency across our entire value chain. We have now rolled out our up- dated Code of Conduct and Supplier Code of Conduct, which is part of our procurement terms and conditions. We also updated our Human Rights policy, which reflects our com- mitment to upholding the highest standards along our value chain. You like to say that innovation is in ABB’s DNA. Did ABB come up with any breakthrough inno- vations in 2023? One that I am very excited about is ABB Dyna- fin™, a revolutionary new electrical propulsion system for ships that mimics the movement of a whale’s tail. ABB Dynafin™ has a rotating wheel 11 “Around 55 percent of our R&D employees are focused on digital and software development. We already have more than 100 AI-focused projects across the ABB Group.” BJÖRN ROSENGREN | CEO with vertical blades, which makes it possible to propel and steer the ship at the same time. It is truly ground-breaking both in terms of oper- ational efficiency and maneuverability. And be- cause ABB Dynafin™ is an electrical propulsion system, it can be powered by any energy source, including zero-emission batteries or fuel cells, further contributing to decarbonize shipping. Another important innovation was our new IE5 SynRM Increased Safety motor for hazard- ous area industries. This latest addition to our portfolio of energy efficient motors and drives reduces energy losses by up to 40 percent com- pared to commonly used IE3 induction motors. It also runs at lower temperatures than stan- dard designs, prolonging the life of the motor and reducing maintenance needs; it also does not contain rare earth materials. Finally, I want to mention the expansion of our large robot range. In 2023, we launched four new models and 22 variants that offer custom- ers superior performance and up to 20 percent energy savings thanks to the lighter robot de- sign and use of regenerative braking. You have chosen a different digital strategy than some of your peers. Why do you think yours is the right strategy for ABB and how will you ensure that as technology evolves you are not left behind? With our decentralized business model, our di- visions have full ownership of their resources and strategies, which also includes their re- spective digital strategies. This allows them to build on their proximity to customers to de- velop more customer-focused offerings and gives them the freedom to work with other divi- sions within ABB as well as external partners. We create customer value through embedded software in our products. The majority of our products are digitally enabled, as well as al- most half of our services. Around 55 percent of our employees in research and development (R&D) are focused on software development and our ABB Ability™ portfolio of digital solu- tions is continuously expanding. How are the rapid advances in artificial intelli- gence affecting ABB’s business? We are certain that generative artificial intel- ligence (AI) has tremendous potential for our business. We have already identified more than 100 AI-focused projects across our Group. For example, our Robotics division produces AI-en- abled robots with integrated vision, which can work safely and autonomously in warehouses. In our Process Automation business area, we continue to progress towards autonomous op- erations, for which AI is an important enabler. We also use AI for preventive maintenance and are working with our long-standing strategic partner Microsoft to unlock further customer value from operational data. Looking at the global market environment, how concerned are you about the weakness of the Chinese economy? Unfortunately, China did not develop as we had hoped in 2023. We had expected that the lifting of COVID-19 restrictions would trigger a recov- ery, however, that did not materialize. One key reason is the continuing decline in the coun- try’s property market, which hit residential and commercial construction hard. On top of that, order growth in China was hampered by cus- tomers normalizing order patterns in response to a normalization of supply chains during the year. This impacted several of our businesses, most notably Robotics & Discrete Automation. While it is difficult to predict how the Chinese economy will develop, we are convinced that China will remain an important market for ABB. China is our second-largest market – we employ 15,000 people there, covering the full range of our business activities, from R&D and manufac- turing to sales and service. Our technology has an important role to play in addressing some of China’s most important challenges. We can help the country meet its dual-carbon goal, further decarbonize industry and transport, and address labor shortages with our robotics and automation solutions. We will continue our strategic focus of serving our customers in the country with locally manufactured products and solutions, as we do in all our markets. 12 ABB INTEGRATED REPORT 2023 INTRODUCTION Last year, you carved out E-mobility as a standalone business. Are you still planning an initial public offering? Our ambition to separately list ABB E-mobil- ity remains unchanged. The new management is currently concentrating on driving perfor- mance, including some reorganization to de- liver a more focused portfolio. We expect to be in a position to move ahead with a potential ini- tial public offering (IPO) when these measures have been implemented successfully and the financial markets are constructive. Most impor- tantly, we remain confident about the growth prospects in this field. ABB continued to buy businesses last year and sold the Power Conversion division, marking the end of the announced divisional exits. How have these portfolio moves worked out? We have a clear strategy for our active portfolio management: we regularly assess our business portfolio to ensure that our divisions fit with our company purpose and strategic focus. We acquire businesses to secure a continued lead- ing technology and market position. In 2023, we made six acquisitions across our four business areas. The divisions continue to build up their acquisition target pipelines and during 2023, we completed the acquisitions of the Siemens low-voltage motor business led by the NEMA Motors Division, strengthened our smart home technology portfolio with the acquisition of EVE systems led by the Smart Buildings Divi- sion, and completed four other smaller bolt-on acquisitions primarily related to software and AI technology. We also made a number of venture capital investments, which can be seen as an exten- sion of our R&D. One is WindESCo, a US-based analytics software provider that is improving the performance and reliability of wind tur- bines. ABB is a leading supplier of wind con- verters for medium and low-voltage turbines and thanks to our investment, we will be able to offer customers a package that combines con- verters with performance monitoring. Another investment was Pratexo, an edge-to-cloud platform innovator that is improving the secu- rity, autonomy and resilience of decentralized electrical networks. We also completed the sale of our Power Con- version division in 2023, which completes all divisional divestments announced at the end of 2020. We now have 19 high-performing di- visions, and approximately 70 percent of our revenues come from businesses with a growth mandate. We will continue to optimize the busi- nesses and product groups within our divisions. We aim to make five to ten small to mid-sized acquisitions a year and target to add 1–2 per- cent growth from acquisitions through the eco- nomic cycle. In 2023, you delisted ABB securities from the New York Stock Exchange. Has that had any impact on your business in the United States? The delisting from the New York Stock Ex- change (NYSE) had no impact on our business or operations. With 26 percent of annual Group revenues and more than 40 manufacturing and distribution facilities, the United States contin- ues to be our largest market. We remain fully committed to our US custom- ers, employees, investors, partners, suppli- ers and other stakeholders. We are investing $170 million to increase capacity in the US to continue to grow our local-for-local footprint and serve our largest market. We took the decision to delist from the NYSE be- cause ABB’s shares are mostly traded on the SIX Swiss Exchange and via electronic trading plat- forms. Consequently, we considered it excessive for ABB to have three stock exchange listings. ABB’s shares are still listed on the SIX and Nas- daq Stockholm, which reflects our Swiss and Swedish heritage. ABB securities in the US are still traded on the over-the-counter (OTC) mar- ket. Once this trade falls below a certain level, we intend to apply for deregistration with the US Securities and Exchange Commission (SEC) and for termination of our equity reporting obli- gations under the US Securities Exchange Act. You have now been ABB’s CEO for four years. What are you most proud of and what is next for you personally? What’s important is that our ABB Way operat- ing model is here to stay. With our performance improvements over the past four years, we have demonstrated that the ABB Way is the right model for our company and that the way forward is to continue to drive a decentralized culture. From my side, I am happy with the changes and progress made at ABB so far and I am keen to continue the improvement journey. Working for ABB has been one of the best experiences of my life. We have a great team of talented and moti- vated people, world-class businesses, fantastic technologies and we are making an important contribution to a sustainable future. I want to thank the entire ABB team for their commitment and strong performance in 2023, and also all our customers, employees, investors, partners, sup- pliers, and other stakeholders for their continued trust and support. We all are looking forward to deepening our successful collaboration in 2024. 13 — Important milestones in 2023 $170 million investment announced in various sites in the US to meet increasing demands for electrification and automation solutions, creating approximately 400 new jobs $893 million of shares repurchased via our share buyback programs $280 million investment announced in European robotics hub in Sweden, expanding production capacity by 50% Net-Zero science-based targets submitted to SBTi (Science-Based Targets initiative) for validation. Committed to a 100% reduction in scope 1 and 2 emissions and 90% reduction in scope 3 by 2050 AAA MSCI ESG rating upgraded from AA, ranking ABB in top 10% of industry peers 14 ABB INTEGRATED REPORT 2023 INTRODUCTION — Unveiled ABB Dynafin™, a revolution- ary new electrical propulsion concept for ships that mimics the movement of a whale’s tail. The new concept is expected to reduce propulsion en- ergy consumption by up to 22 percent compared to conventional shaft-line systems, contributing to the shipping industry’s ambition of significantly reducing greenhouse gas emissions. — Acquired Germany-based Eve Sys- tems , strengthening ABB’s smart home technology portfolio. The combined offer will accelerate ABB’s delivery of safe, smart and energy-efficient homes and buildings . Authorities are looking to incentivize retrofitting of existing building stock, as buildings account for approximately 30 percent of global carbon emissions (direct and indirect energy emissions including materials and construction). — Expanded partnership with battery developer Northvolt to provide elec- trification and automation technol- ogies for the world’s largest battery recycling facility, Revolt Ett. The recy- cling site will process 125,000 tons of end-of-life batteries and battery production waste each year , helping Northvolt achieve its goal of reducing the carbon footprint of its batteries by 90 percent by 2030. — Became official charging partner of Formula E , the all-electric motorsport world championship series. The tech- nology partnership enables ABB to showcase its ground-breaking elec- tric vehicle charging technology in cities around the world. — Delisted ABB’s American Depositary Shares (ADSs) from the New York Stock Exchange and converted to a sponsored Level I ADR program on the US over-the-counter market. Decision to delist was because ABB considered it excessive to have three stock ex- change listings. ABB’s shares are still listed on the SIX Swiss Exchange and Nasdaq Stockholm, which reflects the Group’s Swiss and Swedish heritage. — Updated our Code of Conduct and our Supplier Code of Conduct to reflect ABB’s Sustainability Agenda with its foundation of integrity and transpar- ency embedded throughout its value chain. The new Supplier Code of Con- duct is included in ABB’s procurement terms and conditions. We have also up- dated our Human Rights policy. — Completed the divestment of the Power Conversion division for $505 million to AcBel Polytech Inc. With this transaction, ABB has com- pleted all divisional portfolio divest- ments announced at the end of 2020. — Completed acquisition of Siemens’ low-voltage NEMA motor business , as announced in 2022. The business em- ploys around 600 people and generated revenues of approximately $63 million in 2021. The global NEMA motor indus- try, roughly $2.7 billion in size, com- prises industrial electric motors pri- marily used within North America. — In 2023, nine venture capital invest- ments were undertaken by ABB, includ- ing an investment in US-based Wind- ESCo, an analytics software provider for wind turbines , enabling ABB to of- fer customers a package that combines converters with performance monitor- ing. In another minority investment, ABB strengthened the partnership with Pratexo to co-develop edge com- puting solutions to improve security, autonomy, and resilience for decentral- ized electrical networks. 15 — The ABB share In 2023, the price of ABB Ltd shares listed on the SIX Swiss Exchange (SIX) increased 33 per- cent, while the Swiss Market Index (SMI) in- creased 4 percent. The price of ABB Ltd shares on the Nasdaq Stockholm increased 41 percent, compared to the OMX Stockholm 30 Index, which increased 17 percent. Total shareholder return (including dividends) of ABB Ltd shares listed at SIX was 37 percent during 2023. On May 23, 2023, ABB’s American Depositary Shares (ADSs) were delisted from the New York Stock Exchange (NYSE) and converted to a Level I ADR program, which gives US investors a continued investment option on the US over- the-counter (OTC) market, in addition to the ordinary ABB share. Once the 12-month US Av- erage Daily Trading Volume (ADTV) in ABB ADSs has fallen to less than 5 percent ADTV world- wide, we intend to apply for deregistration with the Securities and Exchange Commission (SEC) and for termination of its equity reporting obli- gations under the Exchange Act. Trading volumes have adjusted to a lower level, which is supportive of future deregistration. We have continued to see strong interest in ABB from the US investment community which cur- rently represents approximately 26 percent of our shareholders. In 2023, approximately 28 percent, 27 percent, 26 percent of shares issued were held in Swit- zerland, Sweden and the United States, respec- tively. The ten largest individual shareholders accounted for approximately 39 percent of the share capital on the same date. At December 31, 2023, 75 percent of the shareholder base was made up of institutional investors with retail investors reaching 18 percent. On Decem- ber 31, 2023, members of the Group Executive Committee owned a total of 945,871 shares in ABB. Members of the Board of Directors owned a total of 826,286 shares in ABB. Total own- ership of ABB shares by the Group Executive Committee and the Board corresponds less than 1 percent of the capital and voting rights. — Shareholder information KEY DATA FY 2023 FY 2022 FY 2021 Dividend per share (CHF) 0.871 0.84 0.82 Votes per share 1 1 1 Basic earnings per share ($) 2 2.02 1.30 2.27 Total ABB stockholders’ equity per share ($) 3 7.28 6.85 7.96 Dividend payout ratio (%) 4 51% 70% 40% Weighted-average number of shares outstanding (in millions) 1,855 1,899 2,001 1 Proposed by the Board of Directors and subject to ap- proval by shareholders at the Annual General Meeting on March 21, 2024. 2 Calculation based on weight- ed-average number of shares outstanding. 3 Calculation based on the number of shares outstand- ing at December 31, 2023. 4 Dividend per share (con- verted to US dollars at year- end exchange rates) divided by basic earnings per share. 16 ABB INTEGRATED REPORT 2023 INTRODUCTION DISTRIBUTION OF SHAREHOLDINGS BY COUNTRY BREAKDOWN OF SHAREHOLDERS BY TYPE Source: FactSet. 28% Switzerland 27% Sweden 26% United States 8% UK & Ireland 8% Continental Europe 3% Rest of World 75% Institutional investors 18% Retail positions 5% Miscellaneous 2% Company-related holders STOCKHOLM Average daily traded number of shares: 0.75 million ZURICH Average daily traded number of shares: 3.29 million Jan 2023 Feb 2023 Mar 2023 Apr 2023 May 2023 Jun 2023 Jul 2023 Aug 2023 Sep 2023 Oct 2023 Nov 2023 Dec 2023 460 440 420 400 380 360 340 320 300 280 260 240 Low: 316.20 High: 446.80 Year end: 445.3 ABB OMX Stockholm 30 Index Rebased SEK CHF Jan 2023 Feb 2023 Mar 2023 Apr 2023 May 2023 Jun 2023 Jul 2023 Aug 2023 Sep 2023 Oct 2023 Nov 2023 Dec 2023 39 38 37 36 35 34 33 32 31 30 29 28 27 26 25 24 ABB Swiss Market Index Rebased Low: 28.06 High: 37.77 Year end: 37.30 17 — 01 Market leader with world-class technology — ABB as an investment Our global number 1 and 2 positions in key electrification and automation segments strategically position us to capitalize on long-term megatrends characterized by the energy transition, energy security and efficiency, as well as the need for an increasingly flexible and efficient manu- facturing set-up. Our equity story is based on five pillars: Our market-leading position is based on cutting-edge technology, our ability to scale and decades-long domain expertise, all of which create high barriers to market entry for potential competitors. Our four business areas all have a global num- ber 1 or 2 position in their respective market segments. This gives us strong economies of scale and high pricing power, which results in higher profitability that enables us to con- tinue investments in R&D to defend our leading market positions in electrification and auto- mation. Our cutting-edge technology creates superior customer value by optimizing, electri- fying and decarbonizing their operations. Being present in various verticals for many decades has enabled us to build up unique domain expertise as well as a large installed base and strong long-term relationships with end-customers and channel partners. Our deep understanding of customer needs and opera- tions is at the root of ABB’s success. VALUE FROM SOFTWARE 1 Management estimates Software or digitally enabled products and services 84% Products and solutions 16% Services ~55 % of R&D employees focused on digital and software development 1 Increase the digital content in our products to support gross margin and industry leadership in technology Embedded software enables differentiation Continue to develop Industrial Software and Digital services organically and make bolt-on acquisitions: • Invest to create synergies with our offering • Return on investment • Growth 18 ABB INTEGRATED REPORT 2023 INTRODUCTION New ways of working with divisions accountable for growth and decision-making closer to the market THREE KEY GROWTH ENABLERS Accelerating sustainability requirements for electrification and automation Focused portfolio around sustainability and resource-efficiency through electrification and automation We expect through-cycle average revenue growth of 5 to 7 percent on a comparable ba- sis and 1 to 2 percent inorganic growth. Higher growth will be driven by a focused portfo- lio, which has been aligned to more attractive growth markets and new ways of working. Our divisions are empowered to drive growth and investments based on their strategic mandates. A key focus of ABB’s transformation has been to align our business with global megatrends, including the shrinking labor force, accelerating automation, energy security and efficiency, and the energy transition. — 03 Increasing growth rates In our decentralized operating model, decisions are made close to customers in our divisions, which have full ownership and accountability for their respective businesses. Select common processes ensure that each division benefits from being part of the Group. Our leaders are encouraged to cooperate where there are syn- ergies and it makes sense for the business. Lastly, our strong performance management system ensures performance can be tracked quickly and easily with standard key perfor- mance indicators (KPIs) to facilitate speed. Each division is given a strategic mandate, which translates into strategic priorities and appro- priate targets that are supported by incentives. — 02 ABB Way – accountability, transparency and speed Leveraging on our decentralized operating model Strong performance management system Select common processes in the ABB Way 5–7 % average Comparable revenue growth through economic cycle Excluding FX impacts, acquisitions and divestments (up from 3-5%) 1–2% average Acquired revenue growth through the economic cycle Target is the net of acquisitions and divestments (unchanged) REVENUES TARGETS 35,000 30,000 25,000 20,000 20 10 0 -10 % $ in millions Revenues Comparable growth % 2019 2020 2021 2022 2023 19 We are improving financial performance and in 2023 we achieved new all-time-high (ATH) levels for several KPIs. Our new ways of working are yielding results. We are actively enabling a low-carbon soci- ety as well as working with our customers and suppliers to implement sustainable practices across our value chain and the lifecycle of our products and solutions. We are equally commit- ted to driving social progress, along with our suppliers and in our communities. — 04 Improving performance At least high single-digit % EPS growth through economic cycle (Basic EPS) up from Basic EPS growth > revenue growth Net-Zero by 2050 100% reduction in scope 1 and 2 emissions and 90% in scope 3 new — 04 Improving performance >18 % ROCE (annual) Excluding transformational deals up from 15–20% ~100 % FCF conversion to net income (annual) unchanged 16–19 % Operational EBITA margin (annual) up from >15% SCOPE 1&2 GHG EMISSIONS RETURN ON CAPITAL EMPLOYED (ROCE) Operational EBITA Operational EBITA margin % All-time-high (ATH) ROCE Target range >18% All-time-high (ATH) Scope 1&2 GHG emissions OPERATIONAL EBITA IMPROVED PERFORMANCE LEADING TO MORE AMBITIOUS TARGETS 800 600 400 200 0 2019 2020 2021 2022 2023 new ATH 22 20 18 16 14 12 10 2019 2020 2021 2022 2023 new ATH 6,000 4,000 2,000 0 20 15 10 5 2019 2020 2021 2022 2023 11.1 11.1 14.2 15.3 16.9 21.1 -76% vs. 2019 baseline % % $ in millions Ktons CO 2 e 11.1 10.3 16.5 14.9 20 ABB INTEGRATED REPORT 2023 INTRODUCTION The creation of sustainable long-term share- holder value is a key priority. Our compensation programs and policies are designed to encour- age performance improvement without taking excessive risks. The Company’s shareholding requirements for Executive Committee mem- bers are aligned with market practice and result in a wealth at risk for each Executive Commit- tee member which is aligned with shareholder interests. Our strong balance sheet provides the capacity and flexibility for both solid cash distribution while still ensuring the financial strength to invest in organic and acquired growth. We are committed to a rising sustain- able dividend per share (DPS) over time. Ad- ditionally, our capital allocation priorities also state that we distribute any excess cash to our shareholders via buybacks. — 05 Rewarding shareholders ABB invested $770 million in capital expendi- tures (CapEx). Non-order related R&D invest- ment was $1,317 million in 2023 or 4.1 percent of revenues for the year. The declared dividend amounted to $1,706 million. With respect to the year ended December 31, 2023, ABB’s Board of Directors has proposed to distrib- ute a dividend to shareholders in the amount of CHF 0.87 per share. This is subject to ap- proval by shareholders at the Annual General Meeting on March 21, 2024. The proposal is in line with our dividend policy to pay a rising, sustainable dividend per share over time. In April 2023, we launched a new share buyback program of up to $1 billion. Together with the prior share buyback program, which ran from April 2022 to March 2023, we repurchased a combined value of $893 million during the year 2023. We plan to continue our share buy- backs for the full-year 2024 in line with our capital allocation priorities to return excess cash to shareholders through buybacks. DIVIDENDS AND SHARE BUYBACKS CAPITAL ALLOCATION PRIORITIES 1. Fund organic growth, R&D, CapEx at attractive returns 2. Rising, sustainable dividend per share over time 3. Value-creating acquisitions 4. Returning additional cash to shareholders via share buybacks >$29 billion cash returned to shareholders over last 10 years Dividend per share (DPS)¹ Dividend yield² 2014–2023 $17 billion dividend $12 billion buybacks 5 4 3 2 1 0 1.00 0.80 0.60 % CHF 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1 2023 dividend per share of CHF 0.87 is proposed by the Board of Directors and subject to approval by shareholders at the Annual General Meeting on March 21, 2024. 2 Calculated based on the share price at December 31. 21 02 Value creation 23 Our value creation model 26 Our business environment 32 Our inputs for value creation 34 Our strategic direction and the ABB Way 38 Risks and opportunities 23 — Our value creation model By combining our technology leadership in electrification and automation with our decentralized ABB Way operating model, we create holistic value for our stakeholders while enabling a more sustainable and resource-efficient future. Our value creation model provides a compre- hensive summary of the holistic value we gen- erate for all stakeholders across ABB’s entire value chain. It outlines the inputs that ABB needs to create value and illustrates how we transform these inputs into outputs and out- comes through our decentralized operating model, the ABB Way. The value we create for our stakeholders mea- sures our success as a purpose-led company: • by delivering leading financial performance, through world-class technology, • by enabling a low-carbon society, • by preserving resources, • by promoting social progress, • by embedding a culture of integrity and trans- parency along the extended value chain. Each of these outcomes and related outputs is explained in more detail in the chapter Out- puts and Outcomes. With our holistic approach to value creation, we also consider the complexities of the exter- nal environment. These include risks, oppor- tunities and exposure to key megatrends, as well as how ABB impacts and is impacted by our stakeholders. To track and manage the inputs we use and the value we create, we leverage a broad set of qualitative and quantitative key performance indicators (KPIs). VALUE CREATION AT ABB We understand value creation as the positive transformation of our financial and non-finan- cial inputs into outputs and outcomes that fulfill our purpose of enabling a more sustain- able and resource-efficient future. By focusing on holistic value creation, we deliver mean- ingful progress for our stakeholders, the environment and our organization. In everything we do, we reflect on how ABB impacts and is impacted by our society and the environment. • Collaborative partnerships • Customers • Employees • Governments and civil society • Investment community • Suppliers • Digitalization & AI • Demographics • Economic shifts • Sustainability OUR VALUE CREATION MODEL 1 Includes tools such as My learning, Harvard Spark, Harvard Manager Mentor and LinkedIn Learning and covers both leadership and functional/technical learnings, for internal employees. 2 Learning hours reported in 2022 were affected by an error in the data extraction from the LinkedIn learning platform. The error generated an overestimation of hours from that platform. It has been corrected. 3 Management estimate based on 2022 orders. 4 Including patents, utility model and design applications. 5 Based on representative scenario, see also our Sustainability Report 2023 for more details. 6 At ABB, senior managers are defined as employees in Hay grades 1–7. 7 Year 1 & 2 & 3 (January 1, 2021, to December 31, 2023). STRATEGIC DIRECTION INPUTS ABB PURPOSE The ABB Way KEY MEGATRENDS STAKEHOLDERS OUTPUTS AND OUTCOMES Financial • Total stockholders’ equity: $13,410 mn • Total liabilities: $26,794 mn Intellectual • Percentage of R&D employees in software development: ~55% • R&D spend: 4.1% of revenues in 2023 • Number of new venture-capital investments: 9 Natural • Energy consumption: 1,298 GWh in 2023 (64% of which come from renewable energy sources) • Water withdrawal: 2,545 kilotons in 2023 Manufactured • Book value of property, plants and equipment: $4,142 mn • Number of manufacturing sites: 177 (number of countries with manufacturing sites: >40) • Share of local-for-local production: ~95% Europe, ~85% China & ~75% USA Human • Diverse workforce: 107,900 employees representing 173 nationalities as of December 31, 2023 • Average hours of training per year and employee: 1 , 2 6.8 • Safety observation tours rate: 5.34 Social and relationship • Customer base evenly distributed among the three regions • Numerous partnerships with universities and research institutions We deliver leading financial performance • Comparable revenue growth: 14% • Operational EBITA margin: 16.9% • ROCE: 21.1% • FCF conversion to net income: 99% • EPS: $2.02, +55% year-on year We create value through world-class technology • Percentage of orders from products that are digital or digitally enabled: 55%3 • Number of priority patents, utility models and design applications filed in 2023: 4 Over 650 We enable a low-carbon society • Reduction of ABB’s scope 1 and 2 emissions: 76% since 2019 • Reduction of ABB’s up- and downstream scope 3 emissions: 5 Stayed flat since 2022 • Megatons of avoided customer emissions through products sold in 2023: 74 Mt We preserve resources • Reduction in the amount of waste sent to landfill: 40% since 2019 • Percentage of ABB’s products and solutions assessed against its Circularity Approach: 31% We promote social progress • Employee engagement score: 77/100 in 2023 • Proportion of women in senior management positions 6 : 21% as of December 31, 2023 • Community spending: $11.5 mn donated and ~4,800 person-days volunteered in 2023 • Lost-time injury frequency rate (LTIFR): 0.13 We embed a culture of integrity and transparency • Trust KPI – the rate of severity level 1 and 2 investigations where the reporter disclosed their identity: 60%7 • Engagement KPI – the volume of unique visitors on the Integrity Awareness Portal for integrity learnings: 80% of employees with online access. 7 This infographic is interactive. Click on a section to learn more about it. • Values • People • Leadership • Positioning • Reputation management • Code of Conduct • Internal controls & compliance • Risk management • Regulations, processes and policies • Decentralized setup – full divisional accountability • Performance management • Portfolio management This icon on the subsequent pages signifies your location within the value creation model. 25 24 ABB INTEGRATED REPORT 2023 VALUE CREATION Global megatrends are shaping our world. In- herently complex and interconnected, they transcend borders and markets and are trans- forming our societies. For businesses, govern- ments and countries, megatrends pose both opportunities and challenges. At ABB, we be- lieve that by relentlessly focusing on our pur- pose and continuing to deliver a leading offer- ing in electrification and automation, we are well positioned to capitalize on key megatrends and deliver superior value for our stakeholders in the long-term. At ABB, we take a broad view of external devel- opments including economic and geopolitical shifts. The key megatrends shaping our envi- ronment, industries and markets are demo- graphics, digitalization & artificial intelligence (AI), economic shifts and sustainability. Demographics By 2030, the world population is expected to grow by 8 percent to a total of 8.5 billion peo- ple¹. At the same time, thanks to continued economic development, the middle class is expected to expand to more than half (~56 per- cent) of the world’s population. The impacts will be a further rise in urbanization and an in- crease in demand for often already constrained resources (e.g., natural, energy, infrastructure) as cities expand and living standards improve. Moreover, demand for highly qualified workers continues to increase and is expected to ex- ceed labor supply, as working age population growth across several geographies is projected to remain stable or begin to decline as popula- tion ageing accelerates. To manage these shifts, businesses need to become more efficient and flexible in the way they operate and deliver their products and services. At ABB, our substantial investments in research and development (R&D) and man- ufacturing capacity allow us to work hand-in- hand with our customers to rethink their value chains, building on our leading automation and robotics offering. — Megatrends — Our business environment As a global company operating in a dynamic business environ- ment, we need to consider a wide range of economic, environ- mental, political and social developments. To keep up-to-date, we closely monitor evolving risks and opportunities and main- tain a continuous dialogue with our stakeholders. In line with ABB’s strategic direction, we continuously finetune our offering to reinforce our technology leadership in electrification and au- tomation and position ABB to capitalize on global megatrends. You are here in the value creation model SHARE OF WORKING AGE POPULATION (15–64) IN SELECTED COUNTRIES/REGIONS¹ China India Europe United States 74 72 70 68 66 64 62 60 58 56 2010 2020 2030 2040 2050 % 26 ABB INTEGRATED REPORT 2023 VALUE CREATION 1 UN World Population Prospects 2022, S&P Global 2 Grand view research, Data center market size, share and growth Digitalization & AI While AI has become increasingly prevalent in people’s lives over the past year, the advance of technology has long been moving us towards a future in which the physical and digital worlds merge. Across industries, digitalization is in- creasing productivity and resource efficiency, and making manufacturing more flexible, while improving quality and simplicity. In response to the shrinking labor force and the lack of qualified and experienced workers, de- mand for autonomous operations continues to increase. At the same time, emerging technolo- gies and increasing digital connectivity are fu- eling the world’s data growth and consequently the need to process and make sense of such data – demand for data centers is expected to increase by a CAGR of ~10 percent until 2030². As a global technology leader, our Robotics & Discrete Automation and Process Automation business areas use AI, digital connectivity and software to make robots smarter, accelerate automation and generally push the frontiers of technology. Our Electrification and Motion busi- ness areas provide many of the key technologies that data centers need to meet the increasing processing power required for AI applications. Economic shifts In our global business environment, the COVID-19 pandemic brought supply chain re- siliency to the top of the agenda of executives across industries. Businesses invested heavily to rethink and diversify their strategies up- and downstream, coming out of the pandemic stron- ger. However, the world has remained an uncer- tain and highly volatile place as underscored by KEY MEGATRENDS SHAPING OUR ENVIRONMENT Economic shifts Security of energy supply Resilience of supply chains Demographic Shrinking labor force Increasing global consumption Digitalization & AI Accelerating automation Higher data processing needs Sustainability Energy transition Higher energy efficiency Electrification – the world going electric supports ~50 % of customer offering Energy security supports ~20 % of customer offering Automation supports ~40 % of customer offering Emission reduction, energy efficiency supports ~35 % of customer offering 27 the wars in Ukraine and the Middle East with sig- nificant impact across our economies – be it the energy crisis in Europe and its knock-on effect particularly on Small and Medium Enterprises (SMEs) or the disruption of trade flows in the Red Sea, impacting 12 percent of global trade. Global gross domestic product (GDP) growth has yet to recover and is slowing down com- pared to before the COVID-19 pandemic, accom- panied by high (but slowly declining) inflation, high interest rates, and persistent recession risk across major economies. For businesses across industries this translates into a different, less certain mid-term outlook and means reconsid- ering investments in new capacity, uncertainty regarding customer demand and recalibrating assumptions of future growth markets. ABB has a long tradition of local-for-local man- ufacturing and extensive expertise in enabling companies to become resilient, flexible and effi- cient through our process automation, robotics as well as machine and factory automation solu- tions. As we continue to operate in economic un- certainty and businesses address the risk asso- ciated with single sourcing and manufacturing hubs and require more flexibility, better plan- ning, monitoring and management capabilities, ABB is well positioned to help our customers to make their value chains more resilient. Sustainability In the face of climate change, our society faces an urgent and pressing need to transition to a low-carbon society and preserve natural re- sources. At the same time, governments and businesses are under pressure to provide secure access to electricity to off-grid communities as well as to expand infrastructure and services to meet the needs of growing populations, which expect higher living standards. To enable an equitable transition, countries and businesses require solutions that are more energy efficient, that are powered by renewable or low-carbon energy sources, and that enable production with fewer inputs. While growing populations and rising urban- ization are putting pressure on infrastructure and increasing energy consumption, govern- ments are setting clear climate objectives, and incentivizing investments in the expansion and upgrading of the energy system. To further ac- celerate the adoption of low-carbon solutions, carbon pricing schemes are increasingly being used to encourage investment in energy effi- ciency and new forms of energy. Even though the cost of capital remains high in today’s infla- tionary environment, the most recent study by the International Energy Agency (IEA) predicts that annual investments in low-carbon technol- ogy will increase on average by 110 percent per year by 2030, while investments in energy effi- ciency are expected to increase by 46 percent annually over the same period. With ABB’s technology leadership in electrifica- tion and automation, we are creating superior value for our stakeholders as well as driving and supporting the shift to a more sustainable and resource-efficient future. Approximately 50 per- cent of our offering supports the trend toward electrification and about 35 percent directly enables higher energy efficiency, strongly posi- tioning us to help companies reduce and avoid emissions, cut resource use and move toward circular business models. STRONG GROWTH IN INVESTMENTS IN LOW-CARBON ENERGY SUPPLY AND ENERGY EFFICIENCY¹ 2016–2021 2022–2030 1,200 1,000 800 600 400 200 0 +46% increase in avg. annual investments $309 bn $453 bn $496 bn +110 % increase in avg. annual investments $1,040 bn Low-carbon energy Energy efficiency $ in billions 1 IEA World Energy Out- look 2023, Announced Pledges Scenario 28 ABB INTEGRATED REPORT 2023 VALUE CREATION Our value creation model underscores ABB’s commitment to create superior value for all our stakeholders in the short-, medium-, and long- term. We relentlessly execute on our strategic direction in alignment with the ABB Way and foster a close dialogue with key stakeholder groups to continuously shape our position and policies, finetuning our decentralized ABB Way operating model. Through both business as usual and topic-specific strategic discussions, we are better able to understand our stakehold- ers’ diverse perspectives on economic, environ- mental, social and governance matters. Their valuable insights help ABB to further shape our strategic direction and the way we manage risks and pursue opportunities. Stakeholder engagement Engaging with our stakeholders plays a founda- tional role in defining ABB’s strategic direction and driving our business. We are committed to consistent, transparent communication with our key stakeholder groups, including collaborative partnerships, customers, employees, govern- ments and civil society, our investment com- munity, and suppliers. We aim to build trust and foster long-term responsible business practices and relationships with our stakeholders. Stake- holders shape our business environment and influence the way ABB operates; they are also im- pacted by what we do and the value we create. Stakeholder voices provide a unique perspective on market trends, innovations and technologies to help us better understand how these are per- ceived across industries and geographies. We regularly engage with our main stakehold- ers in the normal course of business through various channels and as part of our materi- ality assessment. We strive to address their concerns and embed their input into our decision-making processes. Material topics for value creation In 2023, ABB conducted its first double materi- ality assessment, reflecting both an impact (in- side-out) and a business (outside-in) perspec- tive. This allowed us to get a clearer picture of our actual or potential impacts on the econ- omy, the environment, society and people, as well as to understand the business implications emerging from risks and opportunities related to our material topics. The methodology took into consideration the following regulatory requirements and guidance of reporting stan- dards: European Sustainability Reporting Stan- dards (ESRS), the provisions of the amended Swiss Code of Obligations related to trans- parency on non-financial matters, the Global Reporting Initiative (GRI) Standards, the Inte- grated Reporting Framework ( Framework), the IFRS Sustainability Disclosure Standards, — Stakeholder engagement and material topics Stakeholder group Primary engagement channels Collaborative partnerships • Memberships in associations and initiatives • Technology, research and innovation partnerships with leading companies, start-ups and universities/technical institutes Customers • Customer requests • Customer service and relationships • Customer trade shows • Partnerships, including on sustainability Employees • Annual performance reviews and employee engagement survey • Collective bargaining associations • Dialogue with the ABB Employees Council Europe, the representative body of all ABB employees in Europe • Global network of employee resource groups promoting D&I in the workplace • Learning and development opportunities Governments and civil society • Direct dialogue and meetings with regulators and community representatives • Donations and volunteering • Engagement with government agencies and other stakeholders to demonstrate the value of our products • Participation in international initiatives to address global issues • Strategic partnerships Investment community • Annual general meeting • Investor roadshows, conferences and capital markets days • One-on-one meetings • Reporting, press releases, investor webcasts, investor relations website Suppliers • Co-development initiatives • Early engagement during new product development • Monitoring through our Sustainable Supply Base Management (SSBM) program • On-site evaluations and audits • Town hall and supplier day events • Trainings and engagement in special projects on sustainability performance You are here in the value creation model 29 ABB’S DOUBLE MATERIALITY MATRIX 2023 Lowest Impact on ABB’s success Highest Data privacy & cyber security Business perfor- mance & resilience Products, solutions and services Employee development & wellbeing Circularity Climate Responsible sourcing Health & safety Human rights & labor standards Lowest Impact of ABB on the economy, environment and society including people Highest the Sustainability Accounting Standards Board (SASB) Standards and the Task Force on Cli- mate Related Financial Disclosures (TCFD) Recommendations. To conduct our materiality assessment, we solicited feedback from ap- proximately 60 key internal stakeholders cov- ering global and local perspectives at different levels of the company as well as functional and subject matter experts. In addition, we reached out to more than 1,400 external stakeholders: collaborative partners, customers, employee representatives, government and civil society, our investment community, as well as suppliers. The results of our dialogue on material top- ics with our internal and external stakeholders are summarized in our materiality matrix 2023, which identifies 10 material topics. Corporate & sustainability governance 30 ABB INTEGRATED REPORT 2023 VALUE CREATION Contribution towards the United Nations’ Sus- tainable Development Goals ABB has always been a strong advocate of the United Nations’ Sustainable Development Goals (SDGs). Following the update of our materiality assessment in 2023, we mapped the topics that we identified in our double materiality assess- ment against the 169 sub-targets of the SDGs. This process allowed us to identify four SDGs on which we have the greatest impact. The selection of these four SDGs is fully aligned with ABB’s purpose of enabling a more sustain- able and resource-efficient future with our tech- nology leadership in electrification and auto- mation. While ABB contributes most to the four SDGs below, we recognize the importance of the other SDGs and endeavor to contribute to their achievement whenever and wherever possible. → More information about the process and results of our materiality assessment can be found in our Sustainabil- ity Report 2023. ABB enables access to afford- able and sustainable energy through our portfolio of elec- trification, automation and energy-efficient solutions. ABB contributes to decent work and economic growth by provid- ing safe and fair employment, paying taxes and supporting local communities. ABB’s innovative technologies ac- tively contribute to sustainable industrialization and give us, our business partners and our cus- tomers the ability to move, work and live more sustainably. By reducing our own GHG emis- sions, empowering customers to avoid emissions and integrate renewables, and working with suppliers and partners to reduce their carbon footprints, ABB is enabling decarbonization and climate action. ABB supports the Sustainable Development Goals SUSTAINABLE DEVELOPMENT GOALS Ensure access to affordable, reliable, sustainable and modern energy for all. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation. Take urgent action to combat climate change and its impacts. 31 32 ABB INTEGRATED REPORT 2023 VALUE CREATION — Our inputs for value creation ABB’s main inputs for creating long-term value for our stake- holders can be categorized into six main groups: financial, intel- lectual, natural, manufactured, human and social & relationship. Additional details on the crucial inputs, including both financial and non-financial aspects, are provided through a combination of qualitative and quantitative data across the input groups. To drive sustainable value creation at ABB, we need to ensure that our inputs are not only bal- anced, but also complementary: we leverage our market leading position and access to financial inputs to continuously invest in research and development (R&D), our people, acquisitions and partnerships, and our manufacturing footprint and capabilities, including more sustainable and resource-efficient operations. Through the combined use of all our inputs, we increase both our financial output – which again allowed us to raise our financial targets in late 2023 and return cash to our shareholders – and our contributions to a sustainable society, for which we were also able to increase our ambition level in 2023. You are here in the value creation model 33 Financial input Financial inputs are the sum of funds available to ABB, represented in our value creation model as $13.4 billion in total stockholders’ equity and $26.8 billion in total liabilities. They enable ABB to invest in intellectual, natural, manufactured, human, and social and relationship inputs, and to transform them into outputs and outcomes. Intellectual input Intellectual inputs encompass R&D, innovation, intellectual property as well as the collective knowledge of our employees, all of which give us a competitive advantage that is not fully rec- ognized on the balance sheet. Our annual R&D investment amounts to approximately 4 per- cent of revenues and we further complement this with venture capital investments in tech- nology start-ups, focused on digital and soft- ware. This has supported the development of cutting-edge technology, which enables us to create superior value for our customers by op- timizing, electrifying and decarbonizing their operations. Advanced software is a key differ- entiator of our digital offering and about 55 per- cent of our approximately 7,500 employees in R&D are active in software development and we have more than 100 projects relating to Artificial Intelligence (AI) in progress across ABB. Natural input Natural inputs include the natural resources, en- ergy and materials used to provide services and products to our customers. We strive to produce and deliver our products, solutions and services in the most efficient way possible, using natural resources only as necessary. For the year ending December 31, 2023, our total energy consump- tion was 1,298 GWh, down from 1,413 GWh in 2022. This is a direct result of our continuous efforts to reduce emissions across our sites and switch to renewable energy sources. Similarly, we continue to focus on our water withdrawal particularly in water-stressed areas, reducing our water withdrawal from 2,815 to 2,545 kilo- tons compared to the prior reporting year. Manufactured input Manufactured inputs include the tools, ma- chines, plants, infrastructure and buildings that we need to produce our products and provide our services. As of December 31, 2023, net property, plant and equipment amounted to $4,142 million, which was primarily invested in our 177 manufacturing sites in over 40 coun- tries. Our focus on “global reach with local presence” allows us to quickly scale innovations across our markets. Moreover, our long tradi- tion of local-for-local manufacturing allows us to remain close to customers, exemplified by approximately 95, 85 and 75 percent of prod- ucts and solutions sold in Europe, China and the United States, respectively, being produced locally. We invest approximately $800 million annually in capital expenditure (CapEx) to en- sure that our manufacturing capabilities can support our organic growth ambitions and se- cure our efficient production. Human input The health, wellbeing, intellectual engagement, motivation and competence of our more than 105,000 employees representing 173 nationali- ties, as well as their ability to do their jobs well and fulfill their personal potential, are essential to our ability to create value. With our “Learn, Connect, Grow” framework at the heart of our people strategy, our employees spend on av- erage 6.8 hours per year on training across our various learning platforms. In 2023, this also included newly launched mandatory integri- ty-focused learning modules, accompanied by a strengthened emphasis on the tone of integrity set by top-level executives and middle man- agement. Moreover, with a focus on providing a safe working environment in which our em- ployees can learn, connect and grow, we further increased our rate of safety observation tours at our sites from 5.28 to 5.34. Social and relationship input Social and relationship inputs are the relation- ships we have with our stakeholders, includ- ing collaborative partnerships, customers, employees, governments and civil society, the investment community and suppliers. Having served various industry and market verticals for decades, we have developed unique domain expertise, a large installed base and long-term relationships with end customers and channel partners. This has enabled us to build a deep understanding of customer needs and opera- tions. We always strive to maintain close rela- tionships with our customers to ensure that we provide them with the highest value possible. As a respected technology leader in electrifica- tion and automation, we also engage in part- nerships with universities and research institu- tions to leverage our resources to create value. We had numerous partnerships with universi- ties and research institutions in 2023. — Inputs — Strategic direction for value creation — Our strategic direction and the ABB Way ABB’s strategic direction is deeply rooted in our purpose and designed to achieve our overarching objective of cre- ating superior value for all our stakeholders. It is realized through the ABB Way, our decentralized operating model. You are here in the value creation model Building on our decentralized operating model, ABB’s strategic direction is set at the Group level. However, as the highest operating level at ABB, our divisions have full ownership and accountability for their respective strategies, performance and resources and are expected to make strategic and operational decisions in line with our strategic direction, including: • allocating capital systematically for organic (including R&D and CapEx) and inorganic growth (e.g., bolt-on acquisitions), aligned with ABB’s purpose; • increasing ABB’s exposure to high-growth, profitable markets that are benefiting from key megatrends; • striving for market leadership positions in all our businesses and enhancing our technology and digital leadership through software-en- abled products and solutions and stand-alone software and digital services; • building resilience to successfully manage a global business in an increasingly volatile world; and • embedding sustainability in all our processes and across our value chain. 34 ABB INTEGRATED REPORT 2023 VALUE CREATION With our purpose at its core, the ABB Way de- fines “how” we create superior value for our stakeholders through our business areas, di- visions and lean corporate center. It has four components: our business model, as well as our approach to developing our people and culture, maintaining good governance, and nurturing our brand. Owned and controlled by ABB’s Executive Com- mittee and mandatory for all divisions, the ABB Way serves as the “glue” that holds the Group together and empowers our divisions with full ownership and accountability for their respec- tive strategies, performance and resources. It provides select standardized policies, processes and systems (including portfolio and perfor- mance management), supports a strong culture of governance and integrity, and enables us to build and protect our brand and reputation. Business model ABB’s business model determines how we gov- ern our portfolio of 19 divisions, manage perfor- mance and drive value creation for all our stake- holders. Our business model ensures that under ABB’s decentralized structure with full divisional accountability, all divisions follow the Group’s strategic direction and pursue opportunities to cooperate, leveraging synergies to best serve our customers and create competitive advan- tages. ABB’s belief that “smart leaders collabo- rate” is deeply embedded in our business model; we consider it an enabler for future growth and efficiency in operations. → See Our business areas for more detail. — How we create value the ABB Way THE ABB WAY ABB PURPOSE • Values • People • Leadership • Positioning • Reputation management • Code of Conduct • Internal controls & compliance • Risk management • Regulations, processes and policies • Decentralized setup – full divisional accountability • Performance management • Portfolio management 35 Performance management We aim to consistently improve our perfor- mance and deliver on our objective of superior value creation. Building on our “continuous improvement mindset”, we translate our strate- gic priorities into short- and long-term targets. Both financial performance and progress on sustainability are addressed by these targets and supported by appropriate incentives. To plan, measure, monitor and review progress against our short- and long-term targets, ABB leverages an established scorecard system and a holistic set of KPIs, covering, among others, the core KPIs included in ABB’s financial target framework: revenue growth, Operational EBITA margin, Return on Capital Employed (ROCE), Free Cash Flow (FCF) conversion to net income, and Earnings per Share (EPS) growth. Further- more, incentives are leveraged to maintain a strong link between strategy and compensa- tion programs. This also includes reinforcing our commitment towards sustainability, which is considered in both the Long-Term Incentive Plan (LTIP) for around 100 executives, includ- ing Executive Committee members and (one measure) and the Annual Incentive Plan (AIP) (at least two sustainability-related goals in the in- dividual component) for Executive Committee members. Portfolio management ABB actively and systematically manages its business portfolio: value creation is focused both on organic and inorganic investments to further increase ABB’s exposure to megatrends, fill technology gaps, complement or expand our offering in high-growth segments, gain access to new geographies, and boost economies of scale through consolidation. Our capital alloca- tion for investments in organic and inorganic growth follows a clear, two-pronged approach to maximize value creation; strategic mandates are leveraged to determine whether a division should focus on accelerating growth, whereas clear portfolio assessment criteria are used to facilitate decisions on portfolio moves. ABB assigns each division a strategic man- date – stability, profitability or growth – that reflects on its performance and translates into strategic priorities for each division. As part of our portfolio assessment approach, we review divisions’ performance and strategic mandates from a Group perspective. To reflect on our re- vised financial and sustainability targets, we further evolved our portfolio assessment ap- proach and also fully embedded sustainability into our methodology through a distinct sus- tainability lens. Our ambition is to transition divisions to a growth mandate, enabling them to operate at best-in-class performance and to actively pursue value-creating, bolt-on acquisi- tions in addition to organic growth. The strategic mandates also imply that the majority of ABB’s bolt-on acquisitions should be made by divisions with a growth mandate, aiming for five to ten small- to mid-sized acqui- sitions per year. Regardless of the acquisition size, the targets must match ABB’s assessment criteria in order to demonstrate that ABB is a better future owner and can deliver superior value creation. Similarly, existing businesses or → See the chapter Targets and performance overview for a comprehensive overview. → See the chapter Perfor- mance-based compensation for more details on our compensation programs. DIVISIONAL STRATEGIC MANDATES Stability • Restructure • Transform offering/ business model Profitability • Improve margin/return • Moderate investment in growth • Select technology add-on acquisitions Growth • Growth above market while keeping high/return level • Invest strongly in organic growth (e.g., digital, R&D, sales/service, capacity) • Actively pursue acquisitions: including technology additions, larger market consolidation moves and penetration of new market segments You are here in the value creation model 36 ABB INTEGRATED REPORT 2023 VALUE CREATION parts of divisions that structurally no longer fit the assessment criteria become exit candidates. People & culture ABB’s four values – courage, care, curiosity and collaboration – are the cornerstones of our cul- ture and reflect the attitudes and behaviors required to drive our decentralized company with its empowered divisions. Our values guide us in building a safe, fair, equitable and inclu- sive work environment, enabling us to attract, retain and develop talent. We foster a culture of life-long learning and em- power our people to manage their own careers within ABB by providing them with tools and re- sources to “Learn, Connect, Grow”. All open job positions up to Executive Committee level are posted internally on our open job market and anyone may apply. Our people strategy also en- ables employees to integrate learning into their work and personal life through networking and connecting with peers, and to identify and pur- sue growth opportunities across ABB. Leader- ship development continues to be a key focus area for ABB. Our leadership teams review the strengths and development needs of their team members and support their development to ensure a long-term approach towards building strong and diverse leaders who enable us to continue to push the boundaries of technology and deliver on our purpose. Governance ABB’s comprehensive governance framework is designed to safeguard our company, peo- ple, assets and reputation from potential harm, enabling ABB to achieve our objective of creat- ing superior value for all our stakeholders. The framework encompasses strong risk and com- pliance management and adequate processes, policies and controls, which respond to regula- tory requirements. Furthermore, the framework embeds integrity as the foundation for every- thing we do and defines how we work, collabo- rate and do business across our organization. Our revised Code of Conduct articulates integ- rity as our core principle. It guides our employ- ees to follow the law, act honorably and treat each other with respect. In doing so, we gain the trust of our stakeholders, including custom- ers, business partners, shareholders and the communities and societies we serve. Integrity underpins our uncompromising commitment to adhere to the highest standards of ethical busi- ness conduct and professional behavior. Brand Our ABB brand is an expression of our purpose and unites us as a company. Through a single voice, it enables us to articulate our distinct identity as a technology pioneer, differentiates us from peers, and positions us as a leader in the market. Our brand also enables us to better attract talent and investors and enforces ac- countability to match our words with our ac- tions. To our stakeholders, the ABB brand is a sign of trust and superior value. → For more information about our people-related performance, please refer to the chapter We promote social progress. → For an overview of our governance framework, please refer to chapter Good Governance. ACQUISITION CRITERIA 1–2 % Acquired average growth through economic cycle STRATEGIC Fit with ABB’s purpose • Electrification & automation • Sustainability & resource-efficiency • Technology leadership Business attractiveness • Market growth and market profitability • Contribute to ABB’s ability to hold a no. 1-2 market position • Financial performance of the target 37 — Enterprise risk management — Risks and opportunities The proactive management of risks is an integral part of how we do busi- ness. Our defined risk management framework enables us to identify and assess risks early and ensures that we have appropriate responses to manage and mitigate their effects across all levels of ABB. At the same time, we seek to turn the risks we face into potential opportunities and strive to manage both risks and opportunities in a responsible way. This approach supports the creation and protection of value for ABB, our stakeholders and society. ABB’S ENTERPRISE RISK MANAGEMENT PROCESS 4. Risk mitigation effectiveness monitoring 3. Risk mitigation planning & implementation 1. Identification of strategic business objectives 2. Identification & assessment of risks The enterprise risk management (ERM) pro- cess is a holistic approach to identifying risks that could adversely impact the achievement of ABB’s strategic business objectives and lead to a material financial impact. The ERM process is embedded in our ABB Way operating model and encompasses all levels of our organization. It provides our leadership, including our Exec- utive Committee and the Finance, Audit and Compliance Committee (FACC) of the Board of Directors, with a comprehensive overview of the most critical risks faced by our business. This information informs our overall strategy and risk discussions and allows us to make better-informed decisions to protect value and take calculated risks to create value, in a rapidly evolving societal and business environment. The ERM process is cyclical and based on the ongoing identification, assessment, mitigation and monitoring of the most critical risks af- fecting ABB. Our detailed methodology starts with the identification of our strategic business objectives. Next, we identify the most critical risks which could prevent us from achieving these objectives and lead to a potential ma- terial financial impact in the next five years. These risks are then assessed in terms of their potential impact, likelihood and speed of oc- currence. Specific responses to address these risks are then planned, implemented and con- tinuously monitored to ensure they remain ef- fective. The ERM process categorizes risks as strategic, financial or operational: 38 ABB INTEGRATED REPORT 2023 VALUE CREATION Top five risk clusters Examples of reported risks Examples of risk responses Cyber security incidents Potential cyber incidents involving ABB or third parties due to a global increase in sophisticated cyberattacks, high inter- connectivity and cyber dependency across the supply chain and increasing process digitalization combined with a com- plex IS landscape. • Cyber security assessments and findings remediation & tools to identify and prevent cyberattacks. • Onboarding of IT assets to global security solutions and business continuity and disaster recovery planning. Geopolitical instability Increased geopolitical tensions resulting in global targeted technology decoupling, protectionism, trade restrictions, “friendshoring”, new regulations and employee security implications. • Evaluation and quantification of exposure to and de- pendency on leading geographical markets. • Design of a balanced supplier base across geographies and further shift to local supplier strategy. Economic slowdown Potential recessions across leading economies, increase in inflation and interest rates globally and a deterioration of macroeconomic factors in China could all lead to a drop in demand and reduced financial performance. • Identification of growth areas, revenue opportunities and cost reduction measures. • Assessment of short-, mid- and long-term economic developments to identify market and demand shifts. Lack of qualified/available human resources Potential shortage of the right skilled resources or inability to retain those skilled resources due to fierce global market competition for talent, aging workforces, technical exper- tise erosion and fast-changing skill sets. • Agile manpower planning with the use of talent agen- cies and external service providers. • Development of people strategies, early talent pro- grams and recognition of key individuals. Availability of components and raw materials Possible shortages of components and raw materials due to high dependency on few suppliers, supply chain shortages or inability to adapt to or comply with changes in import regulations. • Development of alternative materials with the support of R&D. • Extensive activity to minimize single source components. TOP FIVE ENTERPRISE RISK CLUSTERS 2023 1. Strategic: Strategic risks can relate to any of the fol- lowing: macroeconomic factors; market and technological developments; competitor and industry shifts; environmental, social and gov- ernance aspects; geopolitical developments; and/or portfolio management topics. These factors can have both negative and positive impacts on our business and create significant business opportunities. 2. Operational: Operational risks can relate to any of the fol- lowing: engineering, manufacturing, project management and productivity topics; health, safety and environment management; integ- rity and compliance aspects; supply chain management; cyber and information security threats; and/or talent attraction and reten - tion. These factors can have adverse impacts on the day-to-day operations of our business as well as positive impacts by being sources of competitive advantage. 3. Financial: Financial risks can relate to any of the follow- ing: risks arising from ABB’s international fi- nancial activities; fluctuations in currency or interest rates; volatility in commodity prices; accounting and financial reporting require- ments; financial planning, analysis and man- agement aspects; and/or compliance with tax obligations. These factors are key to ensuring ABB has appropriate finance structures in place and that all financial compliance requirements enabling us to meet our capital needs are met. We strive to turn risks into opportunities not only to minimize their downsides but to create value for ABB and our stakeholders, wherever possible. Our decentralized business model al- lows us to stay agile, quickly adjust to changing environments, stay close to market develop- ments and foster innovative responses to risks. As highlighted by the results of this year’s dou- ble materiality assessment, many of the identi- fied material topics offer potential positive im- pacts and opportunities to further create value for ABB, our stakeholders and society. For more details refer to the Stakeholder engagement and material topics section. Below are the top five enterprise risk clusters facing ABB over the next five years as identified in the 2023 ERM process from across ABB: IT SECURITY INCIDENT IN MAY In May 2023, ABB became aware of an IT security incident impacting certain company IT systems. As a result of the incident, ABB started an investigation, notified certain law enforcement and data protection authorities, and worked with leading experts to determine the nature and scope of the incident. ABB also took steps to contain the incident and further enhance the security of its systems. Based on its investigation, ABB determined that an unauthorized third-party accessed certain ABB systems and exfiltrated certain data. Following a review of the data, where neces- sary ABB has provided notifications to individuals and organizations. To date, ABB has no evidence to suggest that any information has been misused as a result of this incident. ABB will continue to monitor this. 39 — Sustainability risks and opportunities Risks and opportunities related to sustainabil- ity are of particular interest to ABB due to their potential impact on our value creation. Align- ment with our Sustainability Agenda calls for diligent identification and monitoring of such risks and opportunities. Our financial performance is closely linked to sustainability issues. A subtle change in climate, the environment, regulation and social trend factors can affect our business environment and operations. That is why at ABB we embed sustainability in everything we do and engage with our stakeholders every step of the way. The key risks associated with the material top- ics from our double materiality assessment are described in the “material and non-material topics description” section of the Sustainability Report. Of these risks, those specifically relat- ing to climate change (physical and transitional) are discussed in more detail in the TCFD Recom- mendations report in the Sustainability Report. 40 ABB INTEGRATED REPORT 2023 VALUE CREATION ABB is particularly well positioned to help ad- dress challenges related to climate change. The urgent need for energy-efficient and low-car- bon products and solutions offers a huge op- portunity for our business to contribute to a more resilient society. For 2023, we submitted our second report in line with TCFD Recommen- dations to disclose our activities towards cli- mate change mitigation, the reduction of neg- ative environmental impacts, and how climate change affects our financial position and over- all business strategy. Starting from the finan- cial year 2024, companies listed in Switzerland will be required to report in line with TCFD Rec- ommendations following the Swiss Ordinance on Climate Disclosures. Governance Our Board of Directors reviews and approves the Sustainability Agenda and related targets, including climate targets. The ABB Group Ex- ecutive Committee validates the Sustainability Agenda and its implementation. It is responsi- ble for reviewing strategic targets, including climate-related targets as well as for ensuring that a sustainability culture is embedded in our business decision making. The Sustainability Council is the operational body that oversees implementation of the Sustainability Agenda, reviews developments and monitors progress toward targets, including climate targets. Risk management We are constantly monitoring and assessing climate-related financial risks and have iden- tified the following main risk categories as relevant to ABB: • physical risks: e.g., increased frequency of ex- treme weather events, such as floods or storms, affecting our direct operations and supply chain; and • transitional risks: e.g., policy, legal and mar- ket risks resulting from a transition to a lower-carbon economy. We have started working on financial quan- tification of these risks, commencing with physical risks affecting our operational sites. Climate-related risks also apply to our sup- pliers and customers across the value chain. Upstream business continuity risks related to climate change, such as extreme weather conditions affecting our suppliers, are cov- ered through comprehensive monitoring and development of our supply base. Our Sustain- able Supply Base Management (SSBM) program helps us assess and improve the sustainability performance of our suppliers. For own sites, ABB has well-developed emergency response programs in place to manage potential impacts from climate change, such as storms or floods. Opportunities ABB capitalizes on climate-related opportu- nities and seeks to build climate resilience through our ABB Way operating model. We can reduce direct operating costs by increasing resource efficiency and shifting towards renewable energy sources. We can also lever- age market opportunities by investing in inno- vative technological developments matching our customers’ needs and providing low emis- sions products and services. Our end-to-end energy management solutions such as smart energy, building automation and mobility systems assist consumers to accelerate their sustainability journey. Impact on our business resilience and strategy We analyze risk exposure to our operations and consider three climate change scenarios to better understand the potential implications of different temperature increases in the fu- ture. We are currently working on enhancing our analysis to include all our sites and sup- pliers. Thanks to our technology leadership in electrification and automation, we can also help our customers and suppliers reduce their GHG emissions with our solutions for smart buildings, urban infrastructure, clean energy, energy efficiency and electric mobility. → Our full TCFD report 2023 can be found in our Sustainability Report 2023. — TCFD report summary 41 03 Outputs and outcomes 43 Targets and performance overview 45 We deliver leading financial performance 55 We create value through world-class technology 61 We enable a low-carbon society 66 We preserve resources 70 We promote social progress 76 We embed a culture of integrity and transparency along the extended value chain WE DELIVER LEADING FINANCIAL PERFORMANCE Targets Prior cycle targets 1 2023 Status Revenue growth 4–7% annual average through economic cycle 2 14% Operational EBITA margin ≥15% 16.9% ROCE (return on capital employed) 15–20% 21.1% Free cash flow (FCF) conversion to net income ~100% 99% Basic EPS (earnings per share) growth Growth > revenue growth 55% WE ENABLE A LOW-CARBON SOCIETY Targets Baseline (year) 3 2023 Status Reduce own scope 1 and 2 CO₂e emissions by at least 80% by 2030 and by 100% by 2050 636 kilotons CO2 e (adjusted for portfolio changes) (2019) 151 kilotons CO2 e Reduce scope 3 CO₂e emissions by 25% by 2030 and by 90% by 2050 (representative scenario)4 76,834 kilotons CO2e ( 2022) 76,665 kilotons CO2 e Reduce scope 3 CO₂e emissions by 25% by 2030 and by 90% by 2050 (strict scenario) 5 392,188 kilotons CO 2e ( 2022) 436,346 kilotons CO2 e Ambition to avoid 600 megatons CO₂e emissions throughout lifetime of products sold from 2022 to 20306 65 megatons CO2e ( 2022) 74 megatons CO2 e WE PRESERVE RESOURCES Targets Baseline (year) 3 2023 Status Cover at least 80% of ABB’s portfolio of products and solutions with our Circularity Approach by 20307 n.a. 31% (share of ABB’s products and solutions assessed)8 Send zero waste to landfill while reducing waste genera- tion by 2030 16.8 kilotons (2019), equiva - lent to 8.8% of total waste (adjusted for portfolio changes 10.1 kilotons, equivalent to 6.3% of total waste WE PROMOTE SOCIAL PROGRESS Targets 2023 Baseline (year) 3 2023 Status Zero harm to our people and contractors – we aim for a gradual reduction in lost time from incidents (LTIFR) 0.24 (2019) 9 0.13 Increase proportion of women in senior management roles 10 to 25% by 2 030 11.7% (2019) 21.0% Achieve a top-tier employee engagement score 71/100 (2019) 77/100 Expand programs for community engagement n.a. As part of the improvement process started in 2022, in 2023 we assessed our community engagement positioning and revised and expanded the scope of action, now focused on education, emergency and disaster relief, community empowerment, and environment and conservation. 1 Our updated targets can be found on page 54. 2 Calculated to exclude FX impacts and transformational acquisitions and divestments, includes bolt-on acquisitions and divestments within divisions. 3 Where baseline applies. 4 Representative scenario: Energy loss used as basis for calculations.; for further details and explanation see our Sustainability Report 2023. 5 Strict scenario: Energy input used as basis for calculations; for further details and explanation see our Sustainability Report 2023. 6 This ambition is not part of the committed targets. 7 Based on revenues from hardware-based products and solutions, where granularity of financial systems allows. Service revenues are excluded. 8 The circularity score of the assessed products and solutions is to be calculated once a representative share of the portfolio has been assessed. 9 Baseline 2019 excludes the Power Grids business and the Turbocharging division. 10 At ABB, senior managers are defined as employees in Hay grades 1–7. — Targets and performance overview We have established a set of short-, mid- and long-term targets, supported by appropriate incentives, to manage our performance and achieve our strategic priorities. These targets encompass both financial performance and progress on sustainability. The table below shows the summary of our progress toward our targets. 43 WE EMBED A CULTURE OF INTEGRITY AND TRANSPARENCY ALONG THE EXTENDED VALUE CHAIN Targets 2030 Baseline (year) 1 2023 Status Global framework for assessing and mitigating third-party integrity risks through risk-based due diligence and life cycle monitoring n.a. This target measures the implementation of a global framework for assessing third-party integrity risks. It is an ongoing and critical organization-wide, integ- rity-based enhancement, which strengthens how we onboard and manage the life cycle of our relationships with suppliers, sales channels and customers. Framework established and operational. Integrity due diligence and risk management enhancements for suppliers (buy-side) and sales channels (sell-side) launched globally. Global Integrity Program underpinned by account- ability for integrity and an adaptive risk management strategy gained from insights through targeted learnings, transparent reporting and monitoring n.a. This target measures the implementation and effec- tiveness of our Global Integrity Program through how we drive individual accountability for integrity and adapt our risk management strategy to real-time data insights gained from integrity-based learnings, re- porting and monitoring. 1. Trust KPI – the rate of severity level 1 and 2 investi - gations where the reporter disclosed their identity: • Year 1 (January 1, 2021, to December 31, 2021): 57% of reporters; • Year 1 and 2 (January 1, 2021, to December 31, 2022): 60% of reporters; • Year 1, 2 and 3 (January 1, 2021, to December 31, 2023): 60% of reporters. 2. Engagement KPI – the volume of unique visitors on the Integrity Awareness Portal for integrity learnings: • Year 1 (January 1, 2021, to December 31, 2021): 25% of employees with online access; • Year 1 and 2 (January 1, 2021, to December 31, 2022): 69% of employees with online access; • Year 1 & 2 & 3 (January 1, 2021, to December 31, 2023): 80% of employees with online access. At least 80% of supply spending in focus countries2 covered by Sustainable Supply Base Management (SSBM) by 2030 n.a. Using a risk-based approach, a mid-term 2025 target has been set, focusing on high-risk suppliers in focus countries. 2 At least 80% of spending on high-risk suppliers in focus countries 2 covered by SSBM by 2025 In 2023, we reached 42% of spend on high-risk suppliers in focus countries 2 covered by SSBM. Linking sustainability targets to executives’ variable pay Under the Annual Incentive Plan (AIP), a safety goal was included within the indi- vidual measure for some member of ABB’s Executive Committee (EC). The in- dividual measure had a weighting of 20 percent of the executive’s target AIP (2019). Under the AIP, at least two sustainability-related per- formance goals are included within the individual measure for each member of ABB’s EC. The individual measure has a weighting of 20 percent of the execu - tive’s target AIP. Under the Long-Term Incentive Plan (LTIP), two performance measures with equal weighting of 50 percent were con - sidered, namely average earnings per share and relative total shareholder re- turn. The LTIP was awarded to around 100 executives, including Executive Com - mittee members and division presidents. Vesting under the LTIP was subject to the achievement of the plan specific targets over a period of three years (2019). One of the three performance measures under ABB’s LTIP is based on achievement of a corporate sustain- ability target and carries a weighting of 20 percent. The LTIP is awarded to around 100 executives, includ - ing EC members and division presidents. Vesting un- der the LTIP is subject to the achievement of the plan specific targets over a period of three years. 1 Where baseline applies. 2 Current focus countries are Argentina, Brazil, Bulgaria, China, Colombia, India, Indonesia, Malaysia, Mexico, Peru, Poland, Saudi Arabia, South Africa, Thailand, Türkiye and Vietnam. 44 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES — We deliver leading financial performance Through our focused portfolio of sustainability and resource-efficient products, solutions and services, we generate increasing growth and profitability, driven by improvements in the quality of our revenues and the exposure of our decentralized divisions to high-growth markets. Strong financial performance allows for solid and attractive shareholder returns and sustains our long-term value creation for all our stakeholders. In 2023 we delivered a strong operational re- sult as we executed on our strong order backlog which was built up during a period of a strained value chain, inflation and an energy crisis. It was also another year of robust price execution where the linked benefits more than offset the inflation in labor costs while the margin was further supported by lower inflation-affected input costs and freight. In the wake of normal- izing value chains, price management progres- sively returned to be customer value driven. The energy crisis triggered a series of customer investments throughout the year and further highlighted their need to ramp up investments in energy efficiency and transition to renewable energy sources. During the year we saw high cus- tomer activity in the areas of LNG and hydrogen, highlighting how relevant our offering and tech- nologies are to address these energy challenges. The ABB Way operating model facilitates more efficient ways of working which, combined with a strong market situation, led to increased op- erational results. We delivered record segment profit (Operational EBITA) and continued to see our divisions progress through their strategic mandates of stability and profitability before growth. With approximately 70 percent of di- vision revenues now covered under a growth mandate we are increasingly shifting our focus to growth. We continued to be active in portfolio manage- ment and completed the sale of our Power Con- version Division in July, marking the completion of the three announced divisional exits. Active portfolio management continues to be part of our performance culture and is an inte- grated part of the responsibilities of divisional management teams. This includes identifying areas for inorganic growth through acquisitions related to new segments, new market access, better economies of scale or filling technology gaps. The divisions also assess, based on sys- tematic portfolio reviews, whether, ultimately, their division is the best owner of their differ- ent businesses. During 2023, we also continued to make strategic venture capital investments focused in the areas of digital capabilities and software, completing nine new investments during the year and a number of follow-on in- vestments in existing ventures. The divisions continue to build up their acquisition target pipelines and, during 2023, we completed the acquisitions of the Siemens low-voltage mo- tor business led by the NEMA motors division, strengthened our smart home technology port- folio with the acquisition of EVE systems led by the Smart Buildings Division, and completed four other smaller bolt-on acquisitions primar- ily related to software and AI technology. As part of our future strategy, we continue to aim to complete five to ten small to mid-size bolt-on acquisitions each year. On the divestment side, the Energy Industries Division completed the divestment of its technical engineering consul- tancy business in the United Kingdom and the Smart Buildings Division divested their indus- trial plugs and sockets product line. You are here in the value creation model 45 Orders In 2023, total orders decreased 1 percent (in- creased 3 percent comparable¹) compared with 2022. Excluding the impact of exchange rates and portfolio changes, three out of four busi- ness areas contributed to the order growth from last year’s high level. Order momentum was strongest in the systems- and project-re- lated business, driven predominantly by the medium-voltage segment and process-related industries. This offset softening from last year’s high order level in the short-cycle businesses, which was mainly evident in the residential con- struction segment and across the board in dis- crete manufacturing outside of the automotive industry, where customers normalized order patterns in the face of shortening delivery lead times. Growth rates were highest in the Process Automation business area even without the Turbocharging division (Accelleron), which was spun off in October 2022. While the absence of the Turbocharging division has impacted the or- der growth across the business area by 12 per- cent, the comparable order growth without the Turbocharging division was up by 24 percent. The Electrification business area was flat (in- creased 3 percent comparable¹) and the Motion business area reported mid-single digit growth. The former was impacted by the sale of the Power Conversion business in July 2023. Ro- botics & Discrete Automation reported a steep decline in orders of 26 percent (25 percent com- parable¹), which were hampered by customers normalizing order patterns in a period of short- ening delivery lead times, with added pressure from weakness in the underlying Robotics mar- ket in China outside the automotive segment. In 2023, orders increased 5 percent in the Amer- icas (7 percent comparable¹), with orders grow- ing in the U.S., Canada, and Chile. The increase in the U.S. includes two large orders totaling $435 million with a multi-year fulfillment pe- riod. In Europe, orders decreased 3 percent (1 percent comparable¹). Orders were higher in Norway and the United Kingdom while they declined in Switzerland and Poland. Despite the impact of an order reversal of approximately $170 million recorded in 2022, orders decreased in Germany as well. In Asia, Middle East and Africa, orders decreased 4 percent (increased 4 percent comparable¹). Order growth in India, Saudi Arabia and other markets more than off- set the decline in China. Revenues In 2023, revenues increased by 9 percent (14 percent comparable¹). The normalization of supply chains facilitated conversion of or- der backlog into strong revenue growth during the year. All business areas reported revenue growth, benefiting from increased volumes and positive price development. Growth was high- est in the Robotics & Discrete Automation and Motion business areas. The increase in the Ro- botics & Discrete Automation business area re- flects improved order backlog execution as sup- ply chain constraints eased in 2023, as well as the negative impact early in 2022 of a COVID 19 shutdown in China. The Electrification business area achieved a high single-digit growth rate despite the adverse impact from the divest- ment of the Power Conversion division in July 2023 which impacted growth rates in the busi- ness area by 2 percent. The Process Automa- tion business area saw mid-single digit growth in local currencies despite the spin-off of the Turbocharging division in October 2022, which had a negative impact on revenue growth in the business area of approximately 11 percent. In 2023, revenues increased 16 percent in the Americas (18 percent comparable¹), where rev- enues in the United States increased 17 per- cent (21 percent comparable¹). Revenues in the Americas also experienced strong growth in Canada, Brazil, Argentina and Chile. In Europe, revenues increased 12 percent (14 percent com- parable¹) and were higher across all business areas. Revenue growth was the highest in Italy, Türkiye, Sweden, Norway and the United King- dom. In Asia, Middle East and Africa, revenues were flat (increased 8 percent comparable¹) compared to 2022. Revenues grew strongest in India and Saudi Arabia while they decreased in China and South Korea. The spin-off of the Tur- bocharging division in October 2022 also had a negative impact of 3 percent on the revenue growth in Asia, Middle East and Africa, 2 per- cent in Europe and 1 percent in the Americas. — Orders and revenues 1 For non-GAAP measures see chapter Alternative performance measures. → For additional information and analysis about individ- ual business area revenues and order performance, refer to the relevant sections of the business analysis in our Financial Report 2023. 46 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES ORDERS REVENUES GROWTH FY 2023 FY 2023 Change year-on-year Orders Revenues Comparable 3% 14% FX -2% -2% Portfolio changes -2% -3% Total -1% 9% ORDERS BY REGION ($ in millions, unless otherwise indicated) FY 2023 FY 2022 Change US$ Comparable 1 Europe 11,458 11,778 -3% -1% The Americas 12,437 11,825 5% 7% Asia, Middle East and Africa 9,923 10,385 -4% 4% ABB Group 33,818 33,988 -1% 3% REVENUES BY REGION ($ in millions, unless otherwise indicated) FY 2023 FY 2022 Change US$ Comparable 1 Europe 11,568 10,285 12% 14% The Americas 11,090 9,573 16% 18% Asia, Middle East and Africa 9,577 9,588 0% 8% ABB Group 32,235 29,446 9% 14% 35,000 30,000 25,000 20,000 % $ in millions 2023 20 10 0 -10 2020 2021 2019 2022 35,000 30,000 25,000 20,000 20 10 0 -10 % $ in millions 2023 2020 2021 2022 2019 Orders Comparable growth % Revenues Comparable growth % 47 — Earnings Gross profit Gross profit increased by 15 percent (16 per- cent in constant currency 1 ) to $ 11,214 million in 2023, resulting in a gross margin improvement of 180 basis points to 34.8 percent. Gross profit improved in all business areas, with Electrifica- tion, Motion and Robotics & Discrete Automa- tion reporting high double-digit growth driven by both volume and price. Process Automation improved by at a high-single digit rate despite the exit of the high-margin Turbocharging di- vision (Accelleron) driven by positive mix and project selectivity. Income from operations Income from operations in 2023 amounted to $4,871 million, representing a strong increase of 46 percent from $3,337 million in the prior year. The improvement was primarily driven by stronger operational performance. Additional support to the improvement rate was due to 2022 being burdened by non-operational items which included costs of approximately $315 mil- lion relating to the legacy Kusile project as well as restructuring and restructuring related ex- penses of approximately $250 million due to the exit of the full train retrofit business in non- core operations, as well as charges related to the exit of the Russia business. Results in 2023 were also supported from gains of $101 million from selling businesses, including the divest- ment of the Power Conversion business. Operational EBITA 2 In 2023, Operational EBITA increased by 20 per- cent (20 percent in constant currency) to $5,427 million and the Operational EBITA mar- gin 2 was up by 160 basis points to 16.9 percent. The main drivers for the improvement were positive impacts from successful price man- agement and operational leverage on higher volumes, which more than offset inflation mainly in labor costs but to some extent also in commodities. Selling, general and administra- tive expenses declined in relation to revenues to 17.2 percent from 17.4 percent in 2022. Oper- ational EBITA in Corporate and Other amounted to -$430 million, of which -$167 million related to the E-mobility business which was negatively impacted by inventory related provisions as well as technology investments geared towards a more focused product strategy to secure a continued market leading position. Net finance expenses and non-operational pension credits The net finance expenses increased by $52 mil- lion to $110 million in 2023. In 2023, both inter- est income and expense reflected increases in market interest rates especially for the U.S. dol- lar and Euro. Interest expense on our external debt was higher both due to higher debt levels but also higher interest rates on floating rate obligations. Non-operational pension credits declined by $98 million to $17 million compared to the same period last year, mainly driven by higher interest costs on the benefit obligations. Income tax Income tax expense was $930 million with an effective tax rate of 19.5 percent down from 22.3 percent in 2022. The tax rate in 2023 was positively impacted by a favorable resolution of a prior year tax matter relating to the divest- ment of the Power Grids business of approxi- mately 4 percentage points. Some additional tailwind was due to non-deductible regulatory penalties related to the legacy Kusile project which increased the tax rate in 2022. Net income and earnings per share Net income attributable to ABB was $3,745 mil- lion and increased significantly by 51 percent. Basic earnings per share was $2.02 and in- creased by 55 percent. The increase was driven by improved operational performance as well as lower adverse impacts from non-operational items than in 2022 discussed above. 1 Constant currency (not adjusted for portfolio changes). 2 For non-GAAP measures see chapter Alternative performance measures. 48 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES INCOME FROM OPERATIONS AND OPERATIONAL EBITA GROSS PROFIT AND GROSS MARGIN BASIC EPS Gross profit Gross margin % Operational EBITA Income from operations Operational EBITA margin % % $ in millions 3.00 2.50 2.00 1.50 1.00 0.50 0.00 $ per share 2023 2020 2021 2019 2022 6,000 4,000 2,000 0 20 15 10 5 % $ in millions 2023 2020 2021 2019 2022 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 35 33 31 29 27 25 2023 2020 2021 2019 2022 49 — Balance sheet and cash flow Net working capital Net working capital amounted to $3,257 million, increasing slightly year-on-year from $3,216 million driven mainly by an increase in receiv- ables on the back of higher revenues, which was however largely offset by customer advances. Net working capital as a percentage of reve- nues 1 decreased from 11.1 percent at the end of 2022 to 10.2 percent at the end of 2023. Capital expenditures Purchases of property, plant and equipment and intangible assets amounted to $770 million in 2023 compared with $762 million in the same period last year. Cash flows Cash flows from operating activities in 2023 provided net cash of $4,290 million, repre- senting a significant increase of $3,003 million compared with 2022. The increase was driven by positive cash generation across all four busi- ness areas on the back of higher earnings due to strong operational performance as well as a lower build-up of net working capital in 2023 compared to 2022. In addition, in 2022, we had lower cash flows partially due to payments of approximately $315 million in relation to regu- latory penalties for the legacy Kusile project as well as costs relating to business restructur- ings and other business portfolio transactions. Free cash flow¹ increased by $3,015 million to $3,667 million, and FCF conversion to net in- come 1 was at 99 percent. Return on Capital Employed The Group’s benchmark for the measure- ment of returns is Return on Capital Employed (ROCE)¹ which increased by 460 basis points from 16.5 percent to 21.1 percent in 2023. Main driver of the improvement was higher Oper- ational EBITA compared with 2022. Addition- ally, in 2022, the Group’s ROCE was hampered by approximately 130 basis points due to the 19.9 percent ownership interest in Hitachi En- ergy which was sold in December 2022. Net debt 1 Net debt amounted to $1,991 million at the end of 2023, down from $2,779 million, year-on- year. Net debt to EBITDA ratio¹ decreased to 0.35 from 0.67 last year. During 2023, although we continued to return high amounts of cash to shareholders in the form of dividends and pur- chases of treasury stock, we significantly grew cash from operating activities and this allowed net debt, as presented in the table below, to de- crease by $788 million. The effect of exchange rate movements increased net debt by approx- imately $433 million. In 2023, we received net proceeds of $553 million for the sales of busi- nesses. We generated cash flows from operat- ing activities during 2023 of $4,290 million and sold treasury stock in relation to our employee share plans for $154 million. We also issued shares in our subsidiary ABB E-mobility to third parties in private placements for $328 million. These items were mostly offset by amounts for purchases of treasury shares of $1,258 million, as well as $1,713 million for the payment of the dividend to our shareholders. We made net purchases of property, plant and equipment and intangible assets of $623 million and made payments of dividends to noncontrolling share- holders totaling $93 million. ($ in millions, unless otherwise indicated) December 31 2023 2022 Short-term debt and current ma- turities of long-term debt 2,607 2,535 Long-term debt 5,221 5,143 Total debt 7,828 7,678 Cash & equivalents 3,891 4,156 Restricted cash – current 18 18 Marketable securities and short- term investments 1,928 725 Cash and marketable securities 5,837 4,899 Net debt (cash) 1,991 2,779 1 For non-GAAP measures see chapter Alternative performance measures. 50 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES NET DEBT FREE CASH FLOW AND CONVERSION RATE RETURN ON CAPITAL EMPLOYED (ROCE) Return on Capital employed ROCE Impact of PG JV ownership interest Target range >18% Free cash flow % of net income % 300 200 100 0 % $ in billions 5 4 3 2 1 0 2.0 1.6 1.2 0.8 0.4 0.0 $ in billions Net debt Net debt/EBITDA ratio 4 3 2 1 0 2020 2021 2022 2019 2023 22 20 18 16 14 12 10 8 2020 2021 2022 2019 2023 2019 2020 2021 2022 2023 51 — Performance of business areas ORDERS AND REVENUES INCOME FROM OPERATIONS & OPERATIONAL EBITA KEY FIGURES ($ in millions, unless otherwise indicated) FY 2023 FY 2022 Change US$ Comparable Orders 15,189 15,182 0% 3% Order backlog 6,808 6,404 6% 14% Revenues 14,584 13,619 7% 10% Operational EBITA 2,937 2,343 25% as % of operational revenues 20.1% 17.2% +2.9 pts Cash flow from operating activities 3,211 2,115 52% No. of employees (FTE equiv.) 50,300 50,600 -1% ELECTRIFICATION MOTION KEY FIGURES ($ in millions, unless otherwise indicated) FY 2023 FY 2022 Change US$ Comparable Orders 8,222 7,896 4% 4% Order backlog 5,343 4,726 13% 8% Revenues 7,814 6,745 16% 15% Operational EBITA 1,475 1,163 27% as % of operational revenues 18.9% 17.3% +1.6 pts Cash flow from operating activities 1,532 853 80% No. of employees (FTE equiv.) 22,300 21,100 6% ORDERS AND REVENUES INCOME FROM OPERATIONS & OPERATIONAL EBITA Operational EBITA Income from operations Operational EBITA margin % Operational EBITA Income from operations Operational EBITA margin % Orders Revenues Orders Revenues $ in millions $ in millions 16,000 13,000 10,000 2019 2020 2022 2021 2023 4,000 2,000 0 2019 2020 2022 2021 2023 $ in millions $ in millions 2019 2020 2022 2021 2019 2020 2022 2021 2023 2023 25 20 15 10 % 9,000 7,500 6,000 20 16 12 % 3,500 3,000 1,500 1,000 500 0 52 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES ORDERS AND REVENUES INCOME FROM OPERATIONS & OPERATIONAL EBITA KEY FIGURES ($ in millions, unless otherwise indicated) FY 2023 FY 2022 Change US$ Comparable Orders 7,535 6,825 10% 24% Order backlog 7,519 6,229 21% 19% Revenues 6,270 6,044 4% 16% Operational EBITA 909 848 7% as % of operational revenues 14.5% 14.0% +0.5 pts Cash flow from operating activities 1,002 675 48% No. of employees (FTE equiv.) 21,100 20,100 5% KEY FIGURES ($ in millions, unless otherwise indicated) FY 2023 FY 2022 Change US$ Comparable Orders 3,066 4,116 -26% -25% Order backlog 2,141 2,679 -20% -20% Revenues 3,640 3,181 14% 14% Operational EBITA 536 340 58% as % of operational revenues 14.7% 10.7% +4.0 pts Cash flow from operating activities 436 214 104% No. of employees (FTE equiv.) 11,300 10,700 5% PROCESS AUTOMATION ROBOTICS & DISCRETE AUTOMATION ORDERS AND REVENUES INCOME FROM OPERATIONS & OPERATIONAL EBITA Operational EBITA Income from operations Operational EBITA margin % Operational EBITA Income from operations Operational EBITA margin % Orders Revenues Orders Revenues $ in millions $ in millions $ in millions $ in millions 8,000 6,500 5,000 2019 2020 2022 2021 2023 2023 2019 2020 2021 2022 4,500 3,500 2,500 600 300 0 -300 2019 2020 2022 2021 2019 2020 2022 2021 2023 2023 1,500 1,000 500 0 15 10 5 % 15 10 5 0 % 53 5–7 % average Comparable revenue growth through economic cycle Excluding FX impacts, acquisitions and divestments 1–2 % average Acquired revenue growth through the economic cycle Target is the net of acquisitions and divestments 16–19 % Operational EBITA margin (annual) >18 % ROCE (annual) Excluding transformational deals At least high single-digit % EPS growth through economic cycle (Basic EPS) Dividend policy unchanged at rising sustainable dividend per share over time ∼100% FCF conversion to net income (annual) — Outlook and new financial targets CHANGED UNCHANGED Looking to 2024, the geopolitical situation adds uncertainty, however we currently expect an- other year of good performance. We expect a positive book-to-bill and revenues to be sup- ported by execution of parts of the $21.6 bil- lion order backlog. In the projects- and systems business we expect continued high customer activity, although we face high comparables from last year when large orders came through at a very high level. In total, order growth year- on-year should show stronger momentum in the latter part of the year when comparables ease. We expect to improve on comparable revenues as well as on Operational EBITA margin, and cash flow should benefit from continued strong operational performance and our continued fo- cus on net working capital efficiency. In full-year 2024, we expect a positive book- to-bill, comparable revenue growth to be about 5 percent and the Operational EBITA mar- gin to slightly improve from the 2023 level of 16.9 percent. 54 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES — We create value through world-class technology We are continuously evolving our offering in order to remain a relevant and trusted partner to our customers. Technology and innovation are key to our stakeholder value creation and long-term success. We invest heavily in research and development and can count on a highly skilled and motivated workforce. We are committed to staying ahead by de- veloping world-class technologies that help our customers address the world’s energy challenges, transform industries to reach new levels of per- formance and embed sustainability in everything we do so we can leave behind a healthier and more prosperous world for future generations. — Our approach to R&D At ABB, our R&D is driven by our 19 divisions and focused on developing and commercializ- ing technologies that are of strategic impor- tance to our future growth. As of December 31, 2023, we had approximately 7,500 employ- ees working in R&D centers across more than 30 countries in six continents, of which about 55 percent were focused on digital and soft- ware development. Women make up 14.0 per- cent of our R&D professionals, an increase of 0.4 percentage points since December 2022, in line with our strategy to increase the share of women in our workforce, including in technical areas 1 . Every year, we invest a significant pro- portion of our revenues in R&D. In 2023, we in- vested $1,317 million or approximately 4.1 per- cent of our 2023 consolidated revenues in R&D activities in our continuing operations. This represented an increase of 13% year on year. We also spent $55 million on order-related de- velopment activities. These are customer- and project specific efforts that we undertake to develop or adapt equipment and systems to the unique needs of our customers in connec- tion with specific orders or projects. We make significant investments in future-oriented ac- tivities and opportunities and spend it wisely according to individual business’ needs. Since 2019, we have invested more than $6.0 bil- lion in R&D representing an annual average of 4.2 percent of revenues. R&D spend by division ranges from 1 to 13 percent of revenues, as each division is different and has different invest- ment needs to maintain market leadership. In addition to continuous product development and order-related engineering work, our R&D laboratories develop platforms for technology applications in our businesses. Our main dig- ital platform is ABB Ability™, which is also the brand name of our digital solutions offerings. We seek to maintain a balance between short- and long-term R&D programs and optimize our return on investment (ROI). We keep control of our innovations by holding patents, copyrights and other intellectual property protections. To complement our business-focused product development, our businesses invest jointly in collaborative research activities covering mul- tiple technology areas including artificial intel- ligence (AI), software, sensors, control and op- timization, mechatronics and robotics, power electronics, communication technologies, ma- terials and manufacturing, electrodynamics and electrical switching technologies. In this way, we advance technologies that are used in our products and common technology plat- forms and apply them to multiple product lines. Universities are incubators of future technol- ogy and one task of our R&D teams is to trans- form university research projects into indus- try-ready technology platforms. We collaborate with multiple universities and research institu- tions to build research networks and foster new technologies. We believe these collaborations shorten the amount of time required to turn ba- sic ideas into viable products. They also help us to recruit and train new personnel. 1 See also chapter We promote social progress. You are here in the value creation model 55 Our university collaborations include long- term, strategic relationships with leading insti- tutions in various countries around the world. To enhance our innovation efforts and gain speed, we partner with other leading compa- nies which have complementary competencies, and we invest in and collaborate with start- ups around the world through our venture cap- ital arm, ABB Technology Ventures, and our start-up collaboration hub, SynerLeap. We act as a catalyst to push innovative entrepreneurs to success and bring benefits to ABB custom- ers and society in the wider sense. In 2023, we made 9 venture investments, and invested $70 million across our four business areas. The investments were driven by the divi- sions and focused primarily on digital capabili- ties that will create synergies with our offering of digitally enabled products and services. One such investment was in US-based Wind- ESCo, an analytics software provider for wind turbines. This partnership will enable ABB to offer customers a package that combines con- verters with performance monitoring. In an- other minority investment, we strengthened our partnership with Pratexo to co-develop edge computing solutions to improve secu- rity, autonomy and resilience for decentralized electrical networks. ABB and Microsoft are collaborating to inte- grate generative AI into our industrial digital solutions, enhancing safety, intelligence and sustainability. This partnership deployed Copi- lot capabilities, improved user interaction with ABB Ability™ Genix and maximized contextual- ized data for efficiency and sustainability. ABB harnessed Microsoft Azure OpenAI Service to strengthen ABB Ability ™ Genix. OUR R&D INVESTMENTS OVER THE PAST FIVE YEARS 4.5 4 3.5 3 2.5 2 1,500 1,300 1,100 900 Non-order related R&D R&D as % of revenues % $ in millions 2019 2020 2021 2022 2023 56 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES Intellectual property rights are crucial to pro- tect the assets of our business. Over the past ten years, we have added a sub- stantial number of new applications to our ex- isting first patent filings and we will continue to seek patent protection for our technologies, products and solutions. As of December 31, 2023, we have a portfolio of approximately 26,000 pending patent applications and granted pat- ents, of which approximately 5,700 are pending applications. This portfolio includes approxi- mately 3,600 utility models and design rights, of which approximately 170 are pending applica- tions. In 2023, we filed over 650 priority patents, utility model and design applications, each cov- ering a unique invention or unique angle on an invention. Additionally, we filed approximately 1,900 secondary patents, utility model and de- sign applications, each extending the coverage of a previously filed priority application. Based on our existing intellectual prop- erty strategy, we believe that we have ade- quate control over our core technologies. The “ABB” trademarks and logo are protected in all of the countries in which we operate. We pro- actively assert our intellectual property rights to safeguard the reputation associated with ABB’s technology and brand. While these intel- lectual property rights are fundamental to all of our businesses, there is no dependency of the business on any single patent, utility model or design application. — Patents 57 Electrification Start-up Challenge In 2023, we hosted our fourth annual ABB Electri- fication Start-up Challenge. The competition rec- ognizes innovative start-ups that are working on electrification solutions to address the world’s energy challenges. Four winners were chosen from the 130 applicants from 30 countries and awarded a collaboration project with ABB worth $30,000 to develop a proof of concept and launch a common solution for ABB’s global cus- tomer base. The winning solutions included: • new control logic hardware and software ar- chitecture for ABB’s Battery Energy Storage System to create a fully AI-driven virtual power plant; • a cybersecurity assessment and reporting tool for electrical substations providing a low-touch solution to instantly identify and protect against vulnerabilities and threats across operational technology; • a patented manufacturing process to elimi- nate short circuits, which compromise the performance of organic photovoltaics in low light; and • a system-level microgrid metering and moni- toring solution to enable energy management while addressing key technical challenges like sensor accuracy, improved energy efficiency and reliability. High-tech service capabilities and delivery ABB’s innovative Electrification Service remote support solutions have been further enhanced with Service Assist. It is an intuitive virtual as- sistant that provides quick access to interactive troubleshooting guides and documentation powered by augmented reality (AR). If further assistance is needed, clients can connect with an ABB technical expert through Remote Assis- tance for Electrical Systems which places AR instructions into the operator’s field of view to enhance voice instructions. Together with our partners and Microsoft, our R&D team is leveraging AR and virtual assistance to offer our customers new service models. — Electrification — Innovations 2023 Innovation is key to staying ahead and maintaining our position as a global market and technology leader. It serves as an accelerator for sustainable development by providing better solutions to help our customers address the world’s energy chal- lenges, transform industries to reach new levels of performance, and embed sustain- ability in everything we do. We aim to leave behind a healthier and more prosperous world for future generations, in line with our purpose of enabling a more sustain- able and resource-efficient future. Key initiatives and innovations in 2023 included: 58 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES IE5 SynRM Increased Safety motor For the first time, customers operating in haz- ardous area industries can now ensure safety of people & equipment and boost their energy efficiency by deploying motors that offer up to 40 percent lower energy losses compared to commonly used IE3 motors. To ensure an en- vironmentally friendly design, the motors do not contain magnets or rare earth metals. Effi- ciency is quickly demonstrated in terms of the total cost of ownership and significant reduc- tions in greenhouse (GHG) emissions that last throughout the motor’s long service life. Top Industrial Efficiency option Customers who take advantage of our Top In- dustrial Efficiency (TIE) option for large motors and generators have a contractual guarantee that they will receive the most efficient solu- tion, with no compromise on reliability, com- plexity or specification compliance. By assuring the highest level of efficiency, the TIE option delivers significant reductions in GHG emis- sions, lowers the total cost of ownership, and prolongs the lifetime of the motor or generator through optimal design and maintenance. ABB Dynafin™ In 2023, ABB introduced ABB Dynafin™, a new electric propulsion concept in the marine indus- try. The new concept mimics the movements of a whale’s tail for ultimate efficiency, enabling new vessel designs. With ABB Dynafin™, we aim to contribute to the shipping industry’s ambi- tion of significantly reducing GHG emissions. Partnership on artificial intelligence ABB and Microsoft announced a collaboration to bring generative AI capabilities to industrial applications. Together, we are working on the implementation of generative AI technology to help industrial companies unlock insights hidden in operational data. This will provide in- dustry executives, functional specialists and shop-floor engineers with real-time action- able insights for better decision-making and increased productivity. Such insights have the potential to signifi- cantly extend asset lifespan and minimize un- planned downtime. In addition, industrial cus- tomers will benefit from advanced monitoring and optimization insights into industrial GHG emissions and energy usage, helping indus- tries achieve their sustainability and energy transition objectives . — Motion — Process Automation 59 OUTLOOK We will continue to focus on technology leadership and further invest in our R&D capabilities, patents and trademarks. We plan to steadily increase the share of our revenues resulting from digital or digitally enabled products. One of our planned actions for 2024 includes the fifth ABB Electrification Start-up Challenge which will run until April 2024. Other business areas will also announce further start-up challenges in the coming months. Robot family In 2023, we expanded the environmental bene- fits of our Robotics & Discrete Automation port- folio offerings. ABB Robotics is broadening its robot range with four new models and 22 vari- ants, offering more choice, increased coverage and greater performance. The improved en- ergy efficiency is driven by ABB’s OmniCore™ controller and lighter robot design with an en- hanced range, delivering superior performance and up to 20 percent energy savings. The next generation models include the IRB 6710, IRB 6720, IRB 6730 and IRB 6740, suitable for pay- loads ranging from 150 to 310 kilograms, with a reach from 2.5 to 3.2 meters, offering custom- ers greater choice as well as significant perfor- mance and energy efficiency improvements. RobotStudio® ABB’s RobotStudio® software is a powerful tool that offers a wealth of possibilities for programming, designing and testing robots in a virtual environment without disturbing real-time production. One of the features of RobotStudio® is automatic collision-free path planning. This feature requires much less pro- gramming of intermediate steps – only the final position needs to be given – and the robot will swiftly follow the most efficient path while au- tomatically avoiding all obstacles. Energy con- sumption is reduced by up to 30 percent. — Robotics & Discrete Automation 60 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES — We enable a low-carbon society Enabling a low-carbon society is at the center of our purpose and value proposition and a key pillar of our Sustainability Agenda. In this chapter, we report on our efforts and achievements in helping customers reduce and avoid emissions through our products, solu- tions and services, as well as the progress we have made in reduc- ing emissions in our own operations and in those of our suppliers. EcoVadis supplier program launched We required 200 of the most impactful suppliers in our Smart Power division, representing over 80 per- cent of the division’s annual spending, to implement an EcoVadis ESG score- card. EcoVadis is one of the most widely used external providers for monitoring sustainability practices in the supply chain. 90 percent of suppliers successfully completed the process. Geothermal power in Indo- nesia supplied with highly efficient generators ABB generators will be used for the first geothermal power plant in East Java, Indonesia, to be completed in 2025. The highly efficient generators will enable the plant to minimize losses and optimize utilization of the geothermal energy source. Based on Indone- sia’s current average en- ergy mix, the site will save around 200,000 tons of GHG emissions annually. On top of that, ABB will use Greenforge® steel for the rotor, which is forged in a process that is 96 percent fossil-fuel free. Enabling energy-efficient operations for offshore wind turbine installation vessels Our integrated power, con- trol and propulsion technol- ogy will be at the core of the two new wind turbine instal- lation vessels built by Yantai CIMC Raffles Offshore Ltd. for Havfram Wind. These vessels, which will be among the most energy-efficient designs to operate in the offshore wind industry, will support this growing seg- ment, contributing to the increased access to wind as a clean energy source. ABB’s B&R division installs new heat pump system to replace natural gas at its printed circuit board plant in Austria With an investment of ap- proximately €2.5 million, B&R no longer requires natural gas and saves more than 1,800 MWh of gas and 450 tons of GHG emissions per year at its printed circuit board plant in Eggelsberg, Austria. This is made possi- ble by new air-source heat pumps with natural refriger- ants. In addition, waste heat from the machines is used for heating the 10,000m² production hall and 5,500m² of office space. — Electrification — Process Automation — Motion — Robotics & Discrete Automation You are here in the value creation model 61 — ABB’s own emissions All of our divisions and business areas are ac- tively working to reduce scope 1 and 2 emis- sions. In doing so, they are not only contrib- uting to a more sustainable future, but also mitigating climate risks to our business and realizing cost savings. In 2023, we made good progress towards our target of reducing scope 1 and 2 emissions by 80 percent by 2030, compared to the base- line of 2019. We also announced a new target of reaching net-zero in our own operations by 2050. These targets are aligned with the Sci- ence-Based Targets initiative (SBTi) Net-Zero Standard and have been submitted to the SBTi for validation. In 2023, we achieved a reduction of 76 percent in our scope 1 and 2 emissions compared to 2019. We reduced our energy consumption by 21 percent compared to 2019 and will continue to invest in measures to reduce energy con- sumption further. This includes investments in heat pumps, energy-efficient lighting and upgraded heating, ventilation and air condi- tioning (HVAC) equipment or building automa- tion systems. At the end of 2023, 64 percent of our energy consumption and 94 percent of our electricity came from renewable sources. We continued to work towards our 2030 com- mitment with the Climate Group. Our progress is as follows: • RE100: 100 percent of our electricity from re- newable energy sources - Status 2023: 94 percent • EV100: 100 percent electric vehicle fleet - Status 2023: 20 percent - As per December 31, 2023, we had over 2,400 chargers installed at approx. 190 loca- tions worldwide. This means 37 percent of our global sites offer EV charging stations. • EP100: 100 percent increase in energy produc- tivity measured as energy consumption in rela- tion to economic output as compared to 2019 - Status 2023: 66 percent SHARE OF RENEWABLE ELECTRICITY from 34% in 2020 to 53% in 2021 to 81% in 2022 to 94% in 2023 percent of our electricity from renewables 62 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES — CASE STUDY ELECTRIFICATION Mission to Zero™ journey Buildings are responsible for approximately 40 percent of the world’s energy consumption and 30 percent of global GHG emissions. We already have the technology needed to eliminate building emissions. Smart en- ergy and asset management can make buildings energy efficient and low carbon. Therefore, we started our Mission to Zero™ program in 2019 – our journey towards significantly reducing GHG emissions of ABB sites, while supporting customers to reduce their GHG emissions, in line with our overall emissions reduction targets. Ours is a scalable program of smart building solutions combined with on-site or locally sourced renew- able energy generation and storage. ABB’s Mission to Zero™ program continued to make progress, with nine sites added in 2023: • Frosinone, Italy • Nashik, India • Nogales, Mexico • Santa Palomba, Italy • Schaffhausen, Switzerland • Senatobia, Mississippi, USA • Vaasa, Finland • Xiamen, China • Xinhui, China With these additional sites, our Mission to Zero™ program now encom- passes 14 ABB sites. They contribute to our sustainability targets by us- ing innovative and ambitious measures to improve environmental sus- tainability. Our facility in Xiamen, China, for example, boasts 100,000 m² of solar panels – the largest such array at ABB – while our Mission to Zero™ site in Nashik, India, has been certified as water positive. At ABB, we are committed to writing the future of safe, smart and sus- tainable electrification for everything from industry and buildings to infrastructure and transportation. We use intelligent systems for energy distribution, building automation, HVAC control, battery solutions, and motors and switches to help our sites achieve Mission to Zero™ status. TOTAL ENERGY USED AND TOTAL SCOPE 1 & 2 GHG EMISSIONS Figures in the graphs are adjusted for portfolio changes. Total energy used (GWh) Total scope 1 and 2 GHG emissions (kilotons CO 2 e) 800 600 400 200 0 2000 1500 1000 500 0 2019 2020 2021 2022 2023 523 1,511 636 1,647 389 1,481 221 151 1,413 1,298 GWh kilotons CO 2 e 63 — ABB’s value chain emissions Our ambition for a low-carbon society extends to our customers and suppliers, with whom we work closely to reduce emissions throughout our value chain. Together, we are working to- wards greener emissions profiles to meet the expectations of markets, which are becoming more and more environmentally conscious. We conduct Life Cycle Assessments (LCAs) to identify opportunities for emissions reduc- tions in the value chain and achieve our targets. Information gained through LCAs is used for our Environmental Product Declarations (EPD). These are standardized documents validated by industry experts to declare quantitative infor- mation of a product’s environmental impacts and allow to compare footprints of products on the market. Customer emissions As an industry leader, we help our customers reduce or avoid GHG emissions through the use of ABB products and solutions. We have three vectors through which we contribute to the energy transition: • increased efficiency through automation, high efficiency motors and drives, and indus- trial software; • substituting fossil-fuel combustion for pro- cesses and propulsion by electrification; and • detection and avoidance of leakages of GHGs like methane and other harmful substances. At ABB, by far the largest contribution we can make to a low-carbon society is in our customers’ operations. The lion’s share of our overall value chain GHG emissions is in our scope 3 downstream emissions from the use of sold products. To help our customers reduce and avoid emis- sions, we provide end-to-end support, which includes product-related trainings and sharing of experiences. We listen carefully to customer feedback and adapt our strategies and opera- tions to best serve their needs. As part of our efforts to enable a low-carbon society, we announced new SBTi Net-Zero Stan- dard aligned targets for 2030 and 2050 at our Capital Markets Day on November 30, 2023. These include new targets for our scope 3 emissions, which we aim to cut by 25 percent by 2030, and by 90 percent by 2050, both ver- sus a 2022 baseline. These targets were also submitted to the SBTi for validation. In 2023, our Scope 3 emissions increased versus 2022 with key drivers being the increase in sales and in grid electricity emission factors. Avoided emissions Our energy-efficient motors and drives and automation and control systems help to reduce and avoid emissions in industries, buildings, infrastructure and transport. Using the lat- est guidance published by the World Business Council for Sustainable Development (WBCSD), — CASE STUDY PROCESS AUTOMATION ABB to help Northvolt save energy and GHG emissions at the world’s largest battery recycling facility ABB and Northvolt are strengthening their long-standing collaboration in the field of green batteries. Since 2017, ABB has been delivering electrifi- cation and automation equipment to power Northvolt’s Ett gigafactory for lithium-ion batteries in Sweden. This partnership was expanded in 2023, with ABB providing process elec- trification to power the world’s largest battery recycling facility, Revolt Ett, being built by Northvolt. The company plans to reduce the carbon footprint of its batteries to 10 kg CO₂e per kilowatt hour (kWh) by 2030, compared to an industry reference of 98 kg CO₂e per kWh. ABB’s switch - gear and variable speed drives will match the speed of the processes tak- ing place in the factory, ramping power up and down as required, saving energy, improving performance and lowering maintenance. → For details, please refer to our Sustainability Report 2023. 64 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES we have strengthened the way we track and quantify our customers’ avoided emissions. Avoided emissions describe the volume of GHG emissions our customers can avoid by us- ing ABB products as compared to other avail- able solutions, and cover the full product lifecy- cle. Given our business model centered around electrification of processes, leading to decar- bonization and energy efficiency, this is an im- portant way to measure ABB’s positive impact. In 2023, the products we sold to customers helped them avoid 74 megatons of emissions. This fits our ambition to support customers in avoiding 600 megatons of GHG emissions from 2022 to 2030, based on all the products we ex- pect to sell over that period. Supplier emissions Our business areas and divisions are explor- ing ways of reducing GHG emissions with our suppliers around the globe. One key action is to improve the transparency of product-related emissions by providing more granular environ- mental product declarations to our customers. To support such efforts, we bring our suppliers and customers together to share their ambi- tions and plans to reduce GHG emissions. At a recent robotics supplier day in Shanghai, China, a customer described their ambition to create true net-zero products, without off-setting schemes, by 2030, inspiring our suppliers to de- velop their own carbon-reduction plans. Using lower-carbon transport, lower-carbon materials and materials that weigh less are key to reducing emissions, as is increasing the share of recycled materials in our products. Initiatives to source materials closer to manu- facturing locations also have a significant im- pact on emissions from transport. Continued tracking of transport emissions on a per ship- ment basis provides us with the required in- sights to make informed and timely decisions. As part of our ambitions to reduce our scope 3 emissions, we work with our suppliers to reduce GHG emissions indirectly linked to ABB through our supply chain. In 2023, we started providing information and training sessions to our sup- pliers and collecting information via our supply chain GHG emissions reduction program. This has provided us with an understanding of the maturity of our suppliers and where to prior- itize our engagement to reach our target. We use the EcoVadis ESG platform to track suppli- ers that have publicly announced emissions re- duction targets, that have set SBTi targets, and that are on track to meet their targets. OUTLOOK We will continue to focus on reducing GHG emissions directly and indirectly across our value chain. Building on our most recent achievements, we are: • seeking validation of our scope 1, 2 and 3 emissions targets from the SBTi • intervening to reduce emissions in our value chain • tracking progress towards our targets • calculating and reporting on avoided emissions using the latest guidance from the WBCSD — CASE STUDY MOTION ABB’s synchronous condensers stabilize UK’s power grid and enable shift towards low-carbon society Traditionally, fossil-fuel powered turbines have provided the spinning inertia vital to maintain stable power networks in the UK. With the shift from fossil fuels to more renewable energy, the inertia in the grid is de- creasing. ABB provides high-inertia synchronous condenser systems to Statkraft, a leading company in hydropower internationally and Europe’s largest generator of renewable energy. They supply around one percent of the UK’s projected inertia requirement for 2025, restoring the inertia that would be provided by five coal-fired power stations, saving UK con- sumers around $122 million over six years. 65 — We preserve resources We collaborate with our stakeholders to safeguard natural resources in our value chain by embedding circularity principles in our operations and products, increasing recycling and reusability rates, and reducing waste and water use. We are committed to preserving biodiversity and to using land responsibly. Our progress is summarized in this chapter. Protecting against wild- fires and extreme weather Extreme weather and wild- fires can cause large-scale power outages and are prompting utilities to im- prove grid resilience by moving equipment under- ground. ABB’s Elastimold® switchgear prevents out- ages caused by flooding. To meet rising demand, we are investing more than $40 million in a new manu- facturing facility for Elasti- mold® solutions in the US. Our watertight solutions are extensively tested to ensure ingress protection for un- derground power lines. To prevent wildfire ignition, we have developed a fire mit- igation fuse that contains sparks within the device. Embedding circularity by recycling old motors and drives Building partnerships is key to moving towards circular business models. We part- ner with recycling compa- nies, like HKS and Mirec in the Netherlands or Stena in Sweden, to take back and recycle old equipment. In 2023, we entered into new partnership with Germa- ny’s Remondis, which recy- cles old, inefficient motors in a sustainable way, and sends the retrieved met- als to selected companies that ABB can use as sup- pliers to manufacture new, energy-efficient motors. The process saves on raw materials, energy and avoids GHG emissions compared to sourcing new metals, which is evidenced through sus- tainability certificates. With this offering, ABB is able to provide solutions across the full lifecycle of motors, while moving toward a circular business model. Helping New Zealand in- crease the resilience of its water infrastructure Wellington Water man- ages the infrastructure for six New Zealand councils, supplying water to about 436,000 people. In close collaboration with ABB, the resilience of its water in- frastructure was brought to the next level with smart flow meters that track wa- ter flow in real time, and are designed to ensure a long, maintenance-free life under arduous conditions. With pumping accounting for the lion’s share of a utility’s en- ergy consumption, we also implemented variable fre- quency drives to deliver cru- cial efficiency gains. For this collaboration, ABB won the 2023 Global Water Awards in the category “Smart Water Project of the Year”. ABB tests the world’s most remote robot in an Amazon reforestation project ABB Robotics collaborated with non-profit organiza- tion Junglekeepers in a pilot project to demonstrate the potential of robotics and cloud technology in revers- ing deforestation. Using solar power, our YuMi® ro- bot automated seed plant- ing, making reforestation in the Amazon faster, more efficient and scalable. The project was made possible by RobotStudio® cloud tech- nology; ABB experts simu- lated, refined and deployed robotic programming in real-time from 12,000 km away in Sweden. You are here in the value creation model — Electrification — Process Automation — Motion — Robotics & Discrete Automation 66 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES — Circularity At ABB, we are stepping up efforts to support the transition to a circular economy. Our goal is to minimize resource consumption and waste generation while promoting the efficient use of materials and reducing our environmen- tal footprint. Embedding circularity princi- ples in our offerings is a key element of our Sustainability Agenda. By 2030, at least 80 percent of ABB’s products and solutions will be covered by our Circularity Approach and evaluated against a clear set of key performance indicators (KPIs). These cor- respond to each stage of the product lifecycle, from design and sourcing, to product manufac- turing, use and end-of-life. Enhancing our prod- ucts in this way also extends the life of customer products that integrate our own. Our take-back services lead to modernization, refurbishment, re-use or recycling of products and components. We facilitate this process by providing instruc- tions for responsible end-of-life treatment. In 2023, we enhanced our Circularity Approach and our four business areas began assessing their products and solutions and setting base- line circularity scores for their portfolios. By the end of 2023, 31 percent of our product portfolio had been assessed against the guidelines of our Circularity Approach. This transition is taking place not only in our customer solutions, but also in our operations. ABB is taking a company-wide approach to pre- serve the earth’s resources for future genera- tions. Resource efficiency is at the center of the development of all our offerings and we aim to use sustainable materials wherever possible. During the production process, we try to elim- inate or recycle waste generated by our pro- cesses and packaging. ABB’S CIRCULARITY APPROACH Responsible end-of-life Circular design & sourcing Optimized use phase Resource- efficient operations ABB CIRCULAR BUSINESS MODEL WHAT WE ENABLE CIRCULAR CUSTOMER SOLUTIONS WHAT WE DO ABB CIRCULAR OPERATIONS Logistics & packaging Efficiency Lifetime Manufac- turing Sourcing Design Recycling Take-back 67 To reduce and, where possible, eliminate the use of hazardous materials from our opera- tions, we rely on the ABB List of Prohibited and Restricted Substances. This list applies to every aspect of our operations, including procure- ment, product development, production pro- cesses, products, packaging materials, ser- vice activities and construction sites. This is a heavily regulated area of activity and we update the list twice a year in keeping with local and international regulations and legislation. ABB’s four business areas have full ownership of their respective product material compliance obli- gations, which include the European Union’s requirements for chemicals and products listed in the Substances of Concern in Products (SCIP) database. We have developed a companion guide to the list to help ABB’s suppliers meet their obliga- tions, which include partnering with us to iden- tify and prevent restricted substances from entering ABB’s supply chain. In addition, ABB’s Global Terms and Conditions for suppliers and our Supplier Code of Conduct address prohib- ited and restricted substances in the context of regulatory compliance. In 2023, ABB’s business areas continued to col- lect material compliance information on more than 50,000 articles and end products ac- quired from their supplier base. This informa- tion is securely stored in dedicated databases and is used for customer communications and product compliance statements. — Safe use of materials — CASE STUDY ELECTRIFICATION ABB’s first platinum “zero waste to landfill” rating Our Frosinone site in Italy has been recognized as a zero waste to landfill (ZWTL) site, according to the UL2799A Environmental Claim Validation Procedure for Zero Waste Classifications. Frosinone has achieved Zero Waste to Landfill Operations Platinum status, 100% diversion, with 9% thermal processing with energy recovery. Nine percent of the waste is thermally processed for energy recovery and the site has closed-loop re- cycling of thermoset waste. Approximately 80 tons of plastic that would have been sent for waste-to-energy are returned to ABB’s supply chain for the manufacturing of products thanks to the closed-loop recycling of thermoset waste. Educating staff to develop an understanding and com- mitment towards more sustainable waste management was made a pri- ority. Frosinone’s goal was to go beyond individual actions and achieve a cultural shift across the site. Collaboration is key to the effective imple- mentation of circularity programs. ZWTL engages staff working across the life cycle of products – from production staff and product engineers in Frosinone to product design teams at different ABB locations. As part of its Mission to Zero™ journey, ABB’s Frosinone site has im- proved the energy efficiency of each circuit breaker by 25 percent and has reduced its scope 1 and 2 GHG emissions per product by 33 percent compared to a 2019 baseline. It sources 100 percent of its electricity from certified renewable sources. 68 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES — Waste, water and biodiversity Managing the use of natural resources in a re- sponsible way is a priority for ABB. Especially critical is the safeguarding of water as an es- sential resource as well as ensuring good waste management and reduction, given the plane- tary boundaries that the ecosystem is facing. We have waste reduction programs at our sites throughout the world. In 2023, we reduced the amount of waste that ABB generates by 6.2 per- cent to 167 kilotons compared to the previous year. In 2023, 86 percent of our waste was recy- cled and 6.3 percent sent to landfill, down from 6.4 percent in the previous year. We have identified water and wastewater as a growth segment for ABB and offer wastewa- ter solutions to reduce water extraction and freshwater pollution. The ABB Water Care pro- gram improves our clients’ processes related to water and wastewater. It ensures optimal and reliable plant performance, extends the oper- ating life of automation and electrical assets, and protects equipment and intellectual invest- ments. The use of energy efficient motors and drives, as well as monitoring solutions, can save money and reduce the risk of downtime, which is fundamental in the water sector. In relation to our own operations, we use the World Resources Institute’s Aqueduct global water risk tool to assess our exposure to wa- ter risks. In 2023, 34 percent of ABB’s locations faced an enhanced level of water stress. We are constantly improving water usage and effi- ciency and were able to reduce water withdrawal by 6.7 percent from 2022 to 2023. Our ABB wa- ter management standard ensures prevention and mitigation of potential negative impacts through monitoring and action plans. Through water recycling initiatives and improved water management, we are targeting additional 30% reduction in water consumption by 2030. Use of natural resources can also have a direct effect on biodiversity and natural habitats. Given the rising importance of biodiversity and its interconnected relevance, also in conjunc- tion with the discussion around climate change, we have identified and included biodiversity and land use as impacts in our 2023 double ma- teriality assessment and will be establishing a strategic approach towards managing these topics, guided by the recently published Rec- ommendations of the Taskforce on Nature-re- lated Financial Disclosures. NON-HAZARDOUS WASTE TO LANDFILL 2020 2021 2022 2023 2019 8.8 (16.8 kiloton) 8.4 (14.3 kiloton) 7.0 (12.0 kiloton) 6.4 (10.9 kiloton) OUTLOOK In our ongoing efforts to preserve resources, we continue to assess our product portfolio against ABB’s Circularity Approach, increase water efficiency and biodiversity. Moving forward, we will: • increase the percentage of our product portfolio covered by our Circularity Approach • identify further opportunities to align our products with circularity principles • continue to focus on solutions that reduce waste generation at our sites • reduce water consumption in water-stressed areas where we and our customers operate • use fauna and flora assessments to identify biodiversity interventions at and around our sites. 12 9 6 3 0 % 6.3 (10.1 kiloton) 69 — We promote social progress We promote social progress for the benefit of our employees, custom- ers, stakeholder groups and communities worldwide. We achieve this through our health and safety programs, by championing diversity and inclusion in the workplace and community engagements. We are com- mitted to employee wellbeing and development and exploring new ini- tiatives to create positive impact in our communities. Our support for social progress is underpinned by respect for people and human rights. ABB’s Iberville facility in Quebec is recognized for health & safety innovation For three years running, the ABB Iberville team has been recognized by Multi-Préven- tion ASP, a Quebec-based occupational health and safety association, for mak- ing health, safety and envi- ronment (HSE) an integral part of their work culture. The team’s signature initia- tive “Dragon’s Den” involves production employees who identify and present safety proposals to a jury of HSE professionals. In 2023, Mul- tiPrévention ASP asked the Iberville team to present their safety strategies to other companies in the re- gion to help advance their HSE journeys and cultures. ABB engages with a com- munity in Spain for World Environment Day Nearly 200 adults and chil- dren – including those of our employees – came together to better understand cli- mate change and how we can all contribute to a more sustainable future. Through recreational activities and games, participants ex- plored the link between the greenhouse effect and climate change and were shown how through small actions, such as saving wa- ter and energy, we can make a big difference. ABB’s extended carbon cap- ture collaboration with Im- perial College London sup- ports the future workforce and the energy transition We signed a 10-year con- tract with Imperial College London to continue our carbon capture technology partnership. A dedicated carbon capture plant at Imperial College is training engineers and scientists of the future, with 4,500 stu- dents already having gained hands-on experience of ABB’s technology solutions in the plant since 2012. The plant is equipped with ABB’s distributed control system and over 250 instru- ments, measuring tempera- ture, pressure, GHG emis- sions and flow. ABB expands its STEM automation offering Our new IRB 1090 robot, au- thenticated by STEM.org, is designed to upskill students for the future of work. This industrial education robot, powered by ABB’s OmniCore controller, includes the lat- est advancements in robot- ics such as feeding regen- erative braking energy back into the factory grid. A total of 100 free RobotStudio® premium licenses are in- cluded in the purchase of an IRB 1090 robot. — Electrification — Process Automation — Motion — Robotics & Discrete Automation You are here in the value creation model 70 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES — Health and safety 0.30 0.25 0.20 0.15 0.10 0.05 0 2020 2021 2022 2023 2019 SAFETY AT ABB LOST-TIME INJURY FREQUENCY RATE (LTIFR) 0.24 0.15 0.14 0.14 0.13 At ABB, our occupational health and safety cen- ters ensure the wellbeing of our diverse work- force around the globe. Our talented and skilled employees are our most valuable asset and pro- viding a safe and healthy work environment is a fundamental responsibility of ABB. In June 2023, we updated our Health, Safety, Environment (HSE) and Security policy to rein- force ABB’s commitment to putting health, safety, the environment and security at the cen- ter of our activities. This commitment encom- passes material sourcing, product design, oper- ations and services. To realize global leadership in our operations, we have launched our Guid- ing Principles for Resilient Operations. These support our HSE & Security Management Sys- tem, which is based on internationally recog- nized standards, principles and commitments. All divisions are required to implement the ABB Way Management System for Corporate HSE & Security. The following three guiding principles set a framework underpinned by a set of behav- iors we strive to follow at every level of our or- ganization to achieve our objectives: • lead with care: leaders create an environment where colleagues feel cared about and safe to speak up; • engage and involve: everyone collaborates and draws on each other’s knowledge and strengths to ensure colleagues feel included and encouraged to contribute to our pro- grams and HSE & Security performance; and • learn and improve: everyone is encouraged to learn about and support continuous improve- ment both as individuals and as a team and organization. Each division is encouraged to develop safety programs that are appropriate for their operations. We coordinate preparations and responses to emergency situations, conduct internal safety inspections, and obtain third- party verifications for our health, safety and wellbeing reporting. We have well-defined procedures to investigate work-related injuries and incidents and act promptly to mitigate negative impacts. We continuously strive to further reduce health and safety hazards. Thanks to our health and safety measures, we continue to see a downward trend in our lost- time injury frequency rate (LTIFR) to indus- try-leading levels. In 2023, we recorded 376 work- place-related injuries and one workplace-related fatality. An investigation into the fatal incident is currently underway, and we will draw on the lessons learned to prevent any future recurrence. Considerations about health, safety, the envi- ronment and security are at the heart of all our activities, including materials sourcing, product design, operations and services. LTIFR 71 — Diversity and inclusion We take pride in the diversity of our workforce and seek to create an inclusive culture in which people feel empowered to share their ideas and perspectives. In this way, we encourage creative thinking which drives innovation – the key to ABB’s growth and success. We believe in diversity across all dimensions and that our differences make us stronger. That is why prog- ress in diversity and inclusion (D&I) is embed- ded in our long-term objectives. Our 2030 sustainability target is to double the proportion of women in senior management roles to 25 percent compared to 2019. This is also a target in our wider Global D&I Strategy 2030. In 2023, ABB increased the proportion of female senior managers to 21.0 percent, up from 17.8 percent in 2022. We have also developed internal targets for D&I supported by a broad portfolio of actions: • achieve equal gender balance among our early talent hires; • provide broad access for our people to em- ployee resource groups (ERGs); and • improve our inclusion scores in our annual employee Engagement Survey. Our aim is to create a welcoming environment in which people have a sense of belonging and can realize their full potential, both as individ- uals and collectively. With a workforce span- ning five generations, we foster collaboration through employee resource networks, various mentorship models, collaborative workshops and age-diverse teams. We facilitate leadership trainings and we have put in place targeted de- velopment activities to ensure a stronger gen- der balance at all levels including an increased leadership pipeline. We have reviewed our pro- cesses and policies and piloted LGBTQ+ reverse mentoring programs to improve understanding and inclusion in the workplace. To support the mental and physical wellbeing of our people, we are improving accessibility in our premises and providing professional support. We also offer individual learning pathways, unconscious bias trainings, and research-backed resources to sys- tematically drive awareness, engagement and progress. We will continue to explore opportu- nities to facilitate diversity and inclusion, striv- ing for an environment where every employee knows their uniqueness is an asset that adds value to our company. This creates shared value in the workplace, marketplace and community. WOMEN ON THE BOARD WOMEN IN TOTAL WORKFORCE WOMEN IN SENIOR MANAGEMENT 30 20 10 0 % 2023 2020 2021 2019 2022 % % 2020 2021 2022 2023 2019 30 20 10 0 30 20 10 0 2020 2021 2022 2023 2019 11.7 13.5 16.3 17.8 21.0 → At ABB, senior managers are defined as employees in Hay grades 1–7. 72 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES — Employee development and wellbeing Investing in the professional and personal de- velopment of our people is a key element of our long-term success. It supports the satisfaction and wellbeing of our employees, nurtures mo- tivation and innovation, and facilitates talent attraction and retention. We have multiple tools in place that enable our employees to make their voices heard. Our an- nual employee Engagement Survey helps man- agers better understand the experiences of our employees at ABB and how they feel about their jobs and the company. The survey also gives employees a channel to highlight opportunities for improvements in the workplace and ask for support to achieve the goals of their team or manage challenges that they may face. As the foundation of our organization, the perspec- tives of our employees influence our business strategy and operations. In 2023, our employee engagement score was 77 out of 100, up from 71 in 2019. In total, 84 percent of employees, nearly 89,000 people, responded to the survey, which represents a significant increase since 2019, when response rate was at 65 percent. The results are bench- marked by our external survey provider against a broader set of companies that ask similar survey questions. This allows us to monitor our ambition of achieving a top-tier score. Our 2023 results highlight strengths in our safety cli- mate, integrity and role clarity. The survey also showed that, while we have made good prog- ress on removing barriers to execution, there is still room for improvement. The actions we take to promote employee de- velopment and wellbeing are principally con- ducted on a local basis. For example, in the United States, our “HSE Week” in October 2023 offered live sessions on mental health and wellbeing, among other topics. We also pro- vide competitive benefits such as paid paren- tal leave for employees worldwide and a global Employee Assistance Program (EAP). We strive to give our employees the skills they need to adapt to change and stay competitive in a con- stantly evolving business environment. This includes our talent management approach: “Learn, Connect, Grow”. We encourage corporate volunteering for the benefit of our employees and impacted com- munities. In 2023, ABB employees dedicated 4,800 days for volunteer work. A strong focus was again on supporting educational initiatives, particularly in technology-related disciplines. — CASE STUDY ELECTRIFICATION 77/100 Employee engagement score in 2023 71/100 Baseline 2019 84 % Response rate 2023 ABB Canada partners with trade school to train first all-women cohort Since 2015, ABB has partnered with 60 trade schools offering electrical and construction training programs across Canada. As well as educa- tional resources for teachers, the ABB School Program provides schools with training content and product samples, and ABB representatives visit schools to provide installation training for our products. As part of this program, ABB was proud to sponsor the first all-female cohort pursuing the Diploma of Vocational Studies in Electricity in Canada at the École professionnelle de métiers (EPM) in Saint-Jean-sur-Richelieu, Quebec. The 22 women graduated in April 2023 with the skills needed to repair, modify and maintain equipment and machinery used in residential, com- mercial and industrial buildings. 73 — Human rights and labor standards ABB is committed to respect the dignity and human rights of all people. Our goal is for hu- man rights to be well-understood and well-inte- grated into our operations and our value chain. We adhere to international frameworks to iden- tify human rights risks and potential impacts and to implement appropriate measures to mit- igate adverse impacts. These frameworks and tools include: the United Nations’ Guiding Prin- ciples on Business and Human Rights (UNGPs), OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, ILO Core Conventions on Labour Standards including ILO Convention No. 138 on minimum age for admis- sion to employment and ILO Convention No. 182 on the worst forms of child labor, and ILO-IOE Child Labour Guidance Tool for Business. With respect to child labor, these frameworks and standards include those which the Swiss Or- dinance on Due Diligence and Transparency in relation to Minerals and Metals from Conflict-Af- fected Areas and Child Labour (DDTrO) specifies as internationally recognized equivalent regula- tions. As a result of our compliance with these frameworks and standards, we are exempted from the specific due diligence and reporting obligations of the DDTrO in regard to child labor. Our Code of Conduct, Supplier Code of Con- duct and our Human Rights Policy establish our commitments to human rights and expec- tations for each individual working at ABB or engaging with ABB’s business. For more infor- mation about the update of the ABB Code of Conduct and Supplier Code of Conduct in 2023 see the following chapter. In a fast-changing global value chain, we rec- ognize that continuous improvements and adaptation are essential. In 2023, following consultations with internal and external stake- holders, we updated our Human Rights Policy to better reflect our stakeholders’ expecta- tions and to ensure compliance with interna- tional frameworks and recent legislation. This update included a review of our human rights due diligence (HRDD) framework and salient human rights risks by each of our business ar- eas, allowing us to identify opportunities for improvement in our human rights management processes. Consistent with the requirements of the UNGPs, the six elements of our HRDD framework are: • policy commitment; • risk and impact assessment; • risk-based measures; • embedding in our business processes; • tracking and communication; and • providing access to grievance and remedy. The scope of our assessment included all inter- nationally recognized human rights as per the Universal Declaration of Human Rights. We mapped our full value chain to identify hu- man rights risks and prioritized risks based on severity and likelihood. Human rights risks identified by internal and external stakehold- ers as part of our materiality assessment were incorporated into the analysis. As a result of this work, we updated our salient human rights issues as follows: • child labor, • corruption and bribery , • environmental issues impacting human rights, • fair employment, • health and safety, • human trafficking and modern slavery, • impact on communities and land rights, and • information security and data privacy. Our roadmap for improvement focuses on com- munication of our updated Human Rights Pol- icy and building a broader understanding of our salient risks and mitigation actions, strength- ening risk identification and management pro- cesses, and monitoring performance. In case of any violation of human rights or codes of con- duct, we take steps to ensure adequate remedi- ation and consequences in line with applicable contracts and laws. We maintain an operating model that brings human rights accountability and expertise to all ABB divisions to ensure adequate monitoring and management of our most salient issues at the highest operating level. In 2023, 4,412 employees completed general hu- man rights e-learning courses, and we provided targeted training for management and certain job roles, for a total of 1,006 participants. In ad- dition, we trained 100 percent of security man- agement specifically exposed to human rights 74 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES OUTLOOK Maintaining a respectful, inclusive and diverse working environment while promoting the wellbeing of our people, maximizing safety, and investing in professional and personal de- velopment will remain key to the success of ABB’s value proposition. To further progress on our targets related to promoting social progress, we will: • further embed the Guiding Principles for Resilient Operations into our HSE & Security processes; • use our updated Human Rights Policy and Due Diligence framework to deepen engage- ment with our stakeholders and better embed human rights considerations in daily busi- ness decisions, with the aim to further promote respect for human rights and effectively prevent and mitigate potential impacts; • continue to increase the number of women in senior management including in P&L roles; • revise the proposed Community Engagement Framework to maximize synergies and en- able more impactful outcomes to communities. Our social investments will be focused on ensuring equitable access to education, providing emergency and disaster relief, support- ing the environment and conservation, and leveraging technology and innovation to em- power communities and enable the energy transition. risks, and 43 new Human Rights Champions to further embed human rights expertise in our businesses. Total hours of instructor-led human rights training amounted to 1,840 hours. Our human rights self-assessment process reviews own operational sites periodically and 78 sites in 39 countries undertook human rights self-as- sessments in 2023. Human rights concerns, such as harassment, discrimination, forced labor and child labor, that are reported via our Business Ethics Help- line are included in the statistics about cases reported in the Section Integrity. In 2023, we did not receive any reports of child labor or threats to freedom of association with respect to our employees. Two cases of attempted forced labor were reported by ABB service employees related to their treatment by cus- tomers. These cases were resolved satisfac- torily following intervention by appropriate management and the customers’ commitment to respect ABB’s policies regarding working conditions. For information about findings of non-conformance within our supply chain, please refer to the Responsible Sourcing sec- tion of this report. 75 — We embed a culture of integrity and transparency along the extended value chain At ABB, integrity and transparency define how we do business. They are the foundation of our Sustainability Agenda and underpin our value cre- ation. We recognize the importance of doing business ethically and main- taining ethical business relationships. In 2023, we updated our Code of Conduct and Supplier Code of Conduct and implemented processes and programs to strengthen our integrity culture and enhance risk monitor- ing. In this chapter, we highlight key actions taken in 2023 to strengthen a culture of integrity and transparency along our extended value chain. Code of Conduct We launched an updated Code of Conduct to reflect the fast-changing world in which we are operating as well as our Sustainability Agenda. Integrity Circles and workplace behavior learnings We introduced manager-led circle discussions around integrity topics and workplace behavior learnings to create a company culture that is in line with our ABB values. Integrity Committees Our business areas and divisions have estab- lished Integrity Committees in which senior and middle management demonstrate their com- mitment to integrity. Data analytics and integrity risk monitoring ABB uses various tools and platforms to track progress and drive performance in regard to our integrity approach. Our continuous moni- toring platform allows us to analyze potential integrity risks based on continued risk assess- ment and lessons learned from past cases. Our integrity analytics report provides insights into progress related to our integrity programs such as engagement with our integrity learn- ings. Through our Real-Time Case Investiga- tion Dashboards, insights into integrity-related case metrics can be generated by a broad audi- ence and the Legal & Integrity community can leverage greater access to analyze root causes and lessons learned. You are here in the value creation model 76 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES — Integrity We continuously work on improving and enhanc- ing our Global Integrity Program through con- trols, processes and a culture that deters bribery and corruption. Our five core Integrity & Regu- latory Affairs procedures include oversight and responsibilities, as well as procedures related to third-party management, data privacy, con- flicts of interest and global trade. We have de- fined five integrity principles that guide every- thing we do at ABB: In 2023, we focused on enhancing and innovat- ing our policies, processes and trainings. Our ABB Code of Conduct represents our in- dividual and collective commitment to up- hold the highest standards of business ethics throughout our global value chain. It guides our employees, business partners and suppli- ers to do business with integrity. In 2023, we issued an updated Code of Conduct under the tagline “We speak the same Code”. The update addressed the key operational integrity risks of Anti-Bribery & Anti-Corruption (ABAC) as well as workplace behavior issues reported in 2022. As before, our Code of Conduct is avail- able in the ABB Code of Conduct mobile app to provide employees and external stakehold- ers with quick and easy access to the Code and related resources. The app design allows users to navigate easily through the Code’s focus ar- eas, take short integrity training courses, seek help if they encounter an integrity issue, and report integrity concerns to ABB’s business ethics helpline. Our ABB Supplier Code of Conduct was also updated in 2023 and explains in detail what we expect of our suppliers. The updated version addresses latest changes in regulatory require- ments such as the German Supply Chain Act (Lieferkettengesetz, LkSG) and the Swiss Or- dinance on Due Diligence and Transparency in relation to Minerals and Metals from Conflict-Af- fected Areas and Child Labour (DDTrO). It also aligns our Supplier Code with international human rights and environmental guidance and conventions, takes account of stakeholder ex- pectations and emphasizes the role of suppliers in preventing and mitigating sustainability risks, especially when it comes to upholding human rights and reducing GHG emissions. Our Supplier Code is part of our procurement terms and conditions as well as our supplier qualification, development and evaluation requirements. The updated implementation guide for the Supplier Code provides suppliers with hands-on advice on how to fulfill ABB’s re- quirements and facilitates the effective imple- mentation of the Supplier Code of Conduct. Our Global Integrity Program includes integrity and communications training. The training mod- ules are delivered in a virtual, e-learning format as well as face-to-face. We actively promote self-driven learning for all employees, supple- mented by bespoke and role-specific mandatory training for those that face higher integrity risks in their roles. In 2023, we created an “Integrity Learning Toolkit”, which includes mandatory case study discussions on key topics in our Code of Conduct for all managers with their direct re- ports (“Integrity Circles”), along with a strongly encouraged e-learning module. This “Code of Conduct package” is complemented by an “Anti-bribery and anti-corruption package” in- cluding general awareness training and targeted modules for at-risk functions, and a “workplace behavior package,” which is mandatory for all ABB employees and promotes a culture of mu- tual respect, tolerance, and collaboration. We behave and do business in an ethical way We protect ABB’s assets and reputation We work in a safe and sustainable way We speak up and do not retaliate We build trust with all stakeholders 1 2 3 4 5 77 Alongside these integrity-focused learning modules, managers at all levels of the company are modeling integrity behaviors and holding team discussions to ensure that their people understand what is expected of them when it comes to ethical conduct and treating people with respect. Newly established Integrity Com- mittees in all business areas and divisions sup- port this approach. In addition, our “Straight Talk” series continues as an impactful platform for sharing real-life integrity successes and fail- ures at ABB, consolidating lessons learned and supporting our speak-up culture. It serves as a strong complement to our training program and has continued to be well received through- out ABB as a transparent method for communi- cating integrity learnings. To track the effectiveness of our integrity-re- lated initiatives, we utilize data analytics and conduct transaction monitoring. Our Integrity Analytics Report, a live dashboard available throughout ABB via our integrity web portal, provides insights into our integrity metrics. To offer insight into ongoing and closed cases, multiple real-time and quarterly Investigation Dashboards are made available to the appropri- ate stakeholders. In 2023, our trust and engagement KPIs were as follows: Trust KPI – the rate of severity level 1 and 2 investigations where the reporters disclosed their identity: 60 percent as compared to 60 percent in the period 2021–2022. Engagement KPI – the volume of unique vis- itors on the Integrity Awareness Portal for integrity learnings: 80 percent of employ- ees, as compared to 70 percent in the period 2021–2022. — CASE STUDY PROCESS AUTOMATION How Process Automation makes integrity part of its daily operations ABB’s principles of integrity and transparency apply across the entire Group. Our business areas and divisions take active ownership and re- sponsibility for integrity in their daily business. In Process Automation, our commitment to integrity is a cornerstone of our business agenda. We continuously implement activities throughout the organization to further drive a culture of integrity in everything we do. For example, in 2023, we launched a monthly internal update highlighting key milestones in our in- tegrity and transparency journey. In addition, we hosted Integrity Aware- ness Weeks across our organization, which included a series of discus- sions covering the topics of the ABB Code of Conduct. Moreover, as part of the Deferred Prosecution Agreement entered into with US authorities on December 2, 2022, ABB has implemented a work plan which is based on the elements of a Corporate Compliance Program, as included in DOJ and SEC’s “A Resource Guide to the US Foreign Corrupt Practices Act”. The work plan includes a component to sustainably imple- ment integrity into daily operations. As part of our daily operations, we drive cross-functional dialogue and collaboration on key integrity topics among our teams, including Legal & Integrity, Risk Management, Human Rights and Sustainability. This is crucial to ensure alignment on these topics, particularly when working on complex projects. 78 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES ABB has a “zero tolerance” policy towards un- ethical business behavior including any form of bribery or corruption. Having a robust anti-bribery and anti-corruption control frame- work and strong ethical culture is essential for ensuring that we comply with our legal respon- sibilities and preserve our license to operate. Our ABAC training program centers on the up- skilling of employees in gatekeeper functions and customer facing roles across ABB. The ABAC training program aims to enhance core ABAC competencies while highlighting the crit- ical role these individuals play in upholding our integrity culture and compliance obligations. Our actions to enhance our culture of integrity continue to focus on: • remediating the root causes of misconduct, firstly through internal control enhancements at the local level where they occurred, and sec- ondly through global process enhancements; • applying learnings to drive company-wide cul- tural changes and individual accountability for integrity; • innovating ABB’s monitoring and testing activ- ities and the platforms/tools we use for strong risk management and integrity assurance, in- cluding our continuous monitoring platform, aimed at attempting to detect ABAC and fraud risks by leveraging risk algorithms as applied to company data points across many com- pany systems. In 2023, we enhanced and innovated a number of company policies and procedures to fur- ther mitigate ABAC risks. We completed the first year of our Deferred Prosecution Agree- ment (DPA) with the United States Department of Justice (DOJ) and Securities and Exchange Commission (SEC) pursuant to a rigorous work- plan focused on these enhancements and inno- vations. Under the DPA, for a three-year period, we will self-report on continual enhancements to our integrity program to ensure that our con- trols, processes and culture serve as effective deterrents to bribery and corruption. Our integrity program goes beyond ABAC and workplace behavior and includes trade and anti- trust as well as data privacy and cyber security. — Anti-Bribery & Anti-Corruption — Trade compliance program ABAC FRAMEWORK ABAC Program Area of Risk Beyond the global ABAC program represented, ABB’s business areas, divisions, and some countries also have policies, procedures and controls that provide further risk migration. Donations & Sponsorships Ethical business Stakeholder trust Transparent value chain Protect license to operate Speak-up culture Gifts, Travel & Hospitality Third Party Management Books & Re- cords / Inter - nal Controls Facilitation and Safety Payments Conflicts of Interest and HR Payments M&A and Joint Ventures Tender Risk Review and Project Review Organization, Roles & Respon- sibilities Policies and Procedures Risk Management & Oversight Communication, Training and Awareness Risk Assessments Data Analytics and Monitoring Reporting Channels Code of Conduct Global Policies and Procedures ABAC Program Objectives Core Governing Policy & Proce- dures embed- ding ABAC con- trols Local require- ments (coun- try-specific) We act in a global environment and comply with applicable trade laws and regulations, includ- ing those relating to import and export con- trols, trade sanctions and customs procedures, and we expect our business partners to do the same. As reflected in ABB’s Code of Conduct, ABB’s Trade Compliance framework includes our Global Trade Compliance Procedure (GTCP), specific instructions and guidance documents for the business to embed trade compliance requirements into day-to-day processes. The extensive network of trade officers work to- gether with other functions across the organi- zation providing advice, raising awareness by delivering training, disseminating regulatory updates and in general, supporting the imple- mentation of processes and controls intended to mitigate trade risks. 79 ABB’s antitrust compliance program is guided by a suite of guidance notes, procedures and internal controls specifically addressing ABB’s global antitrust risks. These are integrated into ABB’s culture and internal controls through dedicated training of legal and business com- munities, the provision of specific expert anti- trust advice as well as regular internal exchange forums to raise awareness of antitrust topics of relevance to our operations. Our antitrust experts work closely with our colleagues from ABB’s business ethics helpline to facilitate the identification, investigation and remediation of any antitrust concerns. Importantly, a strong antitrust ethos permeates ABB’s mergers & acquisitions activities, including through the performance of due diligence prior to invest- ments, acquisitions or joint ventures, to sup- port healthy and compliant company growth. We ensure the protection of customer, em- ployee and other individual privacy and per- sonal data, and implement robust measures to protect their rights and safeguard against cyber threats. Respecting the right to data pro- tection is a priority for us and we have adopted global data protection standards to ensure a high, standardized level of protection for per- sonal data. We monitor and review compliance with ABB’s data protection policies and appli- cable data protection laws, by means of data protection audits, assessments and other con- trols. All ABB employees are made aware of the basics of data privacy, and specialized training is provided for selected job functions. At ABB, we are committed to a culture of eth- ics and transparency and encourage our people to speak up. We offer multiple channels for our stakeholders to report integrity violations and non-compliance with our Code of Conduct. We intend to make this process as straightforward and seamless as possible. Confidential report- ing processes are available for both employees and our broader community of stakeholders, in- cluding options for anonymous reporting. Our commitment to non-retaliation applies anytime someone has raised a potential integrity con- cern either in good faith or through coopera- tion in an investigation. ABB’s business ethics helpline permits web and phone reporting and is operated by an indepen- dent service provider, which forwards the re- port to a dedicated investigations team within the Legal & Integrity function at ABB headquar- ters or, in EU countries where required by law, to a local representative of the chosen ABB partner company. All reports are subject to ap- propriate investigation and are brought to full closure using systematic processes and track- ing systems so that due process is followed across our internal investigations. An employee or stakeholder who files a report can follow-up on the status of their report and continue to engage with the ABB investigator using a per- sonal PIN. The helpline permits reporting on conduct relating to all aspects of the ABB Code of Conduct, including corruption, fraud, trade compliance, antitrust, data privacy, workplace behavior, human rights, environment, occupa- tional health and safety violations, workplace violence, and more. — Antitrust compliance program — Data privacy and cyber security — Grievance and remediation 80 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES Cases reported in 2023 We have seen an increase in total concerns re- ported to our business ethics helpline since 2022. We attribute this to an increased confi- dence in our reporting and allegation manage- ment processes coupled with more in-person interactions in the wake of the pandemic. In 2023, the allegations reported were structured into the following categories (as well as more detailed subcategories within each of these) to ensure appropriate attention, resourcing and internal escalation: • Antitrust & Fair Competition • Bribery benefiting ABB • Commercial integrity & Regulatory • Fraud: Non-Self-Dealing • Fraud: Self-Dealing • HSE & Security • Human Resources • Non-Integrity Issue • Other Integrity Issue The following table provides an overview of number of allegations related to integrity concerns and employment actions – in ad- dition to myriad, non-disciplinary remedial actions – resulting from integrity violations pursuant to ABB’s root-cause analysis and accountability processes: Integrity concerns In 2023 Allegations reported 1894 Allegations closed 1187 Allegations substantiated 341 Verbal warnings 35 Written warnings 107 Employment separations 100 Demotions, suspensions or other financial penalties 11 81 Tracking responsible sourcing 2023 2022 Suppliers assessed on site (number) 118 58 High-risk supply spending in focus countries covered by SSBM (%) 42 22 Risk closure rate (%) 88 87 Contracts terminated 7 7 Employees trained on responsible sourcing (SSBM) 1 959 26 Supplier teams trained on responsible sourcing 95 54 — Responsible sourcing Our Supplier Code of Conduct makes clear that all third parties with which we do business are expected to adhere to the same ethical stan- dards as ABB. In November 2023, we published an updated edition of the Supplier Code of Con- duct along with an implementation guide to address the latest relevant international frame- works, standards and legislation governing ethical and sustainable business practices. To prevent human rights violations in our supply chain, we substantively revised the section on “Human rights and decent work” in our Supplier Code and included more specific requirements regarding modern slavery, discrimination and diversity, as well as the rights of local com- munities and vulnerable groups. Furthermore, a section on “Climate and environment” was added to reflect our intensified efforts to miti- gate climate change. We have expanded the list of potential environmental impacts to include topics of growing interest to our stakeholders, such as GHG emissions, circularity, biodiversity and deforestation. The updated Supplier Code explicitly requires suppliers to disseminate and enforce these requirements across their own supply chains and to report any suspected vio- lations. We provided ABB personnel with train- ing sessions on the updated Supplier Code in 2023 and will start trainings for our suppliers on these updates in 2024. We use our “Third Party Management” pro- gram to assess and manage risks as well as to onboard and monitor engagement with third parties across the entire value chain, including upstream (suppliers) and downstream (sales). It involves the following elements: As part of our Sustainable Supply Base Manage- ment (SSBM) program, we assess suppliers for their sustainability performance every year and mitigate risks identified. This involves a sup- plier self-assessment during the onboarding process, and subsequent further due diligence in case of high-risk scores, including mandatory onsite audits in focus countries. In 2023, we adjusted the SSBM Country Specific Protocol to permit audits of temporary labor suppliers. Several pilots have already been deployed and the resolution of identified cases related to labor law violations is under way. At the end of 2023, 42 percent of our spending on high-risk suppliers in focus countries was covered by our SSBM program, and 88 percent of identified risks were closed. — Risk-based front- end due diligence prior to considering engagement — Appointments subject to robust, structured approval processes — Standard agreement must be used that includes anti-bribery provisions, audit rights and the right to terminate agreements for any violation — Risk-appropriate monitoring over the life cycle of the engagement → Divided over different training programs 82 ABB INTEGRATED REPORT 2023 OUTPUTS AND OUTCOMES Conflict minerals and child labor Our ABB Way operating model requires that all materials intended for our products and ser- vices are sourced and procured ethically. ABB is a member of the Responsible Minerals Initiative and commits to sourcing minerals and metals responsibly, as described in the ABB Policy on Conflict Minerals. We have established a “Con- flict Minerals Compliance Program” based on the OECD Due Diligence Guidance for Respon- sible Supply Chains of Minerals from Conflict Affected and High-Risk Areas and other appro- priate international standards. ABB does not source from smelters and refiners in conflict af- fected or high-risk areas (CAHRAs) unless they have implemented OECD aligned programs. Every year, we file a Conflict Minerals Report with the United States Securities and Exchange Commission (SEC). Last year, we extended our Conflict Minerals program beyond 3TG (Tin, Tungsten, Tantalum and Gold) to include Co- balt. Due diligence on further minerals will con- tinue in 2024. In response to the new requirements estab- lished by Art. 964j–l of the Swiss Code of Ob- ligations and the Swiss Ordinance on Due Diligence and Transparency in relation to Min- erals and Metals from Conflict-Affected Areas and Child Labour (DDTrO), we have assessed our respective risk exposure and reached the following conclusions: • The quantities of minerals and metals in scope of the aforementioned regulations which ABB imported into or processed in Switzerland in 2023 are substantially below applicable thresholds. Hence, ABB is ex- empted from specific due diligence and re- porting obligations under the DDTrO in re- gard to conflict minerals. • No cases of child labor came to light in our analyses of our global supply chains in 2023 and nor was there any reason to suspect that we caused or contributed to the use of child labor either in our own operations, or in our direct suppliers’ operations, as was the case in previous years. In 2023, we again assessed our human rights processes and policies and identified areas of improvement. This led to the updating of our Supplier Code of Conduct and Human Rights Policy as well as our Human Rights Due Diligence framework. We are now compliant with ILO Conventions 138 and 182 as well as the ILO-IOE Child Labour Guidance Tool for Business of December 15, 2015, and the UN Guiding Principles on Business and Human Rights. The aforementioned frame- works and standards include those which the DDTrO specifies as internationally recognized equivalent regulations for child labor. As a re- sult of our compliance with these frameworks and standards, we are exempted from specific due diligence and reporting obligations under the DDTrO in regard to child labor. OUTLOOK Integrity and transparency are the foundations of our Sustainability Agenda. In 2024, we will further strengthen our approach and focus in particular on the following initiatives: • After updating our Code of Conduct and Human Rights Policy in 2023, we will drive imple- mentation and listen to signals. • Conduct in-depth trainings on specific topics such as modern slavery and child labor. • Enhance due diligence incorporating further minerals. • Using our human rights roadmap, we will investigate technological solutions and artificial intelligence to strengthen the risk mapping of our value chains. → Read more in our ABB Policy on Conflict Minerals 2023. 83 04 Good governance 85 Corporate governance 86 Board of Directors 88 Executive Committee — Corporate governance ABB is committed to the highest international stan- dards of corporate governance. This is reinforced in its structure, processes and rules, as outlined in more detail in ABB’s Corporate Governance Report. ABB complies with all relevant frameworks, including the Swiss Code of Obligations, the Swiss Code of Best Practice for Corporate Gov- ernance and the rules of the capital markets where its shares are listed. Governance princi- ples are also anchored in various ABB corporate documents, such as its Articles of Incorpora- tion, its Board Governance Rules and its poli- cies and procedures. Strong corporate governance is not only neces- sary to ensure compliance with applicable legal requirements but is indispensable for creat- ing sustainable value. We are convinced that our established governance culture helps ABB successfully manage its business and realize opportunities for the benefit of all of its share- holders. This applies in particular to sustain- ability. ABB has a robust sustainability gover- nance structure from its Board of Directors through to its operating divisions. → More information about our sustainability governance structure can be found in our Sustainability Report 2023. ABB GOVERNANCE STRUCTURE Board of Directors Executive Committee Compensation Committee Finance, Audit and Compliance Committee Governance and Nomination Committee 85 — Board of Directors ABB’s Board of Directors is responsible for the strategy of the company. It is a truly diverse board: seven of its ten members have been elected in the past eight years and all of them represent a broad variety of geographical, business, management and cultural experience. While the Board takes decisions as a whole, its three committees – the Finance, Audit and Compliance Committee, the Governance and Nomination Committee and the Compensation Committee – support it with high-level exper- tise and by ensuring an efficient mode of oper- ation. Special attention is paid to sustainabil- ity aspects: oversight of ABB’s Sustainability Agenda (including corporate social responsi- bility, health, safety and environment) is the responsibility of the Governance and Nomina- tion Committee, while the Compensation Com- mittee ensures that ABB’s executive compen- sation policies are appropriately aligned to its Sustainability Agenda. Ultimate responsibility for ABB’s Sustainability Agenda, its sustainabil- ity targets and its annual Sustainability Report lies with the entire Board of Directors. MEMBERS OF THE BOARD (2023–2024 BOARD TERM) Board experience Corporate officer experience Other business experience Board member ABB Board tenure (years) Other public board experience CEO CFO Operations Risk management Sustainability Digital / technology Global experience Country of origin / nationality Gender Non-executive Independent Peter Voser 9 • • • • • • • • CH M Yes Yes Jacob Wallenberg 25 • • • • • • • SE M Yes Yes Gunnar Brock 6 • • • • • • SE M Yes Yes David Constable 9 • • • • • • CA, US M Yes Yes Frederico Curado 8 • • • • • • • BR, PT M Yes Yes Lars Förberg 7 • • • • • CH, SE M Yes Yes Denise Johnson 1 • • • • • • US F Yes Yes Jennifer Xin-Zhe Li 6 • • • • • • • CN, CA F Yes Yes Geraldine Matchett 6 • • • • • CH, UK, FR F Yes Yes David Meline 8 • • • • CH, US M Yes Yes 86 ABB INTEGRATED REPORT 2023 GOOD GOVERNANCE David Meline • Member of ABB’s Board of Directors since 2016 • Chairman of the Finance, Audit and Compliance Committee • US and Swiss citizen Geraldine Matchett • Member of ABB’s Board of Directors since 2018 • Member of the Finance, Audit and Compliance Committee • Swiss, British and French citizen Denise Johnson • Member of ABB’s Board of Directors since 2023 • Member of the Finance, Audit and Compliance Committee • US citizen Jennifer Xin-Zhe Li • Member of ABB’s Board of Directors since 2018 • Member of the Governance and Nomination Committee and Compensation Committee • Canadian citizen Frederico Fleury Curado • Member of ABB’s Board of Directors since 2016 • Chairman of the Compensation Committee • Brazilian and Portuguese citizen Lars Förberg • Member of ABB’s Board of Directors since 2017 • Member of the Governance and Nomination Committee • Swedish and Swiss citizen Gunnar Brock • Member of ABB’s Board of Directors since 2018 • Member of the Finance, Audit and Compliance Committee • Swedish citizen David Constable • Member of ABB’s Board of Directors since 2015 • Member of the Compensation Committee • Canadian and US citizen Peter R. Voser • Chairman of ABB’s Board of Directors since 2015 • Chairman of the Governance and Nomination Committee • Swiss citizen Jacob Wallenberg • Member of ABB’s Board of Directors since 1999 and Vice-Chairman since 2015 • Member of the Governance and Nomination Committee • Swedish citizen OUR BOARD MEMBERS (AS OF DECEMBER 31, 2023) 87 — Executive Committee Each member of the Executive Committee is appointed by the Board of Directors. The Board has delegated the executive management of ABB to the CEO, who – together with the other members of the Executive Committee – is responsible for the company’s operational business. In line with the Board’s leading example, ABB’s Executive Committee strives to be equally diverse, not only in business and management experience, but also when it comes to geo- graphical and cultural backgrounds. 88 ABB INTEGRATED REPORT 2023 GOOD GOVERNANCE Sami Atiya • President of the Robotics & Discrete Automation business area since 2019 (member of the Executive Committee since 2016) • German citizen Peter Terwiesch • President of the Process Automation business area since 2015 • German and Swiss citizen Tarak Mehta • President of the Motion business area since 2022 (President of the Electrification business area from 2019 to 2022; member of the Executive Committee since 2010) • US and Swiss citizen On October 30, 2023, ABB announced that Mathias Gaertner had been appointed General Counsel and Company Secre- tary and a Member of the Executive Committee. He will join ABB in 2024 from global construction materials company Holcim. Mr. Gaertner is a German citizen. Morten Wierod • President of the Electrification business area since 2022 (President of the Motion busi- ness area from 2019 to 2022) • Norwegian citizen Carolina Granat • Chief Human Resources Officer since 2021 • Swedish citizen Karin Lepasoon • Chief Communications and Sustainability Officer since 2022 • Swedish citizen Björn Rosengren • Chief Executive Officer since 2020 • Swedish citizen Timo Ihamuotila • Chief Financial Officer since 2017 • Finnish citizen OUR EXECUTIVE COMMITTEE MEMBERS (AS OF DECEMBER 31, 2023) 89 05 Performance based compensation 91 Extracts from Compensation Committee Chair Letter 93 Board compensation 94 Executive Committee compensation 98 Sustainability-related considera- tions in ABB’s compensation — Extracts from Compensation Committee Chair Letter Our focus at the Compensation Committee remains to ensure that the compensation structure at ABB drives value creation for our shareholders, represents a motivating package for our ex- ecutives, and ensures alignment with best-practice corporate governance standards and with ABB’s Sustainability Agenda. In response to valuable feedback from our stakeholders, you will find the 2023 Annual In- centive Plan (AIP) targets for the CEO disclosed in ABB’s Compensation Report 2023, providing additional level of transparency on the align- ment between pay and performance that we seek to ensure at ABB. Furthermore, we will extend our malus and clawback policy, which is currently applied to our Long-Term Incentive Plan (LTIP) with a claw- back period of five years, to future AIP launches (i.e., from 2024) for all EC members, with a clawback period of three years, in line with market practice. Finally, we have introduced an additional dis- closure – the ratio of the annual total compen- sation of our CEO to the median annual total compensation of all permanent ABB employees in Switzerland. Details can be found in the sec- tion “Annual total compensation ratio” of ABB’s Compensation Report 2023. We will maintain the strong link between our Sustainability Agenda and compensation pro- grams, such that all EC members continue to have a sustainability performance measure in their LTIP, with a material weighting of 20 per- cent. Details related to the sustainability target for the 2024 LTIP are disclosed in ABB’s Com- pensation Report 2023. In addition, all EC members shall have two or more goals relating to sustainability in the indi- vidual component of their AIP. — Summary of changes in policies and disclosures — Sustainability impact on executive compensation 91 2023 was a year of solid operational and finan- cial performance. Overall, most key financial, sustainability and operational targets were met or excelled. ABB (the Company) delivered a strong operational EBITA margin, increased its revenues, and improved productivity in 2023. The Company also made significant progress in reducing its environmental footprint and con- tributing to a more sustainable environment. For more information on ABB’s 2023 sustain- ability achievements please refer to sections “Outputs and outcomes” of this Report. Board of Directors (Board) The aggregate Board compensation for the 2023–2024 term (CHF 4.38 million) is in line with the maximum amount (CHF 4.4 million) approved at the 2023 Annual General Meeting (AGM). There has been no change to the individ- ual Board member fees since 2015. Executive Committee The aggregate EC total compensation was CHF 40.6 million in 2023, driven largely by the strong performance related variable pay awards. This is below the maximum amount (CHF 45.9 mil- lion) approved at the 2022 AGM. Two of the nine EC members in place received a salary adjust- ment in March 2023, which ranged from 3.6 to 8.3 percent, for exceptional performance and/or broadened responsibilities. This corresponded to an average 1.3 percent increase on the an- nual aggregate base salaries for EC members in post in March 2023. The average award for the current EC members under the AIP for 2023 was 143.3 percent (out of a maximum of 150 per- cent), compared to 118.3 percent in 2022. The average weighted achievement level of the 2020 LTIP, which vested in 2023, was 189.5 percent (out of a maximum of 200 percent), driven by solid evolution of our Earnings Per Share (EPS) during the period, and a maximum vesting un- der the relative Total Shareholder Return (TSR) performance measure. At the AGM on March 21, 2024, shareholders will be asked to vote on the maximum aggregate compensation for the Board for its 2024–2025 term and on the maximum aggregate compen- sation for the EC in 2025. The former is again unchanged compared to the prior year, while the latter shows an increase from the level re- quested for the prior year, primarily influenced by the change in composition of the EC. The Compensation Report 2023 will also be submitted for a non-binding, consultative vote by shareholders. We have pursued an open and regular dialogue with our stakeholders, as we continue to improve our compensation system. On behalf of the Compensation Com- mittee, I thank all shareholders for their con- tinued trust in ABB and for their consistently supportive feedback. FREDERICO FLEURY CURADO Chairman of the Compensation Committee Zurich, February 22, 2024 — 2023 results and compensation policy outcomes — Governance 92 ABB INTEGRATED REPORT 2023 PERFORMANCE BASED COMPENSATION The aggregate Board compensation for the 2023- 2024 term of office (CHF 4,380,000) was within the maximum amount (CHF 4,400,000) approved at the 2023 Annual General Meeting (AGM). — Compensation for the 2023–2024 term of office EXHIBIT 1: BOARD MEMBERS SHAREHOLDING (AT DECEMBER 31, 2023) IN % OF 2023 TOTAL COMPENSATION — Board compensation Except for one member, who joined the Board in 2023, all other Board members held ABB shares at December 31, 2023, worth at least 300 percent of their 2023 Board compensation. — Share ownership of Board members * Based on share price of CHF 31.24, the 2023 LTIP reference price, and shares held at De- cember 31, 2023. Peter Voser Jacob Wallenberg Gunnar Brock David Constable Frederico Curado Lars Förberg Denise Johnson Jennifer Xin-Zhe Li Geraldine Matchett David Meline April 2015 June 1999 March 2018 April 2015 April 2016 April 2017 March 2023 March 2018 March 2018 April 2016 Board appointment at 1,745% 0% 100% 200% 300% 400% 500% 600% 700% 800% 93 — Executive Committee compensation EXHIBIT 2: EC COMPENSATION STRUCTURE AS FROM 2023 Fixed compensation – base salary and benefits Variable compensation – short term incentive (AIP) Variable compensation – long term incentive (LTIP) Wealth at risk/ Share ownership Purpose and link to strategy Facilitates attraction and re- tention of talented EC mem- bers; base salary compensates for the role and relevant experience; benefits protect against risk Rewards annual Company, business area, functional and individual performance. Aligned with the Company’s Annual Performance Plan Rewards Company performance over a three-year period and en- courages creation of long-term, sustainable value for shareholders. Aligned with the Company’s Long- Term Performance Plan Aligns individual’s personal wealth at risk directly to the ABB share price, and EC mem- bers’ interests with those of shareholders to maintain focus on ABB’s long-term success Operation Salary in cash, benefits in kind, and pension contributions Annual awards, payable in cash after a one-year per- formance period; malus and clawback to be imple- mented from 2024 Annual grants in shares which may vest after three years, and are sub- ject to performance conditions; ma- lus and clawback provisions in place Individuals are required to hold ABB shares Opportunity level (as % of base salary) Based on scope of responsibili- ties, personal experience, and skillset Minimum Target Maximum 0% 100% 150% CEO Minimum Target Maximum 0% 150% 300% Other EC members Minimum Target Maximum 0% 150% 300% CEO 500% of annual salary (net of taxes) Other EC members 400% of annual salary (net of taxes) Performance indicators Changes to base salary con- sider individual performance, future potential, broadening of responsibilities, and exter- nal benchmarking 80% Group financial results 20% Individual results CEO and corporate officers 20% Group financial results 60% Business area financial results 20% Individual results Business area presidents 50% Average EPS 30% Relative TSR 20% Sustainability All EC members Exposure to ABB share price * EC members with legacy employment contracts have a Target LTIP grant of 100 percent, and Max LTIP opportunity of 200 percent. The higher LTIP opportunity for the newer EC members is largely offset by lower pension and other benefit costs. The elements of the EC members’ compensa- tion structure, including the purpose, the link to strategy and applicable performance indicators are summarized in the following table: — Compensation structure 94 ABB INTEGRATED REPORT 2023 PERFORMANCE BASED COMPENSATION The aggregate EC compensation for 2023 (CHF 40,642,468) was within the maxi- mum amount approved at the 2022 AGM (CHF 45,900,000). The largest portion of the CEO’s 2023 total compensation was delivered via performance driven variable compensation (55 percent), represented by short-term and long-term in- centives. For the other EC members, on an aggregate level, variable compensation repre- sented 52 percent of their 2023 compensation. The following chart shows the composition of the 2023 total compensation for the EC mem- bers at December 31, 2023. — Total EC compensation for 2023 EXHIBIT 3: 2023 TOTAL COMPENSATION MIX (IN CHF) FOR THE CEO AND OTHER EC MEMBERS ON AGGREGATE LEVEL * Composed of actual base salary, 2023 AIP, 2023 LTIP grant, pension, and other benefits. 2023 AIP represents accrued short-term incentive for the year 2023, which will be paid in 2024, after the publi- cation of ABB’s finan- cial results. The sum of percentage figures may differ from 100 percent due to round- ing with one decimal. CEO Other EC members Variable compensation 55% Variable compensation 52% Fixed compensation 45% Fixed compensation 48% 18.4% Base salary 8.0% Pension benefits 18.1% Other benefits 27.4% Short-term incentive 28.0% Long-term incentive 21.3% Base salary 11.9% Pension benefits 14.8% Other benefits 30.4% Short-term incentive 21.7% Long-term incentive 9,693,219 27,528,972 95 Target achievement level Realized achievement level Maximum achievement level EXHIBIT 5: 2020 LTIP OUTCOME COMPARED TO TARGET Target AIP award Realized AIP award Maximum AIP award EXHIBIT 4: 2023 AIP OUTCOME COMPARED TO TARGET → Target AIP award cor- responds to 100 per- cent of base salary. * On an aggregate level, while individual outcomes range from 120 to 150 percent. Realized variable compensation considers the AIP award and the LTIP award at the end of their respective performance cycles, re- flecting actual AIP payment and LTIP vesting, based on achievement of the respective plan performance measures. The outcome of the 2023 AIP was above the tar- get for all current EC members (143.3 percent on average), and the LTIP that vested in 2023 (2020 LTIP) exceeded the target level, with a fi- nal vesting level of 189.5 percent of target. — Realized variable compensation in 2023 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000 Other EC members CEO 149% 142% 150% 150% 0% 25% 50% 75% 100% 125% 150% 175% 200% 100% 200% 200.0% 179.0% 189.5% 100% 200% 100% 200% Relative TSR (50% of total) Average EPS (50% of total) LTIP vesting (total) CHF 2,659,650 CHF 8,370,060 96 ABB INTEGRATED REPORT 2023 PERFORMANCE BASED COMPENSATION Considering the stated variable components above, the realized total compensation in 2023 was above the target total compensation for all EC members, driven by strong performance in 2023 and the high level of achievement against the targets for the 2020 LTIP, which vested in 2023. Further details related to the realized compen- sation of each EC member and each compensa- tion component are specified in ABB’s Compen- sation Report 2023 in Exhibit 48. — Realized total compensation in 2023 EXHIBIT 7: EC SHAREHOLDING COMPARED TO SHARE OWNERSHIP GUIDELINE * Based on share price of CHF 31.24, the 2023 LTIP ref- erence price, and shares held at December 31, 2023. Future allocation of granted, but un- vested, shares is based on target achievement level and relevant plan specific set- tlement: default settlement of the final 2021 LTIP, 2022 LTIP and 2023 LTIP awards is 100 percent in shares. The value of shares is compared against the annual base sal- ary net of taxes, at Decem- ber 31, 2023. Held shares in % of net salary Granted, but unvested shares Share ownership requirement EC members may not sell their shares (except to meet tax and social security costs related to share vesting) until they achieve the required share ownership level. Six out of eight EC members exceeded their share ownership requirement. The other two members have been appointed to the EC in the last three years. When considering the number of granted, but unvested, ABB shares of EC members at Decem- ber 31, 2023, it is expected that the remaining two most recently appointed EC members who do not currently meet their share ownership re- quirement are projected to do so in 2026, after vesting of the 2023 LTIP grant, and in 2027, af- ter vesting of the 2024 LTIP grant, respectively. — Share ownership of EC members * On an aggregate level, while individual outcomes range from 117 to 189 percent. Target total compensation Realized total compensation EXHIBIT 6: REALIZED TOTAL COMPENSATION IN 2023 COMPARED TO TARGET TOTAL COMPENSATION 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 Other EC members CEO CHF 8,425,284 CHF 22,164 , 484 Björn Rosengren Timo Ihamuotila Carolina Granat Karin Lepasoon Sami Atiya Tarak Mehta Peter Terwiesch Morten Wierod January 2020 April 2017 January 2021 October 2022 June 2016 October 2010 January 2017 April 2019 EC appointment 0% 200% 400% 600% 800% 1000% 189% 159% CHF 15,953,078 CHF 35,316,988 Other EC members share ownership requirement (400%) CEO share ownership requirement (500%) 97 — Sustainability-related considerations in ABB’s compensation There are a range of sustainability-related considerations which play an important role in our compensation philosophy, including the desire to foster a strong link between ABB’s Sustainability Agenda and the vari- able compensation for the EC and senior management, as well as the general ambition to reinforce its social contract with its employees. Given sustainability is an integral part of ABB’s strategy and plans, there is a strong, direct link between the Sustainability Agenda and execu- tive incentives through ABB’s key variable com- pensation programs such as AIP and LTIP. Regarding the AIP, all EC members have two or three sustainability goals (out of a maximum of three) in the individual component of their respective plans. In 2023, all EC members had an environmental goal (scope 1 and 2 greenhouse gas (GHG) emis- sions reduction). Most of the EC members had a social goal, which for the CEO and business area presidents was safety, and for most corpo- rate officers was an increase in the proportion of women in senior management roles (female leaders), while the CFO had a governance goal (related to internal controls). In addition, all EC members had an integrity goal designed to help deliver ABB’s obligations under the Deferred Prosecution Agreement (DPA) in line with our commitments to the US Department of Justice. Regarding the LTIP granted to ABB’s senior management in 2023, including the EC, a Com- pany-wide sustainability performance measure with a weighting of 20 percent forms part of the performance measures. • For the 2023 LTIP, the sustainability perfor- mance measure was the Company’s GHG emissions reduction at the end of the three- year performance period (2023–2025), com- pared to the 2019 baseline. • To support our strong ambition to our long- term GHG emissions reduction, the sustain- ability measure for the 2024 LTIP will again be GHG emissions reduction at the end of the three-year performance period (2024–2026), compared to the 2019 baseline. Details of the long-term GHG emissions reduc- tion targets can be found in ABB’s Sustainabil- ity Report 2023. — Impact of sustainability performance on variable compensation 98 ABB INTEGRATED REPORT 2023 PERFORMANCE BASED COMPENSATION In addition to the offer of fair and competi- tive compensation to our employees, ABB also strives to offer additional programs to rein- force its social contract with its employees. Selected key programs and their links to our Sustainability Agenda are summarized in the Exhibit 8 below. Program Operation and purpose Link to ABB’s Sustainability Agenda Employee Share Acquisition Plan (ESAP) Offered to ca. 100,000 employees in over 60 coun - tries, providing the opportunity to purchase shares in ABB one year after the start of a plan, at a price which will be fixed at the beginning of each annual plan cycle, and become ABB shareholders. The opportunity for share ownership is the same for permanent full-time and permanent part-time employees at ABB. This is the case in all ABB loca- tions where ESAP is offered. Supports social goals by aligning employees’ in- terests with the interests of shareholders and maintaining focus on the long-term success of the Company. Parental Leave A global and gender-neutral program, offered to all employees, which sets out a minimum stan- dard on paid parental leave that supports all fam- ily types. The primary caregivers receive 12 weeks of paid leave and the secondary caregivers four weeks following the birth of a child or when be- coming a new parent by adoption or surrogacy. Supports social goals, promotes wellbeing and the ABB value of “Care”. Employee Assistance A global program, offered to all employees. The program supports the employee’s wellbeing by offering paid counseling on emotional health, family concerns and workplace concerns. Supports social goals, promotes wellbeing and the ABB value of “Care”. Car or Transportation Allowance Offered to selected employees based on business need or market practice, with any car provision being progressively migrated to e-vehicles or transportation allowances which can be used to contribute to public transport, cycle or other transport needs. Supports environmental goals by addressing changed needs related to mobility and providing greater flexibility to opt for more environmentally friendly solutions. EXHIBIT 8: SELECTED PROGRAMS FOR EMPLOYEES — Programs for ABB employees 99 06 Appendix 101 EU Taxonomy disclosures summary 103 Alternative performance measures 106 Key terms 108 About this report 109 ABB annual reporting suite 2023 and financial calendar — EU Taxonomy disclosures summary At ABB, we are determined to shape our future in an environmentally sustainable way by in- vesting in environmentally sustainable activ- ities. The European Union (EU) has taken the lead in standardizing sustainability-related data and defining criteria for environmental sustainability. As part of the European Green Deal, the EU aims to become climate-neutral and to reduce GHG emissions to net zero by 2050. With the Action Plan on Financing Sus- tainable Growth, the European Commission intends to reorient the European economic and financial system towards more sustainable technologies and businesses. The EU Taxonomy is the cornerstone of the EU’s Green Deal and Sustainable Finance Action Plan, as it aims to direct capital flows specifically into sustainable projects and companies. The EU Taxonomy is a classification sys- tem for economic activities that are envi- ronmentally sustainable. It establishes six environmental objectives: • Climate change mitigation • Climate change adaptation • Sustainable use and protection of water and marine resources • Transition to a circular economy • Pollution prevention and control • Protection and restoration of biodiversity and ecosystems. The EU Taxonomy distinguishes between «Taxonomy-eligible» and «Taxonomy-aligned» economic activities. An economic activity is considered «eligible» if it is described in the adopted Delegated Acts, whereas an eligible activity is only con- sidered environmentally sustainable and thus «aligned», if it meets the following conditions: • Makes a substantial contribution to one of the environmental objectives by complying with the substantial contribution criteria de- fined for the activity; • Meets the “Do No Significant Harm” criteria, having no negative effect on any of the other five environmental objectives; • Complies with the minimum safeguards re- lated primarily to human rights and social and labor standards. How ABB adopted the EU Taxonomy Year Progress in adopting the EU Taxonomy 2021 We conducted a first eligibility analysis of our products, sites and activities and reviewed them against the economic activities defined by the Taxonomy in all the countries in which we oper- ate. We involved the expertise of our product managers, real estate managers, sustainability managers, financial controllers, R&D controllers, and environmental managers across all levels of our organization and solicited advice from external consultants. 2022 Relevant Taxonomy-aligned activities were identi- fied across the Group, with alignment results pub- lished for the first time. 2023 A thorough review was conducted in 2023 to ac - commodate the changes introduced by the new Taxonomy activities that were added in 2023 and amended DNSH criteria. Economic activities of ABB in the context of the EU Taxonomy Most of our eligible products and services are considered “enabling activities”, as defined by the Taxonomy Regulation, 1 meaning economic activities that “directly enable other activities to make a substantial contribution” to one of the environmental objectives. A selection of our activities in Electrification, Motion, Process Automation and Robotics & Discrete Automation business areas, together with our Real Estate activities, are eligible to contribute to the environmental objective of climate change mitigation. In addition, some of our activities are eligible under the environmen- tal objective of transition to a circular economy. The full regulatory disclosure of ABB’s Tax- onomy-eligible and -aligned activities can be found in the EU Taxonomy section of our Sustainability Report 2023. 1 According to Article 16 of Regulation (EU) 2020/852, an economic activity shall qualify as contributing sub- stantially to one or more of the environmental objectives “by directly enabling other activities to make a substan- tial contribution to one or more of those objectives, provided that such economic activity: (a) does not lead to a lock-in of assets that un- dermine long-term environ- mental goals, considering the economic lifetime of those assets; and (b) has a sub- stantial positive environmen- tal impact, on the basis of lifecycle considerations.” 101 2023 ABB ASSESSMENT RESULTS UNDER THE EU TAXONOMY: TURNOVER, CAPEX, OPEX KPIS Turnover 46% eligible 54% non-eligible 6% aligned 94% non-aligned Capital expenditures 64% eligible 36% non-eligible 8% aligned 92% non-aligned Operating expenditures 45% eligible 55% non-eligible 6% aligned 94% non-aligned Assessment results under the EU Taxonomy The EU Taxonomy requires the disclosure of the amounts of eligible and aligned activities in three KPIs: turnover, capital expenditure (CapEx), and operating expenditure (Opex). In 2023, 46% of ABB revenues were Taxonomy- eligible, out of which 6% were Taxonomy- aligned. A more detailed breakdown is offered in the chart below. It is noted that changes may be made to the lists of our economic activities in the future, as the rules around the Taxonomy evolve. Addition- ally, wording and terminology used in the EU Taxonomy are still subject to some uncertainty in interpretation, which may lead to changes in subsequent reporting once clarifications would be provided by the EU. For more details on our Taxonomy disclosures, see the EU Taxonomy section of our Sustainability Report 2023. 102 ABB INTEGRATED REPORT 2023 APPENDIX — Alternative performance measures The following are definitions of key financial measures used to evaluate ABB’s operating performance. These financial measures are referred to in this Annual Report and are not defined under United States generally accepted accounting principles (US GAAP). While ABB’s management believes that the non-GAAP financial measures herein are useful in evaluating ABB’s operating results, this infor- mation should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with US GAAP. COMPARABLE GROWTH RATES Growth rates for certain key figures may be pre- sented and discussed on a “comparable” basis. The comparable growth rate measures growth on a constant currency basis. Since we are a global company, the comparability of our oper- ating results reported in US dollars is affected by foreign currency exchange rate fluctuations. We calculate the impacts from foreign currency fluctuations by translating the current-year periods’ reported key figures into US dollar amounts using the exchange rates in effect for the comparable periods in the previous year. Comparable growth rates are also adjusted for changes in our business portfolio. Adjustments to our business portfolio occur due to acquisi- tions, divestments, or by exiting specific busi- ness activities or customer markets. The ad- justment for portfolio changes is calculated as follows: where the results of any business ac- quired or divested have not been consolidated and reported for the entire duration of both the current and comparable periods, the reported key figures of such business are adjusted to ex- clude the relevant key figures of any correspond- ing quarters which are not comparable when computing the comparable growth rate. Certain portfolio changes which do not qualify as di- vestments under US GAAP have been treated in a similar manner to divestments. Changes in our portfolio where we have exited certain business activities or customer markets are adjusted as if the relevant business was divested in the pe- riod when the decision to cease business activ- ities was taken. We do not adjust for portfolio changes where the relevant business has annu- alized revenues of less than $50 million. OPERATIONAL EBITA MARGIN Operational EBITA margin Operational EBITA margin is operational EBITA as a percentage of operational revenues. Operational EBITA Operational earnings before interest, taxes and acquisition-related amortization (op- erational EBITA) represents income from operations excluding: • acquisition-related amortization (as de- fined below), • restructuring, related and implementation costs (as defined below), • changes in the amount recorded for obliga- tions related to divested businesses occur- ring after the divestment date (changes in obligations related to divested businesses), • gains and losses from sale of businesses (in- cluding fair value adjustment on assets and liabilities held for sale, if any), • acquisition- and divestment-related expenses and integration costs, • certain other non-operational items, as well as • foreign exchange/commodity timing differ - ences in income from operations consisting of: (a) unrealized gains and losses on deriva- tives (foreign exchange, commodities, em- bedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (c) unrealized foreign exchange move- ments on receivables/ payables (and related assets/liabilities). Certain other non-operational items generally includes: certain regulatory, compliance and legal costs, certain asset write downs/impair - ments and certain other fair value changes, changes in estimates relating to opening bal- ance sheets of acquired businesses (changes → For a full reconciliation of ABB’s non-GAAP mea- sures, please refer to Sup- plemental Reconciliations and Definitions, in the ABB Q4 2023 Financial Infor- mation on https://global. abb/group/en/investors/ quarterly-results 103 in pre-acquisition estimates), as well as other items which are determined by management on a case-by-case basis. Operational EBITA is our measure of segment profit but is also used by management to evalu- ate the profitability of the company as a whole. Acquisition-related amortization Amortization expense on intangibles arising upon acquisitions. Restructuring, related and implementa- tion costs consists of restructuring and other related expenses, as well as internal and ex- ternal costs relating to the implementation of Group-wide restructuring programs. Operational revenues We present operational revenues solely for the purpose of allowing the computation of the operational EBITA margin. Operational reve- nues are total revenues adjusted for foreign exchange/commodity timing differences in to - tal revenues of: (i) unrealized gains and losses on derivatives, (ii) realized gains and losses on derivatives where the underlying hedged trans- action has not yet been realized, and (iii) unre- alized foreign exchange movements on receiv- ables (and related assets). Operational revenues are not intended to be an alternative measure to total revenues, which represent our revenues measured in accordance with US GAAP. NET WORKING CAPITAL AS A PERCENTAGE OF REVENUES Net working capital as a percentage of reve- nues is calculated as net working capital divided by adjusted revenues for the trailing 12 months. Net working capital is the sum of (i) receiv- ables, net, (ii) contract assets, (iii) inventories, net, and (iv) prepaid expenses; less (v) accounts payable, trade, (vi) contract liabilities and (vii) other current liabilities (excluding primar- ily: (a) income taxes payable, (b) current deriv- ative liabilities, (c) pension and other employee benefits, (d) payables under the share buyback program, (e) liabilities related to certain other restructuring-related activities and (f) liabil- ities related to the divestment of the Power Grids business); and including the amounts related to these accounts which have been presented as either assets or liabilities held for sale but excluding any amounts included in discontinued operations. Adjusted revenues for the trailing 12 months includes total revenues recorded by ABB in the 12 months preceding the relevant balance sheet date adjusted to eliminate revenues of divested businesses and the estimated impact of annualizing revenues of certain acquisitions which were completed in the same trailing 12-month period. FREE CASH FLOW CONVERSION TO NET INCOME Free cash flow conversion to net income is cal- culated as free cash flow divided by adjusted net income attributable to ABB. Adjusted net income attributable to ABB is calculated as net income attributable to ABB adjusted for: (i) impairment of goodwill, (ii) losses from extinguishment of debt, and (iii) gains arising on the sale of the Power Con- version division, the equity-accounted invest- ment in Hitachi Energy Ltd., and the Power Grids business, the latter being included in discontinued operations. Free cash flow is calculated as net cash pro- vided by operating activities adjusted for: (i) purchases of property, plant and equipment and intangible assets, and (ii) proceeds from sales of property, plant and equipment. RETURN ON CAPITAL EMPLOYED Return on capital employed (ROCE) is calcu- lated as operational EBITA after tax, divided by the average of the period’s opening and closing capital employed, adjusted to reflect impacts from the timing of significant acquisitions/di - vestments occurring during the period. Capital employed is calculated as the sum of adjusted total fixed assets and net working capital (as defined above). Adjusted total fixed assets is the sum of (i) property, plant and equipment, net, (ii) goodwill, (iii) other intangible assets, net, (iv) investments in equity-accounted compa- nies, and (v) operating lease right of-use assets, less (vi) deferred tax liabilities recognized in certain acquisitions. Notional tax on operational EBITA is computed using an adjusted group effective tax rate mul- tiplied by operational EBITA. 104 ABB INTEGRATED REPORT 2023 APPENDIX Adjusted Group effective tax rate is computed by dividing an adjusted income tax expense by an adjusted pretax income. Certain amounts re- corded in income before taxes and the related income tax expense (primarily due to gains and losses from sale of businesses and in 2022, regulatory penalties in connection with the Kusile project) are removed from the reported amounts when computing these adjusted amounts. Certain other amounts recorded in income tax expense are also excluded from the computation to determine the adjusted Group effective tax rate. NET DEBT Net debt is defined as total debt less cash and marketable securities. Total debt is the sum of short-term debt and current maturities of long-term debt, and long- term debt. Cash and marketable securities is the sum of cash and equivalents, restricted cash (current and non-current) and marketable securities and short-term investments. NET DEBT/EBITDA RATIO Net debt/EBITDA ratio is defined as net debt (as defined above) divided by EBITDA. EBITDA is defined as income from operations for the trailing 12 months preceding the bal- ance sheet date before depreciation and amor- tization for the same trailing 12-month period. NET FINANCE EXPENSES Net finance expenses is calculated as interest and dividend income less interest and other finance expense. BOOK-TO-BILL RATIO Book-to-bill ratio is calculated as orders re- ceived divided by total revenues. 105 — Key terms A ABB Way The ABB Way is the common operat- ing model for our divisions, business areas and lean corporate center. It de- fines “how” we create value. It is built around our purpose and consists of four elements: business model, gover- nance, people & culture and brand. B Business areas ABB has a decentralized business model with 19 divisions grouped into four business areas: Electrification, Mo- tion, Process Automation, and Robotics & Discrete Automation. They comple- ment each other, cooperate and find synergies to create competitive advan- tages and best serve our customers. C Circular economy In contrast to a linear “take-make- waste” model of production and con- sumption, the circular economy aims to keep resources in use by designing products for durability, reusability and recyclability. At ABB, circular economy approaches are at the center of the sec- ond pillar of our Sustainability Agenda, “preserving resources”. By 2030, we aim to have at least 80 percent of ABB’s products and solutions covered by our Circularity Approach and evaluated against a clear set of key performance indicators (KPIs), corresponding to each stage of the product lifecycle. D Divisions Our 19 divisions represent the highest level of operating decisions within ABB with full ownership and accountability for their respective strategies, perfor- mance and resources, as they are clos- est to our markets and customers. They are grouped into four business areas. G Greenhouse gas emissions Greenhouse gas emissions (GHG) emissions refer to all emissions that have a warming effect on the earth’s surface by trapping heat in the atmo- sphere. The Greenhouse Gas Protocol , which sets global standards to mea- sure and manage GHG emissions, covers seven GHGs: carbon dioxide (CO 2 ), methane (CH 4 ), nitrous oxide (N 2 O), as well as gases used in indus- try, including hydrofluorocarbons (HFCs), per-fluorocarbons (PCFs), sulfur hexafluoride (SF 6 ). and nitro- gen trifluoride (NF 3 ). CO 2 , CH 4 , and N 2 O are released during the combus- tion of fossil fuels, such as coal, oil, or natural gas. All GHG emissions can be calculated as CO 2 -equivalents (CO 2 e), which is the metric measure used at ABB to calculate our overall emissions and progress towards our emissions reduction targets. H Headcount vs. FTE Headcount and FTE (full-time equiva- lent) are both methods that are used to count members within an organiza- tion. The key difference is that head- count represents the total number of employees that are working at an orga- nization at any given time, regardless of their work status being full-time or part-time. It is mainly used in social reporting. While FTE is a metric that is notably used in financial reporting to calculate the total number of full-time hours being collectively worked across an organization, this way making em- ployed persons comparable although they may work a different number of hours per week. For example, if an or- ganization considers 40 hours per week as full-time, a part-time worker em- ployed for 20 hours a week, is counted as 0.5 FTE or as 1 headcount. M Materiality/material topics Materiality refers to the process of identifying the most important top- ics to be managed and included in re- porting. ABB’s material sustainability topics were identified in 2020 through a comprehensive stakeholder engage- ment process and updated with a double materiality lens in 2023. Based on this analysis, we present an over- view of material topics for value cre- ation in the chapter “Material topics”, reflecting both the impact that ABB has on the economy, environment and society including people, and the im- pact that sustainability has on ABB’s business success. N Net zero versus carbon neutral “Net zero” means that any GHG re- leased into the atmosphere is bal- anced by an equivalent amount being removed. “Carbon neutral” means that carbon emissions can be offset by a reduction in emissions or a removal of carbon from the atmosphere, for instance through carbon sinks, which absorb more carbon than they emit. At ABB, we have established net-zero 106 ABB INTEGRATED REPORT 2023 APPENDIX targets. By 2050, ABB targets reduc- ing absolute scope 1 and 2 emissions by 100 percent, and scope 3 emissions by 90 percent. P Purpose ABB’s purpose is to enable a more sus- tainable and resource-efficient future with our technology leadership in elec- trification and automation. This is why we are in business and is the guiding star for ABB’s direction and strategy. Our purpose is based on five themes: creating success for all our stakehold- ers, addressing the world’s energy challenges, transforming industries, embedding sustainability in everything we do, and leading with technology. S Science-based targets Greenhouse gas reduction targets, set by companies, that are in line with what the latest climate science deems nec- essary to meet the goals of the Paris Agreement, which aims to limit “the increase in the average global tempera- ture to well below 2 °C above pre-indus- trial levels” and “pursue efforts to limit the temperature increase to 1.5 °C.” Scope 1 GHG emissions Direct emissions from compa- ny-owned and controlled resources, for example, emissions from combus- tion in owned or controlled boilers, furnaces, vehicles. Scope 2 GHG emissions Indirect emissions from the generation of purchased energy (electricity, steam, heat, cooling) from a utility provider. Scope 3 GHG emissions All other indirect emissions that are not included in scope 2, occurring in both the upstream and downstream value chain. According to the GHG Pro- tocol, scope 3 emissions are separated into 15 categories, and include, for ex- ample, purchased goods and services, business travel and commuting, or use of sold products. Sustainability Sustainability or sustainable develop- ment can be defined as “meeting the needs of the present without compro- mising the ability of future generations to meet their own needs” (Brundtland Report, 1987). Sustainability is com- monly based on three dimensions: eco- nomic sustainability, environmental sustainability and social sustainability. At ABB, we strive to embed sustain- ability in everything we do. Sustainabil- ity is core to our company’s purpose, strategic direction, operating model (the ABB Way), objectives, and is a key part of the value that we create for our stakeholders. Sustainability Agenda In 2020, ABB defined a clear approach to contribute to a more sustainable so- ciety. The three pillars of our Sustain- ability Agenda are “enabling a low-car- bon society”, “preserving resources” and “promoting social progress”, sus- tained by the foundation of “embed- ding a culture of integrity and transpar- ency along the extended value chain”. V Value creation The process that results in increases, decreases or transformations of inputs and related outputs and outcomes caused by our business activities in the-, medium- and long-term. We not only focus on maximizing shareholder value but work holistically to create fi- nancial and sustainability-linked value for all our stakeholders, for ABB, soci- ety and the environment. We are con- vinced that this is not only the right thing to do, but also in the interest of our long-term business success. 107 — About this report – Peter Voser, Chairman Björn Rosengren, CEO ABB’s Integrated Report highlights progress against our priorities and demonstrates how we create value holistically for our stakehold- ers in the short-, medium- and long-term. As our primary report at ABB Group level, this Integrated Report is crafted for the audience of each of our key stakeholders. That includes our shareholders, customers, suppliers, part- ners and employees. This report integrates the most important material information about our company’s financial and sustainability perfor- mance. It is published in conjunction with our additional, separate reports. The reporting pe- riod and scope of the data in this report cov- ers our operations worldwide and provides an overview of financial and sustainability-linked performance for the full calendar year 2023 or reflects the status as of December 31, 2023. Our Integrated Report contains four main sections: • Value creation • Outputs and outcomes • Good governance • Performance-based compensation As a global company with stock exchange list- ings in Switzerland and Sweden, we adhere to internationally recognized standards and frameworks. This Integrated Report is based on elements of the International Integrated Re- porting Framework. Our financial statements are prepared in accordance with US GAAP. In addition to performance measures prepared in accordance with recognized accounting stan- dards, we use alternative (non-GAAP) mea- sures deemed useful in evaluating ABB’s op- erating results. Please refer to "Supplemental Reconciliations and Definitions" in ABB’s Q4 2023 Financial Information. Our sustainability reporting is prepared in line with the following internationally recognized standards and legal provisions: • GRI Standards; • TCFD Recommendations; • SASB disclosures; • UN Global Compact; • EU Non-Financial Reporting Directive (NFRD); • EU Taxonomy regulation; and • Swiss Code of Obligations Art. 964a ss. The Integrated Report represents an executive summary of the additional separate reports. The full disclosures in line with the Sustainabil- ity Frameworks mentioned above can be found in the Sustainability Report. For a full picture of our performance and the value we have created, please consult our entire annual reporting suite on the ABB website. Our Integrated Report is translated into Ger- man, and only the original English version is binding. For environmental reasons, only a few copies of the Integrated Report are printed. All other reports are published as PDF only. “Integrated Reporting provides an adequate framework to portray our value creation story under the ABB Way and communicate how everything our divisions and business areas do comes together under the common ABB brand. It’s about a strategic ap- proach towards creating and sharing holistic value with our stakeholders. ABB’s senior management bodies, in- cluding our Board of Directors, take responsibility for the accuracy and in- tegrity of the information disclosed within the 2023 ABB Integrated Report, which addresses matters that have or may have a material effect on our value creation model. We believe this report is presented in all material aspects in accordance with the Framework.” 108 ABB INTEGRATED REPORT 2023 APPENDIX — ABB annual reporting suite 2023 and financial calendar The ABB reporting suite incorporates disclosures of our activi- ties and performance throughout the year. Each of our reports is made electronically available on our website. These include: Integrated Report 2023 English (PDF) German (PDF) Sustainability Report 2023 English (PDF) Corporate Governance Report 2023 English (PDF) Compensation Report 2023 English (PDF) SEC Filings Form 20-F (PDF) Form 20-F (iXBRL) ESEF version ESEF version (XHTML) Financial Report 2023 English (PDF) Event 2024 Annual General Meeting, Zurich March 21 Q1 2024 results April 18 Q2 2024 results July 18 Q3 2024 results October 17 Event 2025 Q4 and FY 2024 results January 30 FINANCIAL CALENDAR AND KEY DATES FOR INVESTORS 109 Caution concerning forward-looking statements The Integrated Report 2023 includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have based these forward-looking statements largely on current expectations, estimates and projections about the factors that may affect our fu- ture performance, including global economic conditions as well as the economic conditions of the regions and the industries that are major markets for ABB. The words “believe,” “may,” “will,” “esti- mate,” “continue,” “target,” “anticipate,” “intend,” “expect,” “plan” and similar words and the express or implied discussion of strat- egy, plans or intentions are intended to identify forward-looking statements. These forward- looking statements are subject to risks, uncertainties and assumptions, including among other things, the following: (i) business risks related to the global volatile economic environment; (ii) costs associated with compliance activ- ities; (iii) difficulties encountered in operating in emerging mar- kets; (iv) risks inherent in large, long term projects served by parts of our business; (v) the timely development of new products, tech- nologies, and services that are useful for our customers; (vi) our ability to anticipate and react to technological change and evolving industry standards in the markets in which we operate; (vii) changes in interest rates and fluctuations in currency exchange rates; (viii) changes in raw materials prices or limitations of sup- plies of raw materials; (ix) the weakening or unavailability of our in- tellectual property rights; (x) industry consolidation resulting in more powerful competitors and fewer customers; (xi) effects of competition and changes in economic and market conditions in the product markets and geographic areas in which we operate; (xii) ef- fects of, and changes in, laws, regulations, governmental policies, taxation, or accounting standards and practices and (xiii) other fac- tors described in documents that we may furnish from time to time with the US Securities and Exchange Commission, including our Annual Reports on Form 20-F. Although we believe that the expec- tations reflected in any such forward-looking statements are based on reasonable assumptions, we can give no assurance that they will be achieved. We undertake no obligation to update publicly or re- vise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances might not occur. Our actual results and performance could differ substan- tially from those anticipated in our forward-looking statements. © Copyright 2024 ABB. All rights reserved. — ABB Ltd Corporate Communications Affolternstrasse 44 8050 Zurich Switzerland Tel: +41 (0)43 317 71 11 www.abb.com 01 Financial review of ABB Group 56 Consolidated Financial Statements of ABB Group 125 ABB Ltd Statutory Financial Statements 4 FINANCIAL REPORT 2023 01 Financial review of ABB Group 02 Operating and financial review and prospects 2 FINANCIAL REPORT 2023 — About ABB ABB is a technology leader in electrification and automation, enabling a more sustainable and resource efficient future. The company’s solutions connect engineering know-how and software to optimize how things are manufactured, moved, powered, and operated. Building on more than 140 years of excellence, ABB’s more than 105,000 employees are committed to driving innovations that accelerate industrial transformation. — Organizational structure We operate in approximately 100 countries across three regions: Europe, the Americas, and Asia, Middle East and Africa, and generate revenues in numerous currencies. We are headquartered in Zurich, Switzerland, and we govern our company through our four Business areas: Electrification, Motion, Process Automation, and Robotics & Discrete Automation. For a breakdown of our consolidated revenues (i) by Business area, (ii) by geographic region, and (iii) by product type, see “Analysis of results of operations—Revenues” and “Note 23 - Operating segment and geographic data” to our Consolidated Financial Statements. Our principal corporate offices are located at Affolternstrasse 44, CH 8050 Zurich, Switzerland, telephone number +41 43 317 7111. Our agent for U.S. federal securities law purposes is ABB Holdings Inc., located at 305 Gregson Drive, Cary, North Carolina 27511. Our internet address is www.abb.com or global.abb. The information contained on or accessible from our Website is not incorporated into this annual report, and you should not consider it to be a part of this annual report. The United States Securities and Exchange Commission (SEC) maintains a website at www.sec.gov which contains in electronic form each of the reports and other information that we have filed electronically with the SEC. — Employees A breakdown of our employees by geographic region is as follows: December 31, 2023 2022 2021 Europe 51,400 49,700 50,000 The Americas 26,400 26,400 25,600 Asia, Middle East and Africa 30,100 29,000 28,800 Total 107,900 105,100 104,400 The proportion of our employees that are represented by labor unions or are subject to collective bargaining agreements varies based on the labor practices of each country in which we operate. FINANCIAL REPORT 2023 3 — History of the ABB Group The ABB Group was formed in 1988 through a merger between Asea AB and BBC Brown Boveri AG. Initially founded in 1883, Asea AB was a major participant in the introduction of electricity into Swedish homes and businesses and in the development of Sweden’s railway network. In the 1940s and 1950s, Asea AB expanded into the power, mining and steel industries. Brown Boveri and Cie. (later renamed BBC Brown Boveri AG) was formed in Switzerland in 1891 and initially specialized in power generation and turbines. In the early to mid ‑ 1900s, it expanded its operations throughout Europe and broadened its business operations to include a wide range of electrical engineering activities. In January 1988, Asea AB and BBC Brown Boveri AG each contributed almost all of their businesses to the newly formed ABB Asea Brown Boveri Ltd, of which they each owned 50 percent. In 1996, Asea AB was renamed ABB AB and BBC Brown Boveri AG was renamed ABB AG. In February 1999, the ABB Group announced a group reconfiguration designed to establish a single parent holding company and a single class of shares. ABB Ltd was incorporated on March 5, 1999, under the laws of Switzerland. In June 1999, ABB Ltd became the holding company for the entire ABB Group. This was accomplished by having ABB Ltd issue shares to the shareholders of ABB AG and ABB AB, the two companies that formerly owned the ABB Group. The ABB Ltd shares were exchanged for the shares of those two companies, which, as a result of the share exchange and certain related transactions, became wholly ‑ owned subsidiaries of ABB Ltd. ABB Ltd shares are currently listed on the SIX Swiss Exchange and the NASDAQ OMX Stockholm Exchange. On May 12, 2023, we filed the required Form 25 with the SEC to delist ABB’s American Depositary Shares (ADSs) from trading on the New York Stock Exchange (NYSE). In connection with the delisting from the NYSE which became effective May 23, 2023, we converted our ADS program from a sponsored Level II program into a sponsored Level I program. The new Level I ADSs were assigned a new stock ticker (ABBNY) upon delisting and are now traded on the over-the-counter (OTC) markets. — ABB today As a global technology leader in electrification and automation enabling sustainability and resource efficiency, our offering is relevant for the global transition towards low-carbon energy, increased energy efficiency, and the transition to more adaptive manufacturing and automation, putting us right in the center of long-term secular trends. The ABB Purpose ABB's purpose is to enable a more sustainable and resource-efficient future with our technology leadership in electrification and automation. Our core competencies Our leadership in resource efficiency is based on our core competencies, each of which constitutes a barrier to entry: decades-long domain expertise, cutting-edge technology and innovation as well as the ability to scale operations and distribution. 4 FINANCIAL REPORT 2023 With its long history, ABB not only invented or pioneered many power and automation technologies but has retained technology and market leadership in many of these areas. Being present in various vertical markets for decades with close long-term relationships with customers and channel partners has resulted in our unique deep domain expertise, enabling a thorough understanding of customers’ needs and operations. We continuously evolve our offering to remain a relevant and trusted partner to our customers. Our annual non-order related research and development spending in 2023 amounted to approximately 4.1 percent of revenues. We focus our research and development expenditures on key areas of innovation and have spent approximately $9.2 billion since the beginning of 2016, focusing on developing best-in-class products and services in the fields of electrification and automation with the goal of helping our customers to create resource-efficient value. All our four Business areas are market leaders in their respective areas being in either the number 1 or 2 position. Our global reach along with our extensive local presence assists us in scaling innovations to achieve stronger returns, which supports higher absolute investments for future growth. Active globally, our revenues are well-balanced across regions with customers served directly and through a strong channel partner network. The ABB Way The ABB Way is the glue that unites our Group and comprises a select number of common processes covering our business model, our people and culture, the ABB brand and our governance framework. It facilitates accountability, transparency and speed in ABB. In our operating model, the divisions represent the highest level of operating decisions. They are closest to their respective markets and customer needs. Each division progresses through the strategic mandates and priorities of stability and profitability before growth. In order to deploy full focus on organic and acquired growth to the extent of consolidating the market, the business’ structure should be robust and profitability should be at least in line with industry peers. Each division has full accountability for its results and carries the responsibility for business development, and research and development for leading technology to secure a number 1 or 2 market position. During 2023 we cemented the decentralized way of working at ABB within all our divisions, ensuring accountability, transparency and speed in decision making. Our focus area in 2024 will be to increasingly shift our focus to profitable growth, and further increase the number of our divisions with this mandate. Strong performance management is key in a decentralized business model. We apply a monthly scorecard system for the divisions and Business areas, based on a standardized set of Key Performance Indicators, to support full transparency of operational performance. It is accompanied by a limited select number of short-term incentives, including the mandatory target to make annual productivity improvements of at least 3-5 percent each year. The corporate functions focus on necessary strategic, financial and governance activities, with a lean headcount of approximately 800 employees. Enhanced growth profile Over the past several years, we have taken significant actions to align our business portfolio around our Purpose, resulting in all divisions now active only within the markets of electrification and automation. Both of these markets are benefiting from increasing global investments to decarbonize, increase energy efficiency and to automate and increase flexibility in society, including industrial manufacturing, buildings and process industries. Additionally, we have increased the proportion of sales stemming from short-cycle businesses, meaning a reduced proportion from project-related activities, which we believe should reduce the risk and volatility in our earnings. This ongoing shift towards better quality of revenues is now an integral part of governance and business execution. The responsibility for growth has been fully transferred to the divisions, as they are closest to customers. This includes both organic and acquired growth. The divisions have the best insights into current and future customer needs and are accountable for building their respective business accordingly. With more divisions transitioning over time from stability and profitability to growth, we expect to see a gradual strengthening of our growth profile. FINANCIAL REPORT 2023 5 Finally, environmental, social and governance (ESG) drivers are accelerating and translating into increased demand for our electrification and automation offering. The demand for electricity is growing ten times as fast as other energy sources, resulting in approximately 50 percent higher average annual investments into distribution networks over the next seven years (source: IEA World Energy Outlook 2023, Announced Pledges Scenario). The share of low-carbon sources in the global energy mix is expected to increase to approximately 70 percent by 2050 from only 20 percent today (source: IEA World Energy Outlook 2023, Announced Pledges Scenario). The need to improve energy efficiency has never been more relevant, from both the perspective of sustainable operations and reducing operating costs in a high energy cost environment. Investments in energy efficiency are expected to increase 46 percent per year over the next seven years versus the seven previous years (source: IEA World Energy Outlook 2023, Announced Pledges Scenario). Today approximately 45 percent of the world’s electricity is converted into motion by electric motors yet only approximately 20 percent of the world’s electric motors are optimized through the control of drives. Lastly, the global number of working age people (25 to 64 years) per retiree (65 years or over) is expected to fall by about 20 percent over the next ten years (source: United Nations World Population Prospects 2019), supporting demand for robotics and automation solutions. We believe ABB’s offering is well positioned to address these trends. — Businesses Our markets ABB is a technology leader in electrification and automation with a comprehensive digitalized offering of electrification, motion and automation solutions. Our exposure to customers is geographically balanced while catering to multiple end-markets and segments. We believe our customer offering is well positioned to benefit from secular growth drivers, including urbanization, labor shortage, shift to electrification, automation and robotization, as well as other data and digitalization trends. We are focused on creating superior customer value through our comprehensive, modular offering, combining traditional products and services with software-enabled products and systems as well as digital services and software that we sell both separately and combined as scalable solutions. Our advanced software is a key differentiation of our digital offering and about 55 percent of our approximately 7,500 employees in research and development are active in software development. The majority of our businesses are market leaders within their respective segments. We believe market leadership is critical, as it provides the opportunity for price leadership, which in turn supports profitability, enabling us to invest further in research and development to sustain our technological leadership. For a discussion of the geographic distribution of our total revenues, see “Item 5. Operating and Financial Review and Prospects—Analysis of results of operations—Revenues.” Industry market Approximately half of our revenues are derived from customers within the industrial segment where we serve production facilities and factories all around the world, from process industries such as oil and gas, pulp and paper as well as mining, to discrete industries including automotive, food and beverage and consumer electronics. Demand for our electrification and automation offerings with embedded digital solutions increased as the energy crisis and tight labor markets served as a prominent reminder to companies of the importance of energy efficiency and flexibility in automated production. This has accelerated customer demand for the digital services and solutions we offer. In discrete industries, we saw a normalization of customers’ order patterns following a period of pre-buying due to extended delivery lead times as a result of the supply chain constraints in 2022. Demand in the automotive segment remained at a high level due to broadly accelerating investments in the EV segment, while the general industry and consumer-related robotics segments declined. Late-cycle process industries were strong across nearly all customer segments. We saw particular strength in oil & gas-related demand. Strength was also noted in refining, petrochemicals and the energy-related low-carbon segments. 6 FINANCIAL REPORT 2023 Transport & infrastructure market Approximately one-third of our customers operate in the transport & infrastructure market. Our expertise provides efficient, reliable and sustainable solutions for these customers, with a focus on energy efficiency and reduced operating costs. In transport & infrastructure, there was very strong order development across data centers. The buildings segment saw weakness in all three regions in residential-related demand. Demand in the commercial construction segments varied by geography, where the U.S. and Europe remained stable through most of the year but weakness was noted in China towards the latter part of the year. In the marine segment there were positive developments for the cruise ship sector as well as strong demand in general marine and ports. Utilities market We deliver solutions mainly for distribution utilities and renewables customers, while continuing to service conventional power generation customers with our control and automation solutions. During 2023, the renewables markets continued to see strong growth. Business levels in the conventional power generation market remained stable. Demand from electrical distribution utilities remained strong, with ongoing investments to increase grid reliability and resilience due to increased integration of renewables. We serve our customers through our operating divisions which are included in our Business areas. Developments in these Business areas are discussed in more detail below. Revenue figures presented in this Businesses section are before intersegment eliminations. — Electrification Business area Overview Electrification provides leading electrical distribution and management technologies, solutions and services to electrify the world in a safe, smart and sustainable way. The portfolio includes medium- and low-voltage electrical components, switchgear, digital devices, enclosures, and circuit breakers, among others. With our products, solutions and services, we collaborate with customers to improve power delivery and security, enhance energy management, efficiency and operational reliability, as we seek to achieve a low carbon society. The Electrification Business area delivers products to end customers through a global network of channel partners and end customers. More than half of the Business area’s revenue is derived from distributors and approximately a quarter is derived from direct sales to end-users. The remaining revenues are generated from original equipment manufacturers (OEMs), engineering, procurement and construction (EPC) contracting companies, system integrators, utilities and panel builders. The proportion of direct compared to channel partner sales varies by segment, product technology and geographic markets. The Electrification Business area had approximately 50,300 employees as of December 31, 2023, and generated $14.6 billion of revenues in 2023. Customers The Electrification Business area serves a wide range of customer segments, including residential, commercial and industrial buildings, utilities, oil and gas, chemicals, data centers, renewables, food and beverage, transport and infrastructure, among others. From some of the world’s tallest buildings to the busiest airports, the Business area’s products and solutions cover a wide range of applications and business segments. Products and Services As of December 31, 2023, the Electrification Business area’s products and services are delivered through five operating divisions. The Business area divested its Power Conversion Division in July 2023, which designed, developed, and manufactured end-to-end power conversion solutions for mission-critical applications in the telecommunications, data center, and industrial sectors. FINANCIAL REPORT 2023 7 The Distribution Solutions Division facilitates the efficient and reliable distribution, protection and control of power by improving electric power quality while strengthening the resilience of the grid. The Division offers segment-specific products and solutions that largely serve utilities, industry and infrastructure segments, often providing the requisite medium-voltage link between high-voltage transmission systems and low-voltage users. With ABB Ability™ enabled connected solutions at its core, the offering includes medium-voltage air- and gas-insulated switchgear (1 to 66 kilovolts), indoor and outdoor circuit breakers, reclosers, fuses, contactors, relays, instrument transformers, sensors, motor control centers, as well as low-voltage switchgear for the ANSI standard markets. The Smart Power Division provides energy distribution solutions for data centers, industrial and manufacturing plants, critical infrastructure and commercial buildings. The Division’s technical teams work closely with industry partners, delivering advanced solutions that support rapid growth, energy transition, and sustainability objectives. The Division’s portfolio includes industrial circuit breakers, low-voltage systems, motor starting applications, and safety devices like switches and relays. Its Power Protection unit supports the world’s largest data center companies with advanced energy-efficient UPS solutions. The Division’s ABB Ability™ Energy Manager provides a scalable, easy-to-use platform that helps organizations save energy and reduce CO 2 emissions. The Smart Buildings Division enables optimization of energy efficiency, safety, security and comfort for any building type, through new installations or retrofit solutions. The Division offers integrated digital technologies to control HVAC, lighting, shutters, and security, in addition to energy distribution solutions including DIN rail products, enclosures and emergency lighting through to industrial plugs and sockets and conventional wiring accessories, accommodating for single family homes, multiple dwellings, commercial buildings, infrastructure and industrial applications. The Division’s highly innovative technologies and digital solutions serve rising global demand among real estate developers, owners, and investors for smart building technologies that optimize energy distribution and building automation. The scalable solutions aim to deliver significant sustainable and financial benefits, meeting social and environmental demands, while being able to address even the most complex of customers’ carbon reduction strategies. The Installation Products Division helps manage the connection, protection and distribution of electrical power from source to socket. The Division’s products are engineered to provide ease of installation and perform in demanding and harsh conditions, helping to ensure safety and continuous operation for utilities, businesses and people around the world. The Commercial Essentials product segment includes electrical junction boxes, commercial fittings, strut and cable tray metal framing systems for commercial and residential construction. The Premier Industrial product segment includes multiple product lines, such as Ty-Rap® cable ties, T&B Liquidtight Systems® protection products, PVC coated and nylon conduit systems, power connection and grounding systems, and cable protection systems of conduits and fittings for harsh and industrial applications. The Division also manufactures solutions for medium-voltage applications used in the utility market under its marquee brands including Elastimold™ reclosers and switchgear, capacitor switches, current limiting fuses, Homac™ distribution connectors, Hi-Tech Valiant™ full-range current limiting fuse for fire mitigation, faulted current indicators and distribution connectors, cable accessories and apparatus with products for overhead and underground distribution. Manufacturing includes made-to-stock and custom-made solutions. The Service Division partners with our customers to improve the availability, reliability, predictability and sustainability of electrical products and installations. The Division’s extensive service portfolio offers product care, modernization, and advisory services to improve performance, extend equipment lifetime and deliver new levels of operational and sustainable efficiency. We help customers keep resources in use for as long as possible, extracting the maximum value from them, and then recovering and regenerating products and materials at the end of their useful life. Sales and Marketing Sales and marketing is generally conducted within the divisions in the Electrification Business area. This enables the divisions to manage their respective end-to-end activities and create demand across all channels, products and solutions. They increase focus and speed for our customers to drive faster growth. Where necessary, the divisions work together on joint services, such as the management of accounts, channels, and segment-sales, engaging in a range of promotional activities, both internal and external. Competition The Electrification Business area’s principal competitors vary by product group and include Atkore, Chint, Eaton, Hager, Hubbell, Legrand, LS Electric, Mitsubishi Electric, nVent, Panasonic, Schneider Electric, Siemens and Vertiv. 8 FINANCIAL REPORT 2023 Capital Expenditures The Electrification Business area’s capital expenditures for property, plant and equipment totaled $386 million in 2023, compared to $343 million in 2022. Investments in 2023 principally related to real estate investments, capacity expansion, as well as equipment replacement and upgrades. Geographically, in 2023, Europe represented 53 percent of the capital expenditures, followed by the Americas (35 percent) and Asia, Middle East and Africa (12 percent). — Motion Business area Overview The Motion Business area provides pioneering technology, products, solutions and related services to industrial customers to increase energy efficiency, improve safety and reliability, and maintain precise control over processes. The portfolio includes motors, generators and drives for a wide range of applications in all industrial sectors. The Motion Business area designs, manufactures and sells drives, motors, generators, and traction converters. Building on long-standing experience in electric powertrains, the Business area combines domain expertise and technology to deliver the optimum solution for a wide range of applications for a comprehensive range of industrial segments. In addition, the Business area, along with its channel partners, has an industry leading global service presence. The Motion Business area had approximately 22,300 employees as of December 31, 2023, and generated $7.8 billion of revenues in 2023. Customers The Motion Business area serves a wide range of customers in different industrial segments such as pulp and paper, oil and gas, metals and mining, food and beverage, HVAC, water and wastewater, transportation, power generation, marine and offshore. Products and Services The Motion Business area’s products and services are delivered through seven operating divisions. The Drive Products Division serves the industries and infrastructure segments with world-class drives and programmable logic controllers (PLC). With its products, global scale and local presence, the Division helps customers to improve energy efficiency, productivity and safety. The System Drives Division is the market leader in high-power, high-performance drives, drive systems and packages for industrial process and large infrastructure applications, and a leading supplier of power conversion equipment for renewable energy and other applications. The Division offers global support to help customers, partners and equipment manufacturers with asset reliability, performance improvement and energy efficiency in mission critical applications. The Service Division serves customers worldwide by maximizing uptime, extending product life cycle and enhancing the performance and energy efficiency of their electrical motion solutions. The Division is leading the way in digitalization by securely connecting motors and drives, increasing operational uptime and improving efficiency. The services offered make the difference for our customers and partners every day by helping keep their operations running profitably, safely and reliably. The Traction Division is a recognized leader in onboard propulsion technologies that drive innovation in rail, bus, and industrial vehicle electrification. A comprehensive range of high-performance and full lifecycle managed propulsion, auxiliary and energy storage solutions help improve energy efficiency and contribute to making transportation more sustainable. The IEC Low Voltage Division is a technology leader delivering a full range of energy-efficient low voltage motors, including ultra-efficient solutions such as IE5 SynRM (synchronous reluctance motors). Through a global footprint, domain expertise and rugged designs, the Division provides reliable technology that improves efficiency and productivity even in the most demanding applications . The Large Motors and Generators Division offers a comprehensive product portfolio of large AC motors and generators. The Division’s induction, synchronous and special design motors and synchronous generators power critical applications across industry, infrastructure and marine FINANCIAL REPORT 2023 9 transportation. Combining the best available materials with superior technology, the large motors and generators are designed to operate efficiently and reliably, even for challenging processes or applications and to have low life cycle costs. The NEMA Motors Division is a marketer, designer and manufacturer that offers Baldor-Reliance® industrial electric motors, primarily in North America. The Division focuses on quality, reliability and efficiency to provide a comprehensive offering of NEMA motors in the market across most industrial segments and applications. Sales and Marketing Sales are made both through direct sales forces and through channel partners, such as distributors and wholesalers, as well as installers, OEMs and system integrators. The proportion of direct sales to end users compared to channel partner sales varies among the different industries, products and geographic markets. Competition The principal competitors of the Motion Business area include Schneider Electric, Siemens, Toshiba, WEG Industries, Wolong and Danfoss. Capital Expenditures Capital expenditures in the Motion Business area for property, plant and equipment totaled $171 million in 2023, compared to $150 million in 2022. Principal expenditures in 2023 related to real estate investments, capacity expansion, equipment replacement and upgrades across various countries including Finland, Switzerland, the United States, China and India. Geographically, in 2023, Europe represented 54 percent of the capital expenditures, followed by the Americas (33 percent) and Asia, Middle East and Africa (13 percent). — Process Automation Business area Overview The Process Automation Business area provides a comprehensive range of integrated automation, electrical and digital systems and services for customers in the process, hybrid and maritime industries. These offerings, coupled with deep domain knowledge in each end market, help to optimize productivity, energy efficiency, sustainability and safety of industrial processes and operations. The Business area’s offering can be grouped into two categories, with approximately half of the offering related to solutions for new and brownfield projects and half related to service, mainly for the existing installed base. Process Automation also integrates offerings from the Electrification, Motion and Robotics & Discrete Automation Business areas into its projects. The Business area’s offerings are sold primarily through its direct sales force with a smaller share through partners and distributors. The Business area had approximately 21,100 employees as of December 31, 2023, and generated revenues of $6.3 billion in 2023. Customers The Process Automation Business area’s end customers include companies across process, hybrid and maritime industries. These industries include oil, gas, chemicals, mining, metals, cement, pulp and paper, pharmaceuticals, battery manufacturing, food and beverage, power generation, water, marine and ports. 10 FINANCIAL REPORT 2023 Products and Services The Process Automation Business area offering includes an extensive portfolio of products, solutions, digital applications and services for the control of the simplest to the most complex and critical industrial processes and infrastructure. These systems can link various process and information flows, allowing customers to manage and control their entire production process based on real-time information. The Business area’s automation offering includes the distributed control system (DCS) ABB Ability™ System 800xA ® , which is also an electrical control system, a safety system and a collaboration enabler with the capacity to improve engineering efficiency, operator performance and asset utilization. Other control solutions include Symphony ® Plus (designed to address automation needs of the power and water industry segments) and the Freelance DCS solution. Components for basic automation solutions, process controllers, I/O modules, panels, and Human Machine Interfaces (HMI) are available through the Compact Product Suite offering. The product portfolio is complemented by a suite of ABB Ability™ Advanced Digital Services and by ABB Care, a subscription-based lifecycle management program that provides services to maintain and continually advance and enhance ABB’s distributed control systems and optimize customers’ lifecycle costs. The ABB Ability™ Genix Industrial Analytics and Artificial Intelligence Suite unlocks greater value by contextualizing and integrating data from IT, engineering, and operations systems to provide deep, meaningful and actionable insights. The portfolio is complemented by a range of industry-specific applications in each division. As of December 31, 2023, the Process Automation Business area’s products and services are delivered through four operating divisions. The Energy Industries Division serves a wide range of industrial sectors, including hydrocarbons, chemicals, pharmaceuticals, power generation and water. With its integrated solutions that automate, digitalize and electrify operations, the Division is committed to supporting traditional industries in their efforts to decarbonize. The Division also supports the development, integration and scaling up of new and renewable energy models. The Division’s goal is to help customers adapt and succeed in the rapidly changing global energy transition. Harnessing data, machine learning and artificial intelligence (AI), the Division brings over 50 years of domain expertise delivering solutions designed to improve energy, process and production efficiency, as well as reduce risk, operational cost and capital cost, while minimizing waste for customers, from project start-up and throughout the entire plant lifecycle. The Process Industries Division serves the mining, minerals processing, metals, cement, pulp and paper, battery manufacturing, and food and beverage, as well as their associated service industries. The Division brings deep industry domain expertise coupled with the ability to integrate both automation and electrical systems, increase productivity and reduce overall capital and operating costs for customers. For mining, metals and cement customers, solutions include specialized products and services, as well as total production systems. The Division designs, plans, engineers, supplies, installs and commissions integrated electrical and motion systems, including electric equipment, drives, motors, high power rectifiers and equipment for automation and supervisory control within a variety of areas including mineral handling, mining operations, aluminum smelting, hot and cold steel applications and cement production. The offering for the pulp and paper industries includes control systems, quality control systems, drive systems, on-line sensors, actuators and field instruments. Digitalization solutions, including collaborative operations and augmented reality, help improve plant and enterprise productivity, and reduce maintenance and energy costs. The Marine & Ports Division serves the shipping and ports industries through its extensive portfolio of integrated systems and solutions that improve the flexibility, reliability and energy efficiency of vessels and container terminals. By coupling power, propulsion, automation, marine software and services that ensure maximum vessel uptime, the Division is well positioned to help the marine industry to achieve its decarbonization targets while improving the profitability and sustainability of our customers’ business throughout the entire lifecycle of vessels. With ABB Ability™ Marine software solutions and ABB Ability™ Collaborative Operations Centers around the world, shipowners and operators can run their fleets at lower fuel and maintenance costs, while improving crew, passenger and cargo safety as well as overall productivity of their operations. Further, the Division delivers automation, electrical systems and digital solutions for container and bulk cargo handling, from ship to gate. These solutions help terminal operators meet the challenge of larger ships, taller cranes and bigger volumes per call, and make terminal operations safer, greener and more productive. FINANCIAL REPORT 2023 11 The Measurement & Analytics Division is among the world’s leading manufacturers and suppliers of smart instrumentation and analyzers, working at the heart of industrial digital transformation. The Measurement & Analytics Division’s portfolio consists of analyzers measuring compositions of gases and liquids; instrumentation measuring process variables such as temperature, pressure, flow, and level; force measurement solutions measuring parameters such as flatness, thickness, and tension; and advanced digital solutions for device management, device health check and predictive maintenance. The Measurement & Analytics Division serves key industries such as oil and gas, chemical, water and wastewater, power, hydrogen, batteries, as well as the marine industry. The Division enables the optimization of industrial processes by providing and analyzing data collected from sensing and smart measurement devices. Parameters such as emission levels and production inputs are measured by providing ‘before’ and ‘after’ values, enabling efficient operations and environmental sustainability through measurement. Sales and Marketing The Process Automation Business area’s sales are primarily made through its direct sales force as well as third-party channel partners, such as distributors, system integrators and OEMs. The majority of revenues are derived through the Business area’s own direct sales channels. Competition The Process Automation Business area’s principal competitors vary by industry or product group. Competitors include: Emerson, Honeywell, Schneider Electric, Siemens, Siemens Energy, Yokogawa, Endress + Hauser, Kongsberg and Valmet. Capital Expenditures The Process Automation Business area’s capital expenditures for property, plant and equipment totaled $66 million in 2023, compared to $100 million in 2022. Principal investments in 2023 primarily related to equipment replacement and upgrades, mainly in the Energy Industries Division and Measurement & Analytics Division. Geographically, in 2023, Europe represented 68 percent of the capital expenditures, followed by the Americas (19 percent) and Asia, Middle East and Africa (13 percent). — Robotics & Discrete Automation Business area Overview The Robotics & Discrete Automation Business area provides robotics, and machine and factory automation including products, software, solutions and services. Revenues are generated both from direct sales to end users as well as from indirect sales mainly through system integrators and machine builders. The Robotics & Discrete Automation Business area had approximately 11,300 employees as of December 31, 2023, and generated $3.6 billion of revenues in 2023. Customers The Robotics & Discrete Automation Business area serves a wide range of customers. The main customers are active in industries such as automotive, machine building, metalworking, electronics, food and beverage and logistics. They include end-users such as manufacturers, system integrators and machine builders. Products and Services The Robotics & Discrete Automation Business area’s products and services are delivered through two operating divisions. 12 FINANCIAL REPORT 2023 The Robotics Division offers a wide range of products, solutions and services including robots, autonomous mobile robots, robotics application cells and smart systems, field services, spare parts, digital services, engineering and operations software. This offering provides customers with increased productivity, quality, flexibility and simplicity for operations, e.g. to meet the challenge of making smaller lots of a larger number of specific products in shorter cycles for today’s dynamic global markets and coping with increasing uncertainty. Robots are also used in activities or environments which may be hazardous to employee health and safety, such as repetitive or strenuous lifting, dusty, hot or cold rooms, or painting booths and can help customers address labor shortages. Robotics solutions are used in a wide range of segments from automotive OEMs, automotive suppliers, electronics, general industry, consumer goods, food and beverage, and warehouse/logistics center automation. They are increasingly deployed in service applications for life sciences care, restaurants and retail. Typical robotic applications include welding, material handling, machine tending, machining, painting, picking, packing, palletizing and assembly. The Machine Automation Division offers integrated automation solutions based on programmable logical controllers, industrial PCs, servo motion, industrial transport systems and machine vision. It also provides software for engineering and optimization. The range of solutions are mainly used by machine builders for various types of series machines, e.g. for plastics, metals, printing and packaging. Sales and Marketing Sales are made both through direct sales as well as through third ‑ party channel partners, such as system integrators and machine builders. The proportion of direct sales compared to channel partner sales varies among the different industries, product technologies and geographic markets. Competition Competitors of the Robotics & Discrete Automation Business area vary by offering and include companies such as Fanuc, Kuka, Yaskawa, Epson, Dürr, Stäubli, Universal Robots, Rockwell Automation, Siemens, Mitsubishi Electric and Beckhoff. Capital Expenditures The Robotics & Discrete Automation Business area’s capital expenditures for property, plant and equipment totaled $71 million in 2023, compared to $86 million in 2022. Principal investments in 2023 were primarily related to the expansion of the North American robotics headquarters and manufacturing facility in the United States and production enhancements in both the Robotics Division in China and the Machine Automation Division in Austria. In 2023, Europe represented 55 percent of capital expenditures, followed by the Americas (24 percent) and Asia, Middle East and Africa (21 percent). — Corporate and Other Corporate and Other includes core headquarter functions, real estate activities, Corporate Treasury, functional shared services for human resources, finance and information services and other minor business activities. Certain strategic investments managed by ABB Technology Ventures are also included in Corporate. The remaining activities of certain EPC projects which we are completing and are in a wind-down phase are reported as non-core businesses within Corporate and Other. The historical business activities of certain divested businesses are also presented in Corporate and Other. These include the high-voltage cables business, steel structures and certain EPC contracts relating to the oil and gas industry. In addition, effective January 1, 2023, the E-mobility Division became a separate operating segment and is reported in Corporate and Other for all periods presented. Corporate headquarters and stewardship activities include the operations of our corporate headquarters in Zurich, Switzerland, as well as limited corporate ‑ related activities in certain countries. These activities cover staff functions with group ‑ wide responsibilities, such as accounting and financial reporting, corporate finance and corporate treasury, taxes, internal audit, legal and integrity, compliance, risk management and insurance, corporate communications, human resources, information systems and investor relations. FINANCIAL REPORT 2023 13 We operate shared service centers globally through a network of hubs which consist of services in the areas of human resources, finance and information services. We also staff and maintain front offices in various countries. The costs of these shared services are incurred primarily for the benefit of the Business areas, which are charged for their use of such services and the related number of employees are allocated to the Business areas. Similarly, a significant portion of the shared corporate overhead costs are charged to the operating businesses. We also provide services to third parties under transitional service agreements in relation to certain divested businesses, the largest of which is Hitachi Energy (the former Power Grids business). The E-mobility Division is contributing to a zero-emission mobility future with smart, reliable and emission-free electric vehicle charging solutions including market leading charging hardware, ABB Ability™ enabled digital services and energy and fleet management solutions. ABB E-mobility offers a leading portfolio of EV charging solutions from smart chargers for the home to high-power chargers for the highway stations of the future, solutions for the electrification of fleets and opportunity charging for electric buses and trucks. Corporate and Other had approximately 2,900 employees at December 31, 2023, of which approximately 2,100 pertain to the E-mobility Division and our other non-core businesses. — Discontinued operations In 2020, we completed the divestment of our Power Grids business to Hitachi Ltd (Hitachi). As a result, the Power Grids business was reported as discontinued operations in the Consolidated Financial Statements. See “Note 3 - Discontinued operations” to our Consolidated Financial Statements. — Capital expenditures Total capital expenditures for property, plant and equipment and intangible assets (excluding intangibles acquired through business combinations) amounted to $770 million, $762 million and $820 million in 2023, 2022 and 2021, respectively. In 2023 and 2022, capital expenditures were 1 percent and 6 percent lower, respectively, than depreciation and amortization. Excluding acquisition-related amortization, capital expenditures were 37 percent higher in 2023 and 30 percent higher in 2022, respectively, than depreciation and amortization. Capital expenditures in 2023 primarily focused in mature markets, reflecting the geographic distribution of our existing production facilities. Capital expenditures in Europe and the Americas in 2023 were driven primarily by upgrades of existing production facilities and capacity expansion, mainly in the U.S., Germany, Italy, Finland, Switzerland and Austria. In Asia, Middle East and Africa, capital expenditures were made primarily to increase production capacity by investing in new or expanded facilities, the highest of which were in China and India. The share of emerging markets capital expenditures as a percentage of total capital expenditures in 2023 and 2022 was 23 percent and 24 percent, respectively. 14 FINANCIAL REPORT 2023 At December 31, 2023, construction in progress for property, plant and equipment was $713 million, mainly in the U.S., Germany, Switzerland and Finland, while at December 31, 2022, construction in progress for property, plant and equipment was $586 million, mainly in the U.S., Germany, Switzerland, Finland, Austria, China and Sweden. Our capital expenditures relate primarily to property, plant and equipment and are funded primarily through cash flows from operating activities. For 2024, we estimate the expenditures for property, plant and equipment will be higher than our annual depreciation and amortization charge, excluding acquisition-related amortization. — Supplies and raw materials We purchase a variety of supplies and products which contain raw materials for use in our production and project execution processes. The primary materials used in our products, by weight, are copper, steel, aluminum, mineral oil and various plastics. We also purchase a wide variety of fabricated products, electronic components and systems. We operate a worldwide supply chain management network with employees dedicated to this function in our Business areas, divisions and in key countries. Our supply chain operations consists of a number of teams, each focusing on different product categories. These category teams are tasked with taking advantage of opportunities to leverage the scale of ABB on a global, Business area and/or division level, as appropriate, to optimize the efficiency of our supply networks in a sustainable manner. Our supply chain management organization’s activities and objectives include: • pool and leverage procurement of materials and services, • provide transparency of ABB’s global spending through a comprehensive performance and reporting system linked to our enterprise resource planning (ERP) systems, • strengthen ABB’s supply chain network by implementing an effective product category management structure and extensive competency-based training, and • monitor and develop our supply base to ensure sustainability, both in terms of materials and processes used. We buy many categories of products which contain copper, steel, aluminum, crude oil and other commodities. Continuing global economic growth in many emerging economies, coupled with the volatility in foreign currency exchange rates, has led to significant fluctuations in these raw material costs over the last few years. While we expect global commodity prices to remain highly volatile, we expect to offset some market volatility through the use of long-term contracts and global sourcing. We seek to mitigate the majority of our exposure to commodity price risk by entering into derivative contracts. For example, we manage copper, steel, aluminum, and silver price risk using principally swap contracts based on prices for these commodities quoted on leading exchanges. ABB’s hedging policy is designed to safeguard margins by minimizing price volatility and providing a stable cost base during order execution. In addition to using derivatives to reduce our exposure to fluctuations in raw materials prices, in some cases we can reduce this risk by incorporating changes in raw materials prices into the prices of our end products (through price escalation clauses). Throughout 2023, we continued to optimize our value chain in all aspects of our business, while ensuring high standards of quality and delivery. Despite some continuing global supply chain challenges such as rising costs, port congestion, material access issues and some geopolitical uncertainty, we were able to mitigate these difficulties with efforts from our dedicated category teams, supply chain management personnel and Business area task forces. We also enhanced our rigorous supplier onboarding process involving comprehensive integrity due diligence and competitive bidding for our potential and existing vendors. This helps in reducing the risk of fraud, corruption and non-compliance as well as in securing the best value and quality for our products and services. As a result, we were able to minimize the impact of supply chain disruptions, maintain a high level of customer satisfaction and support our business growth. FINANCIAL REPORT 2023 15 Through our Sustainable Supply Base Management (SSBM) approach, we assess environment, social and governance (ESG) risks, compliance, and the performance of our suppliers in these areas to make sure they meet our expectations. These expectations are detailed in the ABB Supplier Code of Conduct and the ABB Code of Conduct. In 2023, the Supplier Code of Conduct was revised and updated to reflect the increasing legal and stakeholder requirements as well as our Sustainability Framework 2030. In August 2012, the SEC issued its final rules regarding “Conflict Minerals”, as required by section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. We initiated conflict mineral processes in 2013 and have continuously aimed at improving and tailoring the processes to our value chain. We continue to work with our suppliers and customers, to enable us to comply with the rules and disclosure obligations. Further information on ABB’s Conflict Minerals policy and supplier requirements can be found under “Responsible Minerals Sourcing” at https://global.abb/group/en/about/supplying/responsible-minerals. Furthermore, ABB has developed a list of prohibited and restricted substances to ensure that the materials we use do not contribute to environmental degradation. We update this list regularly in line with international regulations, including the U.S. Toxic Substances Control Act (TSCA) regulations and California Proposition 65. More information on our Product Material Compliance program and supplier requirements can be found under “Material Compliance” at https://global.abb/group/en/about/supplying/material-compliance. As announced in 2022, ABB is working closely with its most impactful suppliers to reduce GHG emissions along the supply chain. In 2023, we partnered with EcoVadis, a leading service provider in the ESG domain, to engage with suppliers for GHG emission data collection and supplier education on this topic. — Patents and trademarks While we are not materially dependent on any one of our intellectual properties, as a technology-driven company, we believe that intellectual property rights are crucial to protect the assets of our business. We continue to file new patent applications to protect our new inventions. As of December 31, 2023, we have a portfolio of approximately 26,000 pending patent applications and granted patents, of which approximately 5,700 are pending applications. This portfolio includes approximately 3,600 utility models and design rights, of which approximately 170 are pending applications. In 2023, we filed over 650 priority patents, utility model and design applications, each covering a unique invention or unique angle on an invention. Additionally, we filed approximately 1,900 secondary patents, utility model and design applications, each extending the coverage of a previously filed priority application. Based on our existing intellectual property strategy, we believe that we have adequate control over our core technologies. The “ABB” trademarks and logo are protected in all of the countries in which we operate. We proactively assert our intellectual property rights to safeguard the reputation associated with the ABB technology and brand. While these intellectual property rights are fundamental to all of our businesses, there is no dependency of the business on any single patent, utility model or design application. 16 FINANCIAL REPORT 2023 — Management overview In 2023 we delivered a strong operational result as we executed on our strong order backlog which was built up during a period of a strained value chain, inflation and an energy crisis. It was also another year of robust price execution where the linked benefits more than offset the inflation in labor costs while the margin was further supported by lower inflation-affected input costs and freight. In the wake of normalizing value chains, price management progressively returned to be customer value driven. The energy crisis triggered a series of customer investments throughout the year and further highlighted their need to ramp up investments in energy efficiency and transition to renewable energy sources. During the year we saw high customer activity in the areas of LNG and hydrogen, highlighting how relevant our offering and technologies are to address these energy challenges. The ABB Way operating model facilitates more efficient ways of working which, combined with a strong market situation, led to increased operational results. We delivered record segment profit (Operational EBITA) and continued to see our divisions progress through their strategic mandates of stability and profitability before growth. With approximately 70 percent of division revenues now covered under a growth mandate we are increasingly shifting our focus to growth. We continued to be active in portfolio management and completed the sale of our Power Conversion Division in July 2023, marking the completion of the three announced divisional exits. Active portfolio management continues to be part of our performance culture and is an integrated part of the responsibilities of divisional management teams. This includes identifying areas for inorganic growth through acquisitions related to new segments, new market access, better economies of scale or filling technology gaps. The divisions also assess, based on systematic portfolio reviews, whether, ultimately, their division is the best owner of their different businesses. During 2023, we also continued to make strategic venture capital investments focused in the areas of digital capabilities and software, completing nine new investments during the year and a number of follow-on investments in existing ventures. The divisions continue to build up their acquisition target pipelines and, during 2023, we completed the acquisitions of the Siemens low-voltage motor business led by the NEMA Motors Division, strengthened our smart home technology portfolio with the acquisition of EVE systems led by the Smart Buildings Division, and completed four other smaller bolt-on acquisitions primarily related to software and AI technology. As part of our future strategy, we continue to aim to complete five to ten small to mid-size bolt-on acquisitions each year. On the divestment side, the Energy Industries Division completed the divestment of its technical engineering consultancy business in the United Kingdom and the Smart Buildings Division divested their industrial plugs & sockets product line. Business progress During 2023, underlying demand for ABB’s offering remained resilient from the previous year’s already high level with reported orders being steady, somewhat negatively impacted by exchange rates and business divestments. Throughout the year we noted that order momentum was strongest in the systems- and project-related businesses, driven predominantly by utilities and datacenters as well as process-related industries. This offset some softening of demand in the short-cycle business from the previous year's high order level, mainly in the residential construction segment and in the discrete manufacturing sectors apart from the automotive segment, as customers normalized order patterns in the face of shortening delivery lead times. In total, orders continued to exceed revenues in three out of four Business areas, and we further increased total order backlog. While our orders decreased 1 percent (increased 1 percent in local currencies) in 2023, revenue growth was stronger, reaching 9 percent (11 percent in local currencies). As supply chain constraints and imbalances in the overall supply chain eased we were able to effectively convert orders into deliveries. Group profitability showed strong improvement during 2023 with the level of segment profit improving in all Business areas. The result was driven by strong pricing execution, increased volumes and improved internal efficiency. Active price management and productivity gains were able to offset increasing labor inflation as well as some limited cost inflation related to commodities which were still present in the first half of the year. FINANCIAL REPORT 2023 17 The profitability improvement as well as our ability to keep working capital steady facilitated by the normalization of supply chains allowed us to achieve strong operating cashflows. Cash flows from operating activities in continuing operations improved to $4.3 billion in 2023, an increase of $3 billion compared to 2022. This improvement was further helped as the previous year’s results included significant cash outflows relating to the exit of a non-core business, the payment for the settlement related to regulatory penalties for the Kusile project, costs for the spinoff of the Turbocharging Division as well as ongoing restructuring and business transformation costs. We continued to make organic growth investments in a disciplined manner, prioritizing research and development while reducing administrative costs. Total non-order related research and development was $1.3 billion in 2023, or 4.1 percent of revenues. Updated financial targets During 2023, we raised our growth target to 5 to 7 percent (up from 3 to 5 percent) for comparable average revenue growth, through an economic cycle, in constant currencies and excluding acquisitions and divestments. In addition we continue to target 1 to 2 percent acquired revenue growth through the economic cycle net of acquisitions and divestments. For the Operational EBITA margin, having reached our target of at least 15 percent a year earlier than planned, we raised our target to be in the range of 16 to 19 percent on an annual basis commencing in 2024. As a result of our higher growth and Operational EBITA margin targets and increasing focus on capital returns, including in the annual employee incentive plans, we have increased our Return on Capital Employed (ROCE) target to be above 18 percent excluding transformative deals defined as being larger than 3 percent of Group revenues annually (up from the range of 15 to 20 percent). Additionally, we have sharpened our EPS growth target to be at least high-single digit through the economic cycle (from basic EPS growth above revenue growth) reflecting our confidence in our ability to sustainably reduce the gap between Operational EBITA and Income from operations. Lastly, we maintain our target to achieve Free cash flow conversion of approximately 100 percent on an annual basis. Capital allocation Our capital allocation priorities are unchanged: • funding organic growth, research and development, and capital expenditures at attractive returns, • paying a rising, sustainable dividend per share over time, • investing in value-creating acquisitions, and • returning additional cash to shareholders. We expect that our strong cash generation, on the back of the ABB Way operating model, will enhance our flexibility to invest in both organic growth and bolt-on acquisitions, while providing attractive returns to shareholders. At the 2024 Annual General Meeting (AGM), the Board of Directors is proposing a dividend of 0.87 Swiss francs per share. Under the various share buyback programs we repurchased $893 million of shares in 2023. Sustainability Agenda With our sustainability agenda, we are actively contributing to a more sustainable world, leading by example in our own operations and partnering with customers and suppliers to enable a low-carbon society, preserve resources and promote social progress. All three pillars of our sustainability agenda are underpinned by our commitment to create a culture of integrity and transparency across our value chain. 18 FINANCIAL REPORT 2023 Amongst other focus areas in 2023, we’ve reinforced and accelerated our sustainability efforts, aligning our methodologies with recognized international frameworks. We have submitted updated SBTi (Science Based Targets initiative) targets to be net-zero aligned. In this context, we increased our scope 3 emissions reduction target to 25 percent by 2030. By 2050, we target to have a 100 percent reduction in Scope 1 and 2 emissions versus the 2019 baseline and a 90 percent reduction in Scope 3 emissions versus the 2022 baseline. Furthermore, we aligned our methodology for our avoided emissions to the World Business Council for Sustainable Development (WBCSD) 2023 guidance and moved from a target to an ambition to avoid 600 megatons of CO 2 e emissions by 2030, providing increased credibility and comparability to our contribution of enabling a low carbon society. For a detailed discussion of our sustainability strategy 2030 and our progress in 2023, see “Item 4. Information on the Company—Sustainability activities”. — Critical accounting policies and estimates General We prepare our Consolidated Financial Statements in accordance with U.S. GAAP and present these in U.S. dollars unless otherwise stated. The preparation of our financial statements requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis (see “Note 2 - Significant accounting policies” to our Consolidated Financial Statements for a listing of our most significant accounting estimates). Where appropriate, we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from our estimates and assumptions. We deem an accounting policy to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if different estimates that reasonably could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our Consolidated Financial Statements. We also deem an accounting policy to be critical when the application of such policy is essential to our ongoing operations. We believe the following critical accounting policies require us to make subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain and material to our Consolidated Financial Statements. These policies should be considered when reading our Consolidated Financial Statements. Revenue recognition A customer contract exists if collectability under the contract is considered probable, the contract has commercial substance, contains payment terms, the rights and commitments of both parties, and has been approved. By analyzing the type, terms and conditions of each contract or arrangement with a customer, we determine which revenue recognition method applies. We recognize revenues when control of goods or services is transferred to customers in an amount that reflects the consideration we expect to be entitled to in exchange for these goods or services. Control is transferred when the customer has the ability to direct the use and obtain the benefits from the goods or services. FINANCIAL REPORT 2023 19 The percentage ‑ of ‑ completion method of accounting is generally used when recognizing revenue on an over time basis and involves the use of assumptions and projections, principally relating to future material, labor, subcontractor and project ‑ related overhead costs as well as estimates of the amount of variable consideration to which we expect to be entitled. As a consequence, there is a risk that total contract costs or the amount of variable consideration will, respectively, either exceed or be lower than those we originally estimated (based on all information reasonably available to us) and the margin will decrease or the contract may become unprofitable. This risk increases if the duration of a contract increases because there is a higher probability that the circumstances upon which we originally developed our estimates will change, resulting in increased costs that we may not recover. Factors that could cause costs to increase include: • unanticipated technical problems with equipment supplied or developed by us which may require us to incur additional costs to remedy, • changes in the cost of components, materials or labor, • difficulties in obtaining required governmental permits or approvals, • project modifications creating unanticipated costs, • suppliers’ or subcontractors’ failure to perform, and • delays caused by unexpected conditions or events. Changes in our initial assumptions, which we review on a regular basis between balance sheet dates, may result in revisions to estimated costs, current earnings and anticipated earnings. We recognize these changes in the period in which the changes in estimates are determined. By recognizing changes in estimates cumulatively, recorded revenue and costs to date reflect the current estimates of the stage of completion of each project. Additionally, losses on such contracts are recognized in the period when they are identified and are based upon the anticipated excess of contract costs over the related contract revenues. Pension and other postretirement benefits As more fully described in “Note 17 - Employee benefits” to our Consolidated Financial Statements, we have a number of defined benefit pension and other postretirement plans and recognize an asset for a plan’s overfunded status or a liability for a plan’s underfunded status in our Consolidated Balance Sheets. We measure such a plan’s assets and obligations that determine its funded status as of the end of the year. Significant differences between assumptions and actual experience, or significant changes in assumptions, may materially affect the pension obligations. The effects of actual results differing from assumptions and the changing of assumptions are included in net actuarial loss within Accumulated other comprehensive loss. We recognize actuarial gains and losses gradually over time. Any cumulative unrecognized actuarial gain or loss that exceeds 10 percent of the greater of the present value of the projected benefit obligation (PBO) and the fair value of plan assets is recognized in earnings over the expected average remaining working lives of the employees participating in the plan, or the expected average remaining lifetime of the inactive plan participants if the plan is comprised of all or almost all inactive participants. Otherwise, the actuarial gain or loss is not recognized in the Consolidated Income Statements. We use actuarial valuations to determine our pension costs and credits. The amounts calculated depend on a variety of key assumptions, including discount rates, mortality rates and expected return on plan assets. Under U.S. GAAP, we are required to consider current market conditions in making these assumptions. In particular, the discount rates are reviewed annually based on changes in long ‑ term, highly ‑ rated corporate bond yields. Decreases in the discount rates result in an increase in the PBO and a decrease in pension costs. Conversely, an increase in the discount rates results in a decrease in the PBO and an increase in pension costs. The mortality assumptions are reviewed annually by management. Decreases in mortality rates result in an increase in the PBO and in pension costs. Conversely, an increase in mortality rates results in a decrease in the PBO and in pension costs. Holding all other assumptions constant, a 0.25 percentage-point decrease in the discount rate would have increased the PBO related to our defined benefit pension plans by $157 million while a 0.25 percentage-point increase in the discount rate would have decreased the PBO related to our defined benefit pension plans by $153 million. 20 FINANCIAL REPORT 2023 The expected return on plan assets is reviewed regularly and considered for adjustment annually based upon the target asset allocations and represents the long ‑ term return expected to be achieved. Decreases in the expected return on plan assets result in an increase to pension costs. Holding all other assumptions constant, an increase or decrease of 0.25 percentage points in the expected long ‑ term rate of asset return would have decreased or increased, respectively, the net periodic benefit cost in 2023 by $16 million. The funded status, which can increase or decrease based on the performance of the financial markets or changes in our assumptions, does not represent a mandatory short ‑ term cash obligation. Instead, the funded status of a defined benefit pension plan is the difference between the PBO and the fair value of the plan assets. Our defined benefit pension plans were overfunded by $212 million and $326 million at December 31, 2023 and 2022, respectively. Income taxes In preparing our Consolidated Financial Statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. Tax expense from continuing operations is reconciled from the weighted ‑ average global tax rate (rather than from the Swiss domestic statutory tax rate). As the parent company of the ABB Group, ABB Ltd, is domiciled in Switzerland, income which has been generated in jurisdictions outside of Switzerland (hereafter “foreign jurisdictions”) and has already been subject to corporate income tax in those foreign jurisdictions is, to a large extent, tax exempt in Switzerland. Therefore, generally no or only limited Swiss income tax has to be provided for on the repatriated earnings of foreign subsidiaries. There is no requirement in Switzerland for a parent company of a group to file a tax return of the group determining domestic and foreign pre ‑ tax income and as our consolidated income from continuing operations is predominantly earned outside of Switzerland, corporate income tax in foreign jurisdictions largely determines our global weighted ‑ average tax rate. We account for deferred taxes by using the asset and liability method. Under this method, we determine deferred tax assets and liabilities based on temporary differences between the financial reporting and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. We recognize a deferred tax asset when it is more likely than not that the asset will be realized. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. To the extent we increase or decrease this allowance in a period, we recognize the change in the allowance within Income tax expense in the Consolidated Income Statements unless the change relates to discontinued operations, in which case the change is recorded in Loss from discontinued operations, net of tax. Unforeseen changes in tax rates and tax laws, as well as differences in the projected taxable income as compared to the actual taxable income, may affect these estimates. Certain countries levy withholding taxes, dividend distribution taxes or additional corporate income taxes (hereafter “withholding taxes”) on dividend distributions. Such taxes cannot always be fully reclaimed by the shareholder, although they have to be declared and withheld by the subsidiary. Switzerland has concluded double taxation treaties with many countries in which we operate. These treaties either eliminate or reduce such withholding taxes on dividend distributions. It is our policy to distribute retained earnings of subsidiaries, insofar as such earnings are not permanently reinvested or no other reasons exist that would prevent the subsidiary from distributing them. No deferred tax liability is set up if retained earnings are considered as indefinitely reinvested and used for financing current operations as well as business growth through working capital and capital expenditure in those countries. We operate in numerous tax jurisdictions and, as a result, are regularly subject to audit by tax authorities, including for transfer pricing. We provide for tax contingencies whenever it is deemed more likely than not that a tax asset has been impaired or a tax liability has been incurred for events such as tax claims or changes in tax laws. Contingency provisions are recorded based on the technical merits of our filing position, considering the applicable tax laws and OECD guidelines and are based on our evaluations of the facts and circumstances as of the end of each reporting period. Changes in the facts and circumstances could result in a material change to the tax accruals. Although we believe that our tax estimates are reasonable and that appropriate tax reserves have been made, the final determination of tax audits and any related litigation could be different than that which is reflected in our income tax provisions and accruals. FINANCIAL REPORT 2023 21 An estimated loss from a tax contingency must be accrued as a charge to income if it is more likely than not that a tax asset has been impaired or a tax liability has been incurred and the amount of the loss can be reasonably estimated. We apply a two ‑ step approach to recognize and measure uncertainty in income taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50 percent likely of being realized upon ultimate settlement. The required amount of provisions for contingencies of any type may change in the future due to new developments. Goodwill and intangible assets We review goodwill for impairment annually as of October 1, or more frequently if events or circumstances indicate the carrying value may not be recoverable. We use either a qualitative or quantitative assessment method for each reporting unit. As each of our divisions have full ownership and accountability for their respective strategies, performance and resources, we have determined our reporting units to be at the division level, which is generally one level below our reportable segments of Electrification, Motion, Process Automation and Robotics & Discrete Automation. When performing the qualitative assessment, we first determine, for a reporting unit, factors which would affect the fair value of the reporting unit including: (i) macroeconomic conditions related to the business, (ii) industry and market trends, and (iii) the overall future financial performance and future opportunities in the markets in which the business operates. We then consider how these factors would impact the most recent quantitative analysis of the reporting unit’s fair value. Key assumptions in determining the fair value of the reporting unit include the projected level of business operations including future expected profit margins, the reporting unit’s weighted ‑ average cost of capital and the terminal growth rate. During 2023, we divested our Power Conversion Division resulting in nineteen divisions and reporting units. There were no additions to our divisions and reporting units during 2023. For each change in reporting unit which arose during 2023, an interim impairment test was conducted before and after the change. In both the “before” and “after” tests, it was concluded that the fair value of the reporting units exceeded the carrying value by a significant amount. In 2023, we elected to perform quantitative assessments for seven divisions, being Installation Products, IEC LV Motors, Large Motors and Generators, NEMA Motors, Robotics, Machine Automation and E-mobility. For each of these divisions the fair value was determined using a discounted cash flow fair value estimate based on objective information available at the measurement date. The significant assumptions used to develop the estimates of fair value for each division included management’s best estimates of the expected future results, as well as discount and terminal growth rates specific to the reporting unit. The fair value estimates were based on assumptions that a market participant would expect to use, but which are inherently uncertain and thus, actual results may differ from those estimates. The fair values for each of the individual reporting units and their associated goodwill were determined using Level 3 measurements. In each of the above quantitative assessments, it was concluded that the fair value of the reporting unit exceeded its carrying value by more than 100 percent. For the remaining divisions, we performed qualitative assessments and determined that it was not more likely than not that the fair value for each of these reporting units was below the carrying value. Intangible assets are reviewed for recoverability upon the occurrence of certain triggering events (such as a decision to divest a business or projected losses of an entity) or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We record impairment charges other than impairments of goodwill in Other income (expense), net, in our Consolidated Income Statements, unless they relate to a discontinued operation, in which case the charges are recorded in Loss from discontinued operations, net of tax. 22 FINANCIAL REPORT 2023 — New accounting pronouncements For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our Consolidated Financial Statements, see “Note 2 - Significant accounting policies” to our Consolidated Financial Statements. — Research and development Each year, we invest significantly in research and development. Our research and development focuses on developing and commercializing the technologies, products and solutions of our businesses that are of strategic importance to our future growth. In 2023, we invested $1,317 million, or approximately 4.1 percent of our 2023 consolidated revenues, on research and development activities in our continuing operations. We also had expenditures of approximately $55 million on order-related development activities. These are customer ‑ and project ‑ specific development efforts that we undertake to develop or adapt equipment and systems to the unique needs of our customers in connection with specific orders or projects. In addition to continuous product development, and order ‑ related engineering work, we develop platforms for technology applications in our businesses in our research and development laboratories, which operate on a global basis. Through active management of our investment in research and development, we seek to maintain a balance between short ‑ term and long ‑ term research and development programs and optimize our return on investment. We protect these results by holding patents, copyrights and other appropriate intellectual property protection. To complement our business-focused product development, our businesses invest together in collaborative research activities covering topics such as artificial intelligence, software, sensors, control and optimization, mechatronics and robotics, power electronics, communication technologies, material and manufacturing, electrodynamics and electrical switching technologies. This results in advancing the state-of-the-art technologies used in our products and in common technology platforms that can be applied across multiple product lines. Universities are incubators of future technology, and one task of our research and development teams is to transform university research into industry ‑ ready technology platforms. We collaborate with multiple universities and research institutions to build research networks and foster new technologies. We believe these collaborations shorten the amount of time required to turn basic ideas into viable products, and they additionally help us to recruit and train new personnel. We have built numerous university strategic relationships with a number of leading institutions in various countries around the world. We are also leveraging our ecosystem to enhance our innovation efforts and gain speed with strategic partners with complementary competencies. In addition, we invest and collaborate with start-ups worldwide via our corporate venture arm ABB Technology Ventures and our start-up collaboration arm SynerLeap. The result of our investment in research and development is that ABB is widely recognized for its world-class technology. FINANCIAL REPORT 2023 23 — Acquisitions and divestments Acquisitions During 2023, 2022 and 2021, ABB paid $175 million, $195 million and $212 million to purchase seven, five and two businesses, respectively. The principal acquisition in 2022 was InCharge Energy, Inc. (In-Charge), where we increased our ownership to a 60 percent controlling interest, expanding the market presence of the E-mobility operating segment, particularly in the North American market. In-Charge is headquartered in Santa Monica, United States, and is a provider of turn-key commercial electric vehicle charging hardware and software solutions. See “Note 4 - Acquisitions, divestments and equity-accounted companies” to our Consolidated Financial Statements. The principal acquisition in 2021 was ASTI Mobile Robotics Group SL (ASTI). ASTI is headquartered in Burgos, Spain. There were no significant acquisitions in 2023. Divestments and spin-offs Divestment of the Power Conversion Division In July 2023, we completed the sale of our Power Conversion Division to AcBel Polytech Inc. for cash proceeds of $496 million, net of transaction costs and cash disposed, and recognized a net gain on sale of $59 million. Prior to its disposal, the Power Conversion Division was part of our Electrification Business area. See “Note 4 - Acquisitions, divestments and equity-accounted companies” to our Consolidated Financial Statements. Spin-off of the Turbocharging Division In September 2022, the shareholders approved the spin-off of our Turbocharging Division into an independent, publicly traded company, Accelleron Industries AG (Accelleron), which was completed through the distribution of common stock of Accelleron to the stockholders of ABB on October 3, 2022. As a result of the spin-off of this Division, we distributed net assets of $272 million, net of amounts attributable to noncontrolling interests of $12 million, which was reflected as a reduction in Retained earnings. In addition, total accumulated comprehensive income of $95 million, including the cumulative translation adjustment, was reclassified to Retained earnings. Cash and cash equivalents distributed with Accelleron was $172 million. Prior to being spun-off, the Turbocharging Division was part of our Process Automation Business area. See “Note 4 - Acquisitions, divestments and equity-accounted companies” to our Consolidated Financial Statements. Divestment of the Mechanical Power Transmission Division In November 2021, we completed the sale of our Mechanical Power Transmission Division (Dodge) to RBC Bearings Inc. for cash proceeds of $2,862 million, net of transaction costs and cash disposed, and recognized a net gain on sale of $2,195 million. Prior to its disposal, the Dodge business was part of our Motion Business area. See “Note 4 - Acquisitions, divestments and equity-accounted companies” to our Consolidated Financial Statements. 24 FINANCIAL REPORT 2023 Divestment of the Power Grids business On July 1, 2020, we completed the divestment of 80.1 percent of our former Power Grids business (Hitachi Energy) to Hitachi. As this divestment represented a strategic shift that would have a major effect on our operations and financial results, the results of operations for this business are presented as discontinued operations and the assets and liabilities are reflected as held for sale for all periods presented. For more information on the divestment of the Power Grids business see “Note 3 - Discontinued operations” to our Consolidated Financial Statements. Hitachi held a call option which required ABB to sell the remaining 19.9 percent interest in Hitachi Energy at a price consistent with what was paid by Hitachi to acquire the initial 80.1 percent or at fair value, if higher. In September 2022, we agreed with Hitachi that we would sell our remaining investment in Hitachi Energy and concurrently settle certain outstanding contractual obligations relating to the initial sale of the business, including certain indemnification guarantees (see Note 15 - Commitments and contingencies). The transaction was completed in December 2022, and we received proceeds of $1,552 million. See “Note 4 - Acquisitions, divestments and equity-accounted companies” to our Consolidated Financial Statements. — Exchange rates We report our financial results in U.S. dollars. Due to our global operations, a significant amount of our revenues, expenses, assets and liabilities are denominated in other currencies. As a consequence, movements in exchange rates between currencies may affect: (i) our profitability, (ii) the comparability of our results between periods and (iii) the reported carrying value of our assets and liabilities. We translate non ‑ USD denominated results of operations, assets and liabilities to USD in our Consolidated Financial Statements. Balance sheet items are translated to USD using year ‑ end currency exchange rates. Income statement and cash flow items are translated to USD using the relevant monthly average currency exchange rate. Increases and decreases in the value of the USD against other currencies will affect the reported results of operations in our Consolidated Income Statements and the value of certain of our assets and liabilities in our Consolidated Balance Sheets, even if our results of operations or the value of those assets and liabilities have not changed in their original currency. As foreign exchange rates impact our reported results of operations and the reported value of our assets and liabilities, changes in foreign exchange rates could significantly affect the comparability of our reported results of operations between periods and result in significant changes to the reported value of our assets, liabilities and stockholders’ equity. While we operate globally and report our financial results in USD, exchange rate movements between the USD and the EUR, the CNY and the CHF are of particular importance to us due to (i) the location of our significant operations and (ii) our corporate headquarters being in Switzerland. The exchange rates between the USD and the EUR, the USD and the CHF and the USD and the CNY at December 31, 2023, 2022 and 2021, were as follows: Exchange rates into $ 2023 2022 2021 EUR 1.00 1.11 1.07 1.13 CHF 1.00 1.20 1.08 1.10 CNY 1.00 0.14 0.14 0.16 FINANCIAL REPORT 2023 25 The average exchange rates between the USD and the EUR, the USD and the CHF and the USD and the CNY for the years ended December 31, 2023, 2022 and 2021, were as follows: Exchange rates into $ 2023 2022 2021 EUR 1.00 1.08 1.05 1.18 CHF 1.00 1.11 1.05 1.09 CNY 1.00 0.14 0.15 0.16 When we incur expenses that are not denominated in the same currency as the related revenues, foreign exchange rate fluctuations could affect our profitability. To mitigate the impact of exchange rate movements on our profitability, it is our policy to enter into forward foreign exchange contracts to manage the foreign exchange transaction risk of our operations. In 2023, approximately 74 percent of our consolidated revenues were reported in currencies other than the USD. The following percentages of consolidated revenues were reported in the following currencies: • Euro, approximately 25 percent, and • Chinese renminbi, approximately 14 percent. In 2023, approximately 72 percent of our cost of sales and selling, general and administrative expenses were reported in currencies other than the USD. The following percentages of consolidated cost of sales and selling, general and administrative expenses were reported in the following currencies: • Euro, approximately 22 percent, and • Chinese renminbi, approximately 12 percent. We also incur expenses other than cost of sales and selling, general and administrative expenses in various currencies. The results of operations and financial position of our subsidiaries outside of the U.S. are generally accounted for in the currencies of the countries in which those subsidiaries are located. We refer to these currencies as “local currencies”. Local currency financial information is then translated into USD at applicable exchange rates for inclusion in our Consolidated Financial Statements. The discussion of our results of operations below provides certain information with respect to orders, revenues, income from operations and other measures as reported in USD (as well as in local currencies). We measure period ‑ to ‑ period variations in local currency results by using a constant foreign exchange rate for all periods under comparison. Differences in our results of operations in local currencies as compared to our results of operations in USD are caused exclusively by changes in currency exchange rates. While we consider our results of operations as measured in local currencies to be a significant indicator of business performance, local currency information should not be relied upon to the exclusion of U.S. GAAP financial measures. Instead, local currencies reflect an additional measure of comparability and provide a means of viewing aspects of our operations that, when viewed together with the U.S. GAAP results, provide a more complete understanding of factors and trends affecting the business. As local currency information is not standardized, it may not be possible to compare our local currency information to other companies’ financial measures that have the same or a similar title. We encourage investors to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. 26 FINANCIAL REPORT 2023 — Orders Our policy is to book and report an order when a binding contractual agreement has been concluded with a customer covering, at a minimum, the price and scope of products or services to be supplied, the delivery schedule and the payment terms. The reported value of an order corresponds to the undiscounted value of revenues that we expect to recognize following delivery of the goods or services subject to the order, less any trade discounts and excluding any value added or sales tax. The value of orders received during a given period of time represents the sum of the value of all orders received during the period, adjusted to reflect the aggregate value of any changes to the value of orders received during the period and orders existing at the beginning of the period. These adjustments, which may in the aggregate increase or decrease the orders reported during the period, may include changes in the estimated order price up to the date of contractual performance, changes in the scope of products or services ordered and cancellations of orders. The undiscounted value of future revenues we expect to generate from our orders at any point in time is represented by our order backlog. The level of orders fluctuates from year to year. Portions of our business involve orders for long ‑ term projects that can take months or years to complete and many larger orders result in revenues in periods after the order is booked. Consequently, the level of orders generally cannot be used to accurately predict future revenues or operating performance. Orders that have been placed can often be cancelled, delayed or modified by the customer. These actions can reduce or delay any future revenues from the order or may result in the elimination of the order. — Performance measures We evaluate the performance of our operating segments based on orders received, revenues and Operational EBITA. Operational EBITA represents income from operations excluding: • amortization expense on intangibles arising upon acquisitions (acquisition-related amortization), • restructuring, related and implementation costs, • changes in the amount recorded for obligations related to divested businesses occurring after the divestment date (changes in obligations related to divested businesses), • gains and losses from sale of businesses (including fair value adjustment on assets and liabilities held for sale), • acquisition- and divestment-related expenses and integration costs, • certain other non-operational items, as well as • foreign exchange/commodity timing differences in income from operations consisting of: (a) unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (c) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities). Certain other non-operational items generally includes: certain regulatory, compliance and legal costs, certain asset write downs/impairments and certain other fair value changes, changes in estimates relating to opening balance sheets of acquired businesses (changes in pre-acquisition estimates), as well as other items which are determined by management on a case-by-case basis. See “Note 23 - Operating segment and geographic data” to our Consolidated Financial Statements for a reconciliation of the total Operational EBITA to income from continuing operations before taxes. FINANCIAL REPORT 2023 27 — Transactions with affiliates and associates In the normal course of our business, we purchase products from, sell products to and engage in other transactions with entities in which we hold an equity interest. The amounts involved in these transactions are not material to ABB Ltd. Prior to its sale in December 2022 our most significant equity method investment was in Hitachi Energy Ltd (see “Note 4 - Acquisitions, divestments and equity- accounted companies” for details). Also, in the normal course of our business, we engage in transactions with businesses that we have divested. We believe that the terms of the transactions we conduct with these companies are negotiated on an arm’s length basis. 28 FINANCIAL REPORT 2023 — Analysis of results of operations The discussion in the following sections below provides a comparative analysis between 2023 and 2022. See the sections under “Operating and Financial Review and Prospects” in our 2022 Annual Report for a comparative discussion and analysis between 2022 and 2021, with the exception of subsections "Electrification" and "Corporate and Other" under "Business analysis" below, where a comparative analysis between 2022 and 2021 has been provided to reflect the realignment of E-mobility (see “Note 23 - Operating segment and geographic data” for details). Our consolidated results from operations were as follows: Income Statement Data: ($ in millions, except per share data in $) 2023 2022 2021 Revenues 32,235 29,446 28,945 Cost of sales (21,021) (19,736) (19,478) Gross profit 11,214 9,710 9,467 Selling, general and administrative expenses (5,543) (5,132) (5,162) Non-order related research and development expenses (1,317) (1,166) (1,219) Other income (expense), net 517 (75) 2,632 Income from operations 4,871 3,337 5,718 Interest and dividend income 165 72 51 Interest and other finance expense (275) (130) (148) Non-operational pension (cost) credit 17 115 166 Income tax expense (930) (757) (1,057) Income from continuing operations, net of tax 3,848 2,637 4,730 Loss from discontinued operations, net of tax (24) (43) (80) Net income 3,824 2,594 4,650 Net income attributable to noncontrolling interests and redeemable noncontrolling interests (79) (119) (104) Net income attributable to ABB 3,745 2,475 4,546 Amounts attributable to ABB shareholders: Income from continuing operations, net of tax 3,769 2,517 4,625 Loss from discontinued operations, net of tax (24) (42) (79) Net income 3,745 2,475 4,546 Basic earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 2.03 1.33 2.31 Loss from discontinued operations, net of tax (0.01) (0.02) (0.04) Net income 2.02 1.30 2.27 Diluted earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 2.02 1.32 2.29 Loss from discontinued operations, net of tax (0.01) (0.02) (0.04) Net income 2.01 1.30 2.25 A more detailed discussion of the orders, revenues, income from operations and Operational EBITA for our Business areas follows in the sections of “Business analysis” below for Electrification, Motion, Process Automation, Robotics & Discrete Automation, and Corporate and Other. Orders and revenues of our businesses include intersegment transactions which are eliminated in the “Corporate and Other” line in the tables below. FINANCIAL REPORT 2023 29 Orders % Change ($ in millions) 2023 2022 2021 2023 2022 Electrification 15,189 15,182 13,850 0% 10% Motion 8,222 7,896 7,616 4% 4% Process Automation 7,535 6,825 6,779 10% 1% Robotics & Discrete Automation 3,066 4,116 3,844 (26)% 7% Total Business areas 34,012 34,019 32,089 0% 6% Corporate and Other E-mobility, Non-core and divested businesses 720 787 593 (9)% 33% Intersegment eliminations (914) (818) (814) n.a. n.a. Total 33,818 33,988 31,868 (1)% 7% In 2023, total orders decreased 1 percent compared with 2022 (increased 1 percent in local currencies). The decrease reflects the steep decline in orders for the Robotics & Discrete Automation Business area as customers normalized order patterns in response to shortened delivery lead times, as well as an overall weakness in the Robotics market outside the automotive segment. Orders in the Electrification Business area were steady despite the sale of the Power Conversion Division in July 2023. The Process Automation Business area had a strong increase, reflecting the receipt of higher large orders which more than offset the impact from the spin-off of the Turbocharging Division in October 2022 which affected total order growth by 1 percent. The increase in Orders in the Motion Business area reflects strong demand in long-cycle markets and project businesses. For additional information about individual Business area order performance, refer to the relevant sections of “Business analysis” below. We determine the geographic distribution of our orders based on the location of the ultimate destination of the products’ end use, if known, or the location of the customer. The geographic distribution of our consolidated orders was as follows: % Change ($ in millions) 2023 2022 2021 2023 2022 Europe 11,458 11,778 11,857 (3)% (1)% The Americas 12,437 11,825 9,940 5% 19% of which: United States 9,204 8,920 7,453 3% 20% Asia, Middle East and Africa 9,923 10,385 10,071 (4)% 3% of which: China 4,488 5,087 5,036 (12)% 1% Total 33,818 33,988 31,868 (1)% 7% In 2023, orders increased 5 percent in the Americas (5 percent in local currencies), with orders growing in the U.S., Canada and Chile. The increase in the U.S. includes two large orders with multi-year fulfillment periods for $285 million and $150 million, respectively. In Europe, orders decreased 3 percent (4 percent in local currencies). Orders were higher in Norway and the United Kingdom while they declined in Switzerland and Poland. Despite the impact of an order reversal of approximately $170 million recorded in 2022, orders decreased in Germany as well. In Asia, Middle East and Africa, orders decreased 4 percent (increased 1 percent in local currencies). In local currencies, order growth in India and Saudi Arabia more than offset the decline in China. The spin-off of the Turbocharging Division in October 2022 also had a negative impact of 3 percent on the order growth in Asia, Middle East and Africa and 2 percent in Europe. 30 FINANCIAL REPORT 2023 Order backlog % Change December 31, ($ in millions) 2023 2022 2021 2023 2022 Electrification 6,808 6,404 5,105 6% 25% Motion 5,343 4,726 3,749 13% 26% Process Automation 7,519 6,229 6,079 21% 2% Robotics & Discrete Automation 2,141 2,679 1,919 (20)% 40% Total Business areas 21,811 20,038 16,852 9% 19% Corporate and Other E-mobility, Non-core and divested businesses 508 552 467 (8)% 18% Intersegment eliminations (752) (723) (712) n.a. n.a. Total 21,567 19,867 16,607 9% 20% At December 31, 2023, consolidated order backlog was 9 percent higher (7 percent in local currencies) compared to December 31, 2022. Order backlog increased in all Business areas except Robotics & Discrete Automation. The order backlog in the Process Automation Business area was supported by a strong order increase in most Divisions except the Measurement & Analytics Division. The increase also includes the impact of two large orders with multi-year fulfillment periods for $285 million and $150 million, respectively, in the Marine & Ports Division. The order backlog in the Electrification Business area was driven by order growth in the Smart Power Division, partially offset by a decrease from the divestment of the Power Conversion Division in July 2023. An increase in orders in both the Systems Drives and Traction Divisions contributed to the increase in the order backlog in the Motion Business area while the decrease in the order backlog in the Robotics & Discrete Automation Business area was a result of the decline in orders in both Divisions. Revenues % Change ($ in millions) 2023 2022 2021 2023 2022 Electrification 14,584 13,619 12,894 7% 6% Motion 7,814 6,745 6,925 16% (3)% Process Automation 6,270 6,044 6,259 4% (3)% Robotics & Discrete Automation 3,640 3,181 3,297 14% (4)% Total Business areas 32,308 29,589 29,375 9% 1% Corporate and Other E-mobility, Non-core and divested businesses 769 653 348 18% 88% Intersegment eliminations (842) (796) (778) n.a. n.a. Total 32,235 29,446 28,945 9% 2% In 2023, revenues increased by 9 percent (11 percent in local currencies). The normalization of supply chains facilitated strong execution of our order backlog into revenue growth during the year. All Business areas reported revenue growth, with both increased volumes and product prices. Growth was highest in the Robotics & Discrete Automation and Motion Business areas. The increase in the Robotics & Discrete Automation Business area reflects improved order backlog execution as supply chain constraints eased in 2023. The Electrification Business area achieved a high single-digit growth rate despite the adverse impact from the divestment of the Power Conversion Division in July 2023, while the Process Automation Business area achieved single-digit growth in local currencies despite the spin-off of the Turbocharging Division in October 2022. These two business portfolio changes had a combined negative impact on the growth in total Revenues of 2 percent. For additional analysis of revenues for each of the Business areas, refer to the relevant sections of “Business analysis” below. FINANCIAL REPORT 2023 31 We determine the geographic distribution of our revenues based on the location of the ultimate destination of the products’ end use, if known, or the location of the customer. The geographic distribution of our consolidated revenues was as follows: % Change ($ in millions) 2023 2022 2021 2023 2022 Europe 11,568 10,285 10,529 12% (2)% The Americas 11,090 9,573 8,686 16% 10% of which: United States 8,248 7,023 6,397 17% 10% Asia, Middle East and Africa 9,577 9,588 9,730 0% (1)% of which: China 4,468 4,696 4,932 (5)% (5)% Total 32,235 29,446 28,945 9% 2% In 2023, revenues increased 16 percent in the Americas (15 percent in local currencies), where revenues in the United States increased 17 percent (17 percent in local currencies). Revenues in the Americas also experienced strong growth in Canada, Brazil, Argentina and Chile. In Europe, revenues increased 12 percent (11 percent in local currencies) and were higher across all Business areas. Revenue growth was the highest in Italy, Turkiye, Sweden, Norway and the United Kingdom. In Asia, Middle East and Africa, revenues were flat (increased 5 percent in local currencies) compared to 2022. Revenues grew strongest in India and Saudi Arabia while they decreased in China and South Korea. The spin-off of the Turbocharging Division in October 2022 also had a negative impact of 3 percent on the revenue growth in Asia, Middle East and Africa, 2 percent in Europe and 1 percent in the Americas. Cost of sales Cost of sales consists primarily of labor, raw materials and component costs but also includes indirect production costs, expenses for warranties, contract and project charges, as well as order-related development expenses incurred in connection with projects for which corresponding revenues have been recognized. In 2023, costs of sales increased 7 percent (8 percent in local currencies) to $21,021 million. Cost of sales as a percentage of revenues decreased to 65.2 percent from 67.0 percent in 2022. The increase in the gross margin was primarily due to the stabilization of commodity and freight costs and certain mitigation actions taken in response to higher labor costs as well as some positive impact from changes in the product portfolio. The improvement in 2023 was realized in all Business areas. Selling, general and administrative expenses The components of selling, general and administrative expenses were as follows: ($ in millions) 2023 2022 2021 Selling expenses 3,415 3,248 3,281 General and administrative expenses 2,128 1,884 1,881 Total 5,543 5,132 5,162 In 2023, general and administrative expenses increased 13 percent (15 percent in local currencies) compared to 2022. As a percentage of revenues, general and administrative expenses slightly increased to 6.6 percent from 6.4 percent in 2022. The increase represents inflation impacts as well as increased business transformation and employee short-term incentive compensation costs. General and administrative expenses in 2023 also includes the ongoing costs required to deliver services to Hitachi Energy Ltd and Accelleron under transition service agreements for which we are compensated. We have recorded $121 million in Other income (expense), net, during 2023 compared to $162 million in 2022 related to these agreements with Hitachi Energy and Accelleron. In 2023, selling expenses increased 5 percent (5 percent in local currencies) compared to 2022 and was higher across all Business areas apart from Process Automation. Selling expenses as a percentage of orders increased from 9.6 percent in 2022 to 10.1 percent in 2023. 32 FINANCIAL REPORT 2023 Non ‑ order related research and development expenses In 2023, non ‑ order related research and development expenses increased 13 percent (14 percent in local currencies) compared to 2022. In 2023, non ‑ order related research and development expenses as a percentage of revenues remained similar to prior year levels (4.1 percent in 2023 compared to 4.0 percent in 2022) as we continued investing in research and development in line with revenue growth. Other income (expense), net ($ in millions) 2023 2022 2021 Income from provision of services under transition services agreements 175 221 173 Net gain from sale of property, plant and equipment 116 84 38 Gain (loss) from change in fair value of investments in equity securities 3 52 108 Brand income from Hitachi Energy 39 57 89 Net gain from sale of businesses and equity-accounted investments (1) 101 36 2,193 Asset impairments (49) (55) (33) Income (loss) from equity-accounted companies (16) (102) (100) Restructuring and restructuring-related expenses (2) (20) (227) (48) Regulatory penalties in connection with Kusile project — (313) — Other income (expense) 168 172 212 Total 517 (75) 2,632 (1) 2022 includes gain on sale of the remaining 19.9 percent investment in Hitachi Energy Ltd. (2) Excluding asset impairments In 2023, Other income (expense), net, was a gain of $517 million compared to a loss of $75 million in 2022. The primary reason for the change was that in 2022, we recorded costs of $313 million associated with regulatory penalties assessed in connection with the Kusile project and $195 million of restructuring and restructuring-related expenses in connection with the exit of the full train retrofit business. The amount in 2022 also included higher losses from equity-accounted companies which principally represented losses in Hitachi Energy. In 2023, we recorded higher gains from sales of businesses primarily due to the sale of the Power Conversion Division. In 2022, we recorded a gain of $43 million relating to the sale of the remaining 19.9 percent of Hitachi Energy to Hitachi. In 2023, we recorded lower gains for net fair value increases in various equity investments compared to 2022, the most significant of which in 2022 related to InCharge Energy, Inc. Income from operations % Change ($ in millions) 2023 2022 2021 2023 2022 Electrification 2,800 2,140 1,827 31% 17% Motion 1,390 1,092 3,276 27% (67)% Process Automation 947 663 713 43% (7)% Robotics & Discrete Automation 446 247 269 81% (8)% Total Business areas 5,583 4,142 6,085 35% (32)% Corporate and Other (711) (804) (371) n.a. n.a. Intersegment elimination (1) (1) 4 n.a. n.a. Total 4,871 3,337 5,718 46% (42)% In 2023 and 2022, changes in income from operations were a result of the factors discussed above and in “Business analysis” below. FINANCIAL REPORT 2023 33 Financial income and expenses Financial income and expenses include Interest and dividend income and Interest and other finance expense. Interest and other finance expense includes interest expense on our debt, the amortization of upfront transaction costs associated with long ‑ term debt and committed credit facilities, commitment fees on credit facilities, foreign exchange gains and losses on financial items, and gains and losses on marketable securities. In addition, interest costs relating to uncertain tax positions are included within interest expense. ($ in millions) 2023 2022 2021 Interest and dividend income 165 72 51 Interest and other finance expense (275) (130) (148) In 2023, both interest income and interest expense reflect increases in market interest rates especially for the U.S. dollar and the euro. Interest on cash deposits reflects primarily interest income on U.S. dollar deposits. Interest expense on our external debt increased due to higher debt levels as well as higher interest rates on floating rate obligations. Due to our internal funding structure and the resulting currency hedging requirements, our interest expense reflects more the short-term Swiss franc interest rates than the direct underlying interest costs incurred in the currencies of our external debt, especially the euro. Non-operational pension (cost) credit A non-operational pension credit of $17 million was recorded in 2023 compared to a $115 million credit in 2022. The decrease in the non-operational pension credit compared to 2022 is primarily due to higher interest costs on the benefit obligations (see “Note 17 - Employee benefits” to our Consolidated Financial Statements). Income tax expense ($ in millions) 2023 2022 2021 Income from continuing operations before taxes 4,778 3,394 5,787 Income tax expense (930) (757) (1,057) Effective tax rate for the year 19.5% 22.3% 18.3% In 2023, the effective tax rate decreased to 19.5 percent from 22.3 percent in 2022. In 2023, the effective tax rate benefited from a favorable resolution of an uncertain tax position early in the year which reduced the effective tax rate by approximately 4 percentage points. In 2022, the effective tax was approximately 2 percentage points higher due to the non-deductible regulatory penalties in connection with the Kusile project and 3 percentage points higher due to not benefiting losses in entities having a participation exemption. The effective tax rate in 2022 also reflects a benefit of approximately 6 percentage points due to changes in assessment of recoverability of deferred tax assets. See “Note 16 - Income taxes” to our Consolidated Financial Statements for additional information. Income from continuing operations, net of tax As a result of the factors discussed above, compared to 2022, Income from continuing operations, net of tax, increased by $1,211 million to $3,848 million in 2023. 34 FINANCIAL REPORT 2023 Loss from discontinued operations, net of tax In 2020, we completed the divestment of 80.1 percent of our former Power Grids business to Hitachi. As a result of the sale, substantially all Power Grids related assets and liabilities have been sold. As this divestment represented a strategic shift that would have a major effect on our operations and financial results, the results of operations for this business were presented as discontinued operations. In addition, we also have retained obligations (primarily for environmental and taxes) related to other businesses disposed or otherwise exited that qualified as discontinued operations. Changes to these retained obligations are also included in Loss from discontinued operations, net of tax. For additional information on the divestment and discontinued operations, see “Note 3 - Discontinued operations” to our Consolidated Financial Statements. Net income attributable to ABB As a result of the factors discussed above, compared to 2022, Net income attributable to ABB increased by $1,270 million to $3,745 million in 2023. Earnings per share attributable to ABB shareholders (in $) 2023 2022 2021 Basic earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 2.03 1.33 2.31 Loss from discontinued operations, net of tax (0.01) (0.02) (0.04) Net income 2.02 1.30 2.27 Diluted earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 2.02 1.32 2.29 Loss from discontinued operations, net of tax (0.01) (0.02) (0.04) Net income 2.01 1.30 2.25 Basic earnings per share is calculated by dividing income by the weighted ‑ average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing income by the weighted ‑ average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised, if dilutive. Potentially dilutive securities comprise: outstanding written call options and outstanding options and shares granted subject to certain conditions under our share ‑ based payment arrangements. See “Note 20 - Earnings per share” to our Consolidated Financial Statements. FINANCIAL REPORT 2023 35 — Business analysis Electrification Business area The financial results of our Electrification Business area were as follows: % Change ($ in millions) 2023 2022 2021 2023 2022 Orders 15,189 15,182 13,850 0% 10% Order backlog at December 31, 6,808 6,404 5,105 6% 25% Revenues 14,584 13,619 12,894 7% 6% Income from operations 2,800 2,140 1,827 31% 17% Operational EBITA 2,937 2,343 2,120 25% 11% Orders Approximately two-thirds of the Business area’s orders are for products with short lead times; these orders are usually recorded and delivered within a three-month period and thus are generally considered as short-cycle. The remainder is comprised of smaller project orders that require longer lead times, as well as larger solutions requiring engineering and installation. Approximately half of the Business area’s orders are received via third-party distributors. As a consequence, end-customer market data is based partially on management estimates. In 2023, orders were flat (increased 1 percent in local currencies) compared to 2022, despite the divestment of the Power Conversion Division in July 2023, which negatively impacted the growth rate by approximately 2 percent. Order growth was strong in the Smart Power Division, partially offset by decreased demand in the Smart Buildings and Installation Products Divisions. Orders improved on strength in demand in customer segments such as data centers, utilities, chemical, and oil and gas. This was partially offset by weakness in the building segment, the Electrification Business area’s largest end-user segment, led by a slowdown in residential construction while commercial construction showed positive momentum, mainly in the United States. In 2022, orders increased 10 percent (16 percent in local currencies) as demand improved across all key end-user segments. Demand in the buildings segment was robust, with strong growth particularly in the non-residential building sector. Solid growth in the residential building sector in the first half of the year was partially offset by a slowdown in the second half of 2022, particularly in certain European markets. We experienced strong growth in data centers, food and beverage, infrastructure and renewables. Demand from the oil and gas segment increased significantly during the year, while growth in the utilities and rail segments was solid even if geographically uneven. 36 FINANCIAL REPORT 2023 The geographic distribution of orders for our Electrification Business area was as follows: ($ in millions) 2023 2022 2021 Europe 4,629 4,595 4,789 The Americas 6,567 6,509 5,000 of which: United States 5,001 5,062 3,733 Asia, Middle East and Africa 3,993 4,078 4,061 of which: China 1,815 1,992 2,103 Total 15,189 15,182 13,850 In 2023, orders in Europe increased 1 percent (decreased 1 percent in local currencies) as a result of growth in markets such as the United Kingdom, Turkiye and Ireland. This was partially offset by a decrease in demand in Germany, particularly in the building segment, as well as in the Netherlands and France. Orders in the Americas increased 1 percent (1 percent in local currencies) despite the divestment of the Power Conversion Division, which had a large market presence in the Americas and negatively impacted growth in the region by 2 percent. Orders decreased 2 percent in Asia, Middle East and Africa (increased 5 percent in local currencies) as a lower level of orders in China, reflecting a slowdown in demand, were more than offset by strong growth in Saudi Arabia and India. In 2022, orders in local currencies increased in all regions. The pandemic-related challenges improved compared to 2021 in most geographies. Orders in the Americas increased 30 percent (31 percent in local currencies), with demand strengthening across all key markets, led by increases in the U.S. and Brazil. Orders in Europe decreased 4 percent, reflecting the weakening of many European currencies against the U.S. dollar, but increased 6 percent in local currencies, with growth across the region including in key markets such as Italy and Germany. Orders in Asia, Middle East and Africa were on the same level as in 2021, but increased 6 percent in local currencies, with strong order growth in India throughout the year offsetting a slowdown in China. Orders in China were lower in most end-user segments mainly as business activity was hampered by pandemic-related measures and also reflected a challenging comparable due to strong order performance in 2021. Order backlog In 2023, the order backlog increased 6 percent (6 percent in local currencies). The divestment of the Power Conversion Division in July 2023 negatively impacted the growth rate by approximately 8 percent. Order backlog benefited from the strong order intake in the Smart Power Division. In 2022, order backlog increased 25 percent (32 percent in local currencies). Order backlog benefited from strong order intake, but was also impacted by execution challenges caused by material shortages, transportation constraints as well as pandemic-related production pressures in some local markets. Revenues In 2023, revenues increased 7 percent (8 percent in local currencies) compared to 2022. The divestment of the Power Conversion Division in July 2023 negatively impacted the growth rate by approximately 2 percent. The supply chain tightness that negatively impacted revenues in 2022 normalized in 2023, however, inflation and labor market shortages continued to pose challenges. Pricing actions taken to mitigate increasing material, labor and transportation costs again contributed strongly to the higher revenue level and accounted for almost half of the revenue growth in 2023, excluding the negative impact from the divestment of the Power Conversion Division. The revenue growth was led by the Distribution Solutions and Smart Power Divisions, reflecting high demand as well as strong order backlog execution, while revenues in the Smart Buildings and Installation Products Divisions decreased. In 2022, revenues increased 6 percent (12 percent in local currencies). Revenues in local currencies increased in all divisions reflecting the strong demand across regions and end-user segments, however growth was hampered by component shortages, logistics challenges and a tight labor market. Pricing actions taken to mitigate increasing material, labor and transportation costs contributed strongly to the higher revenue level and accounted for around three quarters of the revenue growth in 2022. The revenue growth was led by the Smart Power Division, mirroring the very high demand in this segment. There was also strong double-digit revenue growth in local currencies in the Power Conversion Division as well as in the Installation Products Division. FINANCIAL REPORT 2023 37 The geographic distribution of revenues for our Electrification Business area was as follows: ($ in millions) 2023 2022 2021 Europe 4,641 4,318 4,489 The Americas 5,968 5,181 4,418 of which: United States 4,480 3,791 3,252 Asia, Middle East and Africa 3,975 4,120 3,987 of which: China 1,797 1,969 2,079 Total 14,584 13,619 12,894 In 2023, revenues in the Americas increased 15 percent (15 percent in local currencies) compared to 2022, despite the divestment of the Power Conversion Division, which negatively impacted growth in the region by 4 percent. Revenues increased 7 percent (5 percent in local currencies) in Europe, led by growth in the United Kingdom, Turkiye and Italy and supported by the strengthening of key European currencies against the U.S. dollar. Revenues in Asia, Middle East and Africa decreased 4 percent (increased 3 percent in local currencies), mainly reflecting lower revenues in China caused by a slowdown in demand. In 2022, revenues in the Americas increased 17 percent (18 percent in local currencies) with widespread regional growth. Revenues increased 3 percent (10 percent in local currencies) in Asia, Middle East and Africa, supported by strong growth in India, while revenues in China were lower than the previous year. Revenues in Europe decreased 4 percent, impacted by weakening currencies in many European countries versus the U.S. dollar, while revenues in the region grew 6 percent in local currencies. Income from operations In 2023, income from operations increased 31 percent, supported by higher volumes as well as pricing actions to offset the adverse impact from cost inflation, primarily in labor. Gains from sale of businesses amounted to $75 million primarily reflecting the gain from the divestment of the Power Conversion Division in July 2023. Benefits of savings realized from ongoing restructuring and cost savings programs also positively influenced income from operations. These positive effects were partially dampened by widespread inflationary cost pressures in 2023. The level of research and development spending was higher in 2023 than in 2022, driven mainly by our expansion in the United States, as well as increased investments in sustainability and in our service offering. Restructuring- related expenses and implementation costs increased in 2023 compared to 2022 mainly due to right- sizing actions following lower demand in certain market segments. Changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations in 2023 by 1 percent. In 2022, income from operations increased 17 percent supported by higher volumes as well as strong price management, which helped offset the adverse impact from cost inflation in raw materials, freight and labor. Benefits of savings realized from ongoing restructuring and cost savings programs also positively influenced income from operations. Restructuring-related expenses and implementation costs in our operating divisions were lower in 2022 than in 2021, mainly due to the substantial completion of the integration of GEIS, which we acquired in 2018. Also, lower GEIS integration costs contributed to the higher income from operations in 2022 compared to 2021. These positive effects were partially dampened by widespread inflationary cost pressures in 2022, as well as higher personnel expenses driven by a ramp-up of manufacturing capacity to meet higher demand. Changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations by approximately 6 percent. 38 FINANCIAL REPORT 2023 Operational EBITA The reconciliation of Income from operations to Operational EBITA for the Electrification Business area was as follows: ($ in millions) 2023 2022 2021 Income from operations 2,800 2,140 1,827 Acquisition-related amortization 88 104 115 Restructuring, related and implementation costs 76 28 66 Changes in obligations related to divested businesses 1 1 — Gains and losses from sale of businesses (75) (1) 13 Acquisition- and divestment-related expenses and integration costs 30 36 69 Certain other non-operational items 16 41 7 FX/commodity timing differences in income from operations 1 (6) 23 Operational EBITA 2,937 2,343 2,120 In 2023, Operational EBITA increased 25 percent (27 percent excluding the impact from changes in foreign currency exchange rates) compared to 2022, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above. In 2022, Operational EBITA increased 11 percent (20 percent excluding the impact from changes in foreign currency exchange rates) compared to 2021, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above. Motion Business area The financial results of our Motion Business area were as follows: % Change ($ in millions) 2023 2022 2021 2023 2022 Orders 8,222 7,896 7,616 4% 4% Order backlog at December 31, 5,343 4,726 3,749 13% 26% Revenues 7,814 6,745 6,925 16% (3)% Income from operations 1,390 1,092 3,276 27% (67)% Operational EBITA 1,475 1,163 1,183 27% (2)% FINANCIAL REPORT 2023 39 Orders In 2023, orders increased 4 percent, (5 percent in local currencies) compared to 2022. The Business area experienced strong double-digit order growth in long-cycle markets and project businesses served by the System Drives, Large Motors and Generators, and Traction Divisions, partially offset by decreased demand in the short-cycle product-related divisions. The Business area recorded strong double-digit order growth in process-related segments such as chemical, oil and gas, and also growth in cement, mining and minerals. Transport segments related to rail and marine also experienced order growth during the year while orders declined in the buildings segment (heating, ventilation and air conditioning) as well as food and beverage. Overall, the Business area has benefited from the market shift towards carbon reduction and increased energy efficiency in critical processes, such as the electrification of propulsion systems and investments in hydrogen and renewables. The geographic distribution of orders for our Motion Business area was as follows: ($ in millions) 2023 2022 2021 Europe 2,797 2,710 2,617 The Americas 2,715 2,583 2,677 of which: United States 2,186 2,128 2,200 Asia, Middle East and Africa 2,710 2,603 2,322 of which: China 1,300 1,314 1,232 Total 8,222 7,896 7,616 In 2023, orders increased 3 percent (1 percent in local currencies) in Europe as orders increased particularly in Norway, Austria, Finland and Spain partially offset by lower orders in Sweden, France, Switzerland and Italy. In Asia, Middle East and Africa, orders increased 4 percent (10 percent in local currencies) driven by growth in India and China, with the latter impacted by a weakened Chinese currency. In the Americas, orders increased 5 percent (4 percent in local currencies) driven by increased orders in the U.S. and Canada. Order backlog Order backlog in 2023 increased 13 percent (9 percent in local currencies) compared to 2022 reaching $5.3 billion. Order backlog increase was driven by large orders in the long-cycle business. In the short-cycle business, supply chain constraints eased from the prior year and resulted in a reduction of the high backlog built up in 2022. Revenues In 2023, revenues increased 16 percent (17 percent in local currencies) compared to 2022. Strong revenue growth was delivered across all divisions, both in the short- and long-cycle businesses. The revenue growth was supported by strong demand and execution of the order backlog, as well as a positive full-year impact from successful price increases in the prior year. The geographic distribution of revenues for our Motion Business area was as follows: ($ in millions) 2023 2022 2021 Europe 2,704 2,271 2,258 The Americas 2,650 2,208 2,396 of which: United States 2,176 1,823 1,974 Asia, Middle East and Africa 2,460 2,266 2,271 of which: China 1,256 1,245 1,256 Total 7,814 6,745 6,925 In 2023, revenues in Europe increased 19 percent (16 percent in local currencies) compared to 2022. The revenue increase was driven by Italy, Germany, Sweden, Turkiye and Spain while revenues declined in Switzerland. In Asia, Middle East and Africa, revenues increased by 9 percent (14 percent in local currencies) with solid revenue growth in India, Australia and China with the latter partially impacted by a weakened Chinese currency. In the Americas, revenues increased 20 percent (20 percent in local currencies) with strong growth in the U.S., Canada and Mexico. 40 FINANCIAL REPORT 2023 Income from operations In 2023, income from operations increased 27 percent. The increase was driven by higher revenues reflecting a strong demand, solid order backlog execution and benefits from a strong price execution which more than offset cost inflation related to labor and materials. Profitability was also supported by continued cost discipline and a positive divisional mix. All divisions apart from the Traction and IEC LV Motors Divisions reported strong profitability improvements in 2023. Changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, positively impacted income from operations by approximately 1 percent. Operational EBITA The reconciliation of Income from operations to Operational EBITA for the Motion Business area was as follows: ($ in millions) 2023 2022 2021 Income from operations 1,390 1,092 3,276 Acquisition-related amortization 35 31 43 Restructuring, related and implementation costs 46 16 22 Gains and losses from sale of businesses — 8 (2,196) Acquisition- and divestment-related expenses and integration costs 17 15 26 Certain other non-operational items 6 — 1 FX/commodity timing differences in income from operations (19) 1 11 Operational EBITA 1,475 1,163 1,183 In 2023, Operational EBITA increased 27 percent (27 percent excluding the impact from changes in foreign currency exchange rates) compared to 2022, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above. Process Automation Business area The financial results of our Process Automation Business area were as follows: % Change ($ in millions) 2023 2022 2021 2023 2022 Orders 7,535 6,825 6,779 10% 1% Order backlog at December 31, 7,519 6,229 6,079 21% 2% Revenues 6,270 6,044 6,259 4% (3)% Income from operations 947 663 713 43% (7)% Operational EBITA 909 848 801 7% 6% FINANCIAL REPORT 2023 41 Orders In 2023, orders increased 10 percent (12 percent in local currencies) compared to 2022. Order growth was negatively impacted by approximately 12 percent due to the spin-off of the Turbocharging Division in October 2022. Orders grew in all divisions excluding the Measurement & Analytics Division and was strong in long-cycle projects, reflecting a significant increase in large orders. Strong demand was seen for the product, systems and service businesses and supported by most customer segments. Demand was particularly strong in sectors such as marine and ports, and oil and gas, with additional positive developments in the areas of mining and metals. Customer activities increased in the power generation segments, and were flat in chemicals and refining, whereas demand in pulp and paper was lower. Customer interest continued to be high in the hydrogen segment, which remains a growing part of the business. The geographic distribution of orders for our Process Automation Business area was as follows: ($ in millions) 2023 2022 2021 Europe 2,662 2,361 2,614 The Americas 2,441 1,994 1,645 of which: United States 1,506 1,201 1,047 Asia, Middle East and Africa 2,432 2,470 2,520 of which: China 729 748 821 Total 7,535 6,825 6,779 Orders in Europe increased 13 percent (14 percent in local currencies). In local currencies, orders increased in Norway, Italy and Germany, however the increase in Germany included the impact of an order reversal of approximately $170 million recorded in 2022. Orders in Asia, Middle East and Africa decreased 2 percent (increased 2 percent in local currencies). Higher orders in Saudi Arabia were more than offset by lower order volumes in Japan, Singapore and South Africa. In the Americas, orders increased 22 percent (21 percent in local currencies) supported by strong demand in the U.S. and Canada, with the former impacted by two large orders with multi-year fulfillment periods for $285 million and $150 million, respectively, in the Marine & Ports Division. This is partially offset by declined demand in Argentina which received several large order bookings in 2022. Order backlog In 2023, Order backlog increased 21 percent (19 percent in local currencies) compared to 2022. Order backlog increased in all divisions except the Measurement & Analytics Division due to strong order intake during 2023. The increase in Order backlog also includes the impact of the two large orders with multi-year fulfillment periods in the Marine & Ports Division. Revenues In 2023, revenues increased 4 percent (increased 5 percent in local currencies) in 2023. Revenue growth was negatively impacted by approximately 11 percent due to the spin-off of the Turbocharging Division in October 2022. Revenues increased in all divisions, reflecting strong execution of the order backlog in the long-cycle businesses and strong underlying demand in the current year. The geographic distribution of revenues for our Process Automation Business area was as follows: ($ in millions) 2023 2022 2021 Europe 2,311 2,266 2,439 The Americas 1,741 1,569 1,439 of which: United States 1,077 943 836 Asia, Middle East and Africa 2,218 2,209 2,381 of which: China 708 668 742 Total 6,270 6,044 6,259 Revenues in 2023 were 11 percent higher (10 percent in local currencies) in the Americas, flat (5 percent higher in local currencies) in Asia, Middle East and Africa and 2 percent higher (2 percent in local currencies) in Europe compared to 2022. The spin-off of the Turbocharging Division in October 2022 had a negative impact on the growth rate in 2023 of 10 percent in the Americas, 12 percent in Asia, Middle East and Africa, and 12 percent in Europe. In the Americas, revenue growth was driven by the U.S. and Argentina. In Asia, Middle East and Africa, revenues were higher in India and Saudi Arabia but declined in South Korea and the United Arab Emirates. Growth in Europe was reported in key markets including Norway, Sweden and Poland. 42 FINANCIAL REPORT 2023 Income from operations In 2023, income from operations increased 43 percent compared to 2022, driven by strong business performance in all divisions, partly offset by the impact of the spin-off of the Turbocharging Division. All divisions reported higher income from operations. Growth was driven by higher revenue volumes, continued operational improvements in project execution and a favorable business mix. The impact of inflation on input costs was more than offset by the impact of successful pricing actions taken in 2022, especially in the short-cycle business. The increase in income from operations is also impacted by gains from sales of businesses of $26 million while 2022 included significant costs in connection with the spin-off of the Turbocharging Division. Changes in foreign currencies, including the effect from changes in the FX/commodity timing differences summarized in the table below, positively impacted income from operations by approximately 2 percent. Operational EBITA The reconciliation of Income from operations to Operational EBITA for the Process Automation Business area was as follows: ($ in millions) 2023 2022 2021 Income from operations 947 663 713 Acquisition-related amortization 5 4 5 Restructuring, related and implementation costs 3 29 48 Gains and losses from sale of businesses (26) — (13) Acquisition- and divestment-related expenses and integration costs (7) 134 35 Certain other non-operational items — — 1 FX/commodity timing differences in income from operations (13) 18 12 Operational EBITA 909 848 801 In 2023, Operational EBITA increased 7 percent (8 percent excluding the impact from changes in foreign currency exchange rates) compared to 2022, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above. Robotics & Discrete Automation Business area The financial results of our Robotics & Discrete Automation Business area were as follows: % Change ($ in millions) 2023 2022 2021 2023 2022 Orders 3,066 4,116 3,844 (26)% 7% Order backlog at December 31, 2,141 2,679 1,919 (20)% 40% Revenues 3,640 3,181 3,297 14% (4)% Income from operations 446 247 269 81% (8)% Operational EBITA 536 340 355 58% (4)% FINANCIAL REPORT 2023 43 Orders In 2023, orders decreased 26 percent (25 percent in local currencies) as customers normalized order patterns and the market in China softened. In the Machine Automation Division, the shortening of delivery lead times and easing of supply chain constraints led to customers normalizing order patterns, as the previous year saw customers placing orders early in an effort to secure deliveries. In the Robotics Division, lower orders were driven by the weakness in the underlying market in China with additional pressure from local inventory reductions among channel partners, apart from the automotive segment. The geographic distribution of orders for our Robotics & Discrete Automation Business area was as follows: ($ in millions) 2023 2022 2021 Europe 1,481 2,043 1,978 The Americas 544 609 530 of which: United States 335 404 371 Asia, Middle East and Africa 1,041 1,464 1,336 of which: China 752 1,151 976 Total 3,066 4,116 3,844 In 2023, orders decreased in all regions. Orders in Europe decreased 28 percent (28 percent in local currencies) driven by decreased demand, mainly in Germany, Italy, France and Austria. Orders in the Americas decreased 11 percent (12 percent in local currencies) compared to 2022, driven by the normalization of orders in the U.S. due to shortened delivery lead times. Orders in Asia, Middle East and Africa decreased 29 percent (25 percent in local currencies) with lower demand in China, primarily in the Robotics Division. Order backlog In 2023, order backlog decreased 20 percent (20 percent in local currencies) compared to 2022. Order backlog decreased in both divisions due primarily to lower order intake, along with improved order backlog execution. Revenues In 2023, revenues increased 14 percent (14 percent in local currencies) compared to 2022. Revenues increased in both divisions due to improved order backlog execution, higher volumes from book-and- bill business and the realization of the impacts of successful price increases. Service revenues also increased in 2023, driven by strong demand from the automotive segment. The higher revenues in 2023 also reflects the impacts of the COVID-19 shutdown of the robotics factory in China during April 2022. The geographic distribution of revenues for our Robotics & Discrete Automation Business area was as follows: ($ in millions) 2023 2022 2021 Europe 1,942 1,498 1,582 The Americas 577 525 441 of which: United States 361 374 309 Asia, Middle East and Africa 1,121 1,158 1,274 of which: China 805 899 950 Total 3,640 3,181 3,297 Revenues from Asia, Middle East and Africa decreased 3 percent (increased 1 percent in local currencies) compared to 2022 due to improved order backlog execution. Revenues in Europe increased 30 percent (27 percent in local currencies) with strong deliveries to Germany, Italy and France. In the Americas, revenues increased 10 percent (8 percent in local currencies) due to improved order backlog execution in Mexico and Canada. 44 FINANCIAL REPORT 2023 Income from operations In 2023, the Business area recorded income from operations of $446 million compared to $247 million in 2022, with both divisions contributing to the higher income level. The operational performance in 2023 reflected improved sales volumes, price increases, a favorable change in the revenue mix, and the benefit of cost reduction measures put in place in the second half of 2022. These positive drivers were partially offset by inflationary cost pressures in 2023 as well as some under absorption of fixed costs in the Robotics Division as demand softened towards the second half of the year. Changes in foreign currencies, including the impacts from FX/commodity timing differences summarized in the table below, negatively impacted income from operations by approximately 1 percent. Operational EBITA The reconciliation of Income (loss) from operations to Operational EBITA for the Robotics & Discrete Automation Business area was as follows: ($ in millions) 2023 2022 2021 Income from operations 446 247 269 Acquisition-related amortization 79 78 83 Restructuring, related and implementation costs 6 11 7 Acquisition- and divestment-related expenses and integration costs 14 6 1 Certain other non-operational items (10) (8) — FX/commodity timing differences in income from operations 1 6 (5) Operational EBITA 536 340 355 In 2023, Operational EBITA increased 58 percent (increased 60 percent excluding the impact from changes in foreign currency exchange rates) compared to 2022, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above. Corporate and Other Net loss from operations for Corporate and Other was as follows: ($ in millions) 2023 2022 2021 Corporate headquarters and stewardship (557) (430) (399) Other corporate costs (18) (25) (29) Loss from equity-accounted companies (6) (101) (102) Fair value adjustment on equity securities (2) (4) 94 Regulatory penalty in connection with Kusile project — (313) — Net gain (loss) from sale of businesses (1) — 43 (3) Corporate brand income from Hitachi Energy 39 57 89 Corporate real estate 103 66 41 E-mobility Division (234) 19 14 Divested businesses and other non-core activities (37) (117) (72) Total Corporate and Other (712) (805) (367) (1) 2022 includes gain on sale of the remaining 19.9 percent investment in Hitachi Energy Ltd. In 2023, the net loss from operations within Corporate and Other decreased by $93 million to $712 million compared to 2022. This decrease was primarily driven by the impact of certain charges incurred in 2022 including the regulatory penalties in connection with the Kusile project and the loss from equity-accounted companies recorded for our investment in Hitachi Energy, which was sold in December 2022, partially offset by the net loss from operations in the E-mobility Division in 2023. Corporate In 2023, Corporate headquarters and stewardship costs increased by $127 million, mainly due to higher external consulting costs for system implementations and related process design, as well as higher costs in 2023 for employee short-term incentive compensation. Corporate brand income results from granting the use of the ABB Brand to Hitachi Energy, the fair value of which was initially determined on the date of the divestment of the former Power Grids business in 2020. A portion of the proceeds received for the sale was allocated to the fair value of the granting of the use of the brand and is being amortized over the expected period of benefit received by Hitachi Energy. FINANCIAL REPORT 2023 45 Corporate real estate primarily includes income and expenses from property rentals and gains from the sale of real estate properties. In 2023, income from operations in corporate real estate included gains from the sale of real estate properties of approximately $102 million compared to $73 million in 2022. Other corporate costs consists of operational costs of Corporate Treasury and other minor items. Other - E-mobility Commencing in 2023, the E-mobility Division became an independent Division and separate operating segment within ABB. Previously, the Division was managed in the Electrification Business area. In connection with this change, the results of the Division for all periods are reported within Corporate and Other as the Division does not meet any of the size thresholds in any period to be considered a reportable segment. In 2023, the E-mobility Division reported a net loss from operations of $234 million compared to income from operations of $19 million in 2022. The loss in 2023 was impacted by combined charges in connection with excess and obsolete components and unfavorable inventory purchase commitments of $70 million, restructuring, related and implementation costs of $27 million and higher costs for system implementations and related process design. The amount in 2023 also reflects higher personnel costs as the Division continues its growth strategy as the revenues within the Division grew 33 percent. The change compared to 2022 also reflects $54 million of gains recorded in 2022 for net fair value gains on investments. The E-mobility Division experienced revenue growth of 89 percent from 2021 to 2022. The income from operations in 2022 included the fair value gains as described above, while in 2021 it included $17 million of fair value gains. The Division also experienced increases in administrative costs in 2022 as it expanded its cost base in anticipation of significant revenue growth. Other - Divested businesses and other non-core activities The results of operations for certain divested businesses and other non ‑ core activities are presented in Corporate and Other. Divested businesses include the high-voltage cables business, steel structures business and the oil & gas EPC business. Other continuing non ‑ core activities include the execution and wind ‑ down of certain legacy EPC and other contracts. In 2023 and 2022, the amounts represent charges and losses relating to divested businesses and the winding down of the remaining EPC projects. We recorded losses of $37 million in 2023, down significantly from 2022, in which we recorded a restructuring expense of $195 million in connection with the exit of the full train retrofit business primarily for contract settlement costs, partially offset by the reversal of a provision of $61 million that we had previously recorded related to one of our divested businesses based on a settlement proposal issued by the ruling court. At December 31, 2023, our remaining non ‑ core activities primarily include the completion of the remaining EPC contracts for substations and oil & gas. — Liquidity and capital resources Principal sources of funding We meet our liquidity needs principally using cash from operations, proceeds from the issuance of debt instruments (bonds and commercial paper), and short ‑ term bank borrowings. In 2023, we also received funds from the sale of our Power Conversion Division. 46 FINANCIAL REPORT 2023 Our net debt is shown in the table below: December 31, ($ in millions) 2023 2022 Short-term debt and current maturities of long-term debt 2,607 2,535 Long-term debt 5,221 5,143 Cash and equivalents (3,891) (4,156) Restricted cash - current (18) (18) Marketable securities and short-term investments (1,928) (725) Net debt (defined as the sum of the above lines) 1,991 2,779 During 2023, although we continued to return high amounts of cash to shareholders in the form of dividends and purchases of treasury stock, we significantly increased cash from operating activities, resulting in a decrease in net debt, as presented in the table above. During 2023, our net debt decreased $788 million to a net debt position of $1,991 million at December 31, 2023. The effect of exchange rate movements increased net debt by approximately $433 million. In 2023, we received net proceeds of $553 million for the sales of businesses. We generated cash flows from operating activities during 2023 of $4,290 million and sold treasury stock in relation to our employee share plans for $154 million. We also issued shares in our subsidiary ABB E-Mobility to third parties in private placements for $328 million. These items were mostly offset by amounts for purchases of treasury shares of $1,258 million, including $909 million relating to the announced buybacks of our shares, as well as $1,713 million for the payment of the dividend to our shareholders. We made net purchases of property, plant and equipment and intangible assets of $623 million and made payments of dividends to noncontrolling shareholders totaling $93 million. See “Financial position”, “Investing activities” and “Financing activities” for further details. Our Corporate Treasury is responsible for providing a range of treasury management services to our Group companies, including investing cash in excess of current business requirements. At December 31, 2023 and 2022, the proportion of our aggregate “Cash and equivalents” (including restricted cash) and “Marketable securities and short ‑ term investments” managed by Corporate Treasury amounted to approximately 59 percent and 51 percent, respectively. Our investment strategy for cash (in excess of current business requirements) has generally been to invest in short-term time deposits with maturities of less than 3 months, supplemented at times by investments in money market funds and in some cases, government securities. We actively monitor credit risk in our investment and derivative portfolios. Credit risk exposures are controlled in accordance with policies approved by our senior management to identify, measure, monitor and control credit risks. We have minimum rating requirements for our counterparts and closely monitor developments in the credit markets making appropriate changes to our investment policy as deemed necessary. In addition to minimum rating criteria, we have strict investment parameters and specific approved instruments as well as restrictions on the types of investments we make. These parameters are closely monitored on an ongoing basis and amended as we consider necessary. Our cash is held in various currencies around the world. Approximately 51 percent of our cash and equivalents held at December 31, 2023, was in U.S. dollars, while the most significant foreign currencies in which cash and equivalents was held was euros (15 percent) and Chinese Renminbi (5 percent). We believe the ongoing cash flows generated from our business, supplemented, when necessary, through access to the capital markets (including short ‑ term commercial paper) and our credit facilities are sufficient to support business operations, capital expenditures, business acquisitions, the payment of dividends to shareholders and contributions to pension plans. Consequently, we believe that our ability to obtain funding from these sources will continue to provide the cash flows necessary to satisfy our working capital and capital expenditure requirements, as well as meet our debt repayments and other financial commitments for the next 12 months. See “Contractual obligations and commitments”. Due to the nature of our operations, including the timing of annual incentive payments to employees, our cash flow from operations generally tends to be weaker in the first half of the year than in the second half of the year. FINANCIAL REPORT 2023 47 Debt and interest rates Total outstanding debt was as follows: December 31, ($ in millions) 2023 2022 Short-term debt and current maturities of long-term debt 2,607 2,535 Long-term debt: Bonds 5,051 4,944 Other long-term debt 170 199 Total debt 7,828 7,678 In 2023, while the reduction of commercial paper outstanding and the repayment of long-term debt due in 2023 offset the reclassifications to short-term of long-term debt due in 2024, movements in foreign exchange rates resulted in a small increase of short-term debt of 3 percent. At December 31, 2023, Long-term debt was $78 million higher compared to the end of 2022. We issued five new instruments in 2023 which remain classified as Long-term debt at December 31, 2023 (CHF 325 million 1.965% Bonds due 2026, EUR 500 million 3.25% Instruments due 2027, CHF 150 million 1.9775% Bonds due 2028, EUR 750 million 3.375% Instruments due 2031, and CHF 275 million 2.1125% Bonds due 2033). This was more than offset by the reclassification to current of the EUR 700 million 0.625% Instruments due 2024, EUR 500 million floating rate Instruments due 2024, EUR 750 million 0.75% Instruments due 2024, and CHF 150 million 0.3% Bonds due 2024. Decreases in interest rates also resulted in an increase in our long-term debt of approximately $97 million due to the application of fair value hedge accounting on certain outstanding instruments. Our debt has been obtained in a range of currencies and maturities and with various interest rate terms. For certain of our debt obligations, we use derivatives to manage the fixed interest rate exposure. For example, we use interest rate swaps and cross-currency interest rate swaps to effectively convert fixed rate debt into floating rate liabilities. After considering the effects of interest rate swaps and cross-currency interest rate swaps, at December 31, 2023, the effective average interest rate on our floating rate long-term debt (including current maturities) of $2,907 million and our fixed rate long-term debt (including current maturities) of $4,834 million was 4.8 percent and 2.7 percent, respectively. This compares with an effective rate of 2.8 percent for floating rate long-term debt of $3,459 million and 2.2 percent for fixed rate long-term debt of $2,771 million at December 31, 2022. For a discussion of our use of derivatives to modify the interest characteristics of certain of our individual bond issuances, see “Note 12 - Debt” to our Consolidated Financial Statements. Credit facility In December 2019, we replaced our previous multicurrency revolving credit facility with a new $2 billion multicurrency revolving credit facility, maturing in 2024. In 2021 we exercised our option to extend the maturity of this facility to 2026. No amount was drawn under the facility at December 31, 2023 and 2022. The facility is available for general corporate purposes and contains cross-default clauses whereby an event of default would occur if we were to default on indebtedness, as defined in the facility, at or above a specified threshold. In February 2023, we amended and restated our facility for the purpose of addressing the discontinuation of LIBOR. Under the amended and restated credit facility, the margin is unchanged, but advances in USD are referenced to CME Term SOFR, whilst advances in CHF and GBP are referenced to overnight SARON and SONIA, respectively, and subject to applicable credit adjustment spreads. The credit facility does not contain financial covenants that would restrict our ability to pay dividends or raise additional funds in the capital markets. For further details of the credit facility, see “Note 12 - Debt” to our Consolidated Financial Statements. Commercial paper At December 31, 2023, we had two commercial paper programs in place: • a $2 billion commercial paper program for the private placement of U.S. dollar denominated commercial paper in the United States, and • a $2 billion Euro-commercial paper program for the issuance of commercial paper in a variety of currencies. 48 FINANCIAL REPORT 2023 At December 31, 2023 and 2022, there were no amounts outstanding under the $2 billion program in the United States. At December 31, 2023, there was no amount outstanding under the $2 billion Euro-commercial paper program while at December 31, 2022, there was $1,383 million outstanding. European program for the issuance of debt The European program for the issuance of debt allows the issuance of up to the equivalent of $8 billion in certain debt instruments. The terms of the program do not obligate any third party to extend credit to us and the terms and possibility of issuing any debt under the program are determined with respect to, and as of the date of issuance of, each debt instrument. At December 31, 2023, six bonds (principal amount of EUR 700 million due in 2024, principal amount of EUR 500 million due in 2024, principal amount of EUR 750 million due in 2024, principal amount of EUR 500 million due in 2027, principal amount of EUR 800 million due in 2030, and principal amount of EUR 750 million due in 2031) having a combined carrying amount of $4,259 million were outstanding under the program. The carrying amount of the five bonds outstanding under the program at December 31, 2022, was $3,444 million. Credit ratings Credit ratings are assessments by the rating agencies of the credit risk associated with ABB and are based on information provided by us or other sources that the rating agencies consider reliable. Higher ratings generally result in lower borrowing costs and increased access to capital markets. Our ratings are of “investment grade” which is defined as Baa3 (or above) from Moody’s and BBB− (or above) from Standard & Poor’s. At December 31, 2023 and 2022, our long-term debt was rated A3 by Moody’s and with a Stable outlook. At December 31, 2023 and 2022, our long-term debt was rated A- by Standard & Poor’s and with a Stable outlook. Limitations on transfers of funds Currency and other local regulatory limitations related to the transfer of funds exist in a number of countries where we operate or otherwise have bank deposits, including: Argentina, Egypt, India, Indonesia, Malaysia, the Russian Federation, South Africa, South Korea, Thailand, Turkiye and Vietnam. Funds, other than regular dividends, fees or loan repayments, cannot be readily transferred offshore from these countries and are therefore deposited and used for working capital needs in those countries. In addition, there are certain countries where, for tax reasons, it is not considered optimal to transfer the cash offshore. Consequently, these funds are not available within Corporate Treasury to meet short-term cash obligations outside the relevant country. The above-described funds are reported as cash in our Consolidated Balance Sheets, but we do not consider these funds immediately available for the repayment of debt outside the respective countries where the cash is situated, including those described above. At December 31, 2023 and 2022, the balance of “Cash and equivalents” and “Marketable securities and other short-term investments” under such limitations (either regulatory or sub-optimal from a tax perspective) totaled $1,479 million and $1,381 million, respectively. During 2023, we continued to direct our subsidiaries in countries with restrictions to place such cash with our core banks or investment grade banks, where possible, in order to minimize credit risk on such cash positions. We continue to closely monitor the situation to ensure bank counterparty risks are minimized. FINANCIAL REPORT 2023 49 — Financial position Balance sheets December 31, ($ in millions) 2023 2022 % Change Current assets Cash and equivalents 3,891 4,156 (6)% Restricted cash 18 18 0% Marketable securities and short-term investments 1,928 725 166% Receivables, net 7,446 6,858 9% Contract assets 1,090 954 14% Inventories, net 6,149 6,028 2% Prepaid expenses 235 230 2% Other current assets 520 601 (13)% Total current assets 21,277 19,570 9% For a discussion on Cash and equivalents, see sections “Liquidity and Capital Resources—Principal sources of funding” and “Cash flows” for further details. Marketable securities and short-term investments increased in 2023. The change primarily reflects higher amounts placed in bank time deposits and an increase in amounts placed in money market funds classified as equity securities (see “Note 5 - Cash and equivalents, marketable securities and short-term investments” to our Consolidated Financial Statements). Receivables, net, increased 9 percent (7 percent in local currencies) reflecting the higher revenues in all Business areas primarily a result of higher business in 2023 compared to 2022. Contract assets increased 14 percent (12 percent in local currencies) due to the higher level of business activity in all Business areas as well as timing of invoices issued. The increase is primarily driven by the Process Automation Business area. Inventories, net, increased 2 percent primarily due to movements in foreign currencies. In local currency, Inventories, net, decreased 1 percent, reflecting a net decrease from acquisitions and divestments of approximately 1 percent. Inventory was stable on increased business volumes as the previous year included some stockpiling of certain key components due to supply chain challenges. December 31, ($ in millions) 2023 2022 % Change Current liabilities Accounts payable, trade 4,847 4,904 (1)% Contract liabilities 2,844 2,216 28% Short-term debt and current maturities of long-term debt 2,607 2,535 3% Current operating leases 249 220 13% Provisions for warranties 1,210 1,028 18% Other provisions 1,201 1,171 3% Other current liabilities 5,046 4,455 13% Total current liabilities 18,004 16,529 9% Accounts payable, trade, decreased 1 percent (3 percent in local currencies) reflecting some decrease in average days payable in 2023 compared to 2022. Contract liabilities increased 28 percent (27 percent in local currency) primarily due to higher levels of progress billings and advances at the end of 2023 compared to 2022. The increase reflects higher levels in all Business areas except for Robotics & Discrete Automation. 50 FINANCIAL REPORT 2023 The increase in short-term debt and current maturities of long-term debt in 2023 reflects the reclassification to current of the EUR 700 million 0.625% Instruments due 2024, EUR 500 million Floating Rate Instruments due 2024, EUR 750 million 0.75% Instruments due 2024 and the CHF 280 million 0.3% Bonds due 2024, offset by the repayment at maturity of the EUR 700 million 0.625% Instruments due 2023 and the CHF 275 million 0% Bonds due 2023 as well as by the full repayment of commercial paper borrowings under the Euro-commercial program in 2023. Movements in foreign currency rates increased short-term debt by 6 percent. Current operating leases includes the portion of the operating lease liabilities that are due to be paid in the next 12 months. For a summary of operating lease liabilities, see “Note 14 - Leases” to our Consolidated Financial Statements. Provisions for warranties increased 18 percent (15 percent in local currencies). The increase reflects the higher provisioning in 2023 on increased revenues as well as increases in expected costs for certain newer product lines. For details on the change in the Provisions for warranties, see “Note 15 - Commitments and contingencies” to our Consolidated Financial Statements. December 31, ($ in millions) 2023 2022 % Change Non-current assets Property, plant and equipment, net 4,142 3,911 6% Operating lease right-of-use assets 893 841 6% Investments in equity-accounted companies 187 130 44% Prepaid pension and other employee benefits 780 916 (15)% Intangible assets, net 1,223 1,406 (13)% Goodwill 10,561 10,511 0% Deferred taxes 1,381 1,396 (1)% Other non-current assets 496 467 6% Total non-current assets 19,663 19,578 0% In 2023, Property, plant and equipment, net, increased 6 percent (3 percent in local currencies) as capital expenditures exceeded the annual depreciation expense. In 2023, Goodwill remained flat (flat in local currencies). While currency movements increased goodwill by 1 percent, the net impact of acquisitions and divestments mostly offset this movement. Intangible assets, net, decreased 13 percent (15 percent in local currencies). The decrease primarily represents the amortization recorded during the year. While the divestment of the Power Conversion division decreased Intangible assets, net, by 5 percent this was mostly offset by other acquisitions in 2023. For additional information on goodwill and intangible assets see “Note 11 - Goodwill and intangible assets” to our Consolidated Financial Statements. Prepaid pension and other employee benefits decreased 15 percent (22 percent in local currencies). For additional information on Pension and employee benefits see “Note 17 - Employee benefits” to our Consolidated Financial Statements. In 2023, Deferred taxes decreased 1 percent (4 percent in local currencies). For details on deferred tax assets see “Note 16 - Income taxes” to our Consolidated Financial Statements. December 31, ($ in millions) 2023 2022 % Change Non-current liabilities Long-term debt 5,221 5,143 2% Non-current operating leases 666 651 2% Pension and other employee benefits 686 719 (5)% Deferred taxes 669 729 (8)% Other non-current liabilities 1,548 2,105 (26)% Total non-current liabilities 8,790 9,347 (6)% FINANCIAL REPORT 2023 51 Long-term debt increased 2 percent (decreased 3 percent in local currencies). The balance at December 31, 2023, includes five instruments newly issued in 2023: (i) CHF 325 million 1.965% Bonds due 2026, (ii) EUR 500 million 3.25% Instruments due 2027, (iii) CHF 150 million 1.9775% Bonds due 2028, (iv) EUR 750 million 3.375% Instruments due 2031 and (v) CHF 275 million 2.1125% Bonds due 2033. The increase was more than offset by the reclassification to current of the EUR 700 million 0.625% Instruments due 2024, EUR 500 million Floating Rate Instruments due 2024, EUR 750 million 0.75% Instruments due 2024 and CHF 280 million 0.3% Bonds due 2024. For additional information on Long-term debt, see “Liquidity and Capital Resources—Debt and interest rates” as well as “Note 12 - Debt” to our Consolidated Financial Statements. Non-current operating leases includes the portion of the operating lease liabilities that are due to be paid in more than 12 months. Pension and employee benefits decreased 5 percent (6 percent in local currencies). For additional information on Pension and employee benefits see “Note 17 - Employee benefits” to our Consolidated Financial Statements. For a breakdown of Other non ‑ current liabilities, see “Note 13 - Other provisions, other current liabilities and other non-current liabilities” to our Consolidated Financial Statements. Cash flows The Consolidated Statements of Cash Flows are shown on a continuing operations basis, with the effects of discontinued operations shown in aggregate for each major cash flow activity and also include the impact from changes in restricted cash. The Consolidated Statements of Cash Flows can be summarized as follows: ($ in millions) 2023 2022 2021 Net cash provided by operating activities 4,290 1,287 3,330 Net cash provided by (used in) investing activities (1,615) 981 2,307 Net cash used in financing activities (2,897) (2,394) (4,968) Effects of exchange rate changes on cash and equivalents (43) (189) (81) Net change in cash and equivalents and restricted cash (265) (315) 588 Operating activities ($ in millions) 2023 2022 2021 Net income 3,824 2,594 4,650 Loss from discontinued operations, net of tax 24 43 80 Depreciation and amortization 780 814 893 Total adjustments to reconcile net income to net cash provided by operating activities (excluding depreciation and amortization) (200) (434) (2,593) Total changes in operating assets and liabilities (127) (1,683) 308 Net cash provided by operating activities — continuing operations 4,301 1,334 3,338 Net cash used in operating activities — discontinued operations (11) (47) (8) Cash flows from operating activities in continuing operations in 2023 provided net cash of $4,301 million, more than three times the amount reported in 2022. In 2023, we had significantly higher cash effective net income (i.e. net income from continuing operations adjusted for depreciation, amortization and other non-cash items) reflecting the increase in business volumes and operating margins. Lower cash flows in 2022 were also partially due to costs relating to business restructurings as well as costs for the spin-off of the Turbocharging Division and other business portfolio transactions. In 2022, the amount also includes payments of approximately $315 million in relation to regulatory penalties for the Kusile project. Our cash flows in 2023 improved on stronger working capital management especially in the area of inventories which contributed more than $1 billion of improvements in cash flows with some additional modest improvements in the timing of collections of cash from customers. In 2023, we were able to keep our working capital steady even while realizing increasing business volumes and some inflation- driven cost and price changes. This compares to the increase in working capital in 2022 which was driven by the significant buildup of inventories. In 2023 and 2022, there were no significant cash flows from operating activities of discontinued operations. 52 FINANCIAL REPORT 2023 Investing activities ($ in millions) 2023 2022 2021 Purchases of investments (1,957) (321) (1,528) Purchases of property, plant and equipment and intangible assets (770) (762) (820) Acquisition of businesses (net of cash acquired) and increases in cost- and equity-accounted companies (225) (288) (241) Proceeds from sales of investments 610 697 2,272 Proceeds from maturity of investments 149 73 81 Proceeds from sales of property, plant and equipment 147 127 93 Proceeds from sales of businesses (net of transaction costs and cash disposed) and cost- and equity-accounted companies 553 1,541 2,958 Net cash from settlement of foreign currency derivatives (109) (166) (121) Changes in loans receivable, net 3 320 (19) Other investing activities 7 (14) (4) Net cash provided by (used in) investing activities — continuing operations (1,592) 1,207 2,671 Net cash used in investing activities — discontinued operations (23) (226) (364) Net cash used in investing activities for continuing operations in 2023 was $1,592 million compared to $1,207 million provided by investing activities during 2022, a change of $2,799 million. This difference primarily represents changes in amounts invested in money market funds as well as other short-term investments as the significantly higher operating cash flows generated in 2023 resulted in higher investments made, especially at the end of the year. In 2023, net proceeds from sales of businesses was lower at $553 million, primarily representing the sale of our Power Conversion Division, while in 2022 we received net proceeds in connection with the sale of our remaining equity-method investment in Hitachi Energy of $1,552 million. In addition, during 2022, Changes in loans receivable, net, includes funds collected from a subsidiary of Accelleron in October 2022, related to a short-term intercompany loan granted in anticipation of the Turbocharging Division spin-off. The following presents purchases of property, plant and equipment and intangible assets by significant asset category: ($ in millions) 2023 2022 2021 Construction in progress 532 540 479 Purchase of machinery and equipment 176 127 150 Purchase of land and buildings 11 26 158 Purchase of intangible assets 51 69 33 Purchases of property, plant and equipment and intangible assets 770 762 820 There were no significant acquisitions in 2023 while the amount in 2022 primarily reflects the amount paid to acquire In-Charge. Cash flows used in investing activities for discontinued operations includes amounts relating to the original sale of the Power Grids business to Hitachi in 2020. Certain amounts related to the purchase price were subject to adjustment, including the final settlement for working capital balances as well as other payments which were contractually due to be transferred to Hitachi in periods after the initial sale. In 2023 and 2022, payments totaling $23 million and $227 million, respectively, were made. FINANCIAL REPORT 2023 53 Financing activities ($ in millions) 2023 2022 2021 Net changes in debt with maturities of 90 days or less (1,365) 1,366 (83) Increase in debt 2,586 3,849 1,400 Repayment of debt (1,567) (2,703) (1,538) Delivery of shares 154 394 826 Purchase of treasury stock (1,258) (3,553) (3,708) Dividends paid (1,713) (1,698) (1,726) Cash associated with the spin-off of the Turbocharging Division — (172) — Dividends paid to noncontrolling shareholders (93) (99) (98) Proceeds from issuance of subsidiary shares 328 216 — Other financing activities 31 6 (41) Net cash used in financing activities — continuing operations (2,897) (2,394) (4,968) Net cash provided by financing activities — discontinued operations — — — Our financing cash flow activities primarily include debt transactions (both from the issuance of debt securities and borrowings directly from banks), share transactions (including share transactions in consolidated subsidiaries) and payments of distributions to controlling and noncontrolling shareholders. In 2023, the net outflow for debt with maturities of 90 days or less related to net repayments of amounts outstanding under the Euro-commercial paper program and various local country borrowings. In 2023, “Increase in debt” primarily represents initial borrowings for terms longer than 90 days under the Euro-commercial paper program of $400 million and borrowings under the following five long-term debt transactions (total cashflow amount at date of borrowings of approximately $2,170 million): • CHF 325 million 1.965% Bonds due 2026 • EUR 500 million 3.25% Instruments due 2027 • CHF 150 million 1.9775% Bonds due 2028 • EUR 750 million 3.375% Instruments due 2031 • CHF 275 million 2.1125% Bonds due 2033 In 2023, “Repayment of debt” includes the repayment at maturity of the EUR 700 million 0.625% Instruments and CHF 275 million 0% Bonds and repayments of $418 million under the Euro- commercial paper program for borrowings having terms longer than 90 days. “Delivery of shares” in 2023 primarily reflects cash received from the exercise of options in connection with our Management Incentive Plan (resulting in a delivery of 6 million shares). All shares were delivered out of Treasury stock. “Proceeds from issuance of subsidiary shares” in 2023 relates to the sale of shares by ABB E-mobility Holdings Ltd through a private placement of $328 million. In 2023, “Purchase of treasury stock” reflects $909 million of cash payments to purchase 25 million of our own shares in connection with the announced share buyback programs. It also reflects $349 million paid to purchase 9 million shares on the open market during the year. 54 FINANCIAL REPORT 2023 Contractual obligations and commitments The contractual obligations presented in the table below represent our estimates of future payments under fixed contractual obligations and commitments. These amounts may differ from those reported in our Consolidated Balance Sheet at December 31, 2023. Changes in our business needs, cancellation provisions and changes in interest rates, as well as actions by third parties and other factors, may cause these estimates to change. Therefore, our actual payments in future periods may vary from those presented below. The table below summarizes certain of our cash requirements for known contractual obligations and principal and interest payments under our debt instruments and purchase obligations at December 31, 2023, and the timing thereof. For details of future operating and finance lease payments, see “Note 14 - Leases” to our Consolidated Financial Statements. At December 31, 2023 ($ in millions) Current Non-current Total Long-term debt obligations 2,507 5,237 7,744 Interest payments related to long-term debt obligations 131 910 1,041 Purchase obligations 3,150 1,297 4,447 Total 5,788 7,444 13,232 In the table above, the “Long ‑ term debt obligations” reflect the cash amounts to be repaid upon maturity of those debt obligations. The cash obligations above will differ from Long ‑ term debt due to the impacts of fair value hedge accounting adjustments and premiums or discounts on certain debt. We have determined the interest payments related to long ‑ term debt obligations by reference to the payments due under the terms of our debt obligations at the time such obligations were incurred. However, we use interest rate swaps to modify the interest characteristics of certain of our debt obligations. The net effect of these swaps may increase or decrease the actual amount of our cash interest payment obligations, which may differ from those stated in the above table. For further details on our debt obligations and the related hedges, see “Note 12 - Debt” to our Consolidated Financial Statements. Purchase obligations are defined as agreements to purchase goods and services that are enforceable and legally binding, that specify all significant terms, including the quantities to be purchased, price provisions and the approximate timing of the transactions. Purchase obligations includes procurement contracts for raw materials, sub-contracted work, supplies and services. Purchase obligations include amounts recorded as well as amounts that are not recorded in the Consolidated Balance Sheets. Off ‑ balance sheet arrangements Commercial commitments We disclose the maximum potential exposure of certain guarantees, as well as possible recourse provisions that may allow us to recover from third parties amounts paid out under such guarantees. The maximum potential exposure does not allow any discounting of our assessment of actual exposure under the guarantees. The information below reflects our maximum potential exposure under the guarantees, which is higher than our assessment of the expected exposure. Guarantees The following table provides quantitative data regarding our third ‑ party guarantees. The maximum potential payments represent a worst ‑ case scenario, and do not reflect our expected outcomes. Maximum potential payments December 31, ($ in millions) 2023 2022 Performance guarantees 3,451 4,300 Financial guarantees 94 96 Total 3,545 4,396 The carrying amount of liabilities recorded in the Consolidated Balance Sheets reflects our best estimate of future payments, which we may incur as part of fulfilling our guarantee obligations. In respect of the above guarantees, the carrying amounts of liabilities at December 31, 2023 and 2022, were not significant. FINANCIAL REPORT 2023 55 In addition, in the normal course of bidding for and executing certain projects, we have entered into standby letters of credit, bid/performance bonds and surety bonds (collectively “performance bonds”) with various financial institutions. Customers can draw on such performance bonds in the event that we do not fulfill our contractual obligations. We would then have an obligation to reimburse the financial institution for amounts paid under the performance bonds. At December 31, 2023 and 2022, the total outstanding performance bonds aggregated to $3.1 billion and $2.9 billion, respectively. There have been no significant amounts reimbursed to financial institutions under these types of arrangements in 2023 and 2022. For additional descriptions of our performance, financial and indemnification guarantees see “Note 15 - Commitments and contingencies” to our Consolidated Financial Statements. 56 FINANCIAL REPORT 2023 02 Consolidated Financial Statements CONSOLIDATED FINANCIAL STATEMENTS OF ABB GROUP 57 Report of management on internal controls over financial reporting 58 Reports of the Auditors 64 Financial Statements and Notes FINANCIAL REPORT 2023 57 — Report of management on internal control over financial reporting The Board of Directors and Management of ABB Ltd and its consolidated subsidiaries (“ABB”) are responsible for establishing and maintaining adequate internal control over financial reporting. ABB’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of the published Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with ABB’s policies and procedures may deteriorate. Management conducted an assessment of the effectiveness of internal control over financial reporting based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, management has concluded that ABB’s internal control over financial reporting was effective as of December 31, 2023. KPMG AG, the independent registered public accounting firm who audited the Company’s consolidated financial statements, has issued an opinion on the effectiveness of ABB’s internal control over financial reporting as of December 31, 2023, which is included on page 62 of this Annual Report. Björn Rosengren Timo Ihamuotila Chief Executive Officer Chief Financial Officer Zurich, February 22, 2024 58 Statutory Auditor’s Report To the General Meeting of ABB Ltd, Zurich Report on the Audit of the Consolidated Financial Statements Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of ABB Ltd and subsidiaries (the Group) as of December 31, 2023 and 2022, the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of cash flows, and consolidated statements of changes in stockholders’ equity for each of the years in the three-year period ended December 31, 2023, and the related notes to the consolidated financial statements (collectively, the consolidated financial statements on page 64 to124, including a summary of significant accounting policies. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles (US GAAP) and comply with Swiss law. Basis for Opinion We conducted our audit in accordance with Swiss law, Swiss Standards on Auditing (SA-CH) and the standards of the Public Company Accounting Oversight Board (United States) (PCAOB). Our responsibility is to express an opinion on these consolidated financial statements based on our audit and our responsibilities under those provisions and standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements” section of our report. We are a public accounting firm and are independent of the Group in accordance with the provisions of Swiss law and U.S. federal securities laws, together with the requirements of the Swiss audit profession, the U.S. Securities and Exchange Commission and the PCAOB, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Statutory Auditor’s Report To the General Meeting of ABB Ltd, Zurich Report on the Audit of the Consolidated Financial Statements Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of ABB Ltd and subsidiaries (the Group) as of December 31, 2023 and 2022, the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of cash flows, and consolidated statements of changes in stockholders’ equity for each of the years in the three-year period ended December 31, 2023, and the related notes to the consolidated financial statements (collectively, the consolidated financial statements on page 64 to124, including a summary of significant accounting policies. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles (US GAAP) and comply with Swiss law. Basis for Opinion We conducted our audit in accordance with Swiss law, Swiss Standards on Auditing (SA-CH) and the standards of the Public Company Accounting Oversight Board (United States) (PCAOB). Our responsibility is to express an opinion on these consolidated financial statements based on our audit and our responsibilities under those provisions and standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements” section of our report. We are a public accounting firm and are independent of the Group in accordance with the provisions of Swiss law and U.S. federal securities laws, together with the requirements of the Swiss audit profession, the U.S. Securities and Exchange Commission and the PCAOB, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 59 Revenue recognition for certain long-term fixed price contracts using the percentage-of-completion method Our response The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Group’s revenue process including controls over the development of estimates regarding the amount of future direct materials, labor and subcontract costs, and indirect costs. We assessed the Group’s historical ability to accurately estimate costs to complete by comparing historical estimates to actual results for a selection of contracts. We evaluated the estimate of remaining costs to be incurred for a selection of contracts by assessing progress to date and the nature and complexity of work to be performed through interviewing project managers and inspecting correspondence, if any, between the Group and the customer and/or subcontractors. Critical Audit Matter As discussed in Note 2 to the consolidated financial statements, revenues from the sale of customized products, including long-term fixed price contracts for integrated automation and electrification systems and solutions are generally recognized on an over time basis using the percentage-of-completion method of accounting. For the year ended December 31, 2023, the Group/Company reported $27,010 million of revenue from sales of products, a portion of which related to long- term fixed price contracts. We identified the evaluation of estimated costs to complete related to revenue recognition of certain long- term fixed price contracts using the percentage of- completion method of accounting as a critical audit matter. In particular, a high degree of subjective auditor judgment was required to evaluate the Group’s estimates regarding the amount of future direct materials, labor and subcontract costs, and indirect costs to complete the contracts. For further information on revenue recognition for long-term fixed price contracts refer to the following: Note 2 “Significant accounting policies Other Information in the ABB Annual Reporting Suite The Board of Directors is responsible for the other information. The other information comprises the information included in the ABB Annual Reporting Suite (consisting of the Integrated Report, the Financial Report, the Corporate Governance Report, and the Compensation Report), but does not include the consolidated financial statements, the stand-alone financial statements of the company, the compensation report and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Board of Directors for the Consolidated Financial Statements The Board of Directors is responsible for the preparation and fair presentation of consolidated financial statements in accordance with US GAAP and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Revenue recognition for certain long-term fixed price contracts using the percentage-of-completion method Our response The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Group’s revenue process including controls over the development of estimates regarding the amount of future direct materials, labor and subcontract costs, and indirect costs. We assessed the Group’s historical ability to accurately estimate costs to complete by comparing historical estimates to actual results for a selection of contracts. We evaluated the estimate of remaining costs to be incurred for a selection of contracts by assessing progress to date and the nature and complexity of work to be performed through interviewing project managers and inspecting correspondence, if any, between the Group and the customer and/or subcontractors. Critical Audit Matter As discussed in Note 2 to the consolidated financial statements, revenues from the sale of customized products, including long-term fixed price contracts for integrated automation and electrification systems and solutions are generally recognized on an over time basis using the percentage-of-completion method of accounting. For the year ended December 31, 2023, the Group/Company reported $27,010 million of revenue from sales of products, a portion of which related to long- term fixed price contracts. We identified the evaluation of estimated costs to complete related to revenue recognition of certain long- term fixed price contracts using the percentage of- completion method of accounting as a critical audit matter. In particular, a high degree of subjective auditor judgment was required to evaluate the Group’s estimates regarding the amount of future direct materials, labor and subcontract costs, and indirect costs to complete the contracts. For further information on revenue recognition for long-term fixed price contracts refer to the following: Note 2 “Significant accounting policies Other Information in the ABB Annual Reporting Suite The Board of Directors is responsible for the other information. The other information comprises the information included in the ABB Annual Reporting Suite (consisting of the Integrated Report, the Financial Report, the Corporate Governance Report, and the Compensation Report), but does not include the consolidated financial statements, the stand-alone financial statements of the company, the compensation report and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Board of Directors for the Consolidated Financial Statements The Board of Directors is responsible for the preparation and fair presentation of consolidated financial statements in accordance with US GAAP and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 60 KPMG In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Consolidation Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, SA-CH and PCAOB standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Swiss law, SA-CH and PCAOB standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors and the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies or material weaknesses in internal control that we identify during our audit. We also provide the Board of Directors and the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. KPMG In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Consolidation Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, SA-CH and PCAOB standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Swiss law, SA-CH and PCAOB standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors and the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies or material weaknesses in internal control that we identify during our audit. We also provide the Board of Directors and the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. 61 From the matters arising from the audit of the financial statements that were communicated or required to be communicated to the Board of Directors and the Audit Committee, we determine those matters that related to accounts or disclosures that are material to the financial statements and involved especially challenging, subjective, or complex auditor judgment in current period and are therefore critical audit matters. Report on Other Legal and Regulatory Requirement In accordance with article 728a para. 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Group’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2024, expressed an unqualified opinion on the effectiveness of the Group’s internal control over financial reporting. We have served as the Group’s auditor since 2018. KPMG AG w Mohammad Nafeie Achim Wolper Licensed Audit Expert Auditor in Charge Zurich, Switzerland February 22, 2024 © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. EXPER su'sse Certified Company From the matters arising from the audit of the financial statements that were communicated or required to be communicated to the Board of Directors and the Audit Committee, we determine those matters that related to accounts or disclosures that are material to the financial statements and involved especially challenging, subjective, or complex auditor judgment in current period and are therefore critical audit matters. Report on Other Legal and Regulatory Requirement In accordance with article 728a para. 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Group’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2024, expressed an unqualified opinion on the effectiveness of the Group’s internal control over financial reporting. We have served as the Group’s auditor since 2018. KPMG AG w Mohammad Nafeie Achim Wolper Licensed Audit Expert Auditor in Charge Zurich, Switzerland February 22, 2024 © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. EXPER su'sse Certified Company 62 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of ABB Ltd Opinion on Internal Control Over Financial Reporting We have audited ABB Ltd and subsidiaries’ (the Group) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO. We also have audited, in accordance with the Swiss law, Swiss Standards on Auditing (SA-CH) and the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated income statements, statements of comprehensive income, cash flows and changes in stockholders’ equity for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 22, 2024, expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s Board of Directors and management are responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying report of management on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of ABB Ltd Opinion on Internal Control Over Financial Reporting We have audited ABB Ltd and subsidiaries’ (the Group) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO. We also have audited, in accordance with the Swiss law, Swiss Standards on Auditing (SA-CH) and the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated income statements, statements of comprehensive income, cash flows and changes in stockholders’ equity for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 22, 2024, expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s Board of Directors and management are responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying report of management on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 63 Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. KPMG AG Mohammad Nafeie Achim Wolper Licensed Audit Expert Auditor in Charge Zurich, Switzerland February 22, 2024 © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. EXPERTsuisse Certified Company Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. KPMG AG Mohammad Nafeie Achim Wolper Licensed Audit Expert Auditor in Charge Zurich, Switzerland February 22, 2024 © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. EXPERTsuisse Certified Company 64 FINANCIAL REPORT 2023 — ABB Ltd Consolidated Income Statements Year ended December 31 ($ in millions, except per share data in $) 2023 2022 2021 Sales of products 27,010 24,471 23,745 Sales of services and other 5,225 4,975 5,200 Total revenues 32,235 29,446 28,945 Cost of sales of products (17,938) (16,804) (16,364) Cost of services and other (3,083) (2,932) (3,114) Total cost of sales (21,021) (19,736) (19,478) Gross profit 11,214 9,710 9,467 Selling, general and administrative expenses (5,543) (5,132) (5,162) Non-order related research and development expenses (1,317) (1,166) (1,219) Other income (expense), net 517 (75) 2,632 Income from operations 4,871 3,337 5,718 Interest and dividend income 165 72 51 Interest and other finance expense (275) (130) (148) Non-operational pension (cost) credit 17 115 166 Income from continuing operations before taxes 4,778 3,394 5,787 Income tax expense (930) (757) (1,057) Income from continuing operations, net of tax 3,848 2,637 4,730 Loss from discontinued operations, net of tax (24) (43) (80) Net income 3,824 2,594 4,650 Net income attributable to noncontrolling interests and redeemable noncontrolling interests (79) (119) (104) Net income attributable to ABB 3,745 2,475 4,546 Amounts attributable to ABB shareholders: Income from continuing operations, net of tax 3,769 2,517 4,625 Loss from discontinued operations, net of tax (24) (42) (79) Net income 3,745 2,475 4,546 Basic earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 2.03 1.33 2.31 Loss from discontinued operations, net of tax (0.01) (0.02) (0.04) Net income 2.02 1.30 2.27 Diluted earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 2.02 1.32 2.29 Loss from discontinued operations, net of tax (0.01) (0.02) (0.04) Net income 2.01 1.30 2.25 Weighted-average number of shares outstanding (in millions) used to compute: Basic earnings per share attributable to ABB shareholders 1,855 1,899 2,001 Diluted earnings per share attributable to ABB shareholders 1,867 1,910 2,019 Due to rounding, numbers presented may not add to the totals provided. See accompanying Notes to the Consolidated Financial Statements FINANCIAL REPORT 2023 65 — ABB Ltd Consolidated Statements of Comprehensive Income Year ended December 31 ($ in millions) 2023 2022 2021 Net income 3,824 2,594 4,650 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments: Foreign currency translation adjustments (290) (685) (521) Net loss on complete or substantially complete liquidations of foreign subsidiaries — 5 — Changes attributable to divestments 9 41 (9) Foreign currency translation adjustments (281) (639) (530) Available-for-sale securities: Net unrealized gains (losses) arising during the year 5 (23) (10) Reclassification adjustments for net (gains) losses included in net income 6 2 (5) Unrealized gains (losses) on available-for-sale securities 11 (21) (15) Pension and other postretirement plans: Prior service (costs) credits arising during the year (1) — — Net actuarial gains (losses) arising during the year (282) 226 411 Amortization of prior service credit included in net income (9) (16) (14) Amortization of net actuarial loss included in net income 38 44 69 Net losses from settlements and curtailments included in net income 14 9 7 Changes attributable to divestments 3 (8) (6) Pension and other postretirement plan adjustments (237) 255 467 Derivative instruments and hedges: Net unrealized gains (losses) arising during the year (10) (12) 8 Reclassification adjustments for net (gains) losses included in net income 8 12 (13) Changes in derivative instruments and hedges (2) — (5) Total other comprehensive income (loss), net of tax (509) (405) (83) Total comprehensive income, net of tax 3,315 2,189 4,567 Total comprehensive (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests, net of tax (84) (87) (108) Total comprehensive income attributable to ABB, net of tax 3,231 2,102 4,459 Due to rounding, numbers presented may not add to the totals provided. See accompanying Notes to the Consolidated Financial Statements 66 FINANCIAL REPORT 2023 — ABB Ltd Consolidated Balance Sheets December 31 ($ in millions, except share data) 2023 2022 Cash and equivalents 3,891 4,156 Restricted cash 18 18 Marketable securities and short-term investments 1,928 725 Receivables, net 7,446 6,858 Contract assets 1,090 954 Inventories, net 6,149 6,028 Prepaid expenses 235 230 Other current assets 520 601 Total current assets 21,277 19,570 Property, plant and equipment, net 4,142 3,911 Operating lease right-of-use assets 893 841 Investments in equity-accounted companies 187 130 Prepaid pension and other employee benefits 780 916 Intangible assets, net 1,223 1,406 Goodwill 10,561 10,511 Deferred taxes 1,381 1,396 Other non-current assets 496 467 Total assets 40,940 39,148 Accounts payable, trade 4,847 4,904 Contract liabilities 2,844 2,216 Short-term debt and current maturities of long-term debt 2,607 2,535 Current operating leases 249 220 Provisions for warranties 1,210 1,028 Other provisions 1,201 1,171 Other current liabilities 5,046 4,455 Total current liabilities 18,004 16,529 Long-term debt 5,221 5,143 Non-current operating leases 666 651 Pension and other employee benefits 686 719 Deferred taxes 669 729 Other non-current liabilities 1,548 2,105 Total liabilities 26,794 25,876 Commitments and contingencies Redeemable noncontrolling interest 89 85 Stockholders’ equity: Common stock, CHF 0.12 par value (1,882 million and 1,965 million shares issued at December 31, 2023 and 2022, respectively) 163 171 Additional paid-in capital 7 141 Retained earnings 19,724 20,082 Accumulated other comprehensive loss (5,070) (4,556) Treasury stock, at cost (40 million and 100 million shares at December 31, 2023 and 2022, respectively) (1,414) (3,061) Total ABB stockholders’ equity 13,410 12,777 Noncontrolling interests 647 410 Total stockholders’ equity 14,057 13,187 Total liabilities and stockholders’ equity 40,940 39,148 Due to rounding, numbers presented may not add to the totals provided. See accompanying Notes to the Consolidated Financial Statements FINANCIAL REPORT 2023 67 — ABB Ltd Consolidated Statements of Cash Flows Year ended December 31 ($ in millions) 2023 2022 2021 Operating activities: Net income 3,824 2,594 4,650 Loss from discontinued operations, net of tax 24 43 80 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 780 814 893 Changes in fair values of investments (29) (33) (123) Pension and other employee benefits (48) (125) (216) Deferred taxes (25) (344) (289) Loss from equity-accounted companies 16 102 100 Net loss (gain) from derivatives and foreign exchange (55) (23) 49 Net gain from sale of property, plant and equipment (116) (84) (38) Net loss (gain) from sale of businesses (101) 7 (2,193) Other 158 66 117 Changes in operating assets and liabilities: Trade receivables, net (661) (831) (142) Contract assets and liabilities 412 416 29 Inventories, net (3) (1,599) (771) Accounts payable, trade (106) 395 659 Accrued liabilities 254 136 454 Provisions, net 211 (70) (48) Income taxes payable and receivable (190) (94) 117 Other assets and liabilities, net (44) (36) 10 Net cash provided by operating activities — continuing operations 4,301 1,334 3,338 Net cash used in operating activities — discontinued operations (11) (47) (8) Net cash provided by operating activities 4,290 1,287 3,330 Investing activities: Purchases of investments (1,957) (321) (1,528) Purchases of property, plant and equipment and intangible assets (770) (762) (820) Acquisition of businesses (net of cash acquired) and increases in cost- and equity-accounted companies (225) (288) (241) Proceeds from sales of investments 610 697 2,272 Proceeds from maturity of investments 149 73 81 Proceeds from sales of property, plant and equipment 147 127 93 Proceeds from sales of businesses (net of transaction costs and cash disposed) and cost- and equity-accounted companies 553 1,541 2,958 Net cash from settlement of foreign currency derivatives (109) (166) (121) Changes in loans receivable, net 3 320 (19) Other investing activities 7 (14) (4) Net cash provided by (used in) investing activities — continuing operations (1,592) 1,207 2,671 Net cash used in investing activities — discontinued operations (23) (226) (364) Net cash provided by (used in) investing activities (1,615) 981 2,307 68 FINANCIAL REPORT 2023 Year ended December 31 ($ in millions) 2023 2022 2021 Financing activities: Net changes in debt with maturities of 90 days or less (1,365) 1,366 (83) Increase in debt 2,586 3,849 1,400 Repayment of debt (1,567) (2,703) (1,538) Delivery of shares 154 394 826 Purchase of treasury stock (1,258) (3,553) (3,708) Dividends paid (1,713) (1,698) (1,726) Cash associated with the spin-off of the Turbocharging Division — (172) — Dividends paid to noncontrolling shareholders (93) (99) (98) Proceeds from issuance of subsidiary shares 328 216 — Other financing activities 31 6 (41) Net cash used in financing activities — continuing operations (2,897) (2,394) (4,968) Net cash provided by financing activities — discontinued operations — — — Net cash used in financing activities (2,897) (2,394) (4,968) Effects of exchange rate changes on cash and equivalents and restricted cash (43) (189) (81) Net change in cash and equivalents and restricted cash (265) (315) 588 Cash and equivalents and restricted cash, beginning of period 4,174 4,489 3,901 Cash and equivalents and restricted cash, end of period 3,909 4,174 4,489 Supplementary disclosure of cash flow information: Interest paid 250 90 132 Income taxes paid 1,147 1,188 1,292 Due to rounding, numbers presented may not add to the totals provided. See accompanying Notes to the Consolidated Financial Statements FINANCIAL REPORT 2023 69 — ABB Ltd Consolidated Statements of Changes in Stockholders’ Equity Accumulated Additional other Total ABB Non- Total Years ended December 31, 2023, 2022 and 2021 Common paid-in Retained comprehensive Treasury stockholders’ controlling stockholders’ ($ in millions) stock capital earnings loss stock equity interests equity Balance at January 1, 2021 188 83 22,946 (4,002) (3,530) 15,685 314 15,999 Net income 4,546 4,546 104 4,650 Foreign currency translation adjustments, net of tax (534) (534) 4 (530) Effect of change in fair value of available-for-sale securities, net of tax (15) (15) (15) Unrecognized income (expense) related to pensions and other postretirement plans, net of tax 467 467 467 Change in derivative instruments and hedges, net of tax (5) (5) (5) Changes in noncontrolling interests (37) (20) (57) 55 (2) Dividends to noncontrolling shareholders — (98) (98) Dividends to shareholders (1,730) (1,730) (1,730) Cancellation of treasury shares (10) (17) (3,130) 3,157 — — Share-based payment arrangements 60 60 60 Purchase of treasury stock (3,682) (3,682) (3,682) Delivery of shares (84) (136) 1,046 826 826 Other 16 16 16 Balance at December 31, 2021 178 22 22,477 (4,088) (3,010) 15,579 378 15,957 Net income (1) 2,475 2,475 124 2,599 Foreign currency translation adjustments, net of tax (608) (608) (31) (639) Effect of change in fair value of available-for-sale securities, net of tax (21) (21) (21) Unrecognized income (expense) related to pensions and other postretirement plans, net of tax 256 256 (1) 255 Change in derivative instruments and hedges, net of tax — — — Issuance of subsidiary shares 120 120 86 206 Other changes in noncontrolling interests 10 10 (34) (24) Dividends to noncontrolling shareholders — (100) (100) Dividends to shareholders (1,700) (1,700) (1,700) Spin-off of the Turbocharging Division (177) (95) (272) (12) (284) Cancellation of treasury shares (8) (4) (2,864) 2,876 — — Share-based payment arrangements 42 42 42 Purchase of treasury stock (3,502) (3,502) (3,502) Delivery of shares (51) (130) 575 394 394 Other 2 2 2 Balance at December 31, 2022 171 141 20,082 (4,556) (3,061) 12,777 410 13,187 Net income (1) 3,745 3,745 83 3,828 Foreign currency translation adjustments, net of tax (286) (286) 5 (281) Effect of change in fair value of available-for-sale securities, net of tax 11 11 11 Unrecognized income (expense) related to pensions and other postretirement plans, net of tax (237) (237) (237) Change in derivative instruments and hedges, net of tax (2) (2) (2) Issuance of subsidiary shares 170 170 168 338 Other changes in noncontrolling interests (31) (37) (68) 67 (1) Dividends to noncontrolling shareholders — (93) (93) Dividends to shareholders (1,706) (1,706) (1,706) Cancellation of treasury shares (7) (201) (2,359) 2,567 — — Share-based payment arrangements 101 101 2 103 Purchase of treasury stock (1,247) (1,247) (1,247) Delivery of shares (173) 327 154 154 Other (2) (2) 5 3 Balance at December 31, 2023 163 7 19,724 (5,070) (1,414) 13,410 647 14,057 (1) Amounts attributable to noncontrolling interests in 2023 and 2022 exclude net losses of $4 million and $5 million, respectively, related to redeemable noncontrolling interests, which are reported in the mezzanine equity section on the Consolidated Balance Sheets. See Note 4 for details. Due to rounding, numbers presented may not add to the totals provided. See accompanying Notes to the Consolidated Financial Statements 70 FINANCIAL REPORT 2023 — Notes to the Consolidated Financial Statements — Note 1 The Company ABB Ltd and its subsidiaries (collectively, the Company) together form a technology leader in electrification and automation, enabling a more sustainable and resource-efficient future. The Company’s solutions connect engineering know-how and software to optimize how things are manufactured, moved, powered, and operated. — Note 2 Significant accounting policies The following is a summary of significant accounting policies followed in the preparation of these Consolidated Financial Statements. Basis of presentation The Consolidated Financial Statements are prepared in accordance with United States of America (United States or U.S.) generally accepted accounting principles (U.S. GAAP) and are presented in United States dollars ($ or USD) unless otherwise stated. Due to rounding, numbers presented may not add to the totals provided. The par value of capital stock is denominated in Swiss francs. Reclassifications Certain amounts reported for prior years in the Consolidated Financial Statements and the accompanying Notes have been reclassified to conform to the current year’s presentation. These changes relate primarily to the reorganization of the Company’s operating segments (see Note 23 for details). Scope of consolidation The Consolidated Financial Statements include the accounts of ABB Ltd and companies which are directly or indirectly controlled by ABB Ltd. Additionally, the Company consolidates variable interest entities if it has determined that it is the primary beneficiary. Intercompany accounts and transactions are eliminated. Investments in joint ventures and affiliated companies in which the Company has the ability to exercise significant influence over operating and financial policies (generally through direct or indirect ownership of 20 percent to 50 percent of the voting rights and/or board of director representation), are recorded in the Consolidated Financial Statements using the equity method of accounting. Translation of foreign currencies and foreign exchange transactions The functional currency for most of the Company’s subsidiaries is the applicable local currency. The translation from the applicable functional currencies into the Company’s reporting currency is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for income statement accounts using average exchange rates prevailing during the year. The resulting translation adjustments are excluded from the determination of earnings and are recognized in Accumulated other comprehensive loss until the subsidiary is sold, substantially liquidated or evaluated for impairment in anticipation of disposal. FINANCIAL REPORT 2023 71 Foreign currency exchange gains and losses, such as those resulting from foreign currency denominated receivables or payables, are included in the determination of earnings, except as they relate to intercompany loans that are equity ‑ like in nature with no reasonable expectation of repayment, which are recognized in Accumulated other comprehensive loss. Exchange gains and losses are recognized in earnings and classified in the line item consistent with the underlying transaction or item. Discontinued operations The Company reports a disposal, or planned disposal, of a component or a group of components as a discontinued operation if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results. A strategic shift could include a disposal of a major geographical area, a major line of business or other major parts of the Company. A component may be a reportable segment or an operating segment, a reporting unit, a subsidiary, or an asset group. The assets and liabilities of a component reported as a discontinued operation are presented separately as held for sale and in discontinued operations in the Company’s Consolidated Balance Sheets. Interest expense that is not directly attributable to or related to the Company’s continuing business or discontinued business is allocated to discontinued operations based on the ratio of net assets to be sold less debt that is required to be paid as a result of the planned disposal transaction to the sum of total net assets of the Company plus consolidated debt. General corporate overhead is not allocated to discontinued operations. Operating cycle For classification of certain current assets and liabilities, the Company has elected to use the duration of individual contracts as its operating cycle. Accordingly, there are contract assets and liabilities, accounts receivable, inventories and provisions related to these contracts which will not be realized within one year that have been classified as current. Long-term system integration activities comprise the majority of the Company’s activities which have an operating cycle in excess of one year that have been classified as current. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make assumptions and estimates that directly affect the amounts reported in the Consolidated Financial Statements and the accompanying Notes. These accounting assumptions and estimates include: • estimates to determine valuation allowances for deferred tax assets and amounts recorded for unrecognized tax benefits, • estimates related to credit losses expected to occur over the remaining life of financial assets such as trade and other receivables, loans and other instruments, • estimates of loss contingencies associated with litigation or threatened litigation and other claims and inquiries, environmental damages, product warranties, self ‑ insurance reserves, regulatory and other proceedings, • assumptions and projections, principally related to future material, labor and project ‑ related overhead costs, used in determining the percentage ‑ of ‑ completion on projects where revenue is recognized over time, as well as the amount of variable consideration the Company expects to be entitled to, • assumptions used in the calculation of pension and postretirement benefits and the fair value of pension plan assets, • estimates used to record expected costs for employee severance in connection with restructuring programs, • assumptions used in determining inventory obsolescence and net realizable value, • growth rates, discount rates and other assumptions used to determine impairment of long ‑ lived assets and in testing goodwill for impairment, • estimates and assumptions used in determining the fair values of assets and liabilities assumed in business combinations, and • estimates and assumptions used in determining the initial fair value of retained noncontrolling interests and certain obligations in connection with divestments. The actual results and outcomes may differ from the Company’s estimates and assumptions. 72 FINANCIAL REPORT 2023 Cash and equivalents Cash and equivalents include highly liquid investments with maturities of three months or less at the date of acquisition. Currency and other local regulatory limitations related to the transfer of funds exist in a number of countries where the Company operates. Funds, other than regular dividends, fees or loan repayments, cannot be readily transferred abroad from these countries and are therefore deposited and used for working capital needs locally. These funds are included in cash and equivalents as they are not considered restricted. Cash and equivalents that are subject to contractual restrictions or other legal obligations and are not readily available are classified as “Restricted cash”. Marketable securities and short ‑ term investments Management determines the appropriate classification of held ‑ to ‑ maturity and available ‑ for ‑ sale debt securities at the time of purchase. Debt securities are classified as held ‑ to ‑ maturity when the Company has the positive intent and ability to hold the securities to maturity. Held ‑ to ‑ maturity debt securities are carried at amortized cost, adjusted for accretion of discounts or amortization of premiums to maturity computed under the effective interest method. Such accretion or amortization is included in Interest and dividend income. Marketable debt securities not classified as held ‑ to ‑ maturity are classified as available ‑ for ‑ sale and reported at fair value. Unrealized gains and losses on available ‑ for ‑ sale debt securities are excluded from the determination of earnings and are instead recognized in the Accumulated other comprehensive loss component of stockholders’ equity, net of tax, until realized. Realized gains and losses on available ‑ for ‑ sale debt securities are computed based upon the historical cost of these securities, using the specific identification method. Marketable debt securities are classified as either “Cash and equivalents” or “Marketable securities and short ‑ term investments” according to their maturity at the time of acquisition. Marketable equity securities are generally classified as “Marketable securities and short ‑ term investments”, however, any marketable securities held as a long ‑ term investment rather than as an investment of excess liquidity are classified as “Other non ‑ current assets”. Marketable equity securities are measured at fair value with fair value changes reported in net income. Fair value changes for marketable equity securities are generally reported in Interest and other finance expense, however, fair value changes for certain marketable equity securities classified as long-term investments are reported in Other income (expense), net. For debt securities classified as available-for-sale where fair value has declined below amortized cost due to credit losses, the Company records an allowance for expected credit losses and adjusts the allowance in subsequent periods in Interest and other finance expense. All fair value changes other than those related to credit risk are reported in Accumulated other comprehensive loss until the security is sold. In addition, equity securities without readily determinable fair values are remeasured if there is an observable price change in an orderly transaction for the same investment, or if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than its carrying amount. Similar to other fair value changes as described above, depending on the nature of the investment, this fair value change is either recorded in Other income (expense), net or Interest and other finance expense. Accounts receivable and allowance for expected credit losses Accounts receivable are recorded at the invoiced amount. The Company has a group ‑ wide policy on the management of credit risk. The policy includes a credit assessment methodology to assess the creditworthiness of customers and assign to those customers a risk category. Third ‑ party agencies’ ratings are considered, if available. For customers where agency ratings are not available, the customer’s most recent financial statements, payment history and other relevant information are considered in the assignment to a risk category. Customers are assessed at least annually or more frequently when information on significant changes in the customer’s financial position becomes known. In addition to the assignment to a risk category, a credit limit per customer is set. FINANCIAL REPORT 2023 73 The Company recognizes an allowance for credit losses to present the net amount of receivables expected to be collected at the balance sheet date. The allowance is based on the credit losses expected to arise over the asset’s contractual term taking into account historical loss experience, customer-specific data as well as forward looking estimates. The Company’s accounts receivable are first grouped by the individual legal entity which generally has a geographic concentration of receivables, resulting in different risk levels for different entities. Receivables are then further subdivided within the entity into pools based on similar risk characteristics to estimate expected credit losses. Expected credit losses are estimated individually when the related assets do not share similar risk characteristics. Accounts receivable are written off when deemed uncollectible and are recognized as a deduction from the allowance for credit losses. Expected recoveries, which are not to exceed the amount previously written off, are considered in determining the allowance balance at the balance sheet date. The Company, in its normal course of business, transfers receivables to third parties, generally without recourse. The transfer is accounted for as a sale when the Company has surrendered control over the receivables. Control is deemed to have been surrendered when (i) the transferred receivables have been put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership, (ii) the third ‑ party transferees have the right to pledge or exchange the transferred receivables, and (iii) the Company has relinquished effective control over the transferred receivables and does not retain the ability or obligation to repurchase or redeem the transferred receivables. At the time of sale, the sold receivables are removed from the Consolidated Balance Sheets and the related cash inflows are classified as operating activities in the Consolidated Statements of Cash Flows. Transfers of receivables that do not meet the requirements for treatment as sales are accounted for as secured borrowings and the related cash flows are classified as financing activities in the Consolidated Statements of Cash Flows. Concentrations of credit risk The Company sells a broad range of products, systems, services and software to a wide range of industrial, commercial and utility customers as well as various government agencies and quasi ‑ governmental agencies throughout the world. Concentrations of credit risk with respect to accounts receivable are limited, as the Company’s customer base is comprised of a large number of individual customers. Ongoing credit evaluations of customers’ financial positions are performed to determine whether the use of credit support instruments such as guarantees, letters of credit or credit insurance are necessary; collateral is not generally required. The Company maintains an allowance for credit losses as discussed above in “Accounts receivable and allowance for expected credit losses”. Such losses, in the aggregate, are in line with the Company’s expectations. It is the Company’s policy to invest cash in deposits with banks throughout the world with certain minimum credit ratings and in high quality, low risk, liquid investments. The Company actively manages its credit risk by routinely reviewing the creditworthiness of the banks and the investments held. The Company has not incurred significant credit losses related to such investments. The Company’s exposure to credit risk on derivative financial instruments is the risk that the counterparty will fail to meet its obligations. To reduce this risk, the Company has credit policies that require the establishment and periodic review of credit limits for individual counterparties. In addition, the Company has entered into close ‑ out netting agreements with most derivative counterparties. Close ‑ out netting agreements provide for the termination, valuation and net settlement of some or all outstanding transactions between two counterparties on the occurrence of one or more pre ‑ defined trigger events. Derivative instruments are presented on a gross basis in the Consolidated Financial Statements. Revenue recognition A customer contract exists if collectability under the contract is considered probable, the contract has commercial substance, contains payment terms, as well as the rights and commitments of both parties, and has been approved. The Company offers arrangements with multiple performance obligations to meet its customers’ needs. These arrangements may involve the delivery of multiple products and/or performance of services (such as installation and training) and the delivery and/or performance may occur at different points in time or over different periods of time. Goods and services under such arrangements are evaluated to determine whether they form distinct performance obligations and should be accounted for as separate revenue transactions. The Company allocates the sales price to each distinct performance obligation based on the price of each item sold in separate transactions at the inception of the arrangement. 74 FINANCIAL REPORT 2023 The Company generally recognizes revenues for the sale of non ‑ customized products including circuit breakers, modular substation packages, control products, motors, generators, drives, robots, measurement and analytical instrumentation, and other goods which are manufactured on a standardized basis at a point in time. Revenues are recognized at the point in time that the customer obtains control of the goods, which is when it has taken title to the products and assumed the risks and rewards of ownership of the products specified in the purchase order or sales agreement. Generally, the transfer of title and risks and rewards of ownership are governed by the contractually defined shipping terms. The Company uses various International Commercial Terms (as promulgated by the International Chamber of Commerce) in its sales of products to third party customers, such as Ex Works (EXW), Free Carrier (FCA) and Delivered Duty Paid (DDP). Billing terms for these point in time contracts vary but generally coincide with delivery to the customer. Payment is generally due upon receipt of the invoice, payable within 90 days or less. The Company generally recognizes revenues for the sale of customized products, including integrated automation and electrification systems and solutions, on an over time basis using the percentage ‑ of ‑ completion method of accounting. These systems are generally accounted for as a single performance obligation as the Company is required to integrate equipment and services into one deliverable for the customer. Revenues are recognized as the systems are customized during the manufacturing or integration process and as control is transferred to the customer as evidenced by the Company’s right to payment for work performed or by the customer’s ownership of the work in process. The Company principally uses the cost ‑ to ‑ cost method to measure progress towards completion on contracts. Under this method, progress of contracts is measured by actual costs incurred in relation to the Company’s best estimate of total costs based on the Company’s history of manufacturing or constructing similar assets for customers. Estimated costs are reviewed and updated routinely for contracts in progress to reflect changes in quantity or pricing of the inputs. The cumulative effect of any change in estimate is recorded in the period when the change in estimate is determined. Contract costs include all direct materials, labor and subcontract costs and indirect costs related to contract performance, such as indirect labor, supplies, tools and depreciation costs. The nature of the Company’s contracts for the sale of customized products gives rise to several types of variable consideration, including claims, unpriced change orders, liquidated damages and penalties. These amounts are estimated based upon the most likely amount of consideration to which the customer or the Company will be entitled. The estimated amounts are included in the sales price to the extent it is probable that a significant reversal of cumulative revenues recognized will not occur when the uncertainty associated with the variable consideration is resolved. All estimates of variable consideration are reassessed periodically. Back charges to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is probable and the amounts can be reliably estimated. Billing terms for these over ‑ time contracts vary but are generally based on achieving specified milestones. The differences between the timing of revenues recognized and customer billings result in changes to contract assets and contract liabilities. Payment is generally due upon receipt of the invoice, payable within 90 days or less. Contractual retention amounts billed to customers are generally due upon expiration of the contractual warranty period. Service revenues reflect revenues earned from the Company’s activities in providing services to customers primarily subsequent to the sale and delivery of a product or complete system. Such revenues consist of maintenance type contracts, repair services, equipment upgrades, field service activities that include personnel and accompanying spare parts, training, and installation and commissioning of products as a stand-alone service or as part of a service contract. The Company generally recognizes revenues from service transactions as services are performed or at the point in time that the customer obtains control of the spare parts. For long-term service contracts including monitoring and maintenance services, revenues are recognized on a straight-line basis over the term of the contract consistent with the nature, timing and extent of the services or, if the performance pattern is other than straight line, as the services are provided based on costs incurred relative to total expected costs. In limited circumstances the Company sells extended warranties that extend the warranty coverage beyond the standard coverage offered on specific products. Revenues for these warranties are recorded over the length of the warranty period based on their stand ‑ alone selling price. Billing terms for service contracts vary but are generally based on the occurrence of a service event. Payment is generally due upon receipt of the invoice, payable within 90 days or less. FINANCIAL REPORT 2023 75 Revenues are reported net of customer rebates, early settlement discounts, and similar incentives. Rebates are estimated based on sales terms, historical experience and trend analysis. The most common incentives relate to amounts paid or credited to customers for achieving defined volume levels. Taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions between the Company and its customers, such as sales, use, value added and some excise taxes, are excluded from revenues. The Company does not adjust the contract price for the effects of a financing component if the Company expects, at contract inception, that the time between control transfer and cash receipt is less than 12 months. Sales commissions are expensed immediately when the amortization period for the costs to obtain the contract is less than a year. Contract loss provisions Losses on contracts are recognized in the period when they are identified and are based upon the anticipated excess of contract costs over the related contract revenues. Shipping and handling costs Shipping and handling costs are recorded as a component of cost of sales. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first ‑ in, first ‑ out method, the weighted ‑ average cost method, or the specific identification method. Inventoried costs are stated at acquisition cost or actual production cost, including direct material and labor and applicable manufacturing overheads. Adjustments to reduce the cost of inventory to its net realizable value are made, if required, for decreases in sales prices, obsolescence or similar reductions in value. Impairment of long ‑ lived assets Long ‑ lived assets that are held and used are evaluated for impairment for each of the Company’s asset groups when events or circumstances indicate that the carrying amount of the long-lived asset or asset group may not be recoverable. If the asset group’s net carrying value exceeds the asset group’s net undiscounted cash flows expected to be generated over its remaining useful life including net proceeds expected from disposition of the asset group, if any, the carrying amount of the asset group is reduced to its estimated fair value. The estimated fair value is determined using a market, income and/or cost approach. Property, plant and equipment Property, plant and equipment is stated at cost, less accumulated depreciation and is depreciated using the straight ‑ line method. The estimated useful lives of the assets are generally as follows: • factories and office buildings: 30 to 40 years, • other facilities: 15 years, • machinery and equipment: 3 to 15 years, • furniture and office equipment: 3 to 8 years, and • leasehold improvements are depreciated over their estimated useful life or, for operating leases, over the lease term, if shorter. Goodwill and intangible assets Goodwill is reviewed for impairment annually as of October 1, or more frequently if events or circumstances indicate that the carrying value may not be recoverable. Goodwill is evaluated for impairment at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment. For the annual impairment reviews performed in 2023 the reporting units were determined to be one level below the operating segments. 76 FINANCIAL REPORT 2023 When evaluating goodwill for impairment, the Company uses either a qualitative or quantitative assessment method for each reporting unit. The qualitative assessment involves determining, based on an evaluation of qualitative factors, if it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, based on this qualitative assessment, it is determined to be more likely than not that the reporting unit’s fair value is less than its carrying value, a quantitative impairment test is performed, otherwise no further analysis is required. If the Company elects not to perform the qualitative assessment for a reporting unit, then a quantitative impairment test is performed. When performing a quantitative impairment test, the Company generally calculates the fair value of a reporting unit using an income approach based on the present value of future cash flows, applying a discount rate that represents the reporting unit’s weighted-average cost of capital, and compares it to the reporting unit’s carrying value. If the carrying value of the net assets of a reporting unit exceeds the fair value of the reporting unit then the Company records an impairment charge equal to the difference, provided that the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit. The cost of acquired intangible assets with a finite life is amortized using a method of amortization that reflects the pattern of intangible assets’ expected contributions to future cash flows. If that pattern cannot be reliably determined, the straight ‑ line method is used. The amortization periods range from 3 to 5 years for software and from 5 to 20 years for customer ‑ , technology ‑ and marketing ‑ related intangibles. Intangible assets with a finite life are tested for impairment upon the occurrence of certain triggering events. Derivative financial instruments and hedging activities The Company uses derivative financial instruments to manage currency, commodity, interest rate and equity exposures, arising from its global operating, financing and investing activities (see Note 6). The Company recognizes all derivatives, other than certain derivatives indexed to the Company’s own stock, at fair value in the Consolidated Balance Sheets. Derivatives that are not designated as hedging instruments are reported at fair value with derivative gains and losses reported through earnings and classified consistent with the nature of the underlying transaction. If the derivatives are designated as a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives will either be offset against the change in fair value of the hedged item attributable to the risk being hedged through earnings (in the case of a fair value hedge) or recognized in Accumulated other comprehensive loss until the hedged item is recognized in earnings (in the case of a cash flow hedge). Where derivative financial instruments have been designated as cash flow hedges of forecasted transactions and such forecasted transactions are no longer probable of occurring, hedge accounting is discontinued and any derivative gain or loss previously included in Accumulated other comprehensive loss is reclassified into earnings consistent with the nature of the original forecasted transaction. Gains or losses from derivatives designated as hedging instruments in a fair value hedge are reported through earnings and classified consistent with the nature of the underlying hedged transaction. Certain commercial contracts may grant rights to the Company or the counterparties, or contain other provisions that are considered to be derivatives. Such embedded derivatives are assessed at inception of the contract and depending on their characteristics, accounted for as separate derivative instruments and shown at their fair value in the Consolidated Balance Sheets with changes in their fair value reported in earnings consistent with the nature of the commercial contract to which they relate. Derivatives are classified in the Consolidated Statements of Cash Flows in the same section as the underlying item. Cash flows from the settlement of undesignated derivatives used to manage the risks of different underlying items on a net basis are classified within “Net cash provided by operating activities”, as the underlying items are primarily operational in nature. Other cash flows on the settlement of derivatives are recorded within “Net cash provided by (used in) investing activities”. Leases The Company leases primarily real estate, vehicles, machinery and equipment. FINANCIAL REPORT 2023 77 The Company evaluates if a contract contains a lease at inception of the contract. A contract is or contains a lease if it conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. To determine this, the Company assesses whether, throughout the period of use, it has both the right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset. Leases are classified as either finance or operating, with the classification determining the pattern of expense recognition in the Consolidated Income Statements. Lease expense for operating leases is recorded on a straight-line basis over the lease term. Lease expense for finance leases is separated between amortization of right-of-use assets and lease interest expense. In many cases, the Company’s leases include one or more options to renew, with renewal terms that can extend up to 5 years. The exercise of lease renewal options is at the Company’s discretion. Renewal periods are included in the expected lease term if they are reasonably certain of being exercised by the Company. Certain leases also include options to purchase the leased property. None of the Company’s lease agreements contain material residual value guarantees or material restrictions or covenants. Long-term leases (leases with terms greater than 12 months) are recorded in the Consolidated Balance Sheets at the commencement date of the lease based on the present value of the minimum lease payments. The present value of the lease payments is determined by using the interest rate implicit in the lease if available. As most of the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used for most leases and is determined for portfolios of leases based on the remaining lease term, currency of the lease, and the internal credit rating of the subsidiary which entered into the lease. Short-term leases (leases with an initial lease term of 12 months or less and where it is reasonably certain that the identified asset will not be leased for a term greater than 12 months) are not recorded in the Consolidated Balance Sheets and are expensed on a straight-line basis over the lease term. The majority of short-term leases relate to real estate and machinery. Assets under operating lease are included in Operating lease right-of-use assets. Operating lease liabilities are reported both as current and non-current operating lease liabilities. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Assets under finance lease are included in Property, plant and equipment, net while finance lease liabilities are included in Long-term debt (including Current maturities of long-term debt as applicable). Lease and non-lease components for leases other than real estate are not accounted for separately. Income taxes The Company uses the asset and liability method to account for deferred taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company records a deferred tax asset when it determines that it is more likely than not that the deduction will be sustained based upon the deduction’s technical merit. Deferred tax assets and liabilities that can be offset against each other are reported on a net basis. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized. Deferred taxes are provided on unredeemed retained earnings of the Company’s subsidiaries. However, deferred taxes are not provided on such unredeemed retained earnings to the extent it is expected that the earnings are permanently reinvested. Such earnings may become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. The Company operates in numerous tax jurisdictions and, as a result, is regularly subject to audit by tax authorities. The Company provides for tax contingencies whenever it is deemed more likely than not that a tax asset has been impaired or a tax liability has been incurred. Contingency provisions are recorded based on the technical merits of the Company’s filing position, considering the applicable tax laws and Organisation for Economic Co ‑ operation and Development (OECD) guidelines and are based on its evaluations of the facts and circumstances as of the end of each reporting period. 78 FINANCIAL REPORT 2023 The Company applies a two ‑ step approach to recognize and measure uncertainty in income taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50 percent likely of being realized upon ultimate settlement. Uncertain tax positions that could be settled against existing loss carryforwards or income tax credits are reported net. Expenses related to tax penalties are classified in the Consolidated Income Statements as “Income tax expense” while interest thereon is classified as “Interest and other finance expense”. Current income tax relating to certain items is recognized directly in Accumulated other comprehensive loss and not in earnings. In general, the Company applies the individual items approach when releasing income tax effects from Accumulated other comprehensive loss. Research and development Research and development costs not related to specific customer orders are generally expensed as incurred. Earnings per share Basic earnings per share is calculated by dividing income by the weighted ‑ average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing income by the weighted ‑ average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options, outstanding options and shares granted subject to certain conditions under the Company’s share ‑ based payment arrangements. See further discussion related to earnings per share in Note 20 and of potentially dilutive securities in Note 18. Share ‑ based payment arrangements The Company has various share ‑ based payment arrangements for its employees, which are described more fully in Note 18. Such arrangements are accounted for under the fair value method. For awards that are equity ‑ settled, total compensation is measured at grant date, based on the fair value of the award at that date, and recorded in earnings over the period the employees are required to render service. For awards that are cash ‑ settled, compensation is initially measured at grant date and subsequently remeasured at each reporting period, based on the fair value and vesting percentage of the award at each of those dates, with changes in the liability recorded in earnings. Fair value measures The Company uses fair value measurement principles to record certain financial assets and liabilities on a recurring basis and, when necessary, to record certain non ‑ financial assets at fair value on a non ‑ recurring basis, as well as to determine fair value disclosures for certain financial instruments carried at amortized cost in the financial statements. Financial assets and liabilities recorded at fair value on a recurring basis include foreign currency, commodity and interest rate derivatives, as well as cash ‑ settled call options and available ‑ for ‑ sale securities. Non ‑ financial assets recorded at fair value on a non ‑ recurring basis include long ‑ lived assets that are reduced to their estimated fair value due to impairments. Fair value is the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation techniques including the market approach (using observable market data for identical or similar assets and liabilities), the income approach (discounted cash flow method) and the cost approach (using costs a market participant would incur to develop a comparable asset). Inputs used to determine the fair value of assets and liabilities are defined by a three ‑ level hierarchy, depending on the nature of those inputs. The Company has categorized its financial assets and liabilities and non ‑ financial assets measured at fair value within this hierarchy based on whether the inputs to the valuation technique are observable or unobservable. An observable input is based on market data obtained from independent sources, while an unobservable input reflects the Company’s assumptions about market data. FINANCIAL REPORT 2023 79 The levels of the fair value hierarchy are as follows: Level 1: Valuation inputs consist of quoted prices in an active market for identical assets or liabilities (observable quoted prices). Assets and liabilities valued using Level 1 inputs include exchange ‑ traded equity securities, listed derivatives which are actively traded such as commodity futures, interest rate futures and certain actively traded debt securities. Level 2: Valuation inputs consist of observable inputs (other than Level 1 inputs) such as actively quoted prices for similar assets, quoted prices in inactive markets and inputs other than quoted prices such as interest rate yield curves, credit spreads, or inputs derived from other observable data by interpolation, correlation, regression or other means. The adjustments applied to quoted prices or the inputs used in valuation models may be both observable and unobservable. In these cases, the fair value measurement is classified as Level 2 unless the unobservable portion of the adjustment or the unobservable input to the valuation model is significant, in which case the fair value measurement would be classified as Level 3. Assets and liabilities valued or disclosed using Level 2 inputs include investments in certain funds, certain debt securities that are not actively traded, interest rate swaps, cross-currency interest rate swaps, commodity swaps, cash ‑ settled call options, forward foreign exchange contracts, foreign exchange swaps and forward rate agreements, time deposits, as well as financing receivables and debt. Level 3: Valuation inputs are based on the Company’s assumptions of relevant market data (unobservable input). Assets valued or disclosed using Level 3 inputs include insurance contracts and certain private equity investments. Investments in private equity, real estate and collective funds held within the Company’s pension plans are generally valued using the net asset value (NAV) per share as a practical expedient for fair value provided certain criteria are met. The NAVs are determined based on the fair values of the underlying investments in the funds. These assets are not classified in the fair value hierarchy but are separately disclosed. Whenever quoted prices involve bid ‑ ask spreads, the Company ordinarily determines fair values based on mid ‑ market quotes. However, for the purpose of determining the fair value of cash ‑ settled call options serving as hedges of the Company’s management incentive plan (MIP), bid prices are used. When determining fair values based on quoted prices in an active market, the Company considers if the level of transaction activity for the financial instrument has significantly decreased, or would not be considered orderly. In such cases, the resulting changes in valuation techniques would be disclosed. If the market is considered disorderly or if quoted prices are not available, the Company is required to use another valuation technique, such as an income approach. Disclosures about the Company’s fair value measurements of assets and liabilities are included in Note 7. Contingencies The Company is subject to proceedings, litigation or threatened litigation and other claims and inquiries, related to environmental, labor, product, regulatory, tax (other than income tax) and other matters, and is required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. A determination of the provision required, if any, for these contingencies is made after analysis of each individual issue, often with assistance from both internal and external legal counsel and technical experts. The required amount of a provision for a contingency of any type may change in the future due to new developments in the particular matter, including changes in the approach to its resolution. The Company records a provision for its contingent obligations when it is probable that a loss will be incurred and the amount can be reasonably estimated. Any such provision is generally recognized on an undiscounted basis using the Company’s best estimate of the amount of loss incurred or at the lower end of an estimated range when a single best estimate is not determinable. In some cases, the Company may be able to recover a portion of the costs relating to these obligations from insurers or other third parties; however, the Company records such amounts only when it is probable that they will be collected. 80 FINANCIAL REPORT 2023 The Company generally provides for anticipated costs for warranties when it delivers the related products. Warranty costs include calculated costs arising from imperfections in design, material and workmanship in the Company’s products. The Company makes individual assessments on contracts with risks resulting from order ‑ specific conditions or guarantees and assessments on an overall, statistical basis for similar products sold in larger quantities. The Company may have legal obligations to perform environmental clean ‑ up activities related to land and buildings as a result of the normal operations of its business. In some cases, the timing or the method of settlement, or both, are conditional upon a future event that may or may not be within the control of the Company, but the underlying obligation itself is unconditional and certain. The Company recognizes a provision for these obligations when it is probable that a liability for the clean ‑ up activity has been incurred and a reasonable estimate of its fair value can be made. In some cases, a portion of the costs expected to be incurred to settle these matters may be recoverable. An asset is recorded when it is probable that such amounts are recoverable. Provisions for environmental obligations are not discounted to their present value when the timing of payments cannot be reasonably estimated. Pensions and other postretirement benefits The Company has a number of defined benefit pension plans, defined contribution pension plans and termination indemnity plans. For plans accounted for as a defined benefit pension plan, the Company recognizes an asset for such a plan’s overfunded status or a liability for such a plan’s underfunded status in its Consolidated Balance Sheets. Additionally, the Company measures such a plan’s assets and obligations that determine its funded status as of the end of the year and recognizes the changes in the funded status in the year in which the changes occur. Those changes are reported in Accumulated other comprehensive loss. The Company uses actuarial valuations to determine its pension and postretirement benefit costs and credits. The amounts calculated depend on a variety of key assumptions, including discount rates and expected return on plan assets. Current market conditions are considered in selecting these assumptions. The Company’s various pension plan assets are assigned to their respective levels in the fair value hierarchy in accordance with the valuation principles described in the “Fair value measures” section above. See Note 17 for further discussion of the Company’s employee benefit plans. Business combinations The Company accounts for assets acquired and liabilities assumed in business combinations using the acquisition method and records these at their respective fair values. Contingent consideration is recorded at fair value as an element of purchase price with subsequent adjustments recognized in income. Acquired contract assets and liabilities are valued and recorded in accordance with the principles for recognizing revenues from contracts with customers as outlined in the section entitled Revenue recognition above. Identifiable intangibles consist of intellectual property such as trademarks and trade names, customer relationships, patented and unpatented technology, in ‑ process research and development, order backlog and capitalized software; these are amortized over their estimated useful lives. Such intangibles are subsequently subject to evaluation for potential impairment if events or circumstances indicate the carrying amount may not be recoverable. See “Goodwill and intangible assets” above. Acquisition ‑ related costs are recognized separately from the acquisition and expensed as incurred. Upon gaining control of an entity in which an equity method or cost basis investment was held by the Company, the carrying value of that investment is adjusted to fair value with the related gain or loss recorded in income. Deferred tax assets and liabilities based on temporary differences between the financial reporting and the tax base of assets and liabilities, as well as uncertain tax positions and valuation allowances on acquired deferred tax assets assumed in connection with a business combination, are initially estimated as of the acquisition date based on facts and circumstances that existed at the acquisition date. Changes in deferred taxes, uncertain tax positions and valuation allowances on acquired deferred tax assets that occur after the measurement period are recognized in income. Estimated fair values of acquired assets and liabilities are subject to change within the measurement period (a period of up to 12 months after the acquisition date during which the acquirer may adjust the provisional acquisition amounts) with any adjustments to the preliminary estimates being recorded to goodwill. FINANCIAL REPORT 2023 81 New accounting pronouncements Applicable for current period Disclosure about supplier finance program obligations In January 2023, the Company adopted an accounting standard update which requires entities to disclose information related to supplier finance programs. Under the update, the Company is required to disclose annually (i) the key terms of the program, (ii) the amount of the supplier finance obligations outstanding and where those obligations are presented in the balance sheet at the reporting date, and (iii) a rollforward of the supplier finance obligation program within the reporting period. The Company adopted this update retrospectively for all in-scope transactions, with the exception of the rollforward disclosures, which will be adopted prospectively for annual periods beginning January 1, 2024. Apart from the additional disclosure requirements, this update does not have a significant impact on the Company’s Consolidated Financial Statements. The total outstanding supplier finance obligation included in Accounts payable, trade in the Consolidated Balance Sheets at December 31, 2023 and 2022, amounted to $415 million and $477 million, respectively. The Company’s payment terms related to suppliers’ finance programs are not impacted by the suppliers’ decisions to sell amounts under the arrangements and are typically consistent with local market practices. Facilitation of the effects of reference rate reform on financial reporting In January 2023, the Company adopted an accounting standard update which provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The Company is applying this standard update as relevant contract and hedge accounting relationship modifications are made during the course of the transition period ending December 31, 2024. This update does not have a significant impact on the Company’s Consolidated Financial Statements. Applicable for future periods Improvements to reportable segment disclosures In November 2023, an accounting standard update was issued which requires the Company to disclose additional reportable segment information primarily through enhanced disclosures about significant segment expenses and extending certain annual disclosure requirements to quarterly. This update is effective for the Company for annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025, and is to be applied retrospectively to each prior reporting period presented. The Company is currently evaluating the impact of adopting this update on its Consolidated Financial Statements. Improvements to income tax disclosures In December 2023, an accounting standard update was issued which requires the Company to disclose additional information related to income taxes. Under the update, the Company is required to annually disclose by jurisdiction (i) additional disaggregated information within the tax rate reconciliation and (ii) income taxes paid. This update is effective for the Company prospectively, with retrospective adoption permitted, for annual periods beginning January 1, 2025. The Company is currently evaluating the impact of adopting this update on its Consolidated Financial Statements. — Note 3 Discontinued operations In 2020, the Company completed the divestment of its Power Grids business to Hitachi Ltd (Hitachi). As this divestment represented a strategic shift that would have a major effect on the Company’s operations and financial results, the results of operations for this business were presented as discontinued operations. Certain of the business contracts in the Power Grids business continue to be executed by subsidiaries of the Company for the benefit/risk of Hitachi Energy Ltd (Hitachi Energy). The remaining business activities of the Power Grids business being executed by the Company are not significant. 82 FINANCIAL REPORT 2023 In connection with the divestment, the Company recorded liabilities in discontinued operations for the initial estimated future costs and other cash payments of $487 million for various contractual items relating to the sale of the business. In 2021, the Company and Hitachi concluded an agreement to settle the various amounts owed by the Company. During 2023, 2022 and 2021, total cash payments of $23 million, $102 million and $364 million, respectively, were made under the settlement agreement. Upon closing of the sale, the Company entered into various transition services agreements (TSAs), some of which continue to have services performed. Pursuant to these TSAs, the Company and Hitachi Energy provide to each other, on a transitional basis, various services. The services provided by the Company primarily include finance, information technology, human resources and certain other administrative services. The TSAs were to be performed for up to 3 years with the possibility to agree on extensions on an exceptional basis for business-critical services which are reasonably necessary to avoid a material adverse impact on the business. The TSA for information technology services was extended until mid-2025. In 2023, 2022 and 2021, the Company recognized, within its continuing operations, general and administrative expenses incurred to perform the TSAs, offset by $121 million, $162 million and $173 million, respectively, in TSA-related income for such services that is reported in Other income (expense), net. In addition, the Company also has retained obligations (primarily for environmental and taxes) related to other businesses disposed or otherwise exited that qualified as discontinued operations. Changes to these retained obligations are also included in Loss from discontinued operations, net of tax. — Note 4 Acquisitions, divestments and equity-accounted companies Acquisitions of controlling interests Acquisitions of controlling interests were as follows: ($ in millions, except number of acquired businesses) 2023 2022 2021 Purchase price for acquisitions (net of cash acquired) (1) 175 195 212 Aggregate excess of purchase price over fair value of net assets acquired (2) 142 229 161 Number of acquired businesses 7 5 2 (1) Excluding changes in cost- and equity-accounted companies. (2) Recorded as goodwill (see Note 11). In the table above, the “Purchase price for acquisitions” and “Aggregate excess of purchase price over fair value of net assets acquired” amounts for 2022, relate primarily to the acquisition of InCharge Energy, Inc. (In-Charge) and in 2021, relate primarily to the acquisition of ASTI Mobile Robotics Group SL (ASTI). In 2023, there were no significant acquisitions. Acquisitions of controlling interests have been accounted for under the acquisition method and have been included in the Company’s Consolidated Financial Statements since the date of acquisition. On January 26, 2022, the Company increased its ownership in In-Charge to a 60 percent controlling interest through a stock purchase agreement. In-Charge is headquartered in Santa Monica, USA, and is a provider of turn-key commercial electric vehicle charging hardware and software solutions. The resulting cash outflows for the Company amounted to $134 million (net of cash acquired of $4 million). The acquisition expands the market presence of the E-mobility operating segment, particularly in the North American market. In connection with the acquisition, the Company’s pre-existing 13.2 percent ownership of In-Charge was revalued to fair value and a gain of $32 million was recorded in Other income (expense), net in 2022. The Company entered into an agreement with the remaining noncontrolling shareholders allowing either party to put or call the remaining 40 percent of the shares until 2027. The amount for which either party can exercise their option is dependent on a formula based on revenues and thus, the amount is subject to change. As a result of this agreement, the noncontrolling interest is classified as Redeemable noncontrolling interest (i.e. mezzanine equity) in the Consolidated Balance Sheets and was initially recognized at fair value. FINANCIAL REPORT 2023 83 On August 2, 2021, the Company acquired the shares of ASTI. ASTI is headquartered in Burgos, Spain, and is a global autonomous mobile robot (AMR) manufacturer. The resulting cash outflows for the Company amounted to $186 million (net of cash acquired). The acquisition expands the Company’s robotics and automation offering in its Robotics & Discrete Automation operating segment. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at the acquisition date, the purchase price allocation for acquisitions is preliminary for up to 12 months after the acquisition date and is subject to refinement as more detailed analyses are completed and additional information about the fair values of the acquired assets and liabilities becomes available. Business divestments and spin-offs In 2023, the Company received proceeds (net of transaction costs and cash disposed) of $553 million, relating to divestments of consolidated businesses and recorded gains of $101 million, in Other income (expense), net on the sale of such businesses. These are primarily due to the divestment of the Company’s Power Conversion Division to AcBel Polytech Inc., which prior to its sale was part of the Company’s Electrification operating segment. Certain amounts included in the net gain for the sale of the Power Conversion Division are estimated or otherwise subject to change in value and, as a result, the Company may record additional adjustments to the gain in future periods which are not expected to have a material impact on the Consolidated Financial Statements. On September 7, 2022, the shareholders approved the spin-off of the Company’s Turbocharging Division into an independent, publicly traded company, Accelleron Industries AG (Accelleron), which was completed through the distribution of common stock of Accelleron to the stockholders of ABB on October 3, 2022. As a result of the spin-off of this Division, the Company distributed net assets of $272 million, net of amounts attributable to noncontrolling interests of $12 million, which was reflected as a reduction in Retained earnings. In addition, total accumulated comprehensive income of $95 million, including the cumulative translation adjustment, was reclassified to Retained earnings. Cash and cash equivalents distributed with Accelleron was $172 million. The results of operations of the Turbocharging Division, are included in the continuing operations of the Process Automation operating segment for all periods presented through to the spin-off date. In 2022 and 2021, Income from continuing operations before taxes, included income of $134 million and $186 million, respectively, from this Division. In anticipation of the spin-off, the Company granted to a subsidiary of Accelleron access to funds in the form of a short-term intercompany loan. At the spin-off date, this loan, having a principal amount of 300 million Swiss francs ($306 million at the date of spin-off), was due to the Company and subsequently collected in October 2022. In 2021, the Company received proceeds (net of transaction costs and cash disposed) of $2,958 million, relating to divestments of consolidated businesses and recorded gains of $2,193 million in Other income (expense), net on the sales of such businesses. These are primarily due to the divestment of the Company’s Mechanical Power Transmission Division (Dodge) to RBC Bearings Inc. In 2021 Income from continuing operations before taxes, included net income of $115 million from the Dodge business which, prior to its sale was part of the Company’s Motion operating segment. Investments in equity-accounted companies In connection with the divestment of its Power Grids business to Hitachi in 2020 (see Note 3), the Company initially retained a 19.9 percent interest in the business until December 2022, when the retained investment was sold to Hitachi. During the Company’s period of ownership of the retained 19.9 percent interest, based on its continuing involvement with the Power Grids business, including the membership in its governing board of directors, the Company concluded that it had significant influence over Hitachi Energy. As a result, the investment was accounted for using the equity method through to the date of its sale. In September 2022, the Company and Hitachi agreed terms to sell the Company’s remaining investment in Hitachi Energy to Hitachi and simultaneously settle certain outstanding contractual obligations relating to the initial sale of the Power Grids business, including certain indemnification guarantees (see Note 15). The sale of the remaining investment was completed in December 2022, resulting in cash proceeds of $1,552 million and a gain of $43 million which was recorded in Other income (expense), net. 84 FINANCIAL REPORT 2023 In 2023, 2022 and 2021, the Company recorded its share of the earnings of investees accounted for under the equity method of accounting in Other income (expense), net, as follows: ($ in millions) 2023 2022 2021 Income (loss) from equity-accounted companies, net of taxes (16) (22) 38 Basis difference amortization (net of deferred income tax benefit) — (80) (138) Loss from equity-accounted companies (16) (102) (100) — Note 5 Cash and equivalents, marketable securities and short-term investments Cash and equivalents and marketable securities and short ‑ term investments consisted of the following: Cash and Marketable equivalents securities Gross Gross and and unrealized unrealized restricted short-term December 31, 2023 ($ in millions) Cost basis gains losses Fair value cash investments Changes in fair value recorded in net income Cash 1,449 1,449 1,449 Time deposits 2,923 2,923 2,460 463 Equity securities 1,250 32 1,282 1,282 5,622 32 — 5,654 3,909 1,745 Changes in fair value recorded in other comprehensive income Debt securities available-for-sale: —U.S. government obligations 189 2 (8) 183 183 189 2 (8) 183 — 183 Total 5,811 34 (8) 5,837 3,909 1,928 Of which: —Restricted cash, current 18 Cash and Marketable equivalents securities Gross Gross and and unrealized unrealized restricted short-term December 31, 2022 ($ in millions) Cost basis gains losses Fair value cash investments Changes in fair value recorded in net income Cash 1,715 1,715 1,715 Time deposits 2,459 2,459 2,459 Equity securities 345 10 355 355 4,519 10 — 4,529 4,174 355 Changes in fair value recorded in other comprehensive income Debt securities available-for-sale: —U.S. government obligations 269 1 (15) 255 255 —Other government obligations 58 58 58 —Corporate 64 (7) 57 57 391 1 (22) 370 — 370 Total 4,910 11 (22) 4,899 4,174 725 Of which: —Restricted cash, current 18 FINANCIAL REPORT 2023 85 Contractual maturities Contractual maturities of debt securities consisted of the following: Available-for-sale December 31, 2023 ($ in millions) Cost basis Fair value One to five years 129 126 Six to ten years 57 54 Due after ten years 3 3 Total 189 183 At December 31, 2023 and 2022, the Company pledged $48 million and $69 million, respectively, of available ‑ for ‑ sale marketable securities as collateral for issued letters of credit and other security arrangements. — Note 6 Derivative financial instruments The Company is exposed to certain currency, commodity, and interest rate risks arising from its global operating, financing and investing activities. The Company uses derivative instruments to reduce and manage the economic impact of these exposures. Currency risk Due to the global nature of the Company’s operations, many of its subsidiaries are exposed to currency risk in their operating activities from entering into transactions in currencies other than their functional currency. To manage such currency risks, the Company’s policies require its subsidiaries to hedge their foreign currency exposures from binding sales and purchase contracts denominated in foreign currencies. For forecasted foreign currency denominated sales of standard products and the related foreign currency denominated purchases, the Company’s policy is to hedge up to a maximum of 100 percent of the forecasted foreign currency denominated exposures, depending on the length of the forecasted exposures. Forecasted exposures greater than 12 months are not hedged. Forward foreign exchange contracts are the main instrument used to protect the Company against the volatility of future cash flows (caused by changes in exchange rates) of contracted and forecasted sales and purchases denominated in foreign currencies. In addition, within its treasury operations, the Company primarily uses foreign exchange swaps and forward foreign exchange contracts to manage the currency and timing mismatches arising in its liquidity management activities. Commodity risk Various commodity products are used in the Company’s manufacturing activities. Consequently it is exposed to volatility in future cash flows arising from changes in commodity prices. To manage the price risk of commodities, the Company’s policies require that its subsidiaries hedge the commodity price risk exposures from binding contracts, as well as at least 50 percent (up to a maximum of 100 percent) of the forecasted commodity exposure over the next 12 months or longer (up to a maximum of 18 months). Primarily swap contracts are used to manage the associated price risks of commodities. Interest rate risk The Company has issued bonds at fixed rates. Interest rate swaps and cross-currency interest rate swaps are used to manage the interest rate and foreign currency risk associated with certain debt and generally such swaps are designated as fair value hedges. In addition, from time to time, the Company uses instruments such as interest rate swaps, interest rate futures, bond futures or forward rate agreements to manage interest rate risk arising from the Company’s balance sheet structure but does not designate such instruments as hedges. Volume of derivative activity In general, while the Company’s primary objective in its use of derivatives is to minimize exposures arising from its business, certain derivatives are designated and qualify for hedge accounting treatment while others either are not designated or do not qualify for hedge accounting. 86 FINANCIAL REPORT 2023 Foreign exchange and interest rate derivatives The gross notional amounts of outstanding foreign exchange and interest rate derivatives (whether designated as hedges or not) were as follows: Type of derivative Total notional amounts at December 31, ($ in millions) 2023 2022 2021 Foreign exchange contracts 12,335 13,509 11,276 Embedded foreign exchange derivatives 1,137 933 815 Cross-currency interest rate swaps 886 855 906 Interest rate contracts 1,606 2,830 3,541 Derivative commodity contracts The Company uses derivatives to hedge its direct or indirect exposure to the movement in the prices of commodities which are primarily copper, silver, steel and aluminum. The following table shows the notional amounts of outstanding derivatives (whether designated as hedges or not), on a net basis, to reflect the Company’s requirements for these commodities: Total notional amounts at December 31, Type of derivative Unit 2023 2022 2021 Copper swaps metric tonnes 35,015 29,281 36,017 Silver swaps ounces 2,359,363 2,012,213 2,842,533 Steel swaps metric tonnes 10,206 — 145 Aluminum swaps metric tonnes 5,900 6,825 7,125 Cash flow hedges As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign exchange risk of its operations and commodity swaps to manage its commodity risks. The Company applies cash flow hedge accounting in only limited cases. In these cases, the effective portion of the changes in their fair value is recorded in Accumulated other comprehensive loss and subsequently reclassified into earnings in the same line item and in the same period as the underlying hedged transaction affects earnings. In 2023, 2022 and 2021, there were no significant amounts recorded for cash flow hedge accounting activities. Fair value hedges To reduce its interest rate exposure arising primarily from its debt issuance activities, the Company uses interest rate swaps and cross-currency interest rate swaps. Where such instruments are designated as fair value hedges, the changes in the fair value of these instruments, as well as the changes in the fair value of the risk component of the underlying debt being hedged, are recorded as offsetting gains and losses in Interest and other finance expense. The effect of derivative instruments, designated and qualifying as fair value hedges, on the Consolidated Income Statements was as follows: ($ in millions) 2023 2022 2021 Gains (losses) recognized in Interest and other finance expense: Interest rate contracts Designated as fair value hedges 44 (91) (55) Hedged item (45) 93 56 Cross-currency Designated as fair value hedges 30 (134) (37) interest rate swaps Hedged item (40) 135 34 Derivatives not designated in hedge relationships Derivative instruments that are not designated as hedges or do not qualify as either cash flow or fair value hedges are economic hedges used for risk management purposes. Gains and losses from changes in the fair values of such derivatives are recognized in the same line in the income statement as the economically hedged transaction. Furthermore, under certain circumstances, the Company is required to split and account separately for foreign currency derivatives that are embedded within certain binding sales or purchase contracts denominated in a currency other than the functional currency of the subsidiary and the counterparty. FINANCIAL REPORT 2023 87 The gains (losses) recognized in the Consolidated Income Statements on derivatives not designated in hedging relationships were as follows: ($ in millions) Gains (losses) recognized in income Type of derivative not designated as a hedge Location 2023 2022 2021 Foreign exchange contracts Total revenues 145 (56) 3 Total cost of sales (71) 21 (53) SG&A expenses (1) 27 27 11 Non-order related research and development (7) — (2) Interest and other finance expense (240) (128) (173) Embedded foreign exchange contracts Total revenues 18 (3) (7) Total cost of sales 1 (11) (2) Commodity contracts Total cost of sales (3) (47) 78 Other Interest and other finance expense 1 4 — Total (129) (193) (145) (1) SG&A expenses represent “Selling, general and administrative expenses”. The fair values of derivatives included in the Consolidated Balance Sheets were as follows: Derivative assets Derivative liabilities Current in Non-current Current in Non-current “Other in “Other “Other in “Other current non-current current non-current December 31, 2023 ($ in millions) assets” assets” liabilities” liabilities” Derivatives designated as hedging instruments: Foreign exchange contracts — — 5 2 Interest rate contracts — — 18 — Cross-currency interest rate swaps — — — 230 Other 10 — — — Total 10 — 23 232 Derivatives not designated as hedging instruments: Foreign exchange contracts 123 30 177 9 Commodity contracts 8 — 3 — Interest rate contracts 1 — 1 — Other equity contracts 4 — — — Embedded foreign exchange derivatives 23 5 26 5 Total 159 35 207 14 Total fair value 169 35 230 246 Derivative assets Derivative liabilities Current in Non-current Current in Non-current “Other in “Other “Other in “Other current non-current current non-current December 31, 2022 ($ in millions) assets” assets” liabilities” liabilities” Derivatives designated as hedging instruments: Foreign exchange contracts — — 4 4 Interest rate contracts — — 5 57 Cross-currency interest rate swaps — — — 288 Other 15 — — — Total 15 — 9 349 Derivatives not designated as hedging instruments: Foreign exchange contracts 140 21 80 5 Commodity contracts 13 — 12 — Interest rate contracts 5 — 3 — Embedded foreign exchange derivatives 11 6 17 13 Total 169 27 112 18 Total fair value 184 27 121 367 Close ‑ out netting agreements provide for the termination, valuation and net settlement of some or all outstanding transactions between two counterparties on the occurrence of one or more pre ‑ defined trigger events. 88 FINANCIAL REPORT 2023 Although the Company is party to close ‑ out netting agreements with most derivative counterparties, the fair values in the tables above and in the Consolidated Balance Sheets at December 31, 2023 and 2022, have been presented on a gross basis. The Company’s netting agreements and other similar arrangements allow net settlements under certain conditions. At December 31, 2023 and 2022, information related to these offsetting arrangements was as follows: December 31, 2023 ($ in millions) Gross amount of Derivative liabilities Cash Non-cash Type of agreement or recognized eligible for set-off in collateral collateral Net asset similar arrangement assets case of default received received exposure Derivatives 176 (111) — — 65 Total 176 (111) — — 65 December 31, 2023 ($ in millions) Gross amount of Derivative liabilities Cash Non-cash Type of agreement or recognized eligible for set-off in collateral collateral Net liability similar arrangement liabilities case of default pledged pledged exposure Derivatives 445 (111) — — 334 Total 445 (111) — — 334 December 31, 2022 ($ in millions) Gross amount of Derivative liabilities Cash Non-cash Type of agreement or recognized eligible for set-off in collateral collateral Net asset similar arrangement assets case of default received received exposure Derivatives 194 (96) — — 98 Total 194 (96) — — 98 December 31, 2022 ($ in millions) Gross amount of Derivative liabilities Cash Non-cash Type of agreement or recognized eligible for set-off in collateral collateral Net liability similar arrangement liabilities case of default pledged pledged exposure Derivatives 458 (96) — — 362 Total 458 (96) — — 362 — Note 7 Fair values Recurring fair value measures The fair values of financial assets and liabilities measured at fair value on a recurring basis were as follows: Total December 31, 2023 ($ in millions) Level 1 Level 2 Level 3 fair value Assets Securities in “Marketable securities and short-term investments”: Equity securities — 1,282 — 1,282 Debt securities—U.S. government obligations 183 — — 183 Derivative assets—current in “Other current assets” — 169 — 169 Derivative assets—non-current in “Other non-current assets” — 35 — 35 Total 183 1,486 — 1,669 Liabilities Derivative liabilities—current in “Other current liabilities” — 230 — 230 Derivative liabilities—non-current in “Other non-current liabilities” — 246 — 246 Total — 476 — 476 FINANCIAL REPORT 2023 89 Total December 31, 2022 ($ in millions) Level 1 Level 2 Level 3 fair value Assets Securities in “Marketable securities and short-term investments”: Equity securities — 355 — 355 Debt securities—U.S. government obligations 255 — — 255 Debt securities—Other government obligations — 58 — 58 Debt securities—Corporate — 57 — 57 Derivative assets—current in “Other current assets” — 184 — 184 Derivative assets—non-current in “Other non-current assets” — 27 — 27 Total 255 681 — 936 Liabilities Derivative liabilities—current in “Other current liabilities” — 121 — 121 Derivative liabilities—non-current in “Other non-current liabilities” — 367 — 367 Total — 488 — 488 During 2023, 2022 and 2021, there have been no reclassifications for any financial assets or liabilities between Level 1 and Level 2. The Company uses the following methods and assumptions in estimating fair values of financial assets and liabilities measured at fair value on a recurring basis: • Securities in “Marketable securities and short ‑ term investments”: If quoted market prices in active markets for identical assets are available, these are considered Level 1 inputs; however, when markets are not active, these inputs are considered Level 2. If such quoted market prices are not available, fair value is determined using market prices for similar assets or present value techniques, applying an appropriate risk ‑ free interest rate adjusted for non ‑ performance risk. The inputs used in present value techniques are observable and fall into the Level 2 category. • Derivatives: The fair values of derivative instruments are determined using quoted prices of identical instruments from an active market, if available (Level 1 inputs). If quoted prices are not available, price quotes for similar instruments, appropriately adjusted, or present value techniques, based on available market data, or option pricing models are used. The fair values obtained using price quotes for similar instruments or valuation techniques represent a Level 2 input unless significant unobservable inputs are used. Non ‑ recurring fair value measures There were no significant non ‑ recurring fair value measurements during the years ended 2023, 2022 and 2021. Disclosure about financial instruments carried on a cost basis The fair values of financial instruments carried on a cost basis were as follows: Carrying Total December 31, 2023 ($ in millions) value Level 1 Level 2 Level 3 fair value Assets Cash and equivalents (excluding securities with original maturities up to 3 months): Cash 1,431 1,431 — — 1,431 Time deposits 2,460 — 2,460 — 2,460 Restricted cash 18 18 — — 18 Marketable securities and short-term investments (excluding securities): Time deposits 463 — 463 — 463 Liabilities Short-term debt and current maturities of long-term debt (excluding finance lease obligations) 2,576 2,521 55 — 2,576 Long-term debt (excluding finance lease obligations) 5,060 5,096 5 — 5,101 90 FINANCIAL REPORT 2023 Carrying Total December 31, 2022 ($ in millions) value Level 1 Level 2 Level 3 fair value Assets Cash and equivalents (excluding securities with original maturities up to 3 months): Cash 1,697 1,697 — — 1,697 Time deposits 2,459 — 2,459 — 2,459 Restricted cash 18 18 — — 18 Liabilities Short-term debt and current maturities of long-term debt (excluding finance lease obligations) 2,500 1,068 1,432 — 2,500 Long-term debt (excluding finance lease obligations) 4,976 4,813 30 — 4,843 The Company uses the following methods and assumptions in estimating fair values of financial instruments carried on a cost basis: • Cash and equivalents (excluding securities with original maturities up to 3 months), Restricted cash and Marketable securities and short ‑ term investments (excluding securities): The carrying amounts approximate the fair values as the items are short ‑ term in nature or, for cash held in banks, are equal to the deposit amount. • Short ‑ term debt and current maturities of long ‑ term debt (excluding finance lease obligations): Short ‑ term debt includes commercial paper, bank borrowings and overdrafts. The carrying amounts of short ‑ term debt and current maturities of long ‑ term debt, excluding finance lease obligations, approximate their fair values. • Long ‑ term debt (excluding finance lease obligations): Fair values of bonds are determined using quoted market prices (Level 1 inputs), if available. For bonds without available quoted market prices and other long ‑ term debt, the fair values are determined using a discounted cash flow methodology based upon borrowing rates of similar debt instruments and reflecting appropriate adjustments for non ‑ performance risk (Level 2 inputs). — Note 8 Receivables, net and Contract assets and liabilities Receivables, net consisted of the following: December 31, ($ in millions) 2023 2022 Trade receivables 7,107 6,478 Other receivables 646 688 Allowance (307) (308) Total 7,446 6,858 “Trade receivables” in the table above includes contractual retention amounts billed to customers of $104 million and $100 million at December 31, 2023 and 2022, respectively. Management expects that the substantial majority of related contracts will be completed and the substantial majority of the billed amounts retained by the customer will be collected. Of the retention amounts outstanding at December 31, 2023, 61 percent and 28 percent are expected to be collected in 2024 and 2025, respectively. “Other receivables” in the table above consists of value added tax, claims, rental deposits and other non ‑ trade receivables. The reconciliation of changes in the allowance for doubtful accounts is as follows: ($ in millions) 2023 2022 2021 Balance at January 1, 308 339 357 Current-period provision for expected credit losses 47 37 33 Write-offs charged against the allowance (48) (48) (37) Exchange rate differences — (20) (14) Balance at December 31, 307 308 339 FINANCIAL REPORT 2023 91 The following table provides information about Contract assets and Contract liabilities: December 31, ($ in millions) 2023 2022 2021 Contract assets 1,090 954 990 Contract liabilities 2,844 2,216 1,894 Contract assets primarily relate to the Company’s right to receive consideration for work completed but for which no invoice has been issued at the reporting date. Contract assets are transferred to receivables when rights to receive payment become unconditional. Management expects that the majority of the amounts will be collected within one year of the respective balance sheet date. Contract liabilities primarily relate to up-front advances received on orders from customers as well as amounts invoiced to customers in excess of revenues recognized predominantly on long-term projects. Contract liabilities are reduced as work is performed and as revenues are recognized. The significant changes in the Contract assets and Contract liabilities balances were as follows: 2023 2022 Contract Contract Contract Contract ($ in millions) assets liabilities assets liabilities Revenue recognized, which was included in the Contract liabilities balance at January 1, 2023/2022 (1,311) (1,043) Additions to Contract liabilities - excluding amounts recognized as revenue during the period 1,845 1,481 Receivables recognized that were included in the Contract assets balance at January 1, 2023/2022 (622) (591) The Company considers its order backlog to represent its unsatisfied performance obligations. At December 31, 2023, the Company had unsatisfied performance obligations totaling $21,567 million and, of this amount, the Company expects to fulfill approximately 69 percent of the obligations in 2024, approximately 16 percent of the obligations in 2025 and the balance thereafter. — Note 9 Inventories, net Inventories, net consisted of the following: December 31, ($ in millions) 2023 2022 Raw materials 2,546 2,626 Work in process 1,284 1,189 Finished goods 2,092 2,036 Advances to suppliers 227 177 Total 6,149 6,028 — Note 10 Property, plant and equipment, net Property, plant and equipment, net consisted of the following: December 31, ($ in millions) 2023 2022 Land and buildings 3,818 3,622 Machinery and equipment 5,847 5,495 Construction in progress 713 586 10,378 9,703 Accumulated depreciation (6,236) (5,792) Total 4,142 3,911 92 FINANCIAL REPORT 2023 Assets under finance leases included in Property, plant and equipment, net were as follows: December 31, ($ in millions) 2023 2022 Land and buildings 208 178 Machinery and equipment 95 135 303 313 Accumulated depreciation (137) (135) Total 166 178 In 2023, 2022 and 2021, depreciation, including depreciation of assets under finance leases, was $517 million, $531 million and $575 million, respectively. In 2023, 2022 and 2021, there were no significant impairments of property, plant or equipment. — Note 11 Goodwill and intangible assets The changes in “Goodwill” were as follows: Robotics & Process Discrete Corporate ($ in millions) Electrification Motion Automation Automation and Other (3) Total Balance at January 1, 2022 (1) 4,196 2,117 1,613 2,280 276 10,482 Goodwill acquired during the year (2) 16 9 — — 204 229 Goodwill allocated to disposals (2) — (6) — — (8) Exchange rate differences and other (85) (8) (20) (72) (7) (192) Balance at December 31, 2022 (1) 4,125 2,118 1,587 2,208 473 10,511 Goodwill acquired during the year (2) 41 38 — 49 14 142 Goodwill allocated to disposals (181) — (12) — — (193) Exchange rate differences and other 45 3 8 45 — 101 Balance at December 31, 2023 (1) 4,030 2,159 1,583 2,302 487 10,561 (1) At December 31, 2023 and 2022, and at January 1, 2022, the gross goodwill amounted to $10,833 million, $10,774 million and $10,760 million, respectively. The accumulated impairment charges amounted to $272 million, $263 million and $278 million, respectively, and related to the Robotics & Discrete Automation segment. (2) Amount includes adjustments arising during the twelve-month measurement period subsequent to the respective acquisition date. (3) Corporate and Other has been recast to include the E-mobility Division which, effective January 1, 2023, became a separate non-reportable operating segment. See Note 23 for details. In 2023, goodwill allocated to disposals primarily relates to the divestment of the Power Conversion Division in July 2023, which prior to its divestment was reported in the Electrification operating segment. Intangible assets, net consisted of the following: 2023 2022 Gross Accumu- Net Gross Accumu- Net carrying lated amort- carrying carrying lated amort- carrying December 31, ($ in millions) amount ization amount amount ization amount Capitalized software for internal use 904 (775) 129 830 (720) 110 Capitalized software for sale 26 (26) — 26 (26) — Intangibles other than software: Customer-related 1,632 (894) 738 1,743 (808) 935 Technology-related 1,034 (832) 202 997 (812) 185 Marketing-related 531 (400) 131 498 (347) 151 Other 56 (33) 23 55 (30) 25 Total 4,183 (2,960) 1,223 4,149 (2,743) 1,406 FINANCIAL REPORT 2023 93 Additions to intangible assets other than goodwill consisted of the following: ($ in millions) 2023 2022 Capitalized software for internal use 70 53 Capitalized software for sale — — Intangibles other than software: Customer-related 12 79 Technology-related 13 16 Marketing-related 35 20 Other 1 7 Total 131 175 There were no significant intangible assets acquired in business combinations in 2023 and 2022. Amortization expense of intangible assets consisted of the following: ($ in millions) 2023 2022 2021 Capitalized software for internal use 44 52 66 Intangibles other than software 219 230 252 Total 263 282 318 In 2023, 2022 and 2021, impairment charges on intangible assets were not significant. At December 31, 2023, future amortization expense of intangible assets is estimated to be: ($ in millions) 2024 253 2025 198 2026 177 2027 163 2028 140 Thereafter 292 Total 1,223 — Note 12 Debt The Company’s total debt at December 31, 2023 and 2022, amounted to $7,828 million and $7,678 million, respectively. Short ‑ term debt and current maturities of long-term debt Short ‑ term debt and current maturities of long ‑ term debt consisted of the following: December 31, ($ in millions) 2023 2022 Short-term debt (weighted-average interest rate of 5.1% and 1.9%, respectively) 87 1,448 Current maturities of long-term debt (weighted-average nominal interest rate of 1.5% and 0.5%, respectively) 2,520 1,087 Total 2,607 2,535 Short ‑ term debt primarily represents short ‑ term loans from various banks and issued commercial paper. At December 31, 2023, the Company had two commercial paper programs in place: a $2 billion Euro ‑ commercial paper program for the issuance of commercial paper in a variety of currencies, and a $2 billion commercial paper program for the private placement of U.S. dollar denominated commercial paper in the United States. At December 31, 2022, $1,383 million was outstanding under the $2 billion Euro-commercial paper program. No amount was outstanding under this program at December 31, 2023, and at both December 31, 2023 and 2022, no amount was outstanding under the $2 billion program in the United States. 94 FINANCIAL REPORT 2023 In December 2019, the Company replaced its previous multicurrency revolving credit facility with a new $2 billion multicurrency revolving credit facility maturing in 2024. In 2021, the Company exercised its option to extend the maturity of this facility to 2026. The facility is for general corporate purposes. In 2023, the Company amended and restated its facility for the purpose of addressing the discontinuation of LIBOR. Under the amended and restated credit facility, interest costs on drawings under the facility (i) in USD are referenced to CME Term SOFR; (ii) in CHF and GBP are referenced to overnight SARON and SONIA, respectively; and (iii) in Euro are referenced to EURIBOR, subject to applicable credit adjustment spreads (for only (i) and (ii) above), plus a margin of 0.175 percent, while commitment fees (payable on the unused portion of the facility) amount to 35 percent of the margin, which represents commitment fees of 0.06125 percent per annum. Utilization fees, payable on drawings, amount to 0.075 percent per annum on drawings up to one ‑ third of the facility, 0.15 percent per annum on drawings in excess of one ‑ third but less than or equal to two ‑ thirds of the facility, and 0.30 percent per annum on drawings over two ‑ thirds of the facility. The facility contains cross ‑ default clauses whereby an event of default would occur if the Company were to default on indebtedness as defined in the facility, at or above a specified threshold. No amount was drawn at December 31, 2023 and 2022, under this facility. In November 2023, the Company signed a financing agreement of up to EUR 500 million with the European Investment Bank (EIB), the lending arm of the European Union, for financing research and development within the Electrification operating segment. The availability period under the agreement ends in May 2025. The applicable interest rate and other relevant borrowing terms are determined on a case-by-case basis at the time of drawdown. At December 31, 2023, no amount was drawn under this agreement. Long ‑ term debt The Company raises long-term debt in various currencies, maturities and on various interest rate terms. For certain of its debt obligations, the Company utilizes derivative instruments to modify its interest rate exposure. In particular, the Company uses interest rate swaps to effectively convert certain fixed ‑ rate long ‑ term debt into floating rate obligations. For certain non-U.S. dollar denominated debt, the Company utilizes cross-currency interest rate swaps to effectively convert the debt into a U.S. dollar obligation. The carrying value of debt, designated as being hedged by fair value hedges, is adjusted for changes in the fair value of the risk component of the debt being hedged. The following table summarizes the Company’s long ‑ term debt considering the effect of interest rate and cross-currency interest rate swaps. Consequently, a fixed ‑ rate debt subject to a fixed ‑ to ‑ floating interest rate swap is included as a floating rate debt in the table below: 2023 2022 December 31, Nominal Effective Nominal Effective ($ in millions, except % data) Balance rate rate Balance rate rate Floating rate 2,907 1.3% 4.8% 3,459 0.4% 2.8% Fixed rate 4,834 2.6% 2.7% 2,771 2.2% 2.2% 7,741 6,230 Current portion of long-term debt (2,520) 1.5% 3.7% (1,087) 0.5% 1.5% Total 5,221 5,143 At December 31, 2023, the principal amounts of long ‑ term debt repayable (excluding finance lease obligations) at maturity were as follows: ($ in millions) 2024 2,507 2025 187 2026 389 2027 1,062 2028 562 Thereafter 3,037 Total 7,744 FINANCIAL REPORT 2023 95 Details of outstanding bonds were as follows: 2023 2022 December 31, (in millions) Nominal Carrying Nominal Carrying outstanding value (1) outstanding value (1) Bonds: 0.625% EUR Instruments, due 2023 EUR 700 $ 742 0% CHF Bonds, due 2023 CHF 275 $ 298 0.625% EUR Instruments, due 2024 EUR 700 $ 768 EUR 700 $ 720 Floating Rate EUR Instruments, due 2024 EUR 500 $ 554 EUR 500 $ 536 0.75% EUR Instruments, due 2024 EUR 750 $ 819 EUR 750 $ 769 0.3% CHF Bonds, due 2024 CHF 280 $ 335 CHF 280 $ 303 2.1% CHF Bonds, due 2025 CHF 150 $ 179 CHF 150 $ 162 1.965% CHF Bonds, due 2026 CHF 325 $ 387 3.25% EUR Instruments, due 2027 EUR 500 $ 551 0.75% CHF Bonds, due 2027 CHF 425 $ 507 CHF 425 $ 460 3.8% USD Notes, due 2028 (2) USD 383 $ 382 USD 383 $ 381 1.9775% CHF Bonds, due 2028 CHF 150 $ 179 1.0% CHF Bonds, due 2029 CHF 170 $ 203 CHF 170 $ 184 0% EUR Instruments, due 2030 EUR 800 $ 749 EUR 800 $ 677 2.375% CHF Bonds, due 2030 CHF 150 $ 178 CHF 150 $ 162 3.375% EUR Instruments, due 2031 EUR 750 $ 818 2.1125% CHF Bonds, due 2033 CHF 275 $ 327 4.375% USD Notes, due 2042 (2) USD 609 $ 591 USD 609 $ 590 Total $ 7,527 $ 5,984 (1) USD carrying values include unamortized debt issuance costs, bond discounts or premiums, as well as adjustments for fair value hedge accounting, where appropriate. (2) Prior to completing a cash tender offer in 2020, the original principal amount outstanding, on each of the 3.8% USD Notes, due 2028, and the 4.375% USD Notes, due 2042, was $750 million. During 2023, the Company repaid at maturity its 0.625% EUR 700 million Instruments, which paid interest annually in arrears at a fixed rate of 0.625 percent per annum and its CHF 275 million zero interest Bonds. The following EUR Instruments are both due in 2024: (i) EUR 700 million, paying interest annually in arrears at a fixed rate of 0.625 percent per annum, and (ii) EUR 500 million floating rate notes, paying interest quarterly in arrears at a variable rate of 0.7 percentage points above the 3-month EURIBOR, subject to a minimum rate of interest of zero percent. The Company may redeem the EUR 700 million Instruments prior to maturity at the greater of (i) 100 percent of the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the note terms, plus interest accrued at the redemption date. Interest rate swaps have been used to modify the characteristics of the EUR 700 million Instruments, due 2024. After considering the impact of these interest rate swaps, the EUR 700 million Instruments, effectively become floating rate obligations. The 0.75% EUR Instruments, due 2024, pay interest annually in arrears at a fixed rate of 0.75 percent per annum. The Company may redeem these notes up to three months prior to maturity (Par call date), at the greater of (i) 100 percent of the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the note terms, plus interest accrued at the redemption date. The Company may redeem these instruments, after the Par call date at 100 percent of the principal amount of the notes to be redeemed. The Company entered into interest rate swaps to modify the characteristics of these bonds. After considering the impact of such swaps, these notes effectively become floating rate euro obligations and consequently have been shown as floating rate debt, in the table of long ‑ term debt above. The 0.3% CHF Bonds, due 2024, and 1.0% CHF Bonds, due 2029, each pay interest annually in arrears. The Company may redeem these bonds, one month prior to maturity in the case of the 2024 Bonds and three months prior to maturity in the case of the 2029 Bonds, in whole but not in part, at par plus accrued interest. Further, the Company has the option to redeem these instruments prior to maturity, in whole but not in part, at par plus accrued interest, if 85 percent or more of the aggregate principal amount of the relevant bond issue have been redeemed or purchased and cancelled at the time of the option exercise notice. 96 FINANCIAL REPORT 2023 The CHF 150 million 2.1% Bonds, due 2025, and the CHF 150 million 2.375% Bonds, due 2030, both pay interest annually in arrears. The Company may redeem these bonds, three months prior to maturity, in whole but not in part, at par plus accrued interest. Further, the Company has the option to redeem these instruments prior to maturity, in whole but not in part, at par plus accrued interest, if 85 percent or more of the aggregate principal amount of the relevant bond issue has been redeemed or purchased and cancelled at the time of the option exercise notice. The CHF 425 million 0.75% Bonds, due 2027, pay interest annually in arrears. The Company may redeem the Bonds, one month prior to maturity, in whole but not in part, at par plus accrued interest. Further, the Company has the option to redeem these instruments prior to maturity, in whole but not in part, at par plus accrued interest, if 85 percent or more of the aggregate principal amount have been redeemed or purchased and cancelled at the time of the option exercise notice. The 3.8% USD Notes, due 2028, were issued in April 2018 and pay interest semi ‑ annually in arrears. During 2020 by way of a cash tender offer, the Company redeemed $367 million of the original $750 million 3.8% USD Notes, due 2028, issued. The Company may redeem the remaining principal outstanding of the 2028 Notes up to three months prior to their maturity date, in whole or in part, at the greater of (i) 100 percent of the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the Notes terms, plus interest accrued at the redemption date. On or after January 3, 2028 (three months prior to their maturity date), the Company may also redeem the 2028 Notes, in whole or in part, at any time at a redemption price equal to 100 percent of the principal amount of the notes to be redeemed plus unpaid accrued interest to, but excluding, the redemption date. These notes, registered with the U.S. Securities and Exchange Commission, were issued by ABB Finance (USA) Inc., a 100 percent owned finance subsidiary, and are fully and unconditionally guaranteed by ABB Ltd. There are no significant restrictions on the ability of the parent company to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 13-01 of Regulation S ‑ X, the separate financial statements of ABB Finance (USA) Inc. are not provided. The 0% EUR Instruments, due 2030, do not pay interest and have the same early redemption terms as the 0.75% EUR Instruments above. Cross-currency interest rate swaps have been used to modify the characteristics of these instruments. After considering the impact of these cross-currency interest rate swaps, the Company effectively has a floating rate U.S. dollar obligation. The 4.375% USD Notes, due 2042, pay interest semi ‑ annually in arrears at a fixed annual rate of 4.375 percent. During 2020, by way of a cash tender offer, the Company redeemed $141 million of the original $750 million 4.375% USD Notes, due 2042, issued. The Company may redeem these notes prior to maturity, in whole or in part, at the greater of (i) 100 percent of the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the note terms, plus interest accrued at the redemption date. These notes, registered with the U.S. Securities and Exchange Commission, were issued by ABB Finance (USA) Inc., a 100 percent owned finance subsidiary, and are fully and unconditionally guaranteed by ABB Ltd. There are no significant restrictions on the ability of the parent company to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 13 ‑ 01 of Regulation S ‑ X, the separate financial statements of ABB Finance (USA) Inc. are not provided. In 2023, the Company issued the following EUR Instruments: (i) EUR 500 million 3.25% Instruments, due 2027, and (ii) EUR 750 million 3.375% Instruments, due 2031, both paying interest annually in arrears. The Company may redeem the EUR 500 million Instruments one month prior to maturity (Par call date) and the EUR 750 million Instruments three months prior to maturity (Par call date), at the greater of (i) 100 percent of the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the note terms, plus interest accrued at the redemption date. The Company may redeem these instruments, after the Par call date, at 100 percent of the principal amount of the notes to be redeemed. The aggregate net proceeds of these EUR Instruments, after discount and fees, amounted to EUR 1,235 million (equivalent to approximately $1,338 million on date of issuance). Also in 2023, the Company issued the following CHF bonds: (i) CHF 325 million 1.965% Bonds, due 2026, (ii) CHF 150 million 1.9775% Bonds, due 2028, and (iii) CHF 275 million 2.1125% Bonds, due 2033, all paying interest annually in arrears and have the same early redemption terms as the CHF 150 million 2.1% Bonds above. The aggregate net proceeds of these CHF Bonds, after fees, amounted to CHF 748 million (equivalent to approximately $825 million on date of issuance). FINANCIAL REPORT 2023 97 The Company’s various debt instruments contain cross ‑ default clauses which would allow the bondholders to demand repayment if the Company were to default on any borrowing at or above a specified threshold. Furthermore, all such bonds constitute unsecured obligations of the Company and rank pari passu with other debt obligations. In addition to the bonds described above, included in long ‑ term debt at December 31, 2023 and 2022, are finance lease obligations, bank borrowings of subsidiaries and other long ‑ term debt, none of which is individually significant. — Note 13 Other provisions, other current liabilities and other non-current liabilities Other provisions consisted of the following: December 31, ($ in millions) 2023 2022 Contract-related provisions 523 615 Restructuring and restructuring-related provisions 187 145 Provision for insurance-related reserves 183 171 Provisions for contractual penalties and compliance and litigation matters 88 49 Other 220 191 Total 1,201 1,171 Other current liabilities consisted of the following: December 31, ($ in millions) 2023 2022 Employee-related liabilities 1,566 1,490 Accrued expenses 788 872 Income taxes payable and other income tax related liabilities 668 391 Non-trade payables 631 681 Accrued customer rebates 514 315 Other tax liabilities 360 285 Derivative liabilities (see Note 6) 230 121 Accrued interest 105 38 Other 184 262 Total 5,046 4,455 Other non ‑ current liabilities consisted of the following: December 31, ($ in millions) 2023 2022 Income tax related liabilities 813 1,287 Derivative liabilities (see Note 6) 246 367 Provisions for contractual penalties and compliance and litigation matters 160 67 Other 329 384 Total 1,548 2,105 98 FINANCIAL REPORT 2023 — Note 14 Leases The Company’s lease obligations primarily relate to real estate, machinery and equipment. The components of lease expense were as follows: Machinery Land and buildings and equipment Total ($ in millions) 2023 2022 2021 2023 2022 2021 2023 2022 2021 Operating lease cost 221 217 240 73 71 73 294 288 313 Finance lease cost 15 15 17 15 22 20 30 37 37 Short-term lease cost 16 20 26 10 18 14 26 38 40 Sub-lease income (20) (18) (24) — (1) (1) (20) (19) (25) Total lease expense 232 234 259 98 110 106 330 344 365 The following table presents supplemental cash flow information related to leases: Machinery Land and buildings and equipment Total ($ in millions) 2023 2022 2021 2023 2022 2021 2023 2022 2021 Operating leases: Cash paid under operating cash flows 220 200 223 73 66 68 293 266 291 Right-of-use assets obtained in exchange for new liabilities 198 285 267 92 50 86 290 335 353 In 2023, 2022 and 2021 the cash flow amounts under finance leases were not significant. At December 31, 2023, the future net minimum lease payments for operating and finance leases and the related present value of the net minimum lease payments consisted of the following: Operating Leases Finance Leases Land and Machinery Land and Machinery ($ in millions) buildings and equipment buildings and equipment 2024 208 65 21 16 2025 177 49 21 12 2026 143 27 18 6 2027 100 11 18 5 2028 68 2 18 1 Thereafter 158 4 92 — Total minimum lease payments 854 158 188 40 Difference between undiscounted cash flows and discounted cash flows (89) (8) (34) (2) Present value of minimum lease payments 765 150 154 38 The following table presents certain information related to lease terms and discount rates: Land and buildings Machinery and equipment 2023 2022 2021 2023 2022 2021 Operating leases: Weighted-average remaining term (months) 71 73 73 35 31 30 Weighted-average discount rate 3.7% 3.3% 2.6% 4.3% 1.9% 1.9% Finance leases: Weighted-average remaining term (months) 128 135 100 36 33 40 Weighted-average discount rate 4.9% 5.5% 7.7% 3.7% 2.3% 1.8% The present value of minimum finance lease payments included in Short ‑ term debt and current maturities of long ‑ term debt and Long ‑ term debt in the Consolidated Balance Sheets at December 31, 2023, amounts to $31 million and $161 million, respectively, and at December 31, 2022, amounts to $35 million and $167 million, respectively. FINANCIAL REPORT 2023 99 — Note 15 Commitments and contingencies Contingencies—Regulatory, Compliance and Legal Regulatory Based on findings during an internal investigation, the Company self-reported to the Securities and Exchange Commission (SEC) and the Department of Justice (DoJ), in the United States, to the Special Investigating Unit (SIU) and the National Prosecuting Authority (NPA) in South Africa, as well as to various authorities in other countries, potential suspect payments and other compliance concerns in connection with some of the Company’s dealings with Eskom and related persons. Many of those parties have expressed an interest in, or commenced an investigation into, these matters and the Company is cooperating fully with them. The Company paid $104 million to Eskom in December 2020 as part of a full and final settlement with Eskom and the SIU relating to improper payments and other compliance issues associated with the Controls and Instrumentation Contract, and its Variation Orders for Units 1 and 2 at Kusile. The Company made a provision of approximately $325 million, which was recorded in Other income (expense), net, during the third quarter of 2022. In December 2022, the Company settled with the SEC and DoJ as well as the authorities in South Africa and Switzerland. The matter is still pending with the authorities in Germany, but the Company does not believe that it will need to record any additional provisions for this matter. General The Company is aware of proceedings, or the threat of proceedings, against it and others in respect of private claims by customers and other third parties with regard to certain actual or alleged anticompetitive practices. Also, the Company is subject to other claims and legal proceedings, as well as investigations carried out by various law enforcement authorities. With respect to the above-mentioned claims, regulatory matters, and any related proceedings, the Company will bear the related costs, including costs necessary to resolve them. Liabilities recognized At December 31, 2023 and 2022, the Company had aggregate liabilities of $101 million and $86 million, respectively, included in Other provisions and Other non ‑ current liabilities, for the above regulatory, compliance and legal contingencies, and none of the individual liabilities recognized was significant. As it is not possible to make an informed judgment on, or reasonably predict, the outcome of certain matters and as it is not possible, based on information currently available to management, to estimate the maximum potential liability on other matters, there could be adverse outcomes beyond the amounts accrued. Guarantees General The following table provides quantitative data regarding the Company’s third ‑ party guarantees. The maximum potential payments represent a “worst ‑ case scenario”, and do not reflect management’s expected outcomes. Maximum potential payments (1) December 31, ($ in millions) 2023 2022 Performance guarantees 3,451 4,300 Financial guarantees 94 96 Total 3,545 4,396 (1) Maximum potential payments include amounts in both continuing and discontinued operations. The carrying amount of liabilities recorded in the Consolidated Balance Sheets reflects the Company’s best estimate of future payments, which it may incur as part of fulfilling its guarantee obligations. In respect of the above guarantees, the carrying amounts of liabilities at December 31, 2023 and 2022, were not significant. 100 FINANCIAL REPORT 2023 The Company is party to various guarantees providing financial or performance assurances to certain third parties. These guarantees, which have various maturities up to 2032, mainly consist of performance guarantees whereby (i) the Company guarantees the performance of a third party’s product or service according to the terms of a contract and (ii) as member of a consortium/joint venture that includes third parties, the Company guarantees not only its own performance but also the work of third parties. Such guarantees may include guarantees that a project will be completed within a specified time. If the third party does not fulfill the obligation, the Company will compensate the guaranteed party in cash or in kind. The original maturity dates for the majority of these performance guarantees range from one to ten years. In conjunction with the divestment of the high ‑ voltage cable and cables accessories businesses, the Company has entered into various performance guarantees with other parties with respect to certain liabilities of the divested business. At December 31, 2023 and 2022, the maximum potential payable under these guarantees amounts to $874 million and $843 million, respectively, and these guarantees have various maturities ranging from five to ten years. The Company retained obligations for financial and performance guarantees related to the sale of the Power Grids business (see Note 3 for details). At both December 31, 2023 and 2022, the performance and financial guarantees have been fully indemnified by Hitachi. These guarantees, which have various maturities up to 2032, primarily consist of bank guarantees, standby letters of credit, business performance guarantees and other trade-related guarantees, the majority of which have original maturity dates ranging from one to ten years. The maximum amount payable under these guarantees at December 31, 2023 and 2022, is approximately $2.2 billion and $3.0 billion, respectively. On completing the sale of the Company’s remaining 19.9 percent interest in Hitachi Energy Ltd. to Hitachi in 2022, the Company also settled certain existing indemnification guarantees that were due to be settled concurrent with such transaction. As a result, in 2022, the Company recorded $136 million of cash outflows for the settlement of these liabilities (recorded in discontinued operations). Commercial commitments In addition, in the normal course of bidding for and executing certain projects, the Company has entered into standby letters of credit, bid/performance bonds and surety bonds (collectively “performance bonds”) with various financial institutions. Customers can draw on such performance bonds in the event that the Company does not fulfill its contractual obligations. The Company would then have an obligation to reimburse the financial institution for amounts paid under the performance bonds. At December 31, 2023 and 2022, the total outstanding performance bonds aggregated to $3.1 billion and $2.9 billion, respectively. There have been no significant amounts reimbursed to financial institutions under these types of arrangements in 2023 and 2022. Product and order ‑ related contingencies The Company calculates its provision for product warranties based on historical claims experience and specific review of certain contracts. The reconciliation of the Provisions for warranties, including guarantees of product performance, was as follows: ($ in millions) 2023 2022 2021 Balance at January 1, 1,028 1,005 1,035 Net change in warranties due to acquisitions, divestments and spin-offs — (24) 1 Claims paid in cash or in kind (171) (157) (222) Net increase in provision for changes in estimates, warranties issued and warranties expired 327 252 226 Exchange rate differences 26 (48) (35) Balance at December 31, 1,210 1,028 1,005 Related party transactions The Company conducts business with certain companies where members of the Company’s Board of Directors or Executive Committee act, or in recent years have acted, as directors or senior executives. The Company’s Board of Directors has determined that the Company’s business relationships with those companies do not constitute material business relationships. This determination was made in accordance with the Company’s related party transaction policy which was prepared based on the Swiss Code of Best Practice and the independence criteria set forth in the corporate governance rules of the New York Stock Exchange. FINANCIAL REPORT 2023 101 — Note 16 Income taxes Income tax expense consisted of the following: ($ in millions) 2023 2022 2021 Current taxes 955 1,101 1,346 Deferred taxes (25) (344) (289) Income tax expense allocated to continuing operations 930 757 1,057 Income tax benefit allocated to discontinued operations (6) (5) (1) Income tax expense from continuing operations is reconciled below from the Company’s weighted ‑ average global tax rate (rather than from the Swiss domestic statutory tax rate) as the parent company of the ABB Group, ABB Ltd, is domiciled in Switzerland and income generated in jurisdictions outside of Switzerland (hereafter “foreign jurisdictions”) which has already been subject to corporate income tax in those foreign jurisdictions is, to a large extent, tax exempt in Switzerland. There is no requirement in Switzerland for any parent company of a group to file a tax return of the consolidated group determining domestic and foreign pre ‑ tax income. As the Company’s consolidated income from continuing operations is predominantly earned outside of Switzerland, the weighted ‑ average global tax rate of the Company results from enacted corporate income tax rates in foreign jurisdictions. The reconciliation of Income tax expense from continuing operations at the weighted ‑ average tax rate to the effective tax rate is as follows: ($ in millions, except % data) 2023 2022 2021 Income from continuing operations before income taxes 4,778 3,394 5,787 Weighted-average global tax rate 22.3% 23.6% 23.7% Income taxes at weighted-average tax rate 1,065 800 1,371 Items taxed at rates other than the weighted-average tax rate 33 127 176 Unrecognized tax benefits (207) (83) 151 Changes in valuation allowance, net 9 (195) (95) Effects of changes in tax laws and enacted tax rates (3) (19) 1 Non-deductible / non-taxable items 43 97 (542) Other, net (10) 30 (5) Income tax expense from continuing operations 930 757 1,057 Effective tax rate for the year 19.5% 22.3% 18.3% The allocation of consolidated income from continuing operations, which is predominantly earned outside of Switzerland, impacts the “Weighted-average global tax rate”. In 2023 and 2022, “Items taxed at rates other than the weighted-average tax rate” included $30 million and $53 million, respectively, for dividends received in holding entities which could not fully benefit from the participation exemption, while in 2021, this included $107 million for certain amounts related to the divestment of the Dodge business. In 2023, “Changes in valuation allowance, net” included $57 million of negative impacts from business performance in Europe, partially offset with positive impacts from changes in certain outlooks related to business performance in the Americas of $13 million and Europe of $22 million. In 2022, this amount included positive impacts from changes in certain outlooks in Asia of $22 million, Europe of $23 million and the Americas of $208 million, offset by negative impacts from other changes in certain outlooks in Europe of $55 million. In 2021, the amount included positive impacts from changes in certain outlooks in Europe of $82 million. In 2023 and 2021, “Effects of changes in tax laws and enacted tax rates” were not significant while in 2022, this amount primarily reflects the impact of changes in certain tax rates in Europe for $25 million. 102 FINANCIAL REPORT 2023 In 2023, “Non-deductible / non-taxable items” reflects an additional tax impact of $24 million related to the sale of the Power Conversion Division. In 2022, this amount includes a net tax impact of $65 million for the non-deductible regulatory penalties in connection with the Kusile project offset partially by the impact of the non-taxable gain from the sale of the remaining investment in Hitachi Energy. In 2021, this includes $567 million in reported income tax benefits primarily due to impacts of divestments and internal reorganizations where the reported net gain from sale of businesses exceeded the related taxable gain as well as the impact of a recognition of previously unrecognized outside basis differences. In all periods, the amounts reported also include other items that were deducted for financial accounting purposes but are typically not tax deductible, such as certain interest expense costs, local taxes on productive activities, disallowed amounts for meals and entertainment expenses and other similar items. In 2023, “Unrecognized tax benefits” included a benefit of $206 million related to a favorable resolution of an uncertain tax matter in Asia relating to the divestment in 2020 of the Power Grids business. In 2022 and 2021, “Unrecognized tax benefits” in the table above included a net benefit of $95 million and a net cost of $150 million, respectively, related to the interpretation for tax law and double tax treaty agreements by competent tax authorities. Deferred tax assets and liabilities consisted of the following: December 31, ($ in millions) 2023 2022 Deferred tax assets: Unused tax losses and credits 544 462 Provisions and other accrued liabilities 839 756 Other current assets including receivables 76 100 Pension 284 283 Inventories 347 304 Intangible assets 1,121 1,154 Other 69 66 Total gross deferred tax asset 3,280 3,125 Valuation allowance (1,070) (1,000) Total gross deferred tax asset, net of valuation allowance 2,210 2,125 Deferred tax liabilities: Property, plant and equipment (243) (232) Intangible assets (241) (237) Other assets (142) (91) Pension (317) (318) Other liabilities (154) (200) Inventories (66) (44) Unremitted earnings of subsidiaries (335) (336) Total gross deferred tax liability (1,498) (1,458) Net deferred tax asset (liability ) 712 667 Included in: “Deferred taxes”—non-current assets 1,381 1,396 “Deferred taxes”—non-current liabilities (669) (729) Net deferred tax asset (liability) 712 667 Certain entities have deferred tax assets related to net operating loss carry ‑ forwards and other items. As recognition of these assets in certain entities did not meet the more likely than not criterion, valuation allowances have been recorded. “Unused tax losses and credits” at December 31, 2023 and 2022, in the table above, included $54 million and $80 million, respectively, for which the Company has established a valuation allowance as, due to limitations imposed by the relevant tax law, the Company determined that, more likely than not, such deferred tax assets would not be realized. The valuation allowance at December 31, 2023, 2022 and 2021, was $1,070 million, $1,000 million and $1,263 million, respectively. In 2023, the change in valuation allowance was primarily due to movements in foreign exchange rates. Certain amounts included in deferred tax assets for intangible assets result from intercompany transactions occurring at fair market value for which no corresponding accounting basis exists. FINANCIAL REPORT 2023 103 At December 31, 2023 and 2022, deferred tax liabilities totaling $335 million and $336 million, respectively, have been provided for withholding taxes, dividend distribution taxes or additional corporate income taxes (hereafter “withholding taxes”) on unremitted earnings which will be payable in foreign jurisdictions in the event of repatriation of the foreign earnings to Switzerland. Income which has been generated outside of Switzerland and has already been subject to corporate income tax in such foreign jurisdictions is, to a large extent, tax exempt in Switzerland and therefore, generally no or only limited Swiss income tax has to be provided for on the repatriated earnings of foreign subsidiaries. Certain countries levy withholding taxes on dividend distributions and these taxes cannot always be fully reclaimed by the Company’s relevant subsidiary receiving the dividend, although the taxes have to be withheld and paid by the relevant subsidiary distributing such dividend. In 2023 and 2022, certain taxes arose in certain foreign jurisdictions for which the technical merits do not allow utilization of benefits. At December 31, 2023 and 2022, foreign subsidiary retained earnings which would be subject to withholding taxes upon distribution were approximately $50 million and $100 million, respectively. These earnings were considered as indefinitely reinvested, as these funds are used for financing current operations as well as business growth through working capital and capital expenditure in those countries and, consequently, no deferred tax liability was recorded. At December 31, 2023, net operating loss carry ‑ forwards of $2,119 million and tax credits of $56 million were available to reduce future income taxes of certain subsidiaries. Of these amounts, $842 million of operating loss carry-forwards and $56 million of tax credits will expire in varying amounts through 2046, while the remainder are available for carryforward indefinitely. The largest amount of these carry ‑ forwards related to the Company’s Europe operations. Unrecognized tax benefits consisted of the following: Penalties and interest related to Unrecognized unrecognized ($ in millions) tax benefits tax benefits Total Classification as unrecognized tax items on January 1, 2021 1,298 192 1,490 Net change due to acquisitions and divestments 16 (6) 10 Increase relating to prior year tax positions 240 58 298 Decrease relating to prior year tax positions (42) (3) (45) Increase relating to current year tax positions 98 7 105 Decrease due to settlements with tax authorities (175) (20) (195) Decrease as a result of the applicable statute of limitations (72) (22) (94) Exchange rate differences (41) (7) (48) Balance at December 31, 2021, which would, if recognized, affect the effective tax rate 1,322 199 1,521 Increase relating to prior year tax positions 26 36 62 Decrease relating to prior year tax positions (98) (12) (110) Increase relating to current year tax positions 80 4 84 Decrease due to settlements with tax authorities (31) (14) (45) Decrease as a result of the applicable statute of limitations (71) (23) (94) Exchange rate differences (58) (10) (68) Balance at December 31, 2022, which would, if recognized, affect the effective tax rate 1,170 180 1,350 Net change due to acquisitions and divestments (9) (1) (10) Increase relating to prior year tax positions 32 44 76 Decrease relating to prior year tax positions (233) (6) (239) Increase relating to current year tax positions 131 7 138 Decrease due to settlements with tax authorities (82) (13) (95) Decrease as a result of the applicable statute of limitations (80) (19) (99) Exchange rate differences 14 3 17 Balance at December 31, 2023, which would, if recognized, affect the effective tax rate 943 195 1,138 In 2023, 2022 and 2021, “Increase relating to current year tax positions” included a total of $76 million, $69 million and $72 million, respectively, in taxes related to the interpretation of tax law and double tax treaty agreements by competent tax authorities. In 2023, “Increase relating to prior year tax positions” included $14 million, predominantly from Africa. 104 FINANCIAL REPORT 2023 In 2022, “Increase relating to prior year tax positions” included $26 million predominantly from Asia and Europe. In 2021, “Increase relating to prior year tax positions” included a total of $240 million related to the interpretation of tax law and double tax treaty agreements by competent tax authorities in Europe. In 2023, “Decrease relating to prior year tax positions” included $206 million for a decrease in tax risk in Asia related to the divestment in 2020 of the Power Grids business. In 2022, “Decrease relating to prior year tax positions” included $94 million for a decrease in tax risk assessments in Europe. In 2021, “Decrease relating to prior year tax positions” of $42 million included $33 million related to tax risk assessments in Europe. In 2023, “Decrease due to settlements with tax authorities” of $77 million related to tax risk assessments in Europe. In 2021, “Decrease due to settlements with tax authorities” is predominantly related to tax assessments received in Europe, while in 2022, this amount is predominantly related to tax assessments received in Asia and Europe. At December 31, 2023, the Company expected the resolution, within the next twelve months, of unrecognized tax benefits related to pending court cases amounting to $326 million for income taxes, penalties and interest. Otherwise, the Company had not identified any other significant changes which were considered reasonably possible to occur within the next twelve months. At December 31, 2023, the earliest significant open tax years that remained subject to examination were the following: Region Year Europe 2015 United States 2020 Rest of Americas 2019 China 2014 Rest of Asia, Middle East and Africa 2018 — Note 17 Employee benefits The Company operates defined benefit pension plans, defined contribution pension plans, and termination indemnity plans, in accordance with local regulations and practices. At December 31, 2023, the Company’s most significant defined benefit pension plans are in Switzerland as well as in Germany, the United Kingdom, and the United States. These plans cover a large portion of the Company’s employees and provide benefits to employees in the event of death, disability, retirement, or termination of employment. Certain of these plans are multi ‑ employer plans. The Company also operates other postretirement benefit plans including postretirement health care benefits and other employee ‑ related benefits for active employees including long ‑ service award plans. The postretirement benefit plans are not significant. The measurement date used for the Company’s employee benefit plans is December 31. The funding policies of the Company’s plans are consistent with local government and tax requirements. The Company recognizes in its Consolidated Balance Sheets the funded status of its defined benefit pension plans, postretirement plans and other employee ‑ related benefits measured as the difference between the fair value of the plan assets and the benefit obligation. Unless otherwise indicated, the following tables include amounts relating to both continuing and discontinued operations. FINANCIAL REPORT 2023 105 Obligations and funded status of the plans The change in benefit obligation, change in fair value of plan assets, and funded status recognized in the Consolidated Balance Sheets were as follows: Defined pension benefits Switzerland International ($ in millions) 2023 2022 2023 2022 Benefit obligation at January 1, 2,457 3,434 3,572 5,115 Service cost 40 50 30 38 Interest cost 48 13 166 87 Contributions by plan participants 34 34 11 10 Benefit payments (134) (96) (236) (234) Settlements (97) (92) (69) (36) Benefit obligations of businesses acquired (divested) — (328) — (2) Actuarial (gain) loss 224 (478) 91 (1,075) Plan amendments and other 1 — 5 (3) Exchange rate differences 261 (80) 99 (328) Benefit obligation at December 31, 2,834 2,457 3,669 3,572 Fair value of plan assets at January 1, 3,183 4,113 3,172 4,463 Actual return on plan assets 147 (310) 178 (789) Contributions by employer 18 37 89 58 Contributions by plan participants 34 34 11 10 Benefit payments (134) (96) (236) (234) Settlements (97) (92) (69) (36) Plan assets of businesses acquired (divested) — (414) 1 (1) Exchange rate differences 325 (89) 93 (299) Fair value of plan assets at December 31, 3,476 3,183 3,239 3,172 Funded status — overfunded (underfunded) 642 726 (430) (400) The amounts recognized in Accumulated other comprehensive loss and Noncontrolling interests were: Defined pension benefits December 31, ($ in millions) 2023 2022 2021 Net actuarial (loss) gain (1,439) (1,183) (1,540) Prior service credit 39 56 72 Amount recognized in OCI (1) and NCI (2) (1,400) (1,127) (1,468) Taxes associated with amount recognized in OCI and NCI 311 266 352 Amount recognized in OCI (1) and NCI, net of tax (3) (1,089) (861) (1,116) (1) OCI represents Accumulated other comprehensive loss and, in addition, includes $14 million, $37 million and $28 million at December 31, 2023, 2022 and 2021, recognized for Other postretirement benefits. (2) NCI represents Noncontrolling interests. (3) NCI, net of tax, amounted to $0 million, $(1) million and $0 million at December 31, 2023, 2022 and 2021. In addition, the following amounts were recognized in the Company's Consolidated Balance Sheets: Defined pension benefits Switzerland International December 31, ($ in millions) 2023 2022 2023 2022 Overfunded plans 642 726 137 189 Underfunded plans — current — — (16) (22) Underfunded plans — non-current — — (551) (567) Funded status — overfunded (underfunded) 642 726 (430) (400) December 31, ($ in millions) 2023 2022 Non-current assets Overfunded pension plans 779 915 Other employee-related benefits 1 1 Pension and other employee benefits 780 916 106 FINANCIAL REPORT 2023 December 31, ($ in millions) 2023 2022 Current liabilities Underfunded pension plans (16) (22) Underfunded other postretirement benefit plans (3) (6) Other employee-related benefits (14) (10) Pension and other employee benefits (33) (38) December 31, ($ in millions) 2023 2022 Non-current liabilities Underfunded pension plans (551) (567) Underfunded other postretirement benefit plans (18) (44) Other employee-related benefits (117) (108) Pension and other employee benefits (686) (719) The accumulated benefit obligation (ABO) for all defined benefit pension plans was $6,427 million and $5,953 million at December 31, 2023 and 2022, respectively. The projected benefit obligation (PBO), ABO and fair value of plan assets, for pension plans with a PBO in excess of fair value of plan assets or ABO in excess of fair value of plan assets, was: PBO exceeds fair value of plan assets ABO exceeds fair value of plan assets December 31, Switzerland International Switzerland International ($ in millions) 2023 2022 2023 2022 2023 2022 2023 2022 PBO — 9 2,315 2,274 — 9 2,311 2,274 ABO — 9 2,257 2,222 — 9 2,253 2,222 Fair value of plan assets — 9 1,749 1,689 — 9 1,745 1,689 Components of net periodic benefit cost Net periodic benefit cost mainly consisted of the following: Defined pension benefits Switzerland International ($ in millions) 2023 2022 2021 2023 2022 2021 Operational pension cost: Service cost 40 50 61 30 38 47 Operational pension cost 40 50 61 30 38 47 Non-operational pension cost (credit): Interest cost (credit) 48 13 (5) 166 87 72 Expected return on plan assets (129) (117) (116) (157) (153) (178) Amortization of prior service cost (credit) (8) (9) (9) (2) (2) (2) Amortization of net actuarial loss — — — 52 58 67 Curtailments, settlements and special termination benefits 13 4 1 19 7 7 Non-operational pension cost (credit) (1) (76) (109) (129) 78 (3) (34) Net periodic benefit cost (credit) (36) (59) (68) 108 35 13 (1) Total Non-operational pension cost (credit) includes additional credits of $(19) million, $(4) million and $(3) million at December 31, 2023, 2022 and 2021, related to Other postretirement benefits. The components of net periodic benefit cost other than the service cost component are included in Non-operational pension cost (credit) in the Consolidated Income Statements. Assumptions The following weighted-average assumptions were used to determine projected benefit obligations: Defined pension benefits Switzerland International December 31, (in %) 2023 2022 2023 2022 Discount rate 1.4 2.2 4.5 4.8 Rate of compensation increase — — 1.7 1.8 Rate of pension increase — — 1.6 1.8 Cash balance interest credit rate 2.0 2.0 3.2 2.7 FINANCIAL REPORT 2023 107 For the Company’s significant benefit plans, the discount rate used at each measurement date is set based on a high-quality corporate bond yield curve (derived based on bond universe information sourced from reputable third-party index and data providers and rating agencies) reflecting the timing, amount and currency of the future expected benefit payments for the respective plan. Consistent discount rates are used across all plans in each currency zone, based on the duration of the applicable plan(s) in that zone. For plans in the other countries, the discount rate is based on high quality corporate or government bond yields applicable in the respective currency, as appropriate at each measurement date with a duration broadly consistent with the respective plan’s obligations. The following weighted-average assumptions were used to determine the “Net periodic benefit cost”: Defined pension benefits Switzerland International (in %) 2023 2022 2021 2023 2022 2021 Discount rate 2.0 0.7 — 4.8 2.1 1.6 Expected long-term rate of return on plan assets 4.0 3.3 3.0 5.0 3.7 4.0 Rate of compensation increase — — — 1.8 1.5 1.0 Cash balance interest credit rate 2.0 1.3 1.0 2.7 2.1 2.1 The “Expected long-term rate of return on plan assets” is derived for each benefit plan by considering the expected future long-term return assumption for each individual asset class. A single long-term return assumption is then derived for each plan based upon the plan’s target asset allocation. Plan assets The Company has pension plans in various countries with the majority of the Company’s pension liabilities deriving from a limited number of these countries. The pension plans are typically funded by regular contributions from employees and the Company. These plans are typically administered by boards of trustees (which include Company representatives) whose primary responsibilities include ensuring that the plans meet their liabilities through contributions and investment returns. The boards of trustees have the responsibility for making key investment strategy decisions within a risk-controlled framework. The pension plan assets are invested in diversified portfolios that are managed by third-party asset managers, in accordance with local statutory regulations, pension plan rules and the respective plans’ investment guidelines, as approved by the boards of trustees. Plan assets are generally segregated from those of the Company and invested with the aim of meeting the respective plans’ projected future pension liabilities. Plan assets are measured at fair value at the balance sheet date. The boards of trustees manage the assets of the pension plans in a risk-controlled manner and assess the risks embedded in the pension plans through asset/liability management studies. Asset/liability management studies typically take place every three years. However, the risks of the plans are monitored on an ongoing basis. The boards of trustees’ investment goal is to maximize the long-term returns of plan assets within specified risk parameters, while considering the future liabilities and liquidity needs of the individual plans. Risk measures taken into account include the funding ratio of the plan, the likelihood of extraordinary cash contributions being required, the risk embedded in each individual asset class, and the plan asset portfolio as a whole. The Company’s global pension asset allocation is the result of the asset allocations of the individual plans, which are set by the respective boards of trustees. The target asset allocation of the Company’s plans on a weighted-average basis is as follows: Target (in %) Switzerland International Asset class Equity 13 15 Fixed income 56 68 Real estate 26 4 Other 5 13 Total 100 100 The actual asset allocations of the plans are in line with the target asset allocations. 108 FINANCIAL REPORT 2023 Equity securities primarily include investments in large-cap and mid-cap publicly traded companies. Fixed income assets primarily include corporate bonds of companies from diverse industries and government bonds. Both fixed income and equity assets are invested either via funds or directly in segregated investment mandates, and include an allocation to emerging markets. Real estate consists primarily of investments in real estate in Switzerland held in the Swiss plans. The “Other” asset class includes investments in private equity, insurance contracts, cash, and reflects a variety of investment strategies. Based on the above global asset allocation and the fair values of the plan assets, the expected long-term return on assets at December 31, 2023, is 4.6 percent. The Company and the local boards of trustees regularly review the investment performance of the asset classes and individual asset managers. Due to the diversified nature of the investments, the Company is of the opinion that no significant concentration of risks exists in its pension fund assets. At December 31, 2023 and 2022, plan assets include ABB Ltd’s shares (as well as an insignificant amount of the Company’s debt instruments) with a total value of $9 million and $7 million, respectively. The fair values of the Company’s pension plan assets by asset class are presented below. For further information on the fair value hierarchy and an overview of the Company’s valuation techniques applied, see the “Fair value measures” section of Note 2. Not subject to Total December 31, 2023 ($ in millions) Level 1 Level 2 Level 3 leveling (1) fair value Asset class Equity Equity securities 64 64 Mutual funds/commingled funds 751 751 Emerging market mutual funds/commingled funds 76 76 Fixed income Government and corporate securities 160 953 1,113 Government and corporate—mutual funds/commingled funds 2,410 2,410 Emerging market bonds—mutual funds/commingled funds 367 367 Real estate 1,225 1,225 Insurance contracts 215 215 Cash and short-term investments 99 85 184 Private equity 60 250 310 Total 323 4,642 275 1,475 6,715 Not subject to Total December 31, 2022 ($ in millions) Level 1 Level 2 Level 3 leveling (1) fair value Asset class Equity Equity securities 77 77 Mutual funds/commingled funds 748 748 Emerging market mutual funds/commingled funds 96 96 Fixed income Government and corporate securities 121 1,036 1,157 Government and corporate—mutual funds/commingled funds 2,189 2,189 Emerging market bonds—mutual funds/commingled funds 315 315 Real estate 1,172 1,172 Insurance contracts 57 57 Cash and short-term investments 124 129 253 Private equity 54 237 291 Total 322 4,513 111 1,409 6,355 (1) Amounts relate to assets measured using the NAV practical expedient which are not subject to leveling. FINANCIAL REPORT 2023 109 The Company applies accounting guidance related to the presentation of certain investments using the net asset value (NAV) practical expedient. This accounting guidance exempts investments using this practical expedient from categorization within the fair value hierarchy. Investments measured at NAV are primarily non exchange-traded commingled or collective funds in private equity and real estate where the fair value of the underlying assets is determined by the investment manager. Investments in private equity can never be redeemed, but instead the funds will make distributions through liquidation of the underlying assets. Total unfunded commitments for the private equity funds were approximately $108 million and $114 million at December 31, 2023 and 2022, respectively. The real estate funds are typically subject to a lock-in period of up to three years after subscribing. After this period, the real estate funds typically offer a redemption notice of three to twelve months. Contributions Employer contributions were as follows: Defined pension benefits Switzerland International ($ in millions) 2023 2022 2023 2022 Total contributions to defined benefit pension plans 18 37 89 58 Of which, discretionary contributions to defined benefit pension plans — — 67 18 The Company expects to contribute approximately $93 million to its defined benefit pension plans in 2024. Of these contributions, $4 million are expected to be non-cash contributions. The Company also contributes to a number of defined contribution plans. The aggregate expense for these plans in continuing operations was $293 million, $269 million and $278 million in 2023, 2022 and 2021, respectively. Contributions to multi-employer plans were not significant in 2023, 2022 and 2021. Estimated future benefit payments The expected future cash flows to be paid by the Company’s plans in respect of pension at December 31, 2023, are as follows: Defined pension benefits ($ in millions) Switzerland International 2024 257 259 2025 219 261 2026 215 260 2027 205 266 2028 200 264 Years 2029 - 2033 909 1,267 — Note 18 Share-based payment arrangements The Company has granted share-based instruments to its employees under three principal share ‑ based payment plans, as more fully described in the respective sections below. Compensation cost for equity ‑ settled awards is recorded in Total cost of sales and in Selling, general and administrative expenses and totaled $103 million, $42 million and $59 million in 2023, 2022 and 2021, respectively, while compensation cost for cash ‑ settled awards, recorded in Selling, general and administrative expenses, was not significant, as mentioned in the WARs, LTIP and Other share ‑ based payments sections of this note. The total tax benefit recognized in 2023, 2022 and 2021 was not significant. At December 31, 2023, the Company had the ability to issue up to 94 million new shares out of contingent capital in connection with share ‑ based payment arrangements. In addition, 23 million of the 40 million shares held by the Company as treasury stock at December 31, 2023, could be used to settle share ‑ based payment arrangements. 110 FINANCIAL REPORT 2023 As the primary trading market for the shares of ABB Ltd is the SIX Swiss Exchange (on which the shares are traded in Swiss francs) and substantially all the share ‑ based payment arrangements with employees are based on the Swiss franc share or have strike prices set in Swiss francs, certain data disclosed below related to the instruments granted under share ‑ based payment arrangements are presented in Swiss francs. Management Incentive Plan Up to 2019, the Company offered, under the MIP, options and cash ‑ settled warrant appreciation rights (WARs) to key employees for no consideration. The options and WARs expire six years from the date of grant. Participants may exercise or sell options and exercise WARs after the vesting period, which is three years from the date of grant. Starting in 2020, the employee group previously eligible to receive grants under the MIP were granted shares under the LTIP (see LTIP section below) and consequently no grants were made in 2023, 2022 and 2021 under the MIP. The options granted under the MIP allow participants to purchase shares of ABB Ltd at predetermined prices. Participants may sell the options rather than exercise the right to purchase shares. Equivalent warrants are listed by a third ‑ party bank on the SIX Swiss Exchange, which facilitates pricing and transferability of options granted under this plan. The options entitle the holder to request that the third ‑ party bank purchase such options at the market price of equivalent listed warrants related to that MIP launch. If the participant elects to sell the options, the options will thereafter be held by a third party and, consequently, the Company’s obligation to deliver shares will be toward this third party. Each WAR gives the participant the right to receive, in cash, the market price of an equivalent listed warrant on the date of exercise of the WAR. Options The fair value of each option was estimated on the date of grant using a lattice model. As mentioned previously, no options were granted in 2023, 2022 and 2021. In 2023, 25 million options were exercised, representing 5 million shares, with the shares delivered out of treasury stock. Cash received upon exercise amounted to approximately $100 million. In 2023, 2022 and 2021, the aggregate intrinsic value (on the date of exercise) of options exercised was approximately $64 million, $143 million and $313 million, respectively. At December 31, 2023, all options granted under the MIP were vested and exercisable. The aggregate intrinsic value at December 31, 2023, of options outstanding was approximately $297 million. Presented below is a summary, by launch, related to options outstanding at December 31, 2023: Weighted- average Number of Number of remaining options shares contractual Exercise price (in Swiss francs) (1) (in millions) (in millions) (2) term (in years) 22.05 61.3 12.3 0.7 17.63 15.7 3.1 1.7 Total number of options and shares 77.0 15.4 0.9 (1) Information presented reflects the exercise price per share of ABB Ltd. (2) Information presented reflects the number of shares of ABB Ltd that can be received upon exercise. WARs As each WAR gives the holder the right to receive cash equal to the market price of the equivalent listed warrant on date of exercise, the Company records a liability based upon the fair value of outstanding WARs at each period end. In Selling, general and administrative expenses, the Company records the changes in fair value of the outstanding WARs. To hedge its exposure to fluctuations in the fair value of outstanding WARs, the Company had purchased cash-settled call options, which entitle the Company to receive amounts equivalent to its obligations under the outstanding WARs. The cash-settled call options are recorded as derivatives measured at fair value, with subsequent changes in fair value recorded in Selling, general and administrative expenses. The total impact in Selling, general and administrative expenses in 2023, 2022 and 2021 was not significant. At December 31, 2023, the number of WARs outstanding and their aggregate fair value was not significant. The aggregate fair value of outstanding WARs was $15 million at December 31, 2022. The fair value of WARs was determined based upon the trading price of equivalent warrants listed on the SIX Swiss Exchange. FINANCIAL REPORT 2023 111 As mentioned previously, no WARs were granted in 2023, 2022 and 2021. In 2023 and 2021, share-based liabilities of $15 million and $25 million were paid upon exercise of WARs by participants. The amount in 2022 was not significant. Employee Share Acquisition Plan The employee share acquisition plan (ESAP) is an employee stock ‑ option plan with a savings feature. Employees save over a twelve ‑ month period, by way of regular payroll deductions. At the end of the savings period, employees choose whether to exercise their stock options using their savings plus interest, if any, to buy ABB Ltd shares at the exercise price set at the grant date, or have their savings returned with any interest. The savings are accumulated in bank accounts held by a third ‑ party trustee on behalf of the participants and earn interest, where applicable. Employees can withdraw from the ESAP at any time during the savings period and will be entitled to a refund of their accumulated savings. The fair value of each option is estimated on the date of grant using the same option valuation model as described under the MIP, using the assumptions noted in the table below. The expected term of the option granted has been determined to be the contractual one ‑ year life of each option, at the end of which the options vest and the participants are required to decide whether to exercise their options or have their savings returned with interest. The risk ‑ free rate is based on one ‑ year Swiss franc interest rates, reflecting the one ‑ year contractual life of the options. In estimating forfeitures, the Company has used the data from previous ESAP launches. 2023 2022 2021 Expected volatility 21% 25% 20% Dividend yield 2.8% 3.0% 2.9% Expected term 1 year 1 year 1 year Risk-free interest rate 1.6% 1.1% -0.6% Presented below is a summary of activity under the ESAP: Weighted- Weighted- Aggregate average average intrinsic exercise remaining value Number of price contractual (in millions shares (in Swiss term of Swiss (in millions) (1) francs) (2) (in years) francs) (2)(3) Outstanding at January 1, 2023 1.8 27.99 Granted 1.8 30.49 Forfeited (0.1) 28.04 Exercised (4) (1.3) 27.99 Not exercised (savings returned plus interest) (0.4) 27.99 Outstanding at December 31, 2023 1.8 30.49 0.8 12 Vested and expected to vest at December 31, 2023 1.7 30.49 0.8 12 Exercisable at December 31, 2023 — — — — (1) Includes shares represented by ADS. (2) Information presented for ADS is based on equivalent Swiss franc denominated awards. (3) Computed using the closing price, in Swiss francs, of ABB Ltd shares on the SIX Swiss Exchange and the exercise price of each option in Swiss francs. (4) The cash received in 2023 from exercises was approximately $40 million. The shares were delivered out of treasury stock. The exercise price per ABB Ltd share of 30.49 Swiss francs for the 2023 grant was determined using the closing price of the ABB Ltd share on the SIX Swiss Exchange on the grant date. The exercise prices per ABB Ltd share and per ADS of 27.99 Swiss francs and $28.09, respectively, for the 2022 grant, and 30.32 Swiss francs and $33.35, respectively, for the 2021 grant were determined using the closing price of the ABB Ltd share on the SIX Swiss Exchange and ADS on the New York Stock Exchange on the respective grant dates. In connection with the spin-off of the Turbocharging Division in October 2022, the strike prices of the ESAP options outstanding at the time of spin-off were reduced, as per the terms and conditions of the original grant, to neutralize the effect of the spin-off on the Company’s share price, resulting in an equivalent fair value before and after the spin-off. Consequently, the exercise prices per ABB Ltd share and per ADS for the 2021 grant, were adjusted to 29.16 Swiss francs and $32.10, respectively. 112 FINANCIAL REPORT 2023 At December 31, 2023, the total unrecognized compensation cost related to non ‑ vested options granted under the ESAP was not significant. The weighted ‑ average grant ‑ date fair value (per option) of options granted during 2023, 2022 and 2021 was 2.28 Swiss francs, 2.47 Swiss francs and 1.96 Swiss francs, respectively. The total intrinsic value (on the date of exercise) of options exercised in 2023, 2022 and 2021 was not significant. Long-Term Incentive Plan The long ‑ term incentive plan (LTIP) involves annual grants of the Company’s stock subject to certain conditions (Performance Shares) to members of the Company’s Executive Committee and selected other senior executives, as defined in the terms of the LTIP. The ultimate amount delivered under the LTIP’s Performance Shares grant is based on achieving certain results against targets, as set out below, over a three-year period from grant and the final amount is delivered to the participants at the end of this period. In addition, for certain awards to vest, the participant has to fulfill a three-year service condition as defined in the terms and conditions of the LTIP. The Performance Shares under the 2023 and 2022 LTIP launches include a component based on the Company’s earnings per share performance (weighted 50 percent), a component based on the Company’s relative total shareholder return (weighted 30 percent) and a sustainability component based on the Company’s CO 2 equivalent emissions reductions (weighted 20 percent). The Performance Shares under the 2021 LTIP launch comprise of a component based on the Company’s earnings per share performance and a component based on the Company’s relative total shareholder return, both with equal weighting. For the relative total shareholder return component of the Performance Shares, the actual number of shares that will be delivered at a future date is based on the Company’s total shareholder return performance relative to a peer group of companies over a three-year period starting with the year of grant. The actual number of shares that will ultimately be delivered will vary depending on the relative total shareholder return outcome achieved between a lower threshold (no shares delivered) and an upper threshold (the number of shares delivered is capped at 200 percent of the conditional grant). For the earnings per share performance component of the Performance Shares, the actual number of shares that will be delivered at a future date is based on the Company’s average earnings per share over three financial years, beginning with the year of launch. The actual number of shares that will ultimately be delivered will vary depending on the earnings per share outcome as computed under each LTIP launch, interpolated between a lower threshold (no shares delivered) and an upper threshold (the number of shares delivered is capped at 200 percent of the conditional grant). For the sustainability component of the Performance Shares, the actual number of shares that will be delivered at a future date is based on the Company’s scope 1 and 2 CO 2 equivalent emissions reduction over three financial years, beginning with the year of launch, compared to 2019 baseline emissions. The actual number of shares that will ultimately be delivered will vary depending on the sustainability outcome as computed under the LTIP launch, interpolated between a lower threshold (no shares delivered) and an upper threshold (the number of shares delivered is capped at 200 percent of the conditional grant). Starting in 2020, key employees which were previously eligible to participate in the MIP and which were not included in the employee group granted the Performance Shares described above, were granted Restricted Shares of the Company under the LTIP. The Restricted Shares do not have performance conditions and vest over a three-year period from the grant date. Under the 2023, 2022 and 2021 LTIP launches, participants generally do not have the ability to receive any of the award in cash, subject to legal restrictions in certain jurisdictions. FINANCIAL REPORT 2023 113 Presented below is a summary of activity under the Performance Shares of the LTIP: Weighted-average Number of grant-date Performance Shares fair value per share (in millions) (Swiss francs) Nonvested at January 1, 2023 1.9 27.01 Granted 0.8 29.18 Vested (0.9) 16.55 Forfeited (0.1) 31.89 Nonvested at December 31, 2023 1.7 33.60 The aggregate fair value, at the dates of grant, of Performance Shares granted in 2023, 2022 and 2021 was $24 million, $26 million and $37 million, respectively. The total grant-date fair value of shares that vested during 2023 was $17 million while in 2022 and 2021 it was not significant. The weighted-average grant-date fair value (per share) of shares granted during 2023, 2022 and 2021 was 29.18 Swiss francs, 33.33 Swiss francs and 38.92 Swiss francs, respectively. The total fair value of Performance Shares delivered in 2023 (including shares vested in prior years and delivered in the year) was approximately $80 million while in 2022 and 2021 it was not significant. Presented below is a summary of activity under the Restricted Shares of the LTIP: Weighted-average Number of grant-date Restricted Shares fair value per share (in millions) (Swiss francs) Nonvested at January 1, 2023 2.6 23.65 Granted 0.9 31.38 Vested (1.1) 16.99 Forfeited (0.1) 28.71 Nonvested at December 31, 2023 2.3 29.51 The aggregate fair value, at the dates of grant, of Restricted Shares granted in 2023, 2022 and 2021 was $30 million, $27 million and $26 million, respectively. The total grant-date fair value of shares that vested during 2023 was $20 million while in 2022 and 2021 it was not significant. The weighted-average grant-date fair value (per share) of shares granted during 2023, 2022 and 2021 was 31.38 Swiss francs, 30.52 Swiss francs and 26.39 Swiss francs, respectively. The total fair value of Restricted Shares delivered in 2023 was approximately $35 million while in 2022 and 2021 it was not significant. Equity-settled awards are recorded in the Additional paid-in capital component of Stockholders’ equity, with compensation cost recorded in Selling, general and administrative expenses over the vesting period (which is from grant date to the end of the vesting period) based on the grant-date fair value of the shares. Cash-settled awards are recorded as a liability, remeasured at fair value at each reporting date for the percentage vested, with changes in the liability recorded in Selling, general and administrative expenses. At December 31, 2023, total unrecognized compensation cost related to equity-settled awards under the LTIP was $79 million and is expected to be recognized over a weighted-average period of 1.9 years. The compensation cost recorded in 2023, 2022 and 2021 for cash-settled awards was not significant. For the relative total shareholder return component of the LTIP launches, the fair value of granted shares at grant date, for equity-settled awards, and at each reporting date, for cash-settled awards, is determined using a Monte Carlo simulation model. The main inputs to this model are the Company’s share price and dividend yield, the volatility of the Company’s and the peer group’s share price as well as the correlation between the peer companies. For the earnings per share component of the LTIP launches, the fair value of granted shares is based on the market price of the ABB Ltd share at grant date for equity-settled awards and at each reporting date for cash-settled awards, as well as the probable outcome of the earnings per share achievement, as computed using a Monte Carlo simulation model. The main inputs to this model are the Company’s and external financial analysts’ revenue growth rates and Operational EBITA margin expectations. For the sustainability component of the LTIP launches, the fair value of granted shares is based on the market price of the ABB Ltd share at grant date for equity-settled awards and at each reporting date for cash-settled awards, as well as the probable outcome of the sustainability component achievement, as determined by internal modelling based on the Company’s CO 2 equivalent emissions. 114 FINANCIAL REPORT 2023 Other share-based payments The Company has other minor share-based payment arrangements with certain employees. The compensation cost related to these arrangements in 2023, 2022 and 2021 was not significant. — Note 19 Stockholders' equity Capital ABB Ltd is a corporation organized under the laws of Switzerland and the rights of its shareholders are governed by Swiss law and its Articles of Incorporation. At December 31, 2023 and 2022, the Company had 1,882 million shares and 1,965 million shares, respectively, that were registered and issued. In line with the revised provisions of Swiss corporate law effective January 1, 2023, shareholders approved, at ABB’s Annual General Meeting of Shareholders (AGM) in March 2023, the introduction of a capital band ranging from 90 percent to 110 percent of the issued share capital entered in the commercial register at that time. The capital band replaced 200 million shares of authorized capital, which expired in March 2023 and no longer exist under the revised law. Within this capital band, the Board of Directors is authorized to increase or reduce the share capital once or several times until March 23, 2028, or until an earlier expiry of the capital band. The contingent share capital of the Company, which forms a component of the total authorized shares, as specified in the ABB Ltd Articles of Incorporation, remains unchanged. At December 31, 2023 and 2022, the Company had a total of 2,383 million and 2,469 million authorized shares, respectively. Dividends At the AGM in March 2023, the shareholders approved the proposal of the Board of Directors to distribute a total of 0.84 Swiss francs per share. The approved dividend distribution amounted to $1,706 million, with the Company disbursing a portion in March 2023 and the remaining amounts in April 2023. At the AGM in March 2022, the shareholders approved the proposal of the Board of Directors to distribute a total of 0.82 Swiss francs per share. The approved dividend distribution amounted to $1,700 million, with the Company disbursing a portion in March 2022 and the remaining amounts in April 2022. At the AGM in March 2021, the shareholders approved the proposal of the Board of Directors to distribute a total of 0.80 Swiss francs per share. The approved dividend distribution amounted to $1,730 million, with the Company disbursing a portion in March 2021 and the remaining amounts in April 2021. Amounts available to be distributed as dividends to the stockholders of ABB Ltd are based on the requirements of Swiss law and ABB Ltd’s Articles of Incorporation, and are determined based on amounts presented in the unconsolidated financial statements of ABB Ltd, prepared in accordance with Swiss law. At December 31, 2023, the total unconsolidated stockholders’ equity of ABB Ltd was 3,917 million Swiss francs ($4,684 million), including 226 million Swiss francs ($270 million) representing share capital, 4,982 million Swiss francs ($5,957 million) representing reserves and 1,291 million Swiss francs ($1,544 million) representing a reduction of equity for treasury shares. Of the reserves, 1,291 million Swiss francs ($1,544 million) relating to treasury shares and 45 million Swiss francs ($54 million) representing 20 percent of share capital, at December 31, 2023, are restricted by law and not available for distribution. Treasury stock transactions In July 2020, the Company announced it intended to initially buy 10 percent of its share capital (which at the time represented a maximum of 180 million shares, in addition to those already held in treasury) through the share buyback program that started in July 2020. The initial share buyback program was executed on a second trading line on the SIX Swiss Exchange and was completed in March 2021. Through this buyback program, the Company purchased a total of 129 million shares for approximately $3.5 billion. At the March 2021 AGM, shareholders approved the cancellation of 115 million of the shares purchased under this buyback program and the cancellation was completed in the second quarter of 2021, resulting in a decrease in Treasury stock of $3,157 million and a corresponding total decrease in Capital stock, Additional paid-in capital and Retained earnings. FINANCIAL REPORT 2023 115 In March 2021, the Company announced a follow-up share buyback program of up to $4.3 billion. This buyback program, which was launched in April 2021, was executed on a second trading line on the SIX Swiss Exchange and was completed in March 2022. Through this follow-up buyback program, the Company purchased a total of 90 million shares for approximately $3.1 billion. At the March 2022 AGM, shareholders approved the cancellation of 88 million shares which had been purchased under the share buyback programs. The cancellation was completed in the second quarter of 2022, resulting in a decrease in Treasury stock of $2,876 million and a corresponding total decrease in Capital stock, Additional paid-in capital and Retained earnings. In March 2022, the Company announced a share buyback program of up to $3 billion. This program, which was launched in April 2022, was executed on a second trading line on the SIX Swiss Exchange and was completed in March 2023. Through this buyback program, the Company purchased a total of 67 million shares for approximately $2.0 billion. In the second quarter of 2023 the Company cancelled 83 million shares which had been purchased under its share buyback programs. This resulted in a decrease in Treasury stock of $2,567 million and a corresponding total decrease in Capital stock, Additional paid-in capital and Retained earnings. In March 2023, the Company announced a share buyback program of up to $1 billion. This program, which was launched in April 2023, is being executed on a second trading line on the SIX Swiss Exchange and is planned to run until the Company’s 2024 AGM. Under these buyback programs, in 2023, 2022 and 2021, the Company purchased 25 million, 91 million and 78 million, respectively, of its own shares, resulting in an increase in Treasury stock of $893 million, $2,842 million and $2,651 million, respectively. In addition to the share buyback programs, in 2023, 2022 and 2021, the Company purchased a combined total of 9 million, 20 million and 33 million, respectively, of its own shares on the open market, mainly for use in connection with its employee share plans, resulting in an increase in Treasury stock of $354 million, $660 million and $1,032 million, respectively. Obligations to issue shares relating to employee incentive programs At December 31, 2023, the Company had outstanding obligations to deliver: • up to 12 million shares relating to the options granted under the 2018 launch of the MIP, with a strike price of 22.05 Swiss francs, vested in August 2021 and expiring in August 2024, • up to 3 million shares relating to the options granted under the 2019 launch of the MIP, with a strike price of 17.63 Swiss francs, vested in August 2022 and expiring in August 2025, • up to 2 million shares relating to the ESAP, vesting and expiring in October 2024, • up to 7 million shares to Eligible Participants under the 2023, 2022 and 2021 launches of the LTIP, vesting and expiring in April 2026, April 2025 and April 2024, respectively, and • less than 1 million shares in connection with certain other share-based payment arrangements with employees. In addition to the above obligations, the Company had sold, upon and in connection with each launch of the MIP, call options to a bank at fair value, giving the bank the right to acquire shares equivalent to the number of shares represented by the MIP WAR awards to participants. Under the terms of the agreement with the bank, the call options can only be exercised by the bank to the extent that MIP participants have exercised their WARs. At December 31, 2023, such call options representing 2.7 million shares and with strike prices ranging from 17.63 to 22.05 Swiss francs (weighted-average strike price of 21.11 Swiss francs) were held by the bank. The call options expire in periods ranging from August 2024 to August 2025. See Note 18 for a description of the above share ‑ based payment arrangements. In 2023, 2022 and 2021, the Company delivered 6 million, 16 million and 36 million shares, respectively, out of treasury stock, for options exercised in relation to the MIP. In addition, in 2023 and 2021, the Company delivered 1.3 million and 1.7 million shares, respectively, out of treasury stock for options exercised in relation to the ESAP. The number of shares delivered in 2022 under the ESAP was not significant. 116 FINANCIAL REPORT 2023 Issuance of subsidiary shares In November 2022, the Company received gross proceeds of 203 million Swiss francs ($216 million) through a private placement of shares in its ABB E-Mobility subsidiary, ABB E-mobility Holding Ltd (ABB E-Mobility), reducing the Company's beneficial ownership in the subsidiary from 100 percent to 92 percent. This resulted in an increase in Additional paid-in capital of $120 million. In February 2023, the Company obtained an additional amount of funding raised through the private placement of new shares of ABB E-Mobility, increasing the total gross proceeds by an additional 325 million Swiss francs (approximately $351 million) and further reducing the Company’s ownership in ABB E-Mobility to 81 percent. This resulted in an increase in Additional paid-in capital of $170 million. In December 2023, an agreement was reached to increase the ownership percentage of the investors participating in these private placements to 25 percent for no additional consideration. — Note 20 Earnings per share Basic earnings per share is calculated by dividing income by the weighted ‑ average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing income by the weighted ‑ average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options and outstanding options and shares granted subject to certain conditions under the Company’s share ‑ based payment arrangements. In 2022, outstanding securities representing a maximum of 2 million shares were excluded from the calculation of diluted earnings per share as their inclusion would have been antidilutive. None were excluded in 2023 and 2021. Basic earnings per share: ($ in millions, except per share data in $) 2023 2022 2021 Amounts attributable to ABB shareholders: Income from continuing operations, net of tax 3,769 2,517 4,625 Loss from discontinued operations, net of tax (24) (42) (79) Net income 3,745 2,475 4,546 Weighted-average number of shares outstanding (in millions) 1,855 1,899 2,001 Basic earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 2.03 1.33 2.31 Loss from discontinued operations, net of tax (0.01) (0.02) (0.04) Net income 2.02 1.30 2.27 Diluted earnings per share: ($ in millions, except per share data in $) 2023 2022 2021 Amounts attributable to ABB shareholders: Income from continuing operations, net of tax 3,769 2,517 4,625 Loss from discontinued operations, net of tax (24) (42) (79) Net income 3,745 2,475 4,546 Weighted-average number of shares outstanding (in millions) 1,855 1,899 2,001 Effect of dilutive securities: Call options and shares 12 11 18 Adjusted weighted-average number of shares outstanding (in millions) 1,867 1,910 2,019 Diluted earnings per share attributable to ABB shareholders: Income from continuing operations, net of tax 2.02 1.32 2.29 Loss from discontinued operations, net of tax (0.01) (0.02) (0.04) Net income 2.01 1.30 2.25 FINANCIAL REPORT 2023 117 — Note 21 Other comprehensive income The following table includes amounts recorded within “Total other comprehensive income (loss)” including the related income tax effects: 2023 2022 2021 Before Tax Net of Before Tax Net of Before Tax Net of ($ in millions) tax effect tax tax effect tax tax effect tax Foreign currency translation adjustments: Foreign currency translation adjustments (292) 2 (290) (685) — (685) (521) — (521) Net loss on complete or substantially complete liquidations of foreign subsidiaries — — — 5 — 5 — — — Changes attributable to divestments 9 — 9 41 — 41 (9) — (9) Net change during the year (283) 2 (281) (639) — (639) (530) — (530) Available-for-sale securities: Net unrealized gains (losses) arising during the year 6 (1) 5 (28) 5 (23) (13) 3 (10) Reclassification adjustments for net (gains) losses included in net income 8 (2) 6 2 — 2 (6) 1 (5) Net change during the year 14 (3) 11 (26) 5 (21) (19) 4 (15) Pension and other postretirement plans: Prior service (costs) credits arising during the year 1 (2) (1) (2) 2 — 2 (2) — Net actuarial gains (losses) arising during the year (339) 57 (282) 298 (72) 226 437 (26) 411 Amortization of prior service cost (credit) included in net income (11) 2 (9) (13) (3) (16) (14) — (14) Amortization of net actuarial loss included in net income 48 (10) 38 55 (11) 44 65 4 69 Net losses from settlements and curtailments included in net income 16 (2) 14 11 (2) 9 7 — 7 Changes attributable to divestments 3 — 3 (8) — (8) (8) 2 (6) Net change during the year (282) 45 (237) 341 (86) 255 489 (22) 467 Derivative instruments and hedges: Net gains (losses) arising during the year (11) 1 (10) (10) (2) (12) 7 1 8 Reclassification adjustments for net (gains) losses included in net income 8 — 8 12 — 12 (13) — (13) Net change during the year (3) 1 (2) 2 (2) — (6) 1 (5) Total other comprehensive income (loss) (554) 45 (509) (322) (83) (405) (66) (17) (83) 118 FINANCIAL REPORT 2023 The following table shows changes in Accumulated other comprehensive loss (OCI) attributable to ABB, by component, net of tax: Unrealized Pension and Foreign gains (losses) other post- Accumulated currency on available- retirement Derivative other translation for-sale plan instruments comprehensive ($ in millions) adjustments securities adjustments and hedges loss Balance at January 1, 2021 (2,460) 17 (1,556) (3) (4,002) Other comprehensive (loss) income before reclassifications (521) (10) 411 8 (112) Amounts reclassified from OCI (9) (5) 56 (13) 29 Total other comprehensive (loss) income (530) (15) 467 (5) (83) Less: Amounts attributable to noncontrolling interests 4 — — — 4 Balance at December 31, 2021 (1) (2,993) 2 (1,089) (8) (4,088) Other comprehensive (loss) income before reclassifications (685) (23) 226 (12) (494) Amounts reclassified from OCI 46 2 29 12 89 Total other comprehensive (loss) income (639) (21) 255 — (405) Spin-off of the Turbocharging Division (93) — (5) — (98) Less: Amounts attributable to noncontrolling interests (34) — (1) — (35) Balance at December 31, 2022 (3,691) (19) (838) (8) (4,556) Other comprehensive (loss) income before reclassifications (290) 5 (283) (10) (578) Amounts reclassified from OCI 9 6 46 8 69 Total other comprehensive (loss) income (281) 11 (237) (2) (509) Less: Amounts attributable to noncontrolling interests and redeemable noncontrolling interests 5 — — — 5 Balance at December 31, 2023 (3,977) (8) (1,075) (10) (5,070) (1) Due to rounding, numbers presented may not add to the totals provided. The following table reflects amounts reclassified out of OCI in respect of Foreign currency translation adjustments and Pension and other postretirement plan adjustments: ($ in millions) Location of (gains) losses Details about OCI components reclassified from OCI 2023 2022 2021 Foreign currency translation adjustments: Net loss on complete or substantially complete liquidations of foreign subsidiaries Other income (expense), net — 5 — Changes attributable to divestments Other income (expense), net 9 41 (9) Amounts reclassified from OCI 9 46 (9) Pension and other postretirement plan adjustments: Amortization of prior service cost (credit) Non-operational pension (cost) credit (11) (13) (14) Amortization of net actuarial loss Non-operational pension (cost) credit 48 55 65 Net losses from settlements and curtailments Non-operational pension (cost) credit 16 11 7 Changes attributable to divestments Other income (expense), net 3 (8) (8) Total before tax 56 45 50 Tax Income tax expense (10) (16) 4 Changes in tax attributable to divestments Other income (expense), net — — 2 Amounts reclassified from OCI 46 29 56 The amounts reclassified out of “OCI in respect of Unrealized gains (losses) on available ‑ for ‑ sale securities” and “Derivative instruments and hedges” were not significant in 2023, 2022 and 2021. FINANCIAL REPORT 2023 119 — Note 22 Restructuring and related expenses Restructuring-related activities In 2023, 2022 and 2021, the Company executed various restructuring ‑ related activities and incurred the following charges, net of changes in estimates: ($ in millions) 2023 2022 2021 Employee severance costs 120 81 101 Estimated contract settlement, loss order and other costs 7 209 31 Inventory and long-lived asset impairments 49 7 24 Total 176 297 156 Expenses associated with these activities are recorded in the following line items in the Consolidated Income Statements: ($ in millions) 2023 2022 2021 Total cost of sales 65 24 71 Selling, general and administrative expenses 52 40 21 Non-order related research and development expenses 3 2 2 Other income (expense), net 56 231 62 Total 176 297 156 In 2022, the Company completed a plan (initiated in 2021) to fully exit its full train retrofit business by transferring the remaining contracts to a third party. The Company recorded $195 million of restructuring expenses in connection with this business exit primarily for contract settlement costs. Prior to exiting this business, the business was reported as part of the Company’s non-core business activities within Corporate and Other. At December 31, 2023 and 2022, $250 million and $198 million, respectively, was recorded for restructuring-related liabilities and is primarily included in Other provisions. — Note 23 Operating segment and geographic data The Chief Operating Decision Maker (CODM) is the Chief Executive Officer. The CODM allocates resources to and assesses the performance of each operating segment using the information outlined below. The Company is organized into the following segments, based on products and services: Electrification, Motion, Process Automation and Robotics & Discrete Automation. The remaining operations of the Company are included in Corporate and Other. Effective January 1, 2023, the E-mobility Division is no longer managed within the Electrification segment and has become a separate operating segment. This new segment does not currently meet any of the size thresholds to be considered a reportable segment and as such is presented within Corporate and Other. The segment information for 2022 and 2021, and at December 31, 2022 and 2021, has been recast to reflect this change. A description of the types of products and services provided by each reportable segment is as follows: • Electrification: manufactures and sells electrical products and solutions which are designed to provide safe, smart and sustainable electrical flow from the substation to the socket. The portfolio of increasingly digital and connected solutions includes renewable power solutions, modular substation packages, distribution automation products, switchboards and panelboards, switchgear, UPS solutions, circuit breakers, measuring and sensing devices, control products, wiring accessories, enclosures and cabling systems and intelligent home and building solutions, designed to integrate and automate lighting, heating, ventilation, security and data communication networks. The products and services are delivered through six operating Divisions: Distribution Solutions, Smart Power, Smart Buildings, Installation Products, and Service, as well as, prior to its sale in July 2023, the Power Conversion Division. 120 FINANCIAL REPORT 2023 • Motion: designs, manufactures and sells drives, motors, generators and traction converters that are driving the low-carbon future for industries, cities, infrastructure and transportation. These products, digital technology and related services enable industrial customers to increase energy efficiency, improve safety and reliability, and achieve precise control of their processes. Building on over 140 years of cumulative experience in electric powertrains, Motion combines domain expertise and technology to deliver the optimum solution for a wide range of applications in all industrial segments. In addition, Motion, along with its partners, has a leading global service presence. These products and services are delivered through seven operating Divisions: Large Motors and Generators, IEC LV Motors, NEMA Motors, Drive Products, System Drives, Service, and Traction, as well as, prior to its sale in November 2021, the Mechanical Power Transmission Division. • Process Automation: offers a broad range of industry-specific, integrated automation, electrification and digital solutions, as well as lifecycle services for the process, hybrid and marine industries. The product portfolio includes control technologies, industrial software, advanced analytics, sensing and measurement technology, and marine propulsion systems. In addition, Process Automation offers a comprehensive range of services, from repair to advanced digital capabilities such as remote monitoring, preventive maintenance, asset performance management, emission monitoring and cybersecurity. The products, systems and services are currently delivered through four operating Divisions: Energy Industries, Process Industries, Marine & Ports and Measurement & Analytics, as well as, prior to its spin-off in October 2022, the Turbocharging Division. • Robotics & Discrete Automation: delivers its products, solutions and services through two operating Divisions: Robotics provides industrial and collaborative robots, autonomous mobile robotics, mapping and navigation solutions, robotic solutions, field services, spare parts and digital services. Machine Automation specializes in automation solutions based on its programmable logic controllers (PLC), industrial PCs (IPC), servo motion, transport systems and machine vision. Both divisions offer software across the entire life cycle, including engineering and simulation software as well as a comprehensive range of digital solutions. Corporate and Other: Corporate includes headquarter costs, the Company’s corporate real estate activities and Corporate Treasury while Other includes the E-mobility operating segment, other non- core operating activities as well as the operating activities of certain divested businesses. The primary measure of profitability on which the operating segments are evaluated is Operational EBITA, which represents income from operations excluding: • amortization expense on intangibles arising upon acquisition (acquisition-related amortization), • restructuring, related and implementation costs, • changes in the amount recorded for obligations related to divested businesses occurring after the divestment date (changes in obligations related to divested businesses), • gains and losses from sale of businesses (including fair value adjustment on assets and liabilities held for sale, if any), • acquisition- and divestment-related expenses and integration costs, • certain other non-operational items, as well as • foreign exchange/commodity timing differences in income from operations consisting of: (a) unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (c) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities). Certain other non-operational items generally includes certain regulatory, compliance and legal costs, certain asset write downs/impairments and certain other fair value changes, changes in estimates relating to opening balance sheets of acquired businesses (changes in pre-acquisition estimates), as well as other items which are determined by management on a case ‑ by ‑ case basis. The CODM primarily reviews the results of each segment on a basis that is before the elimination of profits made on inventory sales between segments. Segment results below are presented before these eliminations, with a total deduction for intersegment profits to arrive at the Company’s consolidated Operational EBITA. Intersegment sales and transfers are accounted for as if the sales and transfers were to third parties, at current market prices. FINANCIAL REPORT 2023 121 The following tables present disaggregated segment revenues from contracts with customers for 2023, 2022 and 2021: 2023 ($ in millions) Electrification Motion Process Automation Robotics & Discrete Automation Corporate and Other (1) Total Geographical markets Europe 4,547 2,455 2,294 1,932 340 11,568 The Americas 5,926 2,562 1,738 573 291 11,090 of which: United States 4,456 2,123 1,076 358 235 8,248 Asia, Middle East and Africa 3,899 2,276 2,212 1,119 71 9,577 of which: China 1,775 1,148 707 804 34 4,468 14,372 7,293 6,244 3,624 702 32,235 Product type Products 13,437 6,219 3,661 3,063 630 27,010 Services and other 935 1,074 2,583 561 72 5,225 14,372 7,293 6,244 3,624 702 32,235 Third-party revenues 14,372 7,293 6,244 3,624 702 32,235 Intersegment revenues 212 521 26 16 (775) — Total revenues 14,584 7,814 6,270 3,640 (73) 32,235 2022 ($ in millions) Electrification Motion Process Automation Robotics & Discrete Automation Corporate and Other (1) Total Geographical markets Europe 4,199 2,031 2,248 1,494 313 10,285 The Americas 5,140 2,148 1,566 524 195 9,573 of which: United States 3,769 1,787 943 373 151 7,023 Asia, Middle East and Africa 4,053 2,101 2,199 1,155 80 9,588 of which: China 1,948 1,147 666 897 38 4,696 13,392 6,280 6,013 3,173 588 29,446 Product type Products 12,535 5,380 3,311 2,695 550 24,471 Services and other 857 900 2,702 478 38 4,975 13,392 6,280 6,013 3,173 588 29,446 Third-party revenues 13,392 6,280 6,013 3,173 588 29,446 Intersegment revenues 227 465 31 8 (731) — Total revenues 13,619 6,745 6,044 3,181 (143) 29,446 122 FINANCIAL REPORT 2023 2021 ($ in millions) Electrification Motion Process Automation Robotics & Discrete Automation Corporate and Other (1) Total Geographical markets Europe 4,371 2,015 2,416 1,578 149 10,529 The Americas 4,379 2,346 1,431 439 91 8,686 of which: United States 3,234 1,952 833 308 70 6,397 Asia, Middle East and Africa 3,907 2,111 2,367 1,270 75 9,730 of which: China 2,055 1,156 740 949 32 4,932 12,657 6,472 6,214 3,287 315 28,945 Product type Products 11,773 5,555 3,298 2,804 315 23,745 Services and other 884 917 2,916 483 — 5,200 12,657 6,472 6,214 3,287 315 28,945 Third-party revenues 12,657 6,472 6,214 3,287 315 28,945 Intersegment revenues 237 453 45 10 (745) — Total revenues 12,894 6,925 6,259 3,297 (430) 28,945 (1) The amounts shown for “Intersegment revenues” within Corporate and Other primarily represents the consolidated intersegment revenue elimination. These amounts include intersegment revenues of $67 million, $65 million and $33 million for 2023, 2022 and 2021, respectively. Revenues by geography reflect the location of the customer. In 2023, 2022 and 2021 the United States and China are the only countries where revenue exceeded 10 percent of total revenues. In each of 2023, 2022 and 2021 more than 98 percent of the Company’s total revenues were generated from customers outside Switzerland. FINANCIAL REPORT 2023 123 The following tables present Operational EBITA, the reconciliations of consolidated Operational EBITA to Income from continuing operations before taxes, as well as Depreciation and amortization, and Capital expenditures for 2023, 2022 and 2021, and Total assets at December 31, 2023, 2022 and 2021: ($ in millions) 2023 2022 2021 Operational EBITA: Electrification 2,937 2,343 2,120 Motion 1,475 1,163 1,183 Process Automation 909 848 801 Robotics & Discrete Automation 536 340 355 Corporate and Other: — E-mobility (167) (15) 1 — Corporate costs, intersegment elimination and other (263) (169) (338) Total 5,427 4,510 4,122 Acquisition-related amortization (220) (229) (250) Restructuring, related and implementation costs (1) (219) (347) (160) Changes in obligations related to divested businesses 3 88 (9) Gains and losses from sale of businesses 101 (7) 2,193 Acquisition- and divestment-related expenses and integration costs (74) (195) (132) Foreign exchange/commodity timing differences in income from operations: Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives) 19 32 (54) Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized 12 (48) (2) Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities) (13) (15) 20 Certain other non-operational items: Other income/expenses relating to the Power Grids joint venture 36 (57) (34) Regulatory, compliance and legal costs — (317) — Business transformation costs (2) (205) (152) (92) Changes in pre-acquisition estimates (4) (10) 6 Gains and losses from sale of investments in equity-accounted companies — 43 — Certain other fair value changes, including asset impairments (10) 45 119 Other non-operational items 18 (4) (9) Income from operations 4,871 3,337 5,718 Interest and dividend income 165 72 51 Interest and other finance expense (275) (130) (148) Non-operational pension (cost) credit 17 115 166 Income from continuing operations before taxes 4,778 3,394 5,787 (1) Amounts in 2023 and 2022 include impairment of certain assets. (2) Amounts in 2023, 2022 and 2021 include ABB Way process transformation costs of $188 million, $131 million and $80 million, respectively. Depreciation and Total assets (1),(2) amortization Capital expenditures (1) at December 31, ($ in millions) 2023 2022 2021 2023 2022 2021 2023 2022 2021 Electrification 365 382 416 386 343 314 12,668 12,500 12,096 Motion 149 141 172 171 150 230 7,016 6,565 5,936 Process Automation 56 75 83 66 100 85 4,971 4,598 5,009 Robotics & Discrete Automation 138 141 144 71 86 96 5,047 4,901 4,860 Corporate and Other 72 75 78 76 83 95 11,238 10,584 12,359 Consolidated 780 814 893 770 762 820 40,940 39,148 40,260 (1) Capital expenditures and Total assets are after intersegment eliminations and therefore reflect third-party activities only. (2) At December 31, 2021, Corporate and Other included $1,609 million related to the equity investment in Hitachi Energy, which was subsequently sold in December 2022 (see Note 4). 124 FINANCIAL REPORT 2023 Other geographic information Geographic information for long-lived assets was as follows: Long-lived assets at December 31, ($ in millions) 2023 2022 Europe 2,762 2,533 The Americas 1,335 1,256 Asia, Middle East and Africa 938 963 Total 5,035 4,752 Long ‑ lived assets represent Property, plant and equipment, net and Operating lease right-of-use assets and are shown by location of the assets. At December 31, 2023, approximately 19 percent, 11 percent and 9 percent of the Company’s long ‑ lived assets were located in the United States, China and Switzerland, respectively. At December 31, 2022, approximately 20 percent, 13 percent and 8 percent of the Company’s long ‑ lived assets were located in the United States, China and Switzerland, respectively. — Note 24 Subsequent events Debt On January 15, 2024, the Company issued the following EUR Instruments: (i) EUR 500 million 3.125 percent Notes, due 2029, and (ii) EUR 750 million 3.375 percent Notes, due 2034, both paying interest annually in arrears. The aggregate net proceeds of these EUR Instruments, after discount and fees, amounted to EUR 1,243 million (equivalent to approximately $1,360 million on date of issuance). Stockholders’ equity In February 2024, the Company announced that a proposal will be put to the 2024 AGM for approval by the shareholders to distribute 0.87 Swiss francs per share to shareholders. FINANCIAL REPORT 2023 125 03 ABB Ltd Statutory Financial Statements 126 ABB Ltd Management Report 127 Financial statements and Notes 139 Proposed appropriation of available earnings 140 Report of the Statutory Auditor on the Financial Statements 126 FINANCIAL REPORT 2023 — ABB Ltd Management Report 2023 ABB Ltd is the holding company of the ABB Group, owning directly or indirectly all subsidiaries globally. The major business activities during 2023 can be summarized as follows: Management services The Company provided management services to Group companies for CHF 26 million. Share transactions • share deliveries in relation to employee share programs of CHF 302 million • share cancellations of CHF 2,390 million: those shares were repurchased under share buyback programs in 2022 and 2023 • share repurchases of CHF 804 million for cancellation purposes • share repurchases for employee share programs of CHF 310 million Dividend distribution to external shareholders • from retained earnings of CHF 1,404 million Dividend received from subsidiaries As planned, ABB Asea Brown Boveri Ltd did not distribute any dividend to ABB Ltd in 2023. This contributed to a Net loss of CHF 86 million in 2023. Other information In 2023, the Company employed on average 19 employees. Once a year, the Company’s Board of Directors performs a risk assessment in accordance with the Group’s risk management process and discusses appropriate actions if necessary. The Company does not carry out any research and development activities. In 2024, the Company will continue to operate as the holding company of the ABB Group. No change of business is expected. February 22, 2024 FINANCIAL REPORT 2023 127 — Financial Statements 2023 Income Statement Year ended December 31 (CHF in thousands) Note 2023 2022 Dividend income 7 — 4,504,256 Finance income 126,228 141,294 Other operating income 8 31,718 51,730 Gain on sale of participation 2 536 55,199 Total income 158,482 4,752,479 Personnel expenses (58,981) (50,789) Finance expense (169,504) (282,552) Other operating expenses 9 (15,705) (340,983) Total expenses (244,190) (674,324) Net (loss)/income before taxes (85,708) 4,078,155 Income taxes — (153) Net (loss)/income (85,708) 4,078,002 128 FINANCIAL REPORT 2023 Balance Sheet December 31 (CHF in thousands) Note 2023 2022 Cash 545 282,220 Cash deposit with ABB Capital Ltd 189,664 406,029 Non-trade receivables 81 1,220 Non-trade receivables – Group 48,750 11,495 Short-term loans – Group 271,814 1,423,060 Accrued income and prepaid expenses 1,440 223 Accrued income and prepaid expenses – Group 195 672 Total current assets 512,489 2,124,919 Long-term loans – Group — 299,780 Participations 2 5,709,367 5,709,367 Other non-current assets 5,102 3,816 Total non-current assets 5,714,469 6,012,963 Total assets 6,226,958 8,137,882 Interest-bearing liabilities 4 280,013 275,000 Interest-bearing liabilities – Group 4 271,814 23,060 Non-trade payables 29,974 40,022 Non-trade payables – Group 1,696 6,138 Current provisions 35,030 60,102 Deferred income and accrued expenses 33,109 14,449 Deferred income and accrued expenses – Group 12,520 24,862 Total current liabilities 664,156 443,633 Interest-bearing liabilities 4 1,645,534 1,175,698 Interest-bearing liabilities – Group 4 — 299,780 Total non-current liabilities 1,645,534 1,475,478 Total liabilities 2,309,690 1,919,111 Share capital 6 225,840 235,769 Legal reserves from retained earnings 6 1,000,000 1,000,000 Treasury shares 6 (1,290,941) (2,869,196) Available earnings Retained earnings 6 4,068,077 3,774,196 Net (loss)/income (85,708) 4,078,002 Total stockholders' equity 3,917,268 6,218,771 Total liabilities and stockholders’ equity 6,226,958 8,137,882 FINANCIAL REPORT 2023 129 — Notes to Financial Statements — Note 1 General ABB Ltd, Zurich, Switzerland (the Company) is the parent company of the ABB Group. Its stand-alone financial statements are prepared in accordance with Article 957 et seqq. of Title 32 of the Swiss Code of Obligations. Group companies are all companies which are directly or indirectly controlled by the Company and any variable interest entities if it is determined that the Company is the primary beneficiary. — Note 2 Participations 2023 2022 Company name Purpose Domicile Share capital Ownership and voting rights Share capital Ownership and voting rights ABB Asea Brown Boveri Ltd Holding CH-Zurich CHF 2,767,880,000 100.00% CHF 2,767,880,000 100.00% Participations are valued at the lower of cost or fair value, using generally accepted valuation principles. On July 1, 2020, the Company completed the sale of 80.1 percent of Hitachi Energy Ltd (formerly Hitachi ABB Power Grids Ltd). The transaction was executed through the sale of 80.1 percent of the shares of Hitachi Energy Ltd. In September 2022, the Company and Hitachi agreed terms to sell the Company’s remaining investment in Hitachi Energy Ltd to Hitachi and simultaneously settle certain outstanding contractual obligations relating to the initial sale of the Power Grids business. The sale of the remaining investment was completed in December 2022, resulting in net cash proceeds of CHF 1,440 million and a gain of CHF 55 million which was recorded in “Gain on sale of participations”. — Note 3 Indirect Participations The following table sets forth the name, country of incorporation, ownership and voting rights, as well as share capital, of the significant indirect subsidiaries of the Company, as of December 31, 2023 and 2022. Company name/Location Country Company ownership and voting rights % 2023 Share capital in thousands 2023 Company ownership and voting rights % 2022 Share capital in thousands 2022 Currency ABB Australia Pty Limited, Moorebank Australia 100.00 131,218 100.00 131,218 AUD ABB Group Holdings Pty. Ltd., Moorebank Australia 100.00 537,988 (8) 100.00 552,982 AUD ABB Group Investment Management Pty. Ltd., Moorebank Australia 100.00 520,318 (8) 100.00 505,312 AUD ABB AG, Wiener Neudorf Austria 100.00 15,000 100.00 15,000 EUR B&R Holding GmbH, Eggelsberg Austria 100.00 35 100.00 35 EUR B&R Industrial Automation GmbH, Eggelsberg Austria 100.00 1,240 100.00 1,240 EUR ABB N.V., Zaventem Belgium 100.00 4,000 100.00 4,000 EUR ABB AUTOMAÇÃO LTDA., Sorocaba Brazil 100.00 191,039 100.00 191,039 BRL 130 FINANCIAL REPORT 2023 Company name/Location Country Company ownership and voting rights % 2023 Share capital in thousands 2023 Company ownership and voting rights % 2022 Share capital in thousands 2022 Currency ABB ELETRIFICAÇÃO LTDA., Sorocaba Brazil 100.00 268,759 100.00 268,759 BRL ABB Bulgaria EOOD, Sofia Bulgaria 100.00 65,110 100.00 65,110 BGN ABB Electrification Canada Inc., Saint-Laurent (2) Canada 100.00 — (1) 100.00 — (1) CAD ABB Inc., Saint-Laurent Canada 100.00 — (1) 100.00 — (1) CAD ABB S.A., Santiago Chile 100.00 5,484,348 100.00 5,484,348 CLP ABB (China) Investment Limited, Beijing China 100.00 95,000 100.00 95,000 USD ABB (China) Ltd., Beijing China 100.00 140,000 100.00 140,000 USD ABB Beijing Drive Systems Co. Ltd., Beijing China 90.00 5,000 90.00 5,000 USD ABB Beijing Switchgear Limited, Beijing China 60.00 16,500 60.00 16,500 USD ABB Electrical Machines Ltd., Shanghai China 100.00 14,400 100.00 14,400 USD ABB Engineering (Shanghai) Ltd., Shanghai China 100.00 40,000 100.00 40,000 USD ABB LV Installation Materials Co. Ltd. Beijing, Beijing China 85.70 17,100 85.70 17,100 USD ABB Shanghai Free Trade Zone Industrial Co., Ltd., Shanghai China 100.00 6,500 100.00 6,500 CNY ABB Shanghai Motors Co. Ltd., Shanghai China 75.00 11,217 75.00 11,217 USD ABB Xiamen Low Voltage Equipment Co. Ltd., Xiamen China 100.00 15,800 100.00 15,800 USD ABB Xiamen Switchgear Co. Ltd., Xiamen China 66.52 29,500 66.52 29,500 USD ABB Xinhui Low Voltage Switchgear Co. Ltd., Xinhui China 90.00 6,200 90.00 6,200 USD ABB s.r.o., Prague Czech Republic 100.00 400,000 100.00 400,000 CZK ABB A/S, Skovlunde Denmark 100.00 100,000 100.00 100,000 DKK ABB for Electrical Industries (ABB ARAB) S.A.E., Cairo Egypt 100.00 353,479 100.00 353,479 EGP Asea Brown Boveri S.A.E., Cairo Egypt 100.00 166,000 100.00 166,000 USD ABB AS, Jüri Estonia 100.00 1,663 100.00 1,663 EUR ABB Oy, Helsinki Finland 100.00 10,003 100.00 10,003 EUR ABB France, Cergy Pontoise France 99.84 25,778 99.84 25,778 EUR ABB SAS, Cergy Pontoise France 100.00 45,921 100.00 45,921 EUR ABB AG, Mannheim Germany 100.00 167,500 100.00 167,500 EUR ABB Beteiligungs- und Verwaltungsgesellschaft mbH, Mannheim Germany 100.00 61,355 100.00 61,355 EUR ABB Stotz-Kontakt GmbH, Heidelberg Germany 100.00 7,500 100.00 7,500 EUR ABB Striebel & John GmbH, Sasbach Germany 100.00 1,050 100.00 1,050 EUR B + R Industrie-Elektronik GmbH, Bad Homburg Germany 100.00 358 100.00 358 EUR Busch-Jaeger Elektro GmbH, Lüdenscheid Germany 100.00 1,535 100.00 1,535 EUR ABB Engineering Trading and Service Ltd., Budapest Hungary — (3) — (3) 100.00 436,281 HUF ABB Global Business Services and Contracting India Private Limited, Bangalore India 100.00 5,200,100 100.00 5,200,100 INR ABB Global Industries and Services Private Limited, Bangalore India 100.00 366,923 100.00 366,923 INR ABB India Limited, Bangalore India 75.00 423,817 75.00 423,817 INR ABB Limited, Dublin Ireland 100.00 635 — (3) — (3) EUR ABB E-mobility S.p.A., Milan Italy 74.70 20,000 91.56 20,000 EUR ABB S.p.A., Milan Italy 100.00 110,000 100.00 110,000 EUR ABB K.K., Tokyo Japan 100.00 1,000,000 100.00 1,000,000 JPY ABB Ltd., Seoul Korea, Republic of 100.00 23,670,000 100.00 23,670,000 KRW ABB Electrical Control Systems S. de R.L. de C.V., Monterrey Mexico 100.00 712,463 100.00 712,463 MXN ABB Mexico S.A. de C.V., San Luis Potosi Mexico 100.00 1,135,752 100.00 1,135,752 MXN Asea Brown Boveri S.A. de C.V., San Luis Potosi Mexico 100.00 667,686 100.00 667,686 MXN ABB B.V., Rotterdam Netherlands 100.00 9,200 100.00 9,200 EUR ABB E-mobility B.V., Delft Netherlands 74.70 1 91.56 1 EUR ABB Finance B.V., Rotterdam Netherlands 100.00 20 100.00 20 EUR ABB Holdings B.V., Rotterdam Netherlands 100.00 363 100.00 363 EUR ABB AS, Fornebu Norway 100.00 134,550 100.00 134,550 NOK ABB Electrification Norway AS, Skien Norway 100.00 60,450 100.00 60,450 NOK ABB Holding AS, Fornebu Norway 100.00 240,000 100.00 240,000 NOK ABB Business Services Sp. z o.o., Warsaw Poland 99.94 24 99.94 24 PLN ABB Industrial Solutions (Klodzko) Sp. z o.o., Klodzko Poland — (3) — (3) 99.94 50 PLN ABB Sp. z o.o., Warsaw Poland 99.94 245,461 99.94 245,461 PLN FINANCIAL REPORT 2023 131 Company name/Location Country Company ownership and voting rights % 2023 Share capital in thousands 2023 Company ownership and voting rights % 2022 Share capital in thousands 2022 Currency Industrial C&S of P.R. LLC, Arecibo (5) Puerto Rico 100.00 — (1) 100.00 — (1) USD ABB Electrical Industries Co. Ltd., Riyadh Saudi Arabia 65.00 181,000 65.00 181,000 SAR ABB Pte. Ltd., Singapore Singapore 100.00 32,797 100.00 32,797 SGD ABB Holdings (Pty) Ltd., Modderfontein South Africa 100.00 217,758 100.00 217,758 ZAR ABB Investments (Pty) Ltd., Modderfontein South Africa 51.00 185,978 51.00 185,978 ZAR ABB South Africa (Pty) Ltd., Modderfontein South Africa 74.91 3,835,544 74.91 261,000 ZAR Asea Brown Boveri S.A., Madrid Spain 100.00 33,318 100.00 33,318 EUR ABB AB, Västerås Sweden 100.00 200,000 100.00 200,000 SEK ABB Electrification Sweden AB, Västerås Sweden 100.00 10,000 100.00 10,000 SEK ABB Norden Holding AB, Västerås Sweden 100.00 2,344,783 100.00 2,344,783 SEK ABB Canada EL Holding GmbH, Zurich Switzerland — (4) — (4) 100.00 1,000 CHF ABB Capital AG, Zurich Switzerland 100.00 100 100.00 100 CHF ABB E-mobility Holding Ltd, Zurich (6) Switzerland 74.70 1,138 91.56 1,003 CHF ABB Information Systems Ltd., Zurich Switzerland — (3) — (3) 100.00 500 CHF ABB Management Services Ltd., Zurich Switzerland — (3) — (3) 100.00 571 CHF ABB Schweiz AG, Baden Switzerland 100.00 55,000 100.00 55,000 CHF ABB Ltd., Taipei Taiwan (Chinese Taipei) 100.00 195,000 100.00 195,000 TWD ABB Elektrik Sanayi A.S., Istanbul Turkiye 99.99 165,000 99.99 240,076 TRY ABB Industries (L.L.C.), Dubai United Arab Emirates 49.00 (7) 5,000 (7) 49.00 (7) 5,000 (7) AED ABB Industries FZE, Dubai United Arab Emirates 100.00 3,000 — (3) — (3) AED ABB Holdings Limited, Warrington United Kingdom 100.00 226,014 100.00 226,014 GBP ABB Limited, Warrington United Kingdom 100.00 120,000 100.00 120,000 GBP ABB E-mobility Inc., Wilmington, DE United States 74.70 — (1) 91.56 — (1) USD ABB Finance (USA) Inc., Wilmington, DE United States 100.00 1 100.00 1 USD ABB Holdings Inc., Cary, NC United States 100.00 2 100.00 2 USD ABB Inc., Cary, NC United States 100.00 1 100.00 1 USD ABB Installation Products Inc., Memphis, TN United States 100.00 1 100.00 1 USD ABB Motors and Mechanical Inc., Fort Smith, AR United States 100.00 — (1) 100.00 — (1) USD ABB Treasury Center (USA), Inc., Wilmington, DE United States 100.00 1 100.00 1 USD Edison Holding Corporation, Wilmington, DE United States 100.00 — (1) 100.00 — (1) USD Industrial Connections & Solutions LLC, Cary, NC United States 100.00 — (1) 100.00 — (1) USD (1) Shares without par value. (2) In 2023, name and location changed from ABB Electrification Canada ULC, Edmonton to ABB Electrification Canada Inc., Saint-Laurent. (3) Based on the internally defined thresholds, these indirect participations are considered not significant, and therefore no details to these participations are disclosed in the respective year. (4) Participation was either sold, liquidated or merged in 2023. (5) In 2023, location changed from San Juan to Arecibo. (6) In 2023, location changed from Baden to Zurich. (7) Company consolidated as ABB exercises full management control. (8) Share capital adjusted to current facts and circumstances. 132 FINANCIAL REPORT 2023 — Note 4 Interest-bearing liabilities December 31 (CHF in thousands) 2023 2022 Bonds 2019 – 2024 0.3% coupon nominal value 280,000 280,000 premium on issuance 13 34 Bonds 2019 – 2029 1.0% coupon nominal value 170,000 170,000 premium on issuance 115 135 Bonds 2022 – 2023 zero interest nominal value — 275,000 premium on issuance — — Bonds 2022 – 2027 0.75% coupon nominal value 425,000 425,000 premium on issuance 393 496 Bonds 2022 – 2025 2.10% coupon nominal value 150,000 150,000 premium on issuance 7 11 Bonds 2022 – 2030 2.375% coupon nominal value 150,000 150,000 premium on issuance 19 22 Bonds 2023 – 2026 1.965% coupon nominal value 325,000 — premium on issuance — — Bonds 2023 – 2028 1.9775% coupon nominal value 150,000 — premium on issuance — — Bonds 2023 – 2033 2.1125% coupon nominal value 275,000 — premium on issuance — — Loan 2016 – 2024 $325 million (in 2022 $350 million) 271,814 322,840 Total 2,197,361 1,773,538 Bonds are valued at nominal value. Any bond premium is accrued over the duration of the bond so that at maturity, the balance sheet amount will equal the amount that is due to be paid. In September 2023, the Company repaid its CHF 275 million of zero interest bonds at maturity. In September 2023, the Company issued the following bonds: (i) CHF 325 million 1.965% bonds due in 2026, (ii) CHF 150 million 1.9775% bonds due in 2028 and (iii) CHF 275 million 2.1125% bonds due in 2033. Each of the respective bonds pays interest annually. The Company has the option, three months before their maturity date, to redeem each of these bonds, in whole but not in part, at par plus accrued interest. Further, the Company has the option to redeem the above bonds prior to maturity, in whole but not in part, at par plus accrued interest, if 85% or more of the aggregate principal amount of the relevant bond issue has been redeemed or purchased and cancelled at the time of the option exercise notice. In October 2022, the Company issued the following bonds: (i) CHF 150 million 2.1% bonds due in 2025 and (ii) CHF 150 million 2.375% bonds due in 2030. Each of the respective bonds pays interest annually. The Company has the option, three months before their maturity date, to redeem each of these bonds, in whole but not in part, at par plus accrued interest. Further, the Company has the option to redeem the above bonds prior to maturity, in whole but not in part, at par plus accrued interest, if 85% or more of the aggregate principal amount of the relevant bond issue has been redeemed or purchased and cancelled at the time of the option exercise notice. In March 2022, the Company issued the following bonds: (i) CHF 275 million zero interest bonds due in 2023 and (ii) CHF 425 million 0.75% bonds due in 2027. The 0.75% coupon on the CHF 425 million bonds is paid annually. The Company has the option, one month before their maturity date to redeem the 2027 bonds, in whole but not in part, at par plus accrued interest. Further, the Company has the option to redeem the 2027 bonds prior to maturity, in whole but not in part, at par plus accrued interest, if 85% or more of the aggregate principal amount of the relevant bond issue has been redeemed or purchased and cancelled at the time of the option exercise notice. In February 2019, the Company issued the following bonds: (i) CHF 280 million 0.3% bonds due in 2024 and (ii) CHF 170 million 1.0% bonds due in 2029. Each of the respective bonds pays interest annually in August and May respectively. The Company has the option, one month before their maturity date in case of the 2024 bonds and three months before their maturity date in the case of the 2029 bonds, to redeem the bonds, in whole but not in part, at par plus accrued interest. Further, the Company has the option to redeem the above bonds prior to maturity, in whole but not in part, at par plus accrued interest, if 85% or more of the aggregate principal amount of the relevant bond issue has been redeemed or purchased and cancelled at the time of the option exercise notice. FINANCIAL REPORT 2023 133 In 2016, the Company entered into a borrowing agreement of USD 500 million with ABB Capital Ltd that expires in 2024 (with an amortization schedule of USD 25 million per annum) to hedge a USD 500 million loan granted to a Group company. In each of 2023 and 2022, the Company repaid USD 25 million. The average interest in 2023 and 2022 was 6.01% and 2.65%, respectively. — Note 5 Contingent liabilities With certain Group companies, the Company has keep-well agreements. A keep-well agreement is a shareholder agreement between the Company and a Group company. These agreements provide for maintenance of a minimum net worth in the Group company and the maintenance of 100% direct or indirect ownership by the Company. The keep-well agreements additionally provide that if at any time the Group company has insufficient liquid assets to meet any payment obligation on its debt (as defined in the agreements) and has insufficient unused commitments under its credit facilities with its lenders, the Company will make available to the Group company sufficient funds to enable it to fulfill such payment obligation as it falls due. A keep-well agreement is not a guarantee by the Company for payment of the indebtedness, or any other obligation, of a Group company. No party external to the ABB Group is a party to any keep-well agreement. The Company has also provided certain guarantees securing the performance of Group companies in connection with commercial paper programs, indentures or other debt instruments to enable them to fulfill the payment obligations under such instruments as they fall due. The amount guaranteed under these instruments was CHF 4,534 million as of December 31, 2023, and CHF 5,590 million as of December 31, 2022. Additionally, the Company has provided certain guarantees securing the performance of contracts and undertakings of Group companies with third parties entered into in the normal course of business with an aggregate value of CHF 67 million as per December 31, 2023, and CHF 73 million as per December 31, 2022. Furthermore, the Company is the guarantor in the Group’s USD 2 billion multicurrency revolving credit facility (“Group Facility”). In December 2019, the Group Facility maturing in 2021 was replaced with a new Group Facility maturing in 2024, with the option in 2020 and 2021 to extend the maturity to 2025 and 2026, respectively. The Company exercised its option in 2021 to extend the maturity of the facility to 2026. No amounts were drawn under this Group Facility at December 31, 2023 and 2022. The Company through certain of its direct and indirect subsidiaries is involved in various regulatory and legal matters. The Company’s direct and indirect subsidiaries have made certain related provisions as further described in “Note 15 Commitments and contingencies” to the Consolidated Financial Statements of ABB Ltd. As described in the note, there is a risk of adverse outcomes beyond the provisioned amounts. The Company is part of a value added tax Group and therefore is jointly liable to the Swiss Federal Tax Department for the value added tax liabilities of the other members. 134 FINANCIAL REPORT 2023 — Note 6 Stockholders’ equity Legal reserves Available earnings (CHF in thousands) Share capital from retained earnings from retained earnings Net (loss) /income Treasury shares Total Opening balance at January 1, 2023 235,769 1,000,000 3,774,196 4,078,002 (2,869,196) 6,218,771 Allocation to retained earnings 4,078,002 (4,078,002) — Cancellation of shares (9,929) (2,380,048) 2,389,977 — Dividend payment CHF 0.84 per share (1,404,073) (1,404,073) Purchases of treasury shares (1,113,817) (1,113,817) Delivery of treasury shares 302,095 302,095 Net (loss)/income for the year (85,708) (85,708) Closing balance at December 31, 2023 225,840 1,000,000 4,068,077 (85,708) (1,290,941) 3,917,268 Share capital as of December 31, 2023 Number of registered shares Par value (CHF) Total (CHF in thousands) Issued shares 1,882,002,575 0.12 225,840 Contingent shares 304,038,800 0.12 36,485 Authorized shares (1) n.a. n.a. n.a. Capital Band available increase 196,474,500 0.12 23,577 Capital Band available decrease (113,732,000) 0.12 (13,648) Share capital as of December 31, 2022 Number of registered shares Par value (CHF) Total (CHF in thousands) Issued shares 1,964,745,075 0.12 235,769 Contingent shares 304,038,800 0.12 36,485 Authorized shares 200,000,000 0.12 24,000 '(1) The authorized share capital expired in 2023 and was replaced by the capital band. On September 7, 2022, the shareholders approved the spin-off of the Group’s Turbocharging Division into an independent, publicly traded company, Accelleron Industries AG (Accelleron), which was completed through the distribution of common stock of Accelleron to the stockholders of the Company on October 3, 2022. In connection with the spin-off of the Turbocharging Division in October 2022, the strike prices of the options outstanding under the MIP program were reduced to adjust for the effect of the spin-off on the Company’s share price. At December 31, 2022, MIP options issued in 2017, 2018 and 2019 were outstanding and had new strike prices of CHF 21.23, CHF 22.05, and CHF 17.63, respectively. Treasury shares are valued at acquisition cost. During 2023 and 2022, a loss from the delivery of treasury shares of CHF 46 million and CHF 121 million, respectively, was recorded in the Income Statement under Finance expense. During 2023, a bank holding call options related to ABB Group’s management incentive plan (MIP) exercised a portion of these options. Such options had been issued in 2017 and 2019 by the Group company that facilitates the MIP at fair value and had adjusted strike prices of CHF 21.23 and CHF 17.63, respectively. At issuance, the Group company had entered into an intercompany option agreement with the Company, having the same terms and conditions to enable it to meet its future obligations. As a result of the exercise by the bank, the Company delivered 1,440,850 shares at CHF 21.23 and 4,082,844 shares at CHF 17.63, out of treasury shares. During 2022, a bank holding call options related to ABB Group’s management incentive plan (MIP) exercised a portion of these options. Such options had been issued in 2016, 2017 and 2019 by the Group company that facilitates the MIP at fair value and had strike prices of CHF 21.50, CHF 22.50, and CHF 19.00, respectively. At issuance, the Group company had entered into an intercompany option agreement with the Company, having the same terms and conditions to enable it to meet its future obligations. As a result of the exercise by the bank, the Company delivered to the bank 2,048,984 shares at CHF 21.50, 12,836,201 shares at CHF 22.50 and 1,398,083 shares at CHF 19.00, out of treasury shares. The ABB Group has an annual employee share acquisition plan (ESAP) which provides share options to employees globally. To enable the Group company that facilitates the ESAP to deliver shares to employees who have exercised their stock options under the ESAP, the Group company entered into an agreement with the Company to acquire the required number of shares at their then market value from the Company. FINANCIAL REPORT 2023 135 Consequently, in 2023, the Company delivered, out of treasury shares, to the Group company 1,266,178 shares at CHF 33.54. In 2022, the Company delivered, out of treasury shares, to the Group company 105,138 shares at CHF 29.78. In 2023 and 2022, the Company transferred 3,484,043 and 1,665,025 treasury shares at an average acquisition price per share of CHF 29.16 and CHF 29.28, respectively, to fulfill its obligations under other share-based arrangements. In 2023, the Company purchased 9 million shares, for CHF 310 million, to support its employee share programs globally and 25 million shares, for CHF 804 million, as part of its share buyback programs for capital reduction purposes announced on March 31, 2023, and March 31, 2022. In 2022, the Company purchased 20 million shares, for CHF 616 million, to support its employee share programs globally and 91 million shares, for CHF 2,690 million, as part of its share buyback programs for capital reduction purposes announced on March 31, 2022, and April 8, 2021. Following the introduction of a capital band as approved by the Company’s shareholders at its Annual General Meeting 2023, the Company has a capital band ranging from CHF 212 million (lower limit) to CHF 259 million (upper limit). The Board of Directors is authorized within the capital band to increase or reduce the share capital once or several times and in any amounts or to acquire or dispose of shares directly or indirectly, until March 23, 2028, or until an earlier expiry of the capital band. In 2023, the Board of Directors resolved to cancel under the above referred capital band 82,742,500 shares repurchased under ABB’s 2021-22 and 2022-23 share buyback programs. These shares were cancelled in May 2023, resulting in a reduced total number of issued ABB Ltd shares of 1,882,002,575, and a decrease of CHF 2,390 million in treasury shares and a corresponding combined decrease in share capital and retained earnings. The movement in the number of treasury shares during the year was as follows: 2023 2022 Number of shares Average acquisition price per share (in CHF) Number of shares Average acquisition price per share (in CHF) Opening balance as of January 1 99,741,744 28.77 94,803,864 30.09 Purchases for employee share programs 9,100,000 34.08 20,000,000 30.80 Purchases for intended cancellation 24,670,000 32.58 91,394,500 29.44 Cancellation (82,742,500) 28.88 (88,403,189) 31.22 Delivery for employee share programs (10,273,915) 29.40 (18,053,431) 29.34 Closing balance as of December 31 40,495,329 31.88 99,741,744 28.77 Thereof pledged for MIP 2,919,226 3,547,102 — Note 7 Dividend income As planned, the Company did not receive any dividend payments in 2023 from ABB Asea Brown Boveri Ltd. In 2022, the Company received dividend payments from ABB Asea Brown Boveri Ltd of CHF 4.0 billion in cash and CHF 504 million in kind. — Note 8 Other operating income Other operating income includes mainly outgoing charges for Business Area and Division management services, income from share deliveries and guarantee compensation fees to Group companies. 136 FINANCIAL REPORT 2023 — Note 9 Other operating expenses In 2023, Other operating expenses included usual operating expenses. In 2022, Other operating expenses included CHF 301 million for regulatory penalties in connection with the Kusile project. — Note 10 Shareholdings of Board members and Executive Committee members At December 31, 2023 and 2022, the members of the Board of Directors as of that date, held the following numbers of shares: Board ownership of ABB shares Total numbers of shares held Name December 31, 2023 December 31, 2022 Peter Voser 215,876 231,807 Jacob Wallenberg 251,318 245,898 Gunnar Brock 41,785 37,813 David Constable 46,319 42,465 Frederico Curado 57,181 49,175 Lars Förberg 80,095 70,522 Denise Johnson 3,929 — Jennifer Xin-Zhe Li 45,812 41,904 Geraldine Matchett 36,023 30,964 David Meline (1) 47,948 43,131 Satish Pai — 34,827 Total 826,286 828,506 (1) Includes 3,150 shares held by the spouse. At December 31, 2023, the members of the Executive Committee as of that date, held the following number of shares, the conditional rights to receive ABB shares under the Long-term Incentive Plan (LTIP) and unvested shares in respect of other compensation arrangements. Total number of shares held at December 31, 2023 Unvested at December 31, 2023 Reference number of shares deliverable under the 2021 performance factors (EPS and TSR) of the LTIP (1) Reference number of shares deliverable under the 2022 performance factors (EPS, TSR and sustainability) of the LTIP (1) Reference number of shares deliverable under the 2023 performance factors (EPS, TSR and sustainability) of the LTIP (1) Name (vesting 2024) (vesting 2025) (vesting 2026) Björn Rosengren 262,334 99,450 85,487 85,708 Timo Ihamuotila 202,000 37,830 31,609 31,691 Carolina Granat (2) 5,200 27,301 23,148 23,208 Karin Lepasoon 360 — 19,157 19,207 Sami Atiya 100,000 31,201 25,543 25,609 Tarak Mehta 134,710 36,271 29,694 29,770 Peter Terwiesch 100,000 31,201 26,501 27,529 Morten Wierod 141,267 31,201 28,736 31,210 Total Executive Committee members at December 31, 2023 945,871 294,455 269,875 273,932 (1) The final 2020 LTIP, 2021 LTIP and 2022 LTIP awards will be settled 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding taxes. (2) This includes 1,200 shares held by the spouse. FINANCIAL REPORT 2023 137 At December 31, 2022, the members of the Executive Committee, as of that date, held the following number of shares, the conditional rights to receive ABB shares under the Long-term Incentive Plan (LTIP) and unvested shares in respect of other compensation arrangements. Unvested at December 31, 2022 Total number of shares held at December 31, 2022 Reference number of shares deliverable under the 2020 performance factors (EPS and TSR) of the LTIP (1)(2) Reference number of shares deliverable under the 2021 performance factors (EPS and TSR) of the LTIP (1)(2) Reference number of shares deliverable under the 2022 performance factors (EPS, TSR and sustainability) of the LTIP (1)(2) Replacement share grant for foregone benefits from former employer (2)(3) Name (vesting 2023) (vesting 2024) (vesting 2025) (vesting 2023) Björn Rosengren 94,597 136,589 99,450 85,487 19,604 Timo Ihamuotila 189,034 50,887 37,830 31,609 — Carolina Granat (4) 5,200 — 27,301 23,148 — Andrea Antonelli (EC member as of March 1, 2022) — — 7,021 33,525 — Karin Lepasoon (EC member as of October 1, 2022) — — — 19,157 — Sami Atiya (5) 90,473 42,852 31,201 25,543 — Tarak Mehta 152,993 48,209 36,271 29,694 — Peter Terwiesch 132,940 42,852 31,201 26,501 — Morten Wierod 64,777 40,174 31,201 28,736 — Total Executive Committee members at December 31, 2022 730,014 361,563 301,476 303,400 19,604 (1) The final 2020 LTIP, 2021 LTIP and 2022 LTIP awards will be settled 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding taxes. (2) Initial number of shares granted have been increased by 3.7 percent to reflect the impact of the spin-off of the Accelleron business. (3) The replacement share grant was settled 65 percent in shares and 35 percent in cash. (4) This includes 1,200 shares held by the spouse. (5) The disclosure of the number of shares granted under the LTIP 2022 has been corrected, reducing the number by 958. 138 FINANCIAL REPORT 2023 — Note 11 Full time employees During each of 2023 and 2022, the Company employed on average 19 employees. At ABB, we believe that a culture of diversity, inclusion and equal opportunity is critical to our business success and makes us stronger. ABB has non-discriminatory pay policies which play an important part in minimizing any pay disparities based on gender. — Note 12 Subsequent events Subsequent to December 31, 2023, and up to February 15, 2024, the Company purchased, under the 2023-2024 share buyback program, an additional 4 million shares, for approximately CHF 153 million. Any further purchases up to February 22, 2024, are not considered significant for the Company. FINANCIAL REPORT 2023 139 — Proposed appropriation of available earnings Proposed appropriation of available earnings (CHF in thousands) 2023 2022 Net (loss)/income for the year (85,708) 4,078,002 Carried forward from previous year 6,448,125 7,024,633 Cancellation of shares (2,380,048) (2,749,338) Extraordinary dividend 2022 — (501,099) Available earnings to the Annual General Meeting 3,982,369 7,852,198 Gross dividend of CHF 0.84 per share paid directly by the Company (1) — (1,404,073) Gross dividend of CHF 0.87 per share on total number of registered shares (1) (1,637,342) — Balance to be carried forward 2,345,027 6,448,125 (1) No dividend will be paid on treasury shares held by ABB Ltd. Shareholders who are resident in Sweden participating in the established dividend access facility will receive an amount in Swedish kronor from ABB Norden Holding AB which corresponds to the dividend resolved on a registered share of ABB Ltd without deduction of the Swiss withholding tax. This amount however is subject to taxation according to Swedish law. On February 1, 2024, the Company announced that the Board of Directors will recommend for approval at the March 21, 2024, Annual General Meeting that a dividend of CHF 0.87 per share be distributed out of the available earnings, expected to be paid in March and April 2024. As the legal reserves from retained earnings exceed 20% of the share capital, a further allocation has been waived. 140 Statutory Auditor's Report To the General Meeting of ABB Ltd, Zurich Report on the Audit of the Financial Statements Opinion We have audited the financial statements of ABB Ltd (the Company), which comprise the balance sheet as at December 31, 2023, and the income statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements (pages 127 to 138) comply with Swiss law and the Company’s articles of incorporation. Basis for Opinion We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our report. We are independent of the Company in accordance with the provisions of Swiss law, together with the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. We have determined that there are no key audit matters to communicate in our report. Other Information The Board of Directors is responsible for the other information. The other information comprises the information included in the ABB Annual Reporting Suite (consisting of the Integrated Report, the Financial Report, the Corporate Governance Report, the Sustainability report and the Compensation Report), but does not include the consolidated financial statements, the stand-alone financial statements of the Company, the compensation report and our auditor’s reports thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Board of Directors’ Responsibilities for the Financial Statements The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the Company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 141 In preparing the financial statements, the Board of Directors is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: — Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. — Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. — Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. — Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 142 Report on Other Legal and Regulatory Requirements In accordance with article 728a para. 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We further confirm that the proposed appropriation of available earnings complies with Swiss law and the Company’s articles of incorporation. We recommend that the financial statements submitted to you be approved. KPMG AG Achim Wolper Licensed Audit Expert Auditor in Charge Mohammad Nafeie Zurich, Switzerland February 22, 2024 © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member of the KPMG global organization of independent member firms affiliated with KPMG International EXPERTsuisse Certified Company Limited, a private English company limited by guarantee. All rights reserved. FINANCIAL REPORT 2023 143 Caution concerning forward-looking statements The ABB Financial Report 2023 includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have based these forward-looking statements largely on current expectations, estimates and projections about the factors that may affect our future performance, including global economic conditions as well as the economic conditions of the regions and the industries that are major markets for ABB. The words “believe,” “may,” “will,” “estimate,” “continue,” “target,” “anticipate,” “intend,” “expect”, “plan” and similar words and the express or implied discussion of strategy, plans or intentions are intended to identify forward-looking statements. These forward- looking statements are subject to risks, uncertainties and assumptions, including among other things, the following: (i) business risks related to the global volatile economic environment; (ii) costs associated with compliance activities; (iii) difficulties encountered in operating in emerging markets; (iv) risks inherent in large, long term projects served by parts of our business; (v) the timely development of new products, technologies, and services that are useful for our customers; (vi) our ability to anticipate and react to technological change and evolving industry standards in the markets in which we operate; (vii) changes in interest rates and fluctuations in currency exchange rates; (viii) changes in raw materials prices or limitations of supplies of raw materials; (ix) the weakening or unavailability of our intellectual property rights; (x) industry consolidation resulting in more powerful competitors and fewer customers; (xi) effects of competition and changes in economic and market conditions in the product markets and geographic areas in which we operate; (xii) effects of, and changes in, laws, regulations, governmental policies, taxation, or accounting standards and practices and (xiii) other factors described in documents that we may furnish from time to time with the US Securities and Exchange Commission, including our Annual Reports on Form 20-F. Although we believe that the expectations reflected in any such forward- looking statements are based on reasonable assumptions, we can give no assurance that they will be achieved. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements. FINANCIAL REPORT 2023 145 04 Chairman’s Letter 06 Summary of our corporate governance approach 07 Board of Directors 14 Executive Committee 17 Shares 20 Shareholders 23 Independent External Auditors 25 Other governance information 26 Information policy 4 ABB CORPORATE GOVERNANCE REPORT 2023 — Chairman’s letter Dear Shareholders, We are living in turbulent times. Technology is moving forward in leaps and bounds, and challenges like climate change and geopolitical instability are testing our societies as never before. At ABB, we believe that technology holds the key to addressing the climate challenge and to building more stable, prosperous societies. In 2023, we helped customers all over the world optimize, electrify and decarbonize their operations with our leading electrification and automation solutions. This allowed us to increase our order backlog while delivering the best financial results in ABB’s history. Our strong performance – the result of a wide- ranging organizational transformation – gave us the confidence to raise our financial targets and update our Sustainability Agenda in line with the latest international standards. With our leading technologies in electrification and automation, ABB is ideally placed to support the energy transition and help our customers move to low- carbon and circular business models. Updated financial framework At our Capital Markets Day on November 30, we announced a new financial framework for the years ahead. Among the key targets, we increased ABB’s comparable revenue growth target to 5–7 percent through the economic cycle from 3–5 percent previously, and raised our operational EBITA margin target to 16–19 percent from ≥ 15 percent. We also sharpened our objective for basic EPS growth through the economic cycle to at least high single-digit. And we confirmed ABB’s target of ~100 percent free cash flow conversion to net income. Our policy of paying a rising, sustainable dividend per share over time remains in place. Sustainability Agenda To support our purpose of enabling a more sustainable and resource-efficient future, we announced new net-zero-aligned targets at our Capital Markets Day. By 2030, we aim to reduce scope 1 and 2 emissions from our own operations by 80 percent, without carbon offsets, and to cut our scope 3 value-chain emissions by 25 percent. By 2050, our goal is to have reached net zero in our own operations and to have reduced our scope 3 emissions by 90 percent. These targets are science-based and have been submitted to the Science Based Targets initiative (SBTi) for validation. We also introduced a new methodology for quantifying avoided emissions in our customers’ operations, based on the latest guidance from the World Business Council for Sustainable Development (WBCSD). Our aim is to help our customers avoid 600 megatons of greenhouse gas emissions through the products we sell from 2022 to 2030. Beyond reducing emissions, our Sustainability Agenda commits us to moving towards circular business models. By 2030, we aim to eliminate waste to landfill from our own operations and help our customers meet their own circularity commitments by offering retrofit, take-back and recycling services. Finally, to promote social progress, we updated our Human Rights policy and strengthened human rights due diligence along our value chain in line with the United Nations’ Guiding Principles on Business and Human Rights. Focusing our portfolio for profitable growth To ensure that ABB is well-positioned in profitable growth markets that support our purpose, we actively manage our portfolio by encouraging our divisions to seek out acquisitions to drive growth. In the past three years, we have acquired several small companies and we aim to make at least five small to mid-sized acquisitions per year in line with our goal of being number 1 or 2 in all market segments in which we are present. ABB CORPORATE GOVERNANCE REPORT 2023 5 By the same token, divisions that no longer fit our purpose or would perform better under different ownership are either restructured or earmarked for exit. In the past three years, we have sold two high-performing businesses and spun off our successful, global market-leading turbocharging division, Accelleron. Last year, we also streamlined our stock exchange listings by delisting ABB securities from the New York Stock Exchange (NYSE). ABB’s shares are still listed on the SIX Swiss Exchange and Nasdaq Stockholm, which reflects our Swiss and Swedish heritage, and are widely traded on electronic trading platforms. The delisting from the NYSE had no impact on our business or operations in the United States, which is our largest market. Committed to ethical business practices Underpinning everything we do is our commitment to embedding a culture of integrity and transparency throughout our value chain. In 2023, we updated our ABB Code of Conduct and our Supplier Code of Conduct as well as our Human Rights policy, which reflects our commitment to upholding the highest standards along our value chain. We also enhanced our anti-bribery and corruption controls in line with a three-year Deferred Prosecution Agreement (DPA) with the United States Department of Justice and Securities and Exchange Commission. The Board of Directors is responsible for overseeing compliance with the requirements of the DPA, instituted a year ago, which include the engagement of an independent Board counsel expert. Board assessment/composition Every year, the Board of Directors conducts internal self-assessments in which each member assesses the Board’s composition, processes, culture and relationship with executive management, as well as its responsibilities, performance and the role of the Chairman. This year’s assessment concluded that the Board was more diverse than at any time during the members’ tenures and that collaboration was excellent. The internal assessments are complemented periodically by external reviews, the next of which is foreseen for 2024. At our annual general meeting in March, we will be proposing two new Board members for election, Johan Forssell and Mats Rahmström. They will replace Jacob Wallenberg and Gunnar Brock who have decided not to stand for re-election. Jacob Wallenberg has been Vice-Chairman of the Board of Directors since 2015 and a non-executive member since 1999. He is a member of the Governance and Nomination Committee. Gunnar Brock joined ABB’s Board in 2018 and is a member of the Finance, Audit and Compliance Committee. I would like to thank Jacob for his significant contribution to ABB’s success over the past almost 25 years. I also want to thank Gunnar for the important role he has played on our Board over the past six years. Johan Forssell is currently President and CEO of Investor. He will step down from his current position as of May 2024. He also serves on the boards of Atlas Copco, Epiroc, Wärtsilä and EQT. Mats Rahmström is President and CEO of Atlas Copco Group. He will step down from his current position as of April 2024. He is also chairman of the board of Piab AB, a board member of Wärtsilä and member of the Royal Swedish Academy of Engineering Sciences. With Johan’s and Mats’ experience as seasoned senior leaders with a particular focus on industrial companies and decentralized operating models, they will perfectly complement the Board of Directors with its strong combination of CEO, CFO, industry, geographic/regional, sustainability and technology experience. With their election, the entire Board of Directors will have been renewed within the past nine years. On behalf on the Board of Directors, I would like to thank you for your trust and support. Peter Voser Chairman of the Board of Directors Zurich, February 23, 2024 6 ABB CORPORATE GOVERNANCE REPORT 2023 — Summary of corporate governance approach Corporate governance - general principles ABB is committed to the highest international standards of corporate governance and this is reinforced in its structure, processes and rules as outlined in this report. In line with this, ABB complies with the general principles as set forth in the Swiss Code of Best Practice for Corporate Governance, as well as those of the capital markets where its shares are listed and traded. In addition to the provisions of the Swiss Code of Obligations, ABB’s key principles and rules on corporate governance are laid down in ABB’s Articles of Incorporation, the ABB Ltd Board Governance Rules (which include the governance rules of ABB’s Board committees and the ABB Ltd Related Party Transaction Policy, which defines the criteria to determine the independence of the members of ABB Ltd’s Board of Directors), and the ABB Code of Conduct. These documents are available on ABB’s website at https://new.abb.com/about/corporate-governance. It is the duty of ABB’s Board of Directors (the Board) to review and amend or propose amendments to those documents from time to time to reflect the most recent developments and practices, as well as to ensure compliance with applicable laws and regulations. Shareholders and other interested parties may communicate with the Chairman of the Board or the independent directors by writing to ABB Ltd (Attn: Chairman of the Board/independent directors), at Affolternstrasse 44, CH-8050 Zurich, Switzerland. Swiss corporate law has been revised, effective as of January 1, 2023. The main objectives of the revision were to strengthen shareholder rights, improve corporate governance and modernize corporate law in general. Swiss corporations are required to amend their articles of incorporation and other organizational regulations, as applicable, for compliance with the new law by the end of 2024 at the latest. The shareholders of ABB approved the necessary changes to ABB’s Articles of Incorporation as proposed by the Board at ABB’s Annual General Meeting in March 2023. Compensation governance and Board and EC compensation Information about ABB’s compensation governance as well as Board and Executive Committee (EC) compensation and shareholdings is provided in the Compensation Report 2023. ABB CORPORATE GOVERNANCE REPORT 2023 7 — Board of Directors Board and Board committees (2023–2024 Board term) Board of Directors Chairman: Peter R. Voser Gunnar Brock Denise C. Johnson Vice ‑ Chairman: Jacob Wallenberg David Constable Jennifer Xin-Zhe Li Frederico Fleury Curado Geraldine Matchett Lars Förberg David Meline Finance, Audit and Compliance Committee Governance and Nomination Committee Compensation Committee David Meline (chairman) Peter R. Voser (chairman) Frederico Fleury Curado (chairman) Gunnar Brock Lars Förberg David Constable Denise C. Johnson Jennifer Xin-Zhe Li Jennifer Xin ‑ Zhe Li Geraldine Matchett Jacob Wallenberg Board governance The Board The Board defines the ultimate direction of the business of ABB and issues the necessary instructions. It determines the organization of the ABB Group and appoints, removes and supervises the persons entrusted with the executive management and representation of ABB. The internal organizational structure and the definition of the areas of responsibility of the Board, as well as the information and control instruments vis-à-vis the Executive Committee are set forth in the ABB Ltd Board Governance Rules (available at https://new.abb.com/about/corporate-governance). The Board takes decisions as a whole, supported by its three committees: the Finance, Audit and Compliance Committee (FACC), the Governance and Nomination Committee (GNC), and the Compensation Committee (CC). These committees assist the Board in its tasks and report regularly to the Board. The Board and its committees meet regularly throughout the year. The directors and officers of a Swiss corporation are bound, as specified in the Swiss Code of Obligations, to perform their duties with all due care, to safeguard the interests of the corporation in good faith and to extend equal treatment to shareholders in like circumstances. Prior to proposing new candidates for election to the Board, checks are performed to ensure that they are independent and that there are no conflicts of interest. The Swiss Code of Obligations does not specify what standard of due care is required of the directors of a corporate board. However, it is generally held by Swiss legal scholars and jurisprudence that the directors must have the requisite capability and skills to fulfill their function, and must devote the necessary time to the discharge of their duties. Moreover, the directors must exercise all due care that a prudent and diligent director would have taken in like circumstances. Finally, the directors are required to take actions in the best interests of the corporation and may not take any actions that may be harmful to the corporation. 8 ABB CORPORATE GOVERNANCE REPORT 2023 Although the Swiss Code of Obligations does not discuss specifically conflicts of interest for board members, the ABB Ltd Board Governance Rules (available at https://new.abb.com/about/corporate- governance) state that Board members shall avoid entering into any situation in which their personal or financial interests may conflict with the interests of ABB. Chairman of the Board The Chairman is elected by the shareholders to represent their interests in creating sustainable value through effective governance. In addition, the Chairman (1) takes provisional decisions on behalf of the Board on urgent matters where a regular Board decision cannot be obtained, (2) calls for Board meetings and sets the related agendas, (3) interacts with the CEO and other EC members on a more frequent basis outside of Board meetings and (4) represents the Board internally and in the public sphere. Vice-Chairman of the Board The Vice ‑ Chairman is elected by the Board and handles the responsibilities of the Chairman to the extent the Chairman is unable to do so or would have a conflict of interest in doing so. He also acts as counselor/advisor to the Chairman on any matters that are Company or Board relevant and as appropriate or as the Chairman may require and with a particular focus on strategic aspects related to the Company and its business in general. In addition, the Vice ‑ Chairman takes such other actions as may be decided by the Board or requested by the Chairman. Finance, Audit and Compliance Committee The FACC is responsible for overseeing (1) the integrity of ABB’s financial statements, (2) ABB’s compliance with legal, tax and regulatory requirements, (3) the external auditors’ qualifications and independence, (4) the performance and role of ABB’s internal audit function and the performance of the external auditors, (5) ABB’s capital structure, funding requirements and financial and risk policies, and (6) ABB’s implementation and maintenance of an integrity program and internal controls designed to mitigate integrity risk. The FACC must comprise three or more independent directors who have a thorough understanding of finance and accounting. The Chairman of the Board and, upon invitation by the committee’s chairman, the CEO or other members of the Executive Committee may participate in the committee meetings, provided that any potential conflict of interest is avoided and confidentiality of the discussions is maintained. In addition, the chief integrity officer, the head of internal audit and the external auditors participate in the meetings as appropriate. The Board has determined that David Meline, chairman of the FACC, is an audit committee financial expert, in accordance with the rules of the New York Stock Exchange. Governance and Nomination Committee The GNC is responsible for (1) overseeing corporate governance practices within ABB, (2) overseeing ABB’s sustainability agenda (including corporate social responsibility, health, safety and environment), (3) nominating candidates for the Board, the role of the CEO and other positions on the Executive Committee, and (4) succession planning and employment matters relating to the Board and the Executive Committee. The GNC is also responsible for maintaining an orientation program for new Board members and an ongoing education program for existing Board members. The GNC must comprise three or more independent directors. Upon invitation by the committee’s chairman, the CEO or other members of the Executive Committee may participate in the committee meetings, provided that any potential conflict of interest is avoided and confidentiality of the discussions is maintained. Compensation Committee The CC is responsible for compensation matters relating to the Board and the Executive Committee. The CC must comprise three or more directors who are elected by the shareholders. The Chairman of the Board and, upon invitation by the committee’s chairman, the CEO or other members of the Executive Committee may participate in the committee meetings, provided that any potential conflict of interest is avoided and confidentiality of the discussions is maintained. ABB CORPORATE GOVERNANCE REPORT 2023 9 Board membership Board composition In proposing individuals to be elected to the Board, the Board seeks to align the composition and skills of the Board with the Company’s strategic needs, business portfolio, geographic reach and culture. The Board strives for diversity in all aspects including gender, nationalities, ethnicity, geographic/regional experience and business experience. In addition, the average tenure of the members of the Board should be well ‑ balanced. The Board also considers the number of other mandates of each Board member to ensure that he/she will have sufficient time to dedicate to his/her role as an ABB Board member. Elections and term of office The members of the Board of Directors and the Chairman of the Board as well as the members of the Compensation Committee are elected by the shareholders at the general meeting of shareholders for a term of office extending until completion of the next ordinary general meeting of shareholders. Members whose terms of office have expired shall be immediately eligible for re ‑ election. ABB’s Articles of Incorporation (available at https://new.abb.com/about/corporate-governance) do not provide for the retirement of directors based on their age. However, an age limit for members of the Board is set forth in the ABB Ltd Board Governance Rules (available at https://new.abb.com/about/corporate-governance), although waivers are possible and subject to Board discretion. If the office of the Chairman of the Board of Directors or any position on the Compensation Committee becomes vacant during a Board term, the Board of Directors may appoint (shall appoint in the case of the Chairman of the Board) another individual from among its members to that position for the remainder of that term. The Board of Directors shall consist of no less than 7 and no more than 13 members. Members of the Board (2023–2024 Board term) Board Experience Corporate Officer Experience Other Business Experience Global Experience Country of Origin / Nationality Gender Non-Executive Independent Board Member ABB Board Tenure (years) Other Public Board Experience CEO CFO Operations Risk Management Sustainability Digital / Technology Peter R. Voser 9 ● ● ● ● ● ● ● ● CH M Yes Yes Jacob Wallenberg 25 ● ● ● ● ● ● ● SE M Yes Yes Gunnar Brock 6 ● ● ● ● ● ● SE M Yes Yes David Constable 9 ● ● ● ● ● ● CA, US M Yes Yes Frederico Fleury Curado 8 ● ● ● ● ● ● ● BR, PT M Yes Yes Lars Förberg 7 ● ● ● ● ● SE, CH M Yes Yes Denise C. Johnson 1 ● ● ● ● ● ● US F Yes Yes Jennifer Xin-Zhe Li 6 ● ● ● ● ● ● ● CN, CA F Yes Yes Geraldine Matchett 6 ● ● ● ● ● CH, UK, FR F Yes Yes David Meline 8 ● ● ● ● US, CH M Yes Yes 10 ABB CORPORATE GOVERNANCE REPORT 2023 Peter R. Voser has been a member and Chairman of ABB’s Board of Directors since April 2015. He was also ABB’s Chief Executive Officer from April 2019 to February 2020. He is a member of the board of directors of IBM Corporation (US). He is also a member of the board of directors of Temasek Holdings (Private) Limited (Singapore) as well as chairman of the board of PSA International Pte Ltd (Singapore), one of its subsidiaries. In addition, he is the chairman of the board of trustees of the St. Gallen Foundation for International Studies. He was previously the chief executive officer of Royal Dutch Shell plc (The Netherlands). Mr. Voser was born in 1958 and is a Swiss citizen. Jacob Wallenberg has been a member of ABB’s Board of Directors since June 1999 and Vice-Chairman since April 2015. He is the chairman of the board of Investor AB (Sweden). He is vice ‑ chairman of the boards of Telefonaktiebolaget LM Ericsson, Wallenberg Investments AB, FAM AB and Patricia Industries (all Sweden). He is also a member of the board of directors of the Knut and Alice Wallenberg Foundation as well as a member of the nomination committee of SAS AB (both Sweden). Mr. Wallenberg was born in 1956 and is a Swedish citizen. Gunnar Brock has been a member of ABB’s Board of Directors since March 2018. He is chairman of the boards of directors of Neptunia Invest AB and Stena AB (both Sweden) and a member of the boards of directors of Investor AB and Patricia Industries (both Sweden). He was formerly president and chief executive officer of Atlas Copco AB (Sweden). Mr. Brock was born in 1950 and is a Swedish citizen. David Constable has been a member of ABB’s Board of Directors since April 2015. He is the chairman of the board of directors and chief executive officer of Fluor Corporation (US). He was formerly the chief executive officer and president as well as a member of the board of directors of Sasol Limited (South Africa). He joined Sasol after more than 29 years with Fluor Corporation (US). Mr. Constable was born in 1961 and is a Canadian and US citizen. Frederico Fleury Curado has been a member of ABB’s Board of Directors since April 2016. He is a member of the boards of directors of Transocean Ltd. (Switzerland) and LATAM Airlines Group S.A. (Chile). Through April 2023, he was a member of the board of directors of Ultrapar S.A. (Brazil). He was formerly the chief executive officer of Ultrapar S.A. and Embraer S.A. (both Brazil). Mr. Curado was born in 1961 and is a Brazilian and Portuguese citizen. Lars Förberg has been a member of ABB’s Board of Directors since April 2017. He is co ‑ founder and managing partner of Cevian Capital. Mr. Förberg was born in 1965 and is a Swedish and Swiss citizen. Denise C. Johnson has been a member of ABB’s Board of Directors since March 2023. She is a member of the boards of directors of the US National Mining Association, the National Association of Manufacturers and the US Chamber of Commerce (all US). Through December 2023, she was a member of the board of directors of the Mosaic Company (US). Ms. Johnson is group president of Caterpillar Inc. (US), responsible for Resource Industries. Before joining Caterpillar in 2011, she worked for General Motors (GM) in different managerial roles in the US and as president and managing director of GM in Brazil. Ms. Johnson was born in 1966 and is a US citizen. Jennifer Xin-Zhe Li has been a member of ABB’s Board of Directors since March 2018. She is a member of the boards of directors of SAP SE (Germany) and Full Truck Alliance Co. Ltd. (Cayman Islands/P.R.C.). Through February 2023, she was a member of the board of directors of Kone Oy (Finland). Ms. Li is a founder and general partner of Changcheng Investment Partners (P.R.C.), a private investment fund. From 2008 to 2018, she served as chief financial officer of Baidu Inc. (P.R.C.) and chief executive officer of Baidu Capital (P.R.C.). Prior to that, Ms. Li spent 14 years with General Motors, holding various senior finance positions, including chief financial officer of GM China and corporate controller for GMAC North American Operations. Ms. Li was born in 1967 and is a Canadian citizen. ABB CORPORATE GOVERNANCE REPORT 2023 11 Geraldine Matchett has been a member of ABB’s Board of Directors since March 2018. Through September 2023, she was the co- chief executive officer and the chief financial officer of DSM-Firmenich (Switzerland), and prior to the DSM-Firmenich merger of DSM (The Netherlands). She was previously the chief financial officer of SGS Ltd (Switzerland). Prior to joining SGS she worked as an auditor at Deloitte Ltd (Switzerland) and KPMG LLP (UK). Ms. Matchett was born in 1972 and is a Swiss, British and French citizen. David Meline has been a member of ABB’s Board of Directors since April 2016. He is a member of the boards of directors of HP Inc. and Pacific Biosciences of California, Inc. (both US). From 2011 through 2022, he held chief financial officer roles at Moderna Inc., Amgen Inc. and the 3M Company (all US). From 2008 through 2011 he was the corporate controller and chief accounting officer of the 3M Company (US). Prior to joining 3M, Mr. Meline worked for more than 20 years for General Motors Company (US). Mr. Meline was born in 1957 and is a US and Swiss citizen. As of December 31, 2023, none of the Board members held any official functions or political posts. Further information on ABB’s Board members can be found on ABB’s website under the ABB Board of Directors link (available at https://new.abb.com/about/corporate-governance). Board meetings and attendance The Board and its committees have regularly scheduled meetings throughout the year. These meetings are supplemented by additional meetings (either in person or by conference call), as necessary. Board meetings are convened by the Chairman or upon request by any other Board member or the CEO. Documentation covering the various items of the agenda for each Board meeting is sent out in advance to each Board member in order to allow each member time to study the covered matters prior to the meetings. Each Board meeting has a private session without management or others being present. Decisions made at the Board meetings are recorded in written minutes of the meetings. Some decisions are also taken by circular resolution. The table below shows the number of meetings held during 2023 by the Board and its committees, their average duration, as well as the attendance of the individual Board members. The Board meetings shown include a strategic retreat attended by the members of the Board and the EC. 2023 Board and Board Committee Meetings Pre Annual General Meeting 2023 Post Annual General Meeting 2023 Board Board Meetings and attendance Mtg. Conf. Call FACC GNC CC Mtg. Conf. Call FACC GNC CC Average duration (hours) 7.75 1 2.75 1.75 1.75 7.75 1.25 3.25 1.25 1.25 Number of meetings 1 1 3 2 2 4 2 4 3 5 Meetings attended: Peter R. Voser 1 1 2 4 2 3 Jacob Wallenberg 1 1 2 4 1 3 Gunnar Brock 1 1 3 4 2 4 David Constable 1 1 2 4 2 5 Frederico Fleury Curado 1 1 2 4 2 5 Lars Förberg 1 1 2 4 2 3 Denise C. Johnson (1) 4 2 4 Jennifer Xin-Zhe Li 1 1 1 2 4 2 3 4 Geraldine Matchett 1 1 3 4 1 3 David Meline 1 1 3 4 2 4 Satish Pai (2) 1 1 2 (1) Elected at ABB’s Annual General Meeting 2023. (2) Did not stand for re-election at ABB’s Annual General Meeting 2023. 12 ABB CORPORATE GOVERNANCE REPORT 2023 Mandates of Board members outside the ABB Group No member of the Board may hold more than ten additional mandates, of which no more than four may be in listed companies. Certain types of mandates, such as those in our subsidiaries, those in the same group of companies and those in non ‑ profit and charitable institutions, are not subject to those limits. Additional details can be found in Article 38 of ABB’s Articles of Incorporation (available at https://new.abb.com/about/corporate-governance). Business relationships between ABB and its Board members This section describes important business relationships between ABB and its Board members, or companies and organizations represented by them. Fluor Corporation (Fluor) is an important customer of ABB. ABB sells primarily electrical switchgears, control systems and electrical solutions through its Electrification and Process Automation businesses to Fluor. David Constable is the chairman of the board of directors and CEO of Fluor. Caterpillar Inc. (Caterpillar) is an important customer of ABB. ABB sells primarily motors and generators through its Motion business to Caterpillar. Denise Johnson is a group president of Caterpillar. After reviewing the level of business with Fluor and Caterpillar, the Board has determined that ABB’s business relationships with these companies are not unusual in their nature or conditions and do not constitute material business relationships. As a result, the Board concluded that all members of the Board are independent. These determinations were made in accordance with ABB Ltd's Related Party Transaction Policy, which is contained in the ABB Ltd Board Governance Rules (available at https://new.abb.com/about/corporate- governance). Information and control systems of the Board vis-à-vis the Executive Committee Information from the Executive Committee In accordance with the ABB Board Governance Rules (available at https://new.abb.com/about/corporate- governance), the CEO reports regularly to the Board about ABB’s overall business and when circumstances require on any extraordinary events that may arise. This includes: • Reports on financial results (including profit and loss, balance sheet and cash flows); • Changes in key members of management; • Information that may affect the supervisory or monitoring function of the Board (including on matters of strategy and compliance); and • Significant developments in legal matters. At each Board meeting, Board members are briefed by the Chairman, CEO, CFO and other EC members on ABB’s business performance and on material developments affecting ABB. Outside of Board meetings, Board members generally channel any requests for information through the Chairman. Board members also obtain information through offsite retreats with the Executive Committee and visits to ABB sites. In addition, Board members obtain information through the Board committees in which they participate and which are also attended by relevant EC members and management representatives from human resources, finance, legal and the business. Internal Audit ABB has an Internal Audit team that provides independent objective assurance and other services to help ensure that ABB operates in accordance with applicable laws as well as internal policies and procedures. Internal Audit reports to the FACC and to the CFO. The FACC reviews and approves the internal audit plan, and material changes to the plan. Investigations of potential fraud and inappropriate business conduct are an integral part of the internal audit process. Depending on circumstances, Internal Audit may act together with ABB’s Integrity Investigations and Monitoring department, which is part of ABB’s Integrity function. Internal Audit reports on a regular basis its main observations and recommendations to the relevant members of the EC and to the FACC as appropriate. ABB CORPORATE GOVERNANCE REPORT 2023 13 Risk Management ABB has an enterprise risk management program (ERM) in place which takes into account ABB’s size and complexity. ERM provides the EC and the Board with a comprehensive and holistic view of the risks facing the business. ERM involves managing the acceptance of risk to achieve the objectives of the business. The ERM process is typically cyclical in nature, conveying the idea of continuous refinement of the risk management approach in a dynamic business environment. Furthermore, ABB runs a mitigation process for the identified risks that is key to the success of this process. ERM assessments are both top down and bottom up. They cover strategic, financial, and operational risks, both current and long term. Key risks identified and managed in 2023 were those related to information and cyber security, availability of components and price volatility, lack of qualified and available resources and geopolitical instability. ERM results are reported to the FACC and the entire Board. This information becomes part of the overall strategic and risk discussions by the Board to help create value for stakeholders. 14 ABB CORPORATE GOVERNANCE REPORT 2023 — Executive Committee Composition of the Executive Committee (at December 31, 2023) Björn Rosengren Chief Executive Officer CORPORATE OFFICERS BUSINESS AREA PRESIDENTS Timo Ihamuotila Morten Wierod Chief Financial Officer Electrification Carolina Granat Peter Terwiesch Chief Human Resources Officer Process Automation Karin Lepasoon Tarak Mehta Chief Communications and Sustainability Officer Motion Sami Atiya Robotics & Discrete Automation Executive Committee responsibilities and organization The Board has delegated the executive management of ABB to the CEO. The CEO and, under his direction, the other members of the Executive Committee are responsible for ABB’s overall business and affairs and day-to-day management. The CEO reports to the Board regularly, and whenever extraordinary circumstances so require, on the course of ABB’s business and financial performance and on all organizational and personnel matters, transactions and other issues material to the Group. Each member of the Executive Committee is appointed and discharged by the Board. Members of the Executive Committee (at December 31, 2023): Björn Rosengren was appointed Chief Executive Officer and member of the Executive Committee effective March 2020. He is a member of the board of directors of the World Childhood Foundation (Sweden). Before joining ABB, he was the president and chief executive officer of Sandvik AB (Sweden) since 2015. Prior to that, Mr. Rosengren was the chief executive officer of Wärtsilä Corporation (Finland) from 2011 to 2015. He held a variety of management roles at Atlas Copco AB (Sweden) from 1998 to 2011. Mr. Rosengren was born in 1959 and is a Swedish citizen. Timo Ihamuotila was appointed Chief Financial Officer and member of the Executive Committee effective April 2017. He is a member of the board of directors of SoftwareONE Holding AG (Switzerland). Through May 2023, he was a member of the board of directors of Hitachi Energy Ltd (Switzerland). From 2009 to 2016, Mr. Ihamuotila was chief financial officer and an executive vice president of the Nokia Corporation (Finland). From 1999 to 2009, he held various senior roles with Nokia. Mr. Ihamuotila was born in 1966 and is a Finnish citizen. ABB CORPORATE GOVERNANCE REPORT 2023 15 Carolina Granat was appointed Chief Human Resources Officer and member of the Executive Committee effective January 2021. She joined ABB in 2020 as Head of People Development. Prior to that, she was globally responsible for human resources at the machining solutions business area of Sandvik AB (Sweden). Ms. Granat was born in 1972 and is a Swedish citizen. Karin Lepasoon was appointed Chief Communications and Sustainability Officer and member of the Executive Committee effective October 2022. She joined ABB from Vattenfall, where she served as head of group communications and public & regulatory affairs and member of the company’s group executive management team. Prior to that, Ms. Lepasoon also served as head of global marketing and communications at SEB, director of sustainability, communications and HR at Nordic Capital, head of strategy and chief of staff at Skanska, and held various other roles in the area of communications. Ms. Lepasoon was born in 1968 and is a Swedish citizen. Morten Wierod was appointed President of the Electrification business area effective April 2022 and has been a member of the Executive Committee since April 2019, when he was appointed President of the Motion business area. From 2015 until April 2019, he was the Managing Director of the Drives business unit in the Robotics and Motion division. During 2011 to 2015, Mr. Wierod was the Managing Director of the Control Products business unit in the Low Voltage Products division. Between 1998 to 2011, he held various management roles with ABB. Mr. Wierod was born in 1972 and is a Norwegian citizen. Peter Terwiesch was appointed President of the Process Automation business area and member of the Executive Committee effective January 2015 (Process Automation known as Industrial Automation from 2017 until 2020). He is a member of the board of directors of Hilti AG (Liechtenstein). From 2011 to 2014, Mr. Terwiesch was Head of ABB’s Central Europe region. He was ABB’s Chief Technology Officer from 2005 to 2011. From 1994 to 2005, he held several positions with ABB. Mr. Terwiesch was born in 1966 and is a German and Swiss citizen. Tarak Mehta was appointed President of the Motion business area effective April 2022 and has been a member of the Executive Committee since October 2010. He is a member of the board of directors of Prysmian S.p.A. (Italy). He was President of the Electrification business area since April 2019 and President of the Electrification Products division from 2016 to 2019. From October 2010 through December 2015, he was President of the Low Voltage Products division. From 2007 to 2010, he was Head of ABB’s transformers business. Between 1998 and 2006, he held several management positions with ABB. Mr. Mehta was born in 1966 and is a US and Swiss citizen. Sami Atiya was appointed President of the Robotics & Discrete Automation business area effective April 2019 and has been a member of the Executive Committee since June 2016. He is a member of the board of directors of SGS SA (Switzerland). He had previously been President of the Robotics and Motion division since January 2017. From June to December 2016 he was President of the Discrete Automation and Motion division. Prior to joining ABB, Mr. Atiya held senior roles at Siemens in Germany from 1997 to 2015, including as chief executive officer of the mobility and logistics division in the infrastructure and cities sector from 2011. Mr. Atiya was born in 1964 and is a German citizen. On October 30, 2023, ABB announced that Mathias Gaertner had been appointed General Counsel and Company Secretary and a member of the Executive Committee (press release available at new.abb.com/news/detail/108999/abb- appoints-mathias-gaertner-as-general-counsel- and-company-secretary). He will join ABB in 2024 from Holcim, a global construction materials company, where he has been head legal & compliance and a member of its group executive committee since 2021. Mr. Gaertner was born in 1973 and is a German citizen. Further information about the members of the Executive Committee can be found on ABB’s website under the Executive Committee link (available at https://new.abb.com/about/corporate- governance). 16 ABB CORPORATE GOVERNANCE REPORT 2023 Mandates of EC members outside the ABB Group No member of the EC may hold more than five additional mandates, of which no more than one may be in a listed company. Certain types of mandates, such as those in our subsidiaries, those in the same group of companies and those in non ‑ profit and charitable institutions, are not subject to those limits. Additional details can be found in Article 38 of ABB’s Articles of Incorporation (available at https://new.abb.com/about/corporate-governance). Business relationships between ABB and its EC members The Company has determined that there are no important business relationships between ABB and its EC members, or companies and organizations represented by them. This determination was made in accordance with ABB Ltd's Related Party Transaction Policy, which is contained in the ABB Ltd Board Governance Rules (available at https://new.abb.com/about/corporate-governance). ABB CORPORATE GOVERNANCE REPORT 2023 17 — Shares Share capital of ABB At December 31, 2023, ABB’s ordinary share capital (including treasury shares) as registered with the commercial register amounted to CHF 225,840,309, divided into 1,882,002,575 fully paid registered shares with a par value of CHF 0.12 per share. ABB Ltd’s shares are listed on the SIX Swiss Exchange and the NASDAQ OMX Stockholm Exchange. On April 25, 2023, ABB announced its plans to delist its American Depositary Receipts (ADR) from the New York Stock Exchange, and ultimately to seek to deregister its ADRs and the underlying shares under the US Securities Act of 1934. The delisting became effective on May 23, 2023, and the ADR program was converted into a sponsored Level I ADR program, trading on the US over-the-counter market. At December 31, 2023, ABB Ltd had a market capitalization based on outstanding shares (total number of outstanding shares: 1,841,507,246) of approximately CHF 67 billion ($82 billion, SEK 820 billion). The only consolidated subsidiary in the ABB Group with listed shares is ABB India Limited, Bangalore, India, which is listed on the BSE Ltd. (Bombay Stock Exchange) and the National Stock Exchange of India. At December 31, 2023, ABB Ltd, Switzerland, directly or indirectly owned 75 percent of ABB India Limited, Bangalore, India, which at that time had a market capitalization of approximately INR 990 billion. Stock exchange listings (at December 31, 2023) Stock exchange Security Ticker symbol ISIN code SIX Swiss Exchange ABB Ltd, Zurich, share ABBN CH0012221716 SIX Swiss Exchange ABB Ltd, Zurich, share buyback (second trading line) ABBNE CH0357679619 NASDAQ OMX Stockholm Exchange ABB Ltd, Zurich, share ABB CH0012221716 BSE Ltd. (Bombay Stock Exchange) ABB India Limited, Bangalore, share ABB (1) INE117A01022 National Stock Exchange of India ABB India Limited, Bangalore, share ABB INE117A01022 (1) Also called Scrip ID. Share repurchases and cancellation Following the introduction of a capital band as approved by ABB’s shareholders at its Annual General Meeting 2023, the Board of Directors resolved to cancel 82,742,500 shares repurchased under ABB’s 2021/22 and 2022/23 share buyback programs. These shares were cancelled in June 2023, resulting in a reduced total number of issued ABB Ltd shares of 1,882,002,575. In April 2023, ABB launched a follow-up share buyback program of up to $1 billion. This new program is consistent with ABB’s capital allocation principles and its capital structure optimization program targeting to maintain a strong investment grade rating. Under that share buyback program, ABB repurchased a total of 17,167,000 shares as per December 31, 2023. ABB intends to use the capital band (see “Capital band” below) again for cancellation of shares repurchased under the share buyback program 2023/24. 18 ABB CORPORATE GOVERNANCE REPORT 2023 Further information on ABB’s share buyback programs can be found at https://global.abb/group/en/investors/investor-and-shareholder-resources/share-buybacks. In addition, ABB repurchased a total of 9,100,000 shares as per December 31, 2023, primarily for use in connection with employee share programs. Further information can be found at https://www.abb.com/investorrelations. Changes to the ordinary share capital Except for the share cancellations described above and in ABB’s Annual Report 2022 and 2021 on Form 20-F, there were no other changes to ABB’s ordinary share capital during 2023, 2022 and 2021. Convertible bonds and options ABB does not have any bonds outstanding that are convertible into ABB shares. For information about options on shares issued by ABB, please refer to “Note 19 – Stockholders' equity” to ABB’s Consolidated Financial Statements. Contingent share capital At December 31, 2023, ABB’s share capital may be increased by an amount not to exceed CHF 24,000,000 through the issuance of up to 200,000,000 fully paid registered shares with a par value of CHF 0.12 per share through the exercise of conversion rights and/or warrants granted in connection with the issuance on national or international capital markets of newly or already issued bonds or other financial market instruments. If this contingent share capital were fully issued, this would increase the existing share capital by approximately 10.6 percent. The contingent share capital has not changed during the last three years. At December 31, 2023, ABB’s share capital may be increased by an amount not to exceed CHF 1,200,000 through the issuance of up to 10,000,000 fully paid registered shares with a par value of CHF 0.12 per share through the exercise of warrant rights granted to its shareholders. If this contingent share capital were fully issued, this would increase the existing share capital by approximately 0.5 percent. This contingent share capital has not changed during the last three years. The Board may grant warrant rights not taken up by shareholders for other purposes in the interest of ABB. The pre ‑ emptive rights of the shareholders are excluded in connection with the issuance of convertible or warrant-bearing bonds or other financial market instruments or the grant of warrant rights. The then current owners of conversion rights and/or warrants will be entitled to subscribe for new shares. The conditions of the conversion rights and/or warrants will be determined by the Board. The acquisition of shares through the exercise of warrants and each subsequent transfer of the shares will be subject to the restrictions of ABB’s Articles of Incorporation (see “Limitations on transferability of shares and nominee registration” in the Shareholders section below) (available at https://new.abb.com/about/corporate-governance). In connection with the issuance of convertible or warrant-bearing bonds or other financial market instruments, the Board is authorized to restrict or deny the advance subscription rights of shareholders if such bonds or other financial market instruments are for the purpose of financing or refinancing the acquisition of an enterprise, parts of an enterprise, participations or new investments or an issuance on national or international capital markets. If the Board denies advance subscription rights, the convertible or warrant ‑ bearing bonds or other financial market instruments will be issued at the relevant market conditions and the new shares will be issued pursuant to the relevant market conditions taking into account the share price and/or other comparable instruments having a market price. Conversion rights may be exercised during a maximum ten ‑ year period, and warrants may be exercised during a maximum seven ‑ year period, in each case from the date of the respective issuance. The advance subscription rights of the shareholders may be granted indirectly. ABB CORPORATE GOVERNANCE REPORT 2023 19 At December 31, 2023, ABB’s share capital may be increased by an amount not to exceed CHF 11,284,656 through the issuance of up to 94,038,800 fully paid shares with a par value of CHF 0.12 per share to employees. If this contingent share capital were fully issued, this would increase the existing share capital by approximately 5.0 percent. This contingent share capital has not changed during the last three years. The pre ‑ emptive and advance subscription rights of ABB’s shareholders are excluded. The shares or rights to subscribe for shares will be issued to employees pursuant to one or more regulations to be issued by the Board, taking into account performance, functions, level of responsibility and profitability criteria. ABB may issue shares or subscription rights to employees at a price lower than that quoted on a stock exchange. The acquisition of shares within the context of employee share ownership and each subsequent transfer of the shares will be subject to the restrictions of ABB’s Articles of Incorporation (see “Limitations on transferability of shares and nominee registration” in the Shareholders section below). Capital band In line with the revised provisions of the Swiss Code of Obligations effective since January 1, 2023, shareholders approved at ABB’s Annual General Meeting 2023 the introduction of a capital band ranging from CHF 212,192,469 (lower limit) to CHF 259,346,349 (upper limit), i.e. from 90 percent to 110 percent of the share capital entered in the commercial register at that time. The capital band replaced the authorized capital, which expired in March 2023 and no longer exists under the revised law. Within this capital band, the Board of Directors is authorized to increase or reduce the share capital once or several times until March 23, 2028, or until an earlier expiry of the capital band. In the event of a capital increase within the capital band, the Board is authorized, to the extent necessary, to determine the date of issue of new shares, the issue price, the type of contribution, the conditions for the exercise of pre ‑ emptive rights and the beginning date for dividend entitlement. In this regard, the Board may issue new shares by means of a firm underwriting through a financial institution, a syndicate of financial institutions or another third party and a subsequent offer of these shares to the existing shareholders or third parties (if the pre-emptive rights of the existing shareholders have been withdrawn or have not been duly exercised). The Board is entitled to permit, to restrict or to exclude the trade with pre-emptive rights. It may permit the expiration of pre ‑ emptive rights that have not been duly exercised, or it may place such rights or shares as to which pre ‑ emptive rights have been granted, but not duly exercised, at market conditions or may use them otherwise in the interest of the Company. The Board is further authorized to restrict or deny the pre ‑ emptive rights of shareholders and allocate such rights to third parties if the shares are to be used (1) for the acquisition of an enterprise, parts of an enterprise, or participations, or for new investments, or, in case of a share placement, for the financing or refinancing of such transactions; or (2) for the purpose of broadening the shareholder constituency in connection with a listing of shares on domestic or foreign stock exchanges. The subscription and the acquisition of the new shares, as well as each subsequent transfer of the shares, will be subject to the restrictions of ABB’s Articles of Incorporation (available at https://new.abb.com/about/corporate-governance). If ABB’s share capital increases as a result of an increase from ABB’s contingent capital, the upper and lower limits of the capital band shall increase in an amount corresponding to such increase in the share capital. In the event of a capital reduction within the capital band, the Board of Directors is authorized, to the extent necessary, to determine the use of the reduction amount. ABB used the capital band for cancellation of shares repurchased under the share buyback programs 2021/22 and 2022/23 and intends to use it again for cancellation of shares repurchased under the share buyback program 2023/24 (see “Share repurchases and cancellation” above). Exclusion of pre-emptive or advance subscription rights Until March 23, 2028, or an earlier expiry of the capital band, the total number of newly issued shares which may be issued with the restriction or withdrawal of (advance) subscription rights from (i) ABB’s contingent share capital and from (ii) ABB’s capital band in any event shall not exceed 196,474,500 shares, i. e. 10 percent of the share capital entered in the commercial register at the time when the capital band was introduced. 20 ABB CORPORATE GOVERNANCE REPORT 2023 — Shareholders Shareholder structure At December 31, 2023, the total number of shareholders directly registered with ABB Ltd was approximately 88,000 and another 550,000 shareholders held shares indirectly through nominees. In total, as of that date, ABB had approximately 638,000 shareholders. Significant shareholders Under the Swiss Financial Market Infrastructure Act, shareholders and groups of shareholders acting in concert who directly or indirectly acquire or sell shares of a listed Swiss corporation or rights based thereon and thereby reach, exceed or fall below the thresholds of 3 percent, 5 percent, 10 percent, 15 percent, 20 percent, 25 percent, 33 1 / 3 percent, 50 percent or 66 2 / 3 percent of the voting rights of the corporation must notify the corporation and the SIX Swiss Exchange of such holdings. Based on the disclosure notifications made to ABB and the SIX Swiss Exchange, the following shareholders hold or control voting rights of 3 percent or more of ABB Ltd’s issued shares. Except where indicated otherwise, the shareholdings described below are based on the notices provided to ABB and the SIX Swiss Exchange and do not reflect any subsequent changes in shareholdings and share capital and votes. Investor AB, Sweden, disclosed to ABB and the SIX Swiss Exchange that as per November 9, 2015, it owned 232,165,142 ABB Ltd shares and controlled 10.03 percent of the voting rights in ABB Ltd (refer to https://www.ser-ag.com/en/resources/notifications-market-participants/significant- shareholders.html#/shareholder-details/TBFBH00013) . In its latest quarterly financial report, Investor AB, Sweden, disclosed that as per December 31, 2023, it owned 265,385,142 ABB Ltd shares and controlled 14.1 percent of the voting rights in ABB Ltd. The number of shares held by Investor AB does not include shares held by Mr. Jacob Wallenberg, the chairman of Investor AB and a director of ABB, in his individual capacity. BlackRock, Inc., U.S.A., disclosed to ABB and the SIX Swiss Exchange that as per June 1, 2023, it owned 82,027,197 ABB Ltd shares and controlled 5.05 percent of the voting rights in ABB Ltd (refer to https://www.ser-ag.com/en/resources/notifications-market-participants/significant- shareholders.html#/shareholder-details/TAMBH00029). At December 31, 2023, to the best of ABB’s knowledge, no other shareholder held 3 percent or more of ABB’s total share capital and voting rights as registered in the commercial register on that date. ABB Ltd has no cross shareholdings in excess of 5 percent of capital, or voting rights with any other company. Announcements related to disclosure notifications made by shareholders during 2023 can be found via the search facility on the platform of the Disclosure Office of the SIX Swiss Exchange: https://www.ser- ag.com/en/resources/notifications-market-participants/significant-shareholders.html#/. Under ABB’s Articles of Incorporation (available at https://new.abb.com/about/corporate-governance), each registered share represents one vote. Significant shareholders do not have different voting rights. To our knowledge, we are not directly or indirectly owned or controlled by any government or by any other corporation or person. Shareholders’ rights Shareholders have the right to receive dividends, to vote and to execute such other rights as granted under Swiss law and the Articles of Incorporation (available at https://new.abb.com/about/corporate- governance). ABB CORPORATE GOVERNANCE REPORT 2023 21 Right to vote ABB has one class of shares and each registered share carries one vote at the general meeting of shareholders. Voting rights may be exercised only after a shareholder has been registered in the share register of ABB as a shareholder with the right to vote, or with Euroclear Sweden AB (Euroclear), which maintains a subregister of the share register of ABB. A shareholder may be represented at the general meeting of shareholders by the independent proxy elected by the shareholders (“Unabhängiger Stimmrechtsvertreter”), its legal representative or, by means of a written proxy, any other proxy who need not be a shareholder. If the Company does not have an independent proxy, the Board of Directors shall appoint the independent proxy for the next general meeting of shareholders. All shares held by one shareholder may be represented by one representative only. For practical reasons shareholders must be registered in the share register no later than 6 business days before the general meeting of shareholders in order to be entitled to vote. Except for the cases described under “Limitations on transferability of shares and nominee registration” below, there are no voting rights restrictions limiting ABB’s shareholders’ rights. Powers of General Meeting of Shareholders The ordinary general meeting of shareholders must be held each year within 6 months after the close of the fiscal year of the Company; the business report, the compensation report, the auditors’ reports, and the report on non-financial matters shall be made available to the shareholders by no later than 20 days prior to the meeting. The following powers shall be vested exclusively in the general meeting of shareholders: • Adoption and amendment of the Articles of Incorporation; • Election of the members of the Board of Directors, the Chairman of the Board of Directors, the members of the Compensation Committee, the auditors and the independent proxy; • Approval of the annual management report and consolidated financial statements; • Approval of the annual financial statements and decision on the allocation of profits shown on the balance sheet, in particular with regard to dividends; • The determination of interim dividends and the approval of the interim financial statements required for this purpose; • The resolution on the repayment of the statutory capital reserve; • Approval of the maximum compensation of the Board of Directors and of the Executive Committee pursuant to Article 34 of the Articles of Incorporation; • Granting discharge to the members of the Board of Directors and the persons entrusted with management; • The delisting of the Company’s equity securities; • The approval of the report on non-financial matters; • Passing resolutions as to all matters reserved to the authority of the general meeting of shareholders by law or under the Articles of Incorporation or that are submitted to the general meeting of shareholders by the Board of Directors, subject to Article 716a of the Swiss Code of Obligations. Resolutions and elections at General Meetings of Shareholders Unless otherwise required by law or the Company’s Articles of Incorporation, the general meeting of shareholders shall pass resolutions and decide elections upon a majority of the votes represented. One or more shareholders who, alone or together, hold at least 0.02 percent of the share capital or votes may demand that an item be included on the agenda or that a proposal relating to an agenda item be included in the notice convening the general meeting of shareholders. Such a request must be received by the Company in writing at least 40 days prior to the meeting and shall specify the agenda items and the proposal or proposals together with a brief statement of the reasons. ABB’s Articles of Incorporation do not contain provisions on the convocation of the general meeting of shareholders that differ from the applicable legal provisions. 22 ABB CORPORATE GOVERNANCE REPORT 2023 Shareholders’ dividend rights The unconsolidated statutory financial statements of ABB Ltd are prepared in accordance with Swiss law. Based on these financial statements, dividends may be paid only if ABB Ltd has sufficient distributable profits from previous years or sufficient free reserves to allow the distribution of a dividend. Swiss law requires that ABB Ltd retain at least 5 percent of its annual net profits as legal reserves until these reserves amount to at least 20 percent of ABB Ltd’s share capital. Any net profits remaining in excess of those reserves are at the disposal of the general meeting of shareholders. Under Swiss law, ABB Ltd may only pay out a dividend if it has been proposed by a shareholder or the Board of Directors and approved at a general meeting of shareholders, and the auditors confirm that the dividend conforms to statutory law and ABB’s Articles of Incorporation. In practice, the general meeting of shareholders usually approves dividends as proposed by the Board of Directors. Dividends are usually due and payable no earlier than 2 trading days after the shareholders’ resolution and the ex ‑ date for dividends is normally 2 trading days after the shareholders’ resolution approving the dividend. Dividends are paid out to the holders that are registered on the record date. Euroclear administers the payment of those shares registered with it. Under Swiss law, dividends not collected within 5 years after the due date accrue to ABB Ltd and are allocated to its profit reserves. As ABB Ltd pays cash dividends, if any, in Swiss francs (subject to the exception for certain shareholders in Sweden described below), exchange rate fluctuations will affect the US dollar amounts received by holders of ADSs upon conversion of those cash dividends from Swiss francs. For shareholders who are residents of Sweden, ABB has established a dividend access facility (for up to 600,004,716 shares). With respect to any annual dividend payment for which this facility is made available, shareholders who register with Euroclear may elect to receive the dividend from ABB Norden Holding AB in Swedish krona (in an amount equivalent to the dividend paid in Swiss francs) without deduction of Swiss withholding tax. For further information on the dividend access facility, see ABB’s Articles of Incorporation. Limitations on transferability of shares and nominee registration ABB may decline a registration with voting rights if a shareholder does not declare that it has acquired the shares in its own name and for its own account, that there is no agreement on the redemption of the relevant shares and that it bears the economic risk associated with the shares. If the shareholder refuses to make such declarations, it will be registered as a shareholder without voting rights. A person failing to expressly declare in its registration application that it holds the shares for its own account (a nominee) will be entered in the share register with voting rights, provided that such nominee has entered into an agreement with ABB concerning its status, and further provided that the nominee is subject to recognized bank or financial market supervision. In special cases, the Board may grant exemptions. There were no exemptions granted in 2023. The limitation on the transferability of shares may be removed by an amendment of ABB’s Articles of Incorporation by a shareholders’ resolution requiring two-thirds of the votes represented at the general meeting of shareholders. No restriction on trading of shares No restrictions are imposed on the transferability of ABB shares. The registration of shareholders in the ABB share register, Euroclear and the ADS register kept by Citibank does not affect transferability of ABB shares or ADSs. Registered ABB shareholders or ADR holders may therefore purchase or sell their ABB shares or ADRs at any time, including before a general meeting of shareholders regardless of the record date. The record date serves only to determine the right to vote at a general meeting of shareholders. Duty to make a public tender offer ABB’s Articles of Incorporation do not contain any provisions raising the threshold (opting up) or waiving the duty (opting out) to make a public tender offer pursuant to Article 135 of the Swiss Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading. ABB CORPORATE GOVERNANCE REPORT 2023 23 — Independent external auditors Duration of the mandate and term of office of the auditors On March 23, 2023, shareholders at the Annual General Meeting of ABB Ltd approved the appointment of KPMG AG, Zurich, Switzerland (KPMG), to be the auditors of the Company for the 2023 financial year. KPMG are the auditors of ABB’s statutory and consolidated financial statements. KPMG assumed the sole auditing mandate of the consolidated financial statements of the ABB Group beginning in the year ended December 31, 2018. The auditor in charge and responsible for the mandate, Achim Wolper, began serving in this capacity in respect of the financial year ended December 31, 2023. Pursuant to ABB’s Articles of Incorporation (available at https://new.abb.com/about/corporate-governance), the term of office of ABB’s auditors is one year. Information to the Board and the Finance, Audit and Compliance Committee Supervisory and control instruments vis-à-vis the auditors Our auditors, KPMG, attend each meeting of the FACC and each meeting includes a private session between the auditors and the FACC without management being present. In 2023, the FACC had 7 meetings (either in person or via telephone call). On at least an annual basis, the FACC reviews and discusses with the external auditors all significant relationships that the auditors have with the Company that could impair their independence. The FACC reviews the auditor engagement letter and the audit plan including discussion of scope, staffing, locations and general audit approach. The FACC also reviews and evaluates the auditors’ judgment on the quality and appropriateness of the Company’s accounting principles as applied in the financial reporting. In addition, the FACC approves in advance any non-audit services to be performed by the auditors. At least annually, the FACC obtains and reviews a report by the auditors that includes discussion on: • The Company’s internal control procedures; • Material issues, if any, raised by the most recent internal quality control review; • Critical accounting policies and practices of the Company; • All alternative accounting treatments of financial information that were discussed between the auditors and management as well as the related ramifications; and • Material communications between the auditors and management such as any management letter or schedule of audit differences. Taking into account the opinions of management, the FACC evaluates the qualifications, independence and performance of the auditors. The FACC reports the material elements of its supervision of the auditors to the Board and on an annual basis recommends to the Board the auditors to be proposed for election at the general meeting of shareholders. Audit and additional fees paid to the auditors The audit fees charged by KPMG for the legally prescribed audit amounted to $42.0 million in 2023. Audit services are defined as the standard audit work performed each fiscal year necessary to allow the auditors to issue an opinion on the consolidated financial statements of ABB and to issue an opinion on the local statutory financial statements. 24 ABB CORPORATE GOVERNANCE REPORT 2023 This classification may also include services that can be provided only by the auditors, such as pre-issuance reviews of quarterly financial results and comfort letters delivered to underwriters in connection with debt and equity offerings. Included in the 2023 audit fees were approximately $2.3 million related to audits from 2022 and earlier, which were not agreed until after the Company had filed its annual report on Form 20-F with the SEC on February 24, 2023. In addition, KPMG charged $4.7 million for non-audit services during 2023. Non-audit services include primarily service organization attestation procedures, carve-out financial statement audits in relation to transactional activities, agreed-upon procedure reports, accounting consultations, audits of pension and benefit plans, accounting advisory services and other attest services related to financial reporting that are not required by statute or regulation, income tax and indirect tax compliance services as well as tax advisory services. In accordance with the requirements of the U.S. Sarbanes Oxley Act of 2002 and rules issued by the SEC, we utilize a procedure for the review and pre-approval of any services performed by KPMG. In total, KPMG charged ABB fees for audit and non-audit services rendered in 2023 in the amount of $46.7 million. ABB CORPORATE GOVERNANCE REPORT 2023 25 — Other governance information ABB Group organizational structure ABB Ltd, Switzerland, is the ultimate parent company of the ABB Group. It is the sole shareholder of ABB Asea Brown Boveri Ltd, which directly or indirectly owns the other companies in the ABB Group. The table in the appendix to this Corporate Governance Report sets forth, as of December 31, 2023, the name, place of incorporation, ownership interest and share capital of the significant direct and indirect subsidiaries of ABB Ltd. ABB’s operational group structure is described in ABB’s Financial Report 2023. Management contracts There are no management contracts between ABB and companies or natural persons not belonging to the ABB Group. Change of control clauses Board members, Executive Committee members, and other members of senior management do not receive any special benefits in the event of a change of control. From 2021, the rules for the Long-Term Incentive Plan (LTIP) have been amended to no longer provide for accelerated vesting upon a change of control. Employee participation programs In order to align its employees’ interests with the business goals and financial results of the Company, ABB operates a number of incentive plans, linked to ABB’s shares, such as the Employee Share Acquisition Plan and the LTIP. For a more detailed description of these incentive plans, please refer to “Note 18 – Share-based payment arrangements” to ABB’s Consolidated Financial Statements. General blackout periods for trading ABB securities During the 30 days prior to the day of publication of the ABB Group’s quarterly financial results, as well as on such day, the members of the Board of Directors and the Executive Committee as well as certain employees of ABB, as specified in ABB’s internal policies, are prohibited from trading in ABB Ltd securities and any related financial instruments. No exceptions were granted to this rule in 2023. 26 ABB CORPORATE GOVERNANCE REPORT 2023 — Information policy ABB, as a publicly traded company, is committed to communicating in a timely and consistent way to shareholders, potential investors, financial analysts, customers, suppliers, the media and other interested parties. ABB is required to disseminate material information pertaining to its businesses in a manner that complies with its obligations under the rules of the stock exchanges where its shares are listed and traded. ABB publishes an annual reporting suite that provides audited financial statements and information about ABB including our business results, strategy, products and services, corporate governance and executive compensation. ABB also submits an annual report on Form 20-F to the Securities and Exchange Commission (SEC). In addition, ABB publishes its results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the stock exchanges on which its shares are listed and traded. Press releases relating to financial results and material events are also filed with the SEC on Form 6-K. An archive containing annual reports, Form 20-F reports, quarterly results releases and related presentations can be found in the “Financial results and presentations” section at https://www.abb.com/investorrelations. The quarterly results press releases contain unaudited financial information prepared in accordance with or reconciled to U.S. GAAP. To subscribe to important press releases, please click on “Contact” and choose “Subscribe” at https://www.abb.com/investorrelations. Ad-hoc notices can also be found in the press releases section at https://www.abb.com/news. ABB’s official means of communication is the Swiss Official Gazette of Commerce (https://www.shab.ch). An invitation to the Company’s general meeting of shareholders is sent to registered shareholders by mail. Inquiries may also be made to ABB Investor Relations: Affolternstrasse 44 CH-8050 Zurich, Switzerland Telephone: +41 43 317 7111 E-mail: [email protected] www.abb.com Further information on corporate governance The list below contains references to additional information concerning the corporate governance of ABB (available at https://new.abb.com/about/corporate-governance). • Articles of Incorporation • ABB Ltd Board Governance Rules, which include: o Governance Rules of the Finance, Audit and Compliance Committee o Governance Rules of the Governance and Nomination Committee o Governance Rules of the Compensation Committee o Related Party Transaction Policy • ABB Code of Conduct • Summary of differences of shareholder rights under Swedish and Swiss law applicable to ABB • CVs of the Board members • CVs of the Executive Committee members ABB’s corporate calendar can be found at https://new.abb.com/investorrelations/calendar-events-and- publications/financial-calendar. ABB CORPORATE GOVERNANCE REPORT 2023 27 Appendix - ABB Ltd’s significant subsidiaries Name/Location Country Group Interest % Share capital in thousands Currency ABB Australia Pty. Limited, Moorebank Australia 100.00 131,218 AUD ABB Group Holdings Pty. Ltd., Moorebank Australia 100.00 537,988 AUD ABB Group Investment Management Pty. Ltd., Moorebank Australia 100.00 520,318 AUD ABB AG, Wiener Neudorf Austria 100.00 15,000 EUR B&R Holding GmbH, Eggelsberg Austria 100.00 35 EUR B&R Industrial Automation GmbH, Eggelsberg Austria 100.00 1,240 EUR ABB N.V., Zaventem Belgium 100.00 4,000 EUR ABB AUTOMAÇÃO LTDA., Sorocaba Brazil 100.00 191,039 BRL ABB ELETRIFICAÇÃO LTDA., Sorocaba Brazil 100.00 268,759 BRL ABB Bulgaria EOOD, Sofia Bulgaria 100.00 65,110 BGN ABB Electrification Canada Inc., Saint-Laurent Canada 100.00 — (2) CAD ABB Inc., Saint-Laurent Canada 100.00 — (2) CAD ABB S.A., Santiago Chile 100.00 5,484,348 CLP ABB (China) Investment Limited, Beijing China 100.00 95,000 USD ABB (China) Ltd., Beijing China 100.00 140,000 USD ABB Beijing Drive Systems Co. Ltd., Beijing China 90.00 5,000 USD ABB Beijing Switchgear Limited, Beijing China 60.00 16,500 USD ABB Electrical Machines Ltd., Shanghai China 100.00 14,400 USD ABB Engineering (Shanghai) Ltd., Shanghai China 100.00 40,000 USD ABB LV Installation Materials Co. Ltd. Beijing, Beijing China 85.70 17,100 USD ABB Shanghai Free Trade Zone Industrial Co., Ltd., Shanghai China 100.00 6,500 CNY ABB Shanghai Motors Co. Ltd., Shanghai China 75.00 11,217 USD ABB Xiamen Low Voltage Equipment Co. Ltd., Xiamen China 100.00 15,800 USD ABB Xiamen Switchgear Co. Ltd., Xiamen China 66.52 29,500 USD ABB Xinhui Low Voltage Switchgear Co. Ltd., Xinhui China 90.00 6,200 USD ABB s.r.o., Prague Czech Republic 100.00 400,000 CZK ABB A/S, Skovlunde Denmark 100.00 100,000 DKK ABB for Electrical Industries (ABB ARAB) S.A.E., Cairo Egypt 100.00 353,479 EGP Asea Brown Boveri S.A.E., Cairo Egypt 100.00 166,000 USD ABB AS, Jüri Estonia 100.00 1,663 EUR ABB Oy, Helsinki Finland 100.00 10,003 EUR ABB France, Cergy Pontoise France 99.84 25,778 EUR ABB SAS, Cergy Pontoise France 100.00 45,921 EUR ABB AG, Mannheim Germany 100.00 167,500 EUR ABB Beteiligungs- und Verwaltungsgesellschaft mbH, Mannheim Germany 100.00 61,355 EUR ABB Stotz-Kontakt GmbH, Heidelberg Germany 100.00 7,500 EUR ABB Striebel & John GmbH, Sasbach Germany 100.00 1,050 EUR B + R Industrie-Elektronik GmbH, Bad Homburg Germany 100.00 358 EUR Busch-Jaeger Elektro GmbH, Lüdenscheid Germany 100.00 1,535 EUR ABB Global Business Services and Contracting India Private Limited, Bangalore India 100.00 5,200,100 INR 28 ABB CORPORATE GOVERNANCE REPORT 2023 Name/Location Country Group Interest % Share capital in thousands Currency ABB Global Industries and Services Private Limited, Bangalore India 100.00 366,923 INR ABB India Limited, Bangalore India 75.00 423,817 INR ABB Limited, Dublin Ireland 100.00 635 EUR ABB E-mobility S.p.A., Milan Italy 74.70 20,000 EUR ABB S.p.A., Milan Italy 100.00 110,000 EUR ABB K.K., Tokyo Japan 100.00 1,000,000 JPY ABB Ltd., Seoul Korea, Republic of 100.00 23,670,000 KRW ABB Electrical Control Systems S. de R.L. de C.V., Monterrey Mexico 100.00 712,463 MXN ABB Mexico S.A. de C.V., San Luis Potosi Mexico 100.00 1,135,752 MXN Asea Brown Boveri S.A. de C.V., San Luis Potosi Mexico 100.00 667,686 MXN ABB B.V., Rotterdam Netherlands 100.00 9,200 EUR ABB E-mobility B.V., Delft Netherlands 74.70 1 EUR ABB Finance B.V., Rotterdam Netherlands 100.00 20 EUR ABB Holdings B.V., Rotterdam Netherlands 100.00 363 EUR ABB AS, Fornebu Norway 100.00 134,550 NOK ABB Electrification Norway AS, Skien Norway 100.00 60,450 NOK ABB Holding AS, Fornebu Norway 100.00 240,000 NOK ABB Business Services Sp. z o.o., Warsaw Poland 99.94 24 PLN ABB Sp. z o.o., Warsaw Poland 99.94 245,461 PLN Industrial C&S of P.R. LLC, Arecibo Puerto Rico 100.00 — (2) USD ABB Electrical Industries Co. Ltd., Riyadh Saudi Arabia 65.00 181,000 SAR ABB Pte. Ltd., Singapore Singapore 100.00 32,797 SGD ABB Holdings (Pty) Ltd., Modderfontein South Africa 100.00 217,758 ZAR ABB Investments (Pty) Ltd., Modderfontein South Africa 51.00 185,978 ZAR ABB South Africa (Pty) Ltd., Modderfontein South Africa 74.91 3,835,544 ZAR Asea Brown Boveri S.A., Madrid Spain 100.00 33,318 EUR ABB AB, Västerås Sweden 100.00 200,000 SEK ABB Electrification Sweden AB, Västerås Sweden 100.00 10,000 SEK ABB Norden Holding AB, Västerås Sweden 100.00 2,344,783 SEK ABB Asea Brown Boveri Ltd, Zurich Switzerland 100.00 2,767,880 CHF ABB Capital AG, Zurich Switzerland 100.00 100 CHF ABB E-mobility Holding Ltd, Zurich Switzerland 74.70 1,138 CHF ABB Schweiz AG, Baden Switzerland 100.00 55,000 CHF ABB Ltd., Taipei Taiwan (Chinese Taipei) 100.00 195,000 TWD ABB Elektrik Sanayi A.S., Istanbul Turkiye 99.99 165,000 TRY ABB Industries (L.L.C.), Dubai United Arab Emirates 49.00 (1) 5,000 AED ABB Industries FZE, Dubai United Arab Emirates 100.00 3,000 AED ABB Holdings Limited, Warrington United Kingdom 100.00 226,014 GBP ABB Limited, Warrington United Kingdom 100.00 120,000 GBP ABB E-mobility Inc., Wilmington, DE United States 74.70 — USD ABB Finance (USA) Inc., Wilmington, DE United States 100.00 1 USD ABB CORPORATE GOVERNANCE REPORT 2023 29 Name/Location Country Group Interest % Share capital in thousands Currency ABB Holdings Inc., Cary, NC United States 100.00 2 USD ABB Inc., Cary, NC United States 100.00 1 USD ABB Installation Products Inc., Memphis, TN United States 100.00 1 USD ABB Motors and Mechanical Inc., Fort Smith, AR United States 100.00 — (2) USD ABB Treasury Center (USA), Inc., Wilmington, DE United States 100.00 1 USD Edison Holding Corporation, Wilmington, DE United States 100.00 — (2) USD Industrial Connections & Solutions LLC, Cary, NC United States 100.00 — (2) USD (1) Company consolidated as ABB exercises full management control. (2) Shares without par value. 30 ABB CORPORATE GOVERNANCE REPORT 2023 Caution concerning forward-looking statements The Corporate Governance Report 2023 includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have based these forward-looking statements largely on current expectations, estimates and projections about the factors that may affect our future performance, including global economic conditions as well as the economic conditions of the regions and the industries that are major markets for ABB. The words “believe,” “may,” “will,” “estimate,” “continue,” “target,” “anticipate,” “intend,” “expect”, “plan” and similar words and the express or implied discussion of strategy, plans or intentions are intended to identify forward-looking statements. These forward- looking statements are subject to risks, uncertainties and assumptions, including among other things, the following: (i) business risks related to the global volatile economic environment; (ii) costs associated with compliance activities; (iii) difficulties encountered in operating in emerging markets; (iv) risks inherent in large, long term projects served by parts of our business; (v) the timely development of new products, technologies, and services that are useful for our customers; (vi) our ability to anticipate and react to technological change and evolving industry standards in the markets in which we operate; (vii) changes in interest rates and fluctuations in currency exchange rates; (viii) changes in raw materials prices or limitations of supplies of raw materials; (ix) the weakening or unavailability of our intellectual property rights; (x) industry consolidation resulting in more powerful competitors and fewer customers; (xi) effects of competition and changes in economic and market conditions in the product markets and geographic areas in which we operate; (xii) effects of, and changes in, laws, regulations, governmental policies, taxation, or accounting standards and practices and (xiii) other factors described in documents that we may furnish from time to time with the US Securities and Exchange Commission, including our Annual Reports on Form 20-F. Although we believe that the expectations reflected in any such forward- looking statements are based on reasonable assumptions, we can give no assurance that they will be achieved. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements. ABB CORPORATE GOVERNANCE REPORT 2023 31 04 Letter from the Chairman of the Compensation Committee 06 Compensation at a glance 11 Compensation governance 13 Sustainability-related considerations in ABB’s compensation 15 Board compensation policy 16 Implementation of Board compensation policy 18 Executive Committee compensation policy 25 Implementation of EC compensation policy 37 Changes applicable to EC members 38 Votes on compensation at the 2024 AGM 40 Compensation tables and share ownership tables 49 Report of the statutory auditor 4 ABB COMPENSATION REPORT 2023 — Letter from the Chairman of the Compensation Committee Dear Shareholders, On behalf of the Board of Directors (Board) and the Compensation Committee (CC), I am pleased to present the ABB Compensation Report for 2023 (Report). Our focus at the CC remains to ensure that the compensation structure at ABB drives value creation for our shareholders, represents a motivating package for our executives, and ensures alignment with best-practice corporate governance standards and with ABB’s Sustainability Agenda. As we continuously work to perfect the Report, the section “Compensation at a glance” contains the key information of the Board and the Executive Committee (EC) compensation. These can also be found in ABB’s Integrated Report 2023 under the “Compensation Summary” chapter. Summary of changes in policies and disclosures In response to valuable feedback from our stakeholders, you will find the 2023 Annual Incentive Plan (AIP) targets for the CEO disclosed in this Report, providing additional level of transparency on the alignment between pay and performance that we seek to ensure at ABB. Furthermore, we will extend our malus and clawback policy, which is currently applied to our Long-Term Incentive Plan (LTIP) with a clawback period of five years, to future AIP launches (i.e., from 2024) for all EC members, with a clawback period of three years, in line with market practice. Finally, we have introduced an additional disclosure – the ratio of the annual total compensation of our CEO to the median annual total compensation of all permanent ABB employees in Switzerland. Details can be found in the section "Annual total compensation ratio" of the Report. Sustainability impact on executive compensation We will maintain the strong link between our Sustainability Agenda and compensation programs, such that all EC members continue to have a sustainability performance measure in their LTIP, with a material weighting of 20 percent. Details related to the sustainability target for the 2024 LTIP are disclosed in the Report. In addition, all EC members shall have two or more goals relating to sustainability in the individual component of their AIP. 2023 results and compensation policy outcomes 2023 was a year of solid operational and financial performance. Overall, most key financial, sustainability and operational targets were met or excelled. ABB (the Company) delivered a strong operational EBITA margin, increased its revenues, and improved productivity in 2023. The Company also made significant progress in reducing its environmental footprint and contributing to a more sustainable environment. For more information on ABB’s 2023 sustainability achievements please refer to ABB’s Integrated Report 2023. Board of Directors: the aggregate Board compensation for the 2023–2024 term (CHF 4.38 million) is in line with the maximum amount (CHF 4.4 million) approved at the 2023 Annual General Meeting (AGM). There has been no change to the individual Board member fees since 2015. ABB COMPENSATION REPORT 2023 5 Executive Committee: the aggregate EC total compensation was CHF 40.6 million in 2023, driven largely by the strong performance related variable pay awards, as summarized in Exhibit 21, and presented in detail in Exhibits 41 and 42. This is below the maximum amount (CHF 45.9 million) approved at the 2022 AGM. Two of the nine EC members in place received a salary adjustment in March 2023, which ranged from 3.6 to 8.3 percent, for exceptional performance or broadened responsibilities. This corresponded to an average 1.3 percent increase on the annual aggregate base salaries for EC members in post in March 2023. The average award for the current EC members under the AIP for 2023 was 143.3 percent (out of a maximum of 150 percent), compared to 118.3 percent in 2022. The average weighted achievement level of the 2020 LTIP, which vested in 2023, was 189.5 percent (out of a maximum of 200 percent), driven by solid evolution of our Earnings Per Share (EPS) during the period, and a maximum vesting under the relative Total Shareholder Return (TSR) performance measure. Governance At the AGM on March 21, 2024, you will be asked to vote on the maximum aggregate compensation for the Board for its 2024–2025 term and on the maximum aggregate compensation for the EC in 2025. The former is again unchanged compared to the prior year, while the latter shows an increase from the level requested for the prior year, primarily influenced by the change in composition of the EC. This Report will also be submitted for a non- binding, consultative vote by shareholders. We have pursued an open and regular dialogue with our stakeholders, as we continue to improve our compensation system. On behalf of the Compensation Committee, I thank you for your continued trust in ABB and for your consistently supportive feedback. Frederico Fleury Curado Chairman of the Compensation Committee Zurich, February 22, 2024 6 ABB COMPENSATION REPORT 2023 — Compensation at a glance ─ Board compensation Compensation for the 2023–2024 term of office The aggregate Board compensation for the 2023–2024 term of office (CHF 4,380,000) was within the maximum amount (CHF 4,400,000) approved at the 2023 Annual General Meeting (AGM). Exhibit 1: Board compensation (in CHF) for the 2023–2024 term of office Aggregate compensation 4,380,000 Approved compensation amount 4,400,000 Share ownership of Board members Except for one member, who joined the Board in 2023, all other Board members held ABB shares at December 31, 2023, worth at least 300 percent of their 2023 Board compensation. Exhibit 2: Board members shareholding (at December 31, 2023) in % of 2023 total compensation * * Based on share price of CHF 31.24, the 2023 Long-Term Incentive Plan (LTIP) reference price, and shares held at December 31, 2023. April 2015 June 1999 March 2018 April 2015 April 2016 April 2017 March 2023 March 2018 March 2018 April 2016 0% 100% 200% 300% 400% 500% 600% 700% 800% Peter Voser Jacob Wallenberg Gunnar Brock David Constable Frederico Curado Lars Förberg Denise Johnson Jennifer Xin-Zhe Li Geraldine Matchett David Meline at 1745% Board appointment ABB COMPENSATION REPORT 2023 7 ─ Executive Committee (EC) compensation Compensation structure as from 2023 Exhibit 3: EC compensation structure as from 2023 Fixed compensation – base salary and benefits Variable compensation – short-term incentive (AIP) Variable compensation – long-term incentive (LTIP) Wealth at risk/ Share ownership Purpose and link to strategy Facilitates attraction and retention of talented EC members; base salary compensates for the role and relevant experience; benefits protect against risk Rewards annual Company, business area, functional and individual performance. Aligned with the Company’s Annual Performance Plan Rewards Company performance over a three- year period and encourages creation of long-term, sustainable value for shareholders. Aligned with the Company’s Long-Term Performance Plan Aligns individual’s personal wealth at risk directly to the ABB share price, and EC members’ interests with those of shareholders to maintain focus on ABB's long-term success Operation Salary in cash, benefits in kind, and pension contributions Annual awards, payable in cash after a one-year performance period; malus and clawback provisions to be implemented from 2024 Annual grants in shares which may vest after three years, and are subject to performance conditions; malus and clawback provisions in place Individuals are required to hold ABB shares Opportunity level (as % of base salary) Based on scope of responsibilities, personal experience, and skillset CEO 500% of annual salary (net of taxes) * EC members with legacy employment contracts have a Target LTIP grant of 100%, and Max LTIP opportunity of 200%. The higher LTIP opportunity for the newer EC members is largely offset by lower pension and other benefit costs. Other EC members 400% of annual salary (net of taxes) Performance indicators Changes to base salary consider individual performance, future potential, broadening of responsibilities, and external benchmarking Exposure to ABB share price 0% 100% 150% Minimum Target Maximum 0% 150% 300% Minimum Target Maximum CEO 0% 150% 300% Minimum Target Maximum Other EC members 80% Group financial results 20% Individual results CEO and corporate officers 50% Average EPS 30% Relative TSR 20% Sustainability All EC members 20% Group financial results 60% Business area financial results 20% Individual results Business area presidents 8 ABB COMPENSATION REPORT 2023 Total EC compensation for 2023 The aggregate EC compensation for 2023 (CHF 40,642,468) was within the maximum amount approved at the 2022 AGM (CHF 45,900,000). Exhibit 4: EC compensation (in CHF) for 2023 Effective aggregate compensation 40,642,468 Approved aggregate compensation 45,900,000 The largest portion of the CEO’s 2023 total compensation was delivered via performance driven variable compensation (55 percent), represented by short-term and long-term incentives. For the other EC members, on an aggregate level, variable compensation represented 52 percent of their 2023 compensation. The following chart shows the composition of the 2023 total compensation for the EC members at December 31, 2023. Exhibit 5: 2023 total compensation mix (in CHF) for the CEO and other EC members on aggregate level * Composed of actual base salary, 2023 AIP, 2023 LTIP grant, pension, and other benefits. 2023 AIP represents accrued short-term incentive for the year 2023, which will be paid in 2024, after the publication of ABB's financial results. The sum of percentage figures may differ from 100 percent due to rounding with one decimal. Realized variable compensation in 2023 Realized variable compensation considers the AIP award and the LTIP award at the end of their respective performance cycles, reflecting actual AIP payment and LTIP vesting, based on achievement of the respective plan performance measures. The outcome of the 2023 AIP was above the target for all current EC members (143.3 percent on average), and the LTIP that vested in 2023 (2020 LTIP) exceeded the target level, with a final vesting level of 189.5 percent of target. Exhibit 6: 2023 AIP outcome compared to target 18.4% Base salary 8.0% Pension benefits 18.1% Other benefits 27.4% Short-term incentive 28.0% Long-term incentive CEO Variable compensation 55% Fixed compensation 45% 9,693,219 Other EC members 21.3% Base salary 11.9% Pension benefits 14.8% Other benefits 30.4% Short-term incentive 21.7% Long-term incentive 27,528,972 Variable compensation 52% Fixed compensation 48% ABB COMPENSATION REPORT 2023 9 Exhibit 7: 2020 LTIP outcome compared to target Realized total compensation in 2023 Considering the stated variable components above, the realized total compensation in 2023 was above the target total compensation for all EC members, driven by strong performance in 2023 and the high level of achievement against the targets for the 2020 LTIP, which vested in 2023. Exhibit 8: Realized total compensation in 2023 compared to target total compensation Further details related to the realized compensation of each EC member and each compensation component are specified in Exhibit 48. Share ownership of EC members EC members may not sell their shares (except to meet tax and social security costs related to share vesting) until they achieve the required share ownership level. Six out of eight EC members exceeded their share ownership requirements. The other two members have been appointed to the EC in the last three years. When considering the number of granted, but unvested, ABB shares of EC members at December 31, 2023, it is expected that the remaining two most recently appointed EC members who do not currently meet their share ownership requirement are projected to do so in 2026, after vesting of the 2023 LTIP grant, and in 2027, after vesting of the 2024 LTIP grant, respectively. 200% 200% 200% 189.5% 179.0% 200.0% 100% 100% 100% 0% 25% 50% 75% 100% 125% 150% 175% 200% LTIP vesting (total) Average EPS (50% of total) Relative TSR (50% of total) Target achievement level Realized achievement level Maximum achievement level CHF 8,425,284 CHF 22,164,484 CHF 15,953,078 CHF 35,316,988 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 CEO Other EC members Target total compensation Realized total compensation 189% 159% * On an aggregate level, while individual outcomes range from 117 to 189 percent. Other EC members CEO 10 ABB COMPENSATION REPORT 2023 Exhibit 9: EC shareholding compared to share ownership guideline * Based on share price of CHF 31.24, the 2023 LTIP reference price, and shares held at December 31, 2023. Future allocation of granted, but unvested, shares is based on target achievement level and relevant plan specific settlement: default settlement of the final 2021 LTIP, 2022 LTIP and 2023 LTIP awards is 100 percent in shares. The value of shares is compared against the annual base salary net of taxes, at December 31, 2023. January 2020 April 2017 January 2021 October 2022 June 2016 October 2010 January 2017 April 2019 0% 200% 400% 600% 800% 1000% Björn Rosengren Timo Ihamuotila Carolina Granat Karin Lepasoon Sami Atiya Tarak Mehta Peter Terwiesch Morten Wierod Held shares in % of net salary Granted, but unvested shares Share ownership requirement EC appointment Other EC members share ownership requirement (400%) CEO share ownership requirement (500%) ABB COMPENSATION REPORT 2023 11 — Compensation governance The Compensation Report is prepared in accordance with the Swiss Code of Obligations, the Directive on Information relating to Corporate Governance of the SIX Exchange Regulation, the rules of the stock markets of Sweden and the United States, where ABB shares were listed until May 2023, and the principles of the Swiss Code of Best Practice for Corporate Governance of economiesuisse. ABB’s Articles of Incorporation ABB’s Articles of Incorporation, approved by its shareholders, contain provisions on compensation which govern and outline the principles of compensation relating to our Board of Directors and Executive Committee. They can be found on ABB’s Corporate Governance website new.abb.com/about/corporate- governance and are summarized below: • Compensation Committee (Articles 28 to 31): The Compensation Committee (CC) is composed of a minimum of three members of the Board and are elected individually by the shareholders at the Annual General Meeting for a period of one year. It supports the Board in establishing and reviewing the compensation strategy and policy, determining the compensation of the Board and the EC, and in preparing the proposals to the AGM on compensation matters. The responsibilities of the CC are defined in more detail in the Board Regulations and Corporate Governance guidelines, which are also available on ABB’s Corporate Governance website. • Compensation principles (Article 33): Compensation of the members of the Board consists of fixed compensation only, which is delivered in cash and shares (with an option to elect for shares only). Compensation of the members of the EC consists of fixed and variable compensation. Variable compensation may comprise short-term and long-term elements. Compensation may be paid in cash, shares, or other benefits. • “Say-on-pay” vote (Article 34): Shareholders approve the maximum aggregate amount of compensation of the Board for the following Board term and of the EC for the following financial year. • Supplementary amount for new EC members (Article 35): If the maximum approved aggregate compensation amount is not sufficient to also cover the compensation of newly appointed EC members, up to 30 percent of the last maximum approved aggregate amount shall be available as a supplementary amount to cover the compensation of such new EC members. • Loans (Article 37): Loans may not be granted to members of the Board or of the EC. Authority levels in compensation matters The authority levels of the different bodies on compensation matters are detailed in Exhibit 10. Exhibit 10: Authority levels in compensation matters CEO CC Board AGM Maximum aggregate compensation amount for the EC ● ● ● CEO compensation ● ● Individual compensation of other EC members ● ● Maximum aggregate compensation amount for the Board ● ● ● Individual compensation of Board members ● ● Compensation Policy ● ● Compensation Report ● ● Consultative vote ● Recommendation ● Proposal ● Approval 12 ABB COMPENSATION REPORT 2023 Activities of the CC in 2023 The CC meets as often as business requires but at least four times a year. In 2023, the CC held seven meetings and performed the activities described in Exhibit 11. The CEO, the Chief Human Resources Officer (CHRO) and the Head of Performance and Reward also attend all or part of the CC meetings in an advisory capacity. The Chairman of the CC may decide to invite other executives upon consultation with the CEO, as appropriate. Executives do not attend the meetings or the parts of the meetings in which their own compensation and/or performance are being discussed. Further details are provided in the section “Board of Directors – Meetings and attendance” of ABB’s Corporate Governance Report 2023. Exhibit 11: CC activities during 2023 Strategy Review of EC compensation structure Continued monitoring of link between sustainability and compensation Board compensation Review of compensation benchmarking for Board members (bi-annual activity) EC compensation Review of recommendations on individual compensation for EC members Review of the share ownership of EC members Review and approval of compensation for new and departing EC members Performance – relating to past performance cycle Assessment of AIP awards for 2023 Assessment of achievement of performance targets for LTIP awards vesting in 2023 Performance – relating to forthcoming performance cycle Setting of AIP design, measures and targets for 2023 Consideration of forecast AIP outcomes for 2023 Consideration of preliminary AIP measures and targets for 2024 Setting of performance targets for LTIP grants in 2023 Consideration of forecast achievement against performance targets for unvested LTIP grants Compliance Review of CC annual plan Review of feedback from Stakeholder Engagement meetings Regulatory and market updates Review of the Compensation Report for publication Preparation of maximum aggregate compensation for the Board to be submitted for AGM vote Preparation of maximum aggregate compensation for the EC to be submitted for AGM vote The Chairman of the CC reports to the full Board regularly, usually after each CC meeting. The minutes of the CC meetings are available to the members of the Board. The CC retains independent, external advisors for compensation matters. In 2023 PricewaterhouseCoopers (PwC) was mandated to provide these services. In addition to its CC advisory role, PwC also provides human resources, tax, and advisory services to ABB. Other external advisors may be employed by the CC and management on a case-by-case basis. ABB COMPENSATION REPORT 2023 13 — Sustainability-related considerations in ABB’s compensation There are a range of sustainability-related considerations which play an important role in our compensation philosophy, including the desire to foster a strong link between ABB’s Sustainability Agenda and the variable compensation for the EC and senior management, as well as the general ambition to reinforce its social contract with its employees. Impact of sustainability performance on variable compensation Given sustainability is an integral part of ABB’s strategy and plans, there is a strong, direct link between the Sustainability Agenda and executive incentives through ABB’s key variable compensation programs such as AIP and LTIP. Regarding the AIP, all EC members have two or three sustainability goals (out of a maximum of three) in the individual component of their respective plans. In 2023, all EC members had an environmental goal (scope 1 and 2 greenhouse gas (GHG) emissions reduction). Most of the EC members had a social goal, which for the CEO and business area presidents was safety, and for most corporate officers was an increase in the proportion of women in senior management roles (female leaders), while the CFO had a governance goal (related to internal controls). In addition, all EC members had an integrity goal designed to help deliver ABB’s obligations under the Deferred Prosecution Agreement (DPA) in line with our commitments to the US Department of Justice. Regarding the LTIP granted to ABB’s senior management in 2023, including the EC, a Company-wide sustainability performance measure with a weighting of 20 percent forms part of the performance measures. • For the 2023 LTIP, the sustainability performance measure was the Company’s GHG emissions reduction at the end of the three-year performance period (2023–2025), compared to the 2019 baseline. • To support our strong ambition to our long-term GHG emissions reduction, the sustainability measure for the 2024 LTIP will again be GHG emissions reduction at the end of the three-year performance period (2024–2026), compared to the 2019 baseline. See page 32 for the target and award points. Details of the long-term GHG emissions reduction targets can be found in ABB’s Sustainability Report 2023. 14 ABB COMPENSATION REPORT 2023 Programs for ABB employees In addition to the offer of fair and competitive compensation to our employees, ABB also strives to offer additional programs to reinforce its social contract with its employees. Selected key programs and their links to our Sustainability Agenda are summarized in the Exhibit 12 below. Exhibit 12: Selected programs for employees Program Operation and purpose Link to ABB’s Sustainability Agenda Employee Share Acquisition Plan (ESAP) Offered to ca. 100,000 employees in over 60 countries, providing the opportunity to purchase shares in ABB one year after the start of a plan, at a price which will be fixed at the beginning of each annual plan cycle, and become ABB shareholders. The opportunity for share ownership is the same for permanent full-time and permanent part-time employees at ABB. This is the case in all ABB locations where ESAP is offered. Supports social goals by aligning employees’ interests with the interests of shareholders and maintaining focus on the long-term success of the Company. Parental Leave A global and gender-neutral program, offered to all employees, which sets out a minimum standard on paid parental leave that supports all family types. The primary caregivers receive 12 weeks of paid leave and the secondary caregivers four weeks following the birth of a child or when becoming a new parent by adoption or surrogacy. Supports social goals, promotes wellbeing and the ABB value of “Care”. Employee Assistance A global program, offered to all employees. The program supports the employee’s wellbeing by offering paid counseling on emotional health, family concerns and workplace concerns. Supports social goals, promotes wellbeing and the ABB value of “Care”. Car or Transportation Allowance Offered to selected employees based on business need or market practice, with any car provision being progressively migrated to e-vehicles or transportation allowances which can be used to contribute to public transport, cycle, or other transport needs. Supports environmental goals by addressing changed needs related to mobility and providing greater flexibility to opt for more environmentally friendly solutions. ABB COMPENSATION REPORT 2023 15 — Board compensation policy The compensation policy for the members of the Board is designed to attract and retain experienced people to the Board. Compensation considers the responsibilities, time and effort required to fulfill their roles on the Board and its committees and is generally positioned at levels similar to other Swiss listed companies of comparable size and complexity. Compensation structure A fixed fee is payable to the Chairman, Vice-Chairman and members of the Board, and additional fees are payable for chairing or membership of a Board committee, except for the Chairman and Vice-Chairman. Board members are paid for their service over an annual Board term that starts with their election at the AGM. Payment of fees is made in semi-annual installments in arrears. Board members are required to take 50 percent of their compensation in shares, but they may elect to receive all their fees in shares. The number of shares delivered is calculated prior to each semi-annual payment by dividing the monetary amount to which the Board members are entitled by the average closing price of the ABB share over a predefined 30-day period. The shares are subject to a three-year restriction period during which they cannot be sold, transferred, or pledged. Any restricted shares are unblocked when a Board member leaves the Board. 16 ABB COMPENSATION REPORT 2023 — Implementation of Board compensation policy Board fees by role As mentioned above, the levels and mix of Board members’ compensation are regularly compared against the compensation of non-executive Board members from a cross-selection of publicly traded companies in Switzerland, excluding financial services, including Alcon, Geberit, Givaudan, Holcim, Kuehne + Nagel, Logitech, Lonza, Nestle, Novartis, Richemont, Roche, Sika, Sonova and Swisscom. Such a review was last undertaken in 2023, and there was no adjustment made to Board fees for the term of office from the 2023 AGM to the 2024 AGM, as set out in Exhibit 13. There has been no change to the individual Board fees since 2015. Exhibit 13: Board fees (in CHF) for the current term of office Chairman of the Board (1) 1,200,000 Vice-Chairman of the Board (1) 450,000 Member of the Board 290,000 Additional committee fees: Chairman of FACC (2) 110,000 Chairman of CC or GNC (2) 60,000 Member of FACC (2) 40,000 Member of CC or GNC (2) 30,000 (1) The Chairman and the Vice-Chairman do not receive any additional committee fees. (2) CC: Compensation Committee, FACC: Finance, Audit and Compliance Committee, GNC: Governance and Nomination Committee. Total Board compensation The compensation paid to the Board members for the calendar year 2023 and for the term of office from the 2023 AGM to the 2024 AGM are disclosed in Exhibit 14 below and in Exhibits 37 and 38, respectively, in the section “Compensation tables and share ownership tables”. At the 2023 AGM, the shareholders approved a maximum aggregate compensation amount of CHF 4.4 million for the 2023–2024 Board term. This amount equals the approved amount for the previous Board term, as both the compensation per Board member and the number of Board members remained unchanged. The Board compensation to be paid for the 2023–2024 Board term is CHF 4.38 million and is therefore within the amount approved by the shareholders. Exhibit 14: Board compensation (in CHF) Board term Board of Directors 2023–2024 2022–2023 Number of members 10 10 Total compensation 4,380,000 4,380,000 Maximum aggregate compensation amount approved at previous AGM 4,400,000 4,400,000 ABB COMPENSATION REPORT 2023 17 Compensation of former Board members In 2023, no payment was made to any former Board member. Compensation for services rendered In 2023, ABB did not pay any fees or compensation to the members of the Board for services rendered to ABB other than those disclosed in this Compensation Report. Share ownership of Board members The members of the Board collectively owned less than one percent of ABB’s total shares outstanding at December 31, 2023. Exhibit 39 in the section “Compensation tables and share ownership tables” shows the number of ABB shares held by each Board member at December 31, 2023 and 2022. Except as described in this Exhibit, no member of the Board and no person closely linked to a member of the Board held any shares of ABB or options in ABB shares. Shares delivered to Board members as part of their compensation are blocked for a period of three years. Exhibit 2 in the section “Compensation at a glance” shows the wealth at risk for each Board member, comparing the value of shares held at December 31, 2023, with the total compensation for the 2023–2024 term of office. Except for one member, who joined the Board in 2023, all other Board members held ABB shares at December 31, 2023, worth at least 300 percent of their 2023 Board compensation. External mandates held by ABB Board members Nine out of ten ABB Board members held at least one external mandate in other companies. Detailed information can be found in Exhibit 40 in the section “Compensation tables and share ownership tables”. 18 ABB COMPENSATION REPORT 2023 — Executive Committee compensation policy The EC compensation policy reflects ABB’s commitment to attract, motivate and retain people with the talent necessary to strengthen its position as a leading global technology company. Compensation structure The compensation structure is designed to be competitive, based on performance, and to encourage executives to deliver outstanding results and create sustainable shareholder value without taking excessive risks. The EC compensation framework therefore balances fixed and variable compensation. Variable compensation is provided through short-term and long-term incentives based on strategic, financial and sustainability related targets, recognizing Group, business area and corporate function performance as well as individual performance. This structure is linked to our strategy and is illustrated in Exhibit 3 in the section “Compensation at a glance”. A significant portion of total compensation depends on variable pay components, which require the achievement of challenging performance targets, in alignment with ABB’s Annual and Long-Term Performance Plans. The target AIP award is defined as a percentage of base salary, currently 100 percent for all EC members. There is no award under the AIP if performance is below threshold on all financial and individual performance measures. When performance exceeds targets, the maximum award is capped at 150 percent of the targeted amount. The target LTIP grant size is defined as a percentage of base salary, currently 150 percent for the CEO and 100 to 150 percent for all other EC members. There will be no award under the LTIP if performance is below threshold for all applicable measures. When performance exceeds targets, the maximum award is capped at 200 percent of the conditional grant. The Exhibit below shows the impact of the application of the compensation policy introduced in 2022, on the target compensation mix for EC members, compared to the compensation mix applicable prior to 2022. The new policy provides a greater emphasis on variable pay, which is especially reflected in the long- term compensation component. Exhibit 15 illustrates the policy change for new EC entrants (excluding the CEO), applying an entry level salary of CHF 700,000 and an incumbent age of 50 years to reflect the pension benefits. Exhibit 15: Policy for target compensation mix of EC members (excluding CEO) appointed prior to and after 2022 * Note that, by exception, the new mix of target compensation was not applied to the newly appointed Chief Communications and Sustainability Officer, where a target LTIP of 100 percent of base salary is applied. 25% 24% 15% 9% 10% 7% 25% 24% 25% 36% EC members pre 2022 EC members post 2022 Base salary Pension benefits Other benefits Short-term incentive Long-term incentive ABB COMPENSATION REPORT 2023 19 Competitive positioning of compensation The Board considers competitive market data when setting the compensation policy for the EC. It is also one of several factors in positioning the target compensation for individual EC members which include: • individual profile of the EC member in terms of experience and skills; • individual performance and potential; • market value of the role (compensation benchmarking). Comprehensive EC compensation benchmark reviews are performed every other year. The CC last conducted such a review in 2022. While each of these peer groups used in the benchmarking exercise, matched the size, scope and complexity of ABB, and excluded companies from the financial services sector, the application of a specific peer group depends on the nature of the role and the source of relevance. For example, a stronger emphasis is placed on the Global Industry peer group for operational roles and in compensation design, and on the Pan-European Market peer group for functional roles. In all cases, the other two peer groups are used to stress test the findings of the primary peer group (see the summary in Exhibit 16 below). Exhibit 16: Peer groups for EC compensation benchmarking Peer group Composition Companies Rationale Global Industry A tailored group of 16 global industry peer companies, matching the scale and complexity of ABB AB SKF, Alstom, Airbus, Atlas Copco, Denso, Eaton, Emerson Electric, Honeywell, Mitsubishi Electric, Mitsubishi Heavy Industries, Schneider Electric, Schindler, Siemens, Thermo Fisher Scientific, Toshiba, Traton Focus for business area roles and benchmarking compensation design Pan- European Market A panel of 50 cross-industry European companies, matching the scale and complexity of ABB See footnote (1) Focus for Corporate roles; continuity and stability of data points Swiss Market A panel of 16 Swiss headquartered companies, matching the scale and complexity of ABB Adecco, Geberit, Givaudan, Glencore, Kuehne & Nagel, Holcim, Nestle, Novartis, Richemont, Roche, Schindler, SGS, Sika, STMicroelectronics, Swatch, Swisscom Swiss location of headquarters (1) AB InBev, Adidas, Air Liquide, Associated British Foods, AstraZeneca, BAE Systems, Bayer, Bouygues, British American Tobacco, Compass Group, Continental, CRH, Danone, Endesa, EssilorLuxottica, Fresenius, Fresenius Medical Care, GlaxoSmithKline, Heidelberg Materials, Heineken, Henkel, Hennes & Mauritz, Holcim, Iberdrola, Imperial Brands, Industria de Diseno Textil, Jeronimo Martins SGPS, Kuehne + Nagel, Linde, L’Oreal, Michelin, National Grid, Naturgy Energy Group, Nokia, Novartis, Novo Nordisk, OMV, Philips, Rio Tinto, Safran, Saint Gobain, Sanofi, SAP, Schneider Electric, Telefonaktiebolaget LM Ericsson, Thales, Umicore, Veolia Environment, Vinci and Vodafone. It is the intention to position target compensation for individual EC members between the median and upper quartile of the relevant peer group(s) considering the other factors referenced above (e.g., the EC member’s skills, experience, performance and potential). The comparison of ABB to its compensation benchmarking peer groups is shown in Exhibit 17 below. This data shows that ABB is typically positioned at the median of key comparator indicators (market capitalization, revenues, and number of employees) against the Global Industry and Pan-European Market peer groups, and at the upper quartile of the Swiss Market peer group. The next compensation benchmarking review will take place in 2024. 20 ABB COMPENSATION REPORT 2023 Exhibit 17: Comparison of ABB to compensation benchmarking peer groups (1) Market capitalization (2)(3)(4) Revenues (2)(4)(5) Number of employees (5)(6) ABB 58.8 27.5 104,400 Global Industry Upper Quartile 78.5 36.3 133,924 Median 49.0 31.1 98,118 Lower Quartile 16.6 17.0 77,017 Pan-European Market Upper Quartile 75.4 40.0 124,435 Median 32.6 27.9 89,012 Lower Quartile 20.2 22.7 62,660 Swiss Market Upper Quartile 65.1 38.2 85,017 Median 32.0 16.4 58,635 Lower Quartile 20.1 9.1 30,348 (1) Data for market capitalization, revenues and number of employees are sourced from Thomson Reuters. (2) Market capitalization and revenues are in CHF millions. (3) Market capitalization is averaged over a period of three months (June 20, 2022, until September 20, 2022). (4) All currencies have been converted to CHF, where needed, applying full-year average currency exchange rates based on the period from July 1, 2021, to June 30, 2022. (5) Revenues and number of employees as per last financial year prior to October 2022. (6) Number of employees in full-time equivalent (FTE) unless FTE information was not available, then in total number of employees. Compensation elements Exhibit 3 in the section “Compensation at a glance” sets out the purpose and link to strategy, the operation, the opportunity level and the performance measures. This section provides further details for each compensation element. Fixed compensation – base salary and benefits Purpose and link to strategy Facilitate the attraction and retention of talented EC members; base salary compensates for the role and relevant experience; benefits protect against risks. Base salary is paid in cash. Benefits consist primarily of retirement, insurance and healthcare plans that are designed to provide a reasonable level of support for the employees and their dependents in case of retirement, disability or death. Opportunity levels Base salary is set with reference to the scope of responsibilities, personal experience and skills, and competitive market data. Benefit plans are set in line with the local competitive and legal environment and are, at a minimum, in accordance with the legal requirements of the respective country. Performance measures and weighting Base salary is adjusted considering the factors set out under opportunity levels above, the executive’s performance as well as their future potential. Variable compensation – Annual Incentive Plan (AIP) Purpose and link to strategy The AIP is designed to reward EC members for the Group’s results, the results of their business area or corporate function and their individual performance over a time horizon of one year and is aligned with the Annual Performance Plan approved by the Board. ABB COMPENSATION REPORT 2023 21 Opportunity levels The AIP opportunity levels for the EC are 100 percent of base salary at target with a maximum opportunity of 150 percent. Performance measures and weighting The AIP structure is designed to incentivize operational delivery and underpin our performance culture. As such, it is focused on key priorities, with a maximum of five measures. • A common Group financial measure with a 20 to 40 percent weighting. • Up to three Group or business area financial measures, with a 40 to 60 percent weighting. • An individual measure with a 20 percent weighting. This individual component is informed by up to three goals which may include a combination of quantitative and qualitative goals. o From 2022, at least two of these goals relate to sustainability. o The outcome against this individual measure is a discretionary judgment based on the combined performance against all individual goals. A summary of the composition and total weighting of the measures for all EC members is set out in Exhibit 18. Exhibit 18: Composition and weighting of AIP measures for EC members CEO and corporate officers (1) Business area presidents Common Group financial measure 40% 20% Other Group financial measures Up to three measures n.a. 40% Business area financial measures n.a. Up to three measures 60% Individual measure Includes up to three goals (minimum two must relate to sustainability) Includes up to three goals (minimum two relate to sustainability) 20% 20% Total 100% 100% (1) Corporate officers include Chief Financial Officer, Chief Human Resources Officer, General Counsel and Chief Communications and Sustainability Officer. Other design features A target will be set for each performance measure, corresponding to the expected level of performance that will generate a target (100 percent) award. For each measure except the individual measure, a minimum level of performance, below which there is no award (threshold) and a maximum level of performance, above which the award is capped at 150 percent of the target (maximum), will also be defined. The payment conditions for financial AIP measures are summarized in Exhibit 19. For Group and business area financial measures, the award percentage achievements between threshold and target level, as well as between target and maximum level are determined by linear interpolations between these award points. Exhibit 19: Payment conditions for the AIP of EC members Level of performance Below threshold Threshold Target Maximum Award achievement per financial measure 0% >0% 100% 150% The outcomes of the financial AIP measures are subject to appropriate discretionary upward or downward adjustments by the CC for non-operational items and other adjustment principles agreed with the Board, if and to the extent the CC considers this appropriate. In addition, the CC/Board have discretionary authority to adjust the results and/or the AIP award. This specifically includes a downwards adjustment based on safety performance, including fatalities. 22 ABB COMPENSATION REPORT 2023 From 2024, AIP awards of EC members are subject to malus and clawback rules, which include illegal activities, any financial misstatement and reputational damage that have a material impact on ABB Ltd or one of its subsidiaries. This means that the Board may decide not to award any unpaid short-term incentive compensation (malus) to EC members or may seek to recover short-term incentive compensation that has been settled in the past (clawback) to EC members. Clawback applies for a period of up to three years following the date that any AIP award was paid. Variable compensation – Long-Term Incentive Plan (LTIP) Purpose and link to strategy Rewards the achievement of predefined performance targets over a three-year period. Encourages the creation of long-term, sustainable shareholder value creation and is aligned with the Company’s Long- Term Performance Plan approved by the Board. Opportunity levels The LTIP is offered in the form of Performance Share Unit (PSU) grants to approximately 100 executives at ABB. The LTIP described in this Compensation Report represents the PSU plan and as such is applicable to EC members. In addition, ABB offers another LTIP in the form of Restricted Share Unit (RSU) grants to approximately 700 employees below the executive level. For the CEO, the annual LTIP opportunity level is 150 percent of base salary at target, with a maximum opportunity of 300 percent of base salary. As per the policy change announced in our 2021 Compensation Report, the annual target and maximum opportunity levels for EC members appointed from 2023 are 150 percent and 300 percent of annual base salary, respectively. The annual LTIP opportunity levels for EC members appointed prior to 2022 are 100 percent of base salary at target, with a maximum opportunity of 200 percent of base salary. The Board has the discretionary option to make no grants in certain circumstances. The relative opportunity level offered under ABB’s LTIP is the same for permanent full-time and permanent part-time employees. Performance measures and weighting The LTIP has, since 2022, three performance measures with the following relative weighting: Earnings Per Share (EPS) – 50 percent weighting • Achievement against this measure is determined by ABB’s average EPS over a three-year period. The average EPS result is calculated from the sum of the EPS for each of the three relevant years, divided by three. • EPS is defined as diluted earnings per share attributable to ABB shareholders, calculated using Income from continuing operations, net of tax, unless the Board elects to calculate using Net income for a particular year. • Appropriate threshold (zero), target (100 percent) and maximum (200 percent) award points are reviewed by the CC on an annual basis. • Performance target and award points are set using the Company’s Long-Term Performance Plan and are calibrated with an independent “outside-in” view, considering the growth expectations, risk profile, investment levels and profitability levels that are typical for the industry. • Adjustments to the outcome of the EPS achievement level may be considered for items which are not part of, or the result of, the normal course of business operations and/or which were not considered, either by way of inclusion or exclusion, for the target-setting of a specific LTIP launch. Only the net impact of such adjustments over the vesting period of the respective LTIP grant will be considered. The impact of share buybacks will not be considered as an adjustment. The same number of outstanding shares applicable at the time of the EPS target setting will also be applied at the time of vesting. ABB COMPENSATION REPORT 2023 23 Total Shareholder Return (TSR) – 30 percent weighting • The TSR calculations are made for the reference period beginning in the year of the conditional grant of the shares and ending three years later. The evaluation is performed by an independent third party. • Achievement against this measure is determined by ABB’s relative TSR performance over the three-year vesting period against a defined peer group, which currently includes 3M, Danaher, Eaton, Emerson Electric, General Electric, Holcim, Honeywell Intl., Legrand, Mitsubishi Electric, Raytheon Technologies, Rockwell, Rolls-Royce, Schneider Electric, Siemens, and Yokogawa. • The threshold point for awards, above which vesting starts, corresponds to the 50th percentile (P50) of the TSR peer group, i.e., there is no vesting for performance below P50. • Vesting for P50 achievement equals to 100 percent of target and vesting for a 75th percentile (P75) achievement level remains at 200 percent of target (maximum). There is a linear vesting for an achievement between P50 and P75 (100 to 200 percent of target). • The constituents of the peer group and the appropriate threshold, target and maximum award points are reviewed by the CC on an annual basis. Sustainability – 20 percent weighting • The Board determine, on an annual basis, the LTIP specific sustainability measure(s), as well as related target(s) and award points, to incentivize material progress towards our 2030 sustainability strategy commitments. • Appropriate threshold (zero), target (100 percent) and maximum (200 percent) award points are reviewed and approved by the CC on an annual basis. • Adjustments to the outcome of the sustainability achievement may be considered for items which are not part of, or the result of the normal course of business operations and/or which were not considered, either by way of inclusion or exclusion, for the target-setting of a specific LTIP launch. Only the net impact of such adjustments over the vesting period of the respective LTIP grant will be considered. Other design features The number of shares to be granted is determined by dividing the grant value by the average share price on the SIX Swiss Exchange over the period of 20 trading days prior, and 20 trading days after, the date of publication of ABB’s full year financial results. Settlement of the LTIP shares is three years after grant, subject to achievement of performance conditions, defined prior to grant. The vesting schedule for the LTIP is shown in the following Exhibit 20. The award percentage achievements between threshold and target, as well as between target and maximum, are determined by linear interpolations between these award points. Exhibit 20: Vesting schedule for the LTIP of EC members Level of performance Below threshold Threshold* Target Maximum Award achievement per measure 0% >0% 100% 200% * For the TSR measure, the threshold point equals the target point. As of the 2023 LTIP offering, the CC has the discretion to adjust the formulaic LTIP vesting outcome to reflect the overall performance of ABB, over the performance period. Default settlement of the final LTIP award is 100 percent in shares, and beginning with grants made conditionally in 2020, an automatic sell-to-cover is in place for employees who are subject to withholding taxes. LTIP shares are subject to malus and clawback rules, which include illegal activities, any financial misstatement and reputational damage that have a material impact on ABB Ltd or one of its subsidiaries. This means that the Board may decide not to award any unsettled or unvested incentive compensation (malus), or may seek to recover long-term incentive compensation that has been settled in the past (clawback). Clawback applies for a period of up to five years following the originally scheduled plan specific vesting date. 24 ABB COMPENSATION REPORT 2023 The CC also has the ability to suspend the delivery of awards if it is likely that the Board will determine that the malus or clawback provisions may potentially apply (e.g., if the employee is subject to an external investigation). For LTIP grants from 2021, there is no automatic accelerated vesting of awards in the event of a change of control. For LTIP grants from 2022, participants are entitled to receive a cash amount (a “dividend equivalent payment”) on each vested award share that is equal to the total dividends per share paid by the Company on the ABB Ltd share between the grant date and the delivery date of the vested award. Wealth at risk / Share ownership Purpose and link to strategy To align EC members’ personal wealth directly with the interests of shareholders to maintain focus on the long-term success of the Company. Share ownership program EC members are normally required to retain all shares vested from the Company’s LTIP and any other share-based compensation until their share ownership requirement is met. In circumstances where there is a withholding tax obligation, the number of shares received will be considered to be the number of shares vested minus the shares sold under the default sell-to-cover facility. The share ownership requirement is equivalent to a multiple of the EC member’s annual base salary, net of taxes (see Exhibit 3 in the section “Compensation at a glance”). These share ownership requirements are aligned with market practice and result in a wealth at risk for each EC member which is aligned with shareholder interests. Only vested shares owned by an EC member and their spouse count for the comparison of the actual share ownership against the share ownership requirement. The CC reviews the status of EC share ownership on an annual basis. Notice period, severance provisions and non-competition clauses Employment contracts for EC members include a notice period of 12 months, during which they are entitled to their annual base salary, short-term incentive, and benefits. In accordance with Swiss law and ABB’s Articles of Incorporation, the contracts for the EC members do not allow for any severance payment. Non-compete agreements may be entered into with the CEO and all other EC members for a period of 12 months after their employment. Compensation for such agreements, if any, may not exceed the EC member’s last total annual cash remuneration (comprising of base salary, short-term incentive and benefits). ABB COMPENSATION REPORT 2023 25 — Implementation of EC compensation policy Overview EC members received aggregate total compensation of CHF 40.6 million in 2023, compared with CHF 36.0 million in 2022, as summarized in Exhibit 21 below and presented in detail in Exhibits 41 and 42. At the 2022 AGM, the shareholders approved a maximum aggregate compensation amount of CHF 45.9 million for the EC for 2023. The 2023 EC total compensation of CHF 40.6 million is therefore within the approved amount (see Exhibit 21). Exhibit 21: Total compensation of EC members (monetary values in CHF) (1) Calendar year 2023 2022 Base salaries 8,430,879 8,341,720 Pension benefits 4,341,781 4,334,281 Other benefits (2) 6,041,342 4,894,480 Total fixed compensation 18,814,002 17,570,481 Short-term incentives (3) 12,088,564 9,879,882 Long-term incentives (fair value at grant) (4) 9,739,902 8,557,683 Total variable compensation 21,828,466 18,437,565 Total compensation 40,642,468 36,008,046 Maximum aggregate compensation approved at previous AGM 45,900,000 40,000,000 (1) For an overview of compensation by individual and component, please refer to Exhibits 41 and 42 in the section “Compensation tables and share ownership tables” below. An overview of 2023 realized compensation by individual is provided in Exhibit 48 in the same section. (2) Other benefits mainly comprise payments related to social security, health insurance, children's education, transportation, tax advice and certain other items. (3) Represents accrued short-term variable compensation for the year 2023, which will be paid in 2024, after the publication of ABB’s financial results. Short-term variable compensation is linked to the targets and goals defined in each EC member’s Annual Incentive Plan. (4) The disclosure of the number of shares granted under the LTIP in 2022 for Sami Atiya has been corrected from the amount previously disclosed in the 2022 Compensation Report. As a result, the grant fair value has been reduced accordingly. The total compensation for the EC in 2023 increased by 12.9 percent compared to 2022. This mainly reflects the impact of the strong performance achieved in the year and the consequent higher variable incentives from both the 2023 AIP awards and the 2023 LTIP grant fair value, as well as the higher costs relating to the 2020 LTIP, which vested in 2023. Compensation mix The ratio of fixed to variable compensation in any given year depends on the performance of the Company and individual EC members against predefined performance targets. Exhibit 5 in the section “Compensation at a glance” shows the composition of the total annual compensation in 2023 for the CEO and for the other current EC members on an aggregate level, specifying the split of its five compensation components. 26 ABB COMPENSATION REPORT 2023 The variable portion of the total compensation in 2023 remains broadly the same as in the prior year. In 2023, the variable compensation of the CEO was 55 percent of his total annual compensation (previous year: 56 percent). For the other EC members, the variable compensation was 52 percent on average (previous year: 51 percent). Note that compensation paid in 2023 for former EC members is not included in Exhibit 5. This can be found in Exhibit 41. Compensation elements – 2023 highlights Base salary As a result of the regular compensation review for the EC, the Board and the CC decided to increase the salaries of two of the nine EC members in place in March 2023. The base salary of Peter Terwiesch was increased by 3.6 percent to CHF 860,000 and of Morten Wierod by 8.3 percent to CHF 975,000. These salary changes were made to reward exceptional performance of these EC members and, in the case of Morten Wierod, to also reflect a broadening of responsibilities. Considering that the other seven EC members in place in March 2023 had no salary adjustments, this corresponded to a 1.3 percent increase on annual base salaries for the EC members post March 2023. Annual Incentive Plan (AIP) – design Under the 2023 AIP, all EC members had two Group measures, Group Operational EBITA margin with a 20 to 40 percent weighting and Group Operational revenue gross profit productivity growth with a weighting of 10 percent. In addition to these two Group measures, the CEO and the corporate officers shared other Group measures, including Revenues and Free Cash Flow, with a total weighting of 30 percent. All business area presidents had, in addition to the two Group measures, two measures which were tailored to business imperatives, with a total weighting of 50 percent. These tailored measures were Operational EBITA margin, Operational Free Cash Flow and Net working capital (13 months % avg). Exhibit 22 below shows the composition and weighting of the financial measures applied in 2023 for all EC members under their AIP, specified by their roles. Definitions of the financial measures applied for all EC members are set out in Exhibit 23. ABB COMPENSATION REPORT 2023 27 Exhibit 22: Composition and weighting of 2023 AIP measures for EC members Focus of measure CEO and corporate officers (1) President Electrification President Motion President Process Automation President Robotics & Discrete Automation Group financial measures Bottom line earnings Op EBITA margin 40% Op EBITA margin 20% Op EBITA margin 20% Op EBITA margin 20% Op EBITA margin 20% Bottom line output Operational revenues gross profit productivity growth 10% Operational revenues gross profit productivity growth 10% Operational revenues gross profit productivity growth 10% Operational revenues gross profit productivity growth 10% Operational revenues gross profit productivity growth 10% Other Group financial measures Cash generation Free Cash Flow 20% Top line output Revenues 10% Business area financial measures Bottom line earnings Op EBITA margin 30% Op EBITA margin 30% Op EBITA margin 30% Cash generation Op Free Cash Flow 20% Op Free Cash Flow 25% Op Free Cash Flow 20% Top line input Revenues 25% Liquidity and financial health Net working capital (13 months % avg) 20% Individual measure GHG emissions, Integrity, Female leaders, Safety, Internal controls Function-specific 20% GHG emissions, Safety, Integrity Business-specific 20% Business-specific 20% Business-specific 20% Business-specific 20% Total 100% 100% 100% 100% 100% (1) Corporate officers include Chief Financial Officer, Chief Human Resources Officer, General Counsel and Chief Communications and Sustainability Officer. Exhibit 23: Definition of quantitative measures, applied in 2023 Measure Description Operational EBITA margin (%) (1) Operational EBITA, which is Operational earnings before interest, tax, and acquisition-related amortization, as a percentage of Operational revenues, which is total revenues adjusted for foreign exchange/commodity timing differences in total revenues. Revenues Amount of consolidated revenues recognized during the year in accordance with USGAAP. Free Cash Flow (FCF) (1) Free Cash Flow is calculated as net cash provided by operating activities adjusted for: (i) purchases of property, plant and equipment and intangible assets, and (ii) proceeds from sales of property, plant and equipment. Operational revenue gross profit productivity growth (%) Operational revenue gross profit productivity is calculated as the 12-month rolling operational revenue gross profit divided by the average number of total workforce in the last three months. Where operational revenue gross profit is calculated as gross profit (as defined under USGAAP) adjusted for the following non-operational items to the extent that they are included within the USGAAP gross profit amount: (i) foreign exchange/commodity timing differences, (ii) acquisition-related amortization, (iii) restructuring, related and implementation costs, (iv) changes in obligations related to divested businesses, (v) changes in pre-acquisition estimates, (vi) acquisition- and divestment-related expenses and integration costs, (vii) other income/expense relating to the Power Grids joint venture and (viii) certain other non- operational items. Growth is the change in productivity over the same period a year earlier, represented as a percentage change. Operational Free Cash Flow (OFCF) Cash flows from operating activities excluding cash paid for interest and taxes and including (i) purchases of property, plant and equipment and intangible assets, and (ii) proceeds from sales of property, plant and equipment. Net working capital (13 months % avg) Average Net working capital (1) over 13 consecutive month-ends (December 2022 through December 2023), expressed as a percentage of Operational revenues (1) . Calculated using constant exchange rates. (1) Full definition can be found in the section “Alternative performance measures” in ABB’s Integrated Report 2023. 28 ABB COMPENSATION REPORT 2023 All EC members also had an individual measure with a 20 percent weighting. This individual component was informed by a combination of up to three quantitative and qualitative goals. In 2023, all three goals related to sustainability. All EC members had an environmental goal (GHG emissions reduction) and an integrity goal designed to help deliver the Deferred Prosecution Agreement in line with our commitments to the US Department of Justice. In addition, most of the EC members had a social goal, which for the CEO and business area presidents was related to safety, and for most of the corporate officers was related to an increase in the proportion of women in senior management roles (female leaders), while the CFO had a governance goal related to internal controls. The outcome against the individual measure was based on a discretionary judgment of the combined performance against all three goals. Outcomes may be subject to appropriate adjustments for some non- operational items and other adjustment principles agreed with the Board. No adjustments were applied in 2023. 2023 Annual Incentive Plan (AIP) – achievements The 2023 AIP achievements are summarized in Exhibit 24 for the CEO and the corporate officers, and business area presidents, respectively. Individual AIP outcomes per EC member in comparison to their target 2023 AIP are set out in Exhibit 25. ABB COMPENSATION REPORT 2023 29 Exhibit 24: 2023 AIP outcomes for the CEO and the corporate officers (rounded) 2023 AIP outcomes for the business area presidents (rounded) 30 ABB COMPENSATION REPORT 2023 Exhibit 25: Overview of targeted and realized 2023 AIP values Group measures Other Group measures Business area measures Individual measure (1) Total AIP outcome percentage (in % of target) Target AIP award (in CHF) Actual AIP award (in CHF) (2) Achievement Weighting Outcome Achievement Weighting Outcome Achievement Weighting Outcome Achievement Weighting Outcome Björn Rosengren 150.0% 50% 75.0% 150.0% 30.0% 45.0% n.a. n.a. n.a. 145.0% 20% 29.0% 149.0% 1,785,000 2,659,650 Timo Ihamuotila 150.0% 50% 75.0% 150.0% 30.0% 45.0% n.a. n.a. n.a. 100.0% 20% 20.0% 140.0% 990,000 1,386,000 Carolina Granat 150.0% 50% 75.0% 150.0% 30.0% 45.0% n.a. n.a. n.a. 150.0% 20% 30.0% 150.0% 725,000 1,087,500 Karin Lepasoon 150.0% 50% 75.0% 150.0% 30.0% 45.0% n.a. n.a. n.a. 150.0% 20% 30.0% 150.0% 600,000 900,000 Sami Atiya 150.0% 30% 45.0% n.a. n.a. n.a. 90.0% 50% 45.0% 150.0% 20% 30.0% 120.0% 800,000 960,000 Tarak Mehta 150.0% 30% 45.0% n.a. n.a. n.a. 150.0% 50% 75.0% 150.0% 20% 30.0% 150.0% 930,000 1,395,000 Peter Terwiesch 150.0% 30% 45.0% n.a. n.a. n.a. 130.2% 50% 65.1% 135.0% 20% 27.0% 137.1% 860,000 1,179,060 Morten Wierod 150.0% 30% 45.0% n.a. n.a. n.a. 150.0% 50% 75.0% 150.0% 20% 30.0% 150.0% 975,000 1,462,500 Total 7,665,000 11,029,710 (1) Includes, where appropriate, a reduction for a recorded fatality. (2) Represents accrued AIP award for the year 2023, which will be paid in 2024, after the publication of ABB's financial results. CEO retrospective AIP target disclosure The following Exhibit 26 sets out target and award points for each measure under the CEO’s 2023 AIP and its related composition of the final award level. This new exhibit is in response to shareholder feedback and represents a relevant additional level of transparency on the alignment between pay and performance. Exhibit 26: 2023 AIP outcomes for the CEO (rounded) (1) Category Performance measure W eight Target (100% award) Actual Award (% of target) Weighted award Group measures Op EBITA margin (%) 40% 15.2 16.7 150.0% 60.0% Op revenues gross profit productivity growth (%) 10% 6.4 17.9 150.0% 15.0% Other Group measures Free Cash Flow ($ in millions) 20% 2,353.0 3,569.7 150.0% 30.0% Revenues ($ in millions) 10% 29,939.1 31,533.9 150.0% 15.0% Individual measure GHG emissions, Safety, Integrity 20% See (2) See (2) 145.0% 29.0% Total 149.0% (1) The computation of targets as well as the measurement of actual performance against those targets are based on exchange rates set prior to the start of the performance period. Therefore, targets and actuals under the AIP do not agree with the equivalent measure calculated based on the actual results as presented in the Consolidated Financial Statements (2) The achievement of the individual measure is discretionary assessed by the Compensation Committee and approved by the Board, based on an overall outcome of all three performance goals under the individual measure. For 2023 these included a reduction of GHG emissions compared to the 2022 baseline, a reduction of the Lost Time Injury Frequency Rate (LTIFR) compared to the 2019 baseline, and the delivery of the Deferred Prosecution Agreement in line with our commitments to the US Department of Justice. See Exhibit 27 for the achievement of goals against the individual measure. Includes a discretionary reduction for a recorded fatality. Exhibit 27 sets out the target, actual and assessed outcome of the individual goals for the CEO which inform the individual measure. The overall outcome of the individual measure is a discretionary judgement based on performance against all three goals. ABB COMPENSATION REPORT 2023 31 Exhibit 27: Achievement against the 2023 performance goals under the individual measure for the CEO Goal Performance measure Target Actual Assessment GHG emissions Emissions reduction vs 2022 baseline (1) 11.9% 29.0% Exceeded target Safety Lost Time Injury Frequency Rate (2) 0.17 0.13 Lower (better) than target Integrity Deliver DPA in line with our commitments to the DOJ (3) Discretionary assessment by the Board Discretionary assessment by the Board Exceeded goal Total 145.0% (1) ABB’s GHG emissions include direct emissions (scope 1) from burning of fuels (oil, diesel, gas) at our sites; SF6 emissions in own operations; fleet emissions and indirect emissions (scope 2) from our use of electricity and district heating/cooling. (2) Lost Time Injury Frequency Rate (LTIFR) covers workplace incidents (ABB facility, project site, customer site) to ABB employees and contractors; LTIFR formula = number of lost time incidents and serious injury incidents with time lost * 200,000 / work hours (employees + contractors). Rate per 200,000 work hours (equivalent to 100 persons working one calendar year). Managers with direct reports are required to complete a minimum of two Safety Observation Tours (SOT) before an award is made under LTIFR. The baseline is represented by the 2019 LTIFR. Includes, where appropriate, a discretionary reduction for a recorded fatality, (3) Contribution to the delivery of our commitments under the Deferred Prosecution Agreement with the US Department of Justice related to the Kusile project. CEO AIP outcomes in the last four years The historical AIP award outcomes since Björn Rosengren has been ABB’s CEO are shown in Exhibit 28. Over the last four years vesting has averaged at 119.8 percent of target and 79.8 percent of the maximum award. Exhibit 28: CEO AIP historical award percentages Long-Term Incentive (LTIP) 2023 LTIP grants The estimated value at grant of the share-based grants to EC members under the 2023 LTIP was CHF 8.7 million, compared with CHF 8.6 million in 2022. The reference price for the 2023 LTIP grant used to determine the number of shares granted to participants was CHF 31.24. The 2023 LTIP is based on three performance measures: ABB’s EPS, ABB’s TSR and a sustainability measure. Targets and award points under the EPS measure are considered as commercially sensitive information and will only be disclosed retrospectively after the end of the relevant LTIP performance period. As in the previous year, ABB kept the achievement of the EPS threshold point challenging for the 2023 LTIP by applying a range between the EPS target and award points of plus/minus 11.5 percent of target, to reflect the perceived EPS volatility during the performance period. The peer companies approved by the Board to determine ABB’s relative TSR performance for the 2023 LTIP were as set out in the previous section “Executive Committee compensation policy” on page 23. 43.3% 96.7% 80.0% 99.3% 65.0% 145.0% 120.0% 149.0% 0% 50% 100% 150% 2020 AIP 2021 AIP 2022 AIP 2023 AIP CEO AIP award in % of maximum potential award CEO AIP award in % of target award 32 ABB COMPENSATION REPORT 2023 The sustainability measure applied to the 2022 LTIP was also applied in the 2023 LTIP, namely the scope 1 and 2 GHG emissions reduction at the end of the three-year performance period (2023–2025), compared to the 2019 baseline, which was defined without the divested Power Grids business. The targets and award points under the 2023 LTIP have been structured to reflect ABB’s progress to date, its long-term ambitions, and that as the targets get higher, the overall stretch to achieve them is even more challenging. Details of the long-term GHG emissions reduction targets can be found in ABB’s Sustainability Report 2023. The approved target and award points for all three performance measures under the 2023 LTIP are illustrated in Exhibit 29 below. Exhibit 29: 2023 LTIP target and award points Measure Weighting Threshold Target Maximum Average EPS 50% Target point -11.5% Disclosed after performance period Target point +11.5% Relative TSR 30% 50th percentile 75th percentile Reduction of scope 1 and 2 CO 2 equivalent emissions compared to 2019 baseline 20% 75.0% 77.5% 80.0% Below threshold point: no award; At target point: 100 percent award; At or above maximum point: capped at 200 percent award; Linear interpolations between award points; The average EPS target is not prospectively disclosed for reasons of commercial sensitivity. 2024 LTIP grants The sustainability measure applied to the 2022 LTIP and 2023 LTIP will also be applied in the 2024 LTIP, namely the scope 1 and 2 GHG emissions reduction at the end of the three-year performance period (2024- 2026), compared to the 2019 baseline. Details of the long-term GHG emissions reduction targets can be found in ABB’s Sustainability Report 2023. The target and award points, as described in Exhibit 30, have been structured to reflect ABB’s progress to date, its long-term ambitions, and that as the targets get higher, the overall stretch to achieve them becomes more challenging. • The threshold value of 77.0 percent emissions reduction versus the 2019 baseline is significantly above the mid-term target of 70 percent. • The target value of 81.0 percent is in line with ABB’s long-term forecast for 2025. • The maximum value of 85.0 percent is in line with our 2030 Sustainability Strategy target. If it is achieved in 2025, it would mean we have delivered our target five years ahead of our commitment. Exhibit 30: Sustainability target and award points for the 2024 LTIP Measure Weighting Threshold Target Maximum Reduction of scope 1 and 2 CO2 equivalent emissions compared to 2019 baseline 20% 77.0% 81.0% 85.0% Below threshold point: no award; At target point: 100 percent award; At or above maximum point: capped at 200 percent award; Linear interpolations between award points. 2020 LTIP – achievements The final number of shares vesting under the 2020 LTIP grant in 2023 was determined based on the achievement level against the predefined TSR and EPS targets. The relative ranking of ABB’s TSR measure against the predefined peer group of companies for the 2020 LTIP sat on the 83 rd percentile, which led to a vesting level of 200.0 percent (previous year: 200.0 percent) out of a potential of 200 percent. ABB COMPENSATION REPORT 2023 33 The three-year average EPS amounted to $1.14, which led to a vesting level of 179.0 percent (previous year: 42.0 percent) out of a potential 200 percent, net of adjustments for items considered outside the normal course of business operation and/or which were not considered in the target setting of the 2020 LTIP. Adjustments were made to the EPS for each of the relevant financial years to reflect significant unplanned developments after the LTIP grant, including for the impact of divestments, M&A related integration costs and restructuring costs. In line with our commitment to retrospectively disclose the EPS performance targets for vested LTIP awards, the three target and award points (threshold, target and maximum) and the actual achievement for the adjusted 2020 EPS performance measure are shown in Exhibit 31 below. The average weighted achievement level of the two performance measures under the 2020 LTIP was 189.5 percent (out of a maximum 200 percent), as specified in Exhibit 31. Exhibit 31: Target and award points and achievement levels of 2020 LTIP performance measures Measure Weighting Threshold Target Maximum Actual Relative TSR 50% 25 th percentile 50 th percentile 75 th percentile 83 rd percentile Achievement level 0% 100% 200% 200.0% Average EPS ($) 50% 0.84 1.01 1.18 1.14 Achievement level 0% 100% 200% 179.0% Award as percentage of target (maximum at 200%) 189.5% Overview of disclosed and realized 2020 LTIP value The following table compares the previously disclosed “fair value” of the grant to each EC member and the actual value of the grant at the time of vesting. The following Exhibit 32 shows such comparison for the 2020 LTIP, that vested in 2023. Exhibit 32: Realized value of 2020 LTIP grant for current EC members Grant date Number of shares granted related to the TSR measure (1) Shares granted related to the EPS measure (2) Total number of shares granted (3) Disclosed grant fair value (CHF) (3) Vesting date Vesting percentage Number of vested shares (4) Realized value (CHF) (5) Björn Rosengren April 27, 2020 65,858 65,857 131,715 1,970,457 April 27, 2023 189.5% 258,837 8,347,494 Timo Ihamuotila April 27, 2020 24,536 24,535 49,071 734,103 April 27, 2023 189.5% 96,431 3,109,900 Carolina Granat n.a. n.a. Karin Lepasoon n.a. n.a. Sami Atiya April 27, 2020 20,662 20,661 41,323 618,193 April 27, 2023 189.5% 81,205 2,618,862 Tarak Mehta April 27, 2020 23,244 23,244 46,488 695,462 April 27, 2023 189.5% 91,357 2,946,264 Peter Terwiesch April 27, 2020 20,662 20,661 41,323 618,193 April 27, 2023 189.5% 81,205 2,618,862 Morten Wierod April 27, 2020 19,370 19,370 38,740 579,552 April 27, 2023 189.5% 76,130 2,455,193 Total 5,215,960 22,096,575 (1) Actual achievement level of the TSR measure was 200.0 percent. (2) Actual achievement level of the EPS measure was 179.0 percent. (3) Valued at CHF 14.96, the grant fair value of the ABB share on the grant date adjusted for expected foregone dividends during the vesting period. (4) The initial granted number of shares has been increased by 3.7 percent to reflect the impact of the Accelleron spin-off in 2022. (5) Valued at CHF 32.25, the closing price of the ABB share on the day of vesting. The values presented are gross and before payment of any applicable taxes owing by the recipient. This indicates the average gross realized LTIP value was 423.6 percent of the disclosed grant fair value. 34 ABB COMPENSATION REPORT 2023 LTIP vesting outcomes in the last five years The historical LTIP vesting outcomes for the prior five years are shown in Exhibit 33 below. Over the last five years vesting has averaged at 106.7 percent of target and 57.5 percent of the maximum award. Exhibit 33: LTIP historical actual vesting percentages (1) (1) According to plan-specific relative weighting of relevant performance measures. Realized total compensation – 2023 We disclose the realized total compensation for each EC member. Such transparency on realized compensation is designed to aid stakeholders’ understanding of ABB's link between pay and performance. Realized compensation relates to the AIP award and the LTIP award at the end of their respective performance cycles, reflecting actual payment and settlement, based on achievements of the plan specific performance measures. The following Exhibit 34 sets out a high-level comparison of realized and target total compensation for each EC member. A detailed summary table is given in Exhibit 48 in the section “Compensation tables and share ownership tables“. Exhibit 34: Realized 2023 total compensation (in CHF) compared to target total compensation 92.5% 73.0% 57.4% 121.0% 189.5% 61.7% 41.7% 28.7% 60.5% 94.8% 0% 50% 100% 150% 200% 2016 LTIP 2017 LTIP 2018 LTIP 2019 LTIP 2020 LTIP Vesting in % of target award Vesting in % of maximum potential award 189% 170% 117% 120% 165% 172% 167% 165% 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 Björn Rosengren Timo Ihamuotila Carolina Granat Karin Lepasoon Sami Atiya Tarak Mehta Peter Terwiesch Morten Wierod Target total compensation Realized total compensation ABB COMPENSATION REPORT 2023 35 Annual total compensation ratio This new section is in response to shareholder feedback and represents a relevant additional level of pay transparency in the Report. It provides details of the ratio of the annual total compensation for the organization’s highest-paid individual (our CEO) to the median annual total compensation for all permanent ABB employees in Switzerland (excluding the highest-paid individual). We consider Switzerland to be the most relevant location for analyzing the annual total compensation ratio since our CEO is also located in Switzerland. This approach also mitigates employee footprint and currency volatility. In any event, ABB’s data access does not currently allow for the inclusion of all relevant compensation elements of all ABB employees in all countries in which we operate. At the time of publication of the Report, the allocation of annual short-term incentive awards to eligible employees in Switzerland for 2023 has not been concluded. We therefore report the ratio for the year 2022, for which we know relevant short-term incentive awards. The calculated ratio comprises paid base salary, paid short-term incentive, paid pension benefits, paid other benefits and granted long-term incentive as compensation elements. The short-term incentive represents the bonus paid in 2023 (for the year 2022), and the long-term incentive represents the grant fair value, in line with the disclosure for the 2022 CEO compensation in this report. The analysis excludes non-permanent employees (i.e., interns, apprentices, trainees, temporary workers) or international assignees, but includes part-time employees if they were employed at December 31, 2022. Compensation elements of part-time employees and new hires during the year 2022 are extrapolated to represent full-time equivalent and full year equivalent figures. Values of granted long-term incentive, pension benefits and other benefits are considered for the employee with the median total cash compensation, comprising of annual base salary and 2022 short-term incentive award. As disclosed in our Compensation Report 2022, the CEO’s total compensation for 2022 was CHF 8,074,656. Based on the same compensation elements as stated above for the CEO, the median 2022 total compensation for employees in Switzerland was CHF 161,280. The resulting median ratio is 50.1. If the ratio would consider the CEO’s annual total compensation to the average annual total compensation for all permanent ABB employees in Switzerland (excluding the CEO), rather than the median, the resulting average ratio is 45.5. Other compensation – 2023 Members of the EC are eligible to participate in the Employee Share Acquisition Plan (ESAP), a savings plan based on stock options, which is open to employees around the world. Five members of the EC participated in the 20th annual ESAP launch of the plan in 2023. EC members who participated will, upon vesting, each be entitled to acquire up to 330 ABB shares at CHF 30.49 per share, the market share price at the start of the 2023 launch. For a more detailed description of the ESAP, please refer to “Note 18 – Share ‑ based payment arrangements” in our Consolidated Financial Statements. In 2023, ABB did not pay any fees or compensation to the members of the EC for services rendered to ABB other than those disclosed in this Compensation Report. Except as disclosed in the section “Executive Committee – Business relationships between ABB and its EC members” in ABB’s Corporate Governance Report 2023, the Company did not pay any additional fees or compensation in 2023 to persons closely linked to a member of the EC for services rendered to ABB. 36 ABB COMPENSATION REPORT 2023 Share ownership of EC members Six out of eight EC members have met and exceeded their share ownership requirement. The other two members have been appointed to the EC in the last three years. The individual shareholding in comparison to the relevant share ownership requirement is shown in Exhibit 9 in the section “Compensation at a glance”. The EC members collectively owned less than one percent of ABB’s total shares outstanding at December 31, 2023. At December 31, 2023, EC members held ABB shares and conditional rights to receive shares, as shown in Exhibit 46 in the section “Compensation tables and share ownership tables” below. Their holdings at December 31, 2022, are shown in Exhibit 47 in the same section. Except as described in Exhibits 46 and 47, no member of the EC and no person closely linked to a member of the EC held any shares of ABB or options on ABB shares at December 31, 2023 and 2022. External Board mandates held by EC members Four out of eight EC members held at least one external mandate in other companies. Detailed information can be found in Exhibit 43 in the section “Compensation tables and share ownership tables”. ABB COMPENSATION REPORT 2023 37 — Changes applicable to EC members Terms of appointment for new EC members The new General Counsel and Company Secretary, Mathias Gärtner, will be appointed in 2024, with an annual base salary of CHF 800,000, a target short-term incentive of 100 percent of annual base salary and a target long-term incentive of 150 percent of annual base salary. Mathias Gärtner is eligible for standard EC benefits. He will receive a replacement share grant to compensate for his forgone equity grants with his previous employer. The value of forfeited performance share units and options grants will be replaced with an ABB performance share unit grant and the value of forfeited restricted share unit grants will be replaced with an ABB restricted share unit grant. Terms of departure for EC members The previous General Counsel and Company Secretary, Andrea Antonelli, stepped down from the EC as per May 31, 2023, and will depart from ABB on June 30, 2024, reflecting his contractual notice period of 12 months plus extension of such period by one month due to illness. He is entitled to receive compensation and benefits up to the point of his departure. This includes a contractually agreed pro-rata short-term incentive payment of CHF 283,300 for the period January 1 to June 30, 2024. His unvested shares granted under the 2022 and 2023 LTIP will be treated according to contractual terms. Compensation of former EC members In 2023, certain former EC members received contractual compensation for the period after leaving the EC, as shown in Exhibit 41, footnote (5). 38 ABB COMPENSATION REPORT 2023 — Votes on compensation at the 2024 AGM As illustrated in Exhibit 35, the Board’s proposals to shareholders at the 2024 AGM will relate to Board compensation for the 2024–2025 term of office and EC compensation for the calendar year 2025. There will also be a non-binding consultative vote on the Compensation Report 2023. Exhibit 35: Shareholders will have three separate votes on compensation at the 2024 AGM The voting results at ABB’s AGM in 2023 were as follows: • Maximum aggregate Board compensation for the 2023–2024 term of office – 97.94 percent approved • Maximum aggregate EC compensation for 2024 – 93.73 percent approved • Consultative vote on the Compensation Report 2022 – 91.46 percent voted for In determining the proposed maximum aggregate EC compensation for 2025, the Board intends to take into consideration the criteria set forth in Exhibit 36. Given the variable nature of a major portion of the compensation components, the proposed maximum aggregate EC compensation will accordingly be higher than the actual compensation paid or awarded, as it must cover the potential maximum value of each component of compensation. ABB COMPENSATION REPORT 2023 39 The increase in maximum aggregate EC compensation for 2025 compared to 2024 is mainly influenced by the application of the adjusted, more performance-oriented compensation mix for EC entrants and the anticipated costs related to the vesting of 2022 LTIP awards. Exhibit 36: Overview of key factors affecting the determination of maximum aggregate EC compensation 40 ABB COMPENSATION REPORT 2023 — Compensation tables and share ownership tables Exhibit 37: Board compensation in 2023 and 2022 (audited) Paid in 2023 Paid in 2022 November Board term 2023–2024 May Board term 2022–2023 Total compensation paid in 2023 (3) November Board term 2022–2023 May Board term 2021–2022 Total compensation paid in 2022 (3) Name Settled in cash (1) Settled in shares – number of shares received (2) Settled in cash (1) Settled in shares – number of shares received (2) Settled in cash (1) Settled in shares – number of shares received (2) Settled in cash (1) Settled in shares – number of shares received (2) CHF CHF CHF CHF CHF CHF Peter Voser, Chairman (4) — 17,462 — 18,607 1,200,000 — 21,565 — 18,296 1,200,000 Jacob Wallenberg (5) 112,500 2,624 112,500 2,796 450,000 112,500 3,257 112,500 2,763 450,000 Gunnar Brock (6) 82,500 1,924 82,500 2,048 330,000 82,500 2,388 82,500 2,026 330,000 David Constable (7) 80,000 1,866 80,000 1,988 320,000 80,000 2,316 80,000 1,964 320,000 Frederico Curado (8) — 3,876 — 4,130 350,000 — 4,799 — 4,075 350,000 Lars Förberg (9) — 4,628 — 4,945 320,000 — 5,736 — 4,870 320,000 Denise Johnson (10) — 3,929 — — 165,000 — — — — — Jennifer Xin-Zhe Li (11) 87,500 1,890 87,500 2,018 350,000 87,500 2,338 87,500 1,986 350,000 Geraldine Matchett (12) 82,500 2,376 82,500 2,683 330,000 82,500 3,121 82,500 2,647 330,000 David Meline (13) 100,000 2,332 100,000 2,485 400,000 100,000 2,895 100,000 2,456 400,000 Satish Pai (14) — — — 3,341 165,000 — 4,523 82,500 1,872 330,000 Total 545,000 42,907 545,000 45,041 4,380,000 545,000 52,938 627,500 42,955 4,380,000 (1) Represents gross amounts paid, prior to deductions for social security, withholding tax, etc. (2) Number of shares per Board member is calculated based on net amount due after deductions for social security, withholding tax, etc. (3) In addition to the Board remuneration stated in the above table, in 2023 and 2022 the Company paid CHF 235,498 and CHF 248,489, respectively, in related mandatory social security payments. (4) Chairman of the ABB Ltd Board and of the Governance and Nomination Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 100 percent of his compensation in the form of ABB shares. (5) Vice-Chairman of the ABB Ltd Board and member of the Governance and Nomination Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 50 percent of his compensation in the form of ABB shares. (6) Member of the Finance, Audit and Compliance Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 50 percent of his compensation in the form of ABB shares. (7) Member of the Compensation Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 50 percent of his compensation in the form of ABB shares. (8) Chairman of the Compensation Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 100 percent of his compensation in the form of ABB shares. (9) Member of the Governance and Nomination Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 100 percent of his compensation in the form of ABB shares. (10) Member of the Finance, Audit and Compliance Committee for the 2023–2024 Board term; is receiving 100 percent of her compensation in the form of ABB shares. (11) Member of the Compensation Committee and of the Governance and Nomination Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 50 percent of her compensation in the form of ABB shares. (12) Member of the Finance, Audit and Compliance Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 50 percent of her compensation in the form of ABB shares. (13) Chairman of the Finance, Audit and Compliance Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 50 percent of his compensation in the form of ABB shares. (14) Member of the Finance, Audit and Compliance Committee for the 2021–2022 and 2022–2023 Board terms; received 50 percent of his compensation in the form of ABB shares for the 2021–2022 Board term and 100 percent of his compensation in the form of ABB shares for the 2022–2023 Board term. Did not stand for election in 2023. ABB COMPENSATION REPORT 2023 41 Exhibit 38: Board compensation for the Board terms 2023–2024 and 2022–2023 (audited) Board term 2023–2024 Board term 2022–2023 Name Specific Board roles CHF CHF Peter Voser Chairman of the Board and Chairman GNC for 2023–2024 and 2022–2023 terms 1,200,000 1,200,000 Jacob Wallenberg Vice-Chairman of the Board and Member GNC for 2023–2024 and 2022–2023 terms 450,000 450,000 Gunnar Brock Member FACC for 2023–2024 and 2022–2023 terms 330,000 330,000 David Constable Member CC for 2023–2024 and 2022–2023 terms 320,000 320,000 Frederico Curado Chairman CC for 2023–2024 and 2022–2023 terms 350,000 350,000 Lars Förberg Member GNC for 2023–2024 and 2022–2023 terms 320,000 320,000 Denise Johnson Member FACC for 2023–2024 term 330,000 — Jennifer Xin-Zhe Li Member CC and Member GNC for 2023–2024 and 2022–2023 terms 350,000 350,000 Geraldine Matchett Member FACC for 2023–2024 and 2022–2023 terms 330,000 330,000 David Meline Chairman FACC for 2023–2024 and 2022–2023 terms 400,000 400,000 Satish Pai Member FACC for 2022–2023 term — 330,000 Total 4,380,000 4,380,000 Key: CC: Compensation Committee FACC: Finance, Audit and Compliance Committee GNC: Governance and Nomination Committee Exhibit 39: Board ownership of ABB shares (audited) Total number of shares held Name December 31, 2023 December 31, 2022 Peter Voser 215,876 231,807 Jacob Wallenberg 251,318 245,898 Gunnar Brock 41,785 37,813 David Constable 46,319 42,465 Frederico Curado 57,181 49,175 Lars Förberg 80,095 70,522 Denise Johnson 3,929 — Jennifer Xin-Zhe Li 45,812 41,904 Geraldine Matchett 36,023 30,964 David Meline (1) 47,948 43,131 Satish Pai — 34,827 Total 826,286 828,506 (1) Includes 3,150 shares held by the spouse. 42 ABB COMPENSATION REPORT 2023 Exhibit 40: Board members with external mandates at December 31, 2023 (audited) Name Company Listed company Chair of the Board Member of the Board Chair of a Committee Member of a Committee CEO Member of the EC Peter Voser IBM Corporation, Armonk, United States ● ● ● ● Temasek Holdings (Private) Limited, Singapore, Singapore ● ● ● PSA International Pte Ltd, Singapore, Singapore ● Jacob Wallenberg Investor AB, Stockholm, Sweden ● ● ● ● Telefonaktiebolaget L.M. Ericsson AB, Stockholm, Sweden ● ● ● SAS AB, Stockholm, Sweden (1) ● ● FAM AB (Foundation Asset Management), Stockholm, Sweden ● Wallenberg Investments AB, Stockholm, Sweden ● Patricia Industries AB, Stockholm, Sweden ● Gunnar Brock Investor AB, Stockholm, Sweden ● ● ● Neptunia Invest AB, Stockholm, Sweden ● Stena AB, Stockholm, Sweden ● ● Patricia Industries AB, Stockholm, Sweden ● David Constable Fluor Corporation, Irving, United States ● ● ● ● Frederico Curado Transocean Ltd., Zug, Switzerland ● ● ● ● LATAM Airlines Group, Santiago, Chile ● ● ● ● Lars Förberg Cevian Capital AB, Stockholm, Sweden ● Denise Johnson Caterpillar Inc., Deerfield, United States ● ● The Mosaic Company, Tampa, United States ● ● ● Jennifer Xin-Zhe Li Changcheng Investment Partners, Beijing, China ● SAP SE, Walldorf, Germany ● ● ● ● Full Truck Alliance Co. Ltd., Guizhou / Nanjing, China ● ● ● David Meline HP Inc., Palo Alto, United States ● ● ● Pacific Biosciences of California Inc., Menlo Park, United States ● ● ● (1) Jacob Wallenberg is not a member of the Board of Directors of SAS AB. He is a member of their Nomination Committee, which is not a committee of the Board. ABB COMPENSATION REPORT 2023 43 Exhibit 41: EC compensation in 2023 (audited) Cash Compensation Estimated value of share- based grants under the LTIP in 2023 (4) 2023 Total compensation (incl. conditional share- based grants) (5) Name Base salary Short-term incentive (1) Pension benefits Other benefits (2) 2023 Total cash-based compensation (3) CHF CHF CHF CHF CHF CHF CHF Björn Rosengren 1,785,006 2,659,650 775,090 1,759,098 6,978,844 2,714,375 9,693,219 Timo Ihamuotila 990,004 1,386,000 541,130 786,869 3,704,003 1,003,656 4,707,659 Carolina Granat 725,012 1,087,500 440,166 369,285 2,621,963 734,999 3,356,962 Karin Lepasoon 600,000 900,000 254,677 162,089 1,916,766 608,288 2,525,054 Sami Atiya 800,009 960,000 499,122 654,700 2,913,831 811,038 3,724,869 Tarak Mehta 930,009 1,395,000 526,130 746,993 3,598,132 942,817 4,540,949 Peter Terwiesch 855,003 1,179,060 505,595 657,565 3,197,223 871,844 4,069,067 Morten Wierod 962,502 1,462,500 505,842 685,145 3,615,989 988,423 4,604,412 Total Executive Committee members at December 31, 2023 7,647,545 11,029,710 4,047,752 5,821,744 28,546,751 8,675,440 37,222,191 Andrea Antonelli (EC member until May 31, 2023) 700,000 980,000 248,685 140,430 2,069,115 1,064,462 3,133,577 Theodor Swedjemark (EC member until September 30, 2022) 83,334 78,854 45,344 79,168 286,700 — 286,700 Total departing Executive Committee members 783,334 1,058,854 294,029 219,598 2,355,815 1,064,462 3,420,277 Total 8,430,879 12,088,564 4,341,781 6,041,342 30,902,566 9,739,902 40,642,468 (1) Represents accrued short-term variable compensation for the year 2023, which will be paid in 2024, after the publication of ABB's financial results. Short- term variable compensation is linked to the targets and goals defined in each EC member's Annual Incentive Plan. Upon full achievement of these targets and goals, the short-term variable compensation of the EC members represents 100 percent of their respective base salary. Theodor Swedjemark received a short-term variable compensation payment in February 2023 related to his termination period, in accordance with the contractual obligations of ABB. (2) Other benefits mainly comprise payments related to social security, health insurance, children's education, transportation, tax advice and compensation for foregone dividends on replacement share grants and certain other items. (3) Prepared on an accrual basis. (4) The estimated value of the share-based LTIP grants is based on the price of ABB shares on the grant date. On the day of vesting (April 24, 2026), the value of the share-based awards granted under the LTIP may vary from the above amounts due to changes in ABB's share price and the outcome of the performance factors. (5) Payments totaling CHF 308,592 were made in 2023 on behalf of certain other former EC members, representing social security premium payments due on the 2020 LTIP vesting and tax advisory services for the period when they have been active EC members. 44 ABB COMPENSATION REPORT 2023 Exhibit 42: EC compensation in 2022 (audited) Cash Compensation Estimated value of share- based grants under the LTIP in 2022 (4) 2022 Total compensation (incl. conditional share- based grants) (5) Name Base salary Short-term incentive (1) Pension benefits Other benefits (2) 2022 Total cash-based compensation (3) CHF CHF CHF CHF CHF CHF CHF Björn Rosengren 1,770,840 2,142,000 762,478 988,084 5,663,402 2,411,254 8,074,656 Timo Ihamuotila 986,672 1,188,000 527,648 720,953 3,423,273 891,570 4,314,843 Carolina Granat 720,843 870,000 427,903 352,848 2,371,594 652,920 3,024,514 Andrea Antonelli (EC member as of March 1, 2022) 583,334 670,833 198,164 245,754 1,698,085 945,595 2,643,680 Karin Lepasoon (EC member as of October 1, 2022) 150,000 165,000 62,360 38,987 416,347 540,336 956,683 Sami Atiya (6) 800,009 539,200 487,247 599,994 2,426,450 720,458 3,146,908 Tarak Mehta 930,009 1,337,340 513,481 604,563 3,385,393 837,546 4,222,939 Peter Terwiesch 825,001 1,245,000 485,152 536,952 3,092,105 747,485 3,839,590 Morten Wierod 875,006 1,067,400 471,432 523,912 2,937,750 810,519 3,748,269 Total Executive Committee members at December 31, 2022 7,641,714 9,224,773 3,935,865 4,612,047 25,414,399 8,557,683 33,972,082 Maria Varsellona (EC member until March 31, 2022) 200,002 181,985 114,896 79,223 576,106 — 576,106 Theodor Swedjemark (EC member until September 30, 2022) 500,004 473,124 283,520 203,210 1,459,858 — 1,459,858 Total departing Executive Committee members 700,006 655,109 398,416 282,433 2,035,964 — 2,035,964 Total 8,341,720 9,879,882 4,334,281 4,894,480 27,450,363 8,557,683 36,008,046 (1) Represents accrued short-term variable compensation for the year 2022, which was paid in 2023, after the publication of ABB's financial results. Short- term variable compensation is linked to the targets and goals defined in each EC member's Annual Incentive Plan. Upon full achievement of these targets and goals, the short-term variable compensation of the EC members represents 100 percent of their respective base salary. Maria Varsellona received a short-term variable compensation payment in March 2022 related to her termination period, in accordance with the contractual obligations of ABB. (2) Other benefits mainly comprise payments related to social security, health insurance, children's education, transportation, tax advice and compensation for foregone dividends on replacement share grants and certain other items. (3) Prepared on an accrual basis. (4) The estimated value of the share-based LTIP grants is based on the price of ABB shares on the grant date. On the day of vesting (April 25, 2025), the value of the share-based awards granted under the LTIP may vary from the above amounts due to changes in ABB's share price and the outcome of the performance factors. (5) Payments totaling CHF 1,324,301 were made in 2022 on behalf of certain other former EC members, representing social security premium payments due on the 2019 LTIP vesting and tax advisory services for the period when they have been active EC members. (6) The disclosure of the number of shares granted under the LTIP in 2022 for Sami Atiya has been corrected from the amount previously disclosed in the 2022 Compensation Report. As a result, the grant fair value has been reduced accordingly. Exhibit 43: EC members with external mandates at December 31, 2023 (audited) Name Company Listed company Chair of the Board Member of the Board Chair of a Committee Member of a Committee Timo Ihamuotila SoftwareOne Holding AG, Stans, Switzerland ● ● ● Oras Invest Oy, Helsinki, Finland ● Sami Atiya SGS SA, Geneva, Switzerland ● ● ● ● Tarak Mehta Prysmian S.p.A., Milan, Italy ● ● ● Peter Terwiesch Hilti AG, Schaan, Liechtenstein ● ABB COMPENSATION REPORT 2023 45 Exhibit 44: LTIP grants in 2023 (audited) Name Reference number of shares under the EPS performance factor of the 2023 launch of the LTIP (1) Total estimated value of share-based grants under the EPS performance factor of the 2023 launch of the LTIP (2)(3) Reference number of shares under the TSR performance factor of the 2023 launch of the LTIP (1) Total estimated value of share-based grants under the TSR performance factor of the 2023 launch of the LTIP (2)(3) Reference number of shares under the sustainability performance factor of the 2023 launch of the LTIP (1) Total estimated value of share-based grants under the sustainability performance factor of the 2023 launch of the LTIP (2)(3) Total number of shares granted under the 2023 launch of the LTIP (1)(2) Total estimated value of share-based grants under the LTIP in 2023 (2)(3) CHF CHF CHF CHF Björn Rosengren (4) 42,854 1,357,187 25,712 814,300 17,142 542,888 85,708 2,714,375 Timo Ihamuotila 15,845 501,812 9,507 301,087 6,339 200,757 31,691 1,003,656 Carolina Granat 11,604 367,499 6,962 220,487 4,642 147,013 23,208 734,999 Karin Lepasoon (4) 9,603 304,128 5,762 182,483 3,842 121,677 19,207 608,288 Sami Atiya 12,804 405,503 7,682 243,289 5,123 162,246 25,609 811,038 Tarak Mehta (4) 14,885 471,408 8,931 282,845 5,954 188,564 29,770 942,817 Peter Terwiesch (4) 13,764 435,906 8,258 261,531 5,507 174,407 27,529 871,844 Morten Wierod (4) 15,605 494,211 9,363 296,527 6,242 197,685 31,210 988,423 Total Executive Committee members at December 31, 2023 136,964 4,337,654 82,177 2,602,549 54,791 1,735,237 273,932 8,675,440 (1) Vesting date April 24, 2026. (2) The reference number of shares of the EPS, TSR and sustainability performance factors are valued using the fair value of the ABB shares on the grant date. (3) Default settlement of the final LTIP award is 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding taxes. The plan foresees a maximum award of 200 percent of the number of reference shares granted based on the achievement against the predefined average EPS, relative TSR and sustainability performance targets. Participants are also entitled to receive a dividend equivalent payment at the time of vesting for each awarded share. (4) In addition to the above awards, five members of the EC participated in the 20th launch of the ESAP in 2023, which will allow them to save over a 12-month period and, in November 2024, use their savings to acquire ABB shares under the ESAP. Each EC member who participated in ESAP will, upon vesting, be entitled to acquire up to 330 ABB shares at an exercise price of CHF 30.49 per share. 46 ABB COMPENSATION REPORT 2023 Exhibit 45: LTIP grants in 2022 (audited) Name Reference number of shares under the EPS performance factor of the 2022 launch of the LTIP (1)(4) Total estimated value of share-based grants under the EPS performance factor of the 2022 launch of the LTIP (2)(3) Reference number of shares under the TSR performance factor of the 2022 launch of the LTIP (1)(4) Total estimated value of share-based grants under the TSR performance factor of the 2022 launch of the LTIP (2)(3) Reference number of shares under the sustainability performance factor of the 2022 launch of the LTIP (1)(4) Total estimated value of share-based grants under the sustainability performance factor of the 2022 launch of the LTIP (2)(3) Total number of shares granted under the 2022 launch of the LTIP (1)(2)(4) Total estimated value of share-based grants under the LTIP in 2022 (2)(3) CHF CHF CHF CHF Björn Rosengren 42,743 1,205,627 25,646 723,353 17,098 482,274 85,487 2,411,254 Timo Ihamuotila (5) 15,804 445,770 9,482 267,462 6,323 178,338 31,609 891,570 Carolina Granat 11,574 326,460 6,944 195,858 4,630 130,602 23,148 652,920 Andrea Antonelli (EC member as of March 1, 2022) 16,762 472,797 10,057 283,667 6,706 189,131 33,525 945,595 Karin Lepasoon (EC member as of October 1, 2022) (5) 9,578 270,153 5,747 162,075 3,832 108,108 19,157 540,336 Sami Atiya (6) 12,771 360,215 7,662 216,112 5,110 144,131 25,543 720,458 Tarak Mehta (5) 14,847 418,773 8,908 251,258 5,939 167,515 29,694 837,546 Peter Terwiesch (5) 13,250 373,728 7,950 224,231 5,301 149,526 26,501 747,485 Morten Wierod (5) 14,368 405,259 8,620 243,156 5,748 162,104 28,736 810,519 Total Executive Committee members at December 31, 2022 151,697 4,278,782 91,016 2,567,172 60,687 1,711,729 303,400 8,557,683 (1) Vesting date April 25, 2025. (2) The reference number of shares of the EPS, TSR and sustainability performance factors are valued using the fair value of the ABB shares on the grant date. (3) Default settlement of the final LTIP award is 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding taxes. The plan foresees a maximum award of 200 percent of the number of reference shares granted based on the achievement against the predefined average EPS, relative TSR and sustainability performance targets. Participants are also entitled to receive a dividend equivalent payment at the time of vesting for each awarded share. (4) The initial granted number of shares has been increased by 3.7 percent to reflect the impact of the Accelleron spin-off. (5) In addition to the above awards, five members of the EC participated in the 19th launch of the ESAP in 2022, which allowed them to save over a 12-month period and, in November 2023, use their savings to acquire ABB shares under the ESAP. Each EC member who participated in ESAP was entitled to acquire up to 360 ABB shares at an exercise price of CHF 27.99 per share. (6) The disclosure of the number of shares granted under the LTIP in 2022 for Sami Atiya has been corrected from the amount previously disclosed in the 2022 Compensation Report, reducing the number by 958. ABB COMPENSATION REPORT 2023 47 Exhibit 46: EC shareholding overview at December 31, 2023 (audited) Unvested at December 31, 2023 Name Total number of shares held at December 31, 2023 Reference number of shares deliverable under the 2021 performance factors (EPS and TSR) of the LTIP (1) Reference number of shares deliverable under the 2022 performance factors (EPS, TSR and sustainability) of the LTIP (1) Reference number of shares deliverable under the 2023 performance factors (EPS, TSR and sustainability) of the LTIP (1) (vesting 2024) (vesting 2025) (vesting 2026) Björn Rosengren 262,334 99,450 85,487 85,708 Timo Ihamuotila 202,000 37,830 31,609 31,691 Carolina Granat (2) 5,200 27,301 23,148 23,208 Karin Lepasoon 360 — 19,157 19,207 Sami Atiya 100,000 31,201 25,543 25,609 Tarak Mehta 134,710 36,271 29,694 29,770 Peter Terwiesch 100,000 31,201 26,501 27,529 Morten Wierod 141,267 31,201 28,736 31,210 Total Executive Committee members at December 31, 2023 945,871 294,455 269,875 273,932 (1) The final 2020 LTIP, 2021 LTIP and 2022 LTIP awards will be settled 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding taxes. (2) This includes 1,200 shares held by the spouse. Exhibit 47: EC shareholding overview at December 31, 2022 (audited) Unvested at December 31, 2022 Name Total number of shares held at December 31, 2022 Reference number of shares deliverable under the 2020 performance factors (EPS and TSR) of the LTIP (1)(2) Reference number of shares deliverable under the 2021 performance factors (EPS and TSR) of the LTIP (1)(2) Reference number of shares deliverable under the 2022 performance factors (EPS, TSR and sustainability) of the LTIP (1)(2) Replacement share grant for foregone benefits from former employer (2)(3) (vesting 2023) (vesting 2024) (vesting 2025) (vesting 2023) Björn Rosengren 94,597 136,589 99,450 85,487 19,604 Timo Ihamuotila 189,034 50,887 37,830 31,609 — Carolina Granat (4) 5,200 — 27,301 23,148 — Andrea Antonelli (EC member as of March 1, 2022) — — 7,021 33,525 — Karin Lepasoon (EC member as of October 1, 2022) — — — 19,157 — Sami Atiya (5) 90,473 42,852 31,201 25,543 — Tarak Mehta 152,993 48,209 36,271 29,694 — Peter Terwiesch 132,940 42,852 31,201 26,501 — Morten Wierod 64,777 40,174 31,201 28,736 — Total Executive Committee members at December 31, 2022 730,014 361,563 301,476 303,400 19,604 (1) The final 2020 LTIP, 2021 LTIP and 2022 LTIP awards will be settled 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding taxes. (2) Initial number of shares granted have been increased by 3.7 percent to reflect the impact of the spin-off of the Accelleron business. (3) The replacement share grant was settled 65 percent in shares and 35 percent in cash. (4) This includes 1,200 shares held by the spouse. (5) The disclosure of the number of shares granted under the LTIP in 2022 for Sami Atiya has been corrected from the amount previously disclosed in the 2022 Compensation Report, reducing the number by 958. 48 ABB COMPENSATION REPORT 2023 Exhibit 48: Targeted and realized EC total compensation in 2023 Target compensation (in CHF) Base salary Pension benefits Other benefits (1) Target short-term incentive (2) Grant fair value of 2020 LTIP (3) Grant fair value of 2020 replacement share grant (4) Target total variable compensation Target total compensation Björn Rosengren 1,785,006 775,090 1,703,295 1,785,000 1,970,457 406,436 4,161,893 8,425,284 Timo Ihamuotila 990,004 541,130 761,604 990,000 734,103 n.a. 1,724,103 4,016,841 Carolina Granat 725,012 440,166 346,158 725,000 n.a. n.a. 725,000 2,236,336 Karin Lepasoon 600,000 254,677 142,949 600,000 n.a. n.a. 600,000 1,597,626 Sami Atiya 800,009 499,122 644,492 800,000 618,193 n.a. 1,418,193 3,361,816 Tarak Mehta 930,009 526,130 717,326 930,000 695,462 n.a. 1,625,462 3,798,927 Peter Terwiesch 855,003 505,595 637,209 860,000 618,193 n.a. 1,478,193 3,476,000 Morten Wierod 962,502 505,842 654,043 975,000 579,552 n.a. 1,554,552 3,676,939 Total 7,647,545 4,047,752 5,607,076 7,665,000 5,215,960 406,436 13,287,396 30,589,769 Realized compensation (in CHF) Base salary Pension benefits Other benefits (1)(5) Short-term incentive 2023 (6) Realized value of 2020 LTIP (7) Realized value of 2020 replacement share grant (8) Total variable compensation Total compensation Björn Rosengren 1,785,006 775,090 1,759,098 2,659,650 8,347,494 626,740 11,633,884 15,953,078 Timo Ihamuotila 990,004 541,130 786,869 1,386,000 3,109,900 n.a. 4,495,900 6,813,903 Carolina Granat 725,012 440,166 369,285 1,087,500 n.a. n.a. 1,087,500 2,621,963 Karin Lepasoon 600,000 254,677 162,089 900,000 n.a. n.a. 900,000 1,916,766 Sami Atiya 800,009 499,122 654,700 960,000 2,618,862 n.a. 3,578,862 5,532,693 Tarak Mehta 930,009 526,130 746,993 1,395,000 2,946,264 n.a. 4,341,264 6,544,396 Peter Terwiesch 855,003 505,595 657,565 1,179,060 2,618,862 n.a. 3,797,922 5,816,085 Morten Wierod 962,502 505,842 685,145 1,462,500 2,455,193 n.a. 3,917,693 6,071,182 Total 7,647,545 4,047,752 5,821,744 11,029,710 22,096,575 626,740 33,753,025 51,270,066 Realized achievement level Base salary Pension benefits Other benefits (1) Short-term incentive 2023 (6) Realized value of 2020 LTIP in % (7) Realized value of 2020 replacement share grant in % (8) Total variable compensation Total compensation Björn Rosengren 100.0% 100.0% 103.3% 149.0% 423.6% 154.2% 279.5% 189.3% Timo Ihamuotila 100.0% 100.0% 103.3% 140.0% 423.6% n.a. 260.8% 169.6% Carolina Granat 100.0% 100.0% 106.7% 150.0% n.a. n.a. 150.0% 117.2% Karin Lepasoon 100.0% 100.0% 113.4% 150.0% n.a. n.a. 150.0% 120.0% Sami Atiya 100.0% 100.0% 101.6% 120.0% 423.6% n.a. 252.4% 164.6% Tarak Mehta 100.0% 100.0% 104.1% 150.0% 423.6% n.a. 267.1% 172.3% Peter Terwiesch 100.0% 100.0% 103.2% 137.1% 423.6% n.a. 256.9% 167.3% Morten Wierod 100.0% 100.0% 104.8% 150.0% 423.6% n.a. 252.0% 165.1% Average 100.0% 100.0% 105.0% 143.3% 423.6% 154.2% 233.6% 158.2% (1) Other benefits comprise payments related to social security, health insurance, children's education, transportation, tax advice and certain other items. (2) Target short-term incentive corresponds to 100 percent of the latest applicable annual base salary. (3) Represents the 2020 LTIP grant date fair value as per April 27, 2020, as disclosed in our Annual Report 2020. (4) Represents the 2020 grant fair value related to the second tranche (out of two tranches) of the replacement grant, as disclosed in our Annual Report 2020. (5) Differences between realized and target values due to higher social security payments related to AIP awards above target values. (6) Represents accrued short-term incentive for the year 2023, which will be paid in 2024, after the publication of ABB's financial results. STI is linked to the targets and goals defined in each EC member's Annual Incentive Plan. (7) Valued at CHF 32.25, the closing price of the ABB share on the day of vesting. (8) Valued at CHF 31.97, the closing price of the ABB share on the day of vesting. 49 Report of the statutory auditor To the General Meeting of ABB Ltd, Zurich Report on the Audit of the Compensation Report Opinion We have audited the Compensation Report of ABB Ltd (the Company) for the year ended December 31, 2023. The audit was limited to the information pursuant to Art. 734a-734f of the Swiss Code of Obligations (CO) in the tables marked “audited” on pages 40 to 47 of the Compensation Report. In our opinion, the information pursuant to Art. 734a-734f CO in the accompanying Compensation Report complies with Swiss law and the Company’s articles of incorporation. Basis for Opinion We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the “Auditor's Responsibilities for the Audit of the Compensation Report” section of our report. We are independent of the Company in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Information The Board of Directors is responsible for the other information. The other information comprises the information included in the ABB Annual Reporting Suite (consisting of the Integrated Report, the Financial Report, the Corporate Governance Report and the Compensation Report), but does not include the tables marked “audited” in the Compensation Report, the consolidated financial statements, the stand-alone financial statements and our auditor’s reports thereon. Our opinion on the Compensation Report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the Compensation Report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the audited financial information in the Compensation Report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Board of Directors' Responsibilities for the Compensation Report The Board of Directors is responsible for the preparation of a Compensation Report in accordance with the provisions of Swiss law and the Company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of a Compensation Report that is free from material misstatement, whether due to fraud or error. The Board of Directors is also responsible for designing the compensation system and defining individual compensation packages. 50 Auditor’s Responsibilities for the Audit of the Compensation Report Our objectives are to obtain reasonable assurance about whether the information pursuant to Art. 734a-734f CO is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Compensation Report. As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement in the Compensation Report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. KPMG AG Mohammad Nafeie Achim Wolper Licensed Audit Expert Auditor in Charge Zurich, Switzerland February 22, 2024 © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. EXPERTsuisso Certified Company 51 Caution concerning forward-looking statements The Compensation Report 2023 includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have based these forward-looking statements largely on current expectations, estimates and projections about the factors that may affect our future performance, including global economic conditions as well as the economic conditions of the regions and the industries that are major markets for ABB. The words “believe,” “may,” “will,” “estimate,” “continue,” “target,” “anticipate,” “intend,” “expect”, “plan” and similar words and the express or implied discussion of strategy, plans or intentions are intended to identify forward-looking statements. These forward- looking statements are subject to risks, uncertainties and assumptions, including among other things, the following: (i) business risks related to the global volatile economic environment; (ii) costs associated with compliance activities; (iii) difficulties encountered in operating in emerging markets; (iv) risks inherent in large, long term projects served by parts of our business; (v) the timely development of new products, technologies, and services that are useful for our customers; (vi) our ability to anticipate and react to technological change and evolving industry standards in the markets in which we operate; (vii) changes in interest rates and fluctuations in currency exchange rates; (viii) changes in raw materials prices or limitations of supplies of raw materials; (ix) the weakening or unavailability of our intellectual property rights; (x) industry consolidation resulting in more powerful competitors and fewer customers; (xi) effects of competition and changes in economic and market conditions in the product markets and geographic areas in which we operate; (xii) effects of, and changes in, laws, regulations, governmental policies, taxation, or accounting standards and practices and (xiii) other factors described in documents that we may furnish from time to time with the US Securities and Exchange Commission, including our Annual Reports on Form 20-F. Although we believe that the expectations reflected in any such forward- looking statements are based on reasonable assumptions, we can give no assurance that they will be achieved. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements. 52 — Sustainability Report 2023 — Table of contents 01 Sustainability at ABB 04 CEO letter 06 The ABB Way 08 Sustainability Agenda 12 Sustainability governance 14 Materiality 17 Contributions to the UN SDGs 18 ESG ratings 02 Low-carbon society 21 We enable a low-carbon society 22 Customer emissions 28 ABB’s own emissions 30 Supplier emissions 04 Social progress 43 We promote social progress 44 Health and safety 46 Human rights and labor standards 50 Employee engagement score 52 People development 54 Employee wellbeing 56 Diversity and inclusion 58 Stakeholder engagement 61 Community engagement 05 Integrity and transparency 65 We embed a culture of integrity and transparency 67 Integrity and transparency 70 Executives’ sustainability incentives 71 Data privacy & cyber security 73 Responsible sourcing 06 Appendix 77 Approach to reporting 80 Swiss Code of Obligations: transparency on non-financial matters 81 Assurance statement 84 Material topic descriptions 92 Non-material topic descriptions 94 GRI disclosures table 99 GRI content index 120 EU Taxonomy report 143 TCFD recommendations report 149 SASB disclosure table 150 Definitions 03 Preserving resources 33 We preserve resources 34 Circularity 38 Waste and water management 41 Biodiversity and land use 01 Sustainability at ABB 04 CEO letter 06 The ABB Way 08 Sustainability Agenda 12 Sustainability governance 14 Materiality 17 Contributions to the UN SDGs 18 ESG ratings Dear Stakeholders, As a technology leader in electrification and automation, in 2023 ABB continued to play a key role in accelerating the energy transition for a net-zero future. Our solutions help to optimize, electrify and decarbonize industry, buildings, power and transport – sectors that together account for the lion’s share of global energy-related carbon emissions. By doing this, we made the ways we move, produce, work and live more sustainable. Over the past year, ABB continued to make good progress towards its sustainability targets. For instance, we cut emissions in our own operations by an additional 32 per- cent, putting us well on track to achieve our 2030 target of reducing emissions by 80 percent compared with a 2019 baseline. These improvements are the result of an organizational transformation that has em- powered our businesses with full ownership and accountability for their operations and performance, as well as a deeper cultural change that has united ABB around our common purpose of enabling a more sustainable and resource-efficient future. ABB’s 2023 Sustainability Report touches on many of the concrete ways in which we are helping our customers improve their energy efficiency, drive electrification or integrate renewables into the power grid. The report also explains how we produce and distribute these technologies and support the people and communities that make our work possible. We strive to make every aspect of our operations as sustainable as possible. In 2023, we strengthened and accelerated our Sustainability Agenda. We updated our ambitions and targets in line with recognized international standards and frame- works, we carried out a double materiality assessment, and we further embedded sustainability across our businesses. ABB’s Sustainability Agenda is structured around three pillars: enabling a low-carbon society, preserving resources and promoting social progress for a net-zero future. All three pillars support the United Nations’ Sustainable Development Goals (SDGs) and in particular SDG 7 (affordable and clean energy), SDG 8 (decent work and economic growth), SDG 9 (industry, innovation and infrastructure) and SDG 13 (climate action). To enable a low-carbon society, we announced new net-zero-aligned targets for 2030 and 2050 at our Capital Markets Day on November 30, 2023. These targets cover our scope 1 and 2 emissions, which we are aiming to reduce by 80 percent by 2030, with- out carbon offsets, as well as our scope 3 emissions, covering the rest of our value chain, which we aim to cut by 25 percent by 2030. By 2050, our goal is to have reached net-zero in our own operations and to have cut our scope 3 emissions by 90 percent. These targets are aligned with the Science Based Targets initiative (SBTi) Net-Zero Standard. We submitted them to the SBTi in 2023 for validation in 2024. Using the latest guidance published by the World Business Council for Sustainable Development (WBCSD), we have strengthened the way we track and quantify our customers’ avoided emissions. Under this new methodology, we aim to help our — CEO letter 4 ABB SUSTAINABILITY REPORT 2023 SUSTAINABILITY AT ABB customers avoid 600 megatons of greenhouse gas (GHG) emissions through the prod- ucts we sell from 2022 to 2030. To preserve resources, we have initiated our Circularity Approach, with the goal of having 80 percent of ABB’s products and solutions meet circularity requirements by 2030. This includes eliminating waste to landfill from our operations and helping our customers meet their own circularity commitments by offering retrofit, take-back and recycling services. In 2023, we increased the number of life cycle assessments (LCAs) for our products and solutions to promote eco-design principles and provide trans- parency to our customers. To promote social progress, we strengthened our human rights due diligence along the value chain in line with the United Nations’ Guiding Principles on Business and Human Rights. This report describes many other ABB initiatives aimed at creating safe, fair and inclusive working environments and providing impactful support for community-building initiatives. In this area, we have continued to place a special em- phasis on education and upskilling programs in the STEM disciplines, as they will be key to making a net-zero future a reality. On the topic of safety, we further reduced our lost-time injury frequency rate (LTIFR) to industry-leading levels. Despite this achievement and our concerted efforts, I am saddened to note that there was one fatal incident in 2023 involving one of our con- tractors, working on a project in Algeria. An investigation is underway. Our thoughts go out to the family of the deceased. We are continuously reviewing and updating our safety procedures to try to prevent such incidents. All three pillars of our Sustainability Agenda are underpinned by our commitment to embedding a culture of integrity and transparency across our value chain. In 2023, following the release of our updated ABB Code of Conduct, we updated our Human Rights Policy and Supplier Code of Conduct to reflect our Sustainability Agenda. Our Supplier Code of Conduct forms an important part of our procurement terms and conditions. ABB has considerable cause for pride as we seek to fulfill our purpose of enabling a more sustainable and resource-efficient future. I want to thank our customers, em- ployees, investors, partners and all other stakeholders for your continuing collabora- tion, support and trust. Together, we are leading the way to a sustainable future. Björn Rosengren CEO, ABB Ltd 5 The ABB Way, our operating model, enables us to create superior value for all our stakeholders. It defines how our business areas, divisions and lean corporate center approach holistic value creation in our decentralized set-up. By doing so, it serves as the glue that holds our Group together. Core to the ABB Way is our purpose – to enable a more sustainable and resource-efficient future with our technology leadership in electrification and automation. The ABB Way outlines our business model as well as our approach to developing our people and culture, maintaining good governance, and nurturing our brand. While our Sustainability Report focuses on the business model, a comprehensive view of the other elements of the ABB Way and our value creation model can be found in our Integrated Report. — The ABB Way • Decentralized setup – full division accountability • Performance management • Portfolio management THE ABB WAY ABB PURPOSE • Values • People • Leadership • Positioning • Reputation management • Code of Conduct • Internal controls & compliance • Risk management • Regulations, processes and policies B U S I N E S S M O D E L P E O P L E & C U L T U R E G O V E R N A N C E B R A N D 6 ABB SUSTAINABILITY REPORT 2023 SUSTAINABILITY AT ABB ABB’s business model determines how we govern our portfolio of 19 divisions, man- age performance, including delivering on our Sustainability Agenda, and drive value creation for our stakeholders by building on our core competencies. Decentralized set-up – full division accountability While the ABB Way provides standardized policies, processes and systems, it also em- powers our divisions to take full ownership of and accountability for their respective strategies, performance and resources. In practice, this means that divisions follow the Group’s strategic direction and pursue opportunities to collaborate, yet also define their own course of action to deliver on, e.g., Group financial or sustainability targets and allocate resources accordingly. Performance management Building on our mindset of continuous improvement, ABB translates its strategic priorities – including financial performance and progress on sustainability – into short- and long-term targets, which are supported by appropriate incentives. A score- card system and holistic set of key performance indicators (KPIs) enable us to plan, measure, monitor and review progress against these targets. Incentives enable us to maintain a strong link between strategy and compensation. This linkage includes our commitment to sustainability, which is embedded in both the Long-Term Incentive Plan (incorporating one sustainability-related measure) and the Annual Incentive Plan (incorporating at least two sustainability-related goals in the individual component for Executive Committee members). Portfolio management ABB actively and systematically manages its business portfolio. Value creation is focused on both organic and inorganic investments that increase ABB’s exposure to megatrends such as sustainability and digitalization, fill technology gaps, comple- ment or expand our offering in high-growth segments, provide access to new geogra- phies, and lead to economies of scale through consolidation. Capital allocation for investments in organic and inorganic growth is based on our divisions’ strategic mandates – stability, profitability or growth – and on our portfolio assessment criteria. Divisions with a growth mandate are expected to deliver organic growth and to actively pursue value-creating, bolt-on acquisitions; targets must fit well with ABB’s purpose to enable a sustainable and resource-efficient future and to operate in attractive markets. To support the achievement of our revised financial and sustainability targets, we further developed our portfolio assessment approach and also fully embedded sustainability into our methodology through a distinct sustain- ability lens. Similarly, existing businesses or parts of divisions that may structurally no longer meet our assessment criteria – i.e., assets for which ABB is no longer the best owner or can no longer deliver superior value creation – become exit candidates. — Business model 7 ABB has enabled energy efficiency and electrification on multiple fronts for 140 years. Today, we are focused on leveraging our leading technologies in electrification, automation and digitalization to drive the ongoing energy transition. By helping our customers in industry, buildings, power and transport – sectors that account for the majority of the world’s energy-related carbon emissions – to electrify, optimize and decarbonize, we enable them to remain competitive while reducing their carbon foot- prints. Delivering on our purpose, ABB’s solutions make the ways we move, produce, work and live more sustainable. Based on our purpose to enable a more sustainable and resource-efficient future, we aim to create holistic value for stakeholders across ABB’s entire value chain. Our Sustainability Agenda reflects the value we create by enabling a low-carbon society, preserving resources and promoting social progress. It builds on our ABB Way operat- ing model and is underpinned by ABB’s culture of integrity and transparency, extend- ing across our value chain. ABB also creates value in ways beyond the Sustainability Agenda – through our leading financial performance, world-class technology and culture of integrity and transparency. While the ABB Sustainability Report focuses on our Sustainability Agenda, our Integrated Report provides a holistic perspective on our Group’s entire value creation. To enable a low-carbon society, we are raising our ambitions regarding our existing science-based targets by setting net-zero targets aligned with the SBTi Net-Zero Standard. In 2023, we submitted our updated scope 1, 2 and 3 targets for 2030 and 2050 to the Science Based Targets initiative for validation. We are cutting our own GHG emissions, empowering our customers to avoid emissions and deploy more re- newables, and working with our suppliers and partners to expand their efforts. To preserve resources, we consider the full life cycle of our products and apply our Circularity Approach, steadily cutting waste and water use while broadening our capabilities for reuse and recycling. Our efforts are in line with the latest interna- tional standards. To promote social progress, we seek to help workers and their communities and societies to develop and reach their full potential. To achieve this, we aim to cause zero harm to our people and contractors, increase the proportion of women in senior management roles, achieve a top-tier employee engagement score, respect and promote human rights along our value chain and expand our programs for commu- nity engagement. Through our governance approach as defined by the ABB Way, our Sustainability Agenda is fully embedded across our businesses. Our strong business model, with its decentralized set-up and sharp focus on performance management, ensures that our business areas and divisions are fully accountable for their sustainability perfor- mance. In 2023, we continued to make progress toward our ambitious sustainabil- ity targets. — Sustainability Agenda 8 ABB SUSTAINABILITY REPORT 2023 SUSTAINABILITY AT ABB Targets Baseline (baseline year) 1 2023 status LOW-CARBON SOCIETY Reduce own scope 1 and 2 CO₂e emissions by at least 80% by 2030 and by 100% by 2050 636 kilotons CO₂e (adjusted for portfolio changes) 2019 151 kilotons CO₂e Reduce scope 3 CO₂e emissions by 25% by 2030 and by 90% by 2050 76,8342 kilotons CO₂e ( 2022) / 392,188 3 kilotons CO₂e (2022) 76,6652 kilotons CO 2e / 436,346 3 kilotons CO₂e Ambition to avoid 600 megatons CO₂e emissions throughout lifetime of products sold from 2022 to 20304 65 megatons CO₂e (2022) 74 megatons CO₂e PRESERVING RESOURCES Cover at least 80% of ABB’s portfolio of products and solutions with our Circularity Approach by 20305 n.a. 31%6 (share of ABB’s products and solutions assessed) Send zero waste to landfill while reducing waste gen- eration by 2030 16.8 kilotons (2019), equivalent to 8.8% of total waste (adjusted for portfolio changes) 10.1 kilotons, equivalent to 6.3% of total waste SOCIAL PROGRESS Zero harm to our people and contractors – we aim for a gradual reduction in lost time from incidents 0.24 (2019)7 0.13 Increase proportion of women in senior management 8 roles to 25% by 2030 11.7% (2019) 21.0% Achieve a top-tier employee engagement score 71/100 (2019) 77/100 Expand programs for community engagement n.a. As part of the improvement process started in 2022, in 2023 we assessed our community engage - ment positioning and revised and expanded the scope of action, now focused on education, emer- gency and disaster relief, community empower- ment, and environment and conservation. INTEGRITY & TRANSPARENCY Global framework for assessing and mitigating third-party integrity risks through risk-based due dili- gence and life cycle monitoring n.a. This target measures the implementation of a global framework for assessing third-party integ- rity risks. It is an ongoing and critical organization-wide, integrity-based enhancement, which strengthens how we onboard and manage the life cycle of our relationships with suppliers, sales channels and customers. Framework established and operational. Integrity due diligence and risk management enhancements for suppliers (buy-side) and sales channels (sell-side) launched globally. 1 Where a baseline applies. 2 Representative scenario: Energy loss used as basis for calculations; see explanation in the “Customer emissions” chapter of this report. 3 Strict scenario: Energy input used as basis for calculations; see explanation in the “Customer emissions” chapter of this report. 4 This ambition is not part of the committed targets. 5 Based on revenues from hardware-based products and solutions, where granularity of financial systems allows. Service revenues are excluded. 6 The circularity score of the assessed products and solutions is to be calculated once a representative share of the portfolio has been assessed. 7 2019 baseline excludes the Power Grids business and the Turbocharging division. 8 At ABB, senior managers are defined as employees in Hay grade 1-7, including Division Presidents. 9 Targets Baseline (baseline year) 1 2023 status Global Integrity Program underpinned by accountabil- ity for integrity and an adaptive risk management strategy gained from insights through targeted learn- ings, transparent reporting and monitoring n.a. This target measures the implementation and ef- fectiveness of our Global Integrity Program through how we drive individual accountability for integrity and adapt our risk management strategy to real-time data insights gained from integrity-based learnings, reporting and monitoring. 1. Trust KPI – the rate of severity level 1 and 2 in - vestigations where the reporter disclosed their identity: • Year 1 (January 1, 2021, to December 31, 2021): 57% of reporters. • Year 1 and 2 (January 1, 2021, to December 31, 2022): 60% of reporters. • Year 1, 2 and 3 (January 1, 2021, to December 31, 2023): 60% of reporters. 2. Engagement KPI – the volume of unique visitors to the Integrity Awareness Portal (IAP) for integrity learnings: • Year 1 (January 1, 2021, to December 31, 2021): 25% of employees with online access. • Year 1 and 2 (January 1, 2021, to December 31, 2022): 69% of employees with online access. • Year 1, 2 and 3 (January 1, 2021, to December 31, 2023): 80% of employees with online access. At least 80% of supply spending in focus countries2 covered by Sustainable Supply Base Management (SSBM) by 2030 n.a. Using a risk-based approach, a mid-term 2025 tar - get has been set, focusing on high-risk suppliers in focus countries. 2 At least 80% of spending on high-risk suppliers in fo- cus countries 2 covered by SSBM by 2025 In 2023, we reached 42% of spending on high-risk suppliers in focus countries 2 covered by SSBM. Linking sustainability targets to executives’ variable pay Under the Annual Incentive Plan (AIP), a safety goal was included within the individual measure for some member of ABB’s Executive Committee (EC). The individual measure had a weighting of 20 percent of the executive’s target AIP (2019). Under the AIP, at least two sustainability-related performance goals are included within the individ- ual measure for each member of ABB’s EC. The in- dividual measure has a weighting of 20 percent of the executive’s target AIP. Under the Long-Term Incentive Plan (LTIP), two performance measures with equal weighting of 50 percent were considered, namely average earnings per share and relative total share- holder return. The LTIP was awarded to around 100 execu - tives, including EC members and division presidents. Vesting un- der the LTIP was subject to the achievement of the plan specific targets over a period of three years (2019). One of the three performance measures under ABB’s LTIP is based on achievement of a corporate sustainability target and carries a weighting of 20 percent. The LTIP is awarded to around 100 execu - tives, including EC members and division presi- dents. Vesting under the LTIP is subject to the achievement of the plan specific targets over a pe- riod of three years. 1 Where a baseline applies. 2 Current focus countries are Argentina, Brazil, Bulgaria, China, Colombia, India, Indonesia, Malaysia, Mexico, Peru, Poland, Saudi Arabia, South Africa, Thailand, Türkiye and Vietnam. 10 ABB SUSTAINABILITY REPORT 2023 SUSTAINABILITY AT ABB 11 In line with the ABB Way, responsibility for sustainability is clearly defined and covers all levels of the organization: ABB’s Board of Directors reviews and approves the Sustainability Agenda and related targets. In 2023, topics related to the Sustainability Agenda were discussed in every Board meeting. Board committees also have specific roles in relation to sustainability: The Governance and Nomination Committee (GNC) is responsible for overseeing ABB’s Sustainability Agenda (including corporate social responsibility, health, safety and en- vironment). It reviews and proposes to the Board the company’s Sustainability Agenda and its targets, monitors target progress and achievements, and reports to the Board at least once per year. The Compensation Committee ensures that ABB’s executive compensation policies are appropriately aligned with its Sustainability Agenda. The ABB Group Executive Committee validates the Sustainability Agenda and its implementation. It is responsible for reviewing sustainability targets in line with our performance management approach and our business model, as well as for ensuring that a sustainability culture is embedded in our business decision-making. In every Executive Committee meeting held in 2023, topics related to the Sustainability Agenda were discussed. The Chief Communications and Sustainability Officer, who is a member of the Group Executive Committee, holds functional responsibility for — Sustainability governance — Board of Directors — Executive Committee — Sustainability Council — Corporate teams — Workstreams — Business-level implementation 12 ABB SUSTAINABILITY REPORT 2023 SUSTAINABILITY AT ABB sustainability and reports together with the Group Head of Sustainability to the GNC on topics and progress related to the Sustainability Agenda. The Sustainability Council is the operational body that oversees implementation of the Sustainability Agenda, reviews developments and monitors progress toward tar- gets. As of 2023 and in line with the ABB Way, all business areas are represented in the Sustainability Council by their heads of strategy as well as their respective sustainabil- ity leads. This has further strengthened the role of the Sustainability Council. The Group sustainability team shapes ABB’s Sustainability Agenda based on internal and external stakeholder input, impact assessments and evolving regulatory require- ments, and drives sustainability topics on the Group level. To strengthen the quality of our sustainability data and ensure an accurate assessment of our sustainability per- formance, responsibility for ABB’s sustainability reporting was moved to the Finance function in 2023. In 2023, the Sustainability Council defined and clarified the role of topic-specific work- streams. These workstreams establish targets and roadmaps across business areas and determine the governance for their respective sustainability topics. Additionally, they monitor trends and share best practices across business areas. The work- streams include subject-matter experts from our business areas and divisions, as well as members of the Group sustainability team. The workstreams regularly report to the Sustainability Council on their progress and receive support from the Council where needed. In line with the ABB Way and our decentralized operating model, our four business areas and their divisions are ultimately responsible for putting action plans in place and ensuring that appropriate resources are available to implement these plans and deliver on our targets. To strengthen division-level accountability in line with our decentralized operating model, each division appointed a Division Carbon Accounting Lead in 2023. 13 In 2023, ABB conducted a double materiality assessment. This type of assessment has proven to be particularly relevant for companies and organizations that are com- mitted to integrating sustainability considerations into their business strategies and reporting practices. The term “double materiality” refers to the two-way relationship that exists between a company and the economy, environment and society in which it operates. In other words, while the business activities of a company can have a variety of impacts on the economy, environment and society including people (impact ma- teriality), changes that occur within the economy, environment and society can also impact the activities of the company (financial materiality). ABB’s 2023 double mate- riality assessment replaces our prior materiality assessment, which was developed in 2020, to provide a more complete picture of this two-way relationship. The assessment was guided by the following regulatory requirements and report- ing standards: the provisions of the amended Swiss Code of Obligations related to transparency on non-financial matters (Art. 964b CO), the European Sustainability Reporting Standards (ESRS), Global Reporting Initiative (GRI), Integrated Reporting Framework (IR), IFRS Sustainability Disclosure Standards, SASB Standards and recom- mendations of the Task Force on Climate-related Financial Disclosures (TCFD). Over the course of 2023, ABB took a systematic approach to implementing its double materiality assessment. As we were seeking stakeholder feedback to define our material topics, we reviewed and updated the overview of the company’s stakeholder groups. While no major changes were made to the overall group categories, the name of the “external partners” group was changed to “collaborative partnerships” to emphasize our collaborations with other companies and research and academic in- stitutions on a wide range of societal, environmental and technological activities and topics. The updated six stakeholder groups are: collaborative partnerships, custom- ers, employees, governments and civil society, investment community and suppliers. A clear definition was formulated and finalized for each stakeholder group. For more information, please refer to the “Stakeholder engagement” chapter in this report. ABB conducted extensive research to consider evolving regulatory and reporting requirements, industry- and sector-specific topics, and global trends. Positive and negative impacts were derived from desk research, ABB documentation and industry knowledge. On this basis, we identified and categorized 24 potentially material topics for ABB. The list was then validated through the outcome of the internal stakeholder surveys performed by ABB. ABB’s corporate functions and four business areas assessed the topics and impacts from multiple perspectives through an online survey. In total, 59 representatives participated in the survey. In preparation for the external stakeholder survey, and in the interest of greater clarity and understand- ing, ABB elected to simplify the list of topics by clustering them into broader topics. Definitions for these topics were then developed in close consultation with ABB’s in- ternal subject-matter experts and with detailed cross-referencing to the results from the internal survey. The topic descriptions can be found in the Appendix of this report. Next, ABB invited 1,447 external stakeholders – drawn from among our collaborative partnerships, customers, employees, governments and civil society, investment com- munity and suppliers – to participate in an online survey addressing ABB’s impacts related to the proposed topics. Of these, 308 stakeholders submitted a complete response. The work of engaging with ABB’s key external stakeholders represents an essential aspect of the double materiality assessment process, as these parties are — Materiality — ABB’s approach to double materiality 14 ABB SUSTAINABILITY REPORT 2023 SUSTAINABILITY AT ABB well positioned to identify and evaluate many of ABB’s material impacts. The results of our external stakeholder survey were reviewed during a validation workshop involving the strategy and sustainability heads from each business area and relevant corpo- rate functions. Key impacts, risks and opportunities related to the proposed topics were used to identify material topics. The risks related to the material topics were identified based on the results of our Enterprise Risk Management (ERM) process. In total, we identified 10 topics that we consider material because they scored particularly highly in terms of ABB’s impact on the economy, environment and society including people, and in terms of the impact of these topics on ABB’s success. The 10 material topics were then mapped on to a matrix; the two axes of which were “Impact of ABB on the economy, environment and society including people” and “Impact on ABB’s success.” Human rights & labor standards Health & safety Circularity Products, solutions and services Employee development & wellbeing Business perfor- mance & resilience Corporate & sustainability governance Climate Responsible sourcing Data privacy & cyber security Impact of ABB on the economy, environment and society including people Impact on ABB's success Lowest Lowest Highest Highest 15 The 2023 ABB double materiality matrix was reviewed and approved by the Executive Committee and the Governance and Nomination Committee of ABB’s Board of Directors. In our pursuit of a sustainable future, it is crucial to acknowledge that sustainability extends beyond the material considerations of a single company. The double materiality assessment is vital in identifying sustainability topics on which ABB has high impacts and vice versa. Equally, it is important to recognize that some of the topics that scored lower and therefore have been deemed non-material, such as water and waste management, biodiversity and land use, partnerships and collaboration, and diversity and inclusion are relevant for ABB’s and the world’s collective future. Embracing these topics is necessary to ensure a more comprehensive and forward-thinking ap- proach to responsible business practices. Looking ahead, we will continue to engage with our stakeholders to track the ongoing evolution of material topics in response to global risks and opportunities, new regulations and emerging trends, among other factors. 16 ABB SUSTAINABILITY REPORT 2023 SUSTAINABILITY AT ABB Adopted by the member states of the United Nations in 2015, the 17 Sustainable Development Goals (SDGs) and their 169 sub-targets offer a blueprint for achieving peace and prosperity by 2030. Business has a vital role to play in driving progress if the SDGs and their sub-targets are to be achieved by the end of this decade. ABB has always been a strong advocate for the SDGs. Following our double materiality assessment in 2023, we decided to review our impacts on the SDGs. By canvassing a wide range of internal and external stakeholders for their perspectives on ABB’s impacts on the economy, environment and society including people, the double mate- riality assessment provided us with accurate data for our SDG mapping. We mapped the topics that we identified in our double materiality assessment against the 169 sub-targets of the SDGs. This process allowed us to identify four SDGs on which we have the greatest impact. They are as follows: The selection of these four SDGs is fully aligned with ABB’s purpose of enabling a more sustainable and resource-efficient future with our technology leadership in electrification and automation. This alignment allows us to focus our efforts on those areas where we can generate the greatest impact. While these are the SDGs on which ABB has the most influence, we also recognize the importance of all other SDGs and endeavor to contribute to their achievement whenever and wherever possible. — Contributions to the United Nations’ Sustainable Development Goals ABB supports the Sustainable Development Goals Ensure access to affordable, reliable, sustainable and modern energy for all. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation. Take urgent action to combat climate change and its impacts. ABB enables access to af- fordable and sustainable energy through our portfo- lio of electrification, auto- mation and energy-efficient solutions. ABB contributes to decent work and economic growth by providing safe and fair employment, paying taxes and supporting local communities. ABB’s innovative technolo- gies actively contribute to sustainable industrializa- tion and give us, our busi- ness partners and our cus- tomers the ability to move, work and live more sustainably. By cutting our own GHG emissions, empowering customers to avoid emis- sions and integrate renew- ables, and working with suppliers and partners to reduce their carbon foot- prints, ABB is enabling decarbonization and climate action. 17 An environmental, social and governance (ESG) rating is a measure of a company’s exposure to long-term environmental, social and governance risks. Because these risks have financial implications, ESG ratings are used by investors to form a broader understanding of a company’s long-term potential. At the end of 2021, we identified the most relevant ESG ratings for ABB and its stake- holders on the basis of an internal review. Drawing on the results from the review, the Executive Committee decided in 2022 to reduce the number of ESG ratings in which we participate. We reviewed the six rating providers again in 2023 and confirmed that they remain the most relevant to ABB. We were pleased to note that our overall ESG ratings improved in 2023 over 2022. We attribute this improvement to our robust governance structure and our progress toward our 2030 sustainability targets, as well as to the work we did to refine these targets further. — Environmental, social and governance ratings THE ESG RATINGS WE PARTICIPATE IN ARE THE FOLLOWING: Rating Score CDP Climate D C- C B- B A- A D- CDP Water D C- C B- B A- A D- CDP Supplier Engagement D C- C B- B A- A D- The 2023 CDP Supplier Engagement score will be available in March 2024. 18 ABB SUSTAINABILITY REPORT 2023 SUSTAINABILITY AT ABB Rating Score EcoVadis Gold medal, issued on February 17, 2023: 75/100 EcoVadis Silver Gold Platinum Bronze 75 ISS ESG Corporate Rating, received on July 17, 2023 ISS ESG D C- C C+ B- B B+ A- A A+ D- D+ In 2023, July 21, ABB received a rating of AAA (on a scale of AAA-CCC) in the MSCI ESG Ratings assessment. 1 MSCI B BB BBB AAA A AA CCC Sustainalytics ESG Risk Rating, October 12, 2023: 15.4 2 Sustainalytics Severe 40+ High 40 – 30 Medium 30 – 20 Low 20 – 10 15.4 (risk exposure) Negligible 10 – 0 Sustainability Yearbook Member 2024, within the top 15% of the industry, based on S&P Global Corporate Sustainability Assessment (CSA) Score 2023. S&P Global CSA ESG Score 65 100 0 /100 Electrical Components & Equipment S&P Global CSA Score 2023 A key component of the S&P Global ESG Score As of The S&P Global Corporate Sustainability Accessibility (CSA) Score is the S&P Global ESG Score without the inclusion of any modelling approaches. Company scores can be compared to their peers in the same industry . Learn more at spglobal.com/esg/scores 65 ABB Ltd November 22, 2023. Sustainable1 1. DISCLAIMER STATEMENT The use by ABB of any MSCI ESG Research LLC or its affiliates (“MSCI”) data, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, en- dorsement, recommendation, or promotion of ABB by MSCI. MSCI services and data are the property of MSCI or its information pro- viders, and are provided ‘as-is’ and without warranty. MSCI names and logos are trademarks or service marks of MSCI. 2. DISCLAIMER STATEMENT Copyright ©2023 Morningstar Sustainalytics. All rights reserved. This publication contains information developed by Sustainalytics (www. sustainalytics.com). Such information and data are proprietary of Sustainalytics and/or its third party suppliers (Third Party Data) and are provided for informational purposes only. They do not constitute an endorsement of any product or project, nor an investment advice and are not warranted to be complete, timely, accurate or suitable for a particular purpose. Their use is subject to conditions available at https://www.sustainalytics.com/legal-disclaimers. 19 02 Low-carbon society 21 We enable a low-carbon society 22 Customer emissions 28 ABB’s own emissions 30 Supplier emissions ABB is driving the shift towards a low-carbon economy with its innovative technol- ogies. Our expertise in electrification and automation enables greater energy effi- ciency and the integration of renewables into the energy mix. We work closely with our customers and suppliers to help them save energy and reduce emissions across their value chains. Our commitment to supporting energy security and the transition to a low-carbon society is also demonstrated by the work we are doing to increase energy efficiency and reduce emissions in our own operations. This area of endeavor is critical to ABB’s approach to creating value for all our stake- holders. Moreover, our 2023 double materiality assessment identified climate as the topic that is the most material to our business. Under ABB’s Sustainability Agenda, we have set targets that are aligned with the SBTi Net-Zero Standard for both our operations and value chain emissions, including customer and supplier emissions. In our own operations, our target is to reduce our scope 1 and 2 emissions by at least 80 percent by 2030 from the baseline year of 2019; by 2050, we intend to eliminate 100 percent of these emissions. When it comes to our value chain, our target is to reduce our scope 3 emissions by 25 percent by 2030 and by 90 percent by 2050, both from the baseline year of 2022. In 2023, we updated our 2019 and 2022 baseline to take account of recent business acquisitions and divestments. We also updated our scope 3 accounting methodology. Under our strict scenario, in 2023 our scope 3 emissions increased from 2022. The key reasons behind the increase in emissions were increased sales and IEA grid electricity emission factors. 1 These factors had a significant impact on ABB’s value chain emis- sions as 96 percent of them are associated with the use phase of our products. The 2023 emissions update highlights the non-linear path to decarbonizing the world’s grids. For our representative scenario, our scope 3 emissions had a marginal decrease due to portfolio mix changes offsetting the negative impacts above. The “Customer emissions” chapter below explains the two scenarios in detail. By enabling our customers to increase their energy efficiency, to integrate renewables and electrify their operations, and by working with our suppliers and partners to re- duce their carbon footprints, we are committed to delivering on our SBTi targets. Targets Baseline (baseline year) 2023 status LOW-CARBON SOCIETY Reduce own scope 1 and 2 CO₂e emis - sions by at least 80% by 2030 and by 100% by 2050 636 kilotons CO₂e (adjusted for portfolio changes) 2019 151 kilotons CO₂e Reduce scope 3 CO₂e emissions by 25% by 2030 and by 90% by 2050 76,8342 kilotons CO₂e ( 2022) / 392,188 3 kilotons CO₂e (2022) 76,6652 kilotons CO 2e / 436,346 3 kilotons CO₂e Ambition to avoid 600 megatons CO₂e emissions throughout lifetime of prod- ucts sold from 2022 to 20304 65 megatons CO₂e (2022) 74 megatons CO₂e 2 Representative scenario: Energy loss used as basis for calculations; see explanation in the “Customer emissions” chapter of this report. 3 Strict scenario: Energy input used as basis for calculations; see explanation in the “Customer emissions” chapter of this report. 4 This ambition is not part of the committed targets. — We enable a low-carbon society 1 IEA emission factors, https://www.iea. org/ data-and-statistics / data-product / emissions-factors-2023 21 Our impact on our customers’ emissions is principally reflected in our scope 3 down- stream emissions and our avoided emissions. ABB’s scope 3 downstream emissions are the largest contributor to our Group’s GHG footprint. This is because of the substantial electric power consumed by our products. Our scope 3 downstream emissions are directly linked to the carbon inten- sity of the energy used by our customers, which is not within our direct control. To support decarbonization, we are innovating to integrate renewables into the energy mix, to improve the energy efficiency of our products and to provide customers with solutions that will enable them to electrify their operations. In addition, we provide our customers with information about the power consumed and emissions avoided by our offerings, the outcome of Life Cycle Assessments (LCAs) performed, and third-party-verified Environmental Product Declarations (EPDs), which are accessible via QR codes on our products. Every division at ABB is fully committed to our company’s ambition to make a positive, meaningful contribution to a low-carbon society. This includes enabling the energy transition as well as supporting the efforts of hard-to-abate industries to become more sustainable. In the second half of 2023, ABB appointed 19 division carbon accounting leads. Every ABB division and their business lines compiled detailed downstream scope 3 emissions inventories for 2022 and prepared the 2023 inventory. We used the guid- ance provided by the GHG Protocol to develop a bottom-up model for the wide range of offerings across all ABB divisions that allows every business line to gain a complete view of the emission impacts of its products. Each business line assessed its respective contributions to customer emissions in a consistent, standardized manner and identified high-impact areas for improvement in the future. These efforts focused on assessing GHG emissions resulting from the use of our sold products and solutions (also known as “scope 3, category 11” emissions). This view considers both the technical specifications and the operating conditions associated with each product and ensures a consistent approach for calculating scope 3 downstream and avoided emissions. It is important to note the special challenge presented by the need to assess the energy consumption of ABB products in use at our customers’ sites around the world. The emissions accounting guidance contained within the GHG Protocol is insuffi- cient for this purpose. Moreover, our competitors have interpreted the guidance in a number of different ways. As a result, ABB has decided to publish both a “repre- sentative scenario” and a “strict scenario.” The representative scenario quantifies the energy consumption of our products based on measured energy loss; the strict scenario takes a more conservative approach based on the full energy input to our products. The 2023 emissions update highlights the non-linear path to decarboniz- ing the world’s grids, but we are confident that ABB is on the right track as we drive electrification with our customers over the mid- to long-term. Rising sales of our offerings support the decarbonization of multiple sectors, with electric motors re- placing fossil-fuel combustion technology as a key example. Under both approaches, ABB increased the precision of its calculations by using real-life data sets. These data sets were drawn, for example, from an aggregated significant sample of motor-driven systems monitored by ABB Motion’s smart sensor solutions. Ninety-six percent of the Group’s emissions are associated with the use phase of our products as operated by our customers. We simulated how these emissions will evolve over the coming years. The simulations considered business growth, the scaling of — Customer emissions — Helping our customers reduce GHG emissions 22 ABB SUSTAINABILITY REPORT 2023 LOW-CARBON SOCIETY renewable energy globally and the renewable energy ambitions of our key custom- ers. This process served as the basis for ABB’s submission of SBTi Net-Zero Standard aligned targets in November 2023, with validation by SBTi expected for 2024. In 2024, ABB will bring the need for more precise guidance to the attention of the SBTi and the authors of the GHG Protocol, which will be updated for the first time after 12 years; the current guidance does not capture the critical contribution that products and solutions such as electric motors, as part of complex integrated systems, make to the energy transition. ABB developed its avoided emissions methodology based on the 2023 guidance of the WBCSD. 1 In this section, we explain how we account for avoided emissions by applying the WBCSD guidance to ensure a transparent and credible approach. We use the category of avoided emissions to describe the volume of greenhouse gas emissions that our customers will avoid by using ABB products and solutions through their full service lives. Avoided emissions are the reduction in GHG emissions that occur because of the use of a product or solution. For both the product or solution and the reference scenario, we estimate life cycle GHG emissions. We have defined three avoided emissions scenarios: replacement, retrofit and new installation. Data is collected covering the percentage of sales and kWh/tCO₂ e. The data is drawn from ABB’s sales teams and the product’s technical specifications. Alongside the three scenarios, several factors provided by the guidance were reviewed affecting the eligibility of avoided emissions against our ambition. Gate 1 (climate action credibility): ABB transparently reports on 100 percent of its value chain emissions on an annual basis. This covers 13 of the 15 scope 3 GHG Protocol categories. Using this compre- hensive GHG inventory, we have set SBTi Net-Zero Standard aligned targets for the near- (2030) and long-term (2050). In following the SBTi Net-Zero Standard, we will not be using avoided emissions to claim net-zero status or carbon neutrality. Gate 2 (climate science alignment): We do not consider avoided emissions from product lines or solutions sold to sectors and applications linked to exploration, extraction, mining, production, distribution or sale of fossil fuels. Examples of ABB’s climate mitigation options which lead to avoided emissions linked to mitigation options from the IPCC AR6 Working Group III Summary for Policymakers Product category Solution Recognized mitigation potential Variable speed drives (VSD) Low and medium VSDs added to motor-driven systems to regulate load ratio of the motor so as to decrease the demand of energy input to the system itself. Energy efficiency – Direct impact – Reduced demand for energy input of a motor-driven system. High-efficiency low-voltage motors High-efficiency solution replacing old, inef- ficient electric motors with an efficiency rate higher than installed base average. Energy efficiency – Direct impact – Increased efficiency of a motor-driven system. Gearless mill drives (GMD) Installation of GMDs on grinding mills to eliminate mechanical components such as ring gears and pinions, leading to increased efficiency of the application system. Energy efficiency – Direct impact – Increased efficiency of the application. Electrical marine propulsion solutions Marine propulsion units developed and in- stalled to increase maneuverability of the ship/vessel and reduce fuel consumption. Shipping: efficiency and optimiza- tion – Direct impact – Increased effi- ciency of the application and re- duced fuel consumption. Shaft generators Generator/alternator used in the marine sector to support the main engine of a ship/ vessel and increase the efficiency of power generation. Shipping: efficiency and optimiza- tion – Direct impact – Reduced fuel consumption. Shore-to-ship connections Integrated systems that connect ships to the port’s electricity grid via a shore-to-ship power connection and reduce consumption, pollution and noise while ship is docked. Shipping: efficiency and optimiza- tion – Direct impact – Increased effi- ciency and reduced emissions of a system. — How ABB supports our customers on avoided emissions — Eligibility assessment for claiming avoided emissions 1 https://www.wbcsd.org/Imperatives/ Climate-Action /Resources/ Guidance-on-Avoided-Emissions 23 Examples of ABB’s climate mitigation options which lead to avoided emissions linked to mitigation options from the IPCC AR6 Working Group III Summary for Policymakers Product category Solution Recognized mitigation potential Selected modern- ization service for electrification equipment Replacements, extensions, upgrades and retrofits of existing equipment that make it possible to avoid substituting an application package. Material efficiency – Decarbonizing impact – Avoidance of emissions from the production of new equipment. Gate 3 (contribution legitimacy): ABB only considers avoided emissions that arise from installations that drive change within their respective markets. For example, only high-efficiency motors in a higher energy-efficiency class than the installed base average and used in a retrofit applica- tion would be eligible for inclusion. As for general applications like drives, we consider the retrofit of existing direct-on-line motor-driven systems as their main contribu- tion to avoided emissions. In new installations of motor-driven systems, we exclude applications where the customer has already decided to install a drive; we only include sales where the customer has been convinced to install a drive with the motor, thereby improving the overall efficiency. Impact of ABB’s avoided emissions: • 74 MtCO₂e GHG emissions avoided by products sold in 2023 and using full life-time avoided emissions • Products, solutions and systems generating these avoided emissions represent 8 percent of total revenue • Ambition to avoid 600 MtCO₂e by products sold from 2022 to 2030 ABB has identified two of the assumptions used as having the greatest influence on the calculations performed: product lifetime (determined as 10–20 years depending on the product group and the conditions under which products and solutions are used, based on expert estimates and Product Category Rules where available); and the share of replacement, retrofit and new installations as a % of sales volume (based on customer visits and expert judgement). If product lifetimes were to be extended and/ or the share of sales volume to change, the calculation of avoided emissions would change accordingly. Other assumptions that influence the calculations are average op- erating hours per year and efficiency gains, which are based on external data analysis. As ABB is focusing its innovation efforts on increasing product lifetime and improving the circularity of its products and solutions, further data sets will become available, improving the quality of calculations and leading to improving the precision of the avoided emissions calculations. Negative side effects: Increased sales of these solutions may lead to increased demand for natural resources and rare metals. This can result in negative environmental consequences such as in- creased land and water use. ABB is fully aware of this risk and has identified circularity as a key means of mitigating the risk. To this end, we have set a target for at least 80 percent of our products and solutions to be covered by our Circularity Approach by 2030. For more detail, please see the “Preserving resources” section of this report. Rebound effects: ABB has been conservative in selecting product categories that qualify for avoided emissions. After assessing potential rebound effects, we do not believe that the lower GHG emissions impact of our products would lead to increased use of the products and therefore partly or fully cancel out the initial GHG emissions reduction enabled by the product. Avoided lifetime emissions (kgCO₂e) = annual energy saved (MWh) × emission factor (kgCO₂e/MWh) × lifetime (years) • Annual energy saved : Energy saved on a yearly basis when comparing the product or solution with the relevant reference scenario using the following four elements: (i) power output of the product/solution, (ii) operating hours per year, (iii) — Sensitivities — Limitations — Avoided lifetime emissions (kgCO ₂ e) 24 ABB SUSTAINABILITY REPORT 2023 LOW-CARBON SOCIETY percentage of revenues from eligible avoided emissions scenarios (replacements, retrofits, new installations), (iv) percentage of efficiency gain in each scenario. • Emission factor : Weighted average emission factor based on geography of where the respective product or solution is used, using the International Energy Agency (IEA) and UN Economic Commission for Europe (UNECE) data, multiplied by regional revenue exposure. • Lifetime : Average expected lifetime of the product or solution, using Product Category Rules data, when available and applicable, used also for product’s or solu- tion’s Life Cycle Assessment, or expert opinion if not available. In 2023, ABB’s four business areas actively engaged with their customers to enable them to reduce or avoid GHG emissions. ABB Electrification ABB Electrification is playing a key role in the global energy transition with innovative products, components and service solutions. It enables customers in industry, infra- structure and transport to reduce their energy consumption and eliminate emissions. In 2023, Electrification enabled Kemijoki Oy, one of Finland’s largest producers of hy- droelectric power and regulating power, to speed up the removal of a harmful green- house gas, SF 6, from its electrical systems by providing an SF₆-free circuit breaker ret - rofit solution. Additional cost-effective solutions launched by Electrification included a generator circuit breaker retrofit and the reintroduction of the Blackburn® Solar Grounding Lug, which provides contractors with an innovative grounding solution for solar panel installations. To support decarbonization in the food and beverage industry, in 2023 we supplied a leading food and beverage company’s UK factory with M4M 20 network analyzers, which work with ABB’s energy management system to provide real-time data that helps save energy and reduce costs. We also provided Nordic Sugar Nykøbing with an ABB Ability™ Energy Manager solution that enables the customer to collect data, map electrical consumption and target areas for improvement. In late 2023, we provided medium-voltage switchgear for the construction of what will be the largest floating solar power plant in Southeast Asia. ABB Motion Thanks to our industry-leading R&D investments, ABB Motion’s state-of-the-art drives, motors, digital solutions and related services help our customers lower their carbon emissions while reducing costs and improving productivity, reliability and energy efficiency. We are particularly proud of the key role Motion’s advanced power technology is play- ing in the production of green hydrogen. Our electrolyzer power system minimizes the production network’s harmonic current content and power consumption while maxi- mizing efficiency and power factor. By reducing the levelized cost of green hydrogen production, this technology can support its rapid adoption. Motion’s products, solu- tions and services have also supported the wind power sector since 1994 with tech- nology and data insights that optimize the performance and longevity of wind farms. Altogether, we have made key contributions to the operation of 17,645 onshore and 1,576 offshore wind converters. Together, these wind converters account for 47.5 GW of turbine power, an enormous figure considering that 1 GW can power approximately 876,000 households. As an example of the work we do, ABB Motion enabled Tarkett, a Swedish flooring manufacturer, to save 800 MWh of electricity per year. Based on data insights gath- ered from the ABB Ability™ Digital Powertrain Energy Appraisal solution, Motion re- placed 10 of Tarkett’s motors with IE5 SynRM motors, improving efficiency to 95 per - cent. Also in 2023, Motion’s high-inertia synchronous condensers were combined with flywheels at the Lister Drive Greener Grid Park in the United Kingdom. The first of its kind in the world, the system compensates for the reduction in spinning inertia avail- able to the UK’s power grid caused by the transition to renewable energy. — How ABB’s business areas are helping their customers reduce and avoid emissions 25 Spinning inertia, traditionally provided by fossil-fuel-powered generators, is neces- sary to operate a stable power grid. This innovative, green solution will meet about 1 percent of the UK’s electricity needs. ABB Process Automation Technologies and solutions from ABB Process Automation (PA) help our customers ad- dress the need to fundamentally transform their processes to meet decarbonization and other sustainability and efficiency goals. Most of PA’s customers are companies in energy- and resource-intensive industries operating some of the most complex and essential infrastructure on the planet. Our solutions enable these customers to increase efficiency by means of electrification, automation and industrial software, to switch from fossil-fuel combustion to electric power, and to track their emissions of CO 2 , methane and other undesirable byproducts. Based on our 2023 review of our scope 3 downstream emissions, some PA divisions began to work with customers to develop new business models that reduce their carbon footprints. As a result, one of our divisions was central to a 2023 memoran- dum of understanding signed between ABB and Tata Steel. Together, we will make system-level assessments of Tata’s manufacturing plants and production facilities, evaluating and co-developing short- and long-term options for energy efficiency, decarbonization and circularity. In May 2023, PA launched an innovative marine propulsion concept, ABB Dynafin™. Inspired by the dynamic motions of a whale’s tail, it is the result of over a decade of research, development and testing. The new concept achieves extremely high levels of energy efficiency and enables ships to maneuver with remarkable precision. Also announced in May 2023, ABB is collaborating with renewables specialists Lhyfe and Skyborn in the SoutH2Port project, enabling the large-scale integration into the energy system of renewable hydrogen generated using offshore wind. Powered by Skyborn’s planned offshore wind farm, the plant in Söderhamn, Sweden, will produce around 240 tons of hydrogen per day, or the equivalent of around 1.8 million barrels of oil per year. ABB Robotics & Discrete Automation ABB Robotics & Discrete Automation (RA) is enabling customers across a wide range of industries – automotive, general manufacturing, foundry, food and beverage, logistics and others – to reduce their emissions by optimizing output and preserving resources. Our solutions in robotics and AI help customers keep up with trends in the reshoring of industry and the development of more sustainable supply chains. In 2023, we performed extensive life cycle assessments of our portfolio of robots, quantifying the up- and downstream scope 3 emissions associated with our products. The information will be used by RA to identify key areas where we can strengthen our support for our customers’ ambitions to shrink their carbon footprints. Over the year, we expanded our offering with four large new robots, which can provide energy savings of up to 20 percent and greater flexibility for more sustainable pro- duction methods. The higher energy efficiency was achieved by making use of ABB’s OmniCore™ controller and an overall lighter robot design. The new range of robots is intended to meet the needs of the rapidly growing electric vehicle industry, as man- ufacturers increase production to meet regulatory targets. Customers in this sector can choose from a wide range of ABB robots, finding just the right model to handle batteries of any size, from individual cells to complete packages. 26 ABB SUSTAINABILITY REPORT 2023 LOW-CARBON SOCIETY 27 With respect to our own emissions, we have established science-based, net-zero-aligned targets for 2030 and 2050, which we submitted to the SBTi for val- idation. We are aiming to reduce our absolute scope 1 and 2 emissions by at least 80 percent by 2030 and by 100 percent by 2050, versus our 2019 baseline. As part of our drive to make ABB a net-zero company, we have also committed to three initiatives of the Climate Group of global companies. By 2030, we will electrify our vehicle fleet, amounting to more than 10,000 cars (EV100 initiative), source 100 per- cent of our electricity from renewable energy sources (RE100 initiative), and improve energy efficiency and productivity across our operations (EP100 initiative). These actions will help us to reduce our scope 1 and 2 GHG emissions by at least 80 percent by 2030. Under the scope of the ABB Way for Health, Safety, Environment, Security and Sustainability, we have adopted the following control standards: Energy Management Requirements, Energy Management ACOP (Approved Code of Practice), Climate Change Requirements, and Climate Change ACOP. Other relevant sustainability proce- dures include our Fleet Electrification Procedure and Renewable Electricity Procedure. To meet our commitments, we are engaged in a wide range of actions to prevent or mitigate potential negative impacts and risks related to our own emissions. We are switching to renewable energy – with a particular emphasis on renewable electric- ity – investing in heat pumps and installing solar power generation systems at our fa- cilities. We are also implementing energy efficiency measures across our operations. These measures include installing energy-efficient lighting, upgrading our HVAC systems and implementing building automation systems that enable a high level of efficiency. In 2023, all ABB Motion operations in Finland switched to 100-percent green district heating, powered by renewable energy systems. As part of its nearly $100 million — ABB’s own emissions from 25% in 2019 to 34% in 2020 to 53% in 2021 to 81% in 2022 to 94% in 2023 SHARE OF RENEWABLE ELECTRICITY Figures in the graphs are adjusted for portfolio changes. percent of our electricity from renewables 28 ABB SUSTAINABILITY REPORT 2023 LOW-CARBON SOCIETY investment in its greenfield campus in New Berlin, Wisconsin (USA), ABB Motion equipped the facilities with state-of-the-art building design features, including solar power, a geothermal heat pump, modern HVAC systems and advanced building con- trols. In South Korea, ABB Process Automation installed a solar power system at its Cheonan-si site. The solar installation is expected to generate enough power to cover as much as 40 percent of the site’s total energy needs. ABB’s Mission to Zero™ program continued to make its mark, with nine sites joining the program in 2023. One of these, a facility in Xiamen, China, installed 100,000 square meters of solar panels – the largest such array anywhere at ABB. The energy system for the Xiamen site is proactively managed by the ABB Ability™ ZEE600 sys - tem for electrification monitoring and control. ABB Robotics & Discrete Automation also upgraded many sites, installing solar power at its refurbishment center in Mosnov, Czech Republic, and at its two factories in Shanghai. In Eggelsberg, Austria, a heat pump installed in 2023 at the facility of Robotics & Discrete Automation’s B&R subsidiary is expected to replace more than 1,800 MWh of gas consumption per year. To track the effectiveness of our actions on our scope 1 and 2 emissions, we report on our GHG reduction efforts on a quarterly basis. In 2023, we made considerable progress toward our 2030 and 2050 goals. We reduced our total energy consumption by 21 percent, compared to a 2019 baseline. At the end of 2023, 64 percent of ABB’s energy consumption and 94 percent of its electricity was sourced from renewables. Since 2019, we have reduced our GHG emissions by 76 percent. Our shift to renewable electricity in Mexico, where we have significant operations, was a key driver of our emissions reductions in the past year. Additionally, the ABB Real Estate function tracks progress made by its Group-level Green Real Estate program. As of 2023, the program had achieved savings of 106 GWh per year and $13.5 million in costs from 2018 to 2023. The savings were derived from over 450 completed and ongoing energy-saving projects at ABB sites around the world. Moreover, the program supports the RE100 global commitment by increasing on-site renewable power generation capacities, with over 70 photovoltaic projects in develop- ment or completed worldwide. With over 2,400 electric vehicle chargers strategically deployed across more than 190 locations, constituting 37 percent of our global sites, we are actively driving fleet electrification (EV100). This initiative not only transforms the landscape of our infrastructure but also enables e-mobility for the convenience of our customers, employees and visitors. We also track the progress of our global pro- gram to reduce our direct emissions of SF₆ from losses associated with either handling or production processes. Last year, the program reduced ABB’s direct emissions of SF₆ by 56 percent. In 2023, we emitted 383 kilograms of SF₆, down from 861 in 2022. In 2023, 52 percent of our global new vehicle orders were for EVs or plug-in hybrid vehicles, supporting our EV100 commitment. TOTAL ENERGY USED AND TOTAL SCOPE 1 & 2 GHG EMISSIONS kilotons CO 2 e 800 600 400 200 0 GWh 2500 2000 1500 1000 500 0 2019 2020 2021 2022 2023 Figures in the graphs are adjusted for portfolio changes. Total energy used (GWh) Total Scope 1 and 2 GHG emissions (kilotons CO 2 e) 1,647 636 523 389 221 151 1,511 1,481 1,413 1,298 29 As part of ABB’s Sustainability Agenda, we are committed to working with our main tier-one suppliers to reduce emissions in our supply chain. In line with the submission of our 2030 and 2050 targets to the Science Based Targets initiative (SBTi), we include scope 3 emissions associated with our suppliers. Our new net-zero-aligned target is to reduce our scope 3 emissions by 25 percent by 2030 and by 90 percent by 2050. Our work with suppliers to help them reduce emissions contributes to the achievement of our new scope 3 emissions target. In 2023, we continued to engage with suppliers who qualify for our supply chain GHG emissions reduction program. The focus in 2023 was aimed at reducing supplier operational emissions. Before starting the collection of supplier emission data, we conducted training sessions for both our employees and suppliers to explain the aim of the program and the basics of the GHG protocol, including the differences between scope 1, 2 and 3 emissions. We also provided our suppliers with information on differ- ent actions they can take to reduce their emissions. Examples were offered from our own journey to reduce scope 1 and 2 emissions at ABB sites. To collect supplier emissions data, we work with an external provider. Through this provider’s online platform, we make additional training opportunities available to our suppliers. The platform also offers guidance to our suppliers on possible emissions reduction action plans. We held several ABB Supplier Days to engage with our suppliers on emissions reduc- tion programs. For example, at a Robotics Supplier Day in Shanghai, an ABB customer delivered a speech about its plans to reduce GHG emissions across its value chain and shrink the carbon footprint of its products. This peer-to-peer strategy inspired several of ABB’s divisions to introduce ABB’s supply chain emissions program at locally orga- nized supplier day events. Other actions aimed at reducing ABB’s scope 3 emissions include bringing increased volumes of low-carbon and recycled copper into our production cycles, while also committing to use more recycled steel. The Process Automation business area, for example, will use low-carbon copper winding wire from Dahrén, a leading supplier, in the manufacturing of electromagnetic stirring equipment. Process Automation and Motion have also partnered with Swedish mining company Boliden to source certified low-carbon and recycled copper. ABB is also participating in Sweden’s HYBRIT initia- tive, which aims to develop fossil-free steel. Other examples of how we are working with our suppliers to reduce ABB’s scope 3 emissions can be found in our Electrification business area. One division required each of its 200 most impactful suppliers to obtain an EcoVadis ESG scorecard; over 90 percent of these suppliers complied with the mandate, and many are now report- ing their GHG emissions. Another Electrification division opened a new distribution center closer to its customers, avoiding more than 4,000 tons of GHG emissions by reducing its transportation needs by 25,000 miles per week. In addition to measuring our progress toward our new net-zero-aligned scope 3 emissions targets, we track the impact of our supply chain GHG emissions reduction program in terms of the number of suppliers we have registered and rated in our carbon data collection tool and the proportion of suppliers who have attended our events. Other important data we track is the number of suppliers who have publicly — Supplier emissions 30 ABB SUSTAINABILITY REPORT 2023 LOW-CARBON SOCIETY announced emission reduction targets, the number who have set targets with the SBTi and the number who are on track to achieve their targets. We are currently working toward collecting supplier emissions data from 2022. This process began in August 2023 and has provided us with a better understanding of the maturity of our supplier base and of where we need to focus our engagement to reach our target. We continue to leverage lessons learned and to engage with our stakeholders to refine the actions we take to reduce supplier emissions. Our current program is based on the lessons learned from an ABB 2021-22 pilot project on how to track supplier GHG emissions. We have also incorporated lessons learned from the supplier emissions program begun by ABB Electrification’s Distribution Solutions division. 31 03 Preserving resources 33 We preserve resources 34 Circularity 38 Waste and water management 41 Biodiversity and land use Preserving resources is a key pillar of ABB’s Sustainability Agenda and core to ABB’s value creation model. Our 2023 double materiality assessment identified circularity as a key topic of interest to our stakeholders. Internally, we also consider biodiversity. land use, water and waste management as topics that are relevant to ensuring that ABB will be regarded a sustainable company. Our efforts to drive progress on these topics are part of ABB’s value creation process. Our Sustainability Agenda incorporates two targets to support the preservation of resources. The first is to cover at least 80 percent of our products and solutions with our Circularity Approach by 2030, which means that the requirements of the ABB Circularity Approach are met for these products and solutions. 1 By circularity, we are referring to increasing the share of sustainable materials in our products and packaging, reducing waste, maximizing and enabling recyclability and reusability, and extending the lifetime of our products. The ABB Circularity Approach is reshaping and improving our product portfolio by revealing the impact of our offerings through their complete life cycle. Our second quantitative target is to send zero waste to landfill while reducing waste generation by 2030. ABB applies a rigorous approach to recycling and limiting waste generation in our operations and production processes. We are equally committed to the sustainable management of water, which represents a scarce resource in many parts of the world. Biodiversity and land use have been newly identified internally as sustainability topics that require monitoring and continuous improvement efforts. ABB is aware of the im- portance of protecting the world’s biological diversity and is doing its part to support the survival of plant and animal species, and the ecosystems they are a part of. Targets Baseline (baseline year) 1 2023 status PRESERVING RESOURCES Cover at least 80% of ABB’s portfolio of products and solutions with our Circularity Approach by 2030 2 n.a. 31% 3 (share of ABB’s prod- ucts and solutions assessed) Send zero waste to landfill while re- ducing waste generation by 2030 16.8 kilotons (2019), equiv - alent to 8.8% of total waste (adjusted for portfo- lio changes) 10.1 kilotons, equivalent to 6.3% of total waste 1 Where a baseline applies. 2 Based on revenues from hardware-based products and solutions, where granularity of financial systems allows. Service revenues are excluded. 3 The circularity score of the assessed products and solutions is to be calculated once a representative share of the portfolio has been assessed. — We preserve resources 1 The circularity score of the assessed prod- ucts and solutions is to be calculated once a representative share of the portfolio has been assessed. 33 Circularity was identified by the 2023 ABB double materiality assessment as one of our company’s 10 material topics. Our Circularity Approach encompasses our company-wide efforts to foster a circular economy. Beginning with the design stage, we are committed to increasing the reusability and recyclability of our products and to making them more durable by means of our lifetime extension and modernization services. Within our own operations, we avoid waste by making our processes more efficient, by increasing the use of sustainable materials in our products and packag- ing, and by expanding recycling activities at our sites. Additionally, we are working closely with customers, suppliers and partners to embed circularity throughout our entire value chain. By assessing the impact of our offerings through their complete life cycle, our product managers and relevant functions iden- tify ways to improve circularity across our product portfolio. This process encourages cooperation and partnerships with key stakeholders across industries and sectors on a wide range of activities – from recovering scrap from production to enabling take-back schemes in many markets. Our Circularity Approach is managed by the ABB Circularity Working Group, which coordinates initiatives relating to circularity among our four business areas, clarifies and updates the Circularity Approach, defines circu- larity KPIs, and establishes the guidelines by which the KPIs are assessed. To prevent or limit any potential negative impacts or risks, the ABB Circularity Working Group annually reviews regulatory changes related to product sustainability and integrates them into the approach as needed. In 2023, the working group revised our circularity guidelines to take into consideration the latest regulatory developments (e.g., the 2023 EU Taxonomy Delegated Act) and the key sustainability standards that address circularity and product performance (e.g., GRI and SASB). The revision also addressed internal requests for changes submitted by the divisions. To support the ongoing evolution of our approach, over the past year we also reinforced our partner- ships with relevant external organizations, including the WBCSD. In 2023, the working group additionally established governance mechanisms for the core processes associ- ated with ABB’s Circularity Approach. In 2023, all four ABB business areas began assessing their products and setting baseline circularity scores for their portfolios. Where possible, the results from these assessments have been linked with our product data to make them easily accessible. Achieving progress on our product circularity assessments ranks high on our business agenda and has been tied to clear KPIs. We will use the resulting data to evaluate our progress toward ABB’s Sustainability Agenda target of covering at least 80 percent of our products and solutions with our Circularity Approach by 2030. The baseline circularity scores from the business areas will underpin the actions we take to reach our 2030 target. At the end of 2023, 31 per- cent of ABB’s products and solutions had been assessed. — Circularity 34 ABB SUSTAINABILITY REPORT 2023 PRESERVING RESOURCES As the Circularity Approach is being rolled out across the Group, the ABB business areas are implementing initiatives to improve the impact of our product portfolio across all dimensions of the product life cycle: • In September 2023, we launched the updated ABB Product Development Gate Model, following a successful pilot phase. The model supports our new Group-wide require- ment to consider circularity needs and expectations in the development of every new product. We also continue to review and modify existing product designs wher- ever practicable. • The Electrification Smart Buildings division expanded the implementation of me- chanically recycled or bio-circular plastics to its wiring accessories portfolio of junc- tion boxes, socket outlets and light switches. Overall, about 1,000 tons of fossil-fuel-derived raw materials per year have been progressively replaced with more sustainable alternatives. The products are sold under the Busch-art linear brand in central Europe, Niessen Alba in Spain, and ABB SAGA in Scandinavian markets. • ABB Motion’s IE5 SynRM motor offers a good example of how ABB cooperates with key suppliers to enable greater sustainability. In a recent project, our R&D teams de- veloped a prototype motor with a stator housing made of 100 percent recycled alu- minum alloy. The motor also features low-carbon bearings, with a 70 percent smaller CO ₂ e footprint. Taken together, the prototype achieves up to a 20 percent reduction in production-related CO ₂ e emissions compared to our current offering. • The Process Automation business area offers digital solutions that can also enable our clients to extend the lives of their assets through remote operations and — Circularity in every phase of a product ABB CIRCULARITY APPROACH WHAT WE ENABLE Circular customer solutions WHAT WE DO ABB circular operations Recycling Take-Back Lifetime Efficiency Logistics & Packaging Manufacturing Sourcing Design Responsible end-of-life Resource- efficient operations Optimized use phase CIRCULAR BUSINESS MODEL Circular design & sourcing 35 36 ABB SUSTAINABILITY REPORT 2023 PRESERVING RESOURCES preventive maintenance. In 2023, we signed an agreement with SalMar to operate digital services at the remote-controlled Arctic Offshore Farming facility, located at sea off northern Norway. We will collect real-time and historical operating data from individual salmon farms and send it securely to SalMar’s cloud-based database, helping to support decision-making that will improve efficiency and operations. • ABB’s robot remanufacturing teams, over the course of more than 25 years, have given thousands of used robots a second life by refurbishing or upgrading them. The controllers and manipulators of robots can be refurbished to “like-new” condition at ABB’s Global Remanufacture & Workshop Repair Centers. By offering this service, ABB makes it possible for existing customers to sell their redundant robots and equipment back to us rather than scrapping or mothballing them. A life cycle assess- ment carried out in 2021 indicated that robot refurbishment releases roughly 75 per- cent fewer GHG emissions than the manufacture of a new robot. For equipment that can no longer be refurbished, ABB safely disassembles and sorts the component ma- terials for recycling. To reduce and, where possible, eliminate the use of hazardous materials in our op- erations, we rely on the ABB List of Prohibited and Restricted Substances. This list applies to every aspect of our operations, including procurement, product develop- ment, production processes, products, packaging materials, service activities and construction sites. Material compliance is a heavily regulated topic, and we update the list twice yearly in keeping with local and international regulations and legislation. These include the TSCA, Prop 65, REACH, RoHS, POP and other local material compliance legislation, both within and beyond the European Union. We are also tracking likely future regula- tory requirements regarding PFAS in the EU and the United States, DPP in the EU, and the Ecodesign regulatory requirements that will come into force in 2025. We have developed a companion guide to the list to help ABB’s suppliers meet their obligations – which include partnering with us to identify and prevent restricted substances from entering ABB’s supply chain. In addition, ABB’s Global Terms and Conditions for suppliers and our Supplier Code of Conduct both address the subject of prohibited and restricted substances in the context of regulatory compliance. ABB’s business areas and divisions have full ownership of their respective product material compliance obligations, which include the EU requirements for chemicals and products listed in the Substances of Concern in Products (SCIP) database. In 2023, ABB’s business areas continued to collect material compliance information on more than 50,000 articles and end products acquired from their supplier base. This infor- mation is securely stored in dedicated business area and/or divisional databases and is used for customer communications and product compliance statements. — Material compliance 37 In 2023, ABB continued to track and report on its waste and water management pro- cesses. These include ABB’s water usage and the sustainable management of water, which is a scarce resource in many countries. It also includes recycling and the reduc- tion of waste generation in our operations and production processes. While ABB’s production processes consume relatively little water, we have prioritized the reuse and conservation of water and all other scarce material resources on a global basis. ABB has embraced a comprehensive range of waste and water management policies and commitments, including the ABB Policy on Health, Safety, Environment, Security and Sustainability. Under ABB’s Sustainability Agenda, we have committed by 2030 to send zero waste from our own operations to landfill while developing our capability to prevent waste generation. This commitment applies to non-hazardous manufactur- ing waste that is disposed of via landfill or incineration without energy recovery. At the same time, our 2030 commitment to apply our Circularity Approach to more ABB products and solutions also impacts how we manage waste and water. ABB’s divisions are required to adhere to several control standards related to health, safety, the environment, security and sustainability. These include the Water Management & Conservation Requirements, Water Management & Conservation Approved Code of Practice (ACOP), Water Inventory and Action Plan, Waste Management Requirements and Waste Management ACOP. ABB’s sustainability proce- dures and guidance include our Zero Manufacturing Waste to Landfill Procedure. These standards impose several processes designed to prevent or mitigate potential negative impacts. For example, ABB’s water management standard requires sites to periodically monitor their rates of water withdrawal, use and wastewater discharge while assessing opportunities to implement new conservation measures. Sites lo- cated in areas of water stress or which withdraw more than 10,000 cubic meters of water annually are required to implement effective action plans for reducing water withdrawals. Our waste management standards require all ABB sites to continuously reduce the amount of waste generated, as well as to minimize waste at the source. Our sites are presently at varying stages of implementing the procedures for seg- regating, reducing, reusing and recycling waste. Some are at the beginning of their journey while others have reached the end, such as our operations in Bangalore, which were externally certified in 2023 as “zero waste to landfill” by Intertek. We have undertaken several actions to address actual negative impacts and risks related to our water and waste management. These include our Corporate Water Inventory, covering all ABB Group companies worldwide. The inventory compiles data from 338 ABB sites and offices, covering approximately 94 percent of employees. Data for remaining employees based at non-manufacturing sites with limited impacts is estimated on a pro rata basis. In a related field, we work with customers and suppliers to implement sustainable practices that address our complete value chain and the full life cycle of our prod- ucts and solutions. For more information on this area of activity, please refer to the “Circularity” chapter in this report. We also address the environmental performance of our suppliers through our Sustainable Supply Base Management approach. For more information, please refer to the “Responsible sourcing” chapter in this report. — Waste and water management 38 ABB SUSTAINABILITY REPORT 2023 PRESERVING RESOURCES Among the tools we use to monitor and manage water-related risk across our opera- tions is the World Resources Institute’s Aqueduct tool. Aqueduct lets us assess ABB’s facilities according to the level of baseline water stress of the local watershed. We use it to track levels of groundwater depletion, flood risk and seasonal variability of water availability at our sites. ABB is well equipped to identify and deliver actual and potential positive impacts and opportunities related to waste and water management. After 50-plus years in the water industry and 130-plus years in the power sector, we are aware of how important it is for complex businesses to use resources efficiently and sustainably. Our solutions and expertise across water cycle applications help our customers achieve greater op- erational efficiency and insight into their plants’ health and conditions, letting them do more with less. To track the effectiveness of the actions we take on water usage and waste manage- ment, we rely on the management standards described above and on information drawn from our ISO 14001 management system. Data are reported on a quarterly basis and aggregated at the corporate level. We have adopted a clear target for waste, which is to send zero waste to landfill by 2030. While we have not yet set a Group-wide target for water management, this topic is covered under the scope of the “preserving resources” pillar of ABB’s Sustainability Agenda. 39 Globally, 50 percent of our 338 sites send zero waste to landfill, while the remaining 50 percent are making progress in the same direction. Over the course of 2023, we reduced the amount of waste that ABB generates by 11 kilotons. We implemented 37 recycling and waste reduction projects in 2023. These projects reduced the waste we generate annually by an estimated 600 tons. Of these projects, 40 percent have an ex- pected payback period of less than two years. In total, 86 percent of our waste in 2023 was recycled, and 6.3 percent was sent to landfill, down from 6.4 percent in 2022. Of the 338 ABB sites mapped in 2023, 61 face an extremely high level of water stress, and 55 face a high level of water stress. For all ABB sites in stressed watersheds, total water withdrawals in 2023 amounted to 1,242 kilotons, representing 49 percent of our total water withdrawals. There are 12 projects currently under way to improve water management across ABB, with expected annual savings of 19 kilotons. NON-HAZARDOUS WASTE TO LANDFILL 8.8% (16.8 kilotons) 8.4% (14.3 kilotons) 7.0% (12.0 kilotons) 6.4% (10.9 kilotons) 6.3% (10.1 kilotons) 2019 2020 2021 2022 2023 Figures in the graphs are adjusted for portfolio changes. DISTRIBUTION OF WATER WITHDRAWALS 2023 Total water withdrawals in stressed water- sheds for all ABB sites amounted to 1,242 kilo- tons. Total water withdrawals for all ABB sites were 2,545 kilotons Extremely high 35% High 14% Medium to high 20% Low to medium 11% Low 20% 40 ABB SUSTAINABILITY REPORT 2023 PRESERVING RESOURCES ABB has identified the topic of biodiversity and land use as an important part of its efforts to be a more sustainable company. In discussing biodiversity, we are referring to the protection of biological and genetic diversity in the natural world. We believe that the preservation of this diversity is vital to ensuring the survival of plant and animal species and the conservation of natural ecosystems. At ABB, we are aware of the central role that land use plays in protecting biodiversity. To be sustainable, human uses of land should be minimized, and deforestation must be strictly limited or completely avoided. ABB’s Policy on Health, Safety, Environment, Security and Sustainability addresses the topic. We comply with all relevant regulations and legislation on biodiversity, land use and land contamination. We have also engaged with biodiversity as part of our EU Taxonomy reporting process, as it falls under the “do no significant harm” assess- ment. Our internal environmental site reporting questionnaire includes biodiversity, and we have made use of the Natura 2000 protected areas network to carry out fur- ther analysis. Notably, ABB in the United States worked with an external consultant in 2023 to assess the proximity of our sites to nature reserves and other protected areas. With respect to land use, this is not an issue on which we have a large impact, yet we are nonetheless committed to addressing it with proper care. ABB is still at an early stage of preparing to manage the topic of biodiversity and land use. We plan to develop and implement a course of action within the next two years. We have not yet established formal mechanisms for tracking the effectiveness of our actions related to biodiversity and land use. We are nonetheless confident that our approach to protecting biodiversity in years past has been sound, even if it did not represent a priority action item for our Group. In 2023, 13 of ABB’s sites reported that they were in or near protected areas of high biodiversity value. Most of these sites are certified under the ISO 14001 standard for environmental management systems and the ISO 9001 standard for quality manage- ment systems. Globally, 80 percent of our sites are certified according to ISO 14001 and ISO 9001, based on which we identify and manage any significant environmen- tal risks and opportunities. Many of our manufacturing sites operate in line with environmental permits issued by local authorities; these authorities regularly assess our performance. — Biodiversity and land use 41 04 Social progress 43 We promote social progress 44 Health and safety 46 Human rights and labor standards 50 Employee engagement score 52 People development 54 Employee wellbeing 56 Diversity and inclusion 58 Stakeholder engagement 61 Community engagement Business has a crucial role to play in building a prosperous, healthy and equitable society. ABB is proud to be a good corporate citizen and to contribute to the welfare of our employees, customers, other stakeholder groups and communities worldwide. This section addresses three key topics in this area that our 2023 double materiality assessment identified as material to our business and how it impacts the outside world. These are health and safety, human rights and labor standards, and employee development and wellbeing. This section also addresses two additional topics that ABB considers to be vital components of its Sustainability Agenda. These are diversity and inclusion, and partnership and collaboration. Our efforts relating to these five topics represent a relevant part of how we create value for all our stakeholders. Four targets have been established under ABB’s Sustainability Agenda to reflect the ways we are working to promote social progress. With social progress being core to our value creation model, these targets also support us to successfully deliver value to all our stakeholders. The first is to achieve a gradual reduction in lost-time incidents – safety is paramount to our operations, and the physical wellbeing of our employees has always been a top priority. The second target is to increase the proportion of women in senior management roles to 25 percent by 2030. The third is to achieve a top-tier employee engagement score in our industry. And the fourth is to expand our programs for community engagement. Business is inseparable from society, and ABB firmly believes that a healthy society provides the necessary preconditions for any successful enterprise. We are com- mitted to doing our part to enable and support thriving communities and healthy social conditions. Targets Baseline (baseline year) 1 2023 status SOCIAL PROGRESS Zero harm to our people and contractors – we aim for a gradual reduction in lost time from incidents 0.24 (2019) 2 0.13 Increase proportion of women in senior management 3 roles to 25% by 2030 11.7% (2019) 21.0% Achieve a top-tier employee en- gagement score 71/100 (2019) 77/100 Expand programs for commu- nity engagement n.a. As part of the improvement process started in 2022, in 2023 we assessed our commu - nity engagement positioning and revised and expanded the scope of action, now focused on education, emergency and disaster relief, community em- powerment, and environment and conservation. 1 Where a baseline applies. 2 2019 baseline excludes the Power Grids business and the Turbocharging division. 3 At ABB, senior managers are defined as employees in Hay grade 1-7, including Division Presidents. — We promote social progress 43 ABB’s 2023 double materiality assessment identified health and safety as one of our company’s 10 material topics. The topic addresses the necessity of health and safety measures in the workplace and recognizes the provision of a safe workplace as a fun- damental human right. At ABB, it encompasses our efforts to ensure the health and safety of our employees, contractors and supply chain partners by implementing ap- propriate standards and procedures and by complying with local laws and regulations. It also involves developing safe products, solutions and services based on testing and the incorporation of features to prevent accidents and injuries. Health and safety are foremost among the standards by which ABB measures its performance. To underscore this fact, in June 2023, CEO Björn Rosengren signed an updated HSE & Security Policy that reinforces our commitment to health, safety, the environment and security. This commitment encompasses material sourcing, prod- uct design, operations and services. The updated policy includes our HSE Guiding Principles for Resilient Operations. These principles, which are “lead with care,” “engage and involve” and “learn and improve,” are aimed at promoting a leadership style and work environment that allow people to do their best work, talk openly about challenges, ideas and mistakes, and make meaningful contributions to how their work gets done. We accomplish this by actively involving leaders in HSE processes such as sustainability observation tours (SOTs), self-assessments and incident investigations. Our leaders also work to facili- tate a “speak-up” culture by looking beyond the safety numbers and leading with care. In formulating these principles, we benchmarked ourselves in 2023 against more than a dozen of our customers. We actively manage health and safety, along with all of their related impacts, risks and opportunities, in several ways. We seek to address hazardous situations as soon as they are identified, and 77 percent of all reported hazards at ABB were resolved imme- diately in 2023. Reported incidents are categorized as minor, medium or major and are investigated accordingly. The learnings from these investigations create actionable mitigation measures that are then shared across all of ABB’s business areas. The divisions of ABB’s four business areas undergo one-, three- or five-year self-assessment cycles under the HSE&S Management System and submit to an HSE audit process. Independent HSE auditors at ABB’s business areas are responsible for auditing the business under our management system and for identifying areas for improvement and opportunities to implement good practices. As an essential aspect of our Guiding Principles for Resilient Operations, ABB is committed to becoming a learning organization: Instead of only focusing on learning from a limited selection of incidents, we want to learn from our daily work and proactively identify areas that can be improved. We track the effectiveness of our health- and safety-related actions in a range of ways. In terms of processes, our Management Information System allows us to gather all relevant data on hazards and incidents and enables us, after thorough analysis, to assign actions to managers. Our on-time goal is to close 85 percent of all non-conformities reported (NCRs) through self-assessments or HSE audits within the allotted timeframe, which ranges from 30 to 90 days depending on the severity of the non-conformity. We currently have an NCR on-time closure rate of 76 percent for HSE audits and 66 percent for self-assessments. — Health and safety 44 ABB SUSTAINABILITY REPORT 2023 SOCIAL PROGRESS Under the ABB Sustainability Agenda, our ambition is to cause zero harm to our people and contractors, and we aim for a gradual reduction in lost-time incidents. We achieved our internal sustainability safety target in 2023, as our lost-time injury fre- quency rate (LTIFR) of 0.13 declined from the 0.24 we recorded as a baseline in 2019, reaching industry-leading levels. LTIFR is defined as work-related injuries that result in at least one day away from work per 200,000 hours worked (i.e., the total hours worked by 100 full-time employees per year). In 2023, ABB recorded one workplace-related fatality and zero travel-related fatalities. An investigation into the fatal incident is currently underway, and we will draw on the lessons learned to prevent any future recurrence. In spite of this fatality, the total number of serious and high-potential incidents decreased compared to 2022. We are not satisfied with this year’s results and will continue to search for ways to better protect our people. ABB has built a robust safety culture over the past decade, and we are proud of the downward trend in the total number of serious incidents expe- rienced since 2014. We nonetheless refuse to become complacent about our strong safety record. The health aspects of our health and safety efforts are addressed in the “Employee wellbeing” chapter of this report. SAFETY AT ABB LOST-TIME INJURY FREQUENCY RATE (LTIFR) 0.24 0.15 0.14 0.14 0.13 0.30 0.25 0.20 0.15 0.10 0.05 0 2019 2020 2021 2022 2023 Excludes the Power Grids business and the Turbocharging division. 1 Where a baseline applies. 45 Our double materiality assessment identified human rights and labor standards as one of ABB’s 10 material topics. This topic addresses ABB’s commitment to comply- ing with internationally recognized standards, laws and regulations, including the elimination of child and forced labor, as well as the right to work under fair and safe conditions. It encompasses access to fair wages, the right to freedom of association and collective bargaining, respecting the rights of communities and individuals when providing security for our people and assets, and recognizing and respecting commu- nities’ land rights. We also recognize our responsibility to respect and promote human and labor rights along our value chain. This includes conducting proper due diligence on our suppliers and contractors to ensure they meet our standards for the environ- ment, health and safety, as well as human rights and labor standards. ABB is committed to respecting and promoting the dignity and human rights of all people, as expressed in the International Bill of Human Rights. We adhere to interna- tional frameworks to identify human rights risks and potential impacts as well as to implement appropriate measures to mitigate adverse impacts. These frameworks and tools include: United Nations’ Guiding Principles on Business and Human Rights (UNGPs), OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, ILO Core Conventions on Labour Standards, including ILO Convention No. 138 on minimum age for admission to employment and ILO Convention No. 182 on the worst forms of child labor, and ILO-IOE Child Labour Guidance Tool for Business. With respect to child labor, these frameworks and standards include those which the Swiss Ordinance on Due Diligence and Transparency in relation to Minerals and Metals from Conflict-Affected Areas and Child Labor (DDTrO) specifies as internationally rec- ognized equivalent regulations. As a result of our compliance with these frameworks and standards, we are exempted from specific due diligence and reporting obliga- tions under the provisions of the amended Swiss Code of Obligations (Art. 964j–l CO) and the DDTrO respectively in regard to child labor. With respect to labor standards, ABB fully honors all its requirements, whether deter- mined by law or collective bargaining agreements. This includes the EU directive on minimum notice periods regarding operational changes. We are in close and frequent contact with the European Works Council (EWC), with a voluntary agreement to start consultation on any planned transnational changes in Europe that affect a large number of employees before beginning labor relations processes within affected countries. Whenever possible, we await the EWC statement before concluding any lo- cal labor relations process. In this confidential exchange with the EWC about planned future changes and our business outlook, we also review the effectiveness and effi- ciency of our consultation processes and adjust our practices when needed. Via our Global Labor Relations database, we ensure that we comply with local requirements and properly manage engagement processes for more complex projects. Our commitment to respect and promote human rights and labor standards is un- derpinned by the ABB Code of Conduct, the ABB Supplier Code of Conduct and ABB’s — Human rights and labor standards 46 ABB SUSTAINABILITY REPORT 2023 SOCIAL PROGRESS Human Rights Policy. These codes and policies clearly set forth our expectations for every individual who works for ABB or engages with us as a business partner or through our supply chain. ABB’s goal is for human rights to be well understood and managed in all ABB opera- tions. During 2023, we continued our work to strengthen human rights risk manage- ment and mitigation processes, with each of our business areas undertaking reviews of our salient human rights risks and Human Rights Due Diligence (HRDD) Framework. The reviews involved wide consultations with a range of internal stakeholders and subject-matter experts, as well as desktop research. The reviews were based on the methodology used for our Group-level review in 2022 and were conducted according to the requirements of the UNGPs. The scope of our human rights risk assessment included the 12 salient human rights issues identified during the 2022 analysis and all internationally recognized human rights, as per the Universal Declaration of Human Rights. Our four business areas identified the human rights risks for each element on their full value chains, consid- ering all potentially affected people. Each business area consolidated its findings to assemble a high-level human rights risk map, then prioritized risks according to their severity and likelihood, enabling us to define a risk matrix, with salient human rights issues identified at the business area level. Human rights risks identified by internal and external stakeholders as part of ABB’s double materiality assessment were also incorporated into the analysis. As a result of this work, we updated our salient human rights issues as follows: • Child labor • Corruption and bribery • Environmental issues impacting human rights • Fair employment 1 • Health and safety • Human trafficking and modern slavery • Impact on communities and land rights 2 • Information security and data privacy To review our HRDD Framework, business area teams assessed the implementation status of its six core elements (policy commitment, risk and impact assessment, risk-based measures, embeddedness, tracking and communication, and grievance and remedy), assigning them scores for 31 criteria. This work allowed us to update and document a consolidated HRDD Framework for the Group and to identify opportunities for improvement in our human rights man- agement processes. The resulting group roadmap places a strong focus on setting the standard for risk identification, communication and capacity building, both within ABB and along our value chain, to build broader understanding of salient risks and our mitigation actions. Business area roadmaps focus on governance enhancement, implementation of risk identification and mitigation, stakeholder engagement and awareness programs. We will monitor our performance and conduct annual reviews of our improvement plans to assess their effectiveness and define new objectives. In December 2023, we published an updated edition of ABB’s Human Rights Policy, which includes our documented HRDD Framework. The update was drafted concur- rently with business area risk and HRDD reviews and incorporates feedback from internal and external stakeholders and subject-matter experts gathered during 2023, along with the requirements of the latest relevant international frameworks, stan- dards and legislation governing responsible business practices. Alongside the business area risk and HRDD reviews, we continued to focus on internal engagement and capacity-building to better embed human rights considerations in our day-to-day business processes. We continued to make general human rights 1 The definition of fair employment includes these previously identified salient issues: freedom of association and collective bar- gaining, and discrimination and harassment. 2 The definition of impact on communities and land rights includes this previously identified salient issue: contributing to conflict and use of force. 47 awareness training available to all ABB employees and managers, with 4,412 employ- ees completing general human rights e-learning courses, and we provided targeted trainings for management and roles specifically exposed to human rights risks. We also trained and qualified a further 43 Human Rights Champions to continue embed- ding human rights expertise within each business area and division. Human rights and security was an increasing area of focus, with 100 percent of ABB’s security managers undergoing training on ABB’s HRDD processes and their application to our commit- ments to the Voluntary Principles on Security and Human Rights. We also continued our program for conducting human rights self-assessments at se- lected ABB sites. In total, 78 sites in 39 countries undertook the assessments in 2023, for a total of 186 assessments in 47 countries in the period 2021–2023. Number of hours of instructor-led human rights training delivered to ABB personnel during 2023 1,840 Human rights awareness Number of ABB personnel receiving human rights awareness and target role training 108 1,068 1,567 530 162 438 427 185 172 257 596 120 564 312 280 142 Sales & Marketing Operations Procurement Target role training 2023 2022 2021 2020 48 ABB SUSTAINABILITY REPORT 2023 SOCIAL PROGRESS During 2023, we continued to reinforce our risk screening process for major projects. In the coming year, we plan to simplify this process to enhance effectiveness and to pilot human rights risk screening processes for small projects. To address human rights risks related to our suppliers, we rely on our Sustainable Supply Base Management system and our conflict minerals management program. For further information on these two programs, please refer to the “Responsible sourcing” section of this report. The majority of ABB’s employees worldwide are covered by collective bargain- ing agreements (CBAs), either by collective labor agreements at the industry level (generally with unions) or at the company or location level (generally with employee representative bodies such as works councils or unions). Approximately 55 percent of employees are covered by internal employee representatives, and approximately 27 percent are estimated to be members of one or more of 90 trade unions around the world. In addition, the European Works Council represents more than 48,000 ABB em- ployees, covering the majority of employees in countries belonging to the European Economic Area (EEA), UK or Switzerland. For employees not covered by collective bargaining agreements, there are different scenarios regarding the determination of working conditions. In many countries where not all employees are represented by the CBA, among other factors the condi- tions in the CBA that go beyond local labor market practices are considered in deter- mining working conditions and terms. Regardless of the application of a CBA, ABB in general aims to offer working conditions that meet or exceed the typical standards in the respective local employment markets. ABB’s reporting and allegation management processes are available to internal and external stakeholders to address any potential violations of ABB’s Code of Conduct or other ABB policies, as well as applicable laws, including matters relating to human rights. In case of any violation of human rights or our Code of Conduct, we take steps to ensure adequate remediation and consequences in line with applicable contracts and laws. For further information on ABB’s response to the increase in harassment, discrimination and workplace respect and fairness cases recorded in 2022, please refer to the “Integrity and transparency” section of this report. In 2023, we did not receive any reports of child labor or threats to freedom of asso- ciation with respect to ABB employees. Two cases of attempted forced labor were reported by ABB service employees related to their treatment by customers. These cases were resolved satisfactorily following intervention by appropriate management and customer commitments to respect ABB’s policies regarding working conditions. During the year, we did not receive any reports of concerns regarding indigenous peo- ples’ rights, nor of negative impacts caused by security staff or third-party security providers. For further information about reports on these issues within our supply chain, please refer to the “Responsible sourcing” section of this report. Our human rights programs are proving effective in several ways. As more employees are trained in human rights and labor standards, they are sending our Human Rights Champions specific suggestions for improving human rights considerations and pro- posing new processes to upgrade due diligence procedures, as well as volunteering to pilot those new processes. Our growing internal awareness of human rights and labor standards has also enabled us to identify concerns related to temporary laborers. In one case, the ABB training session we conducted alerted a group of temporary laborers that their employer was not observing local labor laws with respect to timely payment of wages. In another case, our training program resulted in reports of third-party laborers not receiving appropriate annual leave from their employers. Action is under way to resolve these cases and ensure appropriate remediation is provided to the workers. These cases demonstrate how our training and due diligence processes can inform and inspire real improvements in people’s lives. 49 In 2023, we conducted our fifth annual ABB Engagement Survey. Separately, we carry out a number of more limited business- or topic-specific pulse surveys, but the ABB Engagement Survey is conducted Group-wide. It provides employees across our company with an opportunity to express their thoughts and opinions about ABB as a workplace. Since the survey was launched in 2019 to help foster a culture of collabora- tion and open dialogue at ABB, we have received valuable feedback about what we are doing well and what we could do better. Every active ABB employee is invited to participate in the ABB Engagement Survey. Each year, ABB cooperates with local works councils and union representatives to ensure that the survey meets all local consultation requirements. It is available in ap- proximately 40 languages, and participation is entirely voluntary and confidential. By listening regularly to feedback from our employees, we mitigate the risk of failing to address critical topics at the team level. Failure to deal with such issues could lead to less motivated employees and to avoidable attrition. Over the last five years, the participation rate for the survey has continuously improved, from a response rate of 65 percent in 2019 to 84 percent in 2023. To be transparent about the effectiveness of our actions, we share all the global survey results with employees, summarizing our overall engagement score and the most notable strengths and areas for improvement that emerged. Our business areas, divisions, country organizations and eligible teams share and discuss the feed- back received. It is our experience that the most effective actions take shape at the team level. Local teams and leaders review the feedback and suggestions before working together to identify key areas for improvement and to devise action plans to make their workplaces better and more successful. Lastly, we share stories and examples about actions taken across ABB’s teams, markets, divisions and business areas. By doing so, we learn from each other and help each other meet our targets for improvement. — Employee engagement score 50 ABB SUSTAINABILITY REPORT 2023 SOCIAL PROGRESS The survey tools supplied by our external provider identify the questions that have the strongest impact on our engagement score. We typically repeat these questions from year to year so that we can monitor the effectiveness of our actions. In addition, we carry out an analysis of all the comments provided in the survey. Each comment is categorized as positive, negative or neutral. To evaluate our overall progress, we rely on our Sustainability Agenda target: “Achieve a top-tier employee engagement score.” Since the first ABB Engagement Survey in 2019, ABB’s engagement score has improved from 71 in 2019 to 77 in 2023. This score is the key survey metric that we track from year to year. In essence, it reflects the an- swers given by our employees to two core questions: “How happy are you working at ABB?” and “Would you recommend ABB as a great place to work?” In 2023, all topics but one received a more favorable rating than in the previous year. The highest-scoring topics remained the same as last year: “safety,” “integrity” and “role clarity.” The topics that saw the most progress vs. 2022 were “challenge status quo,” “wellbeing,” “rewards,” “change adaptation” and “care.” The survey also showed that, while we have made good progress since 2019 on removing barriers to execution, there is still room for improvement. We make use of an external benchmark to determine how our survey scores compare against a broader set of companies that have posed the same survey questions to their employees through the same provider we use. Five years after its launch, the survey has become an indispensable tool that promotes open conversations about the issues that matter to us, facilitates the sharing of best practices and fosters mutual understanding. in 2023 ABB received a total engagement score of 77/100 compared to 76/100 in 2022 71/100 in 2019 (baseline) 124,808 comments received 84% response rate (=88,988 employees) in 2023 is an improvement compared to 82% in 2022 and 65% response rate in (baseline) 2019 ABB employees invited to the 2023 Engagement Survey 106,046 51 People development is critical to the success of ABB. That is why we strive to give our employees the skills they need to adapt to change and stay competitive in today’s constantly evolving business environment. From adapting to new technologies and pivoting in a crisis to handling tectonic shifts in our industry, our workforce must be prepared to face the future. Our approach to people development is a key part of ABB’s People 2025 strategy and is underpinned by two core policies. The first of these is our Corporate People Development Policy, which sets forth the central features of the people development practices that apply to all employees in ABB’s business areas and functions. It outlines mandatory minimum standards for each of our Human Resources (HR) focus areas: the ABB Leadership Way, Employee Engagement, the Open Job Market and our Learn, Connect, Grow approach. Our Learn, Connect, Grow (LCG) approach seeks to create an environment that fosters the development of all our employees. As part of this approach, we provide online and offline trainings on interpersonal and leadership skills, career development resources, and opportunities for our people to connect and learn from each other in informal settings. In 2023, we launched the first edition of our annual LCG day. The event is designed to promote a culture of continuous growth. It was hosted in more than 40 countries, engaging senior leaders and over 20,000 people globally. The event was highly appreciated by our employees and served to showcase opportunities available for learning and growing, while sharing the company culture across all continents and business areas. Our Open Job Market framework underlies our commitment to providing transparent and equal access to job opportunities at ABB. The framework applies to every ABB business area and function, mandating that all vacant office or non-production po- sitions – including part-time, full-time and senior leadership positions – be posted in English on ABB’s Internal Career Portal. The framework establishes that ABB employ- ees can apply for any posted job at any time without restrictions. Exceptions to the framework are permitted under certain specified circumstances. We believe that a culture that consistently allows employees to reflect on their growth objectives and provides them with the support they need to achieve them – through an open job market, learning opportunities and human connections – both prepares our workforce for challenges and safeguards their employability. We have created a broad array of bespoke leadership courses that address the specific challenges found at every level of management in our organization. Additional lead- ership learning resources are made available to our employees through the Harvard Manage Mentor and Harvard Manage Mentor Spark platforms. Many more training op- portunities are provided by our businesses to their respective employee populations. We continuously refine our learning offerings to ensure they are up to date with the latest developments and requirements. To this end, we work closely with our internal stakeholders, involving them from the early design stages of these offerings. We also maintain an open dialogue with internal stakeholders regarding our exist- ing procedures. — People development 52 ABB SUSTAINABILITY REPORT 2023 SOCIAL PROGRESS 53 At ABB, we strive to be an employer of choice, actively seeking to attract new employ- ees and retain current ones. We support our employees’ professional development with training programs and encourage their personal growth with work-life balance initiatives. We also make sure to keep a close eye on changes in the labor market and new workforce skills that will be needed for jobs in the future. This report addresses several aspects of the material topic of employee develop- ment and wellbeing. It describes the support we provide for the physical and mental health of our employees. It details ABB’s annual engagement survey and how our employee engagement score informs our efforts to make ABB a great place to work. It also reviews our approach to supporting personal and professional growth among our employees. We encourage the personal growth of ABB’s employees through initiatives that ensure the right balance between their professional and personal lives. In doing so, we sup- port the wellbeing and mental health of our people around the world. In providing employee benefits, including wellbeing benefits, our general policy is to stay aligned with local market practices on a country-by-country basis. Due to this ap- proach, there is a risk that local market practices may not support our Sustainability Agenda or our goal to drive social progress. Thus, there are two wellbeing-related areas where we have opted to take a global rather than local approach to benefits: the global paid parental leave policy and the global Employee Assistance Program (EAP). — Employee wellbeing 54 ABB SUSTAINABILITY REPORT 2023 SOCIAL PROGRESS Under the EAP, our global provider, Workplace Options, provides the same level of wellbeing support to every ABB employee. All employees can access the EAP through our Inside+ intranet site or through an external website, as not all eligible participants have access to Inside+. This is primarily the case for ABB’s production workers and the dependents of our employees. We also comply with local legislative requirements. For example, in Mexico, all compa- nies are required by law to identify, analyze and prevent psychosocial risks that may harm employees’ physical, social and mental health, as well as to promote a positive organizational environment. The EAP has supported ABB Mexico in complying with these requirements. The actions we take to protect employee wellbeing are principally conducted on a local basis. For example, in the United States, our “HSE Week,” held in October 2023, offered several live sessions on supporting mental health and wellbeing, among other topics. In Italy, we run a wide range of wellbeing initiatives, from promoting healthy eating habits through subsidized meetings with nutritionists, to health screening programs for breast and skin cancer. And in China and Taiwan, we provide health checkups for all ABB employees. We also run global campaigns on wellbeing topics, for example, in support of World Mental Health Day. These highlight support available at the local and business area level (such as the Mental Health Training program provided by the Process Automation business area). Our EAP provides a Rapid Response Critical Incident service that addresses urgent negative impacts and risks related to employee wellbeing. The service supports ABB employees affected by incidents such as natural disasters, accidents at work or the death of a colleague. Programs and initiatives at both the local and Group levels deliver a range of actual and potential positive impacts and opportunities in the area of wellbeing. In China, for example, we organize sports events and clubs for employees and host a regular lecture series on mental and physical health topics. In the United States, we actively seek feedback from our employees; we believe that our annual focus groups help us rapidly remediate benefits issues and determine whether the actions we are taking are effective. The benefits focus groups we held with ABB employees in the first quarter of 2022 and 2023 revealed that our people wanted to understand their benefits better and be able to locate related information more easily. This resulted in the launch of the www.myBenefitsABB.com website, providing details of ABB’s US benefits, in October 2023. In keeping with employee feedback, the website can be accessed from any computer or personal device without requiring the use of an ABB internal network. This approach specifically addressed the needs of ABB production employees who faced challenges in accessing the ABB network. Our global EAP provider makes it simpler to assess the effectiveness of our employee wellbeing initiatives. It allows us to track utilization rates and rapidly identify specific areas where early intervention measures would help. It provides us with data on the mental health-related seminars and events employees have attended. And it tracks the number of hours spent on mental health support and the most popular topics viewed on the EAP portal. This data directly informs our approach to employee wellbeing. Additionally, our global EAP provider offers a wide range of resources and training materials to support the overall wellbeing of our employees. We have set an internal goal for ABB employees either to meet or exceed the average rate at which these materials are accessed by our EAP provider’s other clients. To achieve this goal, we actively publicize the kinds of support it makes available to our employees. We collect feedback from employees who use the EAP in the form of a Net Promoter Score and the ABB Employee Survey. We hope to achieve steady improvements in employee well- being over time as indicated by these two metrics. 55 Diversity and inclusion (D&I) at ABB involves developing and supporting workforce di- versity across all dimensions (e.g., gender, generations, ethnicity, abilities and sexual orientation) and providing all with equal opportunities and equal treatment. We seek to cultivate an inclusive environment that welcomes and respects every individual. We have implemented unequivocal guidelines to promote D&I across ABB. ABB’s Code of Conduct additionally sets forth how we expect employees to act in matters of inclusion, respect and fairness. Under the code, all employees are expected to help keep our workplace free of harassment and discrimination. Among the commitments we have made to D&I, we are proud to have signed the CEO statement of support for the UN Women’s Empowerment Principles (WEPs). ABB also supports the Standards of Conduct for Business. This UN set of guidelines aims to address discrimination against lesbian, gay, bi, trans and intersex (LGBTI) people. In keeping with the ABB Way operating model, our four business areas and their divisions are fully empowered and accountable for translating our global D&I strategy into meaningful actions in all our markets. Collaboration on a monthly basis ensures consistency, sharing of best practices and a culture of empowerment aligned with local nuances and distinctions. To ensure a consistent focus on the D&I agenda throughout the year, we have com- piled an annual D&I calendar for the third year. The calendar provides transparency into the scheduled activities and allows for timely planning and broader engagement across all markets. Among our Group-wide efforts to drive progress on the topic of gender equity, we conducted the #ABBsolutelyUNited campaign in honor of International Women’s Day on March 8. The campaign included a virtual panel discussion in which our business area presidents and corporate heads addressed ABB’s commitment to the WEPs. Unconscious bias training was made available to all employees. The campaign also reached out to a broader public, as employees shared their own stories and reflec- tions on gender equity. In Q2, we launched our Pride Month celebrations with the #ComeAsYouAre campaign, which drove Group-wide engagement on the topic of LGBTQ+. The lineup of events included a virtual panel discussion and initiatives covering such topics as inclusive leadership, inclusive interviewing and LGBTQ+-specific travel safety tips. Additional activities included an “Ally of the Year” prize and various learning-oriented contests. Many countries also organized activities at their local sites, with central support. In 2023, we focused on systemic changes to ensure a fair workplace for all. External assessments on LGBTQ+ inclusion (Stonewall, HRC, Workplace Pride) were conducted, we launched the allyship maturity model and app, and the employee benefit policy review was completed. In Q3, we focused on the topic of generations and age diversity, raising awareness on ageism and how to address it effectively. These efforts were co-led by the Global D&I team and the Encompass Generations employee resource group (ERG). We also held a global panel discussion on the subject of mentorship, which stimulated additional interest in ABB’s existing mentorship opportunities. — Diversity and inclusion 56 ABB SUSTAINABILITY REPORT 2023 SOCIAL PROGRESS In Q4, we focused on the topic of abilities. The month of October was dedicated to raising awareness on invisible disabilities such as dyslexia, menopause and dealing with grief and loss. November featured a hackathon during European disability week, in association with Big Bloom. Employees attended a webinar from the Employee Assistance Program on the subject of mental health. In December, we released news about the onboarding of the newest Executive Committee sponsor for this topic, Karin Lepasoon, Chief Sustainability and Communications Officer at ABB. Our efforts continue to emphasize fostering an inclusive culture and creating strong partnerships with organizations such as Catalyst, WeQual, the Society of Women Engineers, Stonewall, Open for Business and the Global Summit of Women, among others. To track the effectiveness of our actions in support of D&I, we draw from a range of resources, including the inclusion score in the annual employee Engagement Survey, data on the growth of ABB-affiliated ERGs, the proportion of employees receiving D&I training, and our early talent and leadership statistics. We have set four D&I targets to achieve by 2030. One of our 2030 sustainability targets – to increase the proportion of women in senior management roles to 25 percent – is also one of the targets of our Global Diversity and Inclusion Strategy 2030. In 2023, the proportion of female senior managers increased to 21.0 percent, up from 17.8 percent in 2022. Our three additional internal targets for D&I at ABB are as follows: • Achieve 50 percent female early talent hires • Provide all our employees with access to employee resource groups • Achieve yearly improvement on the inclusion scores in the annual employee Engagement Survey In 2023, we made progress toward all three of these targets. Over the course of the year, 39 percent of our early talent hires were female, new ERGs continued to be formed across our Group while the reach of existing ERGs continued to expand, and the inclusion score in the 2023 Engagement Survey was 77, up from 76 in 2022. 11.7 13.5 16.3 17.8 21.0 2019 2020 2021 2022 2023 WOMEN IN SENIOR MANAGEMENT At ABB, senior managers are defined as employees in Hay grade 1-7, including Division Presidents. 57 At ABB, we engage, interact, partner and co-develop solutions with our most relevant stakeholder groups, including collaborative partnerships, customers, employees, governments and civil society, the investment community and suppliers. We actively engage with governments and the local communities in which our products are man- ufactured and used, with the aim of fostering technology adoption, sound regulatory frameworks, job creation and economic growth. We are engaged in an ongoing dialogue and close cooperation with our key stake- holder groups to ensure that ABB’s policies and positions reflect their perspectives. This regular communication is crucial to determining which topics are material for both ABB and our stakeholders. In the conduct of our daily business, we are in continuous contact with customers, employees and suppliers, among others. The transparent dialogue we carry on with in- vestors enables them to make informed and timely investment decisions. We regularly engage with government, civil society and our collaborative partners. In 2023, as part of the process of conducting ABB’s double materiality assessment, we made some minor adjustments to how we categorize and define our different stake- holder groups. These changes are reflected here: We highly value the partnerships ABB maintains with companies and research and academic institutions in order to collaborate on a wide range of social, environmental and technological activities and topics. These partnerships serve to foster knowledge exchange, contribute to innovation, provide access to talent, expand markets and address complex challenges in a more effective manner. How and whom we engage: • Collaborations with research and educational institutions • Global Business Initiative on Human Rights (GBI) • International Committee of the Red Cross (ICRC) • Technology and innovation partnerships with other companies • Technology partnerships with relevant start-ups • UN Global Compact • World Business Council for Sustainable Development (WBCSD) We meet frequently with the many organizations with which ABB has current, future and past commercial relationships. They are a key driver of ABB’s business success, and meeting their needs and expectations is essential to our business. How we engage: • Customer requests • Customer service • Customer trade shows • Key account manager relationships • Sustainability partnerships — Stakeholder engagement — Collaborative partnerships — Customers 58 ABB SUSTAINABILITY REPORT 2023 SOCIAL PROGRESS We are committed to maintaining an open dialogue with current, former and future employees of ABB. This group includes formalized and/or elected bodies of employee representatives that deal with management of labor practices, among other topics. Employees bring valuable skills, drive productivity, foster innovation and contrib- ute to ABB’s culture and values. They are vital for achieving our goals and stay- ing competitive. How we engage: • Annual Employee Engagement Survey • Annual performance review • Collective bargaining associations • Dialogue with the ABB Employees Council Europe, the representative body of all ABB employees in Europe • Global network of employee resource groups promoting diversity & inclusion in the workplace • Learning and development opportunities We engage with governmental, regulatory, political and economic stakeholders, local communities, the media, representatives from social and environmental organiza- tions, non-governmental organizations (NGOs), not-for-profit organizations (NPOs) and charitable organizations, at global, national and local levels. These key stake- holders provide the political and regulatory support, social stability and public trust necessary for ABB to operate its business and achieve sustainable growth. How we engage: • Direct dialogue with community representatives to understand local and national needs • Donations and volunteering • Engagement with government agencies and other stakeholders to demonstrate the value of our products — Employees — Governments and civil society 59 • Meetings with regulators to understand their priorities and share our views on pol- icy issues • Participation in national and international initiatives to address global issues such as climate change and sustainability • Strategic corporate partnerships The investment community enables ABB’s access to financial capital and includes such market participants as shareholders, debtholders, financial analysts, rating agen- cies and proxy advisors. We engage with these stakeholders on both financial and non-financial topics, including sustainability, governance and compensation. How we engage: • Annual General Meeting • Capital markets days • Group reporting • Investor relations website • Investor roadshows and conferences • One-on-one meetings • Press releases • Quarterly analyst and investor webcasts We rely on trusting and stable relationships with the entities that provide prod- ucts and services to ABB, including equipment and human resources. They serve a critical role in the supply chain and can have significant impacts on our operations and success. How we engage: • Co-development initiatives • Early engagement during new product development • Monitoring through our Sustainable Supply Base Management program • On-site evaluations and audits • Procurement management • Providing training and engaging in special projects on sustainability performance • Town hall and supplier day events During 2023, we interacted regularly with our stakeholders and held sustainability-specific meetings with our investors, customers and suppliers. In addition to the regular day-to-day discourses we hold with our stakeholders, we also engaged with them for specific strategic and reporting purposes. We are particularly interested in gaining insights into how they perceive value and what matters to them most in terms of economic, environmental and social issues. The knowledge and un- derstanding we acquire from these interactions inform our strategic decision-making and the way we manage risks and opportunities. They shape the actions we take and help us to communicate these actions in ways that maximize our transparency and ac- countability. By continuously engaging with our various stakeholders, we ensure that we are well positioned to identify and anticipate emerging trends, shifting customer needs and changing market expectations. — Investment community — Suppliers 60 ABB SUSTAINABILITY REPORT 2023 SOCIAL PROGRESS Our community engagement encompasses partnerships, projects, advocacy and philanthropic initiatives addressing topics such as climate change, education, employability, digitalization readiness, diversity, poverty alleviation and health. We also donate to charitable causes and maintain open, trustworthy and transparent communication and cooperation with all our stakeholders. Within our Sustainability Agenda, our ambition for community engagement is to provide impactful support for community-building initiatives around the world. ABB is committed to creating a more prosperous and sustainable future for the communities where we operate. To accomplish this, we engage with our stakehold- ers, periodically measure our impact and promote a range of development initiatives, including employee volunteer programs. Our activities are focused on ensuring eq- uitable access to education, leveraging technology and innovation, and enabling the energy transition. In 2023, we proposed a new community engagement framework that will help us expand our focus while implementing a more standardized, efficient and quantifiable approach on a global basis. At the start of this process, we formed a working group to assess ABB’s performance compared with our peers and other leading companies. The group drafted a proposal for the new community engagement framework, which was then revised in a cross-business area and cross-country workshop hosted by ABB in Italy. At the workshop, representatives from our 10 most active countries in the field of community engagement discussed the role ABB should play in society and pro- posed an ideal community engagement strategy and governance model for the Group. The framework will be revised in 2024. The output from this workshop laid the foundation for a harmonized approach that is more capable of identifying community needs and better positioned to implement effective development initiatives. The new model, which is aligned with the ABB Way operating model, will provide greater support for cross-border collaboration and syn- ergies, as well as for scaling up our best practices. Our community engagement initiatives will be expanded around four focus areas (4Es): education, emergency and disaster relief, empowering communities, and the environment and conservation. The initiatives are all founded on the needs of the communities involved and are managed in close cooperation with local partners to ensure a stronger impact. — Community engagement 61 Among our many educational initiatives, in 2023 we continued a longstanding partner- ship with Junior Achievement, a non-profit organization that runs entrepreneurship and job training programs in Italy. Students in the program get to develop innova- tive business ideas and work on real projects with the guidance and support of ABB “dream coaches.” Over a 20-year partnership, we have involved 1,000 volunteers and reached out to 224,400 students. Also in Italy, we held the 2023 ABB RoboCup, which gave 1,000 students from 44 schools hands-on experience in a robotics program- ming competition. At the university level, staff at ABB’s Ormond Beach site in the United States began to mentor their third cohort of students participating in the Federation for Advanced Manufacturing Education program (FAME). FAME students work part-time with our Ormond Beach maintenance team, receiving real-world work experience that comple- ments their coursework at Daytona State College. In India, we initiated a school men- toring program for the 2023-24 academic year, involving 94 teachers and 4,673 stu- dents. In Finland, we donated €1 million to four universities, supporting world-class research, product development and education. At the end of March 2023, we invited 12 prominent professors to Västerås, Sweden, for the first of four symposiums on the impact of energy-efficiency solutions in the context of climate change. Together with senior researchers from ABB Corporate Research, they spent two days discussing techniques to improve efficiency in indus- try, transportation and buildings, examining technology and design processes, and — Educational initiatives Education Ensure equitable access to STEM education and build the next genera- tion’s life-long compe- tence and soft skills, leveraging technology, sustainability, renewable electricity innovation. Environment & conservation Support communities in biodiversity conser- vation, protecting land, marine and freshwater ecosystems, mitigat- ing impacts and offer- ing new development opportunities. Emergency & disaster relief Support local commu- nities and employees impacted by natural di- sasters and educate our ABB community on disaster preparedness. Empowering communities Create a more prosper- ous and sustainable fu- ture for fragile communi- ties where we operate, mitigating impacts and offering new develop- ment opportunities. ABB’S FOCUS AREAS 62 ABB SUSTAINABILITY REPORT 2023 SOCIAL PROGRESS assessing potential business models. The findings of the symposiums will be com- piled and used to provide guidance to research funders and the EU research agenda. In the United Kingdom, ABB and Imperial College London signed a 10-year contract in October 2023 to extend their partnership operating a pilot plant for carbon capture. The plant first opened at Imperial College in 2012 and has built a proven track record of training the engineers, scientists and other net-zero workers of the future. The only facility of its kind in the world set in an academic institution, it has given more than 4,500 students hands-on experience with ABB technologies. Imperial is one of the world’s top universities, with a reputation for excellence in science and engineering. In the area of emergency and disaster relief, ABB enhanced its partnerships with the International Committee of the Red Cross (ICRC) and the International Federation of Red Cross and Red Crescent Societies (IFRC) in 2023 to support local communities in times of crisis. Over the past year, these partnerships allowed us to support commu- nities affected by earthquakes in Türkiye and Syria. Funds from ABB were also used to support the ICRC’s relief activities for people affected by the war in Ukraine. To empower communities in 2023, we actively supported many communities’ efforts to meet specific basic, local needs. As an example, ABB India partnered with HelpAge India to launch mobile healthcare units in the states of Karnataka, Gujarat, Nashik and Haryana, providing primary health services to the elderly and other vulnerable popula- tions. Each unit serves around 1,500 individuals monthly; an estimated 70,000 people will benefit each year from the services. Another initiative we are especially proud of is our 23-year partnership with the Special Olympics; in 2023 we supported the Special Olympics World Games, held in Germany. Around 150 ABB employees volunteered at the games, where more than 7,000 athletes with diverse abilities competed. The environment and conservation represented a new focus area for our commu- nity engagement initiatives in 2023. Among our activities, ABB Robotics supported conservation organization Junglekeepers in its mission to protect 55,000 acres of Amazon rainforest in Peru while reversing deforestation. In a first-of-its-kind pilot program, ABB’s YuMi cobot is being used to automate planting tasks at a jungle base, speeding up the reforestation process and freeing up Junglekeepers’ volunteers to focus on work such as patrolling the forest to deter illegal logging, educating locals on the value of conservation and planting saplings. In another initiative, colleagues from ABB Switzerland used their new “Volunteer Day” to support Pro Natura, an organiza- tion dedicated to cleaning up forests and helping native species flourish. To track the effectiveness of our community engagement actions, we monitor the number of countries where we ran engagement programs, the total funds we do- nated, the number of person-days volunteered by our employees, and the number of community projects and charities supported. Overall, in 2023, we delivered a strong performance. — Emergency and disaster relief efforts — Community empowerment — Environment and conservation initiatives 45 countries 4,800 person-days volunteered $11.5 million donated 500+ community projects and charities COMMUNITY ENGAGEMENT HIGHLIGHTS: OUR EMPLOYEES AND OUR BUSINESS AREAS SUPPORTED OUR COMMUNITIES 63 05 Integrity and transparency 65 We embed a culture of integrity and transparency 67 Integrity and transparency 70 Executives’ sustainability incentives 71 Data privacy and cyber security 73 Responsible sourcing No enterprise can hope to retain its license to operate in today’s world without mea- suring up to a high standard of integrity and transparency. Customers, employees, governments and civil society, the investment community, partners, suppliers and other stakeholders rightly expect a culture of integrity and transparency to be firmly embedded in our Group, and ABB places due weight on their expectations. This sec- tion addresses our approach to managing three core material topics related to integ- rity and transparency. They consist of corporate and sustainability governance, data privacy and cyber security, and responsible sourcing. Our work in these areas makes up an important component of our value creation model. In connection with these topics, we have established four concrete targets, of which two relate to integrity: The first is to create a global framework for assessing and mitigating third-party integrity risks through risk-based due diligence and life cycle monitoring by 2030. The second is to build a global integrity program underpinned by accountability for integrity and an adaptive risk management strategy gained from insights through targeted learnings, transparent reporting and monitoring by 2030. The other two targets are associated with transparency: The first of these is for at least 80 percent of our supply spending in focus countries to be covered by our Sustainable Supply Base Management (SSBM) approach by 2030. The 2025 mid-term target is to cover at least 80 percent of our high-risk supply spending in these focus countries by SSBM. This approach includes regular assessments of environmental, social and governance performance. The other target is for ABB to link sustainability targets to executives’ variable pay. — We embed a culture of integrity and transparency Targets Baseline (baseline year) 1 2023 status INTEGRITY & TRANSPARENCY Global framework for as- sessing and mitigating third-party integrity risks through risk-based due dili- gence and life cycle monitoring n.a. This target measures the implementation of a global framework for assessing third-party integrity risks. It is an ongoing and critical organization-wide, integrity-based enhancement, which strengthens how we onboard and manage the life cycle of our relationships with suppliers, sales channels and customers. Framework established and operational. Integrity due diligence and risk man- agement enhancements for suppliers (buy-side) and sales channels (sell-side) launched globally. Global Integrity Program underpinned by account- ability for integrity and an adaptive risk management strategy gained from in- sights through targeted learnings, transparent re- porting and monitoring n.a. This target measures the implementation and effectiveness of our Global Integrity Program through how we drive individual accountability for integ- rity and adapt our risk management strategy to real-time data insights gained from integrity-based learnings, reporting and monitoring. 1. Trust KPI – the rate of severity level 1 and 2 investigations where the re - porter disclosed their identity: • Year 1 (January 1, 2021, to December 31, 2021): 57% of reporters. • Year 1 and 2 (January 1, 2021, to December 31, 2022): 60% of reporters. • Year 1, 2 and 3 (January 1, 2021, to December 31, 2023): 60% of reporters. 2. Engagement KPI – the volume of unique visitors to the Integrity Awareness Portal (IAP) for integrity learnings: • Year 1 (January 1, 2021, to December 31, 2021): 25% of employees with on - line access. • Year 1 and 2 (January 1, 2021, to December 31, 2022): 69% of employees with online access. • Year 1, 2 and 3 (January 1, 2021, to December 31, 2023): 80% of employees with online access. 1 Where a baseline applies. 65 At ABB, we are raising the bar for corporate and sustainability governance by work- ing to maintain ethical business practices and systematic risk management that addresses environmental, social and legal risks. For us, ethical business behavior and good governance as well as transparency and integrity, are critical in our commitment to anti-corruption, fair competition and compliance with legal obligations within ABB and towards all stakeholders. Another vital component of our approach to corporate and sustainability governance is our regular review of the relevant processes as well as thorough due diligence. We take care to disclose our tax practices and corresponding payments and to design responsible and fair remuneration practices. We are always seeking new ways to enhance our sustainability governance structure so that sustain- ability is given appropriate consideration at all levels, from the Board of Directors to the operating departments. The following two chapters – “Integrity and transparency” and “Executives’ sustain- ability incentives” – address two different components of our approach to managing the critical topic of corporate and sustainability governance, which was identified by our stakeholders as a material topic. The third component of our approach to this material topic is addressed in the “Sustainability governance” chapter, which can be found in the first section of this report. Targets Baseline (baseline year) 1 2023 status At least 80% of supply spending in focus coun- tries 2 covered by Sustainable Supply Base Management (SSBM) by 2030 n.a. Using a risk-based approach, a mid-term 2025 target has been set, focusing on high-risk suppliers in focus countries. 2 At least 80% of spending on high-risk suppliers in focus countries 2 covered by SSBM by 2025 In 2023, we reached 42% of spending on high-risk suppliers in focus coun- tries 2 covered by SSBM. Linking sustainability tar- gets to executives’ variable pay Under the Annual Incentive Plan (AIP), a safety goal was included within the individual measure for some member of ABB’s Executive Committee (EC). The individual measure had a weighting of 20 percent of the executive’s target AIP (2019). Under the AIP, at least two sustainability-related performance goals are in- cluded within the individual measure for each member of ABB’s EC. The indi- vidual measure has a weighting of 20 percent of the executive’s target AIP. Under the Long-Term Incentive Plan (LTIP), two performance measures with equal weighting of 50 percent were considered, namely average earnings per share and relative total share- holder return. The LTIP was awarded to around 100 execu - tives, including EC members and division presidents. Vesting under the LTIP was subject to the achievement of the plan specific targets over a period of three years (2019). One of the three performance measures under ABB’s LTIP is based on achieve- ment of a corporate sustainability target and carries a weighting of 20 per - cent. The LTIP is awarded to around 100 executives, including EC members and division presidents. Vesting under the LTIP is subject to the achievement of the plan specific targets over a period of three years. 1 Where a baseline applies. 2 Current focus countries are Argentina, Brazil, Bulgaria, China, Colombia, India, Indonesia, Malaysia, Mexico, Peru, Poland, Saudi Arabia, South Africa, Thailand, Türkiye and Vietnam. 66 ABB SUSTAINABILITY REPORT 2023 INTEGRITY AND TRANSPARENCY Integrity and transparency are core to our operating model. Having evolved well beyond the limits of legal compliance, we aim to embed integrity and transparency in everything we do. Our culture of integrity and transparency is anchored in the ABB Code of Conduct and is strengthened by a range of other ABB policies and procedures. These include the ABB Supplier Code of Conduct and our five core Integrity & Regulatory Affairs (I&RA) procedures. These procedures cover I&RA oversight and responsibilities, third-party management, data privacy, conflicts of interest and global trade. The I&RA team, which is part of the Legal & Integrity function, is responsible for driv- ing integrity enhancements that apply to all ABB functions and business areas. The team oversees a comprehensive integrity program that can adapt to risk in real time and is fully fit-for-purpose. The result of more than 20 years of development, the pro- gram has in recent years been significantly transformed and expanded. While the I&RA program covers a variety of risk areas, below we specifically address two key opera- tional risks which were also highlighted in the 2022 Sustainability Report: workplace behavior, and bribery and corruption. In 2023, allegations reported internally were structured into the following categories (as well as more detailed subcategories within each of these) to ensure appropriate attention, resourcing and internal escalation: • Antitrust & Fair Competition • Bribery benefiting ABB • Commercial Integrity & Regulatory • Fraud: Non-Self-Dealing • Fraud: Self-Dealing • HSE & Security • Human Resources • Non-Integrity Issue • Other Integrity Issue The following table provides an overview of the number of allegations related to integrity concerns and employment actions – in addition to myriad, non-disciplinary remedial actions – resulting from integrity violations pursuant to ABB’s root-cause analysis and accountability processes: Integrity concerns In 2023 Allegations reported 1894 Allegations closed 1187 Allegations substantiated 341 Verbal warnings 35 Written warnings 107 Employment separations 100 Demotions, suspensions or other financial penalties 11 We have seen an increase in total allegations reported to our business ethics helpline since 2022. We attribute this to an increased confidence in our reporting and allega- tion management processes coupled with more in-person interactions in the wake of — Integrity and transparency — Cases reported in 2023 67 the pandemic. We have taken steps in 2023 to address these issues with appropriate policies, processes and training. For example, we have updated our country policies for anti-bullying, anti-discrimination and grievances in all our key jurisdictions to reflect current legal standards and our commitment to a fair and respectful workplace that encourages a “speak-up” culture. In recognition of the return of in-person interactions since the end of the pandemic, we have also introduced new guidance for social events, designed to help our people adhere to behavioral norms in both the workplace and informal settings. We have strengthened our investigation and remediation processes to ensure con- sistent and effective case management as well as consequence management. These processes enforce a zero-tolerance approach to discrimination and harassment. Additional resources have been provided to the Human Resources (HR) teams tasked with investigating and responding to complaints about poor workplace behaviors. These resources include our new HR Investigations Framework, HR Investigations Playbook and a new Disciplinary Committee Framework. At ABB, we have zero tolerance for unethical business practices. Any abuse of power or trust for private gain is a breach of our ethical standards and Code of Conduct, and has no place at ABB. We know that having an adaptive anti-bribery and corruption (ABAC) program, which anticipates and meets risks head-on, is critical for ABB’s orga- nizational success. During 2023, we built on the extensive and ongoing enhancements to our ABAC program and developed ABB’s new ABAC framework. It is a conceptual overview of existing key ABAC policies, procedures and controls that have been de- signed and implemented across our operations to prevent, detect and respond to key ABAC risks that we face as a global organization. To inform how we continuously develop our ABAC program, we leveraged estab- lished processes – and developed some new ones – to perform targeted monitor- ing and testing activities throughout the year. This included testing risk scenarios in key jurisdictions, assessing the extent of implementation of enhanced policies, procedures and controls, and developing and monitoring data-driven dashboards fed by primary enterprise tools used for day-to-day business. Through this, we have identified key ABAC risks in our operations, which we are addressing through various organization-wide initiatives, including targeted face-to-face and online training of our most at-risk employees. Our global framework for managing third-party integrity risk, which was launched in 2022, is a key pillar of our ABAC program. In 2023, the framework saw the organization-wide roll-out of enhanced mandatory integrity requirements and processes designed to identify, manage and mitigate third-party integrity risks. In 2024, the focus is to continue extending this global framework to our existing third-party population. Among the actions we took in 2023 to mitigate specific negative impacts involving ABB’s ABAC risks, we activated our Deferred Prosecution Agreement (DPA) workplan to conduct and report on the initial review of our integrity program and remediation efforts. The workplan was developed to meet the requirements of a DPA that ABB entered into as part of a settlement with the United States Department of Justice and the Securities and Exchange Commission, announced on December 2, 2022. In 2024, we are activating and working under our first follow-up workplan for year two of the three-year DPA. The workplan is characterized by appropriate governance, a clear PMO structure, project and change management tools, and resourcing. It places ownership and accountability for its activities with ABB’s business areas and divisions, in keep- ing with the ABB Way operating model. — Anti-bribery & Corruption Program 68 ABB SUSTAINABILITY REPORT 2023 INTEGRITY AND TRANSPARENCY We refreshed and relaunched our Code of Conduct, promoting it through a global communications campaign led by our Executive Committee and supported by manager-led discussions which drive understanding of our global policies on anti-bribery and corruption and respect in the workplace. Almost 85 percent of our teams have participated in these discussions. The new code was rolled out globally under the tagline: “We speak the same code,” which was aimed at creating heightened company-wide interest in and awareness about the Code and its enhancements. We created a series of mandatory training modules in 2023 that bring to life our expectations under the Code of Conduct. They cover the workplace behavior topics “bullying and harassment,” “equality and discrimination” and “speaking up.” Our integrity training programs and the ABB Code of Conduct have been translated into 17 languages and provided in different formats to make them accessible to office and production staff alike. The programs have been completed by 83 percent of our people, almost 82,300 to date, and all new hires must complete our training programs as part of the onboarding process. According to our people, these training programs help them live ABB’s values of courage, care, curiosity and collaboration. Of those who have been trained, 85 percent find the programs “effective” or “very effective.” After completing the programs, our teams make a pledge to commit to our values. The top three pledges chosen in 2023 were “speaking up if they see something that goes against our Code of Conduct,” “re- porting concerns” and “becoming more familiar with the Code of Conduct.” ABB’s integrity training program takes a hybrid approach to instruction, combining self-guided learning with bespoke, role-specific mandatory training, thereby encour- aging individual ownership and accountability. It centers on the upskilling of employ- ees in gatekeeper functions and customer-facing roles across ABB. The ABAC training program aims to enhance core ABAC competencies while highlighting the critical role these individuals play in upholding our integrity culture and compliance obligations. In 2023, integrity-related incentives were introduced for Executive Committee mem- bers and division presidents. In addition, to improve our management of third-party risks, we expanded the application of our Third Party Management program and pro- cesses to the full third-party population in 2023. This built on our enhancement of the program in 2022, which focused initially on suppliers and sales channels. The program has strengthened our risk-based approach to choosing third parties and enabled more effective oversight and monitoring of their activities and overall performance. Straight Talk, an internal platform for sharing real-life integrity successes and failures at ABB, serves as a strong complement to our training program and has continued to be well received throughout ABB. This transparent communications tool consolidates lessons learned and supports our speak-up culture with regular messaging about our reporting channels. It also provides key leaders with comprehensive data on our inves- tigation portfolio, helping them set the tone from the top in their team meetings. To track the effectiveness of our integrity-related initiatives, we utilize data analytics and conduct transaction monitoring. Our continuous monitoring platform is designed to detect ABAC and fraud risks by applying risk algorithms to data drawn from multi- ple company systems. Our Integrity Analytics Report, a live dashboard available throughout ABB via our integrity web portal, provides insights into three key metrics: trust, engagement and transparency. To offer insight into ongoing and closed cases, a number of real-time and quarterly investigation dashboards are made available to the appropri- ate stakeholders. — Integrity Learning 2023 — Integrity analytics 69 ABB promotes alignment between its executives and its Sustainability Agenda by incorporating sustainability measures into its Annual Incentive Plan (AIP) and its Long-Term Incentive Plan (LTIP). Under the AIP, at least two sustainability-related performance goals are included within the individual measure for each member of ABB’s Executive Committee (EC). The individual measure has a weighting of 20 percent of the executive’s target AIP. One of the three performance measures under the LTIP is based on the achievement of a corporate sustainability target and carries a weighting of 20 percent. The LTIP is awarded to around 100 executives, including EC members and division presidents. Vesting under the LTIP is subject to the achievement of the plan’s specific targets over a period of three years. For further information, please refer to ABB’s Compensation Report 2023. — Executives’ sustainability incentives 70 ABB SUSTAINABILITY REPORT 2023 INTEGRITY AND TRANSPARENCY The topic of data privacy and cyber security was identified as material by ABB’s 2023 double materiality assessment. This topic encompasses ABB’s preventive measures in data security and privacy, cyber security, and compliance with applicable data pri- vacy laws, such as GDPR. We ensure the protection of customer, employee and other individual privacy and personal data, and implement robust measures to protect their rights and safeguard against cyber threats. Our commitment to data security and privacy underscores our determination to maintain compliance and earn the trust of customers and stakeholders. More details can be found at ABB’s external data privacy portal: https://new.abb. com/privacy . Respecting the right to data protection is a priority for us, and we have adopted global data protection standards to ensure a high, standardized level of protection for personal data. We monitor and review compliance with ABB’s data protection policies and applicable data protection laws by means of data protection audits, assessments and other controls. We have produced several Group-level guide- lines and supporting materials for the internal use of our businesses to help them meet data privacy compliance requirements. These include the ABB Binding Corporate Rules. All ABB Group companies are committed to meeting the data privacy principles contained within the rules whenever these companies are the data controller for the personal data involved. For a summary of the ABB Binding Corporate Rules, which cover all relevant policies and commitments, please visit the data privacy portal. To manage the topic of data privacy and cyber security, ABB has put comprehen- sive and robust programs in place. ABB maintains a global privacy team staffed by full-time data privacy professionals. The team is headed by the Group’s Data Protection Officer, who is based in the European Union. The global privacy team supports our robust network of business and country representatives and provides various resources, including software, web portals and other support tools. All ABB employees are made aware of the basics of data privacy, and specialized training is provided for selected job functions. Training sessions cover data privacy awareness, controller versus processor responsibilities, ABB compliance tools, data transfers, privacy notices, privacy by design and contractual requirements. Employees are expected to comply with our internal policies and procedures regarding privacy and information security. External suppliers must meet comparable requirements. Privacy by design is incorporated as an important feature of our products, projects and initiatives. Our Group has created and implemented an in-house privacy man- agement system, which, among other tasks, handles data-related requests from individuals, maintains records of processing activities, and conducts privacy risk assessments. ABB maintains privacy and security controls across its operations, subjecting them to monitoring as well as periodic evaluations and assessments. Physical, technical and administrative controls have been implemented across our Group. Furthermore, we engage with our stakeholders and other members of society at large with the goal of understanding their perspectives and mitigating any poten- tial problem areas. We review our systems and procedures to ensure they meet data privacy compliance requirements. These reviews form a part of our overall compli- ance activities. — Data privacy and cyber security 71 To address specific negative impacts and risks, we have instituted comprehensive incident response and complaint handling mechanisms. And in order to manage and build on the positive effects of this work, we engage with our internal and external stakeholders to identify opportunities for growth and to achieve greater excellence in privacy and cyber security in our own supply chain, as well as in those of our cus- tomers. In general, we endeavor to promote a secure and privacy-friendly approach among our employees, suppliers and customers. In order to monitor the effectiveness of our actions to manage data privacy and cyber security, we apply metrics to our projects and processes; we define, document and track key indicators; and we take follow-up action where appropriate. The goals, targets and indicators we use to evaluate progress are specific to each program or process. We continuously integrate feedback and seek to improve our practices in the fields of cyber security, data privacy, incident management, data subject requests and transparency, among others. IT SECURITY INCIDENT IN MAY In May 2023, ABB became aware of an IT security incident impacting certain company IT systems. As a result of the incident, ABB started an investigation, notified certain law enforcement and data protection authorities, and worked with leading experts to determine the nature and scope of the incident. ABB also took steps to contain the incident and further enhance the security of its systems. Based on its investigation, ABB determined that an unauthorized third-party accessed certain ABB systems and exfiltrated certain data. Following a review of the data, where necessary ABB has provided notifications to individuals and orga- nizations. To date, ABB has no evidence to suggest that any information has been misused as a result of this incident. ABB will continue to monitor this. 72 ABB SUSTAINABILITY REPORT 2023 INTEGRITY AND TRANSPARENCY ABB’s 2023 double materiality assessment identified responsible sourcing as one of ABB’s 10 material topics. This topic addresses the sustainable and responsible sourcing of materials, products and services. It covers the social and environmental performance of suppliers, as well as their adherence to ABB’s requirements involving material compliance and conflict minerals. To ensure sustainable sourcing, ABB has implemented a Supplier Code of Conduct (SCoC), which complements the compre- hensive and binding ABB Code of Conduct. The SCoC sets forth our requirements for suppliers in clear terms. In November 2023, we published an updated edition of the SCoC. The update is in line with the latest relevant international frameworks, standards and legislation gov- erning ethical and sustainable business practices. It was drafted following rigorous consultation with both internal and external subject-matter experts and was informed by our previous experiences with supplier audits, as well as by our many discussions with suppliers. We have also issued an updated implementation guide, with hands-on advice on how our suppliers can meet the requirements of the SCoC. To prevent human rights violations in our supply chain, we substantially revised the SCoC’s section on “Human rights and decent work.” Among other revisions, we added more specific requirements regarding modern slavery, discrimination and diversity, as well as the rights of local communities and vulnerable groups. To reflect our inten- sifying efforts to mitigate climate change, we also created a separate section entitled “Climate and environment” and expanded the list of potential environmental impacts to include topics of growing interest to our stakeholders, such as GHG emissions, circularity, biodiversity and deforestation. To ensure that ABB’s requirements are met along our full value chain, we updated the SCoC to explicitly require suppliers to disseminate and enforce these requirements across their own supply chains and to report any suspected violations. In 2023, we provided ABB personnel with training sessions on the updated SCoC and implementation guide. Training for our suppliers on these updates will start in Q1 2024. In-depth training on modern slavery, child labor and other SCoC-related topics will be provided to both ABB personnel and suppliers in 2024. Our Sustainable Supply Base Management (SSBM) program, which addresses sustain- ability topics and performance at each stage of the supplier life cycle, forms part of our “Beyond Audit” initiative. The SSBM program integrates sustainability principles comprehensively into ABB’s supplier selection and qualification processes. Through the SSBM program, we address issues in six main categories: general management, labor rights, social benefits, health, safety and the environment. The approach is backed by risk-based monitoring that covers a broad range of suppliers and incorpo- rates Group-wide standards and targets. The management and implementation of the SSBM program is handled by ABB’s four business areas. The program is governed by a steering committee comprised of representatives from our business areas and the corporate sustainability team and a working group comprised of representatives from all our divisions. Under the SSBM program, new suppliers must complete a self-assessment that incor- porates questions on how they manage issues such as labor and human rights, the environment, health and safety, and integrity, as well as how they manage their own supply chains. Depending on the results, further due diligence is carried out. In 2023, we simplified the overall supplier onboarding process, resulting in reduced lead times. — Responsible sourcing 73 As part of this work, we reformulated several self-assessment questions on sustain- ability to offer greater clarity and prompt more meaningful responses. Also in 2023, we updated our risk management review process and implemented a new tool that assesses country risk for a range of issues such as child labor, forced labor, freedom of association, adverse effects due to environmental changes, land rights and abuse of force by private or public security forces, among others. We also reviewed our portfolio of sourced materials and parts and have updated our commod- ity risk matrix. To prevent or further mitigate potential negative impacts and risks related to our supply chain, in 2023 we continued to enhance the SSBM program and updated our audit procedures to include temporary labor providers. Upon carrying out audits in one pilot country in 2023, we found evidence that local labor laws were not being observed. Resolution of these cases is still pending as we work with the suppliers to remediate the problems. In 2024, we plan to expand these assessments of temporary labor providers to other countries that form part of our list of focus countries. 1 In 2023, our engagement with stakeholders at internal awareness training sessions on human rights and labor rights brought to light additional concerns related to tem- porary laborers at certain ABB sites. We are still working to resolve these cases. For further details, please refer to the “Human rights” chapter in this report. Among the positive impacts and opportunities connected with sourcing at ABB in 2023, we saw a strong response to the updated sustainability self-assessment ques- tionnaire that forms part of the SSBM program. Many of our internal training sessions focused on the role of the questionnaire and its importance to new suppliers in our simplified onboarding process. At the local level, we organized several supplier day events that spotlighted the importance of responsible sourcing and provided suppli- ers with an opportunity to share good practices with each other. 88 % of identified risks were closed 118 suppliers assessed on-site 2023 HIGHLIGHTS IN RESPONSIBLE SOURCING of high-risk supply spending in focus countries 1 was covered by SSBM suppliers with which business was terminated due to unsatisfactory progress on their respective corrective action plans 42 % 7 959 supplier teams trained in responsible sourcing during the year ABB employees and 95 1 Current focus countries are Argentina, Brazil, Bulgaria, China, Colombia, India, Indonesia, Malaysia, Mexico, Peru, Poland, Saudi Arabia, South Africa, Thailand, Türkiye and Vietnam. 74 ABB SUSTAINABILITY REPORT 2023 INTEGRITY AND TRANSPARENCY To track the effectiveness of the SSBM program, we report on the reduction of risk using a KPI for “percentage of identified risks closed.” We evaluate our progress using a range of internal and external metrics. Under ABB’s Sustainability Agenda, we are aiming to cover at least 80 percent of our high-risk supply spending in focus countries with the SSBM program by 2025. This includes monitoring of environmental, social and governance performance. By 2030, we are aiming to cover 80 percent of all ABB supply spending in focus countries with the SSBM program. Our main internal target is to close 75 percent yearly of all identified risks. At the end of 2023, 42 percent of high-risk supply spending in focus countries was covered by the SSBM, and 88 percent of identified risks were closed. Other KPIs that we use to evaluate the program include the number of supplier assess- ments carried out, the number of ABB employees and supplier teams trained, and the number of suppliers who have been de-sourced and removed from the approved list. Responsibly sourcing conflict minerals and other minerals of interest is part of our responsible sourcing commitment. This is also reflected in the ABB Policy on Conflict Minerals. We have established a “Conflict Minerals Program” based on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict Affected and High-Risk Areas, and other international standards. Within this program, ABB continues its work to understand and limit its exposure to conflict minerals (tantalum, tin, tungsten and gold, or “3TG”), as defined by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and EU Directive 2017/821. We request information from our suppliers on the source of these minerals and work with them to avoid sourcing from smelters or refiners (SORs) in the covered countries (the Democratic Republic of the Congo and neighboring countries) and conflict-affected and high-risk areas (CAHRAs), other than those that have imple- mented OECD-aligned programs. We continue to participate in smelter and refinery outreach efforts through the Responsible Minerals Initiative (RMI) and its member companies. The RMI, of which ABB is a member, is an organization working to address responsible mineral sourcing issues in the supply chain. In 2023, ABB led the RMI outreach to tin smelt- ers in Indonesia to have them undergo the RMI’s Responsible Minerals Assurance Process (RMAP). In addition to carefully tracking our sources for tantalum, tin, tungsten and gold, in 2023, we expanded our survey to cover the use of other minerals in ABB products. Using the Extended Minerals Reporting Template developed by the RMI, we identified pinch points and conducted due diligence on our cobalt supply chains. As we continue to expand our due diligence on other minerals, we will begin to survey our suppliers’ use of mica in 2024. In response to the new requirements established by the provisions of the amended Swiss Code of Obligations (Art. 964j–l CO) and the Swiss Ordinance on Due Diligence and Transparency in relation to Minerals and Metals from Conflict Affected Areas and Child Labour (DDTrO), we have assessed our respective risk exposure and reached the following conclusions: The quantities of minerals and metals in scope of the afore- mentioned regulations which ABB imported into or processed in Switzerland in 2023 are substantially below applicable thresholds. Hence, ABB is exempted from specific due diligence and reporting obligations under the provisions of the amended Swiss Code of Obligations and the DDTrO respectively in regard to conflict minerals. — Conflict minerals and other minerals of interest 75 06 Appendix 77 Approach to reporting 80 Swiss Code of Obligations: transparency on non-financial matters 81 Assurance statement 84 Material topic descriptions 92 Non-material topic descriptions 94 GRI disclosures table 99 GRI content index 120 EU Taxonomy report 143 TCFD recommendations report 149 SASB disclosure table 150 Definitions This report was compiled as of February 22, 2024. We prepared the report in accordance with the provisions of the amended Swiss Code of Obligations (Art. 964a ss.) and the GRI Standards (2021). The GRI content index is available in the Appendix to this report and covers all topics deemed as material as per the ma- teriality assessment conducted in 2023. In addition to the GRI Standards, the framework for our Sustainability Report and Integrated Report is based on the EU Non-Financial Reporting Directive (NFRD), the Sustainability Accounting Standards Board (SASB), the European Union’s common classification system for sustainable economic activities, known as the EU Taxonomy, the Task Force for Climate-related Financial Disclosures (TCFD) recommendations, and the 10 principles of the UN Global Compact. We aim to maintain alignment with best practices in our sustainability reporting and we closely follow all pertinent developments in international sustainability reporting. This includes applicable regulations such as the provisions of the amended Swiss Code of Obligations (Art. 964a ss.), the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) in the European Union, as well as developments in voluntary reporting standards such as the IFRS Sustainability Standards. Our Sustainability Report covers ABB’s material economic, environmental, and social impacts and how we manage them. Omission from the material issues addressed in our report does not mean that an issue is not managed. In addition to our annual sus- tainability reporting, ABB reports quarterly on a selection of our strategic sustainabil- ity KPIs. This report was prepared for the reporting period January 1 to December 31, 2023. Our formal sustainability reporting system covers all ABB Group companies worldwide, including wholly owned subsidiaries, majority-owned joint ventures and direct and indirect participations (for a list of significant subsidiaries please see the Appendix to the ABB Corporate Governance Report 2023). Newly acquired businesses are typically reflected in annual sustainability reporting in the subsequent year. Businesses that are divested in the first half of the year are typically excluded from annual sustainabil- ity reporting. For a list of acquisitions and divestments in 2023, please refer to the ABB Integrated Report 2023, page 45. We rely on a global, online data reporting system to measure and gather data from across ABB. The system is used to file reports on hazards, incidents, sustainability observation tours and environmental performance at every production and service site, as well as most of our office locations. It is also used to collect annual social data from every country. This centralized reporting system simplifies data collection and facilitates greater transparency. The data in this report relating to health, safety and our social performance covers 100 percent of ABB employees. Data relating to our environmental performance (including energy, emissions, water and waste) was sourced from 338 ABB sites and offices, covering approximately 94 percent of employees. Data on the environmental performance of the remaining employees, who are located at non-manufacturing sites with limited impacts, is generated by estimating energy, water and waste pa- rameters pro rata. — Reporting boundaries — Data collection processes — Approach to reporting 77 → NEXT CHAPTER All GHG emission factors for fuels used at our sites are sourced from the GHG Protocol’s “Emission Factors from Cross-Sector Tools” (March 2017). They include the emissions of CO₂, CH₄ and N₂O. Biogenic emissions from biofuels include only CH₄ and N₂O emission factors. Global warming potential (GWP) factors for CH₄, N₂O and SF 6 follow the IPCC’s AR5 report. Emissions from ABB’s vehicle fleet are based on lease contract distances and tank-to-wheel gCO₂/pkm (grams of CO₂ per passenger kilometer). We applied lab-to-road uplift factors from the International Council on Clean Transportation Europe to better reflect our vehicles’ real emissions on the road vs. the laboratory. ABB uses the market-based method to calculate and report scope 2 GHG emissions. For purchased electricity and district heating, we have obtained local emission factors from utilities. Scope 2 GHG emissions for electricity have also been calculated using the location-based method; for these calculations we sourced our data from the International Energy Agency (2023). In our 2030 Sustainability Agenda, launched in 2020, we measure our progress on scope 1 and 2 against a 2019 baseline, which is adjusted to portfolio changes. The adjusted 2019 baseline is 636 kilotons. The results are provided for comparison below: Scope 2 GHG emissions from electricity Kilotons CO₂e Market-based: 12.9 Location-based: 285 Scope 3 GHG emissions are calculated using average emission factors together with inhouse data on, e.g., product performance, sales volumes, average lifetimes, and other data required to calculate emissions in the 13 out of 15 scope 3 categories that are relevant for ABB. For example, the category “Purchased goods and services” includes all upstream (cradle-to-gate) emissions for the extraction, production and transportation of goods and services purchased or acquired by ABB in the reporting year, not included in other categories. Our calculation uses secondary data, apply- ing spend data (covering 100% of ABB’s procurement) and global industry average emission factors per material consumed from life cycle inventory databases. In the category “business travel,” emissions from air travel are calculated using emission fac- tors, with radiative forcing (RF). For the category “use of sold products,” we calculated the emissions due to losses in equipment such as drives, switches, switchgear and breakers during conduction, conversion, and transformation of electricity through our products. For products with a direct energy use, like motors and industrial robots, we calculated the emissions due to the electricity-use during the product’s service life. For motors we have also calculated and presented numbers associated with energy loss rather than energy input, this we call the “representative” emissions. The GHG Protocol does not provide clear guidance on how to account for electrical motors as part of integrated systems. As a result, two different interpretations can be adopted: one that reflects energy loss and another that reflects energy input. To ensure trans- parency, ABB reports both numbers using the terms “representative” and “strict.” We are working with WBCSD and WRI to formalize a standardized approach to accounting for these emissions. Whenever estimates are used, the estimation method is explained in the footnotes. The Sustainability Report fulfills the provisions of the amended Swiss Code of Obligations (Art. 964a ss.). Material topics covered in the GRI disclosures were amended as per the materiality assessment conducted in 2023. Where possible, comparable information for the previous year is provided. This report contains information for 2023 and comparable information for the previous year. Certain amounts previously reported for 2022 have been adjusted to conform to the way data is presented in the 2023 report and, in some cases, have been corrected for misstatement. — Calculation of energy and GHG data — Estimates — Changes in 2023 78 ABB SUSTAINABILITY REPORT 2023 APPENdIX KPMG AG has been engaged by ABB to provide independent assurance for selected GRI KPIs disclosed in the Sustainability Report, for reported progress against the 2023 sustainability targets and for compliance with the provisions of the amended Swiss Code of Obligations related to transparency on non-financial matters (Art. 964b CO). KPMG AG’s full Assurance Statement, including opinion and basis of opinion, is avail- able in the “Assurance statement” section on this report. ISO management system standards enable organizations to improve performance by specifying repeatable steps that the organizations can implement to achieve their goals and objectives. ISO 14001 sets forth the criteria for an effective environmental management system and maps out a framework for the implementation of such a system. ISO 50001 sets energy management standards, providing organizations with a clear way to improve energy use through the development of an energy management system. ISO 45001 is the international standard for occupational health and safety management systems. It is aimed at mitigating any factors that could harm the mental or physical wellbeing of workers: • 79 percent of our manufacturing and service sites are covered by a certified environ- mental management system (ISO 14001 or equivalent) • 81 percent of our employees at manufacturing or service sites are covered by a certi- fied occupational health and safety management system (ISO 45001 or equivalent) • 36 percent of our energy use at manufacturing or service sites is covered by a certi- fied energy management system (ISO 50001 or equivalent). All of ABB’s policies, procedures and declarations related to the topic of sustainability can be found on our Group website. — Independent assurance — Certified ABB management system information — Additional disclosures 79 → NEXT CHAPTER This Sustainability Report also covers the reporting requirements as defined by the provisions of the amended Swiss Code of Obligations related to transparency on non-financial matters. For easy reference, please find below a table with links to the relevant sections: Swiss CO – Art. 964b paragraph 2 Reference Page 1. Description of the business model The ABB Way 6 2. Description of policies adopted in relation to: • CO₂e goals Low-carbon society 21 • Social issues Social Progress 43 • Employee-related issues Health and safety 44 Employee engagement score 50 People development 52 Employee wellbeing 54 • Respect for human rights Human rights and labor standards 46 • Combatting corruption Anti-bribery & Corruption Program 68 3. Presentation of the measures taken to implement these policies and an assessment of the effective- ness of these measures See above sections 4. Description of the main risks related to the mat - ters referred to above and how ABB is dealing with these risks, in particular: a. Risks that arise from ABB’s own business oper- ations, and Material topic descriptions 84 b. Risks that arise from ABB’s business relation- ships, products or services (to the extent rele- vant and proportionate) Material topic descriptions 84 5. The main performance indicators for ABB’s activi - ties in relation the matters referred to above Material topic descriptions 84 Swiss CO – Art. 964j Reference Page Conflict Minerals Responsible sourcing 73 Child labor Responsible sourcing 73 Human rights and labor standards 46 — Swiss Code of Obligations: transparency on non- financial matters 80 ABB SUSTAINABILITY REPORT 2023 APPENdIX Independent limited assurance report on selected sustainability information in ABB Ltd’s Sustainability Report 2023 To the Board of Directors of ABB Ltd, Zurich We have undertaken a limited assurance engagement on ABB Ltd’s (hereinafter «ABB») following selected Sustainability Information in the Sustainability Report for the year ended December 31, 2023 (hereinafter “Sustainability Information”). - Global Reporting Initiative (GRI) related KPIs (which are marked as ‘Limited assurance 2023’) - 301-1 Materials used by weight and volume - 302-1 Energy consumption within the organization - 302-3 Energy intensity - 305-1 Scope 1 GHG emissions - 305-2 Scope 2 GHG emissions - 305-3 Scope 3 GHG emissions - 305-4 GHG emissions intensity - 403-9 Occupational health and safety - Avoided Emissions - The 2023 status on avoided emissions ambition reported in the ABB sustainability targets table on pages 9 and 10 of the Sustainability Report. - ABB sustainability targets - The 2023 status for the ABB sustainability 2030 targets within the tables presented on pages 9 and 10 of the Sustainability Report. - Non-financial disclosures - Non-financial disclosures, prepared in accordance with article 964b of the Swiss Code of Obligation, as included in the index table on page 80 of the Sustainability Report. Our assurance engagement does not extend to information in respect of earlier periods or to any other information included in the Sustainability Report or within the ABB Annual Reporting Suite (consisting of the Integrated Report, the Financial Report, the Corporate Governance Report, and the Compensation Report) or any other information linked to from the Sustainability Information or from the Sustainability Report, including any images, audio files or embedded videos. Understanding how ABB has Prepared the Sustainability Information ABB prepared the Sustainability Information using the following criteria (hereinafter referred to as the "Sustainability Reporting Criteria”) : - For Global Reporting Initiative (GRI) related KPIs - GRI Standards; - For avoided emissions - internally developed criteria and methodology based on Guidance on Avoided Emissions, issued by the World Business Council for Sustainable Development (WBCSD), as included on pages 23 to 25 of the Sustainability Report; - For ABB sustainability targets – GRI Standards for Environmental and Zero harm target, and ABB self- developed criteria for the remaining of the ABB sustainability targets; - For the non-financial disclosures referenced in the index table on page 80 of the Sustainability Report – - article 964b of the Swiss Code of Obligation. Consequently, the Sustainability Information needs to be read and understood together with the Sustainability Reporting Criteria, including the self-developed criteria. We believe that these criteria are a suitable basis for our limited assurance engagement. 81 → NEXT CHAPTER Our Limited Assurance Conclusion Based on the procedures we have performed as described under the ‘Summary of the work we performed as the basis for our assurance conclusion’ and the evidence we have obtained, nothing has come to our attention that causes us to believe that the Sustainability Information is not prepared, in all material respects, in accordance with the Sustainability Reporting Criteria. We do not express an assurance conclusion on information in respect of earlier periods or to any other information included in the Sustainability Report, Annual Reporting Suite or any other Report, including any images, audio files or embedded videos. Our conclusion does not extend to the requirements of Swiss Code of Obligation article 964 (d-l). Inherent Limitations in Preparing the Sustainability Information Due to the inherent limitations of any internal control structure, it is possible that errors or irregularities may occur in disclosures of the Sustainability Information and not be detected. Our engagement is not designed to detect all internal control weaknesses in the preparation of the Sustainability Information because the engagement was not performed on a continuous basis throughout the period and the audit procedures performed were on a test basis. The calculation of avoided emissions described on pages 23 to 25 of the Sustainability report includes several inherently judgmental assumptions derived from internal ABB sources and analyses and external data for comparison purposes is limited or not available. In time, as the external guidance in the sector evolves and data precision improves, the determination of avoided emissions will be subject to less judgement and less estimation uncertainty. ABB’s Responsibilities The Board of Directors of ABB is responsible for: - Selecting or establishing suitable criteria for preparing the Sustainability Information, taking into account applicable law and regulations related to reporting the Sustainability Information; - The preparation of the Sustainability Information in accordance with the Sustainability Reporting Criteria; - Designing, implementing and maintaining internal control over information relevant to the preparation of the Sustainability Information that is free from material misstatement, whether due to fraud or error. Our Responsibilities We are responsible for: - Planning and performing the engagement to obtain limited assurance about whether the Sustainability Information is free from material misstatement, whether due to fraud or error; - Forming an independent conclusion, based on the procedures we have performed and the evidence we have obtained; and - Reporting our independent conclusion to the Board of Directors of ABB. As we are engaged to form an independent conclusion on the Sustainability Information as prepared by the Board of Directors, we are not permitted to be involved in the preparation of the Sustainability Information as doing so may compromise our independence. Professional Standards Applied We performed a limited assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised) Assurance Engagements other than Audits or Reviews of Historical Financial Information , issued by the International Auditing and Assurance Standards Board (IAASB) and in respect of greenhouse gas emissions, with the International Standard on Assurance Engagements (ISAE 3410) Assurance Engagements on Greenhouse Gas Statements , issued by the International Auditing and Assurance Standards Board. 82 ABB SUSTAINABILITY REPORT 2023 APPENdIX © 2024 KPMG AG, a Swiss corporation, is a subsidiary of KPMG Holding AG, which is a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Our Independence and Quality Control We have complied with the independence and other ethical requirements of the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. Our firm applies International Standard on Quality Management 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Our work was carried out by an independent and multidisciplinary team including assurance practitioners and sustainability experts. We remain solely responsible for our assurance conclusion. Summary of the Work we Performed as the Basis for our Assurance Conclusion We are required to plan and perform our work to address the areas where we have identified that a material misstatement of the Sustainability Information is likely to arise. The procedures we performed were based on our professional judgment. Carrying out our limited assurance engagement on the Sustainability Information included, among others: - Assessment of the design and implementation of systems, processes and internal controls for determining, processing and monitoring sustainability performance data, including the consolidation of data; - Inquiries of employees responsible for the determination and consolidation as well as the implementation of internal control procedures regarding the selected disclosures; - Inspection of selected internal and external documents to determine whether quantitative and qualitative information is supported by sufficient evidence and presented in an accurate and balanced manner; - Assessment of the data collection, validation and reporting processes as well as the reliability of the reported data on a test basis and through testing of selected calculations; - Analytical assessment of the data and trends of the quantitative disclosures included in the scope of the limited assurance engagement; - With respect to the avoided emissions calculated by ABB, we reviewed the internally developed methodology based on the World Business Council for Sustainable Development (WBCSD) guidance, inquired management about the assumptions applied and the sources behind them and reviewed whether the calculation was performed in line with the methodology; - Checking that the Sustainability Report contains the information required by article 964b(1) and (2) to understand the business performance, the business results, the state of the undertaking and the effects of its activity on environmental matters, social matters, employee-related matters, respect for human rights and combating bribery and corruption ; - Assessment of the consistency of the disclosures applicable to ABB with the other disclosures and key figures and of the overall presentation of the disclosures through critical reading of the Sustainability Report. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. KPMG AG Achim Wolper Mohamad Midani Licensed audit expert Zurich, February 22, 2024 83 → NEXT CHAPTER 2023 ABB double materiality assessment – material topic, impact and risk descriptions: TOPIC DESCRIPTION This topic refers to ABB’s financial performance and the effective management of business risks. Its focus is on our ability to adapt and succeed in challenging condi- tions while ensuring sustainable operations and delivering desired results. It refers not only to achieving results in terms of growth, profitability and capital efficiency that ensure financial stability, but also to the way we manage and protect our people, especially in crises such as pandemics. The topic extends to ensuring that our custom- ers receive the products and services they need in the way that they want them. IMPACT MATERIALITY Through our activities and management of business risks, we ensure that ABB is stable and able to create financial value and stability for customers, shareholders, employees and other stakeholders. Furthermore, we ensure the delivery of product of- ferings that positively impact the environment and enable the energy transition, such as our energy-efficient products and solutions. Additionally, we can have positive impacts on the economy by providing employment opportunities and sourcing mate- rials locally, thereby supporting local businesses sustainably and over the long term. It should be noted that projects in high-risk areas could have negative impacts not only on local communities but also on the environment. FINANCIAL MATERIALITY Having a resilient and financially stable business positively impacts the long-term success of ABB and protects our company’s financial and legal security as well as its reputation. It also enables us to overcome challenges, reinvest in operations and take advantage of new opportunities. This in turn has positive impacts on ABB’s business continuity, builds stakeholder confidence and guides strategic decisions. Without a resilient business plan and strategy, a company’s ability to perform, retain employees and maintain business continuity could be compromised. PRINCIPAL RISK: ECONOMIC SLOWDOWN Risk description Example of risk responses Effectiveness of the risk response Potential recessions across lead- ing economies, increase in infla- tion and interest rates globally and a deterioration of macroeco- nomic factors in China could all lead to a drop in demand and re- duced financial performance. • Identification of growth areas, revenue opportunities and cost reduction measures. • Assessment of short-, mid- and long-term economic develop- ments to identifiy market and demand shifts. Financial targets (Financial report). TOPIC DESCRIPTION This refers to ABB’s company-wide efforts to invest in the circular economy. We aim to cut waste, increase recyclability and reusability and make our products more dura- ble. Additionally, we work closely with customers and suppliers to embed circularity across our value chain. Within our own operations, we strive to avoid waste by making our products and processes more efficient and maximizing the use of sustainable materials for packaging. — Business performance and resilience — Circularity — Material topic descriptions 84 ABB SUSTAINABILITY REPORT 2023 APPENdIX IMPACT MATERIALITY We can support economic growth by developing innovative and “retrofitted” products and services that promote the circular economy. We aim to help protect the environ- ment by reducing waste through our products and services, which in turn lowers envi- ronmental impacts such as air and water pollution. We are well aware that we need to pay attention to water usage in water-scarce areas. We can also have a positive impact on human rights in our value chain and encourage customers and suppliers to adopt responsible and sustainable practices. At the same time, cost-efficient sourcing of materials or transitioning to alternative raw materials could lead to sourcing from regions where social and environmental standards are lower, thereby negatively im- pacting the environment and society. Lack of understanding of the broader impacts of circularity can lead to unintended negative impacts on people and the environment, such as loss of income for those employed in the informal waste sector. FINANCIAL MATERIALITY Our efforts to increase recyclability and reusability can reduce waste and conserve resources, while also reducing costs. Furthermore, by demonstrating our commitment to the circular economy, we can differentiate ourselves from competitors, positively impacting our business and brand reputation while opening up new opportunities for growth and innovation. When it comes to take-back systems, which are increasingly in demand from customers, there is a risk of missing out on a business opportunity because these offerings are not yet mature. Finally, being less dependent on scarce raw materials would improve the resilience of our supply chain. PRINCIPAL RISK: MISSED MARKET OPPORTUNITIES Risk description Example of risk responses Effectiveness of the risk response Not increasing our circularity may lead to missed market opportunities. Increasing the company's circularity Circularity targets (Sustainability Report 2023: Preserving re - sources, Circularity). TOPIC DESCRIPTION This refers to ABB’s role as a global technology company that is driving the shift towards a low-carbon economy. Through our expertise in electrification and au- tomation, we enhance energy efficiency throughout the life cycle of our products and enable the integration of renewable energy. Also covered in this topic is energy efficiency in our own operations as well as the procurement of renewable energy and the handling of the potent greenhouse gas, SF 6 . We actively work with customers and suppliers to offer energy-efficient solutions and reduce emissions across the supply chain, demonstrating our commitment to reducing greenhouse gas emissions and supporting the transition to a low-carbon society. IMPACT MATERIALITY We actively work to reduce the carbon footprint of our own operations and imple- ment sustainable practices. By focusing on energy and carbon footprint reduc- tions, we enable our customers and suppliers to reduce their environmental impact. Additionally, our commitment to supporting sustainable solutions not only benefits the environment but also contributes to job creation and supports clean energy gen- eration. Through our products, services and solutions, we set an example for other companies and demonstrate the importance of corporate responsibility in addressing climate change and promoting a low-carbon economy. The transition to a low-carbon economy can have a negative impact on individuals or communities through local job losses or lack of access to affordable technology. The energy transition also will re- quire significantly increased extraction of certain minerals, many of which are mined in regions with low enforcement of basic environmental and labor standards. FINANCIAL MATERIALITY We have a unique opportunity to drive the transition to low-carbon technologies, boosting brand equity and revenue. By focusing on renewable energy, market — Climate 85 → NEXT CHAPTER expansion and new product development, we can enhance ABB’s reputation, attract investors and capture new revenue streams. However, risks such as non-compliance with possible climate regulations, reputation damage and market challenges need to be managed. We must mitigate climate risks, manage emissions, invest in low-carbon technologies and ensure regulatory compliance to maintain competitiveness and seize new opportunities. PRINCIPAL RISK: REFER TO TCFD REPORT Risk description Example of risk responses Effectiveness of the risk response Refer to TCFD Report Refer to TCFD Report Climate targets (Sustainability Report 2023: Low-carbon society). TOPIC DESCRIPTION This topic refers to ABB’s ethical business practices, corporate compliance and systematic risk management, including environmental, social and legal risks. Ethical business behavior, good governance as well as transparency and integrity ensure a strict commitment to anti-corruption, fair competition and compliance with legal obligations within ABB and towards customers and suppliers. Another important component is the regular review of the relevant processes as well as thorough due diligence. This topic also includes the disclosure of our tax practice and correspond- ing payments as well as the design of responsible and fair remuneration practices. In addition, it addresses our sustainability governance structure, which ensures that sus- tainability is given appropriate consideration at all levels, from the Board of Directors to the operating departments. IMPACT MATERIALITY Through ABB’s values and zero-tolerance policy towards bribery, corruption and other inappropriate business behavior, we can prevent negative socioeconomic and envi- ronmental impacts of such activities, bring about a change in business ethics both upstream and downstream and raise standards in the industry. If we do not adhere to ethical principles, we could not only harm our own business but also our stakeholders by damaging our reputation or losing the right to operate in certain markets. This would result in negative social and economic impacts on ABB employees, local com- munities and our suppliers. FINANCIAL MATERIALITY Ethical business practices foster trust in ABB among customers, investors and other stakeholders, which help us to be perceived as a reliable, sustainable and trust- worthy business partner. This trust in the company’s integrity can translate into long-term business relationships and increased revenues for ABB while at the same time having a positive impact on the environment and society. Unethical conduct and non-compliance with applicable laws can lead to fines, damage to our reputation and legal and financial consequences. Failure to manage risk systematically can lead to financial turmoil and reputational damage, undermining long-term sustainability and shareholder confidence. PRINCIPAL RISK: INTEGRITY BREACHES Risk description Example of risk responses Effectiveness of the risk response Failure to act with integrity and meet our high ethical standards in line with our purpose, values and code of conduct leading to adverse reputational impact, fines and litigations. • Zero tolerance policy towards bribery, corruption and inap- propriate business behavior. • Company-wide Code of Conduct policy and associated training. • Compliance monitoring pro- gram and controls. Integrity targets (Sustainability Report 2023: Integrity and transparency). — Corporate and sustainability governance 86 ABB SUSTAINABILITY REPORT 2023 APPENdIX TOPIC DESCRIPTION This refers to ABB’s preventive measures in data security and privacy, cyber security and compliance with applicable data privacy laws, such as GDPR. We ensure the protection of customer, employee and other individual privacy and personal data, implementing robust measures to protect their rights and safeguard against cyber threats. Our commitment to data security and privacy underscores our determination to maintain compliance, earn the trust of customers and stakeholders, and comply with existing and upcoming laws and regulations. More information can be found at our external data privacy portal https://new.abb.com/privacy . IMPACT MATERIALITY ABB has a positive impact on data security and cyber security by proactively manag- ing risks and increasing awareness. We deliver secure solutions to customers and pro- tect their data. We also recognize that there are risks resulting from cyber incidents, such as data breaches, which can result in negative impacts on individuals’ right to privacy. We work to implement safeguards to protect personal and business data and strive to be a role model in data privacy. We aim to minimize negative impacts and contribute to a safer digital environment. FINANCIAL MATERIALITY ABB has opportunities to gain operational efficiencies, competitive advantage and stakeholder trust by enhancing technology and being recognized as a trustworthy market player. Leveraging our focus on privacy and security can provide customers with products and services that mitigate relevant risks and meet their expectations. Risks to ABB’s business include data and cyber security breaches and the subsequent risk of personal data or business data being disclosed and/or misused, which can result in fines, operational disruptions, reputational damage and loss of stakeholder trust. Protecting personal and business data is crucial to retaining the trust of stake- holders and avoiding negative financial impacts. PRINCIPAL RISK: CYBER SECURITY INCIDENTS Risk description Example of risk responses Effectiveness of the risk response Potential cyber incidents involv- ing ABB or third parties due to a global increase in sophisticated cyber attacks, high interconnec- tivity & cyber dependency across the supply chain and increasing process digitalization combined with a complex IS landscape. • Cyber security assessments & findings remediations and tools to identify and prevent cyber attacks. • Onboarding of IT assests to global security solutions & business continuity and disas- ter recovery planning. Cyber security targets (Sustainability Report 2023: Data privacy and cyber security). TOPIC DESCRIPTION This topic refers to being an employer of choice by actively seeking to attract new employees and retain current ones. We actively support not only professional devel- opment, career opportunities and growth by offering training, but also encourage the personal growth of our employees through specific initiatives to ensure the right balance between employees’ professional and personal lives. In doing so, we support the wellbeing and mental health of our employees around the world. This topic also covers changes in the labor market, the mix of occupations and workforce skills that will be needed for jobs in the future. IMPACT MATERIALITY By recruiting and developing talent, ABB can have a positive impact on employee sat- isfaction, work-life balance and performance. Thus, we can contribute to an inclusive culture in the communities in which we operate, as well as in society overall. Ensuring the wellbeing of our (future) employees can positively impact equal growth and devel- opment opportunities. Furthermore, digitalization and automatization of labor can positively impact society by enabling more equal access of learning and employment opportunities. If we did not engage in people management and ensure employee wellbeing, this could have negative impacts on the (mental) health, motivation and — Data privacy and cyber security — Employee development and wellbeing 87 → NEXT CHAPTER learning potential of our employees, with a commensurate negative effect on cus- tomer satisfaction and equality of opportunity in the communities in which we op- erate. Digitalization and automation of labor can potentially result in local job losses with negative economic impacts on individuals and communities. FINANCIAL MATERIALITY By attracting new talents and supporting the development, health and wellbeing of our employees, we can ensure that ABB has the human capital to develop more resource-efficient and sustainable products. This in turn can lead to higher employee engagement with positive impacts on ABB’s long-term business success. Additionally, digitalization and automatization of labor could positively impact our business re- silience as we adapt to new trends and increase the technological knowledge of our employees. Neglecting development and wellbeing could have negative impacts on ABB’s brand reputation and would put the company at risk of losing talent, knowledge and thereby competitive advantage. PRINCIPAL RISK: LACK OF QUALIFIEd/AVAILABLE HUMAN RESOURCES Risk description Example of risk responses Effectiveness of the risk response Potential shortage of the right skilled resources or inability to retain those skilled resources due to fierce global market competi- tion for talent, aging workforces, technical expertise erosion and fast-changing skill sets. • Agile manpower planning with the use of talent agencies and external service providers. • Development of people strate- gies, early talent programs and recognition of key individuals. Employee engagement score and Net Promoter Score (Sustainability Report 2023: Social progress, Employee en- gagement score, People develop- ment, Employee wellbeing). TOPIC DESCRIPTION This topic addresses the importance of health and safety measures in the work- place, recognizing that having a safe place to work is a fundamental human right. It refers to our efforts to ensure the health and safety of employees, contractors and supply-chain partners by implementing standards and procedures to promote a safe work environment and comply with local laws and regulations. It also involves devel- oping safe products, solutions and services through safety testing and implementing safety features in products and services to prevent accidents and injuries. IMPACT MATERIALITY Health and safety measures can help prevent workplace injuries and illnesses, leading to safer, more productive and sustainable working environments for our employees, contractors and supply-chain partners. By prioritizing health and safety, we can create a culture of safety in our own operations and throughout our supply chain. This can lead to higher employee engagement and productivity, as well as lower absenteeism and turnover rates. Neglecting health and safety measures in the workplace or in our products can result in injuries and illnesses, which can also have negative economic impacts for people and communities. FINANCIAL MATERIALITY Safe and healthy working conditions for employees are the basis of functioning business operations. Effective health and safety measures can increase employee en- gagement and raise our profile as an attractive employer. By focusing on developing safe products, solutions and services, we can differentiate ABB from competitors and improve our value proposition to customers. This can lead to long-term sustainable growth for the company. Conversely, neglecting health and safety can lead to penal- ties, fines and claims for compensation, negatively impacting the company’s financial performance and reputation. — Health and safety 88 ABB SUSTAINABILITY REPORT 2023 APPENdIX PRINCIPAL RISK: OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT Risk description Example of risk responses Effectiveness of the risk response Failure to manage health and safety across operations and lo- cations resulting in workplace ac- cidents, injuries or occupational illnesses leading to human suf- fering, compensation costs, legal liabilities and reputational damage. • Health and Safety policies and company-wide Code of Conduct policy. • Company-wide Health and Safety Management system. • Ongoing monitoring and re- porting of key Health and Safety compliance metrics. • Independent Health and Safety audits. Health and safety targets (Sustainability Report 2023: Social progress, Health and safety). TOPIC DESCRIPTION This topic refers to ABB’s commitment to comply with internationally recognized standards, laws and regulations. This includes the elimination of child and forced la- bor, and the right to work under fair and safe conditions, including access to fair wages and the right to freedom of association and collective bargaining. It also includes respecting the rights of communities and individuals when providing security for our people and assets, as well as recognizing and respecting communities’ land rights. We also recognize that we have a responsibility to respect and promote human and labor rights along our value chain. This includes conducting proper due diligence on our suppliers and contractors to ensure they meet our standards for environment, health and safety, as well as human rights and labor standards. IMPACT MATERIALITY Promoting and respecting human rights and labor standards can have a positive impact on communities and society as a whole. By creating and maintaining safe and fair working conditions, we can help to improve the wellbeing and quality of life for our employees, as well as those of our contractors and supply-chain partners. By ensuring that all employees and stakeholders are treated fairly, we can also help to create a more equitable society and a stable economy. Not respecting human rights and labor standards can potentially result in negative impacts on people and commu- nities. Negative impacts can include injuries or illnesses in workplaces, inadequate standards of living for workers due to poor wages, denial of workers’ rights to leave their employers and employment of children, thus depriving them of their childhood and education. Not recognizing communities’ land rights can result in negative eco- nomic or cultural impacts on those communities and not respecting human rights in providing security can escalate conflicts, potentially resulting physical and economic harm to people and communities. FINANCIAL MATERIALITY Respect for human rights and labor standards is a fundamental requirement for our contractors, suppliers and other business partners. By promoting human rights and labor standards, we can enhance ABB’s reputation as a responsible business partner, attract and retain top talent, and foster a positive work environment. Furthermore, ensuring compliance with these standards can also help mitigate risks associated with legal and reputational harm. PRINCIPAL RISK: INTEGRITY BREACHES Risk description Example of risk responses Effectiveness of the risk response Failure to act with integrity and meet our high ethical standards in line with our purpose, values and code of conduct leading to adverse reputational impact, fines and litigations. • Dedicated Supplier Code of Conduct policy • Due diligence processes in all our business relationships. • Company-wide Code of Conduct policy Human Rights targets (Sustainability Report 2023: Social Progress, Human rights and labor standards). — Human rights and labor standards — H 89 → NEXT CHAPTER TOPIC DESCRIPTION This topic refers to ABB’s ability to provide a diverse range of products, solutions and services that meet customer needs, with a focus on quality, safety and eco-efficiency. We are also committed to investing in responsible and innovative product develop- ment, including the careful consideration of AI and cooperations with start-ups, as well as leveraging digital technologies and sustainable raw materials to meet current and future customer demands. IMPACT MATERIALITY Our existing products, solutions and services, as well as our investments in responsi- ble and innovative technologies and digitalization, can increase our customers’ effi- ciency and productivity and improve safety conditions for their workers. Sustainable products, solutions and services can also positively impact the environment by increasing energy and resource efficiency, leading to a reduction in greenhouse gas emissions. Potential negative impacts of the implementation of innovative technolo- gies and digitalization can be local job losses with consequent impacts on communi- ties, lack of access to affordable technologies resulting in further economic disadvan- tage for certain communities. FINANCIAL MATERIALITY By providing high-quality products, solutions and services, we enhance customer satisfaction and strengthen ABB’s market position. By investing in research and development as well as in cooperations with innovative start-ups regarding AI solutions, we can offer innovative products and services that help us maintain a competitive advantage, attract and retain customers and improve sustainability. This can lead to increased revenue and profitability, as well as improved brand recognition and reputation. PRINCIPAL RISK: GEOPOLITICAL INSTABILITY Risk description Example of risk responses Effectiveness of the risk response Increased geopolitical tensions resulting in global targeted tech- nology decoupling, protection- ism, trade restrictions, “friend- shoring,” new regulations and employee security implications. • Evaluation and quantification of exposure to and dependency on leading geo- graphical markets. • Design of a balanced supplier base across geographies and further shift to local supplier strategy. The effectiveness of these mea- sures is considered as part of the annual strategy refresh process, where mitigation actions are re- flected in the strategic decisions. TOPIC DESCRIPTION This refers to the sustainable and responsible sourcing of materials, products and services. It covers the social and environmental performance of suppliers and their ad- herence to ABB’s requirements regarding material compliance and conflict minerals. In order to ensure sustainable sourcing, ABB has a Supplier Code of Conduct, which is based on relevant international frameworks, standards and legislation governing ethical and sustainable business practices. It complements the company’s internal Code of Conduct, which is binding for all employees. Additionally, we are referring to our efforts to optimize logistics and transportation regarding, e.g. the packaging of our products. IMPACT MATERIALITY By actively and responsibly managing our supply chain, we can have a positive impact on local economies, the environment and people, including human rights. Additionally, we aim to set a positive example to our suppliers via our efforts to source miner- als responsibly and to avoid using hazardous substances in our own operations. Furthermore, minimizing logistics can positively impact the environment by reducing emissions. Not applying standards in our supply chain can have negative impacts on the environment, people and communities. Negative impacts can include injuries or illnesses in supplier workplaces, inadequate standards of living for workers due to — Products, solutions and services — Responsible sourcing 90 ABB SUSTAINABILITY REPORT 2023 APPENdIX poor wages, denial of workers’ rights to leave their employers and the employment of children, thus depriving them of their childhood and education. FINANCIAL MATERIALITY Sustainable sourcing can make ABB’s supply chain more resilient, which in turn would support our business stability, growth and future success of ABB. This would also mitigate the negative impacts of reputational loss or a loss of business opportunities. Finally, optimized logistics can lead to cost savings and improved quality. PRINCIPAL RISK: AVAILABILITY OF COMPONENTS AND RAW MATERIALS Risk description Example of risk responses Effectiveness of the risk response Possible shortages of compo- nents and raw materials due to high dependency on few suppli- ers, supply chain shortages or in- ability to adapt or comply with changes in import regulations. • Development of alternative ma- terials with the support of R&D • Extensive activity to minimize single source components." Responsible sourcing targets (Sustainability Report 2023: Integrity and transparency, Responsible sourcing). 91 → NEXT CHAPTER TOPIC DESCRIPTION Biodiversity refers to the protection of biological and genetic diversity in the natural world. Protecting this diversity is critical to ensuring the survival of plant and animal species and the preservation of natural ecosystems. Land use refers to ABB’s work to remediate contaminated soil and water at legacy sites, as well as to its work to protect biodiversity by minimizing land use and reducing or avoiding deforestation. IMPACT MATERIALITY With proper biodiversity and land-use management, ABB can have a positive impact on the environment by protecting flora and fauna and implementing legacy site reme- diation projects. The use of flora/fauna assessments and smart design would enable our operations to avoid harm to the environment. However, improper management could have significant impacts in the form of noise, air, soil or water pollution, as well as potential social and economic impacts on affected communities. FINANCIAL MATERIALITY In cases where not enough attention is paid to biodiversity protection and responsible land use, the outcome could result in negative media coverage, leading to reputational damage and even fines which could harm our business in the long run. TOPIC DESCRIPTION This refers to embracing a diverse workforce across all dimensions (e.g., gender, age, ethnicity, abilities, sexual orientation, etc.). It also refers to ensuring equal opportuni- ties and equal treatment at the workplace by providing an inclusive environment that welcomes and respects every individual. This enables a healthy and balanced work environment with employees who can bring their full selves to work and have a strong sense of belonging. IMPACT MATERIALITY ABB’s focus on diversity and inclusion (D&I) has a positive impact on society by promoting systemic changes, fostering diverse leadership and improving working conditions and employment access for all. Our commitment to D&I creates better working environments, benefits families and communities, and sets an example for other companies. With our local presence and approach, we bring career opportuni- ties to local communities, contributing to social progress and equal opportunities. Lack of inclusion and violations of human rights can negatively impact the wellbeing of individuals and hinder societal progress in ABB’s operating locations. FINANCIAL MATERIALITY We have the opportunity to enhance workforce diversity, attract top talent and drive innovation, leading to improved reputation, customer relationships and overall busi- ness performance. Embracing diversity of thought enables better decision-making and access to a wider range of ideas. However, neglecting diversity and inclusion policies can lead to risks such as reputational damage, talent loss, missed growth opportunities and poorer business decisions due to a lack of diverse perspectives. Non-compliance with regulations and insufficient gender diversity in leadership can also hinder our business success. — Biodiversity and land use — Diversity and inclusion — Non-material topic descriptions 92 ABB SUSTAINABILITY REPORT 2023 APPENdIX TOPIC DESCRIPTION This refers to ABB’s engagement, interaction, partnerships and co-development of solu- tions with its most relevant stakeholder groups, including: employees, customers, suppliers, investors, governments and civil society. We actively engage with governments and local communities in which our products are manufactured and used with the aim of remediating impacts and fostering technology adoption, sound regulatory frameworks, job creation and economic growth. Our community engagement encompasses partnerships, projects, advocacy and philanthropic initiatives addressing areas such as climate change, biodiversity conservation, education to foster employability and digitalization readiness, diversity and poverty alleviation, and disaster and emergency relief. Our support to communities includes in-kind and financial donations, as well as corporate volunteering. We maintain open, trust- worthy and transparent communication and cooperation with all our stakeholders. IMPACT MATERIALITY By engaging with stakeholders, we can create value for them and strengthen our relation- ships. We can use these partnerships through a multiplier effect to positively impact not only our direct stakeholders but also the supply chain beyond. This also holds true for our social activities such as our support for equal access to education or contributions to research programs, through which we can have positive impacts on society. Not engaging with our stakeholders could result in projects or programs that have unintended negative social or economic impacts on individuals or local communities due to lack of under- standing of local needs or sensitivities. FINANCIAL MATERIALITY Through frequent and effective stakeholder engagement, we can maintain ABB’s reputation, consolidate its license to operate and ensure its long-term business success. Close stake- holder cooperation and community engagement initiatives oriented toward impact manage- ment and development opportunities can also benefit society, help the environment, sup- port sustainable growth and encourage new revenue streams. An increase in partnerships can lead to new sustainable business models in the industry. Community engagement can attract investors and talent, enhance employee engagement, reinforce company values, build trust and foster cross-societal relationships. If we were not to engage with our stakeholders, this could have a negative impact on our reputation and on the company, e.g., through litiga- tion or boycotts by civil society, or our investors could decide to invest elsewhere. TOPIC DESCRIPTION This refers to ABB’s water usage as well as its sustainable and proper management of wa- ter, which is a dwindling resource in many countries. Even though we use relatively little water in our production processes, proper water management as well as recycling and the reduction of waste generation in our own operations as well as during production processes are priorities for ABB. This also includes our efforts to reuse materials. IMPACT MATERIALITY Proper (waste) water and waste management can minimize the impact of our operations on the environment. By managing water sustainably, we can contribute to protecting scarce resources, even though our production processes use relatively little water. Additionally, we can reduce or eliminate the pollution of soil, water and air as well as the amount of waste we send to landfill. By acting as a role model with regard to waste management, we can contribute to an improved circular economy and encourage stakeholders follow suit, thereby increasing our positive impact in our supply chain. Improper water management can lead to increased soil, water and air pollution as well as wasting of scarce resources, which can have negative impacts on the health and livelihoods of people and communities. FINANCIAL MATERIALITY Sustainable water management and reuse as well as the recycling of waste can reduce costs for ABB. This helps to ensure business continuity and improves our reputation. If we did not engage in recycling, we would likely have higher manufacturing costs, which would negatively impact our business. Additionally, if water and waste are not managed properly, it could have a negative impact on our reputation and lead to fines. — Partnerships and collaboration — Water and waste management 93 → NEXT CHAPTER — Environmental GRI ref. Indicator description Limited assurance 2023 2023 2022 301-1 MATERIALS USED BY WEIGHT OR VOLUME (KILOTONS) 1 Metals 1,168 1,190 Copper 84 93 Aluminum 83 82 Steel (incl. iron casting) 1,000 1,015 Plastics 136 173 302-1 ENERGY CONSUMPTION WITHIN THE ORGANIZATION (GIGAWATT-HOURS – GWH) 3 Biofuels 3.1 2.03 Oil (11.63 MWh/ton) 7.4 7.1 Diesel (11.75 MWh/ton) 3.9 4.6 Coal (7.56 MWh/ton) 0 0 Gas 332 388 District heat consumption 101 107 Electricity consumption 850 909 Total energy used 1,298 1,413 Electricity sold 3.2 1.7 Total energy consumption within the organization from renewable sources 830 741 Total energy consumption within the organization from non-renewable sources 467 676 302-3 ENERGY INTENSITY (MWH/REVENUE $)4 40 48 GREENHOUSE GAS (GHG) EMISSIONS 5 (KILOTONS CO 2 E) 305-1 DIRECT (SCOPE 1) GHG EMISSIONS 6 Use of fuels 70 81 Coolants 4.3 5.1 SF 67 9 20 Transport by own fleet 44 48 Total scope 1 GHG emissions 128 155 OTHER Biogenic CO 2 emissions 8 0.86 0.72 — GRI disclosures table 94 ABB SUSTAINABILITY REPORT 2023 APPENdIX GRI ref. Indicator description Limited assurance 2023 2023 2022 305-2 ENERGY INDIRECT (SCOPE 2) GHG EMISSIONS 6 District heat consumption 10 15 Electricity consumption 13 52 Total scope 2 GHG emissions 23 66 Total scope 1 and 2 GHG emissions 9 151 221 305-3 OTHER INDIRECT (SCOPE 3) GHG EMISSIONS 6 Purchased goods and services 10 16,485 16,068 Capital goods 94 90 Fuel and energy-related activities 65 75 Upstream transportation and distribution 699 584 Waste generated in operations 15 16 Business travel 11 154 82 Employee commuting 175 190 Upstream leased assets n.a. n.a. Downstream transportation and distribution 62 52 Processing of sold products 0 0 Use of sold products - Energy loss 58,638 59,405 Use of sold products - Energy input 418,318 374,759 End-of-life treatment of sold products 264 263 Downstream leased assets 3 1 Franchises n.a. n.a. Investments 11 10 Total scope 3 GHG emissions 9 (representative 12 / strict 13 ) 2 76,665 12 / 436,346 13 76,834 12/ 392,188 13 305-4 GHG EMISSIONS INTENSITY (TONS CO 2E/MILLION $) Tons CO 2 equivalent per million $ sales, Scope 1+ 2 4.7 7.6 Tons CO 2 equivalent per million $ sales, Scope 1+ 2+3 (representative1 2 ) 2,617 2,383 Tons CO 2 equivalent per million $ sales, Scope 1+ 2+3 (strict1 3 ) 13,541 13,326 305-7 NITROGEN OXIdES (NOx), SULFUR OXIdES (SOx ), AND OTHER SIGNIFICANT AIR EMISSIONS (TONS) Volatile organic compounds (VOC) 421 481 Emissions of NO x and SO x (tons SO 2 and NO 2 ) SO x from burning coal 0 0 SO x from burning oil and biofuels 9.3 10 NO x from burning coal 0 0 NO x from burning oil and biofuels 7 7 NO x from burning gas 72 84 306-3 (2016) SIGNIFICANT SPILLS (TOTAL NUMBER) 14 Oil spills 1 2 Chemical spills 0 0 Emissions to air 0 1 Others 0 0 Total number of significant spills 1 3 95 → NEXT CHAPTER — Social GRI ref. Indicator description Limited assurance 2023 2023 2022 2-7 NUMBER OF EMPLOYEES (REFLECTED IN HEADCOUNT) 15 TOTAL NUMBER OF EMPLOYEES BY REGION Europe 52,723 51,360 The Americas 26,437 25,950 Asia, Middle East and Africa 31,282 29,540 TOTAL NUMBER OF EMPLOYEES BY GENDER Female 30,644 29,900 Male 79,798 76,950 Total number of employees 110,442 106,850 NUMBER OF PERMANENT EMPLOYEES TOTAL NUMBER OF PERMANENT EMPLOYEES BY REGION 16 Europe 48,224 n.a. The Americas 26,184 n.a. Asia, Middle East and Africa 29,618 n.a. TOTAL NUMBER OF PERMANENT EMPLOYEES BY GENDER 16 Female 28,825 n.a. Male 75,201 n.a. Total number of permanent employees 104,026 n.a. NUMBER OF TEMPORARY EMPLOYEES TOTAL NUMBER OF TEMPORARY EMPLOYEES BY REGION 16 Europe 4,499 n.a. The Americas 253 n.a. Asia, Middle East and Africa 1,664 n.a. TOTAL NUMBER OF TEMPORARY EMPLOYEES BY GENDER 16 Female 1,819 n.a. Male 4,597 n.a. Total number of temporary employees 6,416 n.a. NUMBER OF FULL-TIME EMPLOYEES TOTAL NUMBER OF FULL-TIME EMPLOYEES BY REGION 16 Europe 47,837 n.a. The Americas 25,858 n.a. Asia, Middle East and Africa 31,155 n.a. TOTAL NUMBER OF FULL-TIME EMPLOYEES BY GENDER 16 Female 27,886 n.a. Male 76,964 n.a. Total number of full-time employees 104,850 n.a. NUMBER OF PART-TIME EMPLOYEES TOTAL NUMBER OF PART-TIME EMPLOYEES BY REGION 16 Europe 4,886 n.a. The Americas 579 n.a. Asia, Middle East and Africa 127 n.a. TOTAL NUMBER OF PART-TIME EMPLOYEES BY GENDER 16 Female 2,758 n.a. Male 2,834 n.a. Total number of part-time employees 5,592 n.a. 96 ABB SUSTAINABILITY REPORT 2023 APPENdIX GRI ref. Indicator description Limited assurance 2023 2023 2022 401-1 EMPLOYEE TURNOVER (REFLECTED IN HEADCOUNT) TURNOVER OF ALL EMPLOYEES BY REGION 17 Europe 6,852 (13%) 7,032 (14%) The Americas 5,107 (19%) 5,726 (22%) Asia, Middle East and Africa 4,472 (14%) 4,438 (15%) TURNOVER OF ALL EMPLOYEES BY GENDER 17 Female 4,817 (16%) 5,375 (18%) Male 11,614 (15%) 11,821 (15%) Total employee turnover: ABB Group 16,431 (15%) 17,196 (16%) EMPLOYEE HIRES (REFLECTED IN HEADCOUNT) EMPLOYEE HIRES BY REGIO Europe 7,909 (15%) 6,068 (12%) The Americas 6,543 (25%) 4,466 (17%) Asia, Middle East and Africa 5,783 (18%) 5,087 (17%) EMPLOYEE HIRES BY GENDER Female 6,047 (20%) 4,983 (17%) Male 14,188 (18%) 10,638 (14%) Total employee hires: ABB Group 20,235 (18%) 15,621 (15%) 403-9 WORK-RELATED INJURIES Employee work-related fatalities 18 , 19 0 0 Incident rate 19 0 0 Employee business travel fatalities 18 , 21 0 1 Incident rate 20 0 0.001 Contractor work-related fatalities 19 1 0 Contractor business travel fatalities 18 , 21 0 0 Members of the public fatalities 18 0 0 Employee total recordable incident number 19 , 20 312 358 Injury rate 20 0.27 0.31 Contractor total recordable incident number 19 , 22 63 73 Injury rate 20 0.31 0.41 Employee lost time incident number 19 142 165 Injury rate 20 0.12 0.14 Contractor lost time incident number 19 32 30 Injury rate 20 0.16 0.17 Combined lost time incident number 174 182 Combined lost time injury rate 0.13 0.14 Employee lost days due to industrial incidents 23 2,503 2,981 Days lost rate 20 2.2 2.6 Employee occupational health illnesses 19 7 11 Employee occupational health illness rate 19 , 20 0.01 0.01 Sustainability Observation Tours (SOT) conducted 24 69,131 65,687 SOT rate 24 , 25 5.34 5.28 Hazards reported 19 256,513 250,741 Hazards reporting rate 26 2.23 2.18 404-1 AVERAGE HOURS OF TRAINING PER YEAR PER EMPLOYEE TRAINING PER YEAR PER EMPLOYEE (AVERAGE HOURS) BY EMPLOYEE CATEGORY 27 , 28 , 29 Top and senior managers 11.2 4.7 Middle and lower managers 15.1 8.6 Other employees 5.7 4 TRAINING PER YEAR PER EMPLOYEE (AVERAGE HOURS) BY GENDER 27 Female 6 4 Male 7 4 Total workforce 6.8 4.5 97 → NEXT CHAPTER GRI ref. Indicator description Limited assurance 2023 2023 2022 404-3 PERCENTAGE OF EMPLOYEES RECEIVING REGULAR PERFORMANCE AND CAREER DEVELOPMENT REVIEWS 26 , 30 PERCENTAGE OF EMPLOYEES RECEIVING REGULAR PERFORMANCE AND CAREER DEVELOPMENT REVIEWS BY EMPLOYEE CATEGORY Top and senior managers 100% 98% Middle and lower managers 99% 95% Other employees 98% 85% PERCENTAGE OF EMPLOYEES RECEIVING REGULAR PERFORMANCE AND CAREER DEVELOPMENT REVIEWS BY GENDER 16 Female 64% n.a. Male 69% n.a. Total workforce 68% 92% 406-1 INCIDENTS OF DISCRIMINATION AND CORRECTIVE ACTIONS TAKEN 31 Total number of incidents of discrimination 17 10 Total number of incidents of harassment 72 64 415-1 POLITICAL CONTRIBUTIONS Financial and in-kind political contributions 0 0 Note: Due to rounding, numbers presented in the GRI table may not add to the totals provided. 1 Estimated with calculation model based on $ spend. Numbers include materials sourced both as raw material and part of components. 2 Limited assurance extends to 2022 amounts, see limited assurance report (contained in this report) for details. 3 The energy use of our fleet of leased vehicles is not included in these data. 4 Includes all types of energy used within the organization, except the energy use of our fleet of leased vehicles. 5 See “Approach to reporting” for more details on GHG emission calculation. 6 GHG data for 2022 have been adjusted for portfolio changes. 7 In 2019, we updated the factor used to convert SF 6 emissions to CO 2 equivalent to 23,500 kg CO 2e/kg SF6 , as recommended by the IPCC 2013 (Fifth Assessment Report). 8 In our scope 1, ABB only considers methane and N 2 O emissions of biogenic emissions, following SBTi guidance, amounting to 2 tons of CO 2 e in 2023. 9 In 2023, we updated our methodology for determining Scope 1, 2 and 3 SBTi targets, as well as expanding it to incorporate recent business acquisitions, and accordingly have recast prior year information, including the initial 2019 baseline, to conform with the current year’s presentation. 10 Purchased goods and services emissions cover 100% of procurement spend. 11 Includes air travel and rented vehicles. 12 Representative scenario: Energy loss used as basis for calculations. 13 Strict scenario: Energy input used as basis for calculations. 14 An environmental incident is regarded as significant if at least one of the following criteria applies to the incident: obligation to inform local authorities or a governmental agency about the incident and/or regulatory violation; inspection by an environmental agency results in a formal complaint; environmental Notice of Violation, a Consent Order or a Potential Responsible Party (PRP) notification; imposition of a penalty or fine; significant impact on an ecosystem; costs related to the incident exceed, or may exceed, $10,000. 15 This was previously mistakenly displayed as part of GRI 401-1, hence this new 2-7 section this year. 16 As we are disclosing these KPIs for the first time this year, there is no value available for year 2022. 17 Turnover rate calculated as number of ABB employees (full- and part-time ) leaving during the year/total number of ABB employees (full- and part-time) as at December 31. For the purpose of this calculation, employees who leave the organization voluntarily or involuntarily whether due to dismissal, retirement, end of fixed-term contract or death in service or any other reason, are included. However, involuntary turnover arising out of divestments is excluded from the definition. 18 Fatalities include deaths occurring within one year as a result of injuries sustained and commuting is excluded. 19 Data covers incidents that happened at the workplace (ABB facility, customer site, project site) and excludes incidents that occurred during business travel. 20 Rates are per 100 employees or per 200,000 contractor hours worked. Employees in the rates are defined as persons who are permanent or temporary employees, working full time or part time, in the employment of an ABB Group Company (ABBGC). Persons hired via work agencies where ABB provides supervision, defines work to be done, and provides training are also included in this category. 21 Includes incidents during business travel by road. Air and rail travels are excluded. 22 Recordable incidents include fatal incidents, lost time incidents, serious injury incidents, medical treatment injuries, occupational diseases and restricted work- day cases. 23 Days lost are calendar days and are counted from the day after the incident. 24 SOTs are typically conducted by all line managers at all levels. 25 Rate per manager. 26 Rate is calculated per employee. 27 Scope includes centrally managed tools such as My learning, Harvard Spark, Harvard Manager Mentor, LinkedIn Learning. It covers both leadership and functional/ technical learnings. Data are based on the extractions from the respective tools for internal employees (office workers and factory ones). 28 Top and senior managers are defined as employees in Hay grade 1-7, including Division President. Middle and lower managers: Other line managers; Other employees: Individual contributors not considered as managers. 29 Learning hours reported in 2022 were affected by a an error in the data extracted from the LinkedIn learning platform. The error in the dashboard calculation was spotted during 2023, when comparing this year’s data with last year’s data and while analyzing the delta between the two years. It generated an overestimation of hours from the LinkedIn learning platform, which has been now corrected. The restated data are now corrected and shown in the table below (or above based on the graphics). 30 The calculation of performance review data is based on the population that is included in the global people performance management system (HR Group Tools). 100% of top and senior managers and of middle and low managers are covered in the HR Group Tools system and 66% of other employees. This is the only centralized reporting of performance management data that can be quantified and verified and is deemed the ‘eligible population. 31 According to our case categorization structure in place for 2023, data presented relates to number of cases logged in Integrity case management system with an issue subcategory of “Discrimination”, “Sexual Harassment” or “Harassment/Bullying”. 98 ABB SUSTAINABILITY REPORT 2023 APPENdIX Statement of use: ABB Ltd has reported in accordance with the GRI Standards for the period from 1 January 2023 to 31 December 2023. GRI 1 used: GRI 1: Foundation 2021 Applicable GRI Sector Standard(s): Not applicable Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation GENERAL DISCLOSURES 2-1 Organizational details a. Financial Report 2023: History of ABB Group b. Financial Report 2023: History of ABB Group c. Financial Report 2023: Organizational Structure d. Form 20-F: Exhibit 8.1 2-2 Entities included in the orga- nization’s sustainability reporting • Sustainability Report 2023: Appendix, Approach to reporting 2-3 Reporting period, frequency and contact point • Sustainability Report 2023: Appendix, Approach to reporting 2-4 Restatements of information Where necessary, adjustments are described as footnotes to the relevant indicators. 2-5 External assurance • Sustainability Report 2023: Appendix, Assurance Statement 2-6 Activities, value chain and other business relationships • Financial Report 2023: Businesses, Our Markets • Financial Report 2023: Businesses (By Business Area) • Financial Report 2023: Businesses, Suppliers and raw materials • Financial Report 2023: Organizational Structure / Note 4 - Acquisitions, divestments and equity-accounted companies / Note 15 - Commitments and contingencies (Related party transactions) • Integrated Report 2023: Value creation • Sustainability Report 2023: Appendix, Approach to reporting, Changes in 2023 2-7 Employees • Sustainability Report 2023: Appendix, GRI Disclosures table b. report the total number of: iii. non-guaranteed hours employees, and a break- down by gender and by region; Information unavailable/ incomplete Every country has its own definition of non-guaranteed hours employees, this data is therefore not collected at the global level for now. — GRI content index ← PREVIOUS CHAPTER → NEXT CHAPTER 99 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 2-8 Workers who are not employees a. report the total number of workers who are not em- ployees and whose work is controlled by the organi- zation and describe: i. the most common types of worker and their con- tractual relationship with the organization; ii. the type of work they perform; b. describe the methodologies and assumptions used to compile the data, including whether the number of workers who are not employees is reported: i. in head count, full-time equivalent (FTE), or us- ing another methodology; ii. at the end of the reporting period, as an average across the reporting period, or using another methodology; c. describe significant fluctuations in the number of workers who are not employees during the report- ing period and between reporting periods. Information unavailable/ incomplete We are not collecting this information at a global level, this is managed at a local level. 2-9 Governance structure and composition • Corporate Governance Report 2023 vi. underrepresented social groups Information unavailable/ incomplete 2-10 Nomination and selection of the highest governance body • Corporate Governance Report 2023 • ABB Ltd Board Governance Rules 2-11 Chair of the highest gover- nance body • Corporate Governance Report 2023 b. if the chair is also a senior executive, explain their function within the organization’s management, the reasons for this arrangement, and how conflicts of interest are prevented and mitigated. Not applicable The chair of the highest governance body is non-executive and independent. 2-12 Role of the highest gover- nance body in overseeing the management of impacts a. Corporate Governance Report 2023 ABB Ltd Board Governance Rules b. Sustainability Report 2023: Sustainability at ABB, Sustainability governance c. Sustainability Report 2023: Sustainability at ABB, Sustainability governance 2-13 Delegation of responsibility for managing impacts • Corporate Governance Report 2023 • ABB Ltd Board Governance Rules • Sustainability Report 2023: Sustainability at ABB, Sustainability governance 2-14 Role of the highest gover- nance body in sustainability reporting ABB Ltd Board Governance Rules define review and approval com- petences for ABB's reporting; Board is in charge 2-15 Conflicts of interest a. ABB Ltd Board Governances Rules (incl. ABB Ltd's Related Party Transaction Policy) b. Corporate Governance Report 2023 2-16 Communication of critical concerns • ABB Ltd Board Governances Rules • Corporate Governance Report 2023 b. report the total number and the nature of critical concerns that were communicated to the highest governance body during the reporting period. Confidentiality constraints Due to sensitivity such information cannot be disclosed. 2-17 Collective knowledge of the highest governance body • Corporate Governance Report 2023 2-18 Evaluation of the performance of the highest governance body • Corporate Governance Report 2023: Chairman's Letter 2-19 Remuneration policies • Compensation Report 2023 ← PREVIOUS CHAPTER → NEXT CHAPTER 100 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 2-20 Process to determine remuneration • Compensation Report 2023 2-21 Annual total compensation ratio • Compensation Report 2023 b. report the ratio of the percentage increase in annual total compensation for the organization’s high- est-paid individual to the median percentage in- crease in annual total compensation for all employ- ees (excluding the highest-paid individual) Information unavailable/ incomplete We didn’t calculate the ratio prior to the disclosure in the 2023 report, therefore we can not report on the percentage increase of the ratio. Since the ratio will be calculated and disclosed for the first time this year, we will only be able to disclose the percentage increase of the ratio in the 2024 Compensation Report. 2-22 Statement on sustainable de- velopment strategy • Sustainability Report 2023: Sustainability at ABB, CEO letter 2-23 Policy commitments • Sustainability Report 2023: Integrity and transparency, We em - bed a culture of integrity and transparency • Sustainability Report 2023: Integrity and transparency • Sustainability Report 2023: Appendix, Approach to reporting • Sustainability Report 2023: Social progress, Human rights and labor standards • Sustainability Report 2023: Social progress, Diversity and inclusion Group website: • https://global.abb/group/en/about/integrity • https://global.abb/group/en/sustainability/ social-progress#humanrights • https://global.abb/group/en/sustainability/policies--state - ments-and-declarations/human-rights-policy-and-statement • https://global.abb/group/en/sustainability/policies--state - ments-and-declarations/ modern-slavery-and-human-trafficking-statement • https://global.abb/group/en/about/supplying/ code-of-conduct • https://global.abb/group/en/about/supplying/ responsible-minerals • https://global.abb/group/en/about/supplying/ responsible-sourcing ← PREVIOUS CHAPTER → NEXT CHAPTER 101 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 2-24 Embedding policy commitments • Sustainability Report 2023: Sustainability at ABB, Sustainability governance • Sustainability Report 2023: Integrity and transparency, We em - bed a culture of integrity and transparency • Sustainability Report 2023: Integrity and transparency • Sustainability Report 2023: Appendix, Approach to reporting • Sustainability Report 2023: Social progress, Human rights and labor standards • Sustainability Report 2023: Social progress, Diversity and inclusion • Integrated Report 2023 Group website: • https://global.abb/group/en/about/integrity • https://global.abb/group/en/about/integrity/commitment • https://global.abb/group/en/about/integrity/ training-and-communications • https://global.abb/group/en/sustainability/policies--state - ments-and-declarations/human-rights-policy-and-statement • https://global.abb/group/en/sustainability/policies--state - ments-and-declarations/ modern-slavery-and-human-trafficking-statement • https://global.abb/group/en/about/supplying/ code-of-conduct • https://global.abb/group/en/about/supplying/ responsible-minerals • https://global.abb/group/en/about/supplying/ responsible-sourcing 2-25 Processes to remediate nega- tive impacts • Sustainability Report 2023: Sustainability at ABB, Sustainability governance • Sustainability Report 2023: Integrity and transparency, We em - bed a culture of integrity and transparency • Sustainability Report 2023: Integrity and transparency • Sustainability Report 2023: Integrity and transparency, Responsible sourcing • Sustainability Report 2023: Appendix, Approach to reporting • Sustainability Report 2023: Social progress, Human rights and labor standards • Sustainability Report 2023: Social progress, Diversity and inclu - sion Group website: • https://global.abb/group/en/about/integrity • https://global.abb/group/en/about/integrity/resolving-issues • https://global.abb/group/en/about/integrity/ reporting-channels ← PREVIOUS CHAPTER → NEXT CHAPTER 102 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 2-26 Mechanisms for seeking ad- vice and raising concerns • Integrated Report 2023 • Sustainability Report 2023: Sustainability at ABB, Sustainability Governance • Sustainability Report 2023: Social progress, Human rights and labor standards Group website: • https://global.abb/group/en/about/integrity/ training-and-communications • https://global.abb/group/en/about/integrity/faq 2-27 Compliance with laws and regulations No significant instances of non-compliance with laws and regula- tions to report for 2023. 2-28 Membership associations a. report industry associations, other membership as- sociations, and national or international advocacy organizations in which it participates in a signifi- cant role. Information unavailable/ incomplete Currently under review. 2-29 Approach to stakeholder engagement • Sustainability Report 2023: Sustainability at ABB, Materiality • Sustainability report 2023: Social progress, We promote social progress, Stakeholder engagement 2-30 Collective bargaining agreements • Sustainability report 2023: Social progress, Human rights and labor standards MATERIAL TOPICS 3-1 Process to determine material topics • Sustainability Report 2023: Sustainability at ABB, Materiality • Sustainability Report 2023: Social progress, Human rights and labor standards 3-2 List of material topics • Sustainability Report 2023: Sustainability at ABB, Materiality • Sustainability Report 2023: Social progress, Human rights and labor standards • Sustainability Report 2023: Appendix, Material topic and impact descriptions ECONOMIC PERFORMANCE 3-3 Management of material topics • Sustainability Report 2023: Sustainability at ABB, Materiality • Sustainability Report 2023: Appendix, Material topic and impact descriptions ← PREVIOUS CHAPTER → NEXT CHAPTER 103 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 201-1 Direct economic value gener- ated and distributed a. We do not disclose or explicitly state the term ‘EVG&D.’ The be- low refers to the metrics defined in each section: i) Revenue - 29,363 (2311A) b. See above. a. Direct economic value generated and distributed (EVG&D) on an accruals basis, including the basic com- ponents for the organization’s global operations as listed below. If data are presented on a cash basis, re- port the justification for this decision in addition to reporting the following basic components: ii. Economic value distributed: operating costs, em- ployee wages and benefits, payments to providers of capital, payments to government by country, and community investments; iii. Economic value retained: ‘direct economic value generated’ less ‘economic value distributed’. b. Where significant, report EVG&D separately at country, regional, or market levels, and the criteria used for defining significance. Information unavailable/ incomplete a) We do not disclose or explicitly state the term “EVG&D”. a. ii: We don’t present any of the com- ponents as stated. Operating costs could be the combination of certain financial statement line items. Employee wages and benefits are components of several separate fi- nancial statement line items, pay- ments to providers of capital (debt/ dividends) would be on the cash flow statement, and then payments to government by country and commu- nity investments are not disclosed or tracked at that level. a. iii: Not disclosed in financial statements b: see above 201-2 Financial implications and other risks and opportunities due to climate change • Sustainability Report 2023: TCFD recommendations report • Sustainability Report 2023: EU Taxonomy report 201-3 Defined benefit plan obliga- tions and other retirement plans • Financial Report 2023: Note 17 c. If a fund set up to pay the plan’s pension liabilities is not fully covered, explain the strategy, if any, ad- opted by the employer to work towards full cover- age, and the timescale, if any, by which the employer hopes to achieve full coverage. d. Percentage of salary contributed by employee or employer. e. Level of participation in retirement plans, such as participation in mandatory or voluntary schemes, regional, or country-based schemes, or those with financial impact. Confidentiality constraints c. Funding strategy will vary by plan, influenced by the legislative frame- work in each country. Funding strategy is often negotiated with plan fiduciaries and the company does not want to publish any state- ment on strategy which might influ- ence those negotiations. This infor- mation will therefore not be disclosed on confidential- ity grounds. d. The percentage of salary contrib- uted by employee and employer will vary for each plan. Disclosing an av- erage figure would be meaningless without a full breakdown of employ- ees by country and seniority. Disclosing details on a plan by plan basis would disclose details of ABB’s overall remuneration which we wish to keep confidential. e. Disclosing this information at an aggregate level would be meaning- less without a full breakdown of employees by country and employ- ment status. Disclosing details on a plan by plan basis would disclose details of ABB’s overall remunera- tion which we wish to keep confidential. ← PREVIOUS CHAPTER → NEXT CHAPTER 104 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 201-4 Financial assistance received from government c. Financial Report 2023: Organizational Structure a. Total monetary value of financial assistance re- ceived by the organization from any government during the reporting period, including: i. tax relief and tax credits; ii. subsidies; iii. investment grants, research and development grants, and other relevant types of grant; iv. awards; v. royalty holidays; vi. financial assistance from Export Credit Agencies (ECAs); vii. financial incentives; viii.other financial benefits received or receivable from any government for any operation. b. The information in 201-4-a by country. Not applicable a. Government assistance is a re- quired disclosure, if material. As it is not material to ABB, there is no disclosure related to government assistance. b. We are not required to disclose this by country. MARKET PRESENCE 3-3 Management of material topics • Financial Report 2023: Management overview 202-1 Ratios of standard entry level wage by gender compared to local minimum wage ABB's 100k population spans 90+ countries with a significant population in the majority of the countries. Minimum wage rules are defined by the local CBA agreements and/or local legislation of the 90+ counties in which ABB has employees. ABB is compliant with the standards set-fourth in the CBA agreements and/or com - pliant to local legislation with regard to minimum wage rules. a. When a significant proportion of employees are compensated based on wages subject to minimum wage rules, report the relevant ratio of the entry level wage by gender at significant locations of op- eration to the minimum wage. b. When a significant proportion of other workers (ex- cluding employees) performing the organization’s activities are compensated based on wages subject to minimum wage rules, describe the actions taken to determine whether these workers are paid above the minimum wage. c. Whether a local minimum wage is absent or variable at significant locations of operation, by gender. In circumstances in which different minimums can be used as a reference, report which minimum wage is being used. d. The definition used for ‘significant locations of operation’. Information unavailable/ incomplete In order to operate in over 90 coun - tries, ABB must adhere to the local employment laws, regulations, and re- porting standards of each country. These local country requirements are the responsibility of the applicable country HR, HR Services, employment law and compliance groups to ensure that ABB is compliant with each coun- try’s regulatory and employment law requirements. Unless required by law, ABB does not require all local country reporting to be stored or aggregated at Global Corporate level given the thousands of requirements that are maintained at a local level. 202-2 Proportion of senior manage- ment hired from the local community a. Percentage of senior management at significant lo- cations of operation that are hired from the local community. b. The definition used for ‘senior management’. c. The organization’s geographical definition of ‘local’. d. The definition used for ‘significant locations of operation’. Information unavailable/ incomplete We do not collect data regarding this disclosure at the global level but we are investigating the feasibility of do- ing this in the future. ← PREVIOUS CHAPTER → NEXT CHAPTER 105 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation PROCUREMENT PRACTICES 3-3 Management of material topics For disclosures: • Sustainability Report 2023: Preserving resources, We preserve resources • Sustainability Report 2023: Integrity and transparency, Responsible sourcing • Sustainability Report 2023: Integrity and transparency, We em - bed a culture of integrity and transparency For policies: • ABB Supplier Code of Conduct • ABB Code of Conduct: Working with suppliers • ABB General Terms and Conditions • ABB Conflict Minerals Policy • ABB Human rights Policy and Due Diligence Framework 204-1 Proportion of spending on lo- cal suppliers e. Percentage of the procurement budget used for sig- nificant locations of operation that is spent on sup- pliers local to that operation (such as percentage of products and services purchased locally). f. The organization’s geographical definition of “local.” g. The definition used for “significant locations of operation.” Information unavailable/ incomplete This is managed locally and data is not consolidated at Group level. Data reported at Group level will show the budget split between the different re- gions (Europe, AMEA, AMC), but is not differentiated between local and non-local spend. ANTI-CORRUPTION 3-3 Management of material topics • Sustainability Report 2023: Integrity and transparency • Integrated Report 2023: We embed a culture of integrity and transparency along the extended value chain, Anti-Bribery and Anti-Corruption 205-1 Operations assessed for risks related to corruption a. Total number and percentage of operations as- sessed for risks related to corruption. Information unavailable/ incomplete We do not consider this for reporting as of 2023. 205-2 Communication and training about anti-corruption policies and procedures a. 100% - governance body members = EC b. Total number and percentage of employees that the organization’s anti-corruption policies and proce- dures have been communicated to, broken down by employee category and region. c. Total number and percentage of business partners that the organization’s anti-corruption policies and procedures have been communicated to, broken down by type of business partner and region. Describe if the organization’s anti-corruption poli- cies and procedures have been communicated to any other persons or organizations. d. Total number and percentage of governance body members that have received training on anti-cor- ruption, broken down by region. e. Total number and percentage of employees that have received training on anti-corruption, broken down by employee category and region. Information unavailable/ incomplete We do not consider this for reporting as of 2023. ← PREVIOUS CHAPTER → NEXT CHAPTER 106 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 205-3 Confirmed incidents of cor- ruption and actions taken a. Total number and nature of confirmed incidents of corruption. b. Total number of confirmed incidents in which em- ployees were dismissed or disciplined for corruption. c. Total number of confirmed incidents when con- tracts with business partners were terminated or not renewed due to violations related to corruption. d. Public legal cases regarding corruption brought against the organization or its employees during the reporting period and the outcomes of such cases. Confidentiality constraints Not reported publicly on the basis of confidentiality/legal privilege, unless required by authorities/regulators. ANTI-COMPETITIVE BEHAVIOR 3-3 Management of material topics • Integrated Report 2023: We embed a culture of integrity and transparency along the extended value chain 206-1 Legal actions for anti-competitive behavior, anti-trust, and monopoly practices a. Number of legal actions pending or completed during the reporting period regarding anti-compet- itive behavior and violations of anti-trust and mo- nopoly legislation in which the organization has been identified as a participant. b. Main outcomes of completed legal actions, includ- ing any decisions or judgements. Confidentiality constraints Not reported publicly on the basis of confidentiality/legal privilege, unless required by authorities/regulators. TAX 3-3 Management of material topics • ABB Tax Policy 207-1 Approach to tax • ABB Tax Policy 207-2 Tax governance, control, and risk management • ABB Tax Policy 207-3 Stakeholder engagement and management of concerns re- lated to tax • ABB Tax Policy ← PREVIOUS CHAPTER → NEXT CHAPTER 107 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 207-4 Country-by-country reporting a. All tax jurisdictions where the entities included in the organization’s audited consolidated financial statements, or in the financial information filed on public record, are resident for tax purposes. b. For each tax jurisdiction reported in Disclosure 207-4-a: i. Names of the resident entities; ii. Primary activities of the organization; iii. Number of employees, and the basis for the cal- culation of this number; iv. Revenues from third-party sales; v. Revenues from intra-group transactions with other tax jurisdictions; vi. Profit/loss before tax; vii. Tangible assets other than cash and cash equivalents; viii.Corporate income tax paid on a cash basis; ix. Corporate income tax accrued on profit/loss; x. Reasons for the difference between corporate income tax accrued on profit/loss and the tax due if the statutory tax rate is applied to profit/ loss before tax. c. The time period covered by the information re- ported in Disclosure 207-4. Confidentiality constraints ABB discloses consolidated tax infor- mation for ABB Group covering all op- erations worldwide, as required. ABB also submits statutory financial state- ments locally, inclusive of tax bal- ances and disclosures, as required. Data per Country-by-Country report are commercially sensitive. Our com- petitors generally do not publish them. ABB must balance its responsi- bilities as a compliant taxpayer in each and every country in which it op- erates with the need to support com- petitive business growth. MATERIALS 3-3 Management of material topics • Sustainability Report 2023: Preserving resources, We preserve resources • Sustainability Report 2023: Preserving resources, Circularity • Sustainability Report 2023: Preserving resources, Waste and water management 301-1 Materials used by weight or volume • Sustainability Report 2023: Appendix, GRI disclosures table Breakdown of materials used by weight and volume into non-renewable materials and renewable materials. Information unavailable/ incomplete We publish the weight of the four main material groups which make up the main share of our products’ weight. Other materials are omitted due to their insignificance in weight. The requirement to distinguish the materials into renewable/ non-renewable was reviewed; as the ABB Circularity framework requires us to report data on material flows at a higher level, it was agreed not to inte- grate such a distinction into the framework, and we therefore report accordingly. In light of upcoming reg- ulations with similar requirements, we will evaluate this decision again when needed and based on these re- quirements’ materiality to ABB. ← PREVIOUS CHAPTER → NEXT CHAPTER 108 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 301-2 Recycled input materials used a. Percentage of recycled input materials used to man- ufacture the organization's primary products and services. Information unavailable/ incomplete A review of this indicator for integra- tion into the ABB Circularity frame- work has been conducted. As the ABB Circularity framework requires us to report data on material flows at a higher level, it was agreed not to inte- grate such a distinction into the framework, and we therefore report accordingly. In light of upcoming reg- ulations with similar requirements, we will evaluate this decision again when needed and based on these re- quirements’ materiality to ABB. 301-3 Reclaimed products and their packaging materials a. Percentage of reclaimed products and their packag- ing materials for each product category. b. How the data for this disclosure have been collected. Information unavailable/ incomplete A review of this indicator for integra- tion into the ABB Circularity frame- work has been conducted. As the ABB Circularity framework requires us to report data on material flows at a higher level, it was agreed not to inte- grate such a distinction into the framework, and we therefore report accordingly. In light of upcoming reg- ulations with similar requirements, we will evaluate this decision again when needed and based on these re- quirements’ materiality to ABB. ENERGY 3-3 Management of material topics • Sustainability Report 2023: Low-carbon society, We enable a low-carbon society • Sustainability Report 2023: Low-carbon society, Customer emissions • Sustainability Report 2023: Low-carbon society, ABB’s own emissions • Sustainability Report 2023: Low-carbon society, Supplier emissions • Sustainability Report 2023: Appendix, Approach to reporting • Sustainability Report 2023: Appendix, SASB Disclosure table 302-1 Energy consumption within the organization • Sustainability Report 2023: Appendix, GRI disclosures table Non-renewable fuel sources can include fuel for vehi- cles that are owned or controlled by the organization. c. Total fuel consumption within the organization from non-renewable sources, in joules or multiples, and including fuel types used. d. Total fuel consumption within the organization from renewable sources, in joules or multiples, and including fuel types used. e. In joules, watt-hours or multiples, the total: iv. iv. steam consumption f. In joules, watt-hours or multiples, the total: ii. heating sold iii. cooling sold iv. steam sold Information unavailable/ incomplete Measuring the energy use of our own fleet of leased vehicles is under review. Instead of disclosing total fuel con- sumption split by non-renewable and renewable sources, we report total energy consumption. Total consump- tion per fuel is covered in total energy consumption. To the best of our knowledge, no steam is used. To the best of our knowledge, we do not sell heating, cooling or steam. ← PREVIOUS CHAPTER → NEXT CHAPTER 109 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 302-2 Energy consumption outside of the organization a. Energy consumption outside of the organization, in joules or multiples. b. Standards, methodologies, assumptions, and/or calculation tools used. c. Source of the conversion factors used. Information unavailable/ incomplete We calculate our scope 3 emissions in disclosure 305-3 . Some categories of the scope 3 emissions are based on the energy consumption outside the organization. We do not report on this energy consumption yet. However, we are reviewing the option to extract this information from our scope 3 emissions calculation. 302-3 Energy intensity • Sustainability Report 2023: Appendix, GRI disclosures table 302-4 Reduction of energy consumption a. Amount of reductions in energy consumption achieved as a direct result of conservation and effi- ciency initiatives, in joules or multiples. b. Types of energy included in the reductions; whether fuel, electricity, heating, cooling, steam, or all. c. Basis for calculating reductions in energy consump- tion, such as base year or baseline, including the ra- tionale for choosing it. d. Standards, methodologies, assumptions, and/or calculation tools used. Information unavailable/ incomplete Reported locally in a non-standardized way, which makes it difficult to aggregate. Method is un- der review. 302-5 Reductions in energy require- ments of products and services a. Reductions in energy requirements of sold products and services achieved during the reporting period, in joules or multiples. b. Basis for calculating reductions in energy consump- tion, such as base year or baseline, including the ra- tionale for choosing it. c. Standards, methodologies, assumptions, and/or calculation tools used. Information unavailable/ incomplete This information is currently not col- lected at Group level due to the size and complexity of ABB’s portfolio of products, system and services. EMISSIONS 3-3 Management of material topics • Sustainability Report 2023: Low-carbon society, We enable a low-carbon society • Sustainability Report 2023: Low-carbon society, Customer emissions • Sustainability Report 2023: Low-carbon society, ABB’s own emissions • Sustainability Report 2023: Low-carbon society, Supplier emissions • Sustainability Report 2023: Appendix, Approach to reporting 305-1 Direct (Scope 1) GHG emissions • Sustainability Report 2023: Appendix, GRI Disclosures table 305-2 Energy indirect (Scope 2) GHG emissions • Sustainability Report 2023: Appendix, GRI disclosures table 305-3 Other indirect (Scope 3) GHG emissions • Sustainability Report 2023: Appendix, GRI disclosures table 305-4 GHG emissions intensity • Sustainability Report 2023: Appendix, GRI disclosures table 305-5 Reduction of GHG emissions • Sustainability Report 2023: Appendix, GRI disclosures table ← PREVIOUS CHAPTER → NEXT CHAPTER 110 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 305-6 Emissions of ozone-depleting substances (ODS) d. Production, imports, and exports of ODS in metric tons of CFC-11 (trichlorofluoromethane) equivalent. e. Substances included in the calculation. f. Source of the emission factors used. g. Standards, methodologies, assumptions, and/or calculation tools used. Information unavailable/ incomplete This indicator is being reviewed. We expect to disclose data next year. Ozone-depleting substances (ODS) are included in the ABB List of Prohibited and Restricted Substances. We measure the leakage of refrigerants from cooling systems. 305-7 Nitrogen oxides (NOx), sulfur oxides (Sox), and other signif- icant air emissions • Sustainability Report 2023: Appendix, GRI disclosures table h. Significant air emissions, in kilograms or multiples, for each of the following: iii. Persistent organic pollutants (POP) v. Hazardous air pollutants (HAP) vi. Particulate matter (PM) c. Standards, methodologies, assumptions, and/or calculation tools used. Not applicable We do not report air emissions from POP, HAP and PM at Group level, since such emissions are not material to ABB. Where they may occur, they are managed in accordance with local leg- islation and environmental permits. SUPPLIER ENVIRONMENTAL ASSESSMENT 3-3 Management of material topics • ABB Supplier Code of Conduct 308-1 New suppliers that were screened using environmental criteria All new suppliers must follow a registration and qualification pro- cess before being able to become a supplier to ABB. Suppliers fol- lowing the full qualification process are screened on environmen- tal criteria. This is 54 percent of all suppliers. 308-2 Negative environmental im- pacts in the supply chain and actions taken Number of suppliers assessed for environmental impacts is 3104. b. Number of suppliers identified as having significant actual and potential negative environmental impacts. c. Significant actual and potential negative environ- mental impacts identified in the supply chain. d. Percentage of suppliers identified as having signifi- cant actual and potential negative environmental impacts with which improvements were agreed upon as a result of assessment. e. Percentage of suppliers identified as having signifi- cant actual and potential negative environmental impacts with which relationships were terminated as a result of assessment, and why. Information unavailable/ incomplete As part of SSBM we have on-site as- sessment and review adherence to regulatory and ABB requirements. We request our suppliers to implement a corrective action plan and follow up on its progress. Due to sensitivity we do not report externally on findings related to this topic. We only provide an overall overview of suppliers as- sessed and risks mitigated, and the number of suppliers with who we have terminated our business relationship. EMPLOYMENT 3-3 Management of material topics • Sustainability Report 2023: Social progress, Diversity and inclusion 401-1 New employee hires and em- ployee turnover • Sustainability Report 2023: Social progress, Diversity and inclusion Breakdowns by age group Information unavailable/ incomplete We are adapting the global age group mapping to enable reporting against this indicator and it will be available in 2024. ← PREVIOUS CHAPTER → NEXT CHAPTER 111 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 401-2 Benefits provided to full-time employees that are not pro- vided to temporary or part-time employees The opportunity for stock ownership is offered by participation in either the Employee Share Acquisition Program (ESAP), or the Long-Term Incentive Plan (LTIP in form of a Performance Share Plan or Restricted Share Plan). The opportunity for stock owner- ship is the same for permanent full-time and permanent part-time employees at ABB. This is the case in all ABB locations where ESAP is offered. f. Benefits which are standard for full-time employees of the organization but are not provided to tempo- rary or part-time employees, by significant loca- tions of operation. These include, as a minimum: i. life insurance; ii. health care; iii. disability and invalidity coverage; iv. parental leave; v. retirement provision; vi. others. g. The definition used for ‘significant locations of operation’. Confidentiality constraints Due to sensitivity, such information is not disclosed. ABB meets all local reg- ulatory requirements in terms of pro- viding access to benefits to tempo- rary or part time workers. In terms of “vi. stock ownership” any stock program at ABB is equally of- fered to permanent full-time and per- manent part-time employees in the same way, while they are not offered to temporary employees. 401-3 Parental leave 100% of our employees are entitled to parental leave. b. Total number of employees that took parental leave, by gender. c. Total number of employees that returned to work in the reporting period after parental leave ended, by gender d. Total number of employees that returned to work after parental leave ended that were still employed 12 months after their return to work, by gender. e. Return to work and retention rates of employees that took parental leave, by gender." Information unavailable/ incomplete Currently, we are not able to globally report on the requested parental leave-related data items, since related processes are managed locally. As it is the case for other time management and absence management items, data processes are managed locally due to the various practices and legal con- straints specific to each country. Considering the sum of local charac- teristics and specificities, we have yet not been able to align a global report- ing that allows us to provide compre- hensive date for requirements under b./c./d./e. We are reviewing the re - quirements to enable reporting against the all requirements of the GRI indicator in the future. LABOR/MANAGEMENT RELATIONS 3-3 Management of material topics ABB’s relationship with its employee representatives is governed by law and regulations. In line with ABB’s culture, we are overall maintaining a transparent and trust-based relationship, which al- lows for early engagement and valuable discussions. Our policy respects the right of all personnel to form and join trade unions of their choice and to bargain collectively. 402-1 Minimum notice periods re- garding operational changes a. ABB is following the respective legal and regulatory require- ments for the engagement of employee representatives in rele- vant planned organizational changes, which affect employees. In general, affected employees are informed at the beginning of any such processes. b. In most of the collective bargaining agreements this is the case. ← PREVIOUS CHAPTER → NEXT CHAPTER 112 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation OCCUPATIONAL HEALTH AND SAFETY 3-3 Management of material topics For disclosures: • Sustainability Report 2023: Social progress, Health and safety For policies: • ABB Supplier Code of Conduct • ABB General Terms and Conditions • ABB Code of Conduct, Health and safety • ABB Policy on Health, Safety, Environment, Security and Sustainability 403-1 Occupational health and safety management system For disclosures: • Sustainability Report 2023, Appendix, Approach to reporting • Sustainability Report 2023, Social progress, Health and safety For policies: • ABB Supplier Code of Conduct • ABB General Terms and Conditions • ABB Code of Conduct, Health and safety • ABB Policy on Health, Safety, Environment, Security and Sustainability 403-2 Hazard identification, risk as- sessment, and incident investigation • Sustainability Report 2023, Appendix, Approach to reporting • Sustainability Report 2023, Social progress, Health and safety • ABB Code of Conduct 403-3 Occupational health services Where required by law and regulations ABB has the necessary oc- cupational health services, that are certified by local regulations. 403-4 Worker participation, consul- tation, and communication on occupational health and safety • Sustainability Report 2023: Social progress, Health and safety 403-5 Worker training on occupa- tional health and safety • Sustainability Report 2023: Social progress, Health and safety 403-6 Promotion of worker health • Sustainability Report 2023: Social progress, Health and safety 403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships • Sustainability Report 2023: Social progress, Health and safety 403-8 Workers covered by an occu- pational health and safety management system a. i: 100% b. ii: 100% c. iii: 100% d. No workers have been excluded. e. The management system is mandatory for all employees and contractors. The total coverage is estimated to be 99% as there will be theoretically new acquisitions that have not yet imple- mented the Management System. ← PREVIOUS CHAPTER → NEXT CHAPTER 113 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 403-9 Work-related injuries a. Sustainability Report 2023: Appendix, GRI disclosures table b. Sustainability Report 2023: Appendix, GRI disclosures table c. Sustainability Report 2023: Appendix, GRI disclosures table d. Sustainability Report 2023: Appendix, GRI disclosures table e. Rates calculated based on 200,000 hours worked. f. No workers have been excluded from this disclosure. g. For the LTIFR calculation we use the total workforce, which is a combined number of ABB employees and embedded contrac- tors (not employees but their work and/or workplace is con - trolled by the organization). The employee numbers we receive from ABACUS as FTE. The contractor hours are collected at the site-level and each month reported. LTIFR includes lost time in- juries and illnesses, and serious injuries, but excludes fatalities. All hazards and incidents are being investigated and action plans are formulated and executed after investigations. As a result of mergers and acquisitions, there may always be a percentage of employees not yet covered by the HSE programs and therefore by this disclosure. 403-10 Work-related ill health h. For all employees: i. The number of fatalities as a result of work-re- lated ill health; ii. The number of cases of recordable work-related ill health; iii. The main types of work-related ill health. i. For all workers who are not employees but whose work and/or workplace is controlled by the organization: i. The number of fatalities as a result of work-re- lated ill health; ii. The number of cases of recordable work-related ill health; iii. The main types of work-related ill health. j. The work-related hazards that pose a risk of ill health, including: i. how these hazards have been determined; ii. which of these hazards have caused or contrib- uted to cases of ill health during the reporting period; iii. actions taken or underway to eliminate these hazards and minimize risks using the hierarchy of controls. k. Whether and, if so, why any workers have been ex- cluded from this disclosure, including the types of worker excluded. l. Any contextual information necessary to under- stand how the data have been compiled, such as any standards, methodologies, and assumptions used. Information unavailable/ incomplete Data is not qualitatively sufficient. Process to capture data under development. ← PREVIOUS CHAPTER → NEXT CHAPTER 114 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation TRAINING AND EDUCATION 3-3 Management of material topics • ABB Human Rights policy and due diligence statement • ABB Code of Conduct, Fair employment, diversity & inclusion • Sustainability Report 2023: Social progress, Diversity and inclusion • Integrated Report 2023: Performance, We promote social prog - ress, Diversity & inclusion and employee engagement • ABB Group website: Diversity and Inclusion • ABB Group website: Sustainability Agenda 404-1 Average hours of training per year per employee • Sustainability Report 2023: Appendix, GRI disclosures table 404-2 Programs for upgrading em- ployee skills and transition as- sistance programs m. Type and scope of programs implemented and as- sistance provided to upgrade employee skills. n. Transition assistance programs provided to facili- tate continued employability and the management of career endings resulting from retirement or ter- mination of employment. Information unavailable/ incomplete Data are fragmented in local systems. There will be an analysis in the upcom- ing periods to check the feasibility of collecting and reporting on this data. 404-3 Percentage of employees re- ceiving regular performance and career development reviews • Sustainability Report 2023: Appendix, GRI disclosures table NON-DISCRIMINATION 3-3 Management of material topics For disclosures: • Sustainability Report 2023: Social progress, Human rights and labor standards • Sustainability Report 2023: Social progress, Diversity and inclusion • Sustainability Report 2023: Integrity and transparency For policies: • ABB Code of Conduct • ABB Human Rights Policy and Due Diligence Framework • ABB Ltd Modern Slavery Statement • ABB Supplier Code of Conduct 406-1 Incidents of discrimination and corrective actions taken • Sustainability Report 2023: Appendix, GRI disclosures table b. Status of the incidents and actions taken with refer- ence to the following: ii. Remediation plans being implemented; iii. Remediation plans that have been implemented, with results reviewed through routine internal management review processes; Confidentiality constraints The information is confidential and subject to legal privilege, and not be- ing reported as of 2023. FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING 3-3 Management of material topics • ABB Human Rights Policy and Due Diligence Framework ← PREVIOUS CHAPTER → NEXT CHAPTER 115 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 407-1 Operations and suppliers in which the right to freedom of association and collective bar- gaining may be at risk ABB has a rigorous approach to identify countries and commodi- ties where amongst other risks, risk to workers' rights to exercise freedom of association or collective bargaining is at risk. This has resulted in a list of focus countries and high-risk commodities. Type of operations: suppliers of direct and raw materials. Focus countries: Argentina, Brazil, Bulgaria, China, Colombia, India, Indonesia, Malaysia, Mexico, Peru, Poland, Saudi Arabia, South Africa, Thailand, Türkiye, Vietnam We conduct on-site assessments. If suppliers are not following re- quirements on freedom of association and collective bargaining, we request our suppliers to implement a corrective action plan and follow-up on the progress. Regarding our operations, we conduct human rights site assess- ments as part of our annual internal governance and assurance program. The human rights element includes labor rights and is part of regular assessment within the HSE/Sustainability assess - ment procedures. If any elements do not meet the required stan- dards, the responsible manager has to identify OFI (opportunity for improvement) or NC (non conformity) requiring specific action plans to manage the NC. CHILD LABOR 3-3 Management of material topics • Sustainability Report 2023: Social progress, Human rights and labor standards • Sustainability Report 2023: Integrity and transparency, Responsible sourcing Regarding our operations, we conduct human rights site assess- ments as part of our annual internal governance and assurance program. The human rights element includes child labor and is part of regular assessment within the HSE/Sustainability assess - ment procedures. If any elements do not meet the required stan- dards, the responsible manager has to identify OFI (opportunity for improvement) or NC (non-conformity) requiring specific ac- tion plans to manage the NC. ← PREVIOUS CHAPTER → NEXT CHAPTER 116 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 408-1 Operations and suppliers at significant risk for incidents of child labor c. Operations and suppliers considered to have signif- icant risk for incidents of: i. child labor; ii. young workers exposed to hazardous work. b. Operations and suppliers considered to have signif- icant risk for incidents of child labor either in terms of: i. type of operation (such as manufacturing plant) and supplier; ii. countries or geographic areas with operations and suppliers considered at risk. c. Measures taken by the organization in the reporting period intended to contribute to the effective aboli- tion of child labor. Information unavailable/ incomplete During 2023 we undertook business-specific reviews of our sa- lient human rights issues and analy- ses of our human rights due diligence processes, and validated our conclu- sions through internal and external stakeholder engagement. This work confirmed child labor as a salient human rights issue for ABB, fo- cused on our extended supply chain, rather than as a significant risk in our own operations. In the supply chain, we continued our work to ensure the responsible sourc- ing of conflict minerals and other min- erals of interest. FORCED OR COMPULSORY LABOR 3-3 Management of material topics • Sustainability Report 2023: Social progress, Human rights and labor standards • Sustainability Report 2023: Integrity and transparency, Responsible sourcing 409-1 Operations and suppliers at significant risk for incidents of forced or compulsory labor • Sustainability Report 2023: Social progress, Human rights and labor standards • Sustainability Report 2023: Integrity and transparency, Responsible sourcing SECURITY PRACTICES 3-3 Management of material topics ABB has a group of internal security managers globally, who pro- vide expertise to the business management in the areas of travel risk, security risk and crisis response. The management of third-party private security companies is the responsibility of lo- cal site management teams. 410-1 Security personnel trained in human rights policies or procedures All internal security managers have received internal training in the organization's human rights policies and their application to security. b. Whether training requirements also apply to third- party organizations providing security personnel. Information unavailable/ incomplete ABB internal security personnel have been trained on security and human rights principles. All contracts with third-party security personnel carry a clause to confirm that the third-party abides by the voluntary principle on security and human rights. Due to the management of third-party private security companies on a local level, detailed information is currently not available on Group level. RIGHTS OF INDIGENOUS PEOPLES 3-3 Management of material topics • Sustainability Report 2023: Social progress, Human rights and labor standards ← PREVIOUS CHAPTER → NEXT CHAPTER 117 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 411-1 Incidents of violations involv- ing rights of indigenous peoples • Sustainability Report 2023: Social progress, Human rights and labor standards LOCAL COMMUNITIES 3-3 Management of material topics • Sustainability Report 2023: Social progress, Community engagement 413-1 Operations with local commu- nity engagement, impact as- sessments, and development programs c. Percentage of operations with implemented local community engagement, impact assessments, and/ or development programs, including the use of: i. social impact assessments, including gender im- pact assessments, based on participatory processes; ii. environmental impact assessments and ongoing monitoring; iii. public disclosure of results of environmental and social impact assessments; iv. local community development programs based on local communities’ needs; v. stakeholder engagement plans based on stake- holder mapping; vi. broad-based local community consultation com- mittees and processes that include vulnera- ble groups; vii. works councils, occupational health and safety committees and other worker representation bodies to deal with impacts; viii.formal local community grievance processes Information unavailable/ incomplete Managed locally, global and coordi- nated process not available. Some questions are included in annual so- cial reporting but not systematically released. We have a high-level focus and are not able to release data at lo- cal level. Because we report on more than 400 projects, it is not possible to provide a collective assessment of the impact of diverse projects run in more than 40 countries. 413-2 Operations with significant actual and potential negative impacts on local communities a. Operations with significant actual and potential negative impacts on local communities, including: i. the location of the operations; ii. the significant actual and potential negative im- pacts of operations Information unavailable/ incomplete Managed locally, global and coordi- nated process not available. While the question is included in annual social reporting, it is not answered in a meaningful fashion. No process and systematic impact analysis (impacts including social and environment) SUPPLIER SOCIAL ASSESSMENT 3-3 Management of material topics • Sustainability Report 2023: Integrity and transparency, Responsible sourcing 414-1 New suppliers that were screened using social criteria All new suppliers must follow a registration and qualification pro- cess before being able to become a supplier to ABB. Suppliers fol- lowing the full qualification process are screened on social crite- ria. This is 54 percent of all new suppliers. ← PREVIOUS CHAPTER → NEXT CHAPTER 118 ABB SUSTAINABILITY REPORT 2023 APPENdIX Disclosure Location ABB omission statements Requirement(s) omitted Reason Explanation 414-2 Negative social impacts in the supply chain and actions taken Number of suppliers assessed for social impacts is 3014. b. Number of suppliers assessed for social impacts. Number of suppliers identified as having significant actual and potential negative social impacts. c. Significant actual and potential negative social im- pacts identified in the supply chain. d. Percentage of suppliers identified as having signifi- cant actual and potential negative social impacts with which improvements were agreed upon as a re- sult of assessment. e. Percentage of suppliers identified as having signifi- cant actual and potential negative social impacts with which relationships were terminated as a result of assessment, and why. As part of SSBM we have on-site as- sessment and review adherence to regulatory and ABB requirements. We request to our suppliers to implement an corrective action plan and follow-up on the progress. Due to sen- sitivity we do not report externally on findings related to this topic. We only provide an overall overview of suppli- ers assessed and risks mitigated, and the number of suppliers with who we have terminated our business relationship. PUBLIC POLICY 3-3 Management of material topics • ABB Code of Conduct: Working with governments 415-1 Political contributions • Sustainability Report 2023: Appendix, GRI Disclosures table b. If applicable, how the monetary value of in-kind con- tributions was estimated. Not applicable ABB funds, property or services must not be used to make political dona- tions or support any candidate for po- litical office,or political party, official or committee anywhere in the world. CUSTOMER PRIVACY 3-3 Management of material topics • ABB Code of Conduct: Privacy and personal data 418-1 Substantiated complaints concerning breaches of cus- tomer privacy and losses of customer data a. Total number of substantiated complaints received concerning breaches of customer privacy, catego- rized by: i. complaints received from outside parties and substantiated by the organization; ii. complaints from regulatory bodies. b. Total number of identified leaks, thefts, or losses of customer data. c. If the organization has not identified any substanti- ated complaints, a brief statement of this fact is sufficient. Confidentiality constraints Confidentiality constraints: Further to this, we deem this information confi- dential, hence it is not disclosed at this time. ← PREVIOUS CHAPTER → NEXT CHAPTER 119 ABB SUSTAINABILITY REPORT 2023 APPENdIX At ABB, we are determined to shape our future in an environmentally sustainable way by investing in environmentally sustainable activities. The pursuit of environmentally sustainable business is not only important to the public – but it also represents the paramount challenge of our times. To help address this challenge, the European Union (EU) has taken the lead in standardizing sustainability-related data and defining envi- ronmentally sustainable criteria and objectives. As part of the European Green Deal, the EU aims to become climate-neutral and to reduce GHG emissions generated within its borders to net zero by 2050. With the Action Plan on Financing Sustainable Growth, the European Commission intends to reorient the European economic and financial system towards more sustainable tech- nologies and businesses. The EU Taxonomy is the cornerstone of the EU’s Green Deal and Sustainable Finance Action Plan, as it aims to direct capital flows specifically into sustainable projects and companies. The Regulation (EU) 2020/852 on the establish - ment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2099 and the supplementing Delegated Acts, hereafter referred to as the Taxonomy Regulation, serve as a standardized and binding classification system to determine which economic activities in the EU are considered as “environmentally sustainable.” The EU Taxonomy defines “environmentally sustainable” business activi- ties, based on the six pre-defined environmental objectives 1 . By providing companies, investors, and policymakers with explicit definitions, the EU Taxonomy seeks to identify and scale up green investments, inhibit “greenwashing” and promote greater transparency regarding the true environmental sustainability of economic activities. The Taxonomy Regulation distinguishes between “taxonomy-eligible” and “taxonomy-aligned” economic activities. An economic activity is considered “eligible” if it is described in the adopted Delegated Acts, irrespective of whether that economic activity meets any of the established technical screening criteria. Consequently, economic activities are consid- ered “non-eligible” under the EU Taxonomy when they are not specifically described in the Delegated Acts. From financial year 2022, the Taxonomy Regulation requires affected companies to disclose their environmentally sustainable activities (i.e., taxonomy-aligned activ- ities). An eligible activity is only considered environmentally sustainable, and thus taxonomy-aligned, if it meets the technical screening criteria (TSC): • Makes a substantial contribution to one of the environmental objectives by comply- ing with the substantial contribution (SC) criteria defined for the activity (e.g., level of carbon emissions), • Meets the “do no significant harm” (DNSH) criteria, having no negative effect on any of the other five environmental objectives (e.g., from the asset, process, or product), and • Complies with the minimum safeguards (MS) related primarily to human rights and social and labor standards. — EU Taxonomy: Background and objectives — EU Taxonomy: Disclosures for the financial year 2023 1 Climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystem. 2 Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facil- itate sustainable investment and amending Regulation (EU) 2019/2088. 120 ABB SUSTAINABILITY REPORT 2023 APPENdIX For the first year of reporting, on financial year 2021, disclosures were limited to the proportions of Taxonomy-eligible and Taxonomy-non-eligible turnover, capital expen- diture (Capex) and operating expenditure (Opex), as well as qualitative information, for the objectives of climate change mitigation and adaptation. For the second year of reporting, on financial year 2022, the disclosure requirements were expanded. In addition to the previous disclosures, companies also needed to disclose the proportions of “Taxonomy-aligned” turnover, Capex and Opex, along with supporting qualitative information, still only for the two climate objectives. For the third year of reporting, on financial year 2023, the number of activities and corresponding disclosures were further enlarged. In addition to the 2022 disclosures on Taxonomy-aligned turnover, Capex and Opex, companies now need to report on Taxonomy-eligibility of additional economic activities covered under the amended Climate Delegated Act, as well as for the four remaining environmental objectives introduced by the Environmental Delegated Act. Taxonomy related disclosures should be prepared in line with the Taxonomy Regulation Article 8, and the related Delegated Acts. The legal framework for the EU Taxonomy reporting and disclosure obligations was further expanded in 2023. It currently consists of the following elements: the Taxonomy Regulation 2 , the Climate Delegated Act 3 (as amended in June 202 34 ), the Disclosures Delegated Act 5 (as amended in June 20236 ), the Complementary Climate Delegated Act 7 , and the Environmental Delegated Act 8 , including their various Annexes. In addition, the Taxonomy FAQs and Notices published by the European Commission have been taken into consideration in our disclosures, where relevant. The Taxonomy Regulation is a living legislation, dynamic in its development; the for- mulations and terms contained in these pieces of legislation are sometimes subject to uncertainty in interpretation and require further clarification. Therefore, the fol- lowing disclosures rely on our own interpretation; the approach applied for this year’s reporting is updated in comparison to last year and may not apply in the same way in the future. In 2021, following the release of the Climate Delegated Act, we conducted a first eligi- bility analysis of our products, sites and activities and reviewed them against the eco- nomic activities defined by the Taxonomy in all the countries in which we operate. We opted for a decentralized approach, involving the expertise of our product managers, real estate managers, sustainability managers, financial controllers, R&D controllers, and environmental managers across all levels of our organization and solicited advice from external consultants. In 2022, relevant Taxonomy-aligned activities were identified across the Group, with alignment results published for the first time. In 2023, a thorough review was conducted to accommodate the changes introduced by the Environmental Delegated Act and changes to the Disclosures and Climate Delegated Acts (e.g. additions of new activities, changes in technical screening crite- ria, or changes of the description of activities). To assess eligibility, we reviewed the ABB Global product offering and matched it to the economic activities defined by the Taxonomy Delegated Acts. Most of our eligible products and services are considered “enabling activities” as defined by the Taxonomy 9 , meaning economic activities that “directly enable other activities to make a substantial contribution” to one of the environmental objectives. ABB business activities, products, and solutions that are not described in the Taxonomy Delegated Acts are deemed “non-eligible” and thus are not in scope of the Taxonomy reporting. To identify the relevant activities, we referred to the descriptions of the activities, the relevant Nomenclature of Economic Activities (NACE) codes and, if necessary, the substantial contribution criteria, thereby assessing whether a business activity — How ABB adopted the EU Taxonomy 3 Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852. 4 Commission Delegated Regulation (EU) 2023/2485 of 27 June 2023 amending Delegated Regulation (EU) 2021/2139. 5 Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852. 6 Commission Delegated Regulation (EU) 2023/2486 of 27 June 2023 amending Commission Delegated Regulation (EU) 2021/2178. 7 Commission Delegated Regulation (EU) 2022/1214 of 9 March 2022 amending Delegated Regulation (EU) 2021/2139. 8 Commission Delegated Regulation (EU) 2023/2486 of 27 June 2023 supplementing Regulation (EU) 2020/852. 9 According to Article 16 of Regulation (EU) 2020/852, an economic activity shall qualify as contributing substantially to one or more of the environmental objectives “by directly enabling other activities to make a substan- tial contribution to one or more of those objectives, provided that such economic ac- tivity: (a) does not lead to a lock-in of assets that undermine long-term environmental goals, considering the economic lifetime of those assets; and (b) has a substantial positive environmental impact, on the basis of life-cycle considerations.” 121 → NEXT CHAPTER carried out by ABB matches an activity description. Each ABB business division then broke down their offerings or economic activities to the level of granularity required to identify and cross check with the eligibility and alignment criteria. The mapping of ABB’s real estate initiatives at country level, the EU Taxonomy data collection as well as the reporting was coordinated centrally. Capex was identified ei- ther centrally, at the division level (e.g., large investments), or at the country level (e.g., real estate) and then mapped to the relevant activity or allocated to activities based on the percentage of eligible and/or aligned revenue. Opex activities were analyzed for the purpose of Taxonomy reporting under a twofold approach: 1. R&D activities identified based on the product mapping, and 2. other Opex allocated based on the percentage of eligible and aligned turnover 10 . ABB’s Sustainability Board and the Finance, Audit and Compliance Committee of the Board were kept informed of progress, possible risks and obstacles, as well as current developments regarding the Taxonomy reporting. As a technology leader in electrification and automation, ABB plays a key role in accelerating the energy transition to a net-zero future. Our solutions help optimize, electrify and decarbonize the industry, buildings, power, and transport sectors that together account for a significant share of global environmental impacts. As a result, ABB enables a more sustainable and resource-efficient future through all our business activities. ABB’s strategy is deeply rooted in our purpose and is designed to accelerate profitable growth by capitalizing on key global trends. Our purpose is the cornerstone of ABB’s direction and strategy. Through our technolo- gies and responsible business practices, we aim to make our stakeholders and society more sustainable. We achieve this by addressing the world’s energy challenges, trans- forming industries and embedding sustainability in all our activities and processes across our value chain. Our purpose is based on five themes that capture the essence of what ABB stands for, what we aspire to, and how we make a permanent sustainable impact: creating success, leading with technology, addressing the world’s energy chal- lenges, transforming industries, and embedding sustainability. With these themes in mind, we enable a more sustainable and resource-efficient future with our technology leadership in all our key markets. More information about ABB divisions and activities can be found in the chapter “Businesses” of the Consolidated Financial Statements 2023. Eligibility and substantial contribution assessments A selection of our activities in the Electrification, Motion, Process Automation and Robotics & Discrete Automation business areas, together with our Real Estate activi- ties, are eligible under the EU Taxonomy to contribute to the environmental objective of climate change mitigation. In addition, some of our activities are eligible under the environmental objective of transitioning to a circular economy. On the basis of the analysis of the economic activities, our main contribution remains in climate change mitigation. The table below presents the allocation of our activities to the economic activities listed in the EU Taxonomy under the environmental objectives of climate change mit- igation and transition to a circular economy. Changes may be made to this list of eco- nomic activities in the future as new economic activities that better fit ABB’s portfolio could be further released by the European Commission. In addition, a more detailed assessment of the technical screening criteria (TSC) for the activities introduced in 2023 is still underway. — Economic activities of ABB in the context of the EU Taxonomy 10 The terms turnover and revenue are used interchangeably throughout this document. 122 ABB SUSTAINABILITY REPORT 2023 APPENdIX ABB Group Economic activities 2023 in accordance with the EU Taxonomy (“ Taxonomy-eligible”) Economic activity under the EU Taxonomy Description of economic activity Application to ABB Group business areas and functions ENVIRONMENTAL OBJECTIVE: CLIMATE CHANGE MITIGATION 3. MANUFACTURING 3.1 Manufacture of renewable en - ergy technologies • Manufacture of renewable energy tech- nologies, as renewable energy is defined in Article 2(1) of Directive (EU) 2018/2001 • Electrification • Motion • Process Automation 3.2 Manufacture of equipment for the production and use of hydrogen • Manufacture of equipment for the pro- duction and use of hydrogen • Motion 3.3 Manufacture of low-carbon technologies for transport • Manufacture, repair, maintenance, retro- fitting, repurposing and upgrading of low-carbon vehicles, rolling stock and vessels • Electrification • Motion • Process Automation 3.4 Manufacture of batteries • Manufacture of rechargeable batteries, battery packs and accumulators for transport, stationary and off-grid en- ergy storage, and other industrial applications. • Manufacture of respective components • Motion 3.5 Manufacture of energy effi - ciency equipment for buildings • Manufacture of energy efficiency equip- ment for buildings • Electrification • Motion • Robotics & Discrete Automation 3.6 Manufacture of other low-carbon technologies • Manufacture of technologies aimed at substantial GHG emission reductions in other sectors of the economy, where those technologies are not covered by activities 3.1 to 3.5 • Process Automation 3.19 Manufacture of rail rolling stock constituents (newly added in 2023) • Manufacture, installation, technical con- sulting, retrofitting, upgrade, repair, maintenance, and repurposing of prod- ucts, equipment, systems, and software related to the rail constituents detailed in Point 2.7 of Annex II to Directive (EU) 2016/797 • Electrification 3.20 Manufacture, installation, and servicing of high, medium and low voltage electrical equip- ment for electrical transmission and distribution that result in or enable a substantial contribution to climate change mitigation (newly added in 2023) • The economic activity develops, manu- factures, installs, maintains or services electrical products, equipment or sys- tems, or software aimed at substantial GHG emission reductions in high, me- dium and low voltage electrical trans- mission and distribution systems through electrification, energy effi- ciency, integration of renewable energy or efficient power conversion. • Electrification • Motion • Process Automation 4. ENERGY 4.9 Transmission and distribution of electricity • Construction and operation of transmis- sion systems that transport the electric- ity on the extra high-voltage and high-voltage interconnected system. • Construction and operation of distribu- tion systems that transport electricity on high-voltage, medium-voltage and low-voltage distribution systems • Motion 6. TRANSPORT 6.5 Transport by motorbikes, passenger cars and light com- mercial vehicles • Purchase, financing, renting, leasing and operation of vehicles designated as cat- egory M1 (232), N1 (233), both falling under the scope of Regulation (EC) No 715/2007 of the European Parliament and of the Council, or L (2- and 3-wheel vehicles and quadricycles). • Electrification • Motion • Process Automation • Robotics & Discrete Automation 123 → NEXT CHAPTER Economic activity under the EU Taxonomy Description of economic activity Application to ABB Group business areas and functions 6.14 Infrastructure for rail transport • Construction, modernization, operation and maintenance of railways and sub- ways as well as bridges and tunnels, sta- tions, terminals, rail service facilities, safety and traffic management systems including the provision of architectural services, engineering services, drafting services, building inspection services and surveying and mapping services and the like as well as the performance of physi- cal, chemical and other analytical testing of all types of materials and products. • Electrification 6.15 Infrastructure en - abling low-carbon road transport and public transport • Construction, modernization, mainte- nance and operation of infrastructure that is required for zero tailpipe CO 2 e operation of zero-emissions road trans- port, as well as infrastructure dedicated to transshipment and infrastructure re- quired for operating urban transport • Electrification • Process Automation 6.16 Infrastructure enabling low-carbon water transport • Construction, modernization, operation and maintenance of infrastructure that is required for zero tailpipe CO 2 e opera- tion of vessels or the port’s own opera- tions, as well as infrastructure dedicated to transshipment • Electrification • Process Automation 7. CONSTRUCTION AND REAL ESTATE 7.2 Renovation of existing buildings • Construction and civil engineering works or preparation thereof • Real Estate 7.3 Installation, maintenance and repair of energy efficiency equipment • Individual renovation measures consist- ing of installation, maintenance or repair of energy efficiency equipment • Real Estate 7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) • Installation, maintenance and repair of charging stations for electric vehicles in buildings and parking spaces attached to buildings • Real Estate 7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings • Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy per- formance of buildings • Process Automation • Real Estate 7.6 Installation, maintenance, and repair of renewable energy technologies • Installation, maintenance and repair of renewable energy technologies, on-site • Electrification • Real Estate 7.7 Acquisition and ownership of buildings • Buying real estate and exercising owner- ship of that real estate • Real Estate 8. INFORMATION & COMMUNICATION 8.2 Data-driven solutions for GHG emissions reductions • Development or use of ICT solutions that are aimed at collecting, transmitting, storing data and at its modelling and use where those activities are predomi- nantly aimed at the provision of data and analytics enabling GHG emission reduc- tions; such ICT solutions may include, in- ter alia, the use of decentralized technol- ogies (i.e., distributed ledger technologies), Internet of Things (IoT), 5G and artificial intelligence • Process Automation 9. PROFESSIONAL, SCIENTIFIC AND TECHNICAL ACTIVITIES 9.1 Close to market research, de - velopment and innovation • Research, applied research and experi- mental development of solutions, pro- cesses, technologies, business models and other products dedicated to the re- duction, avoidance or removal of GHG emissions (RD&I) for which the ability to reduce, remove or avoid GHG emissions in the target economic activities has at least been demonstrated in a relevant environment, corresponding to at least Technology Readiness Level 6 • R&D 124 ABB SUSTAINABILITY REPORT 2023 APPENdIX Economic activity under the EU Taxonomy Description of economic activity Application to ABB Group business areas and functions ENVIRONMENTAL OBJECTIVE: TRANSITION TO A CIRCULAR ECONOMY (NEWLY ADDED IN 2023) 1. MANUFACTURING 1.2 Manufacture of electrical and electronic equipment • Manufacturing of electrical and elec- tronic equipment for industrial, profes- sional and consumer use • Motion • Process Automation 4. INFORMATION & COMMUNICATION 4.1 Provision of IT/OT data-driven solutions • The activity manufactures, develops, in- stalls, deploys, maintains, repairs or pro- vides professional services, including technical consulting for design or moni- toring of specific software systems • Electrification • Motion • Process Automation • Robotics & Discrete Automation 5. SERVICES 5.1 Repair, refurbishment and remanufacturing • Repair, refurbishment and remanufactur- ing of goods that have been used for their intended purpose before by a cus- tomer (physical person or legal person) • Electrification • Motion • Process Automation • Robotics & Discrete Automation 5.2 Sale of spare parts • Sale of spare parts • Electrification • Motion • Robotics & Discrete Automation 5.3 Preparation for re-use of end-of-life products and product components • Preparation for re-use of products and components at the end of life • Motion 5.4 Sale of second-hand goods • Sale of second-hand goods that have been used for their intended purpose before by a customer (physical person or legal person), possibly after repair, refur- bishment or remanufacturing • Motion ABB’s activities were mapped following the ABB product tree by business area, divi- sion, product group, product line and industry usage. Financial data was extracted from various management reporting tools and reconciled to our consolidated figures at the division or product group level, with the highest appropriate degree of granu- larity to subsequently assess the Substantial Contribution criteria. In 2023 we reviewed and partially reassessed our 2022 eligible activity mapping based on the developments of the Taxonomy. Overall, the list of eligible activities is more extensive compared to 2022, as more activities relevant for ABB became covered by the amended Climate Delegated Act and the Environmental Delegated Act. In partic- ular, the newly added activity 3.20 “Manufacture, installation, and servicing of high, medium and low voltage electrical equipment for electrical transmission and distri- bution” under the climate change mitigation objective had a direct relevance for ABB business activities and entailed a re-mapping of related activities. Following the eligibility assessment, the alignment of all qualifying activities with the Substantial Contribution (SC) criteria specified in the respective Delegated Acts was analyzed. This assessment was completed for our products, our real estate, our fleet and R&D activities at the Group, business area, business division, and site levels. The eligible activities that were newly released in 2023 will be assessed for alignment in FY 2024, as foreseen by the EU Taxonomy Regulation. In 2023, ABB made a substantial contribution to climate change mitigation to the following activities: • 3.1 Manufacture of renewable energy technologies, • 3.3 Manufacture of low-carbon technologies for transport, • 3.4 Manufacture of batteries, • 3.5 Manufacture of energy efficiency equipment for buildings, • 4.9 Transmission and distribution of electricity, • 6.5 Transport by motorbikes, passenger cars and light commercial vehicles, • 6.14 Infrastructure for rail transport, 125 → NEXT CHAPTER • 6.15 Infrastructure enabling low-carbon road transport and public transport, • 6.16 Infrastructure enabling low-carbon water transport, • 7.2 Renovation of existing buildings, • 7.3 Installation, maintenance and repair of energy efficiency equipment, • 7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings, • 7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings, • 7.6 Installation, maintenance and repair of renewable energy technologies, and • 7.7 Acquisition and ownership of buildings. Do no significant harm (DNSH) The DNSH criteria were analyzed for economic activities where ABB meets the Substantial Contribution condition as listed above. Depending on the relevant envi- ronmental objective under which a certain activity is reported, ABB used a structured assessment to document its compliance with the DNSH criteria for the other five environmental objectives. Based on the DNSH criteria for the relevant economic ac- tivities, our assessment was carried out at the activity, company, and site levels. For site-specific criteria, we focused our analysis on sites that produce products meeting the substantial contribution criteria. Compared to last year, several generic and activity-specific DNSH criteria were expanded or amended by the new Delegated Acts, which we took into account in our assessment. Below, we set out our interpretation and describe the main analyses conducted. The assessments confirm that we meet the requirements of the DNSH criteria. 1. Climate change adaptation We conducted a screening of the relevant physical climate risks and performed an initial climate risk and vulnerability assessment to identify which manufacturing sites may be affected by physical climate risks during their expected lifetimes. The climate risk and vulnerability analyses were based on Representative Concentration Pathway (RCP) scenarios 4.5 and 8.5 up to the year 2052. Furthermore, we assessed the relevance of identified climate risks on the economic activity and potential ad- aptation solutions that could reduce identified risks. 2. Sustainable use and protection of water and marine resources We assessed our activities for relevant sites regarding the sustainable use and pro- tection of water and marine resources by measuring the fulfillment of requirements for water quality preservation, water stress avoidance and water impact assess- ment. Furthermore, the generic criteria were expanded in 2023 to include potential impacts on marine waters. Our sites within this scope are certified according to ISO 14001 Environmental Management Systems and ISO 9001 Quality Management Systems or provided other documentation which served as a basis for our assess- ment, supplemented by additional external data sources. Where activity-specific DNSH criteria exist, we have assessed compliance on an ac- tivity basis. For example, the amended Climate Delegated Act has broadened water protection criteria for the Activity 6.16 Infrastructure enabling low-carbon water transport. Applicability of these criteria was assessed based on the nature of ABB’s activities and products and associated impacts. 3. Transition to a circular economy To help preserve the Earth’s resources for future generations, ABB takes a company-wide approach to circularity. We leverage the ABB Circularity Approach to meet the requirements of DNSH. By 2030, at least 80 percent of our products and solutions will be covered by our Circularity Approach and evaluated against a clear set of KPIs, corresponding to each stage of the product life cycle. 126 ABB SUSTAINABILITY REPORT 2023 APPENdIX Certain requirements for construction and demolition waste specific for activities 6.14 and 6.16 are deemed not applicable to relevant ABB products, since this is not part of ABB operations. 4. Pollution prevention and control The DNSH criteria require that the economic activity does not lead to the produc- tion, placing on the market or use of chemical substances listed in a variety of EU chemical regulations and directives, such as EU Regulation 2019/1021 on Persistent Organic Pollutants, EU Directive 2011/65 on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS) or the EU Regulation 1907/2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH). ABB has robust company-wide processes in place to ensure compliance with all applicable regulations. With respect to the REACH-related requirements, we have noted new specifications concerning a minimum concentration limit for substances of very high concern, ex- cept if “no other suitable alternative substances” are available on the market. The relevant additional assessment and documentation required is not currently avail- able, which for now prevents ABB from claiming compliance with these DNSH crite- ria for some of its products. ABB is committed to taking further steps to make the necessary documentation available. Furthermore, in our assessment, we assume that the approved exemptions to the EU Directive on Restriction of Hazardous Substances in Electrical and Electronic Equipment (RoHS) are valid also in the context of the DNSH. We understand that there are different positions in the industry on interpretation of this point, as the Taxonomy legal text leaves some unclarity. We have therefore opted for an approach adapted to business realities, as long as no official guidance to the opposite has been released. 5. Protection and restoration of biodiversity and ecosystems In order to verify adherence to the requirements for biodiversity and ecosystems, the relevant sites in or near biodiversity-sensitive or -protected areas were identi- fied and analyzed in a structured screening process. The EU Natura 2000 network, UNESCO World Heritage sites, Key Biodiversity Areas, as well as other protected ar- eas were considered. Most of our sites within this scope are certified according to ISO 14001 Environmental Management Systems and ISO 9001 Quality Management Systems, which provided the basis for our assessment, supplemented by additional external data sources. Furthermore, our manufacturing sites operate strictly in line with valid permits. Our EU sites are already subject to relevant EU regulatory requirements relating to flora, fauna, and habitats, whereas the non-EU sites underwent a case-by-case evalua- tion, which considered relevant national legislation related to the conservation of habitats and species, as well as external environmental assessments. Minimum safeguards The minimum safeguards are based on Article 18 of the Taxonomy Regulation and drawn from principles expressed by the OECD, the UN, the Fundamental Conventions of the International Labour Organization and the International Bill of Human Rights. ABB used a structured assessment to document its compliance with the minimum safeguards. The assessment considered the recommendations for the operation- alization of the minimum safeguards as set forth in the Final Report on Minimum Safeguards from the EU Platform on Sustainable Finance (2022). Our assessment was carried out separately for nine guiding principles: policies, due diligence and risk assessment, addressing impacts and tracking remediation effectiveness, commu- nication, grievance mechanisms, consumer interests, anti-corruption, competition, and taxation. For further information, please refer to the chapters on Human rights and labor stan- dards of this Sustainability Report. 127 → NEXT CHAPTER ABB financial and non-financial reporting ABB prepares its consolidated financial statements in accordance with U.S. GAAP. The EU Taxonomy Regulation references the KPI disclosure in accordance with International Financial Reporting Standards (IFRS). For the accounting treatment of fi- nancial data required for the KPI disclosures, the two standards are largely converged, with the following exceptions: • Non-order related research and development is expensed as incurred under U.S. GAAP and therefore has been reported as part of the Opex KPI, and • Leases with a term of one year or less are expensed as incurred under U.S. GAAP and not capitalized; therefore, these have also been reported as part of our Opex KPI. The remaining differences between revenue recognition, tangible and intangible assets, and leases are largely converged, and no material differences impacting the comparability of data would be expected. The results of our assessment of the Taxonomy eligibility and alignment of our of- ferings are summarized below. As our Taxonomy alignment is being reported for the second time, figures and comparable information from 2022 are also provided. The calculation of the KPIs for year-end 2023 was based on financial data as available on December 31, 2023. Turnover KPI The proportion of Taxonomy-eligible and/or -aligned turnover has been calculated as the part of net turnover derived from products and services associated with Taxonomy-eligible and/or -aligned economic activities (numerator) divided by net turnover (denominator) for the financial year ended December 31, 2023. The denominator is the Group’s net turnover as presented in the Consolidated Income Statements under the line item “Total revenues,” in accordance with U.S. GAAP. To cal- culate the numerator, we used the activity mapping described above and identified all third-party revenues associated with the Taxonomy-eligible and/or -aligned activities. For the year ended December 31, 2023, 46% of ABB revenues were Taxonomy-eligible, and 6% of ABB revenues were Taxonomy-aligned under the objective of climate change mitigation (CCM), while 9% of ABB revenues were Taxonomy-eligible under the objective of transition to a circular economy (CE). In some instances, we disaggre- gated revenues by product as well as industry usage to identify the Taxonomy-eligible and aligned turnover. To avoid double-counting of those business activities that were mapped to several activities, we calculated and reported their contribution to only one economic activity. In comparison, in 2022, 37% of ABB revenues were Taxonomy-eligible , and 10% of ABB revenues were Taxonomy-aligned. Large parts of ABB’s business activities are not directly covered by the Taxonomy’s activities, although the new version of the Climate Delegated Act did extend more to our sector. In addition, the alignment assessment for the activities under the Environmental Delegated Act is still ongoing and will be finalized in 2024. Against this background, the majority of our Taxonomy-eligible turnover is re- ported under: (i) Manufacture, installation, and servicing of high, medium, and low voltage electri- cal equipment for electrical transmission and distribution (CCM 3.20), (ii) Manufacture of electrical and electronic equipment (CE 1.2), and (iii) Other low-carbon technologies (CCM 3.6). While the majority of our Taxonomy-aligned turnover is reported under: (i) Renewable energy technologies (CCM 3.1), (ii) Manufacture of low carbon technologies for transport (CCM 3.3), and (iii) Energy efficiency equipment for buildings (CCM 3.5). — Taxonomy KPI disclosures 128 ABB SUSTAINABILITY REPORT 2023 APPENdIX Activities CCM 3.20 and CE 1.2 were newly released in 2023 and only eligibility is required for reporting in financial year 2023, explaining why no alignment is reported this year. Activity CCM 3.6 requires that the contribution to GHG emission reductions be measured using a life cycle GHG emission savings calculation that demonstrates the savings “compared to the best-performing alternative technology, product or solution available on the market”. For many of our significant electrical and industrial automa- tion solutions, it was unclear how to define “the best-performing alternative” on the market, as such products are not widely available. The Substantial Contribution (SC) criteria need further clarification to determine what part of our electrical and indus- trial automation solutions can fulfill them. For now, this Activity CCM 3.6 was deemed not-aligned. The increase of our Taxonomy-eligible turnover in 2023 compared to 2022 is reflecting the expansion of newly added activities and environmental objectives that match better our business focus. The decrease in Taxonomy-aligned turnover between 2023 and 2022 is mainly due to the following reasons: (i) Reclassification of some our 2022 aligned business activities to newly released activities for which alignment is not required this year (for example, e-mobility), (ii) A decrease in the relative share of the turnover of business divisions and product groups that contribute to Taxonomy-aligned activities compared to ABB’s overall global turnover, and (iii) A change in the mix of industry applications of our product portfolio, which im- pacts our ability to meet certain alignment criteria (for example, the relative share of transport and buildings has declined in 2023). The details of the turnover KPI and breakdowns are provided on pages 133-135 of the report. Capital expenditure (Capex) KPI The Capex KPI is defined as Taxonomy-eligible and/or -aligned Capex (numerator) divided by total Capex (denominator) for the financial year ended December 31, 2023. The total Capex used for the denominator includes total additions to tangible and intangible assets before depreciation, amortization and revaluations and impair- ments, as presented in Note 23 “Operating segment and geographic data” of the Consolidated Financial Statements, and from leases (finance and operating), as presented in Note 14 “Leases,” as well as assets acquired as part of business combi- nations, as presented in Note 4 “Acquisitions, divestments and equity-accounted com- panies.” Taxonomy-eligible and/or -aligned Capex used for the numerator includes Capex related to assets or processes that are associated with eligible or aligned activities, and Capex related to the purchase of output for eligible or aligned activi- ties and individual measures. No “Capex plans” in line with the Taxonomy regulation were considered. Within ABB, real estate initiatives and large investments are identified and analyzed on a case-by-case basis and mapped to the relevant activities at the business area and divisional levels. Capex KPI data collection is coordinated centrally. Investments have been reported under the activity with which the Capex is associated. For the year ended December 31, 2023, 64% of ABB Capex are Taxonomy-eligible, and 8% of ABB Capex are Taxonomy-aligned under the objective of climate change mitiga- tion. In comparison, in 2022, 64% of ABB Capex were Taxonomy-eligible , and 14% of ABB Capex were Taxonomy-aligned. For all remaining expenditures we allocated Capex according to a factor based on the percentage of eligible and aligned revenue per business division. For example, if 10% of the division’s revenues were eligible, 10% of the remaining Capex not specifically mapped could be allocated to the activity associated with that revenue. By initially 129 → NEXT CHAPTER mapping large projects and subsequently allocating the remaining Capex, we ensured there was no double counting of Capex KPIs. Against this background, the majority of our Taxonomy-eligible Capex is re- ported under: (i) Acquisition and ownership of buildings (CCM 7.7), (ii) Manufacture, installation, and servicing of high, medium and low voltage electri- cal equipment for electrical transmission and distribution (CCM 3.20), and (iii) Transport by motorbikes, passenger cars and light commercial vehicles (CCM 6.5). While the majority of our Taxonomy-aligned Capex is reported under: (i) Transport by motorbikes, passenger cars and light commercial vehicles (CCM 6.5), (ii) Acquisition and ownership of buildings (CCM 7.7), and (iii) Installation, maintenance and repair of energy efficiency equipment (CCM 7.3). Acquisition and ownership of buildings (CCM 7.7) of ABB’s real estate portfolio ac- counts for the biggest portion of Capex eligibility, with the share further increased as a result of reallocation from Activity 7.1. The main difference between Taxonomy- eli- gible and aligned Capex is mainly due to the following reasons: (i) Challenges in applying EU Energy Performance of Buildings Directive to ABB’s global real estate portfolio outside of the EU, (ii) Limited availability of information on Energy Performance Certificates for our global assets, and (iii) Energy certificates not meeting the Substantial Contribution criteria for energy efficiency of buildings. The real estate function carried out technical screenings on the largest investments within EU. As a result of this activity, the investments related to the new ABB campus in Mannheim proved to be Taxonomy-aligned thanks to the high energy performance of the building, which is designed for minimizing energy use and GHG emissions. The difference between Taxonomy-aligned Capex 2023 and Taxonomy-aligned Capex 2022 is mainly driven by the decrease of aligned Business combination. We could not fully evaluate the Technical Screening Criteria of the business activities newly ac- quired in the last months of the year. The assessment of these new portfolio activities will be completed during 2024 and reflected in our Taxonomy Turnover, Capex and Opex for 2024. The details of the Capex KPI and breakdowns are provided on pages 136-139 of the report. Operating expenditure (Opex) KPI The Opex KPI is defined as Taxonomy-eligible and/or -aligned Opex (numerator) di - vided by total Opex (denominator) for the financial year ended December 31, 2023. Total Opex used for the denominator consists of direct non-capitalized costs related to R&D, short-term leases (less than 1 year), repairs and maintenance, building ren- ovation projects, and any other direct expenditures associated with the day-to-day servicing of assets including property, plants and equipment. Direct costs for training and other human resource needs are not included in either the denominator or the nu- merator. R&D is based on the line item “Non-Order related Research & Development” in the Consolidated Income Statements. Other corresponding values can be derived from our internal reporting systems but are not directly reconcilable with the figures presented in the Consolidated Income Statements. For the year ended December 31, 2023, 45% of Opex are Taxonomy-eligible and 6% of ABB’s Opex are Taxonomy-aligned under the objective of climate change mitigation. In comparison, in 2022, 40% of Opex were Taxonomy-eligible and 11% of ABB’s Opex were Taxonomy-aligned. 130 ABB SUSTAINABILITY REPORT 2023 APPENdIX The Opex data aggregation was broken into two distinct processes. R&D was allocated to Taxonomy-eligible activities identified in the activity mapping phase described above. R&D managers working on projects not associated with Taxonomy-eligible activities but intended to substantially reduce GHG emissions as- sessed their eligibility using the criteria under Activity 9.1 “Close to market research, development and innovation” where appropriate. For the remaining Opex, allocation factors were applied to building renovation projects, maintenance and repair, and any other direct expenditures relating to the day-to-day servicing of real property assets, as well as short-term leases. These expenses were considered for each division and multiplied by the percentage of eligible and aligned revenue in that division. This approach was necessary due to a lack of more granular data on the same basis as described above for the Capex KPI. With this process, we ensured there was no double counting for the Opex KPI. The majority of our Taxonomy-eligible Opex is reported under: (i) Manufacture, installation, and servicing of high, medium and low voltage electri- cal equipment for electrical transmission and distribution (CCM 3.20), (ii) Manufacture of electrical and electronic equipment (CE 1.2), and (iii) Energy efficiency equipment for buildings (CCM 3.5). While the majority of our Taxonomy-aligned Opex is reported under: (i) Renewable energy technologies (CCM 3.1), (ii) Manufacture of low carbon technologies for transport (CCM 3.3), and (iii) Energy efficiency equipment for buildings (CCM 3.5). The variation and difference of Taxonomy-eligible and aligned Opex between 2023 and 2022 are correlated with the Taxonomy-eligible and aligned turnover as Opex is mainly driven by the applied product group revenue allocation. The details of the Opex KPI and breakdowns are provided on pages 140-142 of the report. 2023 ABB ASSESSMENT RESULTS UNdER THE EU TAXONOMY: TURNOVER, CAPEX, OPEX KPIS Turnover 46% eligible 54% non-eligible 6% aligned 94% non-aligned Capital expenditures 64% eligible 36% non-eligible 8% aligned 92% non-aligned Operating expenditures 45% eligible 55% non-eligible 6% aligned 94% non-aligned 131 → NEXT CHAPTER This year was marked by the inclusion of new activities that can make a substantial contribution to climate change mitigation and adaptation and by the official adoption of the Environmental Delegated Act that focuses on the other four environmental objectives. Following these latest Taxonomy developments, we have already carried out an eligibility assessment for the newly released activities. In 2024, we will focus on im- plementing the required processes and expertise to assess our compliance with the technical screening criteria, to fulfill alignment requirements for these activities. Looking ahead, the financial year 2024 will mark the beginning of mandatory compli- ance with the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS). The CSRD and ESRS aim to standardize sustainability reporting and further increase linkages between financial and sustain- ability information, and the mandatory assurance for the ABB Group’s sustainabil- ity reporting. Recommendations and way forward To be effective, the EU Taxonomy needs to take account of all economic activities that play an important role in the transition to net zero. We therefore welcome the fact that the EU Taxonomy now takes more account of many critical technologies, such as electrical equipment, that are needed to enable a renewable energy system. Nonetheless, we also see that there is still potential for a more consistent treatment and inclusion of major readily available technologies which can contribute to a more efficient management of electricity consumption, especially given that electrification lies at the core of the EU decarbonization strategy. In our view, equipment aimed at energy efficiency optimization and automation in industrial processes should be ele- vated to the level of a distinct enabling economic activity under the climate mitigation objective. We also believe that the role of maintenance activities should be better reflected in the context of circular economy, not only climate change mitigation. We also believe that the existing EU legal framework is already well placed to set high quality standards for manufacturing processes. We therefore see no need for the EU Taxonomy to go beyond existing legal obligations for manufacturers. In summary, we view the EU Taxonomy as a significant step forward in developing a common classification system for sustainable economic activities. We also under- stand how challenging this task is and that it remains a work in progress for some time in the future. At ABB, we are determined to further support the development of the EU Taxonomy, including through participation in the EU Taxonomy Stakeholder Request Mechanism, as every year of Taxonomy implementation brings a better understanding of this crucial legislation. Climate change is a global challenge that requires a global approach. The end goal should be a common global classification system for sustainable activities that is comprehensive, credible and relevant to the entire world. If the gaps in the EU Taxonomy are addressed, we believe that it has the potential to serve as a model for such a system, as well as an important driver of truly sustainable investments. — Next steps 132 ABB SUSTAINABILITY REPORT 2023 APPENdIX ABB Group Economic activities 2023 in accordance with the EU Taxonomy EU Taxonomy – Turnover Financial year 2023 2023 Substantial contribution criteria DNSH criteria (Does Not Significantly Harm) Economic activities Code(s) Turnover Proportion of Turnover, 2023 Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Minimum Safeguards Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) Turnover, 2022 Category enabling activity Category transitional activity $million % Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMY– ELIGIBLE ACTIVITIES A.1. ENVIRONMENTALLY SUSTAINABLE ACTIVITIES ( TAXONOMY-ALIGNEd ) 3.1 Manufacture of renewable energy technologies CCM 3.1 717 2% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 4% E 3.3 Manufacture of low-carbon technologies for transport CCM 3.3 491 2% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 2% E 3.4 Manufacture of batteries CCM 3.4 88 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 3.5 Manufacture of energy ef - ficiency equipment for buildings CCM 3.5 277 1% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 1% E 4.9 Transmission and distribu - tion of electricity CCM 4.9 <0.5 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 6.14 Infrastructure for rail transport CCM 6.14 162 1% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% 6.15 Infrastructure enabling low-carbon road transport and public transport CCM 6.15 33 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 2% E 6.16 Infrastructure enabling low-carbon water transport CCM 6.16 225 1% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 1% E 7.6 Installation, maintenance and repair of renewable en- ergy technologies CCM 7.6 <0.5 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E Turnover of environmentally sustain- able activities (Taxonomy-aligned) (A.1) 1 994 6% 6% 0% 0% 0% 0% 0% Y Y Y Y Y Y Y 10% Of which Enabling 1 832 6% 6% 0% 0% 0% 0% 0% Y Y Y Y Y Y Y 10% E Of which Transitional 0 0% 0% Y Y Y Y Y Y Y 0% T ← PREVIOUS CHAPTER → NEXT CHAPTER 133 ABB SUSTAINABILITY REPORT 2023 APPENdIX Financial year 2023 2023 Substantial contribution criteria DNSH criteria (Does Not Significantly Harm) Economic activities Code(s) Turnover Proportion of Turnover, 2023 Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Minimum Safeguards Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) Turnover, 2022 Category enabling activity Category transitional activity $million % Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A.2. TAXONOMY-ELIGIBLE BUT NOT ENVIRONMENTALLY SUSTAINABLE ACTIVITIES (NOT TAXONOMY-ALIGNEd ACTIVITIES) EL; N/EL EL; N/EL EL; N/EL EL; N/EL EL; N/EL EL; N/EL 3.1 Manufacture of renewable energy technologies CCM 3.1 43 0% EL N/EL N/EL N/EL N/EL N/EL 0% 3.2 Equipment for the produc - tion and use of hydrogen CCM 3.2 3 0% EL N/EL N/EL N/EL N/EL N/EL 0% 3.3 Manufacture of low-carbon technologies for transport CCM 3.3 93 0% EL N/EL N/EL N/EL N/EL N/EL 3% 3.6 Manufacture of other low-carbon technologies CCM 3.6 942 3% EL N/EL N/EL N/EL N/EL N/EL 24% 3.19 Manufacture of rail constituents CCM 3.19 <0.5 0% EL N/EL N/EL N/EL N/EL N/EL N/A 3.20 Manufacture, installa - tion, and servicing of high, medium and low voltage elec- trical equipment for electrical transmission and distribution CCM 3.20 8 755 27% EL N/EL N/EL N/EL N/EL N/EL N/A 6.16 Infrastructure enabling low-carbon water transport CCM 6.16 8 0% EL N/EL N/EL N/EL N/EL N/EL 0% 8.2 Data-driven solutions for GHG emissions reductions CCM 8.2 115 0% EL N/EL N/EL N/EL N/EL N/EL 0% 1.2 Manufacture of electrical and electronic equipment CE 1.2 1 692 5% N/EL N/EL N/EL N/EL EL N/EL N/A 4.1 Provision of IT/OT data-driven solutions and software CE 4.1 35 0% N/EL N/EL N/EL N/EL EL N/EL N/A 5.1 Repair, refurbishment and remanufacturing CE 5.1 464 1% N/EL N/EL N/EL N/EL EL N/EL N/A 5.2 Sale of spare-parts CE 5.2 767 2% N/EL N/EL N/EL N/EL EL N/EL N/A ← PREVIOUS CHAPTER → NEXT CHAPTER 134 ABB SUSTAINABILITY REPORT 2023 APPENdIX Financial year 2023 2023 Substantial contribution criteria DNSH criteria (Does Not Significantly Harm) Economic activities Code(s) Turnover Proportion of Turnover, 2023 Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Minimum Safeguards Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) Turnover, 2022 Category enabling activity Category transitional activity $million % Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T 5.3 Preparation of re-use of end-of-life products and product components CE 5.3 <0.5 0% N/EL N/EL N/EL N/EL EL N/EL N/A 5.4 Sale of second-hand goods CE 5.4 <0.5 0% N/EL N/EL N/EL N/EL EL N/EL N/A Turnover of Taxonomy-eligible but not environmentally sustainable ac- tivities (not Taxonomy-aligned activ- ities) (A.2) 12 919 40% 31% 0% 0% 0% 9% 0% 27% Total of Taxonomy eligible activities (A.1+A.2) 14 913 46% 37% 0% 0% 0% 9% 0% 37% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES Turnover of Taxonomy-non-eligible activ- ities (B) 17 322 54% Total (A+B) 32 235 100% Due to rounding, numbers presented may not add to the totals provided. Substantial Contribution Criteria Y – Yes , Taxonomy eligible and Taxonomy-aligned ac- tivity with the relevant environmental objective N – No , Taxonomy eligible but not Taxonomy-aligned activity with the relevant environmental objective N/EL – not eligible , Taxonomy non-eligible activity for the relevant environmental objective EL – eligible , Taxonomy eligible activity for the relevant objective DNSH criteria Y – DNSH criteria are met N – DSNH criteria are not met Minimum Safeguards Y – Minimum safeguards are met N – Minimum safeguards are not met CCM : Climate Change Mitigation CCA : Climate Change Adaptation WTR : Water and Marine Resources CE : Circular Economy PPC : Pollution Prevention and Control BIO : Biodiversity and ecosystems ← PREVIOUS CHAPTER → NEXT CHAPTER 135 ABB SUSTAINABILITY REPORT 2023 APPENdIX ABB Group Economic activities 2023 in accordance with the EU Taxonomy EU Taxonomy – CAPEX Financial year 2023 2023 Substantial contribution criteria DNSH criteria (Does Not Significantly Harm) Economic activities Code(s) CapEx Proportion of CapEx, 2023 Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Minimum safeguards Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) CapEx, 2022 Category enabling activity Category transitional activity $million % Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMY-ELIGIBLE ACTIVITIES A.1. ENVIRONMENTALLY SUSTAINABLE ACTIVITIES ( TAXONOMY-ALIGNEd ) 3.1 Manufacture of renewable energy technologies CCM 3.1 1 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 3.3 Manufacture of low-carbon technologies for transport CCM 3.3 9 1% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 1% E 3.4 Manufacture of batteries CCM 3.4 <0.5 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 3.5 Manufacture of energy ef - ficiency equipment for buildings CCM 3.5 1 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 4.9 Transmission and distribu - tion of electricity CCM 4.9 <0.5 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 6.5 Transport by motorbikes, passenger cars and light com- mercial vehicles CCM 6.5 36 3% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 2% T 6.14 Infrastructure for rail transport CCM 6.14 <0.5 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% 6.15 Infrastructure enabling low-carbon road transport and public transport CCM 6.15 <0.5 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 10% E 6.16 Infrastructure enabling low-carbon water transport CCM 6.16 <0.5 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 7.2 Renovation of Existing Buildings CCM 7.2 1 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% T 7.3 Installation, maintenance and repair of energy efficiency equipment CCM 7.3 11 1% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 7.4 Installation, maintenance and repair of charging sta- tions for electric vehicles in buildings (and parking spaces attached to buildings) CCM 7.4 2 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E ← PREVIOUS CHAPTER → NEXT CHAPTER 136 ABB SUSTAINABILITY REPORT 2023 APPENdIX Financial year 2023 2023 Substantial contribution criteria DNSH criteria (Does Not Significantly Harm) Economic activities Code(s) CapEx Proportion of CapEx, 2023 Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Minimum safeguards Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) CapEx, 2022 Category enabling activity Category transitional activity $million % Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T 7.5 Installation, maintenance and repair of instruments and devices for measuring, regula- tion and controlling energy performance of buildings CCM 7.5 4 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 7.6 Installation, maintenance and repair of renewable en- ergy technologies CCM 7.6 7 1% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 7.7 Acquisition and ownership of buildings CCM 7.7 21 2% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% 8.2 Data-driven solutions for GHG emissions reductions CCM 8.2 0 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E CapEx of environmentally sustain- able activities (Taxonomy-aligned) (A.1) 92 8% 8% 0% 0% 0% 0% 0% Y Y Y Y Y Y Y 14% Of which Enabling 34 3% 3% 0% 0% 0% 0% 0% Y Y Y Y Y Y Y 12% E Of which Transitional 36 3% 3% Y Y Y Y Y Y Y 2% T A.2. TAXONOMY-ELIGIBLE BUT NOT ENVIRONMENTALLY SUSTAINABLE ACTIVITIES (NOT TAXONOMY-ALIGNEd ACTIVITIES) EL; N/EL EL; N/EL EL; N/EL EL; N/EL EL; N/EL EL; N/EL 3.1 Manufacture of renewable energy technologies CCM 3.1 13 1% EL N/EL N/EL N/EL N/EL N/EL 2% 3.2 Equipment for the produc - tion and use of hydrogen CCM 3.2 <0.5 0% EL N/EL N/EL N/EL N/EL N/EL 0% 3.3 Manufacture of low-carbon technologies for transport CCM 3.3 4 0% EL N/EL N/EL N/EL N/EL N/EL 2% 3.4 Manufacture of batteries CCM 3.4 2 0% EL N/EL N/EL N/EL N/EL N/EL 0% 3.5 Manufacture of energy ef - ficiency equipment for buildings CCM 3.5 23 2% EL N/EL N/EL N/EL N/EL N/EL 1% 3.6 Manufacture of other low-carbon technologies CCM 3.6 7 1% EL N/EL N/EL N/EL N/EL N/EL 9% 3.19 Manufacture of rail constituents CCM 3.19 <0.5 0% EL N/EL N/EL N/EL N/EL N/EL N/A 3.20 Manufacture, installa - tion, and servicing of high, medium and low voltage elec- trical equipment for electrical transmission and distribution CCM 3.20 243 20% EL N/EL N/EL N/EL N/EL N/EL N/A ← PREVIOUS CHAPTER → NEXT CHAPTER 137 ABB SUSTAINABILITY REPORT 2023 APPENdIX Financial year 2023 2023 Substantial contribution criteria DNSH criteria (Does Not Significantly Harm) Economic activities Code(s) CapEx Proportion of CapEx, 2023 Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Minimum safeguards Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) CapEx, 2022 Category enabling activity Category transitional activity $million % Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T 4.9 Transmission and distribu - tion of electricity CCM 4.9 <0.5 0% EL N/EL N/EL N/EL N/EL N/EL 0% 6.5 Transport by motorbikes, passenger cars and light com- mercial vehicles CCM 6.5 44 4% EL N/EL N/EL N/EL N/EL N/EL 2% 6.14 Infrastructure for rail transport CCM 6.14 3 0% EL N/EL N/EL N/EL N/EL N/EL 0% 6.15 Infrastructure enabling low-carbon road transport and public transport CCM 6.15 <0.5 0% EL N/EL N/EL N/EL N/EL N/EL 0% 6.16 Infrastructure enabling low-carbon water transport CCM 6.16 2 0% EL N/EL N/EL N/EL N/EL N/EL 0% 7.1 Construction of new buildings CCM 7.1 0 0% EL N/EL N/EL N/EL N/EL N/EL 7% 7.2 Renovation of Existing Buildings CCM 7.2 24 2% EL N/EL N/EL N/EL N/EL N/EL 1% 7.3 Installation, maintenance and repair of energy efficiency equipment CCM 7.3 3 0% EL N/EL N/EL N/EL N/EL N/EL 1% 7.4 Installation, maintenance and repair of charging sta- tions for electric vehicles in buildings CCM 7.4 1 0% EL N/EL N/EL N/EL N/EL N/EL 0% 7.5 Installation, maintenance and repair of instruments and devices for measuring, regula- tion and controlling energy performance of buildings CCM 7.5 <0.5 0% EL N/EL N/EL N/EL N/EL N/EL 0% 7.6 Installation, maintenance and repair of renewable en- ergy technologies CCM 7.6 2 0% EL N/EL N/EL N/EL N/EL N/EL 0% 7.7 Acquisition and ownership of buildings CCM 7.7 267 22% EL N/EL N/EL N/EL N/EL N/EL 23% 8.2 Data-driven solutions for GHG emissions reductions CCM 8.2 1 0% EL N/EL N/EL N/EL N/EL N/EL 0% 1.2 Manufacture of electrical and electronic equipment CE 1.2 26 2% N/EL N/EL N/EL N/EL EL N/EL N/A ← PREVIOUS CHAPTER → NEXT CHAPTER 138 ABB SUSTAINABILITY REPORT 2023 APPENdIX Financial year 2023 2023 Substantial contribution criteria DNSH criteria (Does Not Significantly Harm) Economic activities Code(s) CapEx Proportion of CapEx, 2023 Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Minimum safeguards Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) CapEx, 2022 Category enabling activity Category transitional activity $million % Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T 4.1 Provision of IT/OT data-driven solutions and software CE 4.1 <0.5 0% N/EL N/EL N/EL N/EL EL N/EL N/A 5.1 Repair, refurbishment and remanufacturing CE 5.1 5 0% N/EL N/EL N/EL N/EL EL N/EL N/A 5.2 Sale of spare-parts CE 5.2 8 1% N/EL N/EL N/EL N/EL EL N/EL N/A 5.3 Preparation of re-use of end-of-life products and product components CE 5.3 <0.5 0% N/EL N/EL N/EL N/EL EL N/EL N/A 5.4 Sale of second-hand goods CE 5.4 <0.5 0% N/EL N/EL N/EL N/EL EL N/EL N/A CapEx of Taxonomy-eligible but not environmentally sustainable activi- ties (not Taxonomy-aligned activi- ties) (A.2) 680 56% 53% 0% 0% 0% 3% 0% 50% Total CapEx of Taxonomy eligible ac- tivities (A.1+A.2) 772 64% 61% 0% 0% 0% 3% 0% 64% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES CapEx of Taxonomy-non-eligible activ- ities (B) 436 36% Total (A+B) 1 208 100% Due to rounding, numbers presented may not add to the totals provided. ← PREVIOUS CHAPTER → NEXT CHAPTER 139 ABB SUSTAINABILITY REPORT 2023 APPENdIX ABB Group Economic activities 2023 in accordance with the EU Taxonomy EU Taxonomy – OPEX Financial year 2023 2023 Substantial contribution criteria DNSH criteria (Does Not Significantly Harm) Economic activities Code(s) OpEx Proportion of OpEx, 2023 Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Minimum Safeguards Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) OpEx, 2022 Category enabling activity Category transitional activity $million % Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMY-ELIGIBLE ACTIVITIES A.1. ENVIRONMENTALLY SUSTAINABLE ACTIVITIES ( TAXONOMY-ALIGNEd ) 3.1 Manufacture of renewable energy technologies CCM 3.1 39 2% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 4% E 3.3 Manufacture of low-carbon technologies for transport CCM 3.3 25 1% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 3.4 Manufacture of batteries CCM 3.4 10 1% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 3.5 Manufacture of energy ef - ficiency equipment for buildings CCM 3.5 15 1% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 2% E 4.9 Transmission and distribu - tion of electricity CCM 4.9 <0.5 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 6.14 Infrastructure for rail transport CCM 6.14 10 1% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% 6.15 Infrastructure enabling low-carbon road transport and public transport CCM 6.15 1 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 5% E 6.16 Infrastructure enabling low-carbon water transport CCM 6.16 3 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E 7.6 Installation, maintenance and repair of renewable en- ergy technologies CCM 7.6 <0.5 0% Y N/EL N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0% E OpEx of environmental sustainable activities (Taxonomy-aligned activi- ties) (A.1) 103 6% 6% 0% 0% 0% 0% 0% Y Y Y Y Y Y Y 11% Of which Enabling 94 5% 5% 0% 0% 0% 0% 0% Y Y Y Y Y Y Y 11% E Of which Transitional 0 0% 0% Y Y Y Y Y Y Y 0% T ← PREVIOUS CHAPTER → NEXT CHAPTER 140 ABB SUSTAINABILITY REPORT 2023 APPENdIX Financial year 2023 2023 Substantial contribution criteria DNSH criteria (Does Not Significantly Harm) Economic activities Code(s) OpEx Proportion of OpEx, 2023 Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Minimum Safeguards Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) OpEx, 2022 Category enabling activity Category transitional activity $million % Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A.2. TAXONOMY-ELIGIBLE BUT NOT ENVIRONMENTALLY SUSTAINABLE ACTIVITIES (NOT TAXONOMY-ALIGNEd ACTIVITIES) EL; N/EL EL; N/EL EL; N/EL EL; N/EL EL; N/EL EL; N/EL 3.1 Manufacture of renewable energy technologies CCM 3.1 11 1% EL N/EL N/EL N/EL N/EL N/EL 0% 3.2 Equipment for the produc - tion and use of hydrogen CCM 3.2 3 0% EL N/EL N/EL N/EL N/EL N/EL 0% 3.3 Manufacture of low carbon technologies for transport CCM 3.3 10 1% EL N/EL N/EL N/EL N/EL N/EL 2% 3.5 Manufacture of energy ef - ficiency equipment for buildings CCM 3.5 38 2% EL N/EL N/EL N/EL N/EL N/EL 1% 3.6 Manufacture of other low-carbon technologies CCM 3.6 21 1% EL N/EL N/EL N/EL N/EL N/EL 22% 3.19 Manufacture of rail constituents CCM 3.19 <0.5 0% EL N/EL N/EL N/EL N/EL N/EL N/A 3.20 Manufacture, installa - tion, and servicing of high, medium and low voltage elec- trical equipment for electrical transmission and distribution CCM 3.20 469 26% EL N/EL N/EL N/EL N/EL N/EL N/A 6.14 Infrastructure for rail transport CCM 6.14 <0.5 0% EL N/EL N/EL N/EL N/EL N/EL 0% 6.15 Infrastructure enabling low-carbon road transport and public transport CCM 6.15 0 0% EL N/EL N/EL N/EL N/EL N/EL 1% 6.16 Infrastructure enabling low-carbon water transport CCM 6.16 <0.5 0% EL N/EL N/EL N/EL N/EL N/EL 0% 7.7 Acquisition and ownership of buildings CCM 7.7 2 0% EL N/EL N/EL N/EL N/EL N/EL 0% 8.2 Data-driven solutions for GHG emissions reductions CCM 8.2 16 1% EL N/EL N/EL N/EL N/EL N/EL 1% 9.1 Close to market research, development and innovation CCM 9.1 2 0% EL N/EL N/EL N/EL N/EL N/EL 1% 1.2 Manufacture of electrical and electronic equipment CE 1.2 99 5% N/EL N/EL N/EL N/EL EL N/EL N/A 4.1 Provision of IT/OT data-driven solutions and software CE 4.1 34 2% N/EL N/EL N/EL N/EL EL N/EL N/A ← PREVIOUS CHAPTER → NEXT CHAPTER 141 ABB SUSTAINABILITY REPORT 2023 APPENdIX Financial year 2023 2023 Substantial contribution criteria DNSH criteria (Does Not Significantly Harm) Economic activities Code(s) OpEx Proportion of OpEx, 2023 Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Climate Change Mitigation Climate Change Adaptation Water Pollution Circular Economy Biodiversity Minimum Safeguards Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) OpEx, 2022 Category enabling activity Category transitional activity $million % Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T 5.1 Repair, refurbishment and remanufacturing CE 5.1 13 1% N/EL N/EL N/EL N/EL EL N/EL N/A 5.2 Sale of spare-parts CE 5.2 9 0% N/EL N/EL N/EL N/EL EL N/EL N/A 5.3 Preparation of re-use of end-of-life products and product components CE 5.3 <0.5 0% N/EL N/EL N/EL N/EL EL N/EL N/A 5.4 Sale of second-hand goods CE 5.4 <0.5 0% N/EL N/EL N/EL N/EL EL N/EL N/A OpEx of Taxonomy-eligible but not environmentally sustainable activi- ties (not Taxonomy-aligned activi- ties) (A.2) 725 39% 31% 0% 0% 0% 8% 0% 29% Total OpEx of Taxonomy eligible ac- tivities (A.1+A.2) 829 45% 37% 0% 0% 0% 8% 0% 40% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES OpEx of Taxonomy-non-eligible activ- ities (B) 1 011 55% Total (A+B) 1 839 100% Due to rounding, numbers presented may not add to the totals provided. ← PREVIOUS CHAPTER → NEXT CHAPTER 142 ABB SUSTAINABILITY REPORT 2023 APPENdIX ABB’s Board of Directors reviews and approves the Sustainability Agenda and related targets, including climate targets. The Governance and Nomination Committee (GNC) is responsible for overseeing ABB’s Sustainability Agenda (including corporate social responsibility, health, safety, and environment). The Compensation Committee en- sures that ABB’s executive compensation policies are appropriately aligned with its Sustainability Agenda. The business and sustainability expertise and experience of our Board members enables them to apply the right judgement and make informed decisions about sustainability and climate matters (see also competence matrix in the chapter “Corporate Governance summary”). The ABB Group Executive Committee validates the Sustainability Agenda and its implementation. It is responsible for reviewing strategic targets, including climate-related targets as well as for ensuring that a sustainability culture is embed- ded in our business decision making. This includes both assessing and manag- ing climate-related risks and opportunities. Topics related to the Sustainability Agenda were discussed in each Executive Committee meeting held in 2023 . The Chief Communications and Sustainability Officer, who is a member of the Executive Committee, holds functional responsibility for sustainability and reports together with the Group Head of Sustainability to the GNC on topics and progress related to the Sustainability Agenda. The Sustainability Council is the operational body that oversees implementation of the Sustainability Agenda, reviews developments and monitors progress toward targets, including climate targets. As of 2023, all business areas are represented in the Sustainability Council by their heads of strategy as well as by their respective sustain- ability leads. This has further strengthened the role of the Sustainability Council. For more details on ABB’s sustainability governance, please refer to the chapter “Sustainability governance”. We continuously identify, monitor, and manage climate-related risks and opportu- nities over the short-term (1 year), medium-term (2–5 years), and long-term (5–30 years). They fall into two major categories: risks related to the physical impacts of climate change, and risks related to the transition toward a low-carbon economy, which are already present to some extent. As global temperatures rise, acute physical risks are more likely to occur and may become more severe. Additionally, new risks may emerge. Long-term climate risks and opportunities are assessed in our analyses of science-based climate and emissions scenarios. These analyses help us under- stand how our global emissions in our value chain must progress in the period up to 2050. They serve as a basis for assessing options and costs, as well as for setting long-term targets. Physical risks Physical risks are direct effects from climate change and can result in extreme weather events, such as hurricanes or floods or in long-term chronic climate condi- tions like sustained higher temperatures leading to rising sea levels or more severe heat waves. These risks can have financial implications through damage to assets, reduced availability of resources or disruption of operations and supply chains. For example, ABB sites around the world are vulnerable to water-related incidents caused by extreme weather events, such as flooding from heavy rain, storms, or — Climate-related governance — Climate-related strategy — TCFD recommendations report 143 → NEXT CHAPTER hurricanes. These events may result in disturbances or interrupt production for several months at a time and can also affect our supply chain. If the production of key suppliers is interrupted, as has happened in the past due to severe flooding in South-East Asia, our own production and revenues may be impacted. Upstream risks related to climate change are business continuity risks that are typically part of the ongoing dialogue that ABB has with its suppliers. Transitional risks As the world endeavors to transition towards a lower-carbon economy, the growing challenge of climate change may result in significant changes to the external environ- ment in which we operate. Measures taken to mitigate and adapt to climate change could lead to substantial policy, legal, technological, and market changes that may impact our financial position, strategic decisions, and the way we operate. An example of emerging regulation would be carbon pricing mechanisms. Currently, ABB is already paying carbon taxes in several countries, particularly in Europe, and carbon tax legislation, as well as the carbon price, are likely to increase in the coming years. The higher our scope 1 emissions, the more carbon tax we pay. Therefore, reducing our GHG emissions is not only good for the environment, but also for our business. Climate-related opportunities Climate change can also represent opportunities for growth, improvements, and value creation. With our purpose, strategy and operating model, we believe that ABB is best positioned to help the world mitigate and adapt to climate change and create finan- cial value at the same time. By increasing energy efficiency, switching to renewable energy sources and moving toward circular business models, we are able to reduce costs and improve resilience even in times of crisis. With our leading technologies, we can make an even bigger impact in our customers’ operations. By helping them reduce energy and resource consumption and avoid emissions, we make them more sustain- able while driving further demand for our products, solutions and services. To help our customers reduce GHG emissions, we have identified products and solutions from our portfolio that deliver emissions reductions. These include energy-efficient electric motors and drives and advanced automation, digital and electrification solutions for energy-intensive industries. As many customers lack expertise in energy management, ABB offers an end-to-end approach and a one-stop-shop for building automation and smart energy management solutions. These include the ABB Ability™ Building Ecosystem, NeoGear low-voltage switchgear solutions and the ABB Ability™ Energy and Asset Manager. Crucially, we also support the energy transition with technologies that integrate power from intermittent re- newable sources into the electricity grid. For ABB, this represents a significant oppor- tunity in both the short and medium terms. We assess the impact of climate-related risks on ABB and its value chain and what they could mean in terms of financial costs, as well as how we can mitigate them. At the same time, we also consider the opportunities that such risks create for us as a business to drive value creation. The identification of climate- related business impacts and effects are also part of our strategic planning process, as ABB has clearly identified climate change as a long-term, global challenge that requires low-carbon, high efficiency solutions. Our business strategy is supported by our long-term com- mitment to innovation and technology leadership in areas such as high-efficiency electrification, automation and control systems, robotics and motion solutions, and technologies to capture the full potential of renewable energies. Through our Sustainability Agenda and by joining the “Business Ambition for 1.5°C” pledge, we are committed to achieving net-zero value chain GHG emissions by 2050 in line with the SBTi Net-Zero Standard. We can significantly contribute towards a low-carbon society through our products, systems and services that help our customers reduce GHG emissions. The related 144 ABB SUSTAINABILITY REPORT 2023 APPENdIX market opportunities, which include smart building solutions, urban infrastructure, clean energy, energy efficiency and mobility systems, are projected to be worth more than $4.7 trillion in 2030 (IEA World Energy Outlook 2023). The following table provides an overview of some of the main risks and opportu- nities that we have identified through our risk management processes (see more under “Risk and opportunity management”), what they mean for us and how we deal with them: Category Where it impacts our value chain Time horizon Likelihood Severity 1 (Potential) Impact Measures taken RISKS PHYSICAL Acute Flood, Storms Direct operations Near-term Likely Medium Flooding can damage ABB’s physical infra- structure, disrupt logis- tics and the supply chain, and decreased production capacity, re- sulting in reduced revenue. Comprehensive emergency response plan includ- ing contingencies for potential flood and storm events, regular maintenance of critical infrastruc- ture, investment in resilient infrastructure and equipment, awareness measures for employees. Chronic Increasing heat and precipita- tion Stresses Direct operations Long-term (emerging) More Likely than not Medium This could result in higher water risks, pro- duction capacity disrup- tions, and increased ex- posure to extreme weather events caused by rainfall variability and water scarcity in certain regions. While the majority of our manufacturing pro- cesses are not water- intensive, we work on im- proving water management practices to reduce water consumption, minimize water risks, and maintain business continuity as well as enhancing resilience by diversifying suppliers and identify- ing alternative transportation routes. TRANSITIONAL Policy and legal risk Carbon pricing Direct operations Medium- term (emerging) Likely Medium Increased direct costs Investments in energy efficiency and emission reduction Market risk Supply chain disruption Direct operations/ Upstream Medium- term (emerging) Likely Medium Based on the geo- graphic location of our suppliers, com- modify risk exists, which can result in a limited supply of products or in- creased purchase prices. We proactively identify, assess and address sus- tainability issues at our high-risk suppliers through our SSBM. Reputation risk Stakeholder expectations Direct operations Medium- term (emerging) Low Medium Loss of reputation if we fail to meet climate-related regula- tions or stakeholder expectations. Our Purpose, strategy and operating model help us build a sustainable business. We directly en- gage with our stakeholders, build partnerships and actively support and disclose transparently according to climate related initiatives, such as TCFD and CDP. OPPORTUNITIES Products and services Low emission goods and services Downstream Medium- term (current/ emerging) Certain High Increased revenues resulting from increased demand for products and services R&D investments in offerings that help customers reduce GHG emissions Carbon pricing Downstream Medium- term (emerging) Likely High Customers facing in- creased costs due to carbon pricing are keen to reduce their GHG emissions by buying and using our offering. R&D investments in offerings that help customers reduce GHG emissions 145 → NEXT CHAPTER In addition to the assessment of our current exposure to natural hazards, we reviewed 3 RCP (Representative Concentration Pathway) scenarios of the IPCC (Intergovernmental Panel on Climate Change) to inform our understanding of physical risks linked to our operations and to our 2030 sustainability strategy. In particular, RCP 2.6, 4.5 and 8.5 were reviewed for a time horizon of up to 30 years. We used a high-resolution risk tool of a major reinsurer to assess 328 sites that are consid- ered of critical importance to our worldwide operations. The sites in scope cover the four main business areas in varying proportions and are located in 59 countries represented by manufacturing and non-manufacturing sites distributed over all the continents. The tool provides data modeling and analysis at location level covering 19 sub-perils. The risk is identified based on physics-based hazard modelling, historical events in- surance claims, geographical conditions, and climatic parameters, in addition to fac- toring the potential climate change influence on the increasing frequency and severity of natural hazards in future scenarios. The table above depicts the results of the assessment based on the RCP4.5 scenario, in which we can expect a moderate increase in global temperatures, changes in pre- cipitation patterns, and a rise in sea levels, which may still cause significant impacts to our business. However, the impacts are likely to be less severe than under scenarios of higher greenhouse gas emissions, such as RCP8.5. The findings in the above table illustrated a consistent pattern of increased risk under different scenarios, such as floods and storms in the short-term. Long-term risks included rising temperatures and precipitation. Our analysis indicates that the haz- ards identified are expected to have a “Medium” impact under the RCP4.5 scenario. However, it is important to note that the severity of these hazards may increase under the more extreme RCP8.5 scenario. Category Where it impacts our value chain Time horizon Likelihood Severity 1 (Potential) Impact Measures taken Resource efficiency Energy and emissions reduction Direct operations Short-term (current) Certain Medium Reduced direct costs Investments in energy efficiency measures in our own operations (e.g., HVAC systems, energy effi- cient lighting, compressed air systems, building improvements, specific manufacturing process improvements). Energy source Shifting to- wards renew- able energy sources Direct operations Medium- term (current) Certain volatility Medium costs, increased Reduced costs stability in energy supply Investments in onsite Solar PV will lead to cost re- ductions. Renewable sourcing will reduce emissions. Markets and technology Transition to a lower-carbon economy Direct operations Short to long-term (current/ emerging) Certain High Matching our customer offering with market and technology trends Technology development related to climate change is a big opportunity for ABB. Examples are electric motors and drives for the highest energy efficiency in line with Ecodesign Regulation (EU 2019/1781) or the rapid development of EV-charging for electric vehicles, as the road transport sector is shifting away from fossil fuels. 1 Scale: low, medium, high. 146 ABB SUSTAINABILITY REPORT 2023 APPENdIX At ABB, these risks could lead to infrastructure damage, logistical disruptions, and supply chain interruptions, resulting in decreased production capacity and reduced revenue in the short and medium-term. In the long-term, higher water risks, produc- tion capacity disruptions, and increased exposure to extreme weather events, caused by rainfall variability and water scarcity, may also impact revenue streams. To safeguard our operations against flood and storm damage for short- and medium-term risks, we conducted a thorough risk assessment to identify vulnerable facilities and developed a comprehensive emergency response plan that includes con- tingencies for potential events. We invest in resilient infrastructure and perform reg- ular maintenance of critical equipment. To ensure employee safety, we educate them on the risks of flood and storm damage and how to respond in emergency situations. These measures guarantee business continuity and minimize the impact of flood and storms on our operations. Our sites are prepared for emergencies to keep our people safe and maintain business continuity. These analyses feed into our business continuity plans and preparations. For example, we use the World Resources Institute’s (WRI) Aqueduct global water risk tool to assess our facilities according to the level of baseline water stress of the local watershed. Of the 338 ABB locations mapped in 2023, 61 face an extremely high level of water stress, 55 face a high level and 47 face a medium-to-high level of water stress. The tool not only helps us assess water stress at our sites, but also the levels of groundwater depletion, flood risk and seasonal variability of water availability at our sites, which is extremely useful for our work in managing water risk. ABB has also used different scenarios to understand the speed at which we need to decarbonize our own operations to be in line with scientific estimates. This helped us set science-based targets in line with the 1.5°C trajectory of the Paris Agreement, in which ABB commits to reduce absolute scope 1 and 2 GHG emissions by at least 80 percent between 2019 and 2030 and a 90% Scope 1, 2 and 3 reductions by 2050 versus 2022. Many of ABB’s technologies directly address the causes of climate change, and our market opportunity and value proposition assessments and product/systems de - velopment roadmaps rely directly or indirectly on climate-related scenario analyses and expectations linked to climate-related policy and standards development. For longer-term trends, the analysis shows that ABB is well positioned in very attractive markets. We will further intensify our work on climate risk modelling in the coming year to be able to provide an even more comprehensive analysis including financial quantification of risks and opportunities. ABB includes climate-related risks in its company-wide Enterprise Risk Management (ERM) process. This holistic risk management process supports the identification, assessment and mitigation of climate-related risks and considers their potential neg- ative impact for us in achieving our business objectives and creating value. Climate risks are also considered in terms of their potential effects on our suppliers and cus- tomers across the value chain. ABB has well-developed emergency response programs to manage potential impacts from climate change, such as storms, floods or threats to the water supply. These include, for example, ABB’s facility and workplace emergency preparedness, protocols for unexpected emergencies and ABB’s mandatory business continuity plans for our sites. Our Insurance Risk Management function works closely with our global insur- ance providers to identify risks to our assets and operations. Reviews of facilities are conducted annually or biennially, depending on the value of the asset. Incentive and penalty programs are in place to promote the implementation of best practices and risk mitigation and avoidance recommendations. All facilities are required to develop, implement, and test business continuity plans. Our risk management approach also covers upstream business continuity risks re- lated to climate change, such as extreme weather conditions affecting our suppliers. — Climate risk management 147 → NEXT CHAPTER This includes comprehensive monitoring and development of our supply base to en- sure sustainability, both in terms of materials and processes used and is typically part of the ongoing dialogue that ABB has with its suppliers. We operate a worldwide supply chain management network with employees dedi- cated to this function in our business areas, divisions and in key countries. Upstream climate change risks and opportunities are also considered and analyzed in our assessment of upstream scope 3 emissions, where we identify the climate impact of all relevant scope 3 categories. With our Sustainable Supply Base Management (SSBM) program, we have a comprehensive approach in place, which includes surveillance of the sustainability performance of our suppliers. It involves supplier screening, train- ing, on-site assessment, monitoring, and follow-up until all identified non- conformi- ties are closed. We aim to address sustainability topics and performance at each stage of supplier life cycle management as part of our “beyond audit” approach and have at least 80 percent of our supply spend in focus countries covered by SSBM by 2030. For mitigating transitional risks linked to our exposure to current and potential car- bon taxes, as well as realizing opportunities linked to cost savings, we invest in energy efficiency and emissions reductions throughout our operations. We have committed to electrifying our fleet of more than 10,000 vehicles by 2030 and to continue deploy- ing energy management systems at the company’s sites. Our substantial annual investments in energy efficiency and emissions reduction projects frequently come along with favorable break-even times. This includes investments in low-carbon energy sources, compressed air systems, heating, ven- tilation and cooling systems. The largest part of the investment has been made in energy-efficient lighting. We are raising our ambitions regarding our existing science-based targets by setting net-zero targets aligned with the SBTi Net-Zero Standard. In 2023, we submitted our updated scope 1, 2 and 3 targets for 2030 and 2050 to the Science Based Targets initiative for validation. By 2030, we will reduce our own emissions by at least 80 percent and work with our customers and suppliers to reduce our scope 3 emissions by 25%. By 2050 we will reduce scope 1 and 2 emissions by 100% (versus 2019), and scope 3 emissions by 90% (versus 2022). By 2030, we aim to cover at least 80 percent of ABB’s portfolio of products and solutions with a Circularity Approach and send zero waste to landfill, while taking measures to prevent waste generation. We track our scope 1, 2 and 3 emissions, as well as waste generation and water with- drawal, especially from water-stressed areas. — Climate-related metrics and targets 148 ABB SUSTAINABILITY REPORT 2023 APPENdIX SASB – Electrical & Electronic Equipment Topic Metric Unit of Measure Code ABB answer 2023 Energy Management a. Total Energy Consumed Gigajoules (GJ), Percentage (%) RT-EE-130a.1 4672043 GJ b. Percentage Grid Electricity 63.5% c. Percentage Renewable 64% Hazardous Waste Management a. Amount of hazardous waste generated, percentage recycled Metric tons (t), Percentage (%) RT-EE-150a.1 5,321 metric tons; 40% b. Number and aggregate quantity of re- portable spills, quantity recovered Number, Kilogrammes (kg) RT-EE-150a.2 1 spill, 350 liters of oil, not recovered. Product Safety a. Number of recalls issued, total units recalled Number RT-EE-250a.1 As of 2023, this number is not available on an ag - gregated level at ABB. b. Total amount of monetary losses as a re- sult of legal proceedings associated with product safety Presentation currency RT-EE-250a.2 Not applicable. Due to NDA agreements with third parties, we are unable to disclose monetary values resulting from legal proceedings with these third parties. Product Lifecycle Management a. Percentage of products by revenue that contain IEC 62474 declarable substances Percentage (%) by revenue RT-EE-410a.1 As of 2023, we are unable to respond to this ques - tion. Please refer to the section “Circularity” in the Sustainability Report 2023. b. Percentage of eligible products, by reve- nue, certified to an energy efficiency certification Percentage (%) by revenue RT-EE-410a.2 Only applicable to North America products. All ABB products are included in point c. c. Revenue from renewable energy related and energy efficiency related products Presentation currency RT-EE-410a.3 Using the EU taxonomy as reference: In 2023, ABB reached a 6% Taxonomy-aligned revenue under the Climate Change Mitigation environmental objec- tive that covers partially this requirement. For fur- ther details please refer to ABB's EU Taxonomy dis- closures in the Sustainability Report 2023. Materials sourcing a. Description of the management risks associated with the use of critical materials N/A RT-EE-440a.1 Please refer to the sections “Circularity” and “Responsible sourcing” in the Sustainability Report 2023. Business ethics Description of policies and practices for prevention of: a. Corruption and bribery and anti-com- petitive behaviour N/A RT-EE-510a.1 Please refer to the section “Integrity and transpar- ency” in the Sustainability and Integrated Reports 2023. b. Total amount of monetary losses as a re- sult of legal proceedings associated with bribery or corruption Presentation currency RT-EE-510a.2 Nil in 2023 (subject to any pending resolution with German authorities and the meaning of this question). c. Total amount of monetary losses as a re- sult of legal proceedings associated with anti-competitive behaviour regulations Presentation currency RT-EE-510a.3 We are unable to disclose monetary values result- ing from legal proceedings associated with anti-competitive behavior regulations. Activity Metrics a. Number of units produced (Production should be disclosed as number of units produced by product category, where relevant product categories include en- ergy generation, energy delivery, and lighting and indoor climate control electronics.) Number RT-EE-000 .A Please refer to the section “Analysis of results of operations” in the Financial Report 2023. b. Number of Employees Number RT-EE-000 .B 110,442 — SASB disclosure table 149 → NEXT CHAPTER — Greenhouse gas emissions GHG emissions refer to all emissions that have a warming effect on the earth’s surface by trapping heat in the atmosphere. Carbon dioxide (CO 2 ) makes up the vast majority of GHG emissions, but other gases, including methane (CH 4 ), nitrous oxide (N 2 O) and sulfur hexafluoride (SF 6 ), also have a warming effect. CO 2 , methane and nitrous oxide are released during the combustion of fossil fuels, such as coal, oil and natural gas, to produce energy. At ABB, we use the metric of CO 2 -equivalent (CO 2 e) to calculate our GHG emissions and to measure progress toward our emissions reduction targets. — Scope 1 GHG emissions Direct emissions from company-owned and controlled resources, for example, emis- sions from combustion in owned or controlled boilers, furnaces, vehicles. — Scope 2 GHG emissions Indirect emissions from the generation of purchased energy (electricity, steam, heat, cooling) from a utility provider. — Scope 3 GHG emissions All other indirect emissions not included in scope 1 and 2 that occur in the value chain, both upstream and downstream. According to the GHG protocol, scope 3 emissions are separated into 15 categories and include, for example, purchased goods and ser- vices, business travel and commuting, and use of sold products. — Science Based Targets initiative (SBTi) The SBTi is a global collaboration that enables businesses to set ambitious emissions reduction targets in line with the latest climate science. It independently assesses and approves companies’ targets based on strict criteria. — Definitions 150 ABB SUSTAINABILITY REPORT 2023 APPENdIX Caution concerning forward-looking statements The ABB Sustainability Report 2023 includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have based these forward-looking statements largely on current expectations, estimates and projections about the factors that may affect our future performance, including global economic conditions as well as the economic conditions of the regions and the industries that are major markets for ABB. The words “believe,” “may,” “will,” “estimate,” “continue,” “target,” “anticipate,” “intend,” “expect,” “plan” and similar words and the express or implied discussion of strategy, plans or intentions are intended to identify forward-looking statements. These forward- looking statements are subject to risks, uncertainties and assump- tions, including among other things, the following: (i) business risks related to the global volatile economic environment; (ii) costs associated with compliance activities; (iii) difficulties encountered in operating in emerging markets; (iv) risks inherent in large, long term projects served by parts of our business; (v) the timely development of new products, technologies and services that are useful for our customers; (vi) our ability to anticipate and react to technological change and evolving industry stan- dards in the markets in which we operate; (vii) changes in interest rates and fluctua- tions in currency exchange rates; (viii) changes in raw materials prices or limitations of supplies of raw materials; (ix) the weakening or unavailability of our intellectual property rights; (x) industry consolidation resulting in more powerful competitors and fewer customers; (xi) effects of competition and changes in economic and market conditions in the product markets and geographic areas in which we operate; (xii) effects of, and changes in, laws, regulations, governmental policies, taxation or accounting standards and practices, and (xiii) other factors described in docu- ments that we may furnish from time to time with the US Securities and Exchange Commission, including our Annual Reports on Form 20-F. Although we believe that the expectations reflected in any such forward-looking statements are based on reason- able assumptions, we can give no assurance that they will be achieved. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances might not occur. Our ac- tual results and performance could differ substantially from those anticipated in our forward-looking statements. 151 → NEXT CHAPTER — ABB Ltd Corporate Sustainability Affolternstrasse 44 8050 Zurich Switzerland Tel: +41 (0)43 317 71 11 www.abb.com © Copyright 2024 ABB. All rights reserved.