LEADING THE TRANSFORMATION
Volvo Group
Annual and Sustainability Report
2021
Content
The Volvo Group drives prosperity through
transport and infrastructure solutions, offering
trucks, buses, construction equipment, power
solutions for marine and industrial applications,
financing and services that increase our customers’
uptime and productivity.
Founded in 1927, the Volvo Group is committed
to shaping the future landscape of sustainable
transport and infrastructure solutions.
The Volvo Group is headquartered in Gothenburg,
Sweden, employs 95,000 people and serves
customers in more than 190 markets. In 2021,
net sales amounted to about SEK 372 billion
(EUR 37 billion). Volvo shares are listed on Nasdaq
Stockholm.
Driving
prosperity
through
transport and
infra structure
solutions
OVERVIEW
This is Volvo Group....................2
CEO COMMENTS
CEO comments and key figures ........ 6
STRATEGY
The future of transportation
and infrastructure.......................
Driving prosperity.................... 12
Strategic priorities ................... 14
Perform ............................ 15
Transform........................... 16
Financial targets......................17
BUSINESS MODEL
Customers .......................... 19
Value chain..........................22
Partnerships ........................24
Our sustainability approach ...........25
CLIMATE AND RESOURCES..............26
PEOPLE.................................38
BOARD OF DIRECTORS’ REPORT 2021
Financial performance................45
Financial position ....................48
Cash flow statement .................52
Financial management ...............54
Changes in consolidated equity .......55
Segments...........................56
The share ...........................68
Risks and uncertainties...............70
NOTES TO THE FINANCIAL STATEMENTS..76
PARENT COMPANY.....................140
SUSTAINABILITY NOTES
Impacts, stakeholders
and material topics..................153
Climate and environment ............154
Sustainable finance .................162
Employees and development.........164
Safety .............................167
Human rights.......................170
Responsible sales................... 174
Suppliers ..........................175
Business ethics and compliance ......177
Organizational profile and
reporting practices..................178
CORPORATE GOVERNANCE REPORT
Corporate Governance ..............180
Board of Directors ..................186
Group Executive Board ..............192
OTHER INFORMATION
Proposed remuneration policy........196
Proposed disposition of
unappropriated earnings.............198
Audit report for AB Volvo (publ) ......199
Key Ratios .........................204
Eleven-year summary ...............207
Annual General Meeting .............216
Preliminary financial calendar ........216
The Volvo Group’s formal financial reports are presented on pages 45151, 196198 and 204206 and have been audited by the
company’s auditors. For information on which pages constitute the Volvo Group’s Statutory Sustainability Report, please see page 44.
Sustainability information can be found integrated in the Group overview on pages 644, in the Sustainability Notes on pages 152179
and in the Corporate Governance Report on pages 183 and 190.
100%
safe
The health, safety and wellbeing
of people is our main priority.
100%
more productive
By drastically increasing productivity
and efficiency in logistics systems it
is possible to meet a growing need
for transports while staying within
the boundaries of what our planet
can sustain.
100%
fossil-free
Climate change is the challenge of
our generation. Our ambition is to
enable our customers to go fossil
free and we strive towards net zero
emissions from our operations and
supply chain.
Our ambition is clear. Driving prosperity socially, environmentally and financially
means striving for transport and infrastructure solutions that are:
1
The Volvo Group’s products and services contribute to much of what
we all expect of a well-functioning and prosperous society, since
they are involved in many activities that most of us rely on every day.
The majority of the Volvo Group’s customers are companies within
the transportation or infrastructure industries. The reliability and
productivity of our products and services are a key factor in their
success and profitability.
Our customers
make societies
work
On the road
Our products and services help ensure that people
have food on the table, can travel to their destination
and have roads to drive on. They also deliver indus-
trial goods to keep production plants running.
Off road
Engines, machines and vehicles from the Volvo
Group are used to mine iron ore and haul stone and
rock. They also power vital irrigation installations all
over the world, so that farmers can grow their crops.
In the city
Our buses take people to work or school, trucks
collect rubbish and gensets are used as backup
power. Our products are also used to build housing
as well as industrial and sports facilities.
At sea
People can rely on our products and services,
regardless of whether they are at work on a ship,
travel ing to work on a ferry, on holiday in a pleasure
boat or need urgent help from the sea rescue services.
This is the Volvo Group
Overview / This is the Volvo Group
2
The types of products and
services the Volvo Group
provides contribute to the
functioning of the societies
in which many of us live.
Overview / This is the Volvo Group
3
The Volvo Group has
production in 19 countries
and sells its products and
services in 190 markets
around the world.
Overview / This is the Volvo Group
4
Volvo Group is one of the world’s leading
manufacturers of trucks, buses, construction
equipment as well as marine and industrial
engines. The Group also provides complete
solutions for financing and service.
A global group
with strong
positions
Strong brands
The Volvo Group’s brand portfolio consists of Volvo, Volvo Penta,
Rokbak, Renault Trucks, Prevost, Nova Bus, Mack and Arquus.
We also partner in alliances and joint ventures with SDLG, Eicher,
Dongfeng and cellcentric. By offering products and services under
different brands, we address many different customer and market
segments in mature as well as growth markets.
Competitive products
The Volvo Group’s products have been developed to contribute to
efficient transport and infrastructure solutions and to provide our
customers with maximum uptime. We drive the development of
electrified vehicles and machines as well as automated solutions
for the benefit of customers, society and the environment. Sales
of vehicles and machines build a population of products that
requires spare parts and services.
World-class services
In addition to vehicles and machines, our offering includes various
types of services such as financing, insurance, rentals, spare parts,
repairs, preventive maintenance, service agreements and assistance
services. The range and flexibility of the offering means that solutions
can be tailor-made for each customer to maximize uptime and pro-
ductivity. The service business contributes to balancing the fluctua-
tions in the sales of new products and improving profitability over the
business cycle. Growing the service business is an area of priority.
Strong positions globally
Thanks to competitive product programs, strong dealers with
extensive service networks and increasingly more complete offer-
ings, the Volvo Group has established leading positions globally.
These positions provide for economies of scale in product develop-
ment, production, purchasing and financial services.
Partnerships and collaborations with leading companies
New technologies are developing at a faster pace than ever before.
Staying at the forefront is vital to be successful, and that is why we
work in collaborations and partnerships with other leading compa-
nies. We have a strategic alliance with Isuzu Motors. We have
partnered with Samsung SDI on batteries. We have established
cellcentric together with Daimler Truck to commercialize fuel cell
systems for heavy-duty vehicles and other use cases. We work
together with both NVIDIA and Aurora on autonomous vehicles
and machines. And we plan to pioneer a European high-performance
charging network for heavy-duty trucks and coaches together
with Daimler Truck and Traton Group.
Overview / This is the Volvo Group
Net sales by segment
Net sales by revenue type
Net sales by market
Trucks 62%
Construction Equipment 25%
Buses 4%
Volvo Penta 4%
Financial Services 4%
Group Functions & Other
and eliminations 1%
Vehicles 75%
Service 21%
Financial Services 4%
Europe 43%
North America 27%
South America 8%
Asia 16%
Africa and Oceania 6%
5
Good execution in a
challenging year and ...
CEO comments
• Strong increase in both vehicle and service sales.
• Considerable improvement in profitability despite
supply chain challenges.
• Acceleration of the activities and investments into
the electric age with a rapid expansion of the offer
of electric vehicles and machines.
• Launch of cellcentric, our fuel cell joint venture
together with Daimler Truck.
• Agreement to form a joint venture for a high-
performance public charging network across Europe.
• Divestment of UD Trucks to Isuzu Motors as part
of a formation of a strategic alliance.
• Distribution of SEK 50 billion to our share holders,
including the proceeds from the divestment of UD
Trucks.
SUMMARY OF 2021
6
CEO comments
KEY RATIOS 2021 2020
Net sales, SEK M 372,216 338,446
Net sales excluding UD Trucks
1
, SEK M 366,778 315,742
Adjusted operating income
2
, SEK M 41,015 28,564
Adjusted operating margin, % 11.0 8.4
Operating income, SEK M 43,074 27,484
Operating margin, % 11.6 8.1
Income after financial items, SEK M 43,190 25,917
Income for the period, SEK M 33,243 20,074
Earnings per share, SEK 16.12 9.50
Dividend of the proceeds from the sale of UD Trucks,
SEK per share 9.50
3
–
Dividend, SEK per share 13.00
4
15.00
Operating cash flow, Industrial Operations, SEK M 29,440 18,545
Net financial position excl. provisions for post-employment
benefits and lease liabilities, Industrial Operations, SEK bn 66.2 74.7
Return on capital employed in Industrial Operations, % 25.3 14.7
Return on shareholders’ equity, % 23.4 13.8
Total number of employees 95,850 96,194
Share of women, % 21 19
Share of women, presidents and other senior executives, % 27 26
Energy use per net sales, Industrial Operations, MWh/SEK M 6.7 6.3
Total CO emissions per net sales, Industrial Operations,
tons/SEK M (scope 1 & 2) 1.0 1.0
Share of direct material purchasing spend from suppliers
having made a CSR self- assessment, % 97 95
1 UD Trucks was divested on April 1, 2021. For more information, please see Note 31.
2 For more information on adjusted operating income, please see Key Ratios on page 204.
3 Paid out in July, 2021.
4 Proposed by the Board of Directors to the Annual General Meeting 2022. SEK 6.50 per share in ordinary
dividend and SEK 6.50 per share in extra dividend.
Unless otherwise stated, all comparisons refer to the same period or the same date of the preceding year.
I
n 2021, we continued to deliver good profitability and took
several important steps in our efforts to lead the transition
to a climate-neutral transport system. For the full year, the
Volvo Group’s net sales increased to SEK 372 billion and the
adjusted operating income to SEK 41 billion with an adjusted
operating margin of 11.0%. Return on capital employed in the
Industrial Operations increased to 25.3%.
With economic activity rebounding after the difficulties of 2020,
growing transport volumes and improving construction activity
increased our customers’ fleet utilization, which was back on pre-
covid levels. This was evident in strong demand for both new and
used products as well as in our service business, which grew by
9%. Driving the sales of services and solutions is a prioritized area
since it both strengthens the relationship with our customers and
provides resilience to our earnings over the business cycle.
The situation in the global supply chain for semiconductors and
other components continued to be a challenge in 2021. It was
unstable, characterized by disruptions, unpredictability and lack of
freight capacity. In the difficult circumstances, aggravated by the
ongoing covid-19 pandemic, our decentralized organization was
crucial. It provided us with the ability to act quickly, dare to make
decisions and take responsibility locally and regionally.
It has been fantastic to see the commitment of my colleagues
who have worked hard to build and service trucks, buses, con-
Net sales, SEK bn
19 2018
17
21
372
Adjusted operating income
2
and
Adjusted operating margin
Operating income, SEK bn
Operating margin, %
18 1917 20 2118
11.0
41.0
Return on capital employed
Industrial Operations, %
17 18 2019
21
25.3
Operating cash flow
Industrial Operations, SEK bn
19 2018
17
21
29.4
Net financial position excl.
post- employment benefits
and lease liabilities
Industrial Operations, SEK bn
19 2018
17
21
66.2
7
13.3% (12.4). Volvo CE continued the rollout of electric compact
machines, positioning itself as a manufacturer with a growing
range of commercially available electric machines.
Volvo Buses continued to be impacted by the pandemic, which
primarily affected the coach business while demand for city buses
was less impacted. On the city bus side of the business, there is a
distinct acceleration in the transformation to electric buses. Net
sales for 2021 amounted to SEK 14 billion (15) and the adjusted
operating margin to 0.4% (–3.1).
Volvo Penta’s sales of both engines and services grew strongly,
which had a positive effect on profitability. Net sales rose by 21%
to SEK 14 billion and the adjusted operating margin to 14.5%
(12.2). Electrification projects for both marine and industrial appli-
cations are gaining momentum.
The high activity level at many of our customers is reflected in low
credit provision expenses in our customer-financing business, Volvo
Financial Services. The adjusted operating income increased to
SEK 3,279 M (1,606) and return on equity improved to 18.0% (8.3).
In total, the Volvo Group’s net sales amounted to SEK 372
billion (338). Adjusted for the divestment of UD Trucks net sales
increased by 16% with both vehicle and service sales contribut-
ing. The adjusted operating income improved to SEK 41 billion
(29) with an adjusted operating margin of 11.0% (8.4). Operating
cash flow in the Industrial Operations increased to SEK 29 billion
(19). Even after having distributed SEK 50 billion in 2021, includ-
ing the proceeds from the divestment of UD Trucks, we ended the
year with a net cash position of SEK 66 billion in the Industrial
Operations, pension and leasing liabilities excluded.
Our strong financial position allows us to both increase our
investments in the technologies of the future and continue to
provide a good return to our shareholders. The Board of Directors
proposes an ordinary dividend of SEK 6.50 per share and an extra
dividend of SEK 6.50 per share.
Leading the transformation towards sustainable
transport solutions
The increasing demand for transport is a clear, long-term trend
driven by population growth, urbanization and increasing
e-commerce. It is equally clear that we must meet this demand
with transport and infrastructure solutions that are more sustainable
than today. Our ambition is to be at the forefront and lead this
Overview / CEO comments
struction equipment and engines for our customers. I would like
to thank all my Volvo Group colleagues and our business partners
around the world for a job well done during a tough year. It is their
efforts that make the Volvo Group and our customers successful.
Strong performance in a year with many challenges
Despite the disruptions in the supply chain, our truck business
delivered 198,000 vehicles excluding UD Trucks, which was an
increase of 31% compared with 2020. The increased transport
activity in many countries contributed to good demand for both
new and used trucks as well as for spare parts and services. All in
all, this meant that net sales in the truck business rose by 21% to
SEK 225 billion excluding UD Trucks and the adjusted operating
margin improved to 11.1% (8.3).
Construction activity was high in Volvo CE’s key markets in
Europe and North America, while demand in China weakened
during the course of the year. Volvo CE’s net sales rose by 13%
to SEK 92 billion and the adjusted operating margin improved to
... an increased speed
in the transformation
“ Together with our
customers and
partners we are in
a strong position
to lead the trans -
formation of our
industry towards
a more sustain able
future.”
8
transformation. We have further strengthened our work with the
principles of the UN Global Compact regarding business ethics,
human rights, labor law and the environment. During the pandemic
year of 2021, the health and safety of our colleagues, suppliers
and customers has of course been our first priority, but we also
took major steps in our sustainability ambitions. We set climate
targets that are in line with what the latest climate science deems
necessary to keep global warming at a maximum 1.5 C. Our path-
way to reach the goals of the Paris Climate Agreement was vali-
dated by the Science Based Targets initiative in June. Already
today, a large part of our R&D activities are related to low and
zero-emission technology and it will continue to grow.
We were early out in the electrification journey and have sold
electrified city buses for over ten years. We have built a compre-
hensive knowledge that we are now capitalizing on. In 2020, we
started serial production of medium-duty electric trucks for urban
distribution and waste management. In 2021, we took further
steps on this journey when we started selling heavy-duty electric
trucks in Europe, with planned delivery towards the end of 2022.
Today, we have a broad range of electric trucks with a market-
leading position in Europe. This has been achieved by building on
the great knowledge of our employees, our modular product plat-
form and our global industrial system. We assemble trucks with
combustion engines and electric trucks on the same assembly
lines. We work with competence development of our colleagues –
from engineers to assemblers. And we certify our service work-
shops to take care of the electric vehicles.
All in all, this means that we are ready to reap the benefits from
the transformation. However, we are convinced that it will have
different speeds in different parts of the world and take place seg-
ment by segment. Fully-electric vehicles and machines currently
account for a very small part of our total deliveries, but there is a
large and growing interest from our customers and their custom-
ers. This applies to cities that want to create a quiet and clean
environment, to logistics companies that want to be at the envi-
ronmental forefront and not least to transport buyers who come
directly to us to assist them in decarbonizing their own operations.
The speed of the transformation will depend on several factors
such as costs for fossil fuels, battery prices as well as access to
charging infrastructure, green electricity and various incentive pro-
grams. However, we cannot wait for all the pieces to fall into place.
Instead, we work together with partners and decision-makers to
create the right conditions. One example is the planned joint ven-
ture with Daimler Truck and Traton Group, where we aim to estab-
lish at least 1,700 green charging points for trucks and buses in
Europe. Other important collaborations are the alliance with the
battery manufacturer Samsung SDI, the joint venture with Daimler
Truck on fuel cells, cellcentric, and the technology partnerships
with NVIDIA and Aurora to develop autonomous vehicles and
machines. We also created a strategic alliance with Isuzu Motors
in connection with the sale of UD Trucks to them in April.
Electrification is a crucial part on the road to climate-neutrality
since the absolute majority of climate-affecting emissions occur
when our customers use the vehicles and machines. But we also
work to reduce the climate impact from our own operations and
other parts of our value chain. We have an important role to play
in stimulating demand for climate-neutral materials and components,
and we work closely with our suppliers to drive progress in this
area. In the autumn we presented the world’s first vehicle made
of green steel, an autonomous load carrier. We have a clear vision
and together with our customers we are taking actions here and
now to create the world we want to live in.
With 2021 behind us, we can conclude that our strategy and
our decentralized organization are working well. Our ability to
manage change and act quickly will become even more important
when we are increasing the pace in the transformation to a climate-
neutral transport system. We have a wide range of electric trucks,
buses and machines on the market, high market shares and great
interest from our customers. Together with our customers and
partners we are in a strong position to lead the transformation of
our industry towards a more sustainable future.
Martin Lundstedt
President and CEO
Overview / CEO comments
9
Our commitment to achiev-
ing development without
exceeding the planetary
boundaries includes all 17
of the UN’s Sustainable
Development Goals.
Strategy
10
The world is changing. In many aspects it is
becoming a better place to live in with a global
decrease in poverty, increase in life expectancy
and declining cost for renewable energy. But there
are also challenges. The need to drive sustainable
development and to grow within the planetary
boundaries is greater than ever.
The future of
trans por tation
and infra -
structure
One global agenda for 2030
An increasingly urban and connected planet
The world's population is growing quickly
and the world is becoming more urbanized.
By 2030, it is expected that two thirds of
the global population will be living in cities.
Urbanization is a global megatrend – with
many different faces and implications for
transportation and infrastructure. Projec-
tions show that urbanization combined
with the overall growth of the world popula-
tion could add another 2.5 billion people to
the urban community by 2050, equivalent
to today’s combined population of China
and India. This development will have both
environmental and social implications.
Going forward, we believe that sustainabil-
ity is a prerequisite for doing business. Peo-
ple shop online and more and more people
prefer using services rather than owning
products. More power will shift from pro-
ducers to consumers and expectations on
user experience are extremely high. Com-
panies use data to provide seamless and
individualized services and products.
Factors expected to
drive change
In 2030:
• 30% of all European vehicle
sales are expected to be electric.
• 8.6 billion people share the
planet, with 70% living in cities.
• 4 out of 5 economic super powers
are found in Asia, with China the
world’s largest economy.
• 90% of all people have access
to the internet.
• Effects from climate change are
clearly visible.
• Consumer power is increasing
and consumers are getting used
to seamless and customized
solutions in digital channels.
What will this mean
for business?
• Increased demand for transport
and infrastructure solutions.
• Being sustainable is a must.
• An increasing number of con-
sumers prefer utilizing services
as opposed to owning products.
• Companies owning customer
interfaces and relevant
data thrive as they can provide
seamless and individualized
services and products.
• More power resides with
the buyer. B2B (business-to-
business) and B2C (business-
to-consumer) have merged into
B2P (business-to-people).
Strategy
In our work, we have established three main areas where our business
can contribute to sustainable development:
Climate – reducing emissions from our own operations
and value chain as well as from the use of our products.
Resources – utilizing transports and material in the
most resource- efficient ways possible.
People – because safety and human rights make
up the foundation for prosperity.
The Sustainable Development Goals (SDGs) were set in 2015 by the
United Nations General Assembly and signed by all member states and
they are therefore referred to as one global agenda for 2030. The Volvo
Group’s commitment to achieving development without exceeding
the planetary boundaries includes all 17 SDGs. Several topics, such as
equality and fighting corruption are universal for all enterprises. Beyond
these universal responsibilities, we identify closer connections and
impacts from our business and operations in a number of goals.
This global agenda for 2030 impacts the technological and regula-
tory development as well as expectations from customers, investors,
employees and other stakeholders where we operate. We highlight
some of our activities and their main connections to the SDGs on
pages 2643.
In addition, in the Sustainability Notes on pages 152179, we
further connect detailed disclosures to specific targets in the UN’s
sustainability agenda.
11
Creating value
and building a
new society
Driving prosperity
Moving into the golden age of logistics
An increasing global population,
booming e-commerce and a grow-
ing, connected middle class con-
tribute to rising demand for con-
struction and transportation in the
future. Climate change, congested
cities, hazardous road and working
conditions call for future transpor-
tation technology and systems
solutions that are safer, cleaner and
more efficient. The increased need
for transport and new infrastruc-
ture combined with the rapid devel-
opment of new technologies pro-
vide great opportunities for our
industry, which we believe is mov-
ing into a golden age of logistics.
Looking ahead, we foresee that a
new transport landscape will
emerge. New technologies and
new business models will result in
safer, more sustainable and more
efficient ways to move goods,
material and people.
Factors
expected to
drive change
In 2030:
• Electromobility
requires total
solutions.
• Autonomous
solutions give
radical efficiency
potential.
• Digitalization and
connectivity enable
optimization.
• Sustainability equals
profitability.
Eco-systems delivering
customer value
Tailor made end-to-end
solutions
Polarized customer structure
Our mission is to drive prosperity through transport
and infrastructure solutions. The work we do every
day should ultimately contribute to us becoming
the most desired and successful transport and
infrastructure solution provider in the world.
Bold mission
The world does not stand still, nor does the Volvo Group. The
Volvo Group’s mission to drive prosperity through transport and
infrastructure solutions is our way of shaping the world we want to
live in. Our solutions to global challenges have people at its core
and build upon a history of innovation. We improve the everyday
life of our customers and society at large. The health, safety and
wellbeing of people is our main priority. A growing population cre-
ates a need for more transports of people and goods. Our ambi-
tion is to contribute by offering leading transport and infrastruc-
ture solutions enabling societies to prosper in a sustainable way.
Everything starts with the customer
We are in a people business, even though we operate in a busi-
ness-to-business market. Therefore, trust and relations are as
important as the complete offer. By bringing together the best of
offers and relations, our vision is to become the most desired and
successful transport and infrastructure solution provider in the
world. We offer total solutions and easy to integrate products and
services, tailored towards specific customer needs, through multiple
sales channels.
Our aspirations guide us on our journey, and we lead by example.
We are a trusted partner to our customers – their needs drive
everything we do. Our culture is built around care for people. We
are purpose-driven and build engagement through inclusiveness,
diversity and the ability for teams and individuals to grow. Strong
performance enables us to invest in the future and thereby owning
our own destiny.
Our values support our decision making at all levels every day.
Everything we do starts with our customers and their needs and
we see change as a positive force to succeed. We create a high
performing culture by focusing on results and helping each other
to succeed. We have a business mindset, and we lead with pas-
sion. We build trust by consistently doing business with integrity
and following our Code of Conduct.
Our strategy guides us when shaping the future society through
the Volvo Group’s transport and infrastructure solutions.
Strategy / Driving prosperity
What will this
mean for our
industry?
• Electromobility and
autonomous solu-
tions will be driven by
large customers and
their customers.
• First mover advan-
tage will be massive.
• From standardized
products to sustain-
able and tailor-made
end-to-end solutions.
• Different eco-
systems delivering
customer value.
12
The Volvo Group journey continues
ASPIRATIONS
VALUES
CODE OF CONDUCT
VISION
MISSION
VOLVO
GROUP
Driving prosperity through
transport and infrastructure solutions
Be the most desired and successful transport
and infrastructure solution provider in the world
Customer success Trust Passion Change Performance
We respect
one another
We earn business
fairly and lawfully
We safeguard company
information and assets
We separate personal interests
from business activities
We communicate
transparently and responsibly
Have leading customer satisfaction
for all brands in their segments
Be the most admired
employer in our industry
Have industry
leading profitability
The Volvo Group’s strategy is a continu-
ation of a journey the Group has been
on for the last two decades. During
1999 to 2011 the Volvo Group’s strategy
was primarily targeted at growth, not
least through acquisitions, while at the
same time focusing the business on
commercial vehicles.
In 2012 to 2015 the Volvo Group
underwent a transformation program
aimed at reorganizing the company to
take out overlaps, reduce structural
costs and increase efficiency and profit-
ability after the period of acquisi-
tion-driven growth. During this period,
there was one major acquisition – 45%
of Dongfeng Commercial Vehicles
(DFCV) in China in 2015.
The period between 2016 and 2018
was characterized by reinforcement of
the performance culture evidenced by a
more decentralized organization and a
regionalized value-chain approach. The
improved performance, with increased
profitability and further customer focus
developed into the current focus –
Perform and Transform.
Perform and Transform are not
sequential events, they need to be run
in parallel. To stay relevant and profit-
able, driving both current business per-
formance and the transformation to
meet future demands are our key focus
areas going forward.
The continuous streamlining of the
Group's business portfolio has also
inclu ded the divestment of Volvo Cars
(1999), Volvo Aero (2012), Volvo Rents
(2014), 75.1% of Wireless Car (2019)
and UD Trucks (2021).
ACQUISITIONDRIVEN GROWTH
Scale, synergies and geographical
expansion.
MAJOR ACQUISITIONS
2001
Renault Trucks and Mack Trucks
2007
Nissan Diesel (UD Trucks)
2007
70% of Lingong (SDLG)
2007
Ingersoll Rand Road Development
2008
VECV (joint venture with Eicher)
19992011
Strategy / Driving prosperity
13
Setting the
direction
CLOSING THE GAP
Product renewal, restructuring
and cost efficiency.
20122015
IMPROVED
PERFORMANCE
Customer focus, simplicity, speed,
continuous improvement and
organic growth.
20162018
PERFORM AND TRANSFORM
Customer-centricity, continuous
performance improvement, acceler-
ate solutions and partnerships
for sustainability.
2019–
Strategic priorities
Strategy / Strategic priorities
The strategic priorities provide us with the direction and result in action but should not be seen as a detailed action plan in itself. By understand-
ing our customer’s priorities and challenges, we are able to provide products, services and solutions that grow our customers’ revenues,
decrease their costs and at the same time benefits society. This is the basis for our strategic direction. The order in which the priorities are
presented does not reflect relative importance.
1
Transform the Volvo Group to become a leading end-to-end integrator
as well as offering easy to integrate products and services through
strong brands. An overview of our strong position on a global market
is found on page 5. Read more about our business model and how we
create value for customers starting on page 18.
2
Grow the service business and target selected industry verticals
offering a portfolio of tailor-made solutions. Sales of services grew by
9% in 2021 and accounted for 21% of Group revenues. Read more
about how we support our customers with different solutions to
increase their uptime and profitability and taking into account what
type of transport applications they are performing on page 19.
3
Secure a desirable sustainable product and service portfolio
with the right quality, leveraging new and well-known technologies,
CAST, partnerships and digital innovation – accelerating elec tro -
mobility solutions. Read about our partnerships and our modular
CAST system on page 24. More information about the rollout of
electric trucks and machines and our journey towards carbon-
neutral transport and infrastructure solutions begins on page 27.
4
Grow in Asia and the US: In Asia through JVs, alliances and by
strengthening the Volvo Group footprint in China. In the US by sig-
nificantly improving the Group’s market position. We have formed a
strategic alliance with Isuzu Motors (page 24) and agreed to acquire
a heavy-duty truck manufacturing operation in China (page 58).
In addition to the mission, vision, aspirations,
values and Code of Conduct we have decided
on seven strategic priorities for the Volvo Group.
In the US we are rolling out electric trucks and more customers are
getting onboard (page 30). Information about the development in
North America can also be found on page 56.
5
Develop robust profitability throughout the decentralized regional
value chains by leveraging global scale, digitalization, a purpose-fit
footprint and continuous improvement using Volvo Production
System. Read more about how we are driving synergies through
having the same truck platform and manufacturing the trucks in the
same plant regardless of driveline on page 35.
6
Selectively capture, accelerate and scale-up new businesses
and develop competencies and capabilities needed. We have
created cellcentric, a fuel cell joint venture, with Daimler Truck (page
34), the new business area Volvo Energy to support the Group’s
electrification journey (page 34) and intend to install and operate
a high-performance public charging network for battery electric,
heavy-duty long-haul trucks and coaches across Europe in a joint
venture with Daimler Truck and Traton Group (page 35).
7
Reinforce value-based leadership and ways of working where all
colleagues are empowered to take action and are accountable for
the results. Read more about how we create an inclusive, safe and
engaging workplace on page 42 and further about employee devel-
opment on page 164.
14
Our everyday
work secures
our future
The everyday performance is the
foundation for our business, here and
now as well as in the future.
We need to be agile and flexible in terms of production volumes,
when using our common architecture and shared technology
(CAST) wherever possible, and by having continuous introductions
instead of major launch projects. Our quality work is crucial to
achieve customer satisfaction and the work of regionalizing our
value chain is necessary to give our people the right pre requisites
to serve our customers and to mitigate potential supply chain dis-
turbances.
The performance of the Volvo Group has improved substantially
during the last couple of years. Our focus has been on a gradual
and consistent earnings improvement, reduced volatility in earn-
ings and cash flow as well as allocating capital in a disciplined way.
We have great assets in our people, products and services as well
as production sites and well-established dealer networks. We are
in a good position to support our customers. To keep this position
and to be able to invest further in new technologies, our focus is
on excelling on the basics as well as building resilience.
Building resilience is key to our long-term profitability. There are
approximately 2.8 million trucks, buses and machines, produced by
the Volvo Group, operating on or off-road. Of those, 1.2 million are
connected. With this as a base we can extend our service offer and
defend or capture market share. Increasing uptime benefits our cus-
tomers, and a larger service business also improves our resilience
throughout the business cycle.
Improve current performance and invest for the future
Reduced
volatility
in earnings and
cash flow
Continuous
investments in new
business models by
innovation and new
technologies
Gradual and
consistent
earnings
improvement
Discipline
in capital
allocation/
investments
Perform
Strategy / Perform
The Group’s financial position is also strong with a net cash position in the
Industrial Operations of SEK 66.2 billion excluding post- employment ben-
efits and lease liabilities at year-end 2021.
161514 17 18 19 2120
22208 30 41 48 41
753 9 10 11 11
29
8
Adjusted operating
income SEK bn
Adjusted operating
margin %
Perform Improved profitability
211615 17 18 19 2014
–21
–10
28 43 62 75 66
Net financial position excl.
post-employment benefits
and lease liabilities Industrial
Operations SEK bn
Perform Strong financial position
Profitability has improved in recent years. In 2021, the adjusted operating
margin amounted to 11.0% (8.4), despite a negative impact from short-
ages in the supply chain causing stoppages in production. In 20172021
the average adjusted operating margin was 9.9%.
15
Transforming towards carbon-neutrality
The expected economic life of the Volvo Group’s products
is about ten years. To have a rolling fleet that is completely
net zero by 2050, our ambition is that all Volvo Group
products delivered from 2040 should enable customers
to go fossil free. We expect a gradual shift into battery -
electric and fuel cell-electric vehicles. Our ambition is
that by 2030, electric vehicles should account for at least
35% of our vehicle sales. Even when most of the vehicles
are electric, we foresee use cases for internal combustion
engines (ICE) running on sustainable biofuels or other
fossil-free fuels. On the road towards decarbonized trans-
port, there will be legislative milestones when it comes to
CO
2
across the globe. We continue to invest in combus-
tion engines and aftertreatment systems to increase fuel
efficiency, meet the legislative milestones and stay com-
petitive. Read more about this scenario and climate-
related risks and opportunities on page 154.
Leading the way to
sustainable transport
Carbon fuel Carbon neutral
100%
0%
Share
of new
vehicles
2030 2040 20502020
Battery electric
Fuel cell electric
FC share?
ICE share?
Carbon neutral electricity
Carbon neutral hydrogen
BioLNG
HVO, electrofuels, hydrogen etc.
Internal Combustion
Engine (ICE)
Running fleet
ICE liquefied methane
We are driving the transformation of our industry to
shape the world we want to live in. We have made
great progress in improving performance in recent
years. Going forward, the speed of transformation
will increase.
Our ambitions are clear:
• More than 50% of Group revenues should come from services
and solutions by 2030
• More than 35% of our vehicle sales should be electric by 2030
• We will lead by example with a world-class, sustainable in-house
logistics system by 2025
• We will implement at least 100 transport and infrastructure
solutions together with our customers by 2025.
Transform to provide value
The need for transportation is increasing and the drivers of trans-
formation within our industry are clear. We transform our business
to provide even greater value to our customers and respond to the
need for sustainable transport solutions that are safe, fossil free
and more productive. Today’s trucks are not used to their full
capacity due to congestion, insufficient route planning and low fill
rates. A fully loaded truck operating on diesel is one of the most
energy-efficient ways of transporting goods on our roads with
current infrastructure. It is clear, however, that electromobility and
alternative fuels are here to stay and are solutions for the future.
These offers will be further developed to meet upcoming stringent
CO
2
regulations and to provide our customers with even more
sustainable alternatives.
When it comes to safety aspects, it is a fact that people die in
traffic and human error is by far the main reason. It is also a fact
that people and goods spend a lot of time in congestion. Our daily
life pattern and non-optimized infrastructure and logistics models
result both in temporary congestions and at other times heavily
unutilized road networks. The last couple of years we have contin-
uously invested in new business models and new technologies to be
able to offer safer, more sustainable and more productive solutions
to our customers. Another advantage is that our industrial footprint
is easily adapted to manufacture vehicles with different drivelines
on existing assembly lines.
The Volvo Group has a good position in the electric vehicle market
and the focus is on accelerating the commercialization of new
technologies and business models to get traction and impact.
This is when the real change happens.
Transform
Strategy / Transform
16
Fulfilling our
ambitions
Financial targets
Target: The Volvo Group’s operating margin
shall exceed 10% measured over a business
cycle.
Outcome: In 2021, the operating margin
amounted to 11,6% (8.1). In 20172021 the
average operating margin was 9.8%. In 2021,
the adjusted operating margin amounted to
11.0% (8.4). In 20172021 the average adjusted
operating margin was 9.9%. For more informa-
tion on adjusted operating margin, please
see Key Ratios on page 204.
Operating margin for
the Volvo Group, %
20 2117 1918
0
5
15
10
8.1 11.68.9 11.58.8
Target: Financial Services’ target is a return on
equity of 1215% at an equity ratio above 8%.
Outcome: In 2021, return on equity amounted
to 18.0% at an equity ratio of 8.0%.
Return on equity in
Financial Services, %
4
8
12
20
16
20 2117 1918
8.3 18.014.3 15.015.1
Target: The Industrial Operations shall under
normal conditions have no net financial indebt-
edness excluding provisions for post- employ-
ment benefits and lease liabilities.
Outcome: At the end of 2021, the Industrial
Operations had a net financial asset position
of SEK 66.2 billion.
Net financial position excl. post-
employment benefits and lease liabilities
Industrial Operations, SEK bn
20 2117 1918
80
20
0
60
40
74.7 66.226.3 62.643.9
The current financial targets
were decided on by the Board
of Directors in 2017.
The Volvo Group has in recent years gone through a substantial
restructuring process in order to reduce structural costs and
increase efficiency and is currently in a phase where focus is on
organic growth and improved profitability through continuous
improvement and innovation.
A clear and straightforward operating margin target supports the
efforts to drive performance across the Group through the business
Strategy / Financial targets
cycle. The target also aligns with the way the Group and its business
areas are challenged and measured internally.
A debt-free industrial balance sheet, excluding pension and
lease liabilities, enables the Volvo Group to better manage cyclical-
ity in a capital-intensive industry and to secure competitive cost of
funds for the Financial Services’ operation.
17
Business
model
The Volvo Group works
to create real-life benefits
for both our customers
and the society in terms
of productivity, safety,
energy efficiency and fuel
efficiency.
18
Business model / Customers
Increased
uptime and
improved
profitability
Our customers contribute to prosperity by transporting people
and goods as well as providing societies with infrastructure that
advance development. We work to support our customers by
providing offers that aim to increase their productivity, secure
uptime, increase fuel efficiency and allow for even more sustainable
choices, which drive their financial performance and reduce their
impact on the environment.
Customer focus
Throughout our value chain our customer focus is central. For
product development this means developing productive, fuel-
efficient and sustainable solutions for our customers. In produc-
tion we strive to have the highest quality, which also requires
a high standard from our suppliers. Our distribution and service
network secures availability and uptime for the customers. We
use a circular mindset and adopt responsible business behavior
to build trust and make sure our products contribute to prosperity.
We analyze the segments and applications our customers operate
in to find the best current solutions, capture future opportunities and
prepare for market changes. Our research projects, in collaboration
with our customers and other partners, are a vital part of product
development when we prepare for meeting future demands.
Create value for our customers
From our day-to-day work with customers and through interviews,
customer satisfaction surveys and materiality analysis, we know
that our customers put the highest value on productivity, uptime
and fuel efficiency. Future technologies provide great potential for
increased productivity for our customers. To secure uptime, new
vehicles developed within the Volvo Group are equipped with con-
nected devices to be able to download updates, schedule services
and prevent unplanned stops. Approximately 1,2 million vehicles
and machines are connected, which is important for us to be able
to achieve the goals of increasing efficiency and minimizing envi-
ronmental impact, as well as making our roads safer.
Increased fuel efficiency and adaption to renewable fuels and
electrified vehicles and machines are central in our product devel-
opment since this has a major impact on both the environment and
our customers’ profitability. For instance, we offer vehicles that
can run on liquefied natural gas (LNG) or biogas as well as an
increasing range of battery-electric vehicles.
In the spring of 2021, Volvo Trucks began serial production of
its new range of heavy-duty trucks Volvo FH, Volvo FH16, Volvo
FM and Volvo FMX. All four models have been developed with a
strong focus on improving the driver environment, safety and
We strive to be the most desired and successful
transport solution provider in the world. Therefore,
the customer is integrated in every part of our
value chain strategy.
• Excellent products and services
• Closeness to customers
• Efficient way of operating
• Increased revenue
• Decreased costs
• Profitability growth
Value for Volvo Group
• Productivity
• Asset uptime
• Fuel efficiency
• Increased revenue
• Decreased costs
• Profitability growth
Value for customer
Transport and infrastructure solutions
Insights for additional value creation
VALUE COCREATION
To be successful the key is to create value for our cus-
tomers by contributing to improving their profitability.
By understanding our customers’ priorities and chall-
enges, we are able to provide products and services that
grow customers’ revenues and decrease customers’
cost. Key areas to create value for our customers are
offers that increase our customers’ productivity, secure
uptime and increase fuel efficiency. By delivering
customer value efficiently, we will also deliver value for
ourselves, our owners and society.
Customers
19
Business model / Customers
productivity of the vehicles, making them more efficient than their
predecessors. In the autumn of 2021, Volvo Trucks introduced
several important new updates to its 11- and 13-liter Euro VI
engines that will further improve fuel consumption and drivability.
Reinforcing Volvo Trucks’ commitment to sustainable transport
solutions, the new Volvo FH, FM and FMX trucks have also been
developed for electrified drivelines with planned production start
towards the end of 2022.
During the year, Renault Trucks launched an updated heavy-duty
truck range with focus on improved driver comfort as well as vehicle
reliability and efficiency. This evolution was extended with the
arrival of new 11- and 13-liter engines which, combined with the
integration of new technologies and dedicated services, provide fuel
savings of up to 10% compared to the previous generation of
engines. Renault Trucks also announced its investment ambitions in
electromobility. From 2023, an all-electric offer will be available for
each segment – distribution, construction and long haul transports.
With the launch of three new electric compact machines – and
the introduction of two existing electric compact machines to the
North American market – Volvo Construction Equipment continued
its electrification journey with five models in total, positioning itself
as a manufacturer with a growing range of commercially available
electric machines.
To harness the growing global demand for electrified transport
solutions, the Volvo BZL Electric, a completely new bus chassis
with an electric driveline, was launched. The Volvo BZL Electric
is a global platform for clean, silent, and energy-efficient public
transport.
The Group already has fully-electric trucks, buses and construc-
tion equipment in serial production. Volumes were small in 2021,
but customer interest is high and the Group expects the transition
to electric vehicles to go segment by segment, market by market
and region by region. With the planned rollout of heavy-duty elec-
tric trucks from Volvo Trucks and Renault Trucks in 2022 and
2023, the Volvo Group will offer electric trucks with ranges that
today are expected to cover almost half of the truck transports
carried out in the EU. Read more about our rollout of electric
trucks starting on page 28.
Measure success
Customer satisfaction is the true measure of success. Our aspira-
tion is to have leading customer satisfaction for all brands in their
segments. Through surveys, each business area within the Volvo
Group tracks customer satisfaction and brand image perception.
The data is an important part of understanding our customers’
needs and in our own work with continuous improvement.
Research and studies are performed by leading market research
companies and carried out with decision makers among customers
and non-customers.
SUPPORTING CUSTOMERS WITH DIFFERENT NEEDS
FINANCING AND INSURANCE, INCLUDING USAGEBASED MODELS
CONNECTED PLATFORM
VEHICLES AND EQUIPMENT
Vehicle
parts
services
1
Vehicle
uptime
services
2
Vehicle
productivity
services
3
Fleet
productivity
services
4
Mobility
services
5
Platform
solutions
6
There are different business models for different customers. The range goes from selling a vehicle or machine and get
paid by unit, to solving the customer’s mission and get paid by result. We will have different offerings along the entire
range for different customers depending on preferences, segments and geographies.
Help me
maintain my
vehicle
Keep my
vehicle
available
Maximize
the use of
my vehicle
Maximize
the use of
my fleet
Provide
me with the
right transport
capacity when
I need it
Optimize
my supply
chain
20
Business model / Customers
Trucks are tailor-made for different applications
DISTRIBUTION
FRANCE
CONSTRUCTION
USA
LONGHAULAGE
EUROPE
MINING
INDONESIA
Repair & maintenance
Administration
APPROXIMATE BREAKDOWN OF COSTS
Fuel
Driver
Vehicle
Customers have different cost structures and therefore want different offers depending on their location and
the type of transport work they carry out. Creating customer value by improving our customers’ profit ability
therefore means offering products developed for each market and application.
21
Business model / Value chain
Driving performance
to create value
The Volvo Group generates long-term competitiveness by promoting value creation in every
part of the value chain through increased efficiency, quality and performance and by acting
responsibly towards business partners, employees and the world around us.
Customers
The customer is at the center of everything we do, and
the customer’s voice is present in every part of the
value chain. By delivering customer value we deliver
value for ourselves and our stakeholders. Our custom-
ers contribute to prosperity by transporting people and
goods as well as providing societies with infrastruc-
ture that advance development. Our aim is to support
our customers by providing offers that increase their
productivity, secure uptime and increase fuel efficiency,
which drive their financial performance and reduce their
impact on the environment.
Reuse
We strive to increase material efficiency and reduce energy
use. In this work, we incorporate more recycled materials,
recover heat and recycle waste. Extending service life and
operational uptime of assets is an important element of
increased circularity and resource efficiency. Here, the main
elements are to service, maintain and repair to increase the
utilization rate of all materials in the products. As we increase
our service-based business, the main output is uptime and
availability of machines and vehicles.
Retail and service
Our global network of dealers and service centers staffed by competent and
service- oriented personnel are key factors for customer satisfaction and
success. The business areas within the Volvo Group support customers via
efficient dealer workshops, and through service and maintenance agree-
ments. With our service contracts and connected solutions, customers know
when their vehicle or machine is due for service and what the cost will be for
maintenance and repairs. Customers can bundle their vehicle, financing and
other service purchases for a total solution. We work together with our retail
organization through continuous improvement and dealer development
programs with the aim to ensure our customers get the best possible service.
Production and logistics
Our global industrial and logistics system strives for contin-
uous improvement to meet internal targets and deliver on
customer expectations. The industrial system consists of
capital-intensive component factories as well as labor inten-
sive assembly plants. The component factories supply the
Group’s needs on a global basis, whereas assembly plants,
in most cases, are located close to end-markets to cater for
local needs and specifications and short delivery times.
Product development
Fulfilling our customers’ needs and improving their profitability and
environmental performance forms the basis of our product and
service development. Product development is also influenced by
legislation, changes in society and new technologies. There are
strong trends such as automation, electromobility and connectivity
that need to be balanced with investments in the development of
current technologies.
Purchasing
Long-term cooperation with suppliers drives efficiency, quality and
responsible behavior throughout the value chain. The Volvo Group is
aiming for purchasing excellence, placing high demands on our-
selves and our supply chain partners. We have both global and local
supply chains to deliver components, parts and complete services
and systems. When developing a robust supplier base, we look at a
wide range of opportunities and risks. In 2021, we strengthened our
Supplier Code of Conduct with firmer requirements and targets
including more explicit due diligence requirements on our direct
suppliers to cover further tiers in the supply chain.
Value chain
22
Business model / Value chain
For customers
More than 2 million trucks and almost 100,000 buses, which the Group manufactured in the
last ten years, perform transport work worldwide. Construction equipment operate at sites all
around the world, and we have delivered more than 700,000 machines the last ten years. For
our customers, uptime is everything. Regardless if it is a customer that owns one single truck
or a fleet of trucks, if they are a public transport provider or a coach owner, a construction
entrepreneur or a quarry owner; their performance depends on reliable products and services
that meet the needs of their business. The Volvo Group has a long heritage of developing smart
solutions to boost their performance.
For employees
The Group’s 95,850 employees are our most important asset. Employee engagement and
a performance culture based on customer success, trust and passion are critical for the Group
to fulfill its mission. The Group strives to offer competitive employment terms and benefits
as well as a stimulating, safe and healthy work environment. In 2021 we paid SEK 42,589 M
in salaries and remuneration.
For society
Our products and services make societies function. Our customers operate bus lines so that
people can get to work, they transport food and industrial goods and they build infrastructure
such as roads and hospitals. Furthermore, road transport directly creates millions of jobs
around the world. We also contribute to the local economy by being a major employer in many
communities, providing both direct and indirect employment. In 2021 the Group paid SEK
9,426 M in social costs, SEK 4,928 M in pension costs and SEK 9,651 M in income taxes, in
total SEK 24,005 M. We also pay customs duties as well as property and energy taxes.
For suppliers
A solid supplier base and professional partnerships are essential for customer success. The
Volvo Group provides both income and employment for a large number of companies and in
many societies around the world. Purchased goods and services is the Volvo Group’s single
largest expense and in 2021 we bought goods and services for SEK 253,656 M.
SEK 42.6 BILLION
SEK 24.0 BILLION
SEK 253.7 BILLION
For creditors
A long-term competitive business requires access to capital to be able to invest. The Volvo
Group strives to ensure that the capital is used in the best possible way and to assure debt
providers with the financial strength to secure proceeds and repayment. In 2021 the Volvo
Group paid its creditors in the Industrial Operations SEK 854 M in interest.
For share holders
The Volvo Group strives to generate value for its shareholders. This is achieved through a
positive share price development and payout of dividends. From 2016 to 2021 the price for
the Volvo B share rose by 97%. Shareholders normally receive a certain portion of the retained
earnings in the form of a dividend, after consideration has been given to the Group’s need for
capital for continued development according to its strategies. In, 2021, shareholers received
dividends totaling SEK 49,820 M, inclduing the proceeds from the divestment of UD Trucks.
To the Annual General Meeting 2022, the Board of Directors proposes an ordinary dividend of
SEK 6.50 per share and an extra dividend of SEK 6.50 per share, in total SEK 26,435 M.
For the Volvo Group
A significant portion of generated capital is normally transferred back into the business. The
capital is used for investments that will strengthen competitiveness and create long-term value
for the Group and its stakeholders. In 2021, the Volvo Group invested SEK 18.0 billion in R&D
and another SEK 8.8 billion in properties, plants and equipment, in total SEK 26.8 billion.
SEK 0.9 BILLION
SEK 49.8 BILLION
SEK 26.8 BILLION
UPTIME AND
PROFITABILITY
Driving prosperity for many stakeholders
23
Keeping up with the latest development is vital to stay successful
and is hard to do on one’s own, and that is why the Volvo Group
works in collaborations and partnerships.
Based on emerging technologies and the latest findings within
connectivity, automation and electrification, we see great opportu-
nities to co-create a more sustainable transport system and to make
societies prosper. This is the reason why we are forming a new
ecosystem in different types of collaborations and partnerships.
Many alliances and partnerships
We have a strategic alliance with Samsung SDI to develop battery
packs for the Volvo Group’s electric trucks.
Sharing the Green Deal vision of sustainable transport and a
carbon neutral Europe by 2050, we and Daimler Truck have
launched a fuel cell joint venture called cellcentric.
Together with Daimler Truck and the Traton Group we have
agreed to install and operate a high-performance public charging
network for battery-electric heavy-duty long-haul trucks and
coaches across Europe. We work together with both NVIDIA
and Aurora to develop autonomous trucks.
We collaborate with SSAB on research, development, serial
production and commercialization of the world’s first vehicles
made of fossil-free steel. These are some examples which you can
read more about in this report. We also have a strategic alliance
with Isuzu Motors.
Partnerships
to create
leadership
Business model / Partnerships
E
N
G
I
N
E
S
Trucks
Joint
venture &
Alliancess
CAST
Buses
Volvo
Penta
Construction
Equipment
Strategic alliance with Isuzu Motors
On April 1, the Volvo Group and Isuzu Motors completed the trans-
action whereby Isuzu Motors acquired UD Trucks from the Volvo
Group for an enterprise value of SEK 19 billion on a cash and debt
free basis as part of a formation of a strategic alliance. The alliance
aims to capture opportunities in the ongoing transformation of
the commercial vehicle industry and is set to a build long-term
and robust relationship.
Alliance work is focused on deriving potential synergies in areas
that will encompass i.e. forming a technology partnership, inten ded
to leverage the parties’ complementary areas of expertise within
both well-known and new technologies and creating a larger volume
base to support investments for world-class technology. Creating
the best long-term conditions for a stronger heavy-duty truck busi-
ness for UD Trucks and Isuzu Motors in Japan and across interna-
tional markets. Exploring further opportunities for even broader and
deeper collaboration within the commercial vehicle businesses across
geographical areas and product lines for future urban logistics solu-
tions. Exploring cooperation in the areas of purchasing and logis-
tics, leveraging common technology, as well as the geographical
footprint complementarity and volume expansion.
Technologies develop at a faster pace
than ever before. Combined in new
ways they offer new and innovative
solutions in almost all industries.
The Volvo Group and its partners can benefit from the Group’s
modular platform Common Architecture & Shared Technology
(CAST). The ambition with CAST is to develop a competitive set
of modular products and services that are easy to integrate, meet
future legal, market and society needs, as well as exceeding cus-
tomer expectations. The CAST system is modular, scalable and
cost-efficient. We secure an aggregated view on needed common
architecture and platform solutions, consolidate and support
activities on new enabling technology development and strive for
continuous development of standardized interfaces for both hard-
ware and software. Through well-defined performance steps and
continuous reduction of complexity, the CAST ecosystem sup-
ports our different brand strategies across disruptive technology
trends while maximizing synergies for the Volvo Group and its joint
ventures and alliances.
Partnerships
CAST – the Volvo Group’s modular system
24
Business model / Our sustainability approach
Shared
value
When executing on our business model, we are exposed to a range
of strategic risks and opportunities. Many of these are related to
sustainable development. We commonly refer to three main areas
of our sustainability approach:
Resources
People
Climate
Climate – focusing of reducing greenhouse gas emissions from
our business and operation, striving for 100% fossil free.
Resources – using natural resources in the most efficient way and
contributing to 100% improvement of our customers’ logistics
operations.
People – focusing on health, empowerment, business ethics and
respect for human rights, striving for 100% safe products and
safe operations.
Our strategy responds to a range of
sustainability-related issues. This means
considering the impact on the world
around us as part of considering the
long-term success of our business.
In this annual and sustainability report we present examples that
further describe our strategic sustainability topics with events,
targets and attainments from 2021.
Sustainability reporting
When it comes to reporting, the statutory sustainability report
refers to sustainability as environmental matters, social matters and
treatment of employees, respect for human rights, anti-corruption
and bribery, as well as diversity on company boards.
In addition, we are exposed to a range of stakeholder requests
on our sustainability performance. Therefore we have prepared
a detailed account of these matters in the Sustainability Notes
on page 152179. In the notes we present risks and opportunities,
management approach, policies, metrics and indicators to trace
sustainability performance. The material sustainability topics are
reported in accordance with the GRI standards and in line with
other reporting frameworks, see page 152.
We also include related topics in the Corporate Governance
Report.
Our sustainability approach
25
Climate and
resources
Double the rate of energy
efficiency (7.3)
Main connections to UN Sustainable
Development Goals
Awareness and capacity on climate
change mitigation and impact
reduction (13.3)
Sustainable transport systems
(11.3)
26
Climate and resources
The Volvo Group has committed to the Science-Based Targets ini-
tiative (SBTi) call for action campaign Business Ambition for 1.5°C.
The campaign requires greenhouse gas emissions to be net zero
across the value chain by 2050 at the very latest, but we have
committed to reach this already by 2040. The pace of change is
particularly important, and we have set ambitious milestone tar-
gets along the way.
The transport and infrastructure industries have started their
journey towards net-zero emissions, with buses having been in
front of the development. For trucks and construction equipment
the transition is in an early stage, but it is expected to accelerate
with battery-electric vehicles, lower emission fuels used in com-
bustion engines and, later in this decade, fuel cell-electric vehicles.
The Volvo Group is at the forefront of this development and is eager
to drive change but also aware of the challenges. In 2021, the
Group delivered 942 fully-electric vehicles, mainly in Europe and
North America. Order intake for fully-electric vehicles was 1,683
units. In Europe Volvo Trucks had a 42.2% market share in fully-
electric heavy-duty trucks and Renault Trucks 19.4% in 2021.
Government incentives, investments in charging infrastructure
and other measures are needed to continue the acceleration. The
International Energy Agency’s scenario for net-zero 2050 esti-
mates a gradual adoption of fully-electric commercial vehicles and
that by 2035, 50% of the new trucks sold globally needs to have
zero tailpipe emissions. This development also relies on rapidly
increased supply of renewable energy. The Volvo Group’s approach
is to use our modular product development, production and assem-
bly system (CAST) to quickly adapt to customer needs and
demands. This enables flexible production and thereby limits
investment needs.
Towards
net-zero
Climate change is the challenge of our generation,
and it is the Volvo Group’s long-term ambition to
lead our industry towards net-zero emissions.
Climate change, population growth and increasing
urbanization are changing the landscape and
expectations on transport and infrastructure.
Progress total greenhouse gas emissions
The transition towards lower emissions is at an early
stage but is expected to accelerate as sales of electric
vehicles and fuel efficiency increase. The Volvo Group
measures a range of metrics related to greenhouse gas.
One metric is total emissions from scope 1, 2 and
scope 3 – category 11 use of sold products, where the
use of sold products represent approximately 96% of
the total emission footprint according to the GHG
inventory analysis. In 2021, the total calculated
emissions amounted to 286 million tons compared
with 323 million tons in 2019.
The Volvo Group has introduced a range of solutions
with improved energy and fuel efficiency, but so far, the
main reason for the reduction of emissions is related to
lower sales volumes of trucks compared with the
baseline in 2019. As use phase emissions make up the
vast majority of the emission footprint, annual sales
volumes will have a significant impact on results from
one year to the next. The Volvo Group is operating in
cyclical industries, which are
linked to economic activity, and
consequently sales volumes and
utilization of the rolling fleet of
products vary over time.
See further details on the
result on page 160. Also read
more about the method,
additional metrics, targets and
results in the Sustainability
Notes on page 152162.
19
Mton
20 21
323 241 286
Status 2021
–
3%
Target 2030
–50%
absolute emissions
SCOPE 12
Own operations
Status 2021
+7%
Target 2030
–40%
emissions per
vehicle km
Status 2021
+17%
Target 2030
–30%
absolute emissions
SCOPE 3
USE PHASE
Construction
equipment
Status 2021
–
5%
Target 2034
–37.5%
absolute emissions
SCOPE 3
USE PHASE
Volvo Penta
SBTi approved targets, from baseline 2019
Status 2021
–
2%
Target 2030
–40%
emissions per
vehicle km
SCOPE 3
USE PHASE
Trucks
SCOPE 3
USE PHASE
Buses
27
ROLLOUT OF ELECTRIC TRUCKS
Electromobility plays a key role on the road to fossil-free
transports. Our electric trucks, based on Volvo Group tech-
nology, are already rolling on the streets in real operations.
The electrified transport solutions are helping transport
operators to significantly reduce emissions and noise.
We are determined to continue leading our industry
towards a sustainable future.
We believe that the transformation to electric vehicles
will happen segment by segment, market by market and
region by region. It has already started in public transport,
distribution, waste and recycling and certain construction
segments in some markets. And in 2021, Volvo Trucks
started selling three new heavy-duty all-electric models,
believing that the time is right for a rapid upswing in electri-
fication of heavy road transport. Production is planned to
begin in the second half of 2022, see next page.
When total cost of ownership is outweighed by the
opportunity to provide fossil-free transportation and neces-
sary conditions such as charging infrastructure is in place,
we believe that the shift to electric vehicles will be quick.
The Volvo Group has deep customer knowledge and appli-
cation expertise within many segments and this will remain
a decisive factor in providing customer value also when it
comes to electric vehicles.
Because of different characteristics and requirements,
such as load, energy usage and yearly mileage, there will be
a mix of low carbon or zero emission vehicles products in
2030 – battery electric, fuel cell electric and internal com-
bustion engines that can run on liquefied natural gas (LNG),
biogas or other sustainable biofuels.
A MIX OF PRODUCTS WILL BE REQUIRED
Battery electric Fuel cell electric Internal Combustion Engine (Liquefied Natural Gas/Diesel)
Refuse
City/regional distribution Interregional haul
Yearly mileage
Energy usage
Long haul
Heavy transport
Heavy construction
Urban construction
Climate and resources
Check out our
videos on
Youtube.
28
RENAULT TRUCKS ENHANCES ITS
RANGE OF ELECTRIC TRUCKS
Renault Trucks is developing its range of electric trucks to
adapt to the wide variety of urban distribution activities and
meet the needs of its customers. A 19-ton D Wide Z.E. has
been added to the 16- and 26-ton Renault Trucks D Z.E.
and D Wide Z.E. models, which have been in production
since 2020. Renault Trucks is also offering a wider range of
wheelbases and special connectivity for refrigerated bodies.
Equipped with a two-axle chassis for improved maneuver-
ability, the 19-ton Renault Trucks D Wide Z.E. is a great vehicle
for temperature-controlled distribution, with an optimized
payload. In addition, Renault Trucks has designed a new
system to increase the energy efficiency of all-electric trucks
equipped with a refrigerated body. Renault Trucks D and D
Wide Z.E. 16, 19 and 26 ton trucks are now available with a
fridge-connection option, which supplies the energy required
for the refrigeration system directly from the vehicle’s 600 V
traction batteries.
VOLVO TRUCKS READY TO ELECTRIFY LARGE PART OF TRANSPORTS
With the sales start in 2021 of three new heavy-duty
all-electric models, Volvo Trucks believes the time is right
for a rapid upswing in electrification of heavy road trans-
port. This positive outlook is based on the ability of Volvo’s
electric trucks to meet a broad variety of transport needs.
In the EU for example, almost half of all truck transports
could be electrified in the near future.
With the sales start of the new electric Volvo FH and
Volvo FM models, electrified transport is now possible not
only for urban areas but also for regional traffic between
cities. In addition, the new electric Volvo FMX model is
creating new ways to make construction transport opera-
tions both quieter and cleaner. Production of the new elec-
tric models for Europe is planned to start in the second
half of 2022. They join the Volvo FL Electric and Volvo FE
Electric for city distribution and refuse handling that have
been in serial production since 2019 for the same market.
In North America, sales of the Volvo VNR Electric started
in December 2020.
With the sales start of the new truck models, Volvo
Trucks now has a lineup of six medium and heavy duty
electric trucks, which makes it the most complete com-
mercial electric truck range in the industry.
Can cover nearly half of EU transport needs
With the addition of the new products with higher load
capacities, more powerful drivelines and range of up to 300
km, Volvo Trucks’ electric portfolio could cover around 45%
of all goods transported in Europe today (According to
Eurostat statistics “Road Freight Transport by distance”
2018, 45% of all goods transported on road in Europe trav-
elled less than 300 km). This makes it possible to make an
important contribution to lower the climate impact from
road freight, which according to official statistics account
for about 6% of total CO
2
emissions in the EU.
Climate and resources
29
Volvo VNR Electric
Volvo FM Electric
Mack LR Electric refuse
Climate and resources
CUSTOMERS GETTING ONBOARD
The shift towards electrification is taking place across the
transportation industry. More and more companies are
taking their first steps on this journey together with the
Volvo Group. Here are some examples:
During 2021, Volvo Trucks received an order for 100
Volvo FM Electric trucks from DFDS, Northern Europe’s
largest shipping and logistics company. The deal was the
largest commercial order to date for Volvo electric trucks,
and one of the largest ever for heavy electric trucks world-
wide. In January 2022, DFDS ordered another 25 trucks.
Urby, a subsidiary of La Poste Group and Banque des
Territoires specializing in first and last mile logistics, is
investing in a zero-emission fleet. It has ordered 20 electric
Renault Trucks D Z.E. vehicles, dedicated to urban distribu-
tion, which will be deployed in 15 French cities from 2022.
In North America, Volvo Trucks’ customer Performance
Team, A Maersk Company, placed an order for 16 Volvo
VNR Electric models – the largest commercial order of the
North American zero-tailpipe emission model to date.
Manhattan Beer Distributors, a major New York City-
based beer and beverage distributor, placed an order for
five Volvo VNR Electric trucks — the first zero tailpipe
emission, battery-electric trucks to be deployed in Man-
hattan Beer Distributors’ fleet of more than 400 delivery
trucks.
In June, Mack Trucks announced that the New York City
Department of Sanitation (DSNY) planned to purchase
seven Mack LR Electric refuse models, which will operate
in each of the city’s boroughs.
Check out our videos on Youtube.
Next genera-
tion of Volvo
VNR Electric
Inside the new
revolutionary
heavy-duty
electric
driveline
Renault
Trucks D Z.E
30
Climate and resources
VOLVO CE POWERS A SUSTAINABLE FUTURE WITH
GROWING RANGE OF ELECTRIC MACHINES
With three new electric compact machines – one wheel
loader and two excavators – Volvo Construction Equipment
(Volvo CE) is showcasing its commitment to build the world
we want to live in by offering a growing range range of elec-
tric machines. In total customers now have five electric
models to choose from.
The three new models were available to reserve online
in twelve European markets from October 2021 for deliv-
ery in 2022. The offer will also expand to other markets.
Demonstrating once again that sustainable solutions are
not just a promise for tomorrow, but a real innovation for
today, Volvo CE’s growing range of electric machines are
providing customers with a cleaner, more silent and more
comfortable work environment – but now with an even
wider range of choice to best suit their needs.
These latest innovations are the next step forward in
Volvo CE’s ambition to reach net zero value chain green-
house gas emissions by 2040 – alongside development of
hydrogen fuel cell solutions and more sustainable internal
combustion engine products.
TRANSFORMATIONAL INVESTMENTS
During the year, Volvo Group acquired 60% of Designwerk
Technologies AG, an engineering company in Switzerland,
that develops and sells electromobility products and engi-
neering services within electromobility eco-systems.
Designwerk Technologies offer customized electric trucks
under the brand Futuricum, mobile rapid chargers and high
voltage battery systems.
Volvo Group Venture Capital made minority investments
in FourKites, Driivz and Fortellix. The role of Volvo Group
Venture Capital is to make investments that drive transfor-
mation by facilitating the creation of new services and
solutions and to support collaborations between start-ups
and the Volvo Group.
FourKites is one of the leading global real-time transpor-
tation visibility platforms having pioneered real-time supply
chain visibility in 2014. Since then, they have built the
world’s largest platform that aim to help leading brands to
reduce their operating costs, improve on-time performance
and create better customer relationships. The company
tracks over one million shipments daily across 176 coun-
tries, with over 120% year-over-year growth.
Driivz Ltd. is a leading
global electric vehicle
charging software
company that has
developed a platform
for managing large
charging networks
from end-to-end. The Driivz
platform functions as an operating system for electric vehi-
cle charging networks and is used by operators of charging
points, electric vehicle fleets and other key players in the
ecosystem. The platform is scalable and modular, which
makes it highly flexible and allows it to be customized to
customers’ needs. The company has a large and growing
number of customers in the utility, oil and gas, and auto-
motive industries and among charging network operators.
Foretellix is a leading company in the field of measurable
safety for driver assistance and autonomous vehicles. In
addition to the Volvo Group Venture Capital investment,
Volvo Autonomous Solutions formed a closer partnership
with Foretellix earlier in the year with the aim of jointly
creating a coverage-driven verification solution for auto-
nomous driving that operates both on public roads and
in restricted areas.
31
Climate and resources
VOLVO FOUNDING MEMBER OF FIRST MOVERS COALITION TO DRIVE DEMAND
FOR LOW CARBON TECH
Roughly half of the emission reductions needed to reach
the 2050 climate goals rely on technologies in early devel-
opment, demonstration or prototype phases. Accelerating
innovation in this decade is critical to bring these technol-
ogies to market and make them cost-competitive.
To jumpstart this effort, the World Economic Forum, in
partnership with US Special Presidential Envoy for Climate
John Kerry, announced the First Movers Coalition at the
UN Climate Change Conference (COP26) in Glasgow,
Scotland. The Coalition is a new platform for companies
to make purchasing commitments that create market
demand for low carbon technologies. Volvo Group joined
the Coalition as founding member.
The commitments aim to be collectively significant
enough to commercialize emerging decarbonization
technologies. These commitments target new technologies
and aim to create a market by 2030 that can be ramped
up to achieve decarbonization in 2050.
VOLVO BUSES LAUNCHED NEW
GLOBAL ELECTROMOBILITY OFFER
Volvo Buses expanded its electromobility offer worldwide.
With the launch of a new Volvo BZL Electric chassis, Volvo
Buses provides a solid platform for sustainable and effi-
cient public transport in cities around the world, along with
reliable and profitable operations for customers.
Global demand for electromobility solutions in the pub-
lic transport sector is rising and Volvo Buses expects a
rapid increase in the coming years. With the new Volvo
BZL Electric, Volvo Buses offers a global platform for
clean, silent, and energy-efficient public transport to meet
the rising demand on important markets that are ready for
the shift to electromobility.
Volvo Buses has years of experience of electromobility
solutions from working closely together with operators all
over the world. The new Volvo BZL Electric is designed
for both single and double decker applications with multi-
ple options for bodybuilders.
32
Climate and resources
WORLD’S FIRST VEHICLE USING FOSSILFREE STEEL
In 2021, Volvo Group proudly revealed the world’s first vehi-
cle made of fossil-free steel. The vehicle was made in Volvo
Construction Equipment’s facility in Braås, Sweden using
fossil-free steel from SSAB. More vehicles will follow in
2022 in what will be a series of concept vehicles and com-
ponents using fossil-free steel.
The machine, a load carrier for use in mining and quarry-
ing, was unveiled at a Green steel collaboration event in
October. Volvo CE’s ambition is to have fossil-free steel
used across all its products, with a step-by-step approach.
A move toward green steel is an important step for Volvo
Group, as well as for the transport and infrastructure indus-
tries as a whole, particularly considering that around 70%
of a truck’s weight comes from steel and cast iron, with the
figure for Volvo CE’s machines even higher. This first concept
machine is just the start, with smaller-scale series production
planned by 2022 and mass production set to follow.
Further to creating the world’s first, fossil-free vehicle
with SSAB, the Green steel collaboration is also about
making use of surplus fossil-free hydrogen from steel-maker
Ovako to power the Volvo Group’s fuel-cell vehicles.
FUEL SAVINGS WITH NEW GENERA
TION OF RENAULT TRUCKS ENGINES
Electric trucks is key in reducing the C0 footprint from our
products, but it is also about improving current engines.
Following major updates with improved fuel efficiency on
Volvo Trucks the last two years, Renault Trucks in 2021
made major changes to its T, T High, C and K ranges in
terms of design, driving comfort and on- board comfort.
They continued this evolution with the arrival of new 11-
and 13-liter Euro VI Step E engines which, combined
with the integration of new technologies and dedicated
services, provide fuel savings of up to 10% compared to
the previous generation of Renault Trucks engines.
10%
Check out our videos
on Youtube.
Volvo Group
launches
world’s first
vehicle using
fossil-free
steel
33
Climate and resources
LAUNCH OF FUEL CELL JOINT VENTURE CELLCENTRIC
Volvo Group and Daimler Truck AG have officially outlined
the roadmap for the new fuel-cell joint venture cellcentric,
as part of an industry-first commitment to accelerate the use
of hydrogen-based fuel cells for long-haul trucks and beyond.
With the ambition of becoming a leading global manufac-
turer of fuel-cell systems, cellcentric will build one of Europe’s
largest planned series production of fuel-cell systems, with
operation planned to commence in 2025. The joint venture
can draw on decades of expertise and development work
from both Volvo Group and Daimler Truck AG.
The Volvo Group believes
that purely battery-
electric and hydro-
gen-based fuel-cell
trucks will comple-
ment each other
depending on the
individual customer
use case. Battery
power will be used
for lower cargo
weights and for shorter
distances, while fuel-cell
power will tend to be the preferred option for heavier loads
and longer distances. The major truck manufacturers in
Europe, also backed by Volvo Group and Daimler Truck AG,
are therefore calling for the setup of around 300 high-
performance hydrogen refueling stations suitable for heavy-
duty vehicles by 2025 and of around 1,000 hydrogen
refuel ing stations no later than 2030 in Europe. This joint
initiative, using hydrogen as a carrier of green electricity to
power electric trucks in long-haul operations, is one impor-
tant part of decarbonizing road transport.
Volvo Group’s goal is to start with customer tests of fuel-
cell trucks in about three years and to be in series production
of fuel-cell trucks during the second half of this decade. All
vehicle-related activities are carried out independently from
each other, as both companies remain competitors in all
vehicle and product ranges, and particularly in fuel-cell inte-
gration solutions for all products.
VOLVO ENERGY DEDICATED TO ACCELERATING ELECTRIFICATION
In February 2021, the Volvo Group decided to create a
new business area, Volvo Energy. The business area will
support the electrification journey of the Group by secur-
ing charging infrastructure and other related electromobil-
ity services as well as manage the Volvo Group’s business
flow of batteries over the lifecycle. On the latter, the envi-
ronmental impact from electric and hybrid electric com-
mercial vehicles and machines will be reduced by giving
used batteries a second life in different applications.
Joachim Rosenberg, member of the Volvo Group Execu-
tive Board and previously Chairman of UD Trucks, heads
the new business area.
“There is a strong and growing interest for electric vehi-
cles and machines among our customers. This is of course
very positive as it accelerates the transition towards more
sustainable transport solutions. Our ambition is to offer
our customers the most competitive solutions when it
comes to electrification, including batteries and charging
infrastructure. With Volvo Energy, we are taking a holistic
view of the entire life cycle, which benefits both our cus-
tomers’ business and society as a whole", says Martin
Lundstedt, President and CEO.
About cellcentric
On March 1, 2021, Volvo Group and Daimler Truck AG
formed cellcentric. To that end, Volvo Group acquired
50% of the partnership interests in the existing
Daimler Truck Fuel Cell GmbH & Co. KG for approxi-
mately EUR 0.6 billion on a cash and debt-free basis.
More than 300 highly specialized experts work for
cellcentric in inter-disciplinary teams at locations in
Nabern and Stuttgart, Germany and
Burnaby, Canada. Around 700 individ-
ual patents have been issued so far,
underlining the leading role played by
the company when it comes to tech-
nological development.
34
JOINT VENTURE FOR A EUROPEAN
HIGHPERFORMANCE CHARGING
NETWORK
In December 2021, Volvo Group, Daimler Truck and the
Traton Group signed a binding agreement to create a joint
venture (JV) to install and operate a high-performance
public charging network for battery-electric, heavy-duty
long-haul trucks and coaches across Europe. The parties
are committed to initiating and accelerating the necessary
build-up of charging infrastructure for the increasing
number of customers of electric vehicles in Europe and
contribute to net-zero transportation in Europe by 2050.
The JV creation is subject to regulatory approvals.
The planned JV, to be equally owned by the three par-
ties, is scheduled to start operations in 2022. The parties
are together committing to invest 500 million euros,
which is assumed to be by far the largest charging infra-
structure investment in the European heavy-duty truck
industry to date. The plan is to install and operate at least
1,700 high-performance green energy charging points on
and close to highways as well as at logistics and destina-
tion points within five years of the establishment of the JV.
The number of charging points is with time intended to be
increased significantly by seeking additional partners as
well as public funding. The forthcoming JV is planned to
operate under its own corporate identity and be based in
Amsterdam, Netherlands. The JV will be able to build on
the broad experience and knowledge of its heavy-duty
trucking founding partners.
The JV will offer both high-performance charging
and overnight charging. The starting point for the high-
performance charging is the current CCS standard of
350 kW. As soon as it is feasible, newer standards with
higher output will be adopted wherever possible to enable
and prioritize the 45-minute charge use case, which is
typically expected to be around 750 kW. Overnight
charging will be 50100 kW.
DRIVING SYNERGIES THROUGH SAME PLATFORM AND SAME PLANT
The Volvo Group’s modular vehicle architecture creates
advantages in both the development and the manufacturing
phase. The architecture allows us to put either an internal
combustion engine or an electric driveline in the same chassis.
In this way, we reduce development time, costs and can
bring new offers to the market faster. In addition, we can
manufacture the different variants on the same assembly
line, which again reduces costs and enables us to scale up
volumes quickly when conditions are right.
Climate and resources
Combustion
engine
Electric
driveline
Battery
package
Fuel cell
package
Fuel cell
electric
Battery
electric
Combustion
engine
Pre-assembly stations
Main assembly line
SAME PLANT SAME VEHICLE PLATFORM
Combustion engine
Battery electric
Fuel cell electric
35
Climate and resources
The world’s natural resources are limited and economic activity is rap-
idly increasing. This means that there are large incentives for rethinking
existing production and transportation patterns.
In order to use resources efficiently, waste and pollution need to be
designed out to the extent possible and products and materials kept in
the use phase for a longer period of time. At the same time, the trans-
port industry as a whole can make significant improvements in produc-
tivity. Today, some estimates show that the average truck in the indus-
try is only using 4050% of total load capacity. Sharing economy
Towards
circularity
and resource
efficiency
INCREASE EFFICIENCY IN TRANSPORT SYSTEMS
Increasing transport efficiency offers opportunities to add sustainable value beyond fuel consumption and electrification. According to
Volvo Group estimates, trucks, buses and construction equipment are on average used 30% of their life cycles, and the average truck on
the road carries 4050% of its total capacity. Theoretically up to 50% of the transport is available for more cargo. With this in mind,
and the fact that 510% of the world’s total fuel is consumed to move goods and materials the climate and cost efficiency potential for
transports is significant, which can lead to a rapid transformation of the business.
Assets used ~30% of
their life cycles
Up to 50% of total payload theoretically
available for more cargo
510% of total fuel consumed
is used to move goods
and materials
5–10%
<30%
40–50%
5–10%
<30%
40–50%
5–10%
<30%
40–50%
RESOURCEEFFICIENT TECHNOLOGY
AND CIRCULAR FUEL OPPORTUNITY
The bio-gas powered Volvo FH and FM with I-See are the most
fuel-efficient gas trucks we have ever built. The gas driveline
plays an important role to reduce fossil emissions here and now.
The technology has been developed for fuel economy as well as
the opportunity to reduce emissions on todays’ long haul trans-
ports, where electric trucks are not yet efficient. With natural
gas, the saving is up to 20% tank-to-wheel. With liquified bio-
gas (bio-LNG), the fossil emissions are close to zero.
Bio-LNG brings several benefits. Lower climate impact is
critical and in the EU, bio-LNG has the potential to replace
around 20% of today’s diesel-based transports. The technol-
ogy is also a key enabler for circularity in organic waste man-
agement. In the process of producing bio-LNG from agricultural
or other biodegradable waste and using it for combustion, a
significant part of the methane emissions from the waste are
avoided and what is left can be used as fertilizer.
Double the rate of energy efficiency (7.3)
Resource efficiency and reduced CO
2
per value added (9.4)
Efficient use of natural resources (12.2)
Main connections to
UN Sustainable
Development Goals
business models, artificial intelligence and machine learning can opti-
mize goods flow and lead to a reduction in transport needs and save
valuable natural resources.
The Volvo Group wants to lead by example. We are aiming for our
own transport system to be world class. What we learn, we will also
offer our customers to contribute to significantly increase efficiency in
their transport systems. This means taking advantage of a wide range
of opportunities that will result in reduced logistics costs, emissions
and wasted resources.
As we focus even more on services, our aim is to increase the sales
of total transport solutions. While the traditional transactional sales
will remain, we offer different business model setups for different
customers depending on their needs. More information on different
business models is available on page 20.
36
Climate and resources
REMANUFACTURING RENAULT TRUCKS
The business case for circularity is developing rapidly to handle
resource scarcity. Volvo Group has a strong position within
refurbishment and remanufacturing of both components and
vehicles. Renault Trucks has during the year scaled up its facility
for remanu factured and refurbished trucks. In 2021, around
500 used trucks were converted in Renault Trucks’ used truck
centers.
The centers focus on a range of business solutions to increase
circularity by extending operating life. Vehicles used up to four
years are regenerated and upgraded with hardware and soft-
ware and returned to their owners for full capacity and operating
beyond the one-million-kilometer mark.
Trucks used for a specific application or route are taken back
and transformed for a new purpose. For example a long-haulage
tractor is turned into a rigid, or a retrofitting of a traditional drive-
line to a biofuel driveline.
Parts and components are remanufactured to the same or
higher quality as a new. Renault Trucks mainly remanufactures
engines, gearboxes, injectors and particle filters.
Read more on renault-trucks.com
VOLVO AND HOLCIM IN A PROJECT TO
USE AUTONOMOUS ELECTRIC HAULERS
Volvo Autonomous Solutions and Holcim Switzerland have
entered a collaboration to jointly test and further develop the use
of autonomous electric haulers in a limestone quarry. The two
companies are dedicated to seeking infrastructure and transport
solutions that are safe, efficient, innovative and sustainable.
Holcim’s quarry Gabenchopf in Siggenthal has been chosen
as the site for this project. The battery-electric haulers currently
being tested mark a groundbreaking step in the industry: not
only are they quieter and more sustainable than conventional
haulers, they are also safer while being a part of a CE-certified
electric, autonomous transport solution for the quarry and
cement industries.
“This project showcases a sustainable transport solution that
is commercially viable and combines the technology shifts of
connectivity, automation and electrification,” says Nils Jaeger,
President of Volvo Autonomous Solutions.
The testing and likely deployment of electric haulers in the
quarry is part of Holcim’s digitization initiative “Plants of Tomor-
row”. As part of the initiative, Holcim is testing automation tech-
nologies, robotics and artificial intelligence throughout the entire
production process in order to develop innovative solutions for a
safer, more efficient and more sustainable cement production.
PROTOTYPE OF LONGHAUL AUTONO
MOUS TRUCK FOR NORTH AMERICA
Volvo Autonomous Solutions and Aurora achieved the next mile-
stone in their partnership to jointly develop on-highway autono-
mous trucks in the U.S. In September, a prototype of Volvo
Trucks’ flagship, long-haul VNL model, integrated with the Aurora
Driver technology, was revealed, representing an important step
towards launching fully autonomous heavy-duty trucks commer-
cially in North America.
While the transformation to autonomous trucking will not
happen overnight, Volvo Autonomous Solutions will continue
to further increase the speed of development to support cus-
tomers’ changing needs across many segments and markets
and ultimately bring the benefits of autonomous transport
solutions to the public with safer, more efficient and more
sustainable commercial transport of goods across the U.S.
37
People
Access to quality tech ni cal and
vocational training (4.3)
Main connections to UN Sustainable
Development Goals
Safe and sustainable transport
systems (11.2)
Safe and secure work
environments (8.8)
Halving global deaths and injuries
from road traffic accidents (3.6)
38
People
Safety is a priority in every thing we do. We
have a vision for zero accidents with Volvo
Group products and in our workplaces.
Striving for
safe roads and
workplaces
Every year there are more than 1.3 million lives lost and 50 million
people injured in road traffic accidents around the world. We work
proactively to develop intelligent solutions that not only mitigate
the consequences of accidents but strive to avoid them altogether.
Our vision is zero fatalities, zero injuries and ultimately zero accidents.
According to the World Health Organization, the cost of road
traffic accidents can be up to 3% of global GDP. Therefore, there
is a strong focus on safety in the transport and infrastructure
industry, as well as from governments around the world. Safety
features for vehicles and machine are key, but our work also
includes a range of engagements with customers and regulatory
bodies, as well as road traffic safety and driver training. Visit
volvogroup.com/safety for more information.
With safety, as well as with the environment, we believe in
taking a full value chain approach. We work to improve health and
safety in our own operations, and we set high standards for our
partners in the supply chain. Collaboration, being innovative, life-
long learning, challenging the status quo and being curious drive
engagement and improvement work. We strive to increase safety
in our operations and have targeted to reduce the accident rate on
an aggregated level by at least 50% by 2030, compared to 2019.
Safety mindset is also the foundation for health, non-discrimi-
nation and other human rights aspects. For more information, see
the Sustainability Notes on page 152179.
SAFETY IN OPERATIONS
We work to improve health and safety in our own
operations, and we set high standards for our
partners in the supply chain.
SAFETY FOR OUR CUSTOMERS
Our vision is zero accidents with Volvo Group prod-
ucts, and the offering of world-leading products
and solutions for sustainable transports is an im-
portant part of getting closer to this vision. The
approach is to look at the traffic system and see
where we can contribute. In this work, we consider
the views of drivers and operators, commuters, as
well as other traffic system users like cyclists and
pedestrians.
39
People
SAFETY ZONES FOR BUSES
Driving carefully is the best general safety action. To help bus
drivers to follow regulations operators can define zones with a
firm maximum speed. Inside the zone, the vehicle simply cannot
exceed the preset level. Safety Zones is used in Volvo buses in
approximately 20 countries all over the world. The Brazilian city
of Curitiba cut accidents by 50% on its busiest bus route after
implementing Safety Zones.
Volvo Safety Zones is a refinement of geofencing technology
where Volvo Buses adds intelligence and functionality to the
vehicle. Operators can simply set the borders of a zone and the
maximum speed they want to permit. Areas close to schools
and public parks are obvious applications, and so too are
hazard ous stretches of road. And there is no limit to the number
of zones that can be created.
It is 5 pm and rush hour in Curitiba, Brazil. The Volvo bus
travelling south on Bus Rapid Transit (BRT) North Corridor is
full of people on their way home from work and schools. As the
bus approaches the entrance to Praça do Japão, the driver pre-
pares to reduce its speed to 30 km/h. This idyllic public space is
in one of the city’s safety zones and even if the driver forgets to
reduce the speed, the bus will slow down automatically.
This bus is one of the buses in the city that is using Safety
Zones. The system is one of many innovations that the city has
adopted to develop its public transport system. Curitiba was
the first city in the world to adopt special express bus lanes,
known as BRT. Today the network includes six express corridors.
In the BRT North Corridor alone, Urbanization of Curitiba
(URBS) a local government-owned company that manages
public transport in the city, has mapped out eight safety zones,
where the maximum speeds range from between 20 km/h and
60 km/h, depending on the risk of accidents.
The laws of physics show that when speed doubles the braking
distance is four times longer and the crash violence is four times
greater. It is easy to see that keeping speed down is a principal
safety factor. And in operators’ depots, restricted speed can reduce
accidental damage to panels, lights, and rear- view mirrors.
NEW SAFETY FEATURES ON ELECTRIC CITY BUSES
During the year, Volvo Buses presented the most recent addi-
tions to its city bus offer to customers. Extended charging
possibilities and how Volvo Buses takes the guesswork out of
battery capacity requirements along with new safety features
were in focus.
In some situations, such as at a bus stop, people may not
hear the bus approaching. The solution is AVAS – Acoustic
Vehicle Alerting System – which is a speed-dependent synth-
etic sound designed to notify the immediate surrounding.
The Volvo 7900 Electric can be specified with a side detec-
tion system. Sensors on the curb side help the driver monitor
the vehicle’s nearside, reducing the risk of a collision when
cornering, for instance when there are cyclists between the
bus and the curb.
Another new feature is that the exterior rear-view mirrors
can be replaced by cameras. Drivers get a better view to the
rear on interior displays optimally placed in the field of vision.
And the forward field of vision is not disturbed by the outside
mirror structure.
The Volvo 7900 Electric features a reinforced front impact
protection system. It is designed to pass the R29 front impact
requirement, a safety standard for heavy-duty trucks. The
enhanced structural design adds an extra protection for the
driver. This is just one example of how Volvo goes beyond
legislation.
VOLVO 7900 ELECTRIC
40
People
ACTIVE CARE PREDICTED
MAINTENANCE IS SAFE MAINTENANCE
Active Care is a telematics service that bundles together moni-
toring of machine health and the provision of weekly reports
that together help reduce downtime. This remote analysis tool
delivers multiple benefits, including catching problems before
they become failures, which reduces the risk for incidents and
unplanned maintenance in the field. Instead, the
maintenance can be planned and performed safely.
VOLVO TRUCKS ADDS UNIQUE SOUNDS TO ITS ELECTRIC TRUCKS
To improve safety, Volvo Trucks has developed an acoustic alert
system with unique sounds for its electric truck models. The
Volvo designed alert will increase safety by making pedestrians,
cyclists and other road users aware of approaching trucks,
which would otherwise be nearly silent. At the same time, the
sounds are designed to be pleasant and unobtrusive, both for
the driver and others close by. The sounds are designed not to
penetrate walls, to allow for quiet nighttime deliveries and con-
tribute to better working conditions.
Since July 1, 2021, all new electric vehicles in the EU are
required to emit a certain sound level when travelling at
speeds below 20 kph. The requirement for the sound level
depends on the speed and the sound is amplified as the speed
increases. At 20 kph it must be at least 56 decibels.
If the vehicle is too quiet, an external acoustic vehicle alerting
system (AVAS) must be added. To meet the new requirements,
and at the same time maintain the benefits of lower noise levels
that come with electric vehicles, Volvo Trucks has developed a
unique set of premium sounds for its electric truck models. The
range of sounds are the result of thorough research and testing
by the Volvo Group’s own acoustics experts.
Volvo’s acoustic alert system for electric vehicles is not just
one but four different sounds, informing people close by about
what the truck is doing: moving forward, idling, reversing, etc.
The sounds will vary in intensity, based on truck speed and will
shift in frequency during acceleration and deceleration.
SOUNDS FOR SAFETY
41
People
We are the
Volvo Group
Creating an inclusive, safe, and engaging work environment built
on care for people is an essential focus area for Volvo Group. We
recognize that digitalization, electromobility and automation are
making a significant impact on the business and ways of working,
and in this shift our people is our most valuable asset. Our approach
is to invest in people, to encourage lifelong learning, to grow
talent, and to create a people centric culture where everyone is
encouraged to contribute. This competence shift will help Volvo
SAFETY AROUND THE CLOCK AT THE VOLVO GROUP IN BRAZIL
At the Volvo Group’s operations in Curitiba, Brazil, the employees
put the emphasis on safety 24 hours a day, 7 days a week.
“We’re very good at looking after ourselves in the factory and
the office. We’ve put in place a whole series of measures to
reduce the number of accidents. But as soon as we leave work,
we forget to think about our safety. That’s why we started the
247 Safety program” , says Maila Faria, Safety Manager, Volvo
Group Latin America.
The 247 Safety program targets all 3,000 employees and
consultants in the factory and offices in Curitiba. The aim is to
make employees aware that safety is not just essential at work.
It is equally important to take a preventive approach at home,
at your exercise class, on the bus or on a bike ride. By influencing
employees’ attitudes and encouraging them to put their knowl-
edge into practice also at home with their families, Volvo Group
in Brazil takes a holistic approach to safety.
Safety 247 is built on four pillars; Be safe at home, Get to
Volvo safely, Be safe at work and Come home safely. Despite
the pandemic and the difficulties involved in bringing people
together, the program has managed to arouse a great deal of
interest. The Annual Safety week was partly held digitally, further
emphasizing the importance of safety at home, at work, when
commuting and when going back to work after restrictions. A
broad range of communication methods, such as posters, news-
letters, information events, quizzes, games and a digital safety
week have been used to engage employees.
Group to realize its People Commitment – to create safe work-
places, to use the full potential of our diversity and to drive
engagement, so that our employees recommend Volvo Group
as a great place to work.
Here we give a few examples that take us forward. Please find
detailed information about people and employment with metrics,
KPI’s and further disclosures in our Sustainability Notes on page
164173.
42
People
UPSKILLING FOR EMPLOYMENT AT ZAMITA ACADEMY IN ZAMBIA
We believe training and life-long learning is a key to individual
empowerment and we take part in a several technical and voca-
tional training programs around the world. This is done in collabo-
ration with universities, technical high schools and international
development organizations. One example from outside the Volvo
Group is ZAMITA Industrial Academy in Ndola, Zambia.
The Zambian government has set out to create a million new
jobs over a five-year period to overcome its challenges with
unemployment. At the same time the commercial transport and
heavy machinery industry faces shortages of skilled drivers and
technicians to their operations. ZAMITA is a multilateral project
collaboration between United Nations Industrial Development
Organization (UNIDO), the Embassy of Sweden in Zambia, the
Volvo Group and the Government of Zambia.
At year-end 2021, the academy had trained over one thousand
students with rapid increase in women enrollment since its
inception. Read more on this and other training and development
initiatives on page 166.
STRATEGY COMES TO LIFE MAKING THE SHIFT
Our industry is in the beginning of its greatest shift – in this
shift we need to both perform and transform. What this means
in our everyday work differs from one individual and work role to
another. Our operations in Gent, Belgium – one of the major
production plants in the Group – has accelerated the transfor-
mation during 2021. A key to this acceleration is competence.
With the right competence, people are empowered to take
action and accountability for result.
“The people are the ones making the move of the Volvo
Group happen and we need to have them onboard. We must
invest in their ownership, create pride but also accountability,
explains Koen Leemans, Director, Production in the Gent
plant. “We want everyone to understand the big picture and
be part of shaping the future”.
The main purpose of the competence shift program was to
accelerate the production start of new products. During 2021,
the Volvo Group has introduced the new high volume product
lines – Volvo FH, FM and FMX – all with new architecture and
modularization for both electric and traditional drivelines.
“Thanks to great cross functional effort between key opera-
tors, specialist from the method lab, team leaders, work leaders
and production and logistic engineers we were able to prepare
ourselves like never before resulting in a smooth transition to
building our new models”, says Bram Timmermans, Team Leader
Cab Drop Assembly.
Selected key operators were assigned in teams together with
operators and staff in the Tuve plant in Gothenburg, Sweden,
which has been a pilot plant for the introduction of new vehi-
cles. The cross-functional teams built up documentation and a
standardized way of working. All spots with big changes for the
upcoming product launch were mapped in the Gent plant and
pilot areas for training were built up. The key operators also
became internal trainers and invited all teams to dialogue to
create awareness and understanding to support the product
launch of the new product lines during the spring of 2021.
As a result of the training and inclusion, the productions
teams were more involved and engaged in the project launches
which has minimized time losses during production, shorter
lead times and fewer training trucks.
”When we started this competency shift program, we
wanted to take the employees with us on a journey to create a
common mindset and build a foundation for the future to meet
new challenges laying ahead, describes Koen. “We already now
see that we have succeeded to increase the commitment and
ownership in the teams and are much better prepared when
introducing future products in our plant”.
43
Board of Directors’
Report 2021
Ownership and legal form
AB Volvo (publ) with corporate
identity no 556012579 0 is a
are listed on Nasdaq Stockholm,
company of the Volvo Group
and is headquartered in Goth-
parent of the Group is AB Volvo
with registered office at
Business activities
production facilities in 19 coun-
tries and sell its products in
more than 190 markets. A sig-
Statutory sustainability report
The Volvo Group has prepared a
sustain ability report in accord-
ance with the Global Reporting
Initiative’s guidelines (GRI
Standards) and the non-financial
disclosure requirements in the
Swedish Annual Accounts Act.
The Volvo Group’s sustain ability
report consists of the Sustain-
ability Notes on pages 152179
together with all other relevant
sustainability disclosures in this
Annual and Sustainability
Report, see:
Strategy and business
model, pages 1043
Policies, assessments and
results, pages 154179
Material risks and mitiga-
tion, pages 7075 and 154–
179
Key performance indicators,
pages 154179. Taxonomy
regulation disclosures, page
162.
Events after the balance
sheet date
The Russia/Ukraine conflict
might negatively impact the
development of the Volvo
Group’s financial results and
financial position. It is however
currently not possible to assess
its consequences for the Volvo
Group.
44
INCOME STATEMENTS VOLVO GROUP
Industrial Operations Financial Services Eliminations Volvo Group
SEK M 2021 2020 2021 2020 2021 2020 2021 2020
Net sales Note 6, 7 361,062 326,472 13,437 13,960 –2,283 –1,987 372,216 338,446
Cost of sales –277,048 –252,933 –7,700 –8,375 2,285 1,989 –282,463 –259,319
Gross income 84,013 73,539 5,738 5,586 2 2 89,753 79,127
Research and development expenses –18,027 –16,798 – – – – –18,027 –16,798
Selling expenses –21,575 –24,284 –2,384 –2,226 – – –23,959 –26,510
Administrative expenses –4,859 –4,611 –11 –9 – – –4,870 –4,621
Other operating income and expenses Note 8 300 –3,673 –54 –1,786 – – 246 –5,459
Income/loss from investments in joint
ventures and associated companies Note 5, 6 –54 1,749 – – – – –54 1,749
Income/loss from other investments –15 –4 0 0 – – –15 –3
Operating income 39,783 25,919 3,289 1,564 2 2 43,074 27,484
Interest income and similar credits 362 372 – – –4 –73 358 299
Interest expenses and similar charges –1,172 –1,422 0 0 4 73 –1,167 –1,349
Other financial income and expenses Note 9 926 –518 – – – – 926 –518
Income after financial items 39,899 24,351 3,289 1,564 2 2 43,190 25,917
Income taxes Note 10 –9,140 –5,439 –807 –404 –0 0 –9,947 –5,843
Income for the period 30,759 18,912 2,482 1,160 1 2 33,243 20,074
Attributable to:
Owners of AB Volvo 32,787 19,318
Non-controlling interest 456 755
Basic earnings per share, SEK Note 19 16.12 9.50
Diluted earnings per share, SEK Note 19 16.12 9.50
OTHER COMPREHENSIVE INCOME
SEK M 2021 2020
Income for the period 33,243 20,074
Items that will not be reclassified to income statement:
Remeasurements of defined benefit plans Note 20 6,091 –1,901
Remeasurements of holding of shares at fair value Note 19 48 –6
Items that may be reclassified subsequently to income statement:
Exchange differences on translation of foreign operations 5,775 –9,741
Share of other comprehensive income related to joint ventures and associated companies 1,349 –939
Accumulated translation difference reversed to income –324 –50
Other comprehensive income for the period, net of income tax 12,938 –12,637
Total comprehensive income for the period 46,182 7,437
Attributable to:
Owners of AB Volvo 45,354 6,895
Non-controlling interest 828 542
For the Volvo Group, 2021 was a year with a strong increase in net sales and improved operating income despite the challenges created by
shortages in the supply chain. Both vehicle and service volumes grew significantly compared with the preceding year.
Increased sales and improved profitability
Financial performance
Board of Directors’ Report 2021 / Financial performance
45
Net sales
During 2021, net sales increased by 10% to SEK 372 billion (338).
Adjusted for currency movements and divestment of UD Trucks on
April 1, 2021, the sales increase was 21%. Vehicle sales increased
by 25% due to growing transport volumes and improving
construction activities. Service sales increased by 11%, as a con-
sequence of high utilization of vehicles and machines which drove
demand for spare parts and services.
The truck business’ net sales increased by 27% adjusted for
currency and divestment of UD Trucks, as a consequence of strong
demand for both new and used trucks as well as services. For Con-
struction Equipment currency-adjusted net sales increased by 17%,
with growth in all markets expect for China, supported by invest-
ments in infrastructure and high demand in the commodity seg-
ment. Buses’ net sales decreased by 5% adjusted for currency
movements, with especially the coach segment being negatively
impacted by the covid-19 pandemic. Net sales for Volvo Penta
increased by 26% currency-adjusted as both the marine and
industrial engine business continued a solid recovery after the
weakening in 2020 due to covid-19 pandemic.
The Volvo Group’s sales of defense material, as defined in the
Swedish Military Equipment Ordinance (1992:1303) section A,
amounted in 2021 to 0,63% (0.93) of net sales.
Operating income
In 2021, the Volvo Group’s adjusted operating income amounted to
SEK 41.0 billion (28.6). The adjusted operating income excludes
the capital gain of SEK 1.7 billion from the divestment of UD
Trucks, a positive effect of SEK 0.2 billion from ceased deprecia-
tion and amortization on assets held for sale and SEK 0.2 billion to
release of a previously booked restructuring reserve for the Group’s
cost-reduction program. In 2020, adjusted operating income
excluded SEK
–1.1 billion, whereof restructuring charges of SEK
–2.2 billion related to headcount reductions and a positive effect
from the ceased depreciation and amortization on assets held for
sale of SEK 1.1 billion.
Net sales by operating segment,
SEK M
2021 2020 %
Trucks 230,881 208,262 11
Construction Equipment 92,031 81,453 13
Buses² 13,652 14,712 –7
Volvo Penta 14,437 11,891 21
Group Functions & Other² 13,459 12,949 4
Eliminations –3,398 –2,796 –
Industrial Operations 361,062 326,472 11
Financial Services 13,437 13,960 –4
Reclassifications and eliminations –2,283 –1,987 –
Volvo Group
1
372,216 338,446 10
1 Adjusted for changes in currency rates and acquired and divested operations,
net sales increased by 21%.
2 The operations of Nova Bus have been reclassified form the Buses segment into
the segment Group Functions and Other as of October 1, 2021 and financial num-
bers has been restated in this report. For more information please see Note 31.
Net sales by market area, SEK M 2021 2020 %
Europe 154,296 130,457 18
North America 94,356 76,501 23
South America 28,810 20,133 43
Asia 62,310 80,088 –22
Africa and Oceania 21,291 19,293 10
Total Industrial Operations 361,062 326,472 11
Of which:
Vehicles 282,666 247,397 14
Services 78,396 79,075 –1
Adjusted operating income by
operating segment, SEK M
2021 2020
Trucks 25,567 17,251
Construction Equipment 12,228 10,071
Buses² 59 –452
Volvo Penta 2,092 1,448
Group Functions & Other² –2,265 –1,375
Eliminations 53 12
Industrial Operations 37,733 26,955
Financial Services 3,279 1,606
Reclassifications and eliminations 2 2
Volvo Group adjusted operating income 41,015 28,564
Adjustments¹ 2,059 –1,081
Volvo Group operating income 43,074 27,484
1 For more information on adjusted operating income, please see section for Key ratios
2 The operations of Nova Bus have been reclassified form the Buses segment into
the segment Group Functions and Other as of October 1, 2021 and financial num-
bers has been restated in this report. For more information please see Note 31.
Adjusted operating margin, %
2021 2020
Trucks 11.1 8.3
Construction Equipment 13.3 12.4
Buses¹ 0.4 –3.1
Volvo Penta 14.5 12.2
Industrial Operations 10.5 8.3
Volvo Group adjusted operating margin 11.0 8.4
Volvo Group operating margin 11.6 8.1
1 The operations of Nova Bus have been reclassified form the Buses segment into the
segment Group Functions and Other as of October 1, 2021 and financial numbers has
been restated in this report. For more information please see Note 31.
17 18 19 2120
333 391 432 372338
Net sales SEK bn
17 18 19 20 21
29,678 3 4,478 49,531 27,484
43,074
Operating income SEK M
46
Board of Directors’ Report 2021 / Financial performance
The increased adjusted operating income was primarily an effect
of increased vehicle and service sales, lower selling expenses and
improved earnings in the used vehicle business. This was partly
offset by higher material costs, supply chain disturbances in the
industrial system, lower contribution from joint ventures and
increased R&D expenses relating to investments in transforma-
tional technologies. In 2020, adjusted operating income included
various governmental short-terms layoff programs amounting to
SEK 2.2 billion and a positive effect of SEK 0.6 billion from a cor-
rection of actuarial calculations of the Group’s pension liabilities.
Reported operating income amounted to SEK 43.1 billion (27.5).
Impact of exchange rates on operating income
In 2021, changes in exchange rates compared to last year
impacted the Volvo Group’s operating income negatively by
approximately SEK 2.5 billion. The impact was related to transla-
tion of operating income in foreign subsidiaries of SEK –2.1 billion
and revaluation of receivables and liabilities of SEK –0.3 billion.
Net flows in foreign currency had an insignificant impact on oper-
ating income. The translation of operating income was negatively
impacted mainly by the depreciation of USD, EUR and BRL. The
net flows in foreign currency were negatively impacted by a depre-
ciation of USD and CNY, offset by a positive impact from an appre-
ciation of ZAR and a depreciation of KRW were net flows are negative.
Read more in Note 4 Goals and policies in financial risk management regard-
ing Industrial Operations transaction exposure from operating net flows,
graphs
4:5
4:6
, as well as currency impact on sales and operating income.
Net financial items
In 2021, interest income was on par with the previous year and
amounted to SEK 0.4 billion (0.3). Interest expenses amounted to
SEK 1.2 billion (1.3). Other financial income and expenses amounted
to SEK 0.9 billion (–0.5). The change compared with 2020 was pri-
marily due to revaluation effects on financial asets and liabilities.
Read more in Note 9 Other financial income and expenses.
Income taxes
The tax expense for the year amounted to SEK 9.9 billion (5.8)
corresponding to an effective tax rate of 23% (23).
Income for the period and earnings per share
In 2021 the income for the period amounted to SEK 33,243 M
(20,074). Earnings per share amounted to SEK 16.12 (9.50) and
diluted earnings per share to SEK 16.12 (9.50).
Key operating ratios, Industrial Operations, % 2021 2020
Gross margin 23.3 22.5
Research and development expenses
as percentage of net sales 5.0 5.1
Selling expenses as percentage of net sales 6.0 7.4
Administrative expenses as percentage of net sales 1.3 1.4
Operating margin 11.0 7.9
Expenses by nature, SEK M 2021 2020
Material cost (freight, distribution, warranty)
and purchased services 232,774 209,444
Personnel 56,944 53,788
Amortization/depreciation 18,720 20,599
Other 20,881 23,417
Total 329,319 307,247
Change in operating income,
Volvo Group
SEK bn
Change
(excluding
currency)
Currency
impact Total
Operating income 2020 27.5
Change in gross income Industrial opera-
tions 13.7 –3.2 10.5
Change in gross income Financial Services 0.5 –0.3 0.2
Lower credit losses 1.2 0.0 1.2
Gains on divestment of group companies¹ 1.6 0.0 1.6
Higher capitalization of development cost 0.9 0.0 0.9
Higher research and development
expenditures –2.3 0.2 –2.1
Lower selling and administrative expenses 1.3 1.0 2.3
Income from investments in Joint
Ventures and associated companies –1.7 0.0 –1.7
Restructuring costs² 2.9 0.0 2.9
Other –0.1 –0.1 –0.2
Operating income 2021 18.00 –2.5 43.1
1 Including a capital gain of SEK 1.7 bn from the divestment of UD Trucks.
2 In 2020 costs of SEK 2.2 bn related to headcount reductions were included.
Impact of exchange rates on operating income,
Volvo Group, Compared with preceding year, SEK M
Net sales
1
–16,063
Cost of sales 12,490
Research and development expenses 161
Selling and administrative expenses 1,009
Other –66
Total effect of changes in exchange rates
on operating income –2,469
1 The Volvo Group sales are reported at monthly average rates.
Research and development expenses
191817 20 21
15.9
4.2
18.5
4.4
16.1
5.0
Research and
development
expenses, SEK bn
Research and
development
expenses,
% of Industrial
Operations’
net sales
16.8
5.1
18.0
5.0
47
Board of Directors’ Report 2021 / Financial performance
Balance sheet
In 2021, total assets in the Volvo Group increased by SEK 5.0 billion
compared with year-end 2020. Currency movements increased
total assets by SEK 23.9 billion and the divestment of UD Trucks
decreased total assets by SEK 34.3 billion. Adjusted for currency
effects and the divestment of UD Trucks total assets increased by
SEK 15.4 billion. The increase was mainly in inventory and customer-
financing receivables, which was partly offset by a decrease in cash
and cash equivalents.
Read more in Note 15 Customer-financing receivables.
Read more in Note 17 Inventories.
Read more in Note 18 Cash and cash equivalents.
Financial position
Continued strong financial position
BALANCE SHEET VOLVO GROUP ASSETS
Industrial Operations Financial Services Eliminations Volvo Group
SEK M
Dec 31
2021
Dec 31
2020
Dec 31
2021
Dec 31
2020
Dec 31
2021
Dec 31
2020
Dec 31
2021
Dec 31
2020
Assets
Non-current assets
Intangible assets Note 12 36,971 34,423 98 154 – – 37,070 34,577
Tangible assets Note 13
Property, plant and equipment 54,299 48,985 48 68 – – 54,348 49,053
Investment property 57 60 – – – – 57 60
Assets under operating leases 32,150 29,460 19,658 19,155 –11,838 –10,653 39,969 37,962
Financial assets
Investments in joint ventures
and associated companies Note 5 20,685 13,160 – – – – 20,685 13,160
Other shares and participations Note 5 524 262 15 15 – – 539 276
Non-current customer-financing
receivables Note 15 1,669 1,061 83,774 70,773 –2,057 –1,287 83,386 70,547
Net pension assets Note 20 2,372 1,712 – – – – 2,372 1,712
Non-current interest-bearing
receivables Note 16 1,747 4,603 74 – –70 –410 1,752 4,193
Other non-current receivables Note 16 9,211 9,228 187 157 –170 –815 9,227 8,569
Deferred tax assets Note 10 9,744 9,505 1,203 1,089 0 1 10,947 10,595
Total non-current assets 169,430 152,458 105,058 91,411 –14,135 –13,164
Current assets
Inventories Note 17 63,715 47,273 202 352 – – 63,916 47,625
Current receivables
Customer-financing receivables Note 15 868 635 68,352 58,096 –1,102 –746 68,118 57,985
Tax assets 1,336 1,659 373 528 – – 1,708 2,187
Interest-bearing receivables Note 16 1,976 1,698 0 4 –26 –15 1,950 1,686
Internal funding
1
Accounts receivables Note 16 39,321 34,278 1,455 1,383 – – 40,776 35,660
Other receivables Note 16 18,103 17,105 1,840 1,361 –3,201 –3,208 16,742 15,258
Marketable securities Note 18 167 213 – – – – 167 213
Cash and cash equivalents Note 18 59,435 81,973 3,913 4,680 –1,223 –1,448 62,126 85,206
Assets held for sale Note 3 – 29,362 – 4,934 – – – 34,296
Total current assets 201,593 225,121 76,135 71,337 –22,223 –16,342 255,504 280,116
Total assets 371,022 377,579 181,193 162,748 –36,359 –29,506 515,856 510,821
1 Internal funding is internal lending from Industrial Operations to Financial Services.
In 2021, the net value of assets and liabilities held for sale decreased
by SEK 23.0 billion compared with year-end 2020. The change was
mainly due to the divestment of UD Trucks to Isuzu Motors. No
assets and liabilities held for sale were recognized as of December
31, 2021.
Read more in Note 3 Acquisitions and divestments of operations,
regarding assets and liabilities held for sale.
In 2021, investments in joint ventures and associated companies
increased by SEK 7.5 billion compared with year-end 2020. The
change was mainly driven by the acquisition of shares in the new fuel
cell joint venture with Daimler Truck AG, cellcentric GmbH & Co. KG.
Read more in Note 5 Investments in joint ventures, associated
companies and other shares and participations.
In 2021, the Volvo Group continued to invest in future technologies and returned
SEK 49.8 billion to its shareholders while maintaining a solid financial position.
48
Board of Directors’ Report 2021 / Financial position
BALANCE SHEET VOLVO GROUP EQUITY AND LIABILITIES
Industrial Operations Financial Services Eliminations Volvo Group
SEK M
Dec 31
2021
Dec 31
2020
Dec 31
2021
Dec 31
2020
Dec 31
2021
Dec 31
2020
Dec 31
2021
Dec 31
2020
Equity and liabilities
Equity attributable to
owners of AB Volvo Note 19 126,546 132,280 14,500 13,018 –2 –3 141,045 145,295
Non-controlling interest Note 11 3,073 2,847 – – – – 3,073 2,847
Total equity 129,619 135,127 14,500 13,018 –2 –3 144,118 148,142
Non-current provisions
Provisions for post-
employment benefits Note 20 12,095 18,282 82 148 – – 12,177 18,430
Provisions for deferred taxes Note 10 2,774 1,166 2,153 2,099 – – 4,926 3,265
Other provisions Note 21 10,610 10,217 49 238 557 464 11,216 10,918
Total non-current provisions 25,478 29,664 2,284 2,484 557 464 28,319 32,612
Non-current liabilities
Bond loans Note 22 79,365 66,391 – – – – 79,365 66,391
Other loans Note 22 16,488 18,053 10,148 11,905 –1,823 –1,182 24,812 28,775
Internal funding
1
–82,734 –58,839 74,223 59,412 8,512 –573 – –
Other liabilities Note 22 42,978 38,094 1,557 1,371 –7,705 –8,041 36,831 31,424
Total non-current liabilities 56,096 63,699 85,928 72,687 –1,016 –9,796 141,008 126,590
Current provisions Note 21 11,535 12,411 36 225 383 517 11,954 13,153
Current liabilities
Bond loans Note 22 21,747 30,904 – – – – 21,747 30,904
Other loans Note 22 21,230 17,055 7,432 10,968 –962 –669 27,700 27,354
Internal funding
1
–36,176 –38,547 63,141 51,050 –26,964 –12,503 – –
Trade payables 76,079 59,013 666 598 – – 76,745 59,611
Tax liabilities 3,720 3,885 567 714 – – 4,287 4,599
Other liabilities Note 22 61,693 57,730 6,639 6,354 –8,354 –7,515 59,978 56,569
Liabilities held for sale
Note 3 – 6,638 – 4,649 – – – 11,286
Total current liabilities
–36,281
–20,688 190,457 190,324
Total equity and liabilities 371,022 377,579 181,193 162,748 –36,359 –29,506 515,856 510,821
1 Internal funding is internal lending from Industrial Operations to Financial Services.
The net value of assets and liabilities related to pensions and similar
obligations amounted to a liability of SEK 9.8 billion as of December
31, 2021, a decrease of SEK 6.9 billion compared with year-end 2020.
Read more in Note 20 Provisions for post- employment benefits.
On December 31, 2021, total equity for the Volvo Group amounted
to SEK 144.1 billion compared with SEK 148.1 billion at year-end
2020. The equity ratio was 27.9% (29.0). Return on total equity
was 23.4% (13.8).
On the same date the equity ratio in the Industrial Operations
amounted to 34.9% (35.8). Return on capital employed in the
Industrial Operations amounted to 25.3% (14.7).
Return on capital employed, Industrial Operations %, SEK bn
17 18 20 2119
22.4 14 .7 25.328.420.5
Board of Directors’ Report 2021 / Financial position
49
Net financial position excl. post-employment benefits and lease
liabilities
Industrial Operations Volvo Group
SEK M Dec 31 2021 Dec 31 2020 Dec 31 2021 Dec 31 2020
Non-current interest-bearing assets
Non-current customer-financing receivables – – 83,386 70,547
Non-current interest-bearing receivables 1,747 4,603 1,752 4,193
Current interest-bearing assets
Customer-financing receivables – – 68,118 57,985
Interest-bearing receivables 1,976 1,698 1,950 1,686
Internal funding 16,672 10,925 – –
Marketable securities 167 213 167 213
Cash and cash equivalents 59,435 81,973 62,126 85,206
Assets held for sale – 1 – 4,671
Total interest-bearing financial assets 79,998 99,414 217,499 224,501
Non-current interest-bearing liabilities
Bond loans –79,365 –66,391 –79,365 –66,391
Other loans –11,995 –13,575 –20,343 –24,341
Internal funding 82,734 58,839 – –
Current interest-bearing liabilities
Bond loans –21,747 –30,904 –21,747 –30,904
Other loans –19,575 –15,489 –26,068 –25,802
Internal funding 36,176 38,547 – –
Liabilities held for sale – 4,255 – –45
Total interest-bearing financial liabilities excl. lease liabilities –13,772 –24,718 –147,523 –147,483
Net financial position excl. post-employment benefits and
lease liabilities 66,227 74,696 69,976 77,018
Provisions for post-employment benefits and lease liabilities, net
Industrial Operations Volvo Group
SEK M Dec 31 2021 Dec 31 2020 Dec 31 2021 Dec 31 2020
Non-current lease liabilities –4,492 –4,477 –4,469 –4,434
Current lease liabilities –1,655 –1,567 –1,632 –1,552
Provisions for post-employment benefits, net –9,723 –16,570 –9,805 –16,717
Liabilities held for sale – –1,123 – –1,127
Provisions for post-employment benefits and lease liabilities, net –15,870 –23,737 –15,907 –23,830
Net financial position
In 2021, net financial assets in the Volvo Group’s Industrial Opera-
tions excluding provisions for post-employment benefits and lease
liabilities decreased by SEK 8.5 billion, resulting in a net financial
asset position of SEK 66.2 billion on December 31, 2021. The
change was mainly an effect of a positive operating cash flow of
SEK 29.4 billion and a positive impact from the divestment of UD
Trucks of SEK 18.4 billion, which were offset by the acquisition of
shares in the new fuel cell joint venture with Daimler Truck AG,
cellcentric GmbH & Co. KG and dividend paid to AB Volvo share-
holders of SEK 49.8 billion. Currency movements increased net
financial assets by SEK 3.0 billion.
Including provisions for post-employment benefits and lease lia-
bilities, the Industrial Operations net financial assets amounted to
SEK 50.4 billion on December 31, 2021. During 2021 provisions
for post-employment benefits and lease liabilities decreased by
SEK 7.8 billion. This was mainly related to remeasurements of
Net financial position incl. post-employment benefits and lease
liabilities
Industrial Operations Volvo Group
SEK M Dec 31 2021 Dec 31 2020 Dec 31 2021 Dec 31 2020
Net financial position excl. post-employment benefits and lease liabilities 66,227 74,696 69,976 77,018
Provisions for post-employment benefits and lease liabilities, net –15,870 –23,737 –15,907 –23,830
Net financial position incl. post-employment benefits and
lease liabilities 50,356 50,959 54,070 53,188
Board of Directors’ Report 2021 / Financial position
50
defined post-employment benefits of SEK 7.7 billion as well as
reduced lease and pension liabilities of SEK 1.1 billion related to the
divestment of UD Trucks, which were partly offset by negative cur-
rency movements of SEK 0.7 billion. The remeasurements were
primarily an effect of significantly higher discount rates and high
return on assets. The total impact from the divestment of UD
Trucks on net financial position including provisions on post-
employment benefits and lease liabilities was SEK 19.5 billion.
Read more in Note 20 Provisions for post- employment benefits.
The Volvo Group’s cash and cash equivalents amounted to SEK
62.1 billion on December 31, 2021 compared with SEK 85.2 billion
on December 31, 2020. In addition to this granted, but unutilized,
credit facilities amounted to SEK 42.3 billion (41.6) on December
31, 2021. Cash and cash equivalents include 2.8 (2.5) billion that is
not available for use by the Volvo Group and SEK 8.7 billion (11.0)
where other limitations exist, mainly liquid funds in countries
where exchange controls or other legal restrictions apply.
Read more in Note 18 Cash and cash equivalents.
Read more in Note 22 Liabilities, regarding the maturity structure on
credit facilities.
Changes in net financial position, Industrial Operations
SEK bn 2021 2020
Net financial position excl. post-employment benefits and lease liabilities at the end of previous period 74.7 62.6
Operating cash flow 29.4 18.5
Investments and divestments of shares, net –7.4 –0.5
Acquired and divested operations, net
1
17.9 0.4
Capital injections to/from Financial Services 1.6 0.0
Currency effect 3.0 –2.2
Dividend to owners of AB Volvo –49.8 –
Dividend to non-controlling interest – –0.8
Other changes –3.2 –3.3
Net financial position excl. post-employment benefits and lease liabilities at the end of period 66.2 74.7
Provisions for post-employment benefits and lease liabilities at the end of previous period –23.7 –25.3
Pension payments, included in operating cash flow 1.8 3.6
Remeasurements of defined post-employment benefits
2
7.7 –1.8
Service costs and other pension costs
3
–2.0 –1.6
Investments and amortizations of lease contracts 0.3 0.4
Transfer pensions and lease liabilities to UD Trucks 1.1 –
Currency effect –0.7 1.3
Other changes –0.4 –0.2
Provisions for post-employment benefits and lease liabilities at the end of period –15.9 –23.7
Net financial position incl. post-employment benefits and lease liabilities at the end of period 50.4 51.0
1 Includes both the cash flow from the divestment of UD Trucks operations and the intercompany loans that financed the divestment of the customer-financing portfolio in VFS
Japan. This was repaid by UD Trucks at the time of divestment.
Read more in Note 3 Acquisitions and divestments of operations.
2 Including corrections of actuarial calculations of negative SEK 1.7 billion in 2020.
Read more in Note 20 Provisions for post-employment benefits.
3 Including corrections of actuarial calculations of positive SEK 0.6 billion in 2020.
Read more in Note 20 Provisions for post-employment benefits.
Net financial position, excl. provisions for post-employment
benefits and lease liabilities, Industrial Operations, SEK bn
17 18 20 2119
43.9 74.7 66.262.626.3
Board of Directors’ Report 2021 / Financial position
51
In 2021, operating cash flow in the Industrial Operations amounted
to SEK 29.4 billion (18.5). The higher operating cash flow compared
with 2020 is primarily an effect of a higher operating income of
SEK 13.9 billion and a lower increase in working capital of SEK 2.3
billion (11.0). This was partly offset by an increase in income taxes
paid of SEK 4.5 billion and higher investments of SEK 3.9 billion
compared with 2020.
Operating cash flow in Financial Services was negative in an
amount of SEK
–12.7 billion (0.8). The change compared to 2020
was mainly due to significantly higher increase of new business
volume in the credit portfolio.
Read more in Note 10 Income taxes.
Read more in Note 21 Other provisions.
Investments and disposals
In 2021, the Industrial Operations’ investments in tangible and
intangible assets amounted to SEK 12.5 billion (8.7).
Trucks investments in tangible and intangible assets amounted
to SEK 9.8 billion (6.8). The major investments were related to
industrial efficiency measures and replacements such as the ongoing
replacement of casting process equipment in Skövde, Sweden,
and upgrades in the plants in the U.S. Investments were also
related to product renewals such as the development of battery-
electric and fuel-cell electric trucks with both product develop-
ment activities and required adaptations in the plants. Investments
in dealer networks and workshops were mainly made in Europe,
primarily for upgrades and replacements.
Investments in Construction Equipment amounted to SEK 1.2
billion (0.9). The major investments in the plants were related to
renewals but also to industrial efficiency measures, primarily in
Asia. Product-related investments were mainly related to upgrades
with both continued investments in adaptations in the plants for
electric machines and product development activities.
Investments in Buses were SEK 0.4 billion (0.2) and in Volvo
Penta SEK 0.7 billion (0.5).
The investment level for property, plant and equipment increased
during 2021 compared to prior year, which was considerably impac-
ted by the covid-19 pandemic. Investments in property, plant and
equipment are expected to increase further during 2022. Invest-
ments in optimization of the industrial footprint, product- related
tooling, replacements as well as dealer investments will continue
to be the main areas.
Investments and divestments of shares
In 2021, investments and divestments of shares had a negative
impact on cash flow of SEK 7.4 billion (0.5). The negative impact
was mainly due to the acquisition of shares in the new fuel cell joint
venture with Daimler Truck AG, cellcentric Gmbh & Co KG.
Read more in Note 5 Investments in joint ventures, associated companies
and other shares and participations.
Acquired and divested operations
In 2021, acquired and divested operations had a positive impact on
cash flow of SEK 22.0 billion (0.4). The positive impact was mainly
due to the divestment of UD Trucks by SEK 22.8 billion.
Read more in Note 3 Acquisitions and divestments of operations.
Financing and dividend
In 2021, net borrowings decreased by SEK 7.0 billion, mainly due to
an improved operating cash flow. In 2020, net borrowings increased
by SEK 7.3 billion to safeguard liquidity in the Volvo Group. During
2021 dividends of in total SEK 49.8 billion (0) were paid. These con-
sisted of an ordinary dividend of SEK 6.00 per share and two extra
dividends totaling 18.50 per share, whereof an extra dividend of 9.50
refers to the distribution of the proceeds from the sale of UD Trucks.
Read more in Note 29 Cash flow regarding change in loans during 2021.
Change in cash and cash equivalents
In 2021, Cash and cash equivalents decreased by SEK 23.1 billion
and amounted to SEK 62.1 billion on December 31, 2021.
Read more in Note 18 Cash and cash equivalents regarding the
accounting policy.
Read more in Note 29 Cash flow regarding principles for preparing the
cash flow statement.
Cash flow statement
Improved operating cash flow
Board of Directors’ Report 2021 / Cash flow statement
52
CONSOLIDATED CASH FLOW STATEMENTS
Industrial Operations Financial Services Eliminations Volvo Group
SEK M 2021 2020 2021 2020 2021 2020 2021 2020
Operating activities
Operating income 39,783 25,919 3,289 1,564 2
Amortization intangible assets Note 12 2,757 3,067 36 76
Depreciation tangible assets Note 13 7,238 7,569 26 27 – – 7,264 7,596
Depreciation leasing vehicles Note 13 4,301 5,292 4,361 4,569 0 0 8,663 9,860
Other non-cash items Note 29 –1,444 –818 453 2,019 –7 16 –998 1,217
Total change in working capital whereof –2,270 –10,961 –16,054 –3,051 853 330 –17,471 –13,682
Change in accounts receivables –1,999 –1,970 –64 –60 – – –2,062 –2,030
Change in customer-financing receivables –623 –332 –15,619 –4,068 871 289 –15,370 –4,112
Change in inventories –12,438 2,351 151 114 – – –12,287 2,465
Change in trade payables 13,137 –4,397 37 372 – – 13,174 –4,025
Other changes in working capital –347 –6,612 –559 592 –19 41 –925 –5,979
Dividends received from joint ventures and
associated companies
Interest and similar items received
Interest and similar items paid –854 –1,191 6 0 –6 88 –854 –1,102
Other financial items –307 –336 – – – – –307 –336
Income taxes paid –8,657 –4,132 –994 –796 – – –9,651 –4,927
Cash flow from operating activities 41,664 25,862 –8,877 4,408 860 340 33,647 30,610
Investing activities
Investments in intangible assets
–3,737 –2,972 15 –51 – – –3,722 –3,023
Investments in tangible assets
–8,806 –5,730 –3 –3 – – –8,809 –5,733
Investment in leasing vehicles
–37 –23 –9,291 –9,425 21 885 –9,308 –8,564
Disposals of in-/tangible assets and leasing vehicles
Operating cash flow 29,440 18,545 –12,662 761 866 330 17,645 19,636
Investments of shares Note 5 –7,384 –475
Divestments of shares Note 5 – 13
Acquired operations Note 3 –789 –10
Divested operations Note 3 22,773 435
Interest-bearing receivables
incl marketable securities –87 1,070
Cash flow after net investments 32,158 20,669
Financing activities
New borrowings
1
Note 29 89,141 128,453
Repayment of borrowings
1
Note 29 –96,113 –121,132
Dividend to owners of AB Volvo –49,820 –
Dividend to non-controlling interest –631 –778
Other –132 –99
Change in cash and cash equivalents
excl. translation differences –25,396 27,113
Translation difference on cash and cash equivalents 2,316 –3,368
Change in cash and cash equivalents –23,080 23,745
Cash and cash equivalents, beginning of year Note 18 85,206 61,461
Cash and cash equivalents, end of year Note 18 62,126 85,206
1 Non-cash items from unrealized currency effects and currency translation are adjusted on new borrowings and repayments of borrowings.
Investments in property, plant and
equipment, Industrial Operations
17
18 19 20 21
Property, plant
and equipment,
% of net sales
Property, plant
and equipment,
SEK Bn
1.8
5.7
2.4
8.8
1.8
7.0
1.9
8.1
1.8
5.7
Operating cash flow,
Industrial Operations SEK bn
17 18 20 2119
26. 6 18.5 29.438.328.4
Board of Directors’ Report 2021 / Cash flow statement
53
Financial management
Improved credit rating
During 2021, Moody’s raised its long-term rating from A3, stable to
A2, stable, and S&P raised its rating from A-, stable to A-, positive.
The objectives of the financial management in the Volvo Group
is to assure shareholders long-term attractive total return and debt
providers the financial strength and flexibility to secure proceeds
and repayment. A long-term competitive business requires access
to capital to be able to invest. Financial management ensures that
the capital is used in the best possible way through well-defined
ratios and objectives for the Industrial Operations as well as for the
customer finance operations in Financial Services. The objective on
Group operating margin and return on equity for Financial Services
are intended to secure the return requirements from shareholders.
The target on no net financial indebtedness under normal circum-
stances in the Industrial Operations and the equity ratio for Financial
Services are there to secure fi nancial stability.
Steering principles to ensure financial flexibility
To ensure financial stability and flexibility throughout the business
cycle the Volvo Group holds a strong liquidity position. Besides
cash and marketable securities, the liquidity position is built up of
revolving committed credit facilities. Funding and lending in Financial
Services are in local currency and the portfolio is matched both
from an interest and a liquidity risk perspective, in accordance with
the Volvo Group policy. For further information, please see Note 4
to the Consolidated financial statements.
Diversified funding sources
The Volvo Group has centralized the portfolio man agement of
financial assets and liabilities, funding operations and cash
manage ment through the internal bank, Volvo Treasury. The liability
port folio is separated into two portfolios, one for Industrial Opera-
tions and one for Financial Services, to correspond to the needs of
the different operations. Volvo Treasury works to assure the possi-
bility to access capital markets at all times through diversified
funding sources. To access capital markets around the world, the
Group uses different instruments, such as bilateral bank funding,
corpor ate bonds and certificates, hybrid bonds, agency funding as
well as securitization of assets in Financial Services’ credit portfolio.
An increasingly import ant part of the treasury work is to manage
increased funding needs in new growth markets.
Green Finance Framework
Volvo Group has a Green Finance Framework for the financing of
investments and projects in the area of clean transportation. The
framework enables the Group to issue green bonds and other
green financial instruments and allows it to identify, select, manage
and report on eligible projects and assets in line with International
Capital Market Association Green Bond Principles. The funds will
be earmarked to projects in areas such as R&D and manufacturing
of electric vehicles, machines and engines with zero tailpipe emis-
sions. Funds will also be used by Volvo Financial Services to offer
green loans to customers who buy the Group’s electric products.
The Green Finance Framework has been subject to an independent
external assessment by CICERO Shades of Green, which has classi-
fied it as Dark Green – their highest level.
A strong and stable credit rating is important
Being a large issuer of bonds, it is critical to have a strong and stable
credit rating. The level of the credit rating is not only important for
debt investors but also for a number of other stakeholders when it
comes to creating long-term relationships. A strong credit rating
has a positive effect on the ability to attract and finance customers’
purchases of the Group’s products and on the trust from suppliers.
It also gives access to more funding sources and lower cost of funds.
The Volvo Group has contractual relations with two global Credit
Rating Agencies for solicited credit ratings: Moody’s Investors Service
(Moody’s) and Standard & Poors’ Rating Services (S&P). During
2021, Moody’s raised its long-term rating from A3, stable to A2,
stable, and S&P raised its rating from A-, stable to A-, positive.
Credit rating, February 24, 2022
Short-term Long-term
Moody’s (Corporate Rating) P1 A2, stable
S&P (Corporate Rating) A2 A–, positive
R&I (Japan) a-1 A+, stable
Geographically diversified market programs
CNY
SEK
JPY
AUD
EUR
CAD
USD
BRL
INR
CNH
Volvo Group liquidity position, December 31, 2021
Cash and
cash equivalents
Credit
facilities
0
20
80
40
140
120
100
60
104.4
SEK bn
42.3
62.1
Board of Directors’ Report 2021 / Financial management
54
Changes in consolidated equity
Equity attributable to owners of AB Volvo
SEK M
Share
capital
Other
reserves
1
Translation
reserve
Retained
earnings Total
Non-
controlling
interest
Total
equity
Balance as of December 31, 2019 2,554 236 6,800 129,004 138,595 3,083 141,678
Income for the period – – – 19,318 19,318 755 20,074
Other comprehensive income
Remeasurements of defined benefit plans Note 20 – – – –1,901 –1,901 – –1,901
Remeasurements of holding
of shares at fair value Note 5, 19 – –6 – – –6 – –6
Exchange differences on translation
of foreign operations – – –9,528 – –9,528 –213 –9,741
Share of other comprehensive income related
to joint ventures and associated companies – – – –939 –939 – –939
Accumulated translation differences
reversed to income – – –50 – –50 – –50
Other comprehensive income for the period – –6 –9,578 –2,840 –12,424 –213 –12,637
Total comprehensive income for the period – –6 –9,578 16,478 6,895 542 7,437
Transactions with shareholders
Dividends to owners of AB Volvo – – – – – –778 –778
Changes in non-controlling interests – – – – – – –
Other changes 8 – – –201 –193 – –193
Transactions with shareholders 8 – – –201 –193 –778 –972
Balance as of December 31, 2020 2,562 230 –2,778 145,281 145,295 2,847 148,142
Income for the period – – – 32 ,787 32,787 456 33, 243
Other comprehensive income
Remeasurements of defined benefit plans Note 20 – – – 6,091 6 ,091 – 6 ,091
Remeasurements of holding
of shares at fair value Note 5, 19 – 48 – – 48 – 48
Exchange differences on translation
of foreign operations – – 5 ,403 – 5 ,403 372 5 ,7 7 5
Share of other comprehensive income related
to joint ventures and associated companies – – – 1, 349 1,3 49 – 1 ,3 49
Accumulated translation differences
reversed to income – – –324 – –324 – –324
Other comprehensive income for the period – 48 5 ,07 9 7, 4 4 0 12,566 372 12,9 38
Total comprehensive income for the period – 48 5,079 40,2 27 45,354 828 4 6 ,1 8 2
Transactions with shareholders
Dividends to owners of AB Volvo – – – –49, 820 –49, 820 –6 31 –50 , 4 51
Changes in non-controlling interests – – – – – 26 26
Other changes – –2 70 – 486 216 4 220
Transactions with shareholders – –2 70 – –49, 33 4 –49,604 –602 –50 , 206
Balance as of December 31, 2021 2, 562 8 2 , 301 1 3 6 ,1 74 141 , 0 4 5 3 ,073 14 4 ,1 1 8
1
Read more in Note 19 Equity and number of shares regarding specification of other reserves.
Board of Directors’ Report 2021 / Changes in consolidated equity
55
191817 20 21
214 250 277 208
SEK bn
231
Net sales
19
18
17 20 21
9.2
10.5 11.4 8.3
SEK bn
%
11.1
19.8 26.4 31.6 17.3 25.6
Adjusted operating income
1
and adjusted operating margin
Number of regular employees
50,974 (56,483).
Trucks
Increased
sales and
improved
profitability
Net sales in the truck business increased by 21% to SEK 225
billion, excluding UD Trucks that was divested on April 1, 2021.
The increase was as a consequence of strong demand for both
trucks and services in most markets around the world. However,
shortages of semiconductors, other components and freight
capacity made it impossbile to fully meet customer demand. The
adjusted operating income amounted to SEK 25,567 M (17,251)
corresponding to an adjusted operating margin of 11.1% (8.3).
Good demand in most markets
The gradual improvement seen in many truck markets over the
course of 2020 continued in 2021, with good demand across
the Volvo Group’s key truck regions on the back of high transport
volumes, high freight rates and improved customer profitability.
This demand situation was broad across all segments, both in
Europe and North America and for both new and used vehicles.
Utilization of the installed truck fleet was back on pre-covid-19 levels,
which drove high demand for spare parts and workshop services.
Demand in Brazil was strong, driven mainly by the mining and agri-
culture segments as well as a continued need to renew an aging truck
fleet. After some weak years in India with a financial crisis followed by
covid-19 lockdowns, the truck market grew in 2021. Governmental
stimulus added momentum to the economy. The Chinese truck mar-
ket slowed down in the second half of 2021 as a consequence of a
weakening economy and a strong first half driven by a pre-buy ahead
of the CN6 emission legislation, which was implemented on July 1.
Orders and deliveries
In 2021, net order intake to the Group’s wholly-owned truck opera-
tions increased by 34% to 257,856 (192,421) trucks, excluding UD
Trucks which was divested on April 1, 2021. Order intake increased
in all regions except in Asia, where it was on the same level as in
2020. Demand was strong as customers in many markets wanted
to both replace old trucks and expand their fleets. However, this was
not fully reflected in the order intake during the second half of the
year, as the Group’s truck brands were restrictive in slotting orders
into production due to large order books and long delivery times.
During the year, a total of 198,464 trucks were delivered from the
Group’s wholly-owned operations, an increase of 31% compared
with 151,383 trucks in 2020, excluding UD Trucks. However, both
the production and the delivery of trucks were hampered by supply
chain disturbances relating to semiconductors and other components
as well as lack of freight capacity. This caused significant disruptions
and stoppages in the Group’s production of trucks during the year.
The Volvo Group is rapidly expanding its offer of fully-electric light-,
medium- and heavy-duty trucks. Total order intake of fully-electric
trucks amounted to 1,062 vehicles and 371 fully-electric trucks were
delivered during 2021.
Solid performance
In 2021, net sales in the truck operations increased by 11% to SEK
230,881 M (208,262). Adjusted for currency movements and UD
Trucks, which was divested on April 1, 2021, net sales increased by
27%, of which vehicle sales by 32% and service sales by 12%.
Adjusted operating income amounted to SEK 25,567 M (17,251)
corresponding to an adjusted operating margin of 11.1% (8.3), ex clud-
ing adjustments of SEK 1,781 M (–1,486). For information on adjust-
ments, please see Key Ratios on page 204. The increased earnings
In brief
The truck operation’s product offer stretches from heavy-duty
trucks for long-haulage and construc tion work to light-duty
trucks for distri bution. The offering also includes maintenance
and repair services, financing and leasing.
Position on the world market
Volvo Group is one of the world’s largest manufac turers
of heavy-duty trucks.
Share of net sales
by market, %
Share of Group
net sales
Net sales
distribution
62%
Vehicles
76%
24%
Services
1 For information on adjusted operating income, see Key Ratios on page 204.
48
29
10
6
7
Brands
Volvo MackRenault
Trucks
Eicher
Dongfeng
Trucks
56
Board of Directors’ Report 2021 / Segments / Trucks
Volvo
Volvo Mack
Volvo
Volvo Mack
Volvo
Renault
Trucks
Volvo
Renault
Trucks
Dongfeng
2
Heavy Medium
Eicher
2
Heavy Medium
9.4
9.6
6.9
7.7
22.2 22.2
17.2
16.8
16,3
16.5
8.8 8.8
6.7
6.8
31.6
30.5
13.0
12.2
7.1
3.7
5.1
19.4
39.8
42.2
6.6
4.4
12.9
16.6
North America
China
India
Australia
Europe (EU29)
1
Battery-electric in Europe
Brazil
South Africa
Net sales and operating income
SEK M
2021 2020
Net sales excluding UD Trucks
Europe 107,794 92,113
North America 65,281 51,941
South America 23,527 15,715
Asia 16,609 15,224
Africa and Oceania 12,233 10,567
Total net sales excluding UD Trucks 225,444 185,559
Of which
Vehicles 172,163 136,048
Services 53,281 49,512
UD Trucks² 5,348 22,703
Total net sales 230,881 208,262
Adjusted operating income
1
25,567 17,251
Adjustments
1
1,781 –1,486
Operating income 27,349 15,764
Adjusted operating margin, % 11.1 8.3
Operating margin, % 11.8 7.6
1 For information on adjusted operating income, please see Key Ratios
on page 204.
2 UD Trucks was divested on April 1, 2021. For more information, see Note 31.
Deliveries by market, No. of trucks 2021 2020
Deliveries excluding UD Trucks
Europe 98,600 79,814
North America 47,613 32,019
South America 28,609 17,440
Asia 14,814 14,585
Africa and Oceania 8,828 7,525
Total deliveries excluding UD Trucks 198,464 151,383
UD Trucks¹ 3,994 15,458
Total deliveries 202,458 166,841
Deliveries excluding UD Trucks
Heavy duty (>16 tons) 167,290 128,471
Medium duty (716 tons) 13,136 8,041
Light duty (<7 tons) 18,038 14,871
Total deliveries excluding UD Trucks 198,464 151,383
UD Trucks¹ 3,994 15,458
Total deliveries 202,458 166,841
Volvo 122,525 93,846
UD Trucks¹ 3,994 15,458
Renault Trucks 51,460 41,117
Mack 23,631 16,420
Other brands 848 –
Total deliveries 202,458 166,841
Non-consolidated operations²
VE Commercial Vehicles (Eicher) 51,777 30,192
Dongfeng Commercial Vehicle
Company (Dongfeng Trucks) 177,430 221,217
1 UD Trucks was divested on April 1, 2021. For more information, see Note 31.
2 Volvo Group holds 45.6% in VECV, which produces Eicher trucks, and
45% in DFCV, which produces Dongfeng trucks.
STRONG POSITIONS GLOBALLY
Market shares, heavy-duty trucks %,
2020
2021
1 The EU, Norway and Switzerland.
2 Volvo Group holds 45.6% in VECV, which produces
Eicher trucks, and 45% in DFCV, which produces
Dongfeng trucks.
57
Board of Directors’ Report 2021 / Segments / Trucks
were mainly an effect of higher vehicle and service volumes, improved
earnings in the used truck business and lower selling expenses. Higher
material costs, supply chain disturbances in the industrial system,
lower contribution from joint ventures and increased R&D expenses
had a negative impact. In 2020, adjusted operating income included a
positive effect of SEK 322 M from a correction of actuarial calcula-
tions of the Group’s pension liabilities and SEK 362 M from a favorable
tax ruling in Brazil. Before the divestment on April 1, 2021, UD Trucks
had a marginally positive impact on adjusted operating income.
Reported operating income amounted to SEK 27,349 M (15,764).
Currency movements had a negative impact of SEK 1,178 M
compared with 2020.
Important events
In March, the Volvo Group signed a partnership agreement with
Aurora in the U.S. to accelerate the deployment of autonomous
transport solutions. The initial focus is on hub-to-hub highway
transport applications in the U.S. In September, a prototype of
Volvo Trucks’ flagship long-haul VNL model, integrated with the
virtual Aurora Driver technology, was revealed.
Also in March, Renault Trucks announced their investment ambi-
tions in electric mobility. From 2023, an all-electric Renault Trucks’
offer is planned to be available for each segment: distribution, con-
struction and long-haul.
In April, Volvo Trucks announced the start of sales of heavy-duty
all-electric Volvo FH, Volvo FM and Volvo FMX, with volume pro-
duction planned to begin in late 2022.
Furthermore, Volvo Group and Daimler Truck AG completed the
creation of the fuel-cell joint venture, cellcentric. The ambition is to
make the new joint venture a leading global manufacturer of fuel
cells. Serial production of fuel cell systems in cellcentric is planned
to commence in 2025.
On April 1, Volvo Group divested UD Trucks to Isuzu Motors as
part of the strategic alliance between the two companies. For more
information, see page 24.
Also in April, Renault Trucks launched its upgraded heavy-duty
truck range which focuses on improved driver comfort as well as
vehicle reliability and efficiency.
In August, Volvo Trucks agreed to acquire JMC Heavy Duty
Vehicle Co., Ltd in Taiyuan, China. Read more below.
50
0
100
150
200
250
300
350
400
Europe 30
North America
Brazil
India
China
2017 2018 2019 20 20
307
244
32
251
1,117
322
311
53
306
1,148
321
336
75
194
1,174
231
235
67
87
1,619
2021
277
270
98
154
1,395
Market development, heavy-duty trucks
Thousands
In September, Volvo Trucks received its thus far largest order for
electric trucks in North America, when Performance Team, a Maersk
Company, in California bought 16 Volvo VNR Electric. Volvo Trucks
also received an order for 100 Volvo FM Electric trucks from DFDS,
Northern Europe's largest shipping and logistics company.
In December, the Volvo Group, Daimler Truck and Traton Group
signed a binding agreement to install and operate a high-performance
public charging network for battery electric heavy-duty long-haul
trucks and coaches across Europe.Start of the joint venture is
pending regulatory approvals.
In Germany, a fully-loaded Volvo FH heavy-duty electric truck
was put through an independent energy-efficiency test. The truck
exceeded its official range and used 50% less energy than its diesel
counterpart.
In January 2022, the electrification journey in North America
continued with the launch of an upgraded version of the Volvo VNR
heavy-duty electric truck. The new truck features an increased
range of up to 440 km (275 miles), faster charging and more con-
figurations than the prior model.
VOLVO TRUCKS ACQUIRES HEAVYDUTY TRUCK
MANUFACTURING OPERATION IN CHINA
In August 2021, Volvo Trucks agreed to
acquire JMC Heavy Duty Vehicle Co., Ltd.,
a subsidiary of Jiangling Motors Co., Ltd.,
which includes a manufacturing site in
Taiyuan, Shanxi province, China, for approxi-
mately SEK 1.1 billion. The objective is to
start production of the heavy-duty Volvo
FH, Volvo FM and Volvo FMX trucks from
the end of 2022.
Volvo Trucks has been active in the
Chinese market since 1934. During the last
couple of years, the strong growth of logis-
tics services, including e-commerce, has led
to a surge in the sales of Volvo trucks in the
country. In line with the long-term Volvo
Group strategy, Volvo Trucks is therefore
expanding its business operation in China.
“We are committed to shaping the future
of sustainable transport solutions. With our
long-standing presence in China, we are
growing our sales, and we are expand ing our
strong network of sales and service points
together with our private dealer partners.
Over the last couple of years, we have seen
a fast development of the logistics markets
and an increasing demand for our premium
trucks and services. To meet the demand
from Chinese transport operators, the time
is right for us to establish a regional value
chain with our own heavy-duty truck
manufacturing in China” , says Roger Alm,
President of Volvo Trucks.
The operations in Taiyuan will include
stamping, welding, manufacturing of cabs,
painting and the final assembly of Volvo
trucks. After investment, within a few years,
the plant will have the capacity to produce
15,000 Volvo trucks per year with the
poten tial to increase the capacity further.
The transaction is subject to customary
closing conditions, including regulatory
approvals.
58
Board of Directors’ Report 2021 / Segments / Trucks
VOLVO FL
ELECTRIC
Volvo Group is in serial
production of electric trucks
in both Europe and North
America.
Fully electric trucks
Net order intake Deliveries
2021 2020 2021 2020
Volvo 440 – 121 24
Renault Trucks 613 79 249 43
Heavy- and medium-duty 290 21 64 10
Light-duty 323 58 185 33
Mack 9 – 1 –
Total 1,062 79 371 67
59
Thanks to a strong rebound in most regions, Volvo Construction
Equipment's (Volvo CE) net sales rose by 13% 2021 to SEK 92
billion. Deliveries rose by 7% after the slowdown in 2020 with the
increase supported by infrastructure investments in many markets.
Adjusted operating income amounted to SEK 12,228 M (10,071)
corresponding to an adjusted operating margin of 13.3% (12.4).
Global growth offsets decline in China
After years of high demand for construction equipment in China,
led by governmental infrastructure investments, demand decreased
considerably during the course of the year as reduced government
investments led to lower construction activity and decreased utili-
zation of customer fleets.
This was more than offset by a good development in other regions,
particularly Europe and North America as demand rebounded from
the challenges of 2020.
Increased sales and improved profitability
In 2021, net sales in Construction Equipment increased by 13%
to SEK 92,031 M (81,543). Adjusted for currency movements, net
sales increased by 17%, of which machine sales increased by 18%
and service sales by 16%.
Adjusted operating income amounted to SEK 12,228 M (10,071),
corresponding to an adjusted operating margin of 13.3% (12.4).
There were no adjustments in 2021 but adjustments of SEK –488 M
in 2020. For information on adjustments, please see Key Ratios on
page 204. The increased earnings were mainly driven by improved
product and market mix as well as increased service sales, which
were partly offset by higher material costs, freight costs, supply chain
disturbances and increased R&D expenses. In 2020, adjusted oper-
ating income included a negative effect of SEK 316 M from a write-
down of VAT credits in Brazil and positive effect of SEK 96 M from a
correction of actuarial calculations of the Group’s pension liabilities.
Reported operating income amounted to SEK 12,228 M
(9,583). Currency movements had a negative impact of SEK 922
M compared with 2020.
Volvo CE's direction to 2030
Determined to perform and transform, Volvo CE reconfirmed its
seven strategic priorities and introduced more tangible ambitions
to place sustainability, electromobility, industry leading profitabil-
ity, diversity and involvement at the center of the company’s con-
tinued focus. It includes a pioneering ambition to have 35% of
deliveries consisting of electric machines by 2030.
Sustainable progress remains at the heart of Volvo CE’s vision
for today and for the future. As such, Volvo CE revealed game-
changing commercial and concept product launches across the
fields of electromobility, automation and more sustainable manu-
facturing.
Important events
With the launch of three new electric compact machines – and the
introduction of two existing electric compact machines to the North
American market – Volvo CE continued its electrification journey
with five models in total, positioning itself as a manufacturer with
a growing range of commercially available electric machines.
Construction Equipment
Improved
profitability
Number of regular employees
13,847 (13,404).
191817 20 21
66 84 89 81 92 SEK bn
Net sales
191817 20 21
SEK Bn
%11.9 13.4 13.4 12.4 13.3
7.9 11.3 11.9 10.1 12.2
Adjusted operating income
1
and adjusted operating margin
In brief
Volvo CE is one of the leaders in the development of products
and services for the construction, extraction, waste processin
and materials handling sectors.
Position on the world market
One of the world’s leading manufacturers of haulers, wheel
loaders and excavators. It also produces road construction
machines and compact equipment. The offering also includes
services such as customer support agreements, machine con-
trol systems, attachments, financing and leasing.
Share of net sales
by market, %
Share of Group
net sales
Net sales
distribution
25%
Construction equipment
86%
14%
Services
1 For information on adjusted operating income, see Key Ratios on page 204.
32
18
4
6
40
Brands
Volvo
Rokbak
SDLG
60
Board of Directors’ Report 2021 / Segments / Construction Equipment
Volvo CE also took its first steps into the development of hydro-
gen fuel cell technology with a dedicated Fuel Cell Test Lab in
Eskilstuna, Sweden.
During the year, Volvo CE revealed the world’s first fossil-free steel
prototype machine together with steelmaker SSAB. It also brought to
life a concept self-learning autonomous wheel loader, the result of an
unconventional partnership with LEGO® Technic, see below.
Volvo CE also continued to roll out products on the commercial
side with two new 50-ton excavators for mass excavation, heavy-
duty digging and large-scale site preparation.
In India, 16 new machines engineered to meet the new CEV 4
emission norms were launched. In China a new online sales channel
proved effective in driving sales for recently launched excavators
specifically designed for the Chinese market.
Reflecting Volvo CE’s increased focus on services, 2021 saw
the introduction of service updates including Efficient Load Out
and Volvo Active Control.
In response to market demand for a more holistic sales option, Volvo
CE also launched a new Equipment-As-A-Service (EAAS) offering,
allowing customers to pay for a package of products and services.
The first shipment of the 20-ton EC230 electric excavator from
the factory in South Korea took place, yet another milestone in the
company’s electric journey.
Deliveries by market
Number of machines
2021 2020
Europe 20,453 15,762
North America 6,217 5,025
South America 4,263 2,335
Asia 65,635 68,232
Africa and Oceania 3,303 2,406
Total deliveries 99,871 93,760
Large and medium construction
equipment
1
73,144 65,959
Compact construction equipment
2
26,727 27,802
Of which
Fully electric
321 12
Total deliveries 99,871 93,760
Of which
Volvo 39,903 38,112
SDLG 59,753 55,504
Of which in China 51,819 50,901
1 Excavators >10 tons, wheel loaders engine power >120 hp, articulated
haulers, rigid haulers and road machinery products.
2 Excavators <10 tons, wheel loaders engine power <120 hp, skid steer
loaders and backhoe loaders.
Net sales and operating income
SEK M
2021 2020
Europe 29,524 23,191
North America 16,583 13,020
South America 3,951 2,245
Asia 36,427 39,095
Africa and Oceania 5,546 3,902
Total net sales 92,031 81,453
Of which
Construction Equipment 79,390 70,146
Services 12,641 11,306
Adjusted operating income
1
12,228 10,071
Adjustments
1
0 –488
Operating income 12,228 9,583
Adjusted operating margin, % 13.3 12.4
Operating margin, % 13.3 11.8
1 For information on adjusted operating income, please see Key Ratios
on page 204.
40
20
80
160
320
Europe
*Rollling 12 months per November
N. America
S. America
Asia (excl. China)
China
Africa & Oceania
2017 2019 20202018
148
117
17
200
220
34
167
134
21
219
292
37
178
143
25
195
317
31
157
127
29
187
411
31
2021*
195
152
46
220
408
44
Market development in Volvo CE's product ranges,
construction equipment
Thousands
SELFLEARNING CONCEPT WHEEL LOADER
The fully autonomous, battery-electric prototype Volvo LX03
is the first real-world example of a self-learning concept wheel
loader with the brains to make decisions, perform tasks, and
interact with humans. It is also the first time ever a LEGO®
Technic model has been turned into a real machine. While not
commercially available, engineers expect that valuable insights
from the LX03 will feed into applications for tomorrow.
61
Board of Directors’ Report 2021 / Segments / Construction Equipment
In a year severely affected by the ongoing covid-19 pandemic,
Buses' net sales decreased by 7% to SEK 14 billion while the
adjusted operating income amounted to SEK 59 M (–452),
corresponding to an adjusted operating margin of 0.4% (–3.1).
Covid-19 impacted coach market
The effects of covid-19 continued to have a significant impact on
the global bus market in 2021, negatively affecting the coach
market and associated service sales. The city bus market showed
a better development, with an increased focus on electric vehicles.
As vaccination rates rose and restrictions were lifted, there was an
increase in the utilization of customers' bus fleets, which led to an
improvement in service sales.
During the year, there was high attention on keeping cost levels
low, aligning them with market conditions. A strong focus on miti-
gating the challenging situation in the supply chain limited the
negative impact on operations and deliveries.
Demand for electromobility solutions increased, and Volvo Buses
continued to focus on offering total system solutions. Orders for
electric buses amounted to 408 (461), of which 185 (174) were for
hybrids. Major orders included 122 electric buses for Nobina in
Sweden, 61 electric buses to Helsinki, Finland and 64 buses of the
S-Charge hybrid model to the Belgian operator OTW.
To support coach customers, Volvo Buses offered adapted
financing solutions as well as solutions for keeping passengers safe
on their journey. Order intake for coaches was low due to the pan-
demic, but with some recovery noticed primarily in North America.
Important orders include 39 buses of the recently introduced Volvo
9700 DD, for regional transport in Stockholm, Sweden.
Deliveries decreased by 17% to 4,552 buses (5,425).
Sales declined but earnings improved
As of October 1, 2021, the operations of Nova Bus were reclassi-
fied from the “Buses” segment into “Group Functions and Other“.
To facilitate comparability, financial numbers for 2020 and 2021
have been restated. For more information, please see Note 31.
Buses’ net sales decreased by 7% to SEK 13,652 M (14,712).
Adjusted for currency movements, net sales decreased by 4%,
with vehicle sales decreasing by 8% and service sales increasing
by 13%. Adjusted operating income amounted to SEK 59 M
(–452), corresponding to an adjusted operating margin of 0.4%
(–3.1) excluding adjustments of SEK 20 M (–77). For information
on adjustments, please see Key Ratios on page 204. The improved
earnings were mainly an effect of increased service sales, improved
earnings in the used bus business and cost control, while lower
new vehicle volumes and costs related to disturbances in the
industrial system had a negative impact. In 2020, adjusted operat-
ing income included a positive effect of SEK 52 M from a correc-
tion of actuarial calculations of the Group’s pension liabilities.
Reported operating income amounted to SEK 78 M (–529).
Currency movements had a positive impact of SEK 65 M com-
pared with 2020.
Changing business landscape
The basis for offering people transport solutions is that it must be
sustainable. The demands of society, customers and passengers
are intensifying as awareness grows regarding the need to reduce
emissions from transport. The trend of increased demand for
Buses
Earnings
improvement
despite lower
volumes
Number of regular employees
5,117 (6,608)
191817 20 21
26 26 31 14 SEK bn15
Net sales
20191817 21
SEK M
%
3.4 3.0 4.3
–3.1
0.4
876 765876 765 1,337
–452
59
Adjusted operating income
1
and adjusted operating margin
As of October 1, 2021, the operations of Nova Bus have been reclassi-
fied from the Buses segment into Group Functions and Other. To facili-
tate comparability, financial numbers for 2020 and 2021 have been
restated. For more information, please see Note 31.
Share of net sales
by market, %
43
30
6
10
10
In brief
Volvo Buses is a leader in the development of sustainable
people transport solutions. The offering includes city buses,
intercity buses, coaches and chassis as well as associated
transport systems, financial services and services for increased
productivity, uptime and safety. Volvo Buses has sales in 85
countries and a global service network with more than 1,500
dealerships and workshops. Production facilities are found in
Europe, North America and South America.
Position on the world market
Volvo Buses is one of the world’s largest manufacturers of
premium buses and coaches.
1 For information on adjusted operating income, see Key Ratios on page 204.
Share of Group
net sales
Net sales
distribution
4%
Vehicles
77%
23%
Services
Brands
Volvo Prevost
62
Board of Directors’ Report 2021 / Segments / Buses
Deliveries by market
1
Number of buses
2021 2020
Europe 1,388 1,565
North America 1118 854
South America 726 1,152
Asia 585 1,097
Africa and Oceania 705 757
Total deliveries 4,522 5,425
Of which
Fully electric 211 223
Hybrids 232 83
1 The operations of Nova Bus have been reclassified from the Buses seg-
ment into the segment Group Functions and Other as of October 1,
2021. To facilitate comparability, financial numbers for 2020 and 2021
have been restated. For more information, please see Note 31.
Net sales and operating income
1
SEK M
2021 2020
Europe 5,886 5,765
North America 4,089 3,223
South America 882 1,793
Asia 1,371 2,397
Africa and Oceania 1,423 1,535
Total net sales 13,652 14,712
Of which
Vehicles 10,459 11,794
Services 3,192 2,919
Adjusted operating income
2
59 –452
Adjustments
2
20 –77
Operating income 78 –529
Adjusted operating margin, % 0.4 –3.1
Operating margin, % 0.6 –3.6
1 The operations of Nova Bus have been reclassified from the Buses
segment into the segment Group Functions and Other as of October 1,
2021. To facilitate comparability, financial numbers for 2020 and 2021
have been restated. For more information, please see Note 31.
2 For information on adjusted operating income, please see Key Ratios
on page 204.
ELECTRIC BUSES REDUCING EMISSIONS AND NOISE
In December 2020, 145 new Volvo 7900 Electric
Articulated buses were put into traffic in central
Gothenburg, Sweden. One year later, it is clear
that they havve contributed to decreasing both
emissions and noise in city traffic.
“It has exceeded expectations! I am very happy
that with electrification we are contributing to a
quieter and cleaner city” , says Hanna Björk,
Sustainability Manager at Västtrafik, the region's
public transport authority.
Calculations show that CO emissions in city
traffic have been reduced by 10% compared to the
replaced vehicles, which were already running on
renewable fuels. Emissions of nitrogen oxides have
almost halved and particles have decreased by
almost 20%. In addition, passengers think that the
electric buses are comfortable and that they have
provided a quieter urban environment.
“Västtrafik have ambitious goals to reduce
emissions by 90% by 2035 compared with 2006.
By 2030 all 700 buses operating in city and urban
traffic will be electric” , says Hanna Björk.
electrified public transport solutions strengthened, primarily
due to a rise in interest and requests globally.
Requirements regarding connected vehicles and services,
digitalization and automated solutions have been stepped up.
Connected services and digital solutions are often required to
enable operators and customers to operate their traffic as safe
and efficient as possible.
New President and strategic direction
Anna Westerberg was appointed President of Volvo Buses as of
February 1, 2021 when she joined from the position as head of
Volvo Group Connected Solutions. A review of Volvo Buses' strategic
direction was initiated and launched during the year. A new vision,
“To be the most desired and successful provider of sustainable
people transport solutions, driving value creation through innovation,
partnerships and people” , and new strategic priorities to support
the vision were launched. The new strategic direction focuses on
profitable growth, develop people and culture, accelerate electromo-
bility, grow services and solution sales and leverage partnerships.
Product and service launches
To harness the growing global demand for electrified transport
solutions, the Volvo BZL Electric, a completely new chassis with
an electric driveline, was launched. The Volvo BZL Electric is a
global platform for clean, silent, and energy-efficient public trans-
port to meet the rising demand on important markets that are
ready for the shift to electromobility. It is based on proven tech-
nologies already implemented in Europe.
During the year, a useable energy commitment was launched.
It is a new business solution for customers who either already have
or plan to introduce electric bus fleets. In this solution, Volvo Buses
guarantees capacity for the amount of energy required to secure
operation throughout the contract period, taking into consideration
climate, speed, range, temperature and charging patterns.
The new customer portal, Volvo Connect, was introduced. Volvo
Connect provide customers with a digital interface to services and
information to run their business effectively.
A new variant of the Volvo 9700 DD double decker was launched
for tourist coach customers. The new double decker is 4 meters
high, designed for European operations and supplements the previous
version designed for the Nordic market. As a result, Volvo Buses has
a complete range of premium coach models for the tourist segment,
and is well prepared for when the coach market recovers.
63
Board of Directors’ Report 2021 / Segments / Buses
In 2021, Volvo Penta’s net sales increased by 21% to SEK 14
billion driven by a strong market recovery and increased utilization
of Volvo Penta products. Adjusted operating income amounted to
SEK 2,092 M (1,448), corresponding to an adjusted operating
margin of 14.5% (12.2).
Strategy focused on customer success
Volvo Penta’s strategy is focused on delivering customer success,
sustainable power solutions and business growth. The company
also strives to have the highest employee engagement in the
business to support its vision of becoming the world leader in
sustainable power solutions.
To be a world leader, Volvo Penta will leverage its innovativeness
and Volvo Group assets, lead the development and create industri-
alized and high-quality products and services that create true value
for its customers to secure a long-term profitable business. Volvo
Penta aims to accelerate transformation within uptime services,
digital experiences, electric drivelines and automation.
Positive market development
The marine leisure market had record levels in 2021 driven by stay-
at-home trends in the wake of the covid-19 pandemic as well as high
economic activity. In combination with the strained supply chains,
this led to longer lead times. In the marine commercial market post-
poned projects in sub segments like passenger vessels for tourism
were restarted. Demand for vessels serving the offshore wind indus-
try continued to show a positive development.
The market for industrial off-road engines recovered with a posi-
tive development in all sub segments. This was driven by high cus-
tomer demand due to rising trade and a boost in construction and
mining. The strong demand in combination with supply constraints
in the value chain affected lead times also for this segment. The
industrial power generation market had good momentum through-
out the year.
Increased volumes had a positive impact on earnings
Volvo Penta’s net sales increased by 21% to SEK 14,437 M (11,891).
Adjusted for currency movements, net sales increased by 26%, of
which engine sales increased by 27% and service sales by 23%.
Adjusted operating income amounted to SEK 2,092 (1,448),
corresponding to an adjusted operating margin of 14.5% (12.2).
There were no adjustments in 2021 but adjustments of SEK –46
M in 2020. For information on adjustments, please see Key Ratios
on page 204. The increased earnings were mainly driven by higher
sales of both engines and services as well as positive price realiza-
tion, which were partly offset by lower industrial productivity due
to supply chain disruptions as well as higher operating and R&D
expenses. In 2020, adjusted operating income included a positive
effect of SEK 48 M from a correction of actuarial calculations of
the Group’s pension liabilities and a negative effect of SEK 177 M
from restructuring cost related to the decision to discontinue the
outboard business.
Reported operating income amounted to SEK 2,092 M (1,402).
Currency movements had a negative impact of SEK 293 M com-
pared with 2020.
Volvo Penta
Increased
sales and good
profitability
1 For information on adjusted operating income, see Key Ratios on page 204.
In brief
Volvo Penta aims to be the most forward thinking and cus-
tomer focused supplier of sustainable power solutions. Volvo
Penta provides engines and power solutions for leisure and
commercial vessels, as well as for power generation and
industrial off-road applications.
Position on the world market
Volvo Penta is one of the world’s largest producer of power
systems for leisure boats and a leading provider of power sys-
tems for industrial off-road and power generation segments.
Number of regular employees
1,832 (1,798)
20191817 21
11 14 13 12
SEK bn
14
Net sales
20191817 21
SEK M
%
1,439 2,341 1,876 1,448 2,092
14.512.9 17.0 14.1 12.2
Adjusted operating income
1
and adjusted operating margin
Share of net sales
by market, %
Share of Group
net sales
Net sales
distribution
Engines
71%
29%
Services
4%
52
20
3
6
19
Brand
Industrial enginesMarine engines
Volvo Penta
64
Board of Directors’ Report 2021 / Segments / Volvo Penta
Important milestones on the journey towards net zero
Volvo Penta progressed on its journey towards electrified power
solutions for both industrial and marine segments. The production
of the 600V electric driveline for Rosenbauer’s ‘Revolutionary
Technology’ fire truck was started.
Volvo Penta also entered into a collaboration with the American
terminal tractor manufacturer TICO with the aim of introducing
emission-free, electric terminal tractors. The first prototypes were
developed and delivered for testing.
The previously announced collaboration with Danfoss Editron on
powering two hybrid crew transfer vessels was successfully final-
ized. Volvo Penta and Danfoss Editron also announced a partner-
ship to further drive the transformation towards sustainable power
solutions within the marine industry.
During 2021, Volvo Penta also announced the acquisition of a
majority stake in Norwegian marine battery and electric driveline
solutions supplier ZEM as a step to expand and accelerate its
range and capabilities in marine electromobility.
Awarded innovations to reduce emissions, increase uptime
and enhance user experience
Several product launches were made during 2021 with the aim to
reduce emissions and enhance the user experience.
Production was started of the new off-road 16-liter Stage V/
Tier 4F engine which delivers a range of industry-leading benefits.
In tests, the engine has showed a reduction of up to 10% in fuel
consumption compared to the previous model. It also has improved
low to high-end torque as well as high-altitude performance. The
new engine is designed for the demanding environments of mining,
agriculture, construction and forestry. The 16-liter engine was
named Engine of the Year in the category over 175 hp at the Diesel
Progress Summit, a conference for the engine and powertrain tech-
nology industry. Further, Volvo Penta started the production of both
the D13 Stage V genset engine as well as the new addition to the
range, the D8.
On the marine leisure side, Volvo Penta presented the Assisted
Docking system digitally at the Consumer Electronics Show (CES)
in January, where it earned two “Best of CES” award nominations.
At the Fort Lauderdale International Boat Show, the system was
presented together with the Garmin Surround View which makes
docking easier and more car-like than ever before.
Net sales and operating income
SEK M
2021 2020
Europe 7,464 6,064
North America 2,949 2,562
South America 474 345
Asia 2,698 2,228
Africa and Oceania 851 691
Total net sales 14,437 11,891
Of which
Engines 10,282 8,365
Services 4,155 3,526
Adjusted operating income
1
2,092 1,448
Adjustments
1
0 –46
Operating income 2,092 1,402
Adjusted operating margin, % 14.5 12.2
Operating margin, % 14.5 11.8
1 For information on adjusted operating income, please see Key Ratios
on page 204.
Deliveries by segment
Number of units
2021 2020
Marine engines 17,149 14,842
Industrial engines 24,839 20,444
Total deliveries 41,988 35,286
Of which
Fully electric 39 –
From January 2021, the International Maritime Organization’s reg-
ulations also include marine leisure vessels above 24 meters in load
line length that navigate US waters as well as the North and Baltic
Seas. Volvo Penta presented a new compact and optimized after-
treatment system which complies with the regulation and reduces
emissions and increases fuel efficiency for its yacht customers.
DAME DESIGN AWARDS
Volvo Penta is a leader in technology that makes boating easier,
safer, and more accessible than ever before. This commitment
was recognized at the 2021 Metstrade Show in Amsterdam, The
Netherlands, where the Assisted Docking System received both
a category award and the overall award.
65
Board of Directors’ Report 2021 / Segments / Volvo Penta
Financial Services
Good
financial
performance
For 2021, Volvo Financial Services (VFS) delivered good performance
with new business volume of SEK 85.1 billion (74.1) and solid pene-
tration of 30% (30). Adjusted operating income increased to SEK
3,279 M (1,606), while return on equity improved to 18.0% (8.3).
Working collaboratively with its Volvo Group brand partners, VFS
provides innovative, responsive financial services and solutions,
including financing and leasing, insurance, and repair and mainte-
nance contracts, that fit the way businesses work today, while
continually adapting to meet the needs of our changing world.
Performing to transform
VFS is committed to delivering a best-in-class customer experi-
ence leveraging the power of working as one Volvo Group. Having
a strong captive finance company to support sales and customers
creates value, especially during downturns like the pandemic.
During the year, VFS continued its recovery from the critical
stages of the pandemic. Business activity was strong in the truck-
ing and construction industries around the world, and almost all
customers who were granted payment relief are back to making
full payments. Exceptions remain in certain industries and mar-
kets, such as bus operators, but the overall trends were positive.
With the majority of contract modifications concluded, it is clear
that helping customers survive through difficult business condi-
tions created by the pandemic was the right decision. This in turn
will have lasting impacts on customers as they choose VFS for
financing, insurance and other solutions. A solid commercial foun-
dation, supported by clear alignment with each Volvo Group brand,
will allow VFS to continue to drive higher penetration.
Good growth in both portfolio and profits
New financing volumes for 2021 totaled SEK 85.1 billion (74.1), an
increase of 20% adjusted for currency. The number of Volvo Group
vehicles and machines financed reached 69,556 (61,047) for 2021.
The net credit portfolio of SEK 171,784 M (152,335) increased
by 10% adjusted for currency and the divestment of UD Trucks.
The funding of the credit portfolio is matched in terms of maturity,
interest rates and currencies in accordance with Group policy.
For further information, see Note 4.
Adjusted operating income amounted to SEK 3,279 M (1,606),
excluding adjustments of SEK 9 M (–43). For information on adjust-
ments, please see Key Ratios on page 204. Reported operating
income amounted to SEK 3,289 M (1,564). The return on share-
holders’ equity was 18.0% (8.3), as provisions for the additional
expected credit losses resulting from the pandemic effects in 2020
have been made and portfolio performance has been good. The
equity ratio at the end of the year was 8.0% (8.0).
For 2021, credit provision expenses amounted to SEK 299 M
(1,892) while write-offs of SEK 413 M (821) were recorded. The
write-off ratio for 2021 was 0.25% (0.49). On December 31, 2021,
credit reserves were 1.82% (2.07) of the credit portfolio.
Accelerating the transformation
To bolster the strong execution, VFS completed an organization-
wide realignment, reducing the number of management layers to
move closer to customers and focus on services development and
transformation activities.
In brief
VFS simplifies the purchase and ownership experience of
Volvo Group trucks, equipment and more by offering innova-
tive financial services to dealers and customers that help drive
their business success. Providing flexible financing, insurance
and other services tailored to a customer’s needs today and
tomorrow, VFS builds long-term relationships, increasing
loyalty to the Volvo Group brands.
Position on world market
VFS’ footprint covers more than 90% of Volvo Group sales,
with customer financing available in 49 countries worldwide.
VFS manages a credit portfolio of SEK 172 billion with
275,000 vehicles and equipment.
Number of regular employees
1,546 (1,511)
Distribution of credit portfolio %
Volvo Trucks, 53 (51)
Volvo CE, 22 (22)
Mack Trucks, 12 (11)
Renault Trucks, 10 (10)
Buses, 3 (3)
In 2020, UD Trucks, which was divested on April 1, 2021,
accounted for 3% of the credit portfolio.
Penetration rate
1
%
2020 2021
Eicher Volvo
CE
BusesRenault
Trucks
Volvo
Trucks
Mack
Trucks
2014 272537383435 2220 2326
1 Share of unit sales financed by Volvo Financial Services in relation
to total number of units sold by the Volvo Group in markets where
financial services are offered.
66
Board of Directors’ Report 2021 / Segments / Financial Services
VFS also unveiled a new strategy that provides a blueprint for
continued success through 2025. The new strategy closely aligns
and integrates with the Volvo Group brands in order to deliver on
the Group strategy. Closer cooperation, further digitalization, inte-
grated offerings, new services, new business models and customer
solutions are at the core of the transformation, supporting the
Group's product and service sales.
Thanks to the reorganization and roll out of the new strategy,
VFS is accelerating its transformation into being the key enabler
for services growth for customers while enhancing the financial
performance for the Group.
VFS worked closely with each of the Volvo Group Business
Areas to create a strategy that is fully aligned and integrated to
support the delivery of the Volvo Group strategy, while meeting
the needs of customers on this transformation journey.
VFS is leveraging its strengths in employee engagement,
customer relationships and digital and information technology
solutions to focus efforts on six key priorities: finance penetration
& loyalty, sustainable growth, expanding parts & service financing,
growing the insurance business, accelerating equipment as a
service (EaaS) and electromobility solutions, and scaling digital
payments programs.
This balanced focus on performance and transformation activities
will enable VFS to adjust and adapt business practices to new
products and services, ultimately accelerating the transformation.
Key ratios, Financial Services
2021 2020
Number of financed units 69,556 61,047
Total penetration rate
1
, % 30 30
New financing volume, SEK billion 85.1 74.1
Credit portfolio net, SEK billion 172 152
Credit provision expenses, SEK M 299 1,892
Adjusted operating income
2
3,279 1,606
Adjustments
2
9 –43
Operating income, SEK M 3,289 1,564
Credit reserves, %
of credit portfolio 1.82 2.07
Return on shareholders’ equity, % 18.0 8.3
1 Share of unit sales financed by Volvo Financial Services in relation to the
total number of units sold by the Volvo Group in markets where financial
services are offered.
2 For information on adjusted operating income, please see Key Ratios on
page 204.
Income statement Financial
Services SEK M
2021 2020
Finance and lease income 13,437 13,960
Finance and lease expenses
1
–7,700 –8,375
Gross income 5,738 5,586
Selling and administrative
expenses –2,395 –2,236
Credit provision expenses
1
–266 –1,892
Other operating income and
expenses 213 106
Operating income 3,289 1,564
Income taxes –807 –404
Income for the period 2,481 1,160
1 Credit provisions for operating leases of SEK 33 M is included in finance
and lease expenses within gross income.
TRANSFORMING TOGETHER: FINANCING ELECTRIC
TRUCKS AND MACHINES
Accelerating sales of electromobility solutions is a core compo-
nent of the new VFS strategy. To support this goal, VFS estab-
lished a dedicated commercial team to develop financial services
and solutions in support of the Volvo Group’s current and future
electric products.
By integrating unique financing and leasing programs with
maintenance and service options across Volvo Group brands
and products, VFS presents customers with a single-payment
solution that helps reduce barriers to entry into the world of
electromobility.
Penetration for electric solutions is growing, with VFS
financing 38% of the Volvo Group’s electric truck sales and
32% of electric construction equipment sales.
67
Board of Directors’ Report 2021 / Segments / Financial Services
The share
Most of the world’s leading stock markets had a positive develop-
ment during 2021. The price of the Volvo B share increased by 8%
after having increased by 24% in 2020.
The Volvo share is listed on the stock exchange Nasdaq Stockholm,
Sweden. One A share carries one vote at General Meetings and one
B share carries one tenth of a vote. Dividends are the same for both
classes of shares. The Volvo share is included in many indices com-
piled by Dow Jones, FTSE, S&P and Nasdaq Nordic.
The Volvo share development
In general, the leading stock exchanges rose during 2021. On Nasdaq
Stockholm the broad OMXSPI index rose by 35% after having risen
by 11% in 2020. On Nasdaq Stockholm the share price for the Volvo
A share rose by 9%, and at year-end the price was SEK 212.60
(195.40). The lowest closing price was SEK 185.30 on September
21 and the highest was SEK 240.00 on March 18. The share price
for the Volvo B share rose by 8% and at year-end the price was SEK
209.65 (193.80). The lowest closing price was SEK 183.12 on Sep-
tember 21 and the highest was SEK 238.80 on March 18. In 2021,
a total of 1.2 billion (1.5) Volvo shares at a value of SEK 242 billion (224)
were traded on Nasdaq Stockholm, with a daily average of 4.5 million
shares (5.9). In terms of value, the Volvo shares were the second most
traded on Nasdaq Stockholm in 2021. At year-end, Volvo’s market
capitalization was SEK 428 billion (395).
Share conversion option
In accordance with a resolution at the Annual General Meeting 2011,
the Articles of Association includes a conversion clause, stipulating
that series A shares may be converted into series B shares, on the
request of the shareholder. During 2021, a total of 3,125,400 A shares
were converted to B shares, representing 0.7% of the A shares that
were outstanding at the end of 2020. Further information on the
conversion procedure is available on the Volvo Group’s web site:
www. volvogroup.com
Dividend
The Board proposes an ordinary dividend of SEK 6.50 per share
for the financial year 2021 and an extra dividend of SEK 6.50 per
share, which would mean that a total of SEK 26,435 M would be
transferred to AB Volvo’s shareholders. For the preceding year a
dividend of SEK 6.00 per share and an extra dividend of SEK 9.00
per share were distributed, in total SEK 30,502 M. Furthermore,
the Board proposed that the proceeds from the sale of UD Trucks
should be distributed to the shareholders, and an extraordinary
AGM in June 2021 resolved that SEK 9.50 per share, SEK 19,318 M
in total, were to be distributed to the shareholders.
Policy for remuneration to senior executives
See Note 27 on page 127 for the current policy for remuneration to
senior executives, and page 196 for the Board of Directors’ proposal
to the AGM for an updated remuneration policy.
Communication with shareholders
Dialogue with the shareholders is important for Volvo. In addition to
the Annual General Meeting and a number of larger activities aimed
at professional investors, private shareholders and stock market
analysts, the relationship between Volvo and the stock market is
maintained through such events as press and telephone conferences
in conjunction with the publication of interim reports, meetings with
retail shareholders’ associations, investor meetings and visits, as well
as roadshows in Europe and North America. On volvogroup.com it
is possible to access financial reports and search for information
concerning the share and statistics for truck deliveries. It is also
possible to access information concerning the Group’s governance,
including information about the Annual General Meeting, the Board
of Directors, Group Management and other areas that are regulated
in the “Swedish Code of Corporate Governance.” The website also
offers the possibility to subscribe to information from the company.
Volvo has decided to present its Corporate Governance Report as
a separate document to the Annual Report in accordance with Chap-
ter 6 § 8 of the Swedish Annual Accounts Act and it is available on
page 180195 of this Annual and Sustainability Report.
Contractual conditions related to takeover bids
Provisions stipulating that an agreement can be changed or termi-
nated if the control of the company is changed, so called change of
control clauses, are included in some of the agreements whereby
Renault Trucks has been given the right to sell Renault s.a.s. and
Nissan Motor Co. Ltd’s light-duty trucks as well as in some of the
Group’s purchasing agreements.
Some of Volvo Group’s long-term loan agreements contain condi-
tions stipulating the right for a creditor to request repayment in
advance under certain conditions following a change of the control
of the company. These clauses are not unusual in loan agreements.
In AB Volvo’s opinion it has been necessary to accept those condi-
tions in order to receive financing on otherwise acceptable terms.
Why invest in the Volvo share?
• Competitive products and services
• Ambition to lead the transformation of our industry
to more sustainable solutions
• Strong market positions globally
• Good return on capital employed
• Strong financial position
• Good cash returns to shareholders
Share price increase in 2021
Earnings and dividend per share,
dividend yield
17 18 19 20 21
Diluted earnings
per share, SEK
Dividend
per share, SEK
Dividend
yield, %
10.00
1
8.7
12.24
0
17.64
4.25
2.8
10.07
0
15.00
1
7.7
9.50
22.50
2
10.7
16.12
1 Ordinary dividend of
SEK 6.00 and extra
dividend of SEK 9.00.
2 SEK 9.50 relating to
the proceeds from the
sale of UD Trucks in
2021 and an ordinary
dividend of SEK 6.50
and an extra dividend of
SEK 6.50 proposed by
the Board of Directors
to the AGM 2022.
Board of Directors’ Report 2021 / The Share
68
The shareholders with the
largest voting rights in AB Volvo,
December 31, 2021
Voting
rights, %
Capital,
%
Industrivärden 27.7 8.6
Geely Holding 16.0 8.2
AMF Insurance &
Funds 5.4 3.4
Alecta 4.2 3.3
AFA Insurance 2.3 0.7
BlackRock 2.1 3.4
AP4 Fund 1.7 0.8
Norges Bank Invest-
ment Management 1.6 2.3
Vanguard 1.5 2.5
Swedbank Robur
Funds 1.4 3.3
Share capital, December 31, 2021
Number of shares 2,033,452,084
of which,
Series A shares
1
444,987,946
of which,
Series B shares
2
1,588,464,138
Share capital, SEK M 2,562
Quota value, SEK 1.26
Number of shareholders 362,144
Private persons 343,978
Legal entities 18.166
For further details on the Volvo share, see Note 19.
1 Series A shares carry one vote each.
2 Series B shares carry one tenth of a vote each.
Non-Swedish owners 39%
Other Swedish institutions 34%
Swedish mutual funds 14%
Swedish private shareholders 13%
More details on the Volvo
shares are provided in
Note 19 to the financial
statements and in the
Eleven-year summary.
Employees’ ownership of shares in Volvo through pension foundations is insignificant.
Source: Euroclear
1 Share of capital
Accumulated total return of the Volvo B share
Volvo B Total return (including reinvested dividends)
SIX Return Index (including reinvested dividends)
1990 1995 2000 2005 2010 20212015
Source: Investis Digital
1987
7,500
%
6,000
4,500
3,000
1,500
0
+7,007%
The graph shows that SEK 1,000 invested in the Volvo B share on
January 2, 1987 had grown to SEK 71,070 at the end of 2021, under the
condition that all dividends have been reinvested in Volvo B shares.
Source: Euroclear
1 Share of capital
Sweden 61%
The US 23%
The UK 5%
Luxembourg 4%
Belgium 2%
Switzerland 1%
Others 4%
50
90
130
250
210
170
2017 2018 2019 2020 2021
OMX Stockholm PI Index
Volvo B
OMX Stockholm Industrial Goods & Services
Source:
Investis Digital
Price trend, Volvo B share, 20172021 SEK
Ownership by categories
1
Ownership by country
1
69
Board of Directors’ Report 2021 / The share
Risks and uncertainties
Managed risk-taking
Each of the Volvo Group’s Business Areas and Truck Divisions
moni tors and manages risks in its operations. In addition, the Volvo
Group utilizes a centralized Enterprise Risk Management (ERM)
Enterprise Risk Management Governance
For the governance
model of the Volvo
Group, please see
page 181.
The Group Executive Board analyzes accuracy of reported
risks and mitigation activities and ensures alignment to
strategic and operational agenda.
The Board of Directors monitors risks and mitiga-
tion activities annually and the Audit Committee
regularly through the consolidated ERM report.
The ERM Committee reviews, analyzes and challenges
compiled risks and mitigation activities three times per year.
The committee consists of the Executive Vice President Group
Finance, Executive Vice President Legal & Compliance, Senior
Vice President Group Treasury & Corporate Finance and Senior
Vice President Group Reporting, Tax and Control.
Each Business Area and Truck Division reports its largest
risks and mitigation activities three times per year to the
ERM function, which reviews and compiles reported risks
into the Group ERM report.
Business review meetings in each Business Area and Truck
Division identifies, mitigates, monitors and analyzes its
largest risks. This forms the basis for the ERM reporting.
Executive Management Teams in each Business Area and
Truck Division are fully responsible for risk and miti gation
management in their respective area. Risks are identified,
mitigation activities are established, and monitoring and
reporting of progress is part of daily operations.
Board of Directors
Audit Committee
Group Executive Board
Enterprise Risk
Management Committee
Enterprise Risk
Management Function
Business Review Meeting
Executive Management Teams
reporting process, which is a systematic and structured framework
for reporting and reviewing risk assessments and mitigations as
well as for following up on identified risks.
Principal risks
The following pages present principal risks and uncertainties the
Volvo Group are facing within each risk category. These risks can,
separately or in combination, have a material adverse effect on the
Group’s business, strategy, financial performance, cash flow, share-
holder value or reputation.
Risk categories
The ERM process classifies Volvo Group risks into five categories:
• Macro and market related risks
• Operational risks
• Climate and people risks
• Compliance risks
• Financial risks.
70
Board of Directors’ Report 2021 / Risks and uncertainties
MACRO AND MARKET RELATED RISKS
extensive and evolving. These laws and regulations result in an often
complex, uncertain and changing legal and regulatory environment
for Volvo Group’s global businesses and operations.
The Volvo Group works actively to ensure compliance with appli-
cable laws and regulations and endeavors to collaborate and be
transparent with all governing bodies in certification and compliance
processes, during development and throughout the lifecycle of Group
products as well as in investments in production plants, but can
provide no assurance that it will at all times be fully compliant. If the
Volvo Group has failed or fails to comply with these laws, regulations
and requirements it could be subject to costs of recalls and other
remediation, significant penalties and other sanctions and liability as
well as reputational damage. A failure to meet applicable laws and
regulations in this area could also imply a failure to assure an updated
and compliant product and service range in time to meet regulations
which could have a material adverse effect on the Volvo Group’s
business, operating results, financial conditions and brand.
In addition, safety regulations are also becoming increasingly
important with autonomous vehicles in commercial applications.
If regulations are not set, or not clear enough, there is a risk of not
being able to scale up the autonomous offer, or not complying with
regulations. A safety incident could have a detrimental effect on the
Group’s brand image and possible earnings. An incident in the industry
could also lead to quickly adjusted or additional regulations.
Political instability and security
The Volvo Group is active in more than 190 countries across the
world. Political instability, armed conflicts or civil unrest can impact
the Group’s ability to trade in affected areas. Acts of terrorism, sab-
otage, and other criminal or malicious activities directed towards the
Volvo Group’s people, information systems, products, production
systems, or facilities, or those of its business partners, suppliers or
customers, could cause harm to people and severely damage the
Group’s operations and brand reputation.
The changing geopolitical situation and potential trade sanctions
may also give rise to further tariffs and other trade restrictions and
barriers being imposed, which can negatively impact the Group’s
production system and ability to conduct its operations.
Cyclical commercial vehicles industry
The Volvo Group’s customers operate all over the world, some within
a single country and others across borders. A multitude of global and
regional economic, regulatory, digital, technological, climate and
energy resource efficiency factors contribute to a considerable
volatility in demand and risks in different markets.
Like many capital goods industries, the commercial vehicle indus-
try generally has been cyclical, impacted by e.g. developments of
GDP and corresponding changes in transport demand, the need to
replace aging vehicles and machines and changing laws and regu-
lations. Although there is a continued shift in focus in the commercial
vehicle industry from product to service, the cyclicality in the indus-
try remains. Fluctuating demand for the Group’s products and ser-
vices makes the financial result of the operations dependent on the
Group’s ability to react quickly to market changes.
Inability to adapt to changes in demand could lead to capacity
constraints or underutilization of resources, which could have a
negative effect on earnings and financial position.
Competition
The Volvo Group operates in markets which are highly competitive,
and thus faces intense competition from global and local industry
peers. The Volvo Group also encounters competition from new
market entrants, seeking to offer e.g. sustainable transportation,
increased logistics efficiency, new technologies and/or new business
models. In this market environment, there can be no assurance that
current or new competitors cannot be more successful than the
Group in bringing new products and service solutions to the market,
in implementing new technologies or collaboration models or in
offering more attractively priced products, services or solutions.
Regulations
The Volvo Group is subject to environmental, occupational health
and safety laws and regulations that affect the operations, facilities,
products and services in each of the jurisdictions in which the Volvo
Group operates. In particular, regulations regarding exhaust emissions,
noise, safety and pollutants from production plants and products are
OPERATIONAL RISKS
The driving factors of the transformation come from different
sources that may not always correlate. Extensive and continuously
evolving regulations and government actions set the legal framework.
Social attitudes and customer preferences relating to climate change
and the transition to a lower carbon economy are additional factors
that the Volvo Group is impacted by. In addition, investor preferences
and sentiment are more and more influenced by environmental, social
and corporate governance (ESG) considerations. Changes in these
factors, including the pace of change to any of these factors, as well
as the pace of the transition itself, could have an adverse impact on
Transformation and technology risk
The ongoing and accelerating transformation of the transport and
vehicle industry towards climate-neutral and sustainable transporta-
tion and infrastructure solutions entails various transitional risks for
the Volvo Group. The Volvo Group’s future business success depends
on its ability to develop new, attractive, competitive and energy-effi-
cient products as well as to successfully position itself in this industry
shift. Failure to develop products in line with demand and regulations,
especially in view of digitalization, electromobility and autonomous
solutions could adversely impact the Group’s operations.
Board of Directors’ Report 2021 / Risks and uncertainties
71
the result of strategic business decisions and, in the end, on the
overall business of the Volvo Group. Changes in investor prefer-
ences and sentiment could significantly affect the Volvo Group’s
business plans and financial performance.
Compliance with CO, fuel efficiency and emission control require-
ments might lead to a need to accelerate introduction of significant
volumes of electric vehicles as well as implementing additional new
technologies for conventional diesel engines. There can be no assur-
ance that such new technologies and solutions can be produced and
sold profitably or that customers will purchase those in the quanti-
ties needed to meet the regulatory requirements. Even if challenges
in these areas are resolved and handled, they could have a negative
impact on the Group’s reputation, usage of resources, cost of pro-
duction or cost of product recalls, and may result in adverse effects
on earnings and financial position.
Many of the new products and technologies are still in early stages
of development which – together with the lack of broadly accepted
standards – poses significant risks for the Volvo Group as it is required
to choose relevant technologies, quality of products and time their
introduction wisely, while respecting the wide spread in readiness
level among markets and segments across the globe. If the Volvo
Group miscalculates, delays recognition of, or fails to adapt its prod-
ucts and services to trends, legal and customer requirements in indi-
vidual markets or other changes in demand, it could have a material
adverse impact on the Group’s results of operations, financial
condition and cash flows.
New business models
The transport and vehicle industry is facing new technologies, busi-
ness models, competitors and global trends such as digitalization
which combined create a highly disruptive environment. These factors
are shifting the Volvo Group from a heavy commercial vehicle manu-
facturer to more of a provider of transport and logistics solutions.
The Volvo Group has, during the last couple of years, continuously
invested in new business models and new technologies to be able to
offer safer, more sustainable and more productive solutions to its
customers. Going forward, a new transport landscape will continue
to emerge and will impact large parts of the Volvo Group’s operations
and way of working, entailing risks related to the ability to respond to
specific customer needs with tailored services and the availability of
technological innovations that respond to the major trends of the
industry (i.e. digitalization, electromobility and autonomous solu-
tions). If the Volvo Group miscalculates, delays recognition of, or fails
to adapt its services to trends, legal and customer requirements or
other changes in demand, it could have a material adverse impact on
the Group’s results of operations, financial condition and cash flows.
An additional level of risk relates to the need to evolve from a
vehicle/product focus towards an ecosystem-driven approach, where
vehicles and infrastructures are to be developed and implemented
simultaneously. The transition to electrification also depends upon
external factors such as the existence of a functioning charging
infrastructure and access to renewable energy sources to power
battery electric and fuel cell electric products. If the Volvo Group
positions itself unsuccessfully in this technology shift, earnings
capacity and financial standing could be severely affected.
Industrial operations
Our ability to deliver in accordance with market demand and product
quality expectations depends significantly on obtaining a timely and
adequate supply of materials, components and other vital services,
as well as on our ability to properly utilize the capacity in the Group’s
different production and service facilities. In 2021, our supply chain
and industrial systems were strained in many areas due to e.g. short-
ages of semiconductors and other materials and components,
shortages of transport services and developments of the covid-19
pandemic and response measures taken. Further disturbances in
the supply chain and industrial system can arise from a variety of
factors, including continued or additional shortages of material,
labor and components, strikes, pandemics or extreme weather,
which each or in combination could result in stoppages and other
interferences in production and deliveries, which may impair our
ability to meet our customers’ orders, and thus negatively affect the
Volvo Group’s business, reputation and results from operations.
Reliance on suppliers and scarce materials
The ongoing technology shift into electrification and other new cus-
tomer offerings, combined with required investments in traditional
technologies, may move the industry and the Volvo Group towards
reliance on new suppliers, new materials and on materials being
used in new applications and in different quantities compared to
traditional technologies. Some of these materials may pose a risk
of supply due to scarcity or geopolitical, conflict or human rights
concerns. At the same time the suppliers providing more traditional
products might lose business and risk closing, which could leave
the Volvo Group with a shortage of suppliers in a particular area
and thereby a need to make investments.
Cost inflation and price increases
Inflationary trends could occur for commodities and other materi-
als which the Group purchase on the world market as well as on
salaries and services. The ability to pass on such higher costs into
price increases for products and services may be limited by com-
petitive pressure or already committed prices to customers in
order books and other agreements. Rising prices on commodities
and other costs may therefore have a negative impact on the profit
margin and negatively affect Group earnings.
Cybersecurity and IT infrastructure
The operation of many of the Volvo Group’s business processes
depends on reliable information technology (IT) systems and infra-
structure. This applies to e.g. production, logistics and sales, as well
as products using connectivity and automation features. Disruptions,
cyberattacks and other security threats against our products or busi-
ness could harm the Volvo Group’s operations, reputation and have a
significant adverse effect on earnings and financial position. Timely
detection of cybersecurity and other security incidents is becoming
increasingly complex, and the Volvo Group seeks to investigate and
manage incidents with a view to prevent their recurrence.
72
Board of Directors’ Report 2021 / Risks and uncertainties
The Volvo Group relies on third parties where significant parts of
maintenance and operations of the IT systems has been outsourced.
The Volvo Group has taken precautions in the selection and ongoing
management of these third parties, but events or incidents caused by
vulnerabilities in their operations or products could cause disruption
of operations, loss or leakage of data, reputational risk and financial
losses.
Mergers and acquisitions, partnerships and divestments
In addition to the Volvo Group’s in-house work and focus on organic
growth, the Volvo Group engages in acquisitions and divestments,
as well as in JVs, partnerships and other forms of cooperation.
These are essential parts in executing on our strategy. However,
there can be no assurance that these transactions and cooperations
become or remain successful, nor that they will deliver expected
benefits. Acquisitions could e.g. result in incurrence of contingent
liabilities and an increase in amortization expenses and impairments
related to goodwill and other intangible assets, as well as unantici-
pated difficulties in integration of an acquired entity. Divestments
could present risks in e.g. the operational separation or through
contractual undertakings or legal liabilities with respect to the
business divested.
JVs and partnerships may fail to perform as expected for various
reasons, including our or our partner’s incorrect assessment of needs
and potential synergies, a failure to invest sufficient resources in the
cooperation or a change of strategic direction that the cooperation
fails to accommodate. Further, JVs and partnerships may restrict
e.g. our ability to run independent operations within the scope of
cooperation, and limitations in our or our partner’s operational and
financial resources may restrain the capabilities of the cooperation.
Residual value commitments
The Volvo Group sometimes offers customers to acquire Group
products with a residual value commitment, meaning that the
customer can return the asset at an agreed date and to an agreed
price. The committed prices are established within each Business
Area, which assumes the responsibility for maintaining a residual
value matrix aiming to reflect fair future market values. Volvo Group
will have a residual value risk if vehicles subject to residual value com-
mitments and/or rebought vehicles can be sold only for a price below
the vehicle’s committed residual value. A residual value commitment
can also become a future used vehicle inventory risk if vehicles are
not sold, affecting the cash flow negatively. For further information
on residual value commitments, see Note 13 Tangible assets.
CLIMATE AND PEOPLE RISKS
Volvo Group Enterprise Risk Management process. These risks,
including their potential financial impact, are described in more
detail in under the risk categories “Regulations” , “Transformation
and technology risk” , “New business models” and “Reliance on
suppliers and scarce materials”.
People and culture
The Volvo Group strongly believes that there is a high correlation
between the Group’s future success and its capability to recruit,
retain and develop qualified personnel. The Volvo Group counts
on leveraging the full diversity of its workforce to fulfil customer
demands. Managing the needed competence shift in the transfor-
mation in specialized areas is key to succeed. To meet expectations
from employees and other stakeholders, a strong focus is required
on areas such as leadership, empowerment, employee engagement,
human rights, Group culture and values, sharing of knowledge, and
building diverse teams. Failure to do the right things in these areas
can cause a negative impact on the Volvo Group’s reputation, as well
as on the image as an employer and on the ability to recruit, retain
and develop the knowledge and skills of the employees necessary
to ensure customer success and the transition to new technologies.
Pandemics
The outbreak of pandemics throughout the world, such as the ongo-
ing covid-19 pandemic, may lead to major disruptions in the econo-
mies of many countries, including the Group’s key markets, and
may impact global economic activity as well as Group performance
negatively going forward. The duration and expected development
of the covid-19 pandemic is unknown, and no predictions can be
made in relation to future impacts. Any prolongation or worsening
of the virus outbreak would, however, be expected to negatively
affect the Group’s financial performance, and could have a material
adverse effect on the Group’s business and financial development.
Climate risk
The scientific consensus indicates that emissions of greenhouse
gases continue to alter the composition of the earth’s atmosphere in
ways that are affecting, and are expected to continue to affect, the
global climate. The potential impacts of climate change on the Volvo
Group’s customers, product offerings, operations, facilities and
suppliers are accelerating and uncertain, as they will be particular to
local and customer-specific circumstances. As stated on page 154
in the Sustainability Notes, the Volvo Group has identified a number
of climate-related transitional risks, which are incorporated into the
Board of Directors’ Report 2021 / Risks and uncertainties
73
COMPLIANCE RISKS
to use the Renault brand and trademarks are related to the truck
operations only and are regulated by a license from Renault s.a.s.,
which owns the Renault brand and trademarks. In addition, the
Volvo Group owns several other trademarks relating to its business.
Use in possible conflict with third-party intellectual property
rights, or third-parties’ unauthorized use of the Volvo Group’s pro-
prietary rights, may have significant business impact on the Group.
Legal proceedings
In the normal course of business, the Volvo Group is involved in legal
proceedings. These proceedings may relate to a number of topics,
including vehicle safety and other product related claims, warranty
claims, commercial disputes, intellectual property claims, allegations
concerning health, environmental or safety issues, antitrust, tax or
labor disputes and regulatory inquiries and investigations. Further,
AB Volvo and other companies in the Group, as well as their officers,
may be subject to claims alleging failures to comply with stock
market regulations, securities law and other applicable rules and
regulations. Legal proceedings can be expensive, lengthy, take up
resources that could be used for other purposes and are often diffi-
cult to predict. There can be no assurance that provisions, where
recognized, for a particular legal proceeding will cover the costs of
an adverse outcome, nor that unprovisioned proceedings will not
give rise to any significant additional expenditure. Information about
certain legal proceedings involving entities within the Volvo Group,
see Note 21 Other Provisions and in Note 24 Contingent Liabilities.
Corruption and non-compliance with competition law
Corruption risks are primarily linked to the Volvo Group’s sales and
supply chain activities but may also relate to administrative proce-
dures, such as licensing and permitting. This includes activities of
Volvo Group employees but may further extend to the activities of
the Volvo Group’s business partners and intermediaries. The overall
risk level therefore is affected by sales volumes, the way of distribution
Non-compliance with data protection laws
Focus on Data Protection is increasing from authorities around the
globe resulting in Data Protection laws entering into force. The EU
General Data Protection Regulation (“GDPR”) introduced increased
monetary penalties for breaches of the regulation and sets a standard
applied in several other data protection laws throughout the juris-
dictions in which Volvo Group operates. Non-compliance with data
protection laws could expose the Group to fines and penalties and
severe infringements may potentially cause authorities to issue
instructions to stop processing of personal data, which could dis-
rupt operations. The Group could also face litigations with persons
allegedly affected by data protection violations. Data protection law
infringements may hence involve severe negative impact for the busi-
ness operations, including reputational damage and adverse effect
on the Group’s earnings and financial standing.
Intangible assets
The Volvo Group owns or otherwise has rights to patents, trademarks,
designs and copyrights that relate to the products and services that
the Group manufactures and markets. These rights have been
developed or acquired over a number of years and are valuable to
the operations of the Volvo Group. Further, in order to safeguard
investments in R&D, the Volvo Group has an intellectual property
plan defining the creation and use of its intellectual property rights.
The share of trade in counterfeit goods as a proportion of global
trade has grown significantly. Products infringing on Volvo Group’s
intellectual property rights are often of substandard quality and poses
risks to the Group regarding safety of customers, vehicle perfor-
mance, quality and emission levels that will affect public health and
the climate, as well as the brand reputation.
AB Volvo and Volvo Car Corporation jointly own the Volvo brand
and trademarks through Volvo Trademark Holding AB. AB Volvo has
the exclusive right to use the Volvo name and trademark for its prod-
ucts and services and according to a license agreement. Similarly,
Volvo Car Corporation has the exclusive right to use the Volvo name
and trademark for its products and services. The Volvo Group’s rights
Human rights
The Volvo Group is committed to respecting internationally recog-
nized human rights and avoiding causing or contributing to adverse
human rights impacts in line with applicable legislation throughout
the world, relevant global frameworks such as the UN Guiding Prin-
ciples on Business and Human Rights (UNGP) and the UN Global
Compact as well as its own standards.
Adverse human rights impacts may potentially materialize not only
within the Group’s own organization, but also through the Group’s
business relationships and in the value chain. The Group seeks to
address adverse human rights impacts with which it may be involved.
The consequences of human rights risks for the Volvo Group could
range from liability to reputational and brand damage, depending
also on the severity of the nature of harm done. This depends on
whether the Group is seen in breach of applicable laws or is seen as
causing, contributing to or being directly linked to the harm done,
as defined in the United Nations Guiding Principles on Business and
Human Rights.
The Group is aware that conducting business in certain parts of
the world constitutes higher risks for potential human rights viola-
tions and therefore has identified certain countries where the Volvo
Group has a substantial number of employees and/or close business
partners that are considered to have elevated risk in this respect.
The Group is also aware that certain purchasing and customer seg-
ments constitutes higher risks for negative human rights impacts.
74
Board of Directors’ Report 2021 / Risks and uncertainties
and the fact that Volvo Group pursues business operations also in
markets that are considered high risk from a corruption perspective.
Potential risks for non-compliance with competition law (e.g.
price fixing, market sharing, unlawful information exchange, abuse
of market power) are primarily linked to behavior of employees when
interacting with competitors and other external stakeholders in
various situations.
Corruption as well as competition law infringements may involve
severe negative impacts for the business operations, including
reputational damage, legal proceedings, fines and imprisonment
of employees. The Group could also be affected by claims raised by
persons or entities affected by allegedly non-compliant practices.
FINANCIAL RISKS
Interest rate risk
Volvo Group’s net financial debt structure is exposed to fluctuations
in market interest rates. Movements in interest-rate levels may
impact the Group’s net income and cash flow or the value of financial
assets and liabilities.
Currency risk
The Volvo Group’s global presence means that business is conducted
in several different currency regions. More than 95% of the Group’s
net sales are generated in countries other than Sweden. The Volvo
Group’s cash flow, profitability, and balance sheet are impacted by
fluctuations in foreign exchange rates.
Liquidity risk
It is of critical importance for the Volvo Group to assure a sufficient
payment capability over time, to continuously manage demands and
expectations from external stakeholders.
Sudden changes in the business cycle, unforeseen events within
the financial markets, changes in the Volvo Group’s access to finan-
cial markets, and changes in customers’ appetite for financing from
the Group, may stress the Group’s liquidity preparedness.
Failure to properly manage the Group’s liquidity risks, may cause
material adverse impact on earnings capability and financial standing.
Impairment
The Volvo Group has substantial values in goodwill and other in tan-
gible assets on its balance sheet. Goodwill and other intangible
assets not yet in use are not depreciated, hence there is a risk for
impairment if the calculated recoverable amount is lower than the
carrying amount. The calculated recoverable amounts differ between
the operating segments and they are, to a varying degree, sensitive
to changes in the business environment. Instability in the business
performance and volatility in interest and currency rates may indi-
cate a need for impairment. Please see Note 12 Intangible assets.
Insurance
The Volvo Group generally takes out insurance coverage where it is
legally or contractually obligated to do so and otherwise against
such risks, in such amounts and on terms that it considers com-
mercially motivated from time to time. Where insurance coverage
cannot be procured on such terms, the Group can be exposed to
material uninsured losses, which could have a materially adverse
effect on Group operations and financial standing. For example,
the Group is not fully insured against effects from flooding, earth-
quakes and other natural disasters.
Credit risk
The Volvo Group is exposed to credit risk mainly through its sales
to customers in the Industrial Operations, and its long-term credit
receivables in its Financial Services operations. Total exposure as
of December 31, 2021 can be found in Note 15 Customer-financing
receivables and Note 16 Receivables. The Group is also exposed to
financial credit risk due to short-term deposits with the Group’s
core banks and unrealized results from derivatives used for hedging
purposes. For further information, please see Note 4 Goals and pol-
icies in financial risk management and Note 15 Customer- financing
receivables. If several larger customers, dealers, or a core bank, fails
to meet its undertakings the Group could suffer significant losses.
Pension commitments
The Volvo Group has substantial pension commitments, some of
which are owed under defined benefit plans. Changes in assump-
tions of interest and inflation rates, mortality, retirement age and
pensionable remunerations could result in significant changes to
the present value of already accrued benefit obligations as well
as the cost of new benefit accruals, affecting funding level of such
plans. The investment performance of pension assets may also
substantially affect funding levels. Defined benefit plan assets are
managed independently from the Group, with a significant portion
of plan assets held in shares and other similar instruments that
are exposed to market risks. Please see Note 20 Provisions for
post-employment benefits for further information.
If there is a shortfall in benefit plans, the Volvo Group could be
required to make substantial unexpected cash contributions, which
would adversely affect cash flow and the Group’s financial position.
Board of Directors’ Report 2021 / Risks and uncertainties
75
Notes to the financial
statements
NOTE PAGE
Accounting policies
Key sources of estimation uncertainty and
critical judgments
Acquisitions and divestments
of operations
Goals and policies in financial risk
management
Investments in joint ventures, associated
companies and other shares and
participations
Segment reporting
Revenue
Other operating income and expenses
Other financial income and expenses
Income taxes
Non-controlling interest
Intangible assets
Tangible assets
Leasing
NOTE PAGE
Customer-financing receivables
Receivables
Inventories
Cash and cash equivalents
Equity and number of shares
Provisions for post-employment benefits
Other provisions
Liabilities
Assets pledged
Contingent liabilities and contingent
assets
Transactions with related parties
Government grants
Personnel
Fees to the auditors
Cash flow
Financial instruments
Changes in Volvo Group financial reporting
Financial Statements
Financial performance
Page 45
Financial position
Page 48
Changes in
consolidated equity
Page 55
Cash flow statement
Page 52
76
Notes to the financial statements
The consolidated financial statements for AB Volvo and its subsidiaries are
prepared in accordance with International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB), as
adopted by the European Union (EU). This Annual Report is prepared in
accordance with IAS 1 Presentation of Financial Statements and the Swedish
Annual Accounts Act. In addition, RFR 1 Supplementary Rules for Groups
has been applied, which is issued by the Swe dish Financial Reporting Board.
Amounts in SEK M unless otherwise specified. The amounts within paren-
theses refer to amounts for year 2020.
1 Accounting policies
Accounting policies Note IFRS standard
Acquisitions and divestments 3, Acquisitions and divestments
of operations
IFRS 3, IFRS 10
Assets and liabilities held for sale
and discontinued operations
3, Acquisitions and divestments
of operations
IFRS 5, IFRS 13
Joint ventures 5, Investments in joint ventures, associated
companies and other shares and
participations
IFRS 11, IFRS 12, IAS 28
Associated companies 5, Investments in joint ventures, associated
companies and other shares and
participations
IFRS 12, IAS 28
Other shares and participations 5, Investments in joint ventures,
associated companies
and other shares and participations
IFRS 7, IFRS 9, IFRS 13, IAS 28, IAS 32
Operating segments 6, Segment reporting IFRS 8
Revenue
7, Revenue IFRS 9, IFRS 15, IFRS 16
Financial income and expenses 9, Other financial income and expenses IFRS 9
Income taxes 10, Income taxes IAS 12
Non-controlling interest 11, Non-controlling interest IFRS 10, IFRS 12
Research and development 12, Intangible assets IAS 36, IAS 38
Goodwill 12, Intangible assets IFRS 3, IAS 36, IAS 38
Tangible assets 13, Tangible assets IFRS 13, IFRS 16, IAS 16, IAS 36, IAS 40
Leasing 14, Leasing IFRS 16
Inventories 17, Inventories IAS 2
Earnings per share 19, Equity and number of shares IAS 33
Pensions and similar obligations 20, Provisions for post-employment benefits IFRS 2, IAS 19
Residual value risks 21, Other provisions IFRS 15, IAS 37
Product warranty 21, Other provisions IAS 37
Technical goodwill 21, Other provisions IAS 37
Restructuring costs 21, Other provisions IAS 19, IAS 37
Extended coverage and service contracts 21, Other provisions IFRS 15, IAS 37
Insurance operations 21, Other provisions IFRS 4
Contingent liabilities and contingent assets 24, Contingent liabilities and contingent assets IAS 37
Transactions with related parties 25, Transactions with related parties IAS 24
Government grants 26, Government grants IAS 20
Incentive programs 27, Personnel IAS
Cash flow statement 29, Cash flow IAS 7
Financial instruments 4, Goals and policies in financial risk management IFRS 7, IFRS 9
15, Customer-financing receivables IFRS 7, IFRS 9, IFRS 13, IFRS 16, IAS 32
16, Receivables IFRS 7, IFRS 9, IFRS 13, IAS 32
18, Cash and cash equivalents IFRS 7, IFRS 9, IFRS 13, IAS 32
22, Liabilities IFRS 7, IFRS 9, IFRS 13, IAS 32
30, Financial instruments IFRS 7, IFRS 9, IFRS 13, IAS 32
1:1
77
Notes to the financial statements
VOLVO GROUP’S ACCOUNTING POLICIES
The Volvo Group describes the most significant accounting policies in con-
junction with each note with the aim of providing enhanced understanding
of each accounting area. The Volvo Group focuses on describing the
accounting choices made within the framework of the prevailing IFRS
standard and avoids repeating the actual text of the standard, unless the
Volvo Group considers it particularly important to the understanding of the
note’s content. The following symbols
IS
and
BS
show if amounts in the
notes can be found in the income statement or balance sheet. The total
amount in tables and statements might not always summarize as there
are rounding differences. The aim is to have each line item corresponding
to the source and it might therefore be rounding differences in the total.
Refer to table
1:1
to see in which note each accounting policy can be
found and the applicable IFRS standard with material impact.
Consolidated financial statements
Principles for consolidation
The consolidated financial statements comprise the parent company and sub-
sidiaries over which the parent company exercises control. Control over a sub-
sidiary exists when the Volvo Group is exposed, or has rights, to variable
returns from its involvement with the subsidiary and has the ability to affect
those returns through its power over the company. Joint ventures and associ-
ated companies are recognized by applying the equity method accounting,
when the Volvo Group has joint control or exercise significant influence. Intra-
group trans actions as well as gains on transactions with joint ventures and
associated companies are eliminated in the consolidated financial statements.
Read more in Note 3 Acquisitions and divestment of operations.
Read more in Note 5 Investments in joint ventures, associated companies and
other shares and participations.
Read more in Note 11 Non-controlling interest.
Translation to Swedish kronor when consolidating companies that have
other functional currencies
The functional currency of each Volvo Group company is determined
based on the primary economic environment in which the company oper-
ates. The primary economic environment is normally in which the com-
pany primarily generates and expends cash. The functional currency is in
most cases, the currency in the country where the company is located. AB
Volvo’s and the Volvo Group’s presentation currency is SEK. In preparing
the consolidated financial statements, items in the income statements of
foreign subsidiaries are translated to SEK using monthly average exchange
rates. Balance sheet items are translated into SEK using exchange rates
at year end (closing rate). Exchange differences are recognized in other
comprehensive income and accumulated in equity.
The accumulated translation differences related to a certain subsidiary,
joint venture or associated company are reversed to the income state-
ment as a part of the gain or loss arising from disposal of the company or
repayment of capital contribution from the company.
Receivables and liabilities in foreign currency
Receivables and liabilities in currencies other than the functional currency
of the reporting entity (foreign currencies) are translated to the functional
currency using the closing rate. Exchange rate gains and losses arising
from operating assets and liabilities impact operating income while
exchange rate gains and losses arising from financial assets and liabilities
impact other financial income and expenses. Interest-bearing financial
assets and liabilities are defined as items included in the net financial posi-
tion of the Volvo Group (see section Key ratios).
Exchange rate differences on loans and other financial instruments in foreign
currency, which are used to hedge net assets in foreign subsidiaries, joint
ventures and associated companies, are offset against translation differ-
ences in equity of the respective companies.
Read more in Note 4 Goals and policies in financial risk management, about
currency exposure and currency risk management.
The most important exchange rates used in the consolidated financial state-
ments are shown in table
1:2
.
Exchange rates
Average rate
Closing rate
as of Dec 31
Country Currency 2021 2020 2021 2020
Australia AUD 6.4415 6.3380 6.5625 6.2646
Brazil BRL 1.5925 1.8068 1.5856 1.5715
Canada CAD 6.8453 6.8603 7.0636 6.3996
China CNY 1.3307 1.3329 1.4186 1.2537
Euro Zone EUR 10.1449 10.4867 10.2269 10.0375
Great Britain GBP 11.8022 11.7981 12.1790 11.0873
Norway NOK 0.9980 0.9786 1.0254 0.9546
South Africa ZAR 0.5809 0.5614 0.5660 0.5590
South Korea KRW 0.0075 0.0078 0.0076 0.0075
United States USD 8.5815 9.2037 9.0437 8.1886
1:2
New accounting policies 2021
Amendments to IFRS 7, IFRS 9 and IFRS 16
The amendments to IFRS 7, IFRS 9 and IFRS 16 are effective from January
1, 2021 and relates to the interest rate benchmark reform – phase 2 which
provides guidance on how to account for the effects of the reform. The reform
refers to the transition from current interest reference rate to new benchmark
interest rates. The transition implies that contract terms for certain financial
instruments will change and shall be accounted for as an adjustment of vari-
able interest. The Volvo Group closely follows the transition which will take
place at different points in time for different interest rates during the coming
years. Hence, the amendments to IFRS 7, IFRS 9 and IFRS 16 will be applied
when new interest rate benchmarks are incorporated in the underlying con-
tracts. Meanwhile, the Volvo Group performs system- and process updates
to ensure new benchmark interest rates can be managed. During 2021, the
GBP LIBOR has been replaced by SONIA. The Volvo Group had a limited
number of interest derivative contracts linked to GBP LIBOR which have
been cancelled with an insignificant effect in the income statement.
No other new or revised accounting standards or interpretations effective
from January 1, 2021 have significantly affected the Volvo Group’s financial
statements.
On October 1, 2021, the Volvo Group reorganized its bus operation
whereby Nova Bus has been moved from the segment Buses to Group
Functions & Other, hence the financial statements of the segments Buses
and Group Functions & Other have been restated. The reorganization has
not affected the total amounts for Industrial Operations and the Volvo Group.
Restated segment reporting for the full year 2020 is disclosed in note 31.
New accounting policies 2022 and later
A number of new and revised accounting standards and interpretations
have been published and is effective from 2022 and later. Among these
are IFRS 17 Insurance Contracts which will replace IFRS 4, the current
standard for insurance contracts. The new and revised accounting stand-
ards or interpretations are not expected to have a material impact on the
Volvo Group’s financial statements.
78
Notes to the financial statements
The preparation of the Volvo Group’s financial statements requires the use
of estimates and assumptions that may affect the recognized amounts of
assets and liabilities at the date of the financial statements. In addition,
the recognized amounts of net sales and expenses during the periods pre-
sented are affected. In preparing the financial statements, management
has made its best judgments of certain amounts included in the financial
statements, materiality taken into account. Actual results may differ from
previously made estimates. In accordance with IAS 1, the company is
required to disclose the assumptions and other major sources of estima-
tion uncertainties that, if actual results differ, may have a material impact
on the financial statements.
SOURCES OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
The sources of estimation uncertainty and critical judgments identified
by the Volvo Group and which are considered to fulfill these criteria are
presented in connection to the items considered to be affected. Table
2:1
discloses where to find these descriptions.
Source of estimation
uncertainty and critical
judgments
Note
Sales with residual value commit-
ments and variable sales price
, Revenue
Deferred taxes and uncertainty over
income tax treatments and claims
, Income taxes
Impairment of goodwill and other
intangible assets
, Intangible assets
Impairment of tangible assets
and residual value risks
, Tangible assets
Measurement of lease liabilities
and right-of-use assets
, Leasing
Allowance for expected
credit losses
,
,
Customer-financing
receivables
Receivables
Write down of inventories , Inventories
Assumptions when calculating
post-employment benefits
, Provisions for
post- employment
benefits
Provisions for product warranty,
other provisions and provisions for
legal proceedings
, Other provisions
2:1
2 Key sources of estimation uncertainty and critical judgments
79
Notes to the financial statements
ACCOUNTING POLICY
Acquisitions
Companies are consolidated as of the date of acquisition, when the Volvo
Group obtains control over the operations. Business combinations are
recognized in accordance with the acquisition method. The identifiable
assets acquired, and the liabilities assumed are measured at their fair values.
Any surplus amount from the purchase price paid, possible non-control-
ling interest, and fair value of previously held equity interests at the acqui-
sition date compared to the acquired net assets is recognized as goodwill.
All acquisition-related costs are expensed. Any deficit amount, known as
gain from a bargain purchase, is recognized in the income statement.
For acquisitions done in stages, a business combination occurs on the
date when control is achieved. As part of obtaining control, the acquired
identifiable net assets are measured at their fair values and goodwill is
recognized. The previously held equity interest is remeasured to its fair
value and any resulting gain or loss compared to the carrying amount is
recognized in the income statement. For each business combination, the
Volvo Group decides whether the non-controlling interest shall be valued
at fair value or at the non-controlling interest’s proportionate share of the
net assets of the acquiree. Transactions between the Volvo Group and
owners with non-controlling interest are recognized in equity if control of
the subsidiary is retained.
Divestments
Subsidiaries that have been divested are included in the consolidated
financial statements until the date of the divestment, when the Volvo
Group loses control over the subsidiary. A decrease in ownership interest
of a subsidiary without losing control is accounted for as an equity trans-
action. Divestment of operations with the main purpose to dispose
intang ible and tangible assets is treated as disposal of intangible and tan-
gible assets.
Assets and liabilities held for sale and discontinued operations
In a global group like the Volvo Group, activities are continuously ongoing
regarding the sale of assets or groups of assets at minor values. When the
criteria for being classified as an assets and liabilities held for sale are ful-
filled and the asset or group of assets are of significant value, the asset or
group of assets, both current and non-current, and the related liabilities are
recognized on separate lines in the balance sheet. The asset or group of
assets are measured at the lower of its’ carrying amount and fair value after
deductions for selling expenses. The balance sheet items and the potential
income statement effect resulting from the revaluation to fair value less
selling expenses are, if related to Industrial Operations, normally recog-
nized in the segment Group functions & Other, otherwise in the Financial
Services segment. When the sale is completed the result is distributed to
the relevant segments.
Read more in Note 5 Investments in joint ventures, associated companies and
other shares and participations.
Read more in Note 11 Non-controlling interest.
Read more in Note 13 Investments in shares and participations in the parent com-
pany about AB Volvo’s holding of shares in subsidiaries as of December 31, 2021.
Acquisitions during the period
In 2021, the Volvo Group completed acquisitions which mainly pertains to
Designwerk Technologies AG and SOPROVI Algérie SPA. In April, the
Volvo Group acquired 60 percent of the shares in Designwerk Technolo-
gies AG, a Swiss company that develops and sells electromobility prod-
ucts and engineering services within electromobility eco- systems. In
August, the Volvo Group acquired the remaining 70 percent of shares in
the former joint venture SOPROVI Algérie SPA (acquisitions done in
stages), hence the company is now a subsidiary within the Volvo Group.
During 2020, the Volvo Group has not made any acquisitions which solely
or jointly have had a significant impact on the financial statements. The
impact on the Volvo Group’s balance sheet and cash flow statement in
connection with acquisitions of operations are specified in table
3:1
.
Acquisitions
2021 2020
Other non-current assets 337 –
Cash and cash equivalents 2 –
Other current assets 274 –
Non-current liabilities –523 –
Current liabilities –245 –
Acquired net assets –155 –
Purchase price paid 474 –
Non-controlling interest 26 –
Goodwill 654 –
Effect on Volvo Group cash and
cash equivalents –472 –
3:1
Divestments during the period
In 2021, the Volvo Group completed divestments which mainly pertains
to the divestment of UD Trucks to Isuzu Motors. The divestment was
completed on April 1 and resulted in a net gain of SEK 1.7 billion, which
had a positive effect on the Volvo Group’s operating income. In respect of
Isuzu Motors’ acquisition of UD Trucks, an additional amount up to JPY 15
billion (approx. SEK 1.2 billion) is to be paid to Volvo Group as an earnout
subject to the performance of UD Trucks during the years 20212023.
The earnout will be revaluated continuously throughout the period speci-
fied. At the time of the sale, the fair value of the additional amount was
estimated to JPY 6.3 billion (approx. SEK 0.5 billion). It is recognized as a
financial asset at fair value through profit or loss and has impacted the net
gain recognized in the period by the same amount.
In 2020, the Volvo Group completed divestments which resulted in a
net gain affecting operating income. The divestments included the sale of
majority of Volvo Buses’ business in India to the Volvo Group’s joint ven-
ture VECV and sale of Volvo Construction Equipment’s Blaw-Knox paver
range in North America.
The impact on the Volvo Group’s balance sheet, income statement and
cash flow statement in connection with divestments of shares and opera-
tions are specified in table
3:2
.
3 Acquisitions and divestments of operations
80
Notes to the financial statements
Divestments 2021 2020
Goodwill –890 –20
Other intangible assets –2,650 –
Tangible assets –11,482 –144
Other shares and participations –854 –
Deferred tax assets –2,306 –
Inventories –4,763 –293
Accounts receivable –5,523 –2
Other receivables –3,364 –2
Cash and cash equivalents –2,344 –3
Provisions 1,883 36
Loans 20,614 –
Other non-current liabilities 1,631 13
Trade payables 4,200 4
Other current liabilities 2,599 –
Divested net assets –3,250 –411
Net gain/loss on divestments affecting
operating income 1,643 25
Cash flow and net financial position
2021 2020
Cash and cash equivalents, received 4,502 435
Loan repayment 20,614 –
Cash and cash equivalents, divested
operations –2,344 –3
Effect on Volvo Group cash and
cash equivalents 22,773 432
Effect on Volvo Group
net financial position 19,064 407
Details on divestment of UD Trucks 2021
Consideration received or receivable:
Cash 4,506
Fair value of contingent consideration 482
Total disposal consideration 4,988
Carrying amount of divested net assets –3,246
Transaction costs –151
Translation differences in foreign currency
reversed to income 62
Net gain 1,653
3:2
Assets and liabilities held for sale
As of December 31, 2021, the Volvo Group recognized assets and liabili-
ties held for sale amounting to SEK 0 M (34,296) and SEK 0 M (11,286)
respectively. For the comparative year 2020, the amounts related to the
divestment of UD Trucks business globally from the Volvo Group to Isuzu
Motors, which was completed on April 1, 2021. Assets and liabilities held
for sale in Industrial Operations have been reclassified within the segment
Group Functions & Other. Assets and liabilities held for sale in Financial
Services have been reclassified within the segment Financial Services.
Assets and liabilities held for sale
Dec 31,
2021
Dec 31,
2020
Intangible assets – 3,592
Tangible assets – 11,782
Financial assets – 6,446
Inventories – 5,755
Accounts receivable – 4,196
Other current receivables – 2,524
BS
Total assets – 34,296
Provisions – 1,910
Other non-current liabilities – 1,642
Trade payables – 4,796
Other current liabilities – 2,938
BS
Total liabilities – 11,286
3:3
Acquisitions and divestments after the end of the period
The Volvo Group has not made any acquisitions or divestments after the end
of the period that have had a significant impact on the financial statements.
81
Notes to the financial statements
The Volvo Group’s global operations expose the Group to financial risks in the
form of interest rate risks, currency risks, credit risks, liquidity risks and other
price risks. The board of AB Volvo has adopted a financial risk policy that regu-
lates how these risks should be controlled and governed and defines roles and
responsibilities within the Volvo Group. The financial risk policy also estab-
lishes principles for how financial activities shall be carried out, sets mandates
and steering principles for the management of financial risks as well as defines
the financial instruments to be used for mitigating these risks. Key mandates
and steering principles are described in the respective risk section.
The board and audit committee of AB Volvo are informed regularly during
the year about the development of the Volvo Group’s financial risks and other
matters covered within the financial risk policy. The financial risk policy is
reviewed on an annual basis. The Volvo Group manages financial risk as an
integrated element of the business operations where parts of the responsibil-
ity for the finance operation and financial risk management are centralized to
1 The sensitivity analysis on interest rate risk is based on simplified assumptions. It is not
unlikely for market interest rates to change by one percentage point on an annual basis.
However, in reality, these rates often rise or decline at different points in time. The sen-
sitivity analysis also assumes a parallel deferment of the return curve, and that the
interest on assets and liabilities will be equally impacted by changes in market interest
rates. Accordingly, the impact of real interest rate changes may differ from the analysis
presented in table
4:1
.
Read more in Note 20 Provisions for post-employment benefits regarding
sensitivity analysis on the defined benefit obligations when changes in the
applied assumptions for discount rate and inflations are made.
INTEREST RATE RISKS
CASH FLOW RISKS
PRICE RISKS
FINANCIAL CURRENCY
EXPOSURE
CURRENCY EXPOSURE
OF EQUITY
COMMERCIAL CURRENCY
EXPOSURE
COMMERCIAL
CREDIT RISK
COMMODITY RISKS
FINANCIAL CREDIT RISK
FINANCIAL
COUNTERPARTY RISK
INTEREST RATE RISKS CURRENCY RISKS CREDIT RISKS
FINANCIAL RISKS
OTHER PRICE RISKSLIQUIDITY RISKS
INTEREST RATE RISKS
A
Interest rate risk refers to the risk that changed interest rates will affect the
Volvo Group’s net income and cash flow (cash flow risk) or the fair value of
financial assets and liabilities (price risk). During 2021 the first step in the
interest rate benchmark reform (IBOR) has taken place where GBP LIBOR
has been replaced by SONIA. The Volvo Group had a limited number of
interest derivative contracts linked to GBP LIBOR which have been can-
celled with an insignificant effect in the income statement.
Read more in Note 1 Accounting principles about the interest rate benchmark
reform.
POLICY
Matching the interest fixing terms of financial assets and liabilities reduces
the exposure. Interest rate swaps are used to change/influence the inter-
est fixing term for the Volvo Group’s financial assets and liabilities. Currency
interest rate swaps enable borrowing in foreign currencies from different
markets without introducing currency risk. The Volvo Group may from
time to time use other types of forward contracts (futures) and forward
rate agreements (FRAs). Most of these contracts are used to hedge
interest rate levels for current borrowing or investments.
Cash flow risks
The effect of changed interest rate levels on future currency and interest
flows primarily pertains to Financial Services and Industrial Operations’
net financial items. The interest rate risk in Financial Services is managed
with the objective to achieve a match of interest rate fixings on borrowing
and lending, in order to eliminate interest rate risk. The matching degree is
measured excluding equity, which amounted to 8% in Financial Services.
At year-end 2021, the degree of such matching ratio was 99% (98) in
Financial Services which is in accordance with the Group policy.
In addition to the financial assets in Financial Services, the Volvo
Group’s interest-bearing assets consisted primarily of cash and cash
equivalents. On December 31, 2021 the average interest on Industrial
Operations financial assets was 0.4% (0.2). The Industrial Operations’
results and profitability are closely aligned to the business cycle. There-
fore, in order to minimize the interest rate risk, outstanding loans had
interest terms corresponding to an interest rate fixing of between one
to three months. The average interest on Industrial Operations financial
liabilities at year end amounted to 3.6% (2.7), including the Volvo Group’s
credit costs. The increase primarily relates to the fact that while the vol-
ume of Industrial operations financial liabilities has decreased during the
year, the second tranche of the relatively expensive hybrid bond issued in
2014 remains and has a higher impact on the average rate.
Table
4:1
shows the impact on income after financial items in Industrial
Operations’ net financial position, excluding lease liabilities and post-
employment benefits, if interest rates were to increase by 1 percentage
point, assuming an average interest rate fixed term of three months on the
liability side.
1
The impact on equity is earnings after tax.
4 Goals and policies in financial risk management
Volvo Group Treasury, the internal bank of the Volvo Group. Their responsi-
bilities include financing of Industrial Operations as well as financing of the
credit portfolio in Financial Services. The Volvo Group balance sheet is pre-
sented per segment where Volvo Group Treasury is part of the Industrial
Operations and the internal lending from Industrial Operations to Financial
Services is presented in the balance sheet as internal funding.
In 2021 volatility in the financial markets have returned to more normal-
ized levels compared to last year and under these conditions the Volvo Group
has performed financial activities and managed risk in accordance with the
financial risk policy. Information on the remaining impact from the covid-19
pandemic related to financial risks is included in the respective notes.
Read more in Note 30 Financial instruments about accounting policies for
financial instruments.
Read more in section Financial Management, page 54 and section Risks and
uncertainties, page 70 about financial risk management.
USD
20,3
BRL
5,0
82
Notes to the financial statements
The Volvo Group’s net assets in
different currencies (SEK bn) =
Read more in section Currency exposure
of equity in this note.
CURRENCY RISKS
B
The balance sheet may be affected by changes in different exchange
rates. Currency risks in the Volvo Group’s operations are related to
changes in the value of contracted and expected future payment flows
(commercial currency exposure), changes in the value of loans and invest-
ments (financial currency exposure) and changes in the value of assets
and liabilities in foreign subsidiaries (currency exposure of equity).
CURRENCY RISKS
Risk net financial
position Dec 31,
2021
Net financial
position excl.
post-employment
benefits and lease
liabilities
Impact on income
after financial items
if interest rate rises 1%
A
(Interest rate risks)
Impact on net financial
position if SEK appreciates
against other currencies 10%
B
(Currency risks)
SEK M
SEK 26,129 308 –
EUR 13,535 119 –1,353
USD 9,657 87 –966
CNY 6,011 62 –601
GBP 5,945 52 –594
Other 4,950 52 –495
Total
C
66,227 679 –4,010
Read more in section Financial Position about the Industrial Operations Net financial position.
4:1
CNY
15,2
INR 2,0
KRW 3,3
OTHER 15,4
SEK
91,7
EUR
22,1
GBP 4,8
POLICY
The aim of the Volvo Group’s currency risk management is to secure cash
flow from firm flows through currency hedges pursuant to the established
Financial risk policy, and to minimize the exposure of financial items in the
Volvo Group’s balance sheet. Below is a presentation on how this work
is conducted for commercial and financial currency exposure, and for
currency exposure of equity.
Price risks
C
Exposure to price risk as a result of changed interest rate refers to financial
assets and liabilities with a longer interest rate fixing term (fixed interest).
All outstanding loans in Industrial Operations are signed with short inter-
est rate fixings, therefore the price risk is immaterial.
For Financial Services, financial assets and liabilities are matched in
order to limit risk. Volvo Group Treasury is allowed to take limited active
currency and interest rate positions in relation to the Financial Services
portfolio. This responsibility is subject to, and shall be within, applicable
market risk limitations. There are several measurements which can be
used to define market risk. Volvo Group Treasury is using Value-at-Risk
(VaR) as the main tool for mandating market risk (including interest rate
risk, currency risk and liquidity risk). Volvo Group Treasury measures VaR
over a one day holding period, using a 97.7% confidence level and his-
torical volatility and correlation. The total VaR mandate for Volvo Group
Treasury is SEK 150 M, and the usage is measured daily. As of December
31, 2021, the VaR usage was SEK 11.8 M (13.1).
83
Notes to the financial statements
Sensitivity analysis
1
Risk currency
exposure
2021
Transaction
exposure from
operating
net flows
Impact on operating
income if currency rate
appreciates against all
other currencies by 10%
B
(Currency risks)SEK bn
SEK –43 –4.3
KRW –7 –0.7
EUR 5 0.5
GBP 9 0.9
USD 10 1.0
The deficit in transaction exposure in SEK is mainly generated from flows
in USD, GBP, EUR, NOK and CAD against SEK.
4:2
Commercial currency exposure
Transaction exposure from commercial flows
The Volvo Group conducts manufacturing in 19 countries around the
globe and more than 95% of net sales are generated in countries other
than Sweden. Transaction exposure from commercial flows in foreign
currency is generated from internal purchases and sales between manu-
facturing entities and market companies and external sales and purchases
in foreign currency around the globe. As the predominant parts of the
operations in the Volvo Group are situated outside Sweden, the fluctu-
ations in currency rates affecting the transaction flows in foreign currency
are in many cases not against SEK. Industrial Operations’ transaction
exposure from commercial flows for key currencies is presented in graph
4:4
. The graph represents the transaction exposure from commercial
operating cash flows in foreign currency, expressed as net surpluses or
deficits in key currencies. Commercial net flows increased compared to
previous year as an effect of improved demand for the Volvo Group’s prod-
ucts and services. The deficit in SEK and KRW is mainly an effect of man-
ufacturing costs in the plants in Sweden and South Korea, but limited
external revenues in those currencies. The surplus in EUR on the other
hand, is the net of significant volumes of sales and purchases made
between many entities around the globe in EUR. The surplus in USD is
mainly generated from external sales to entities in the USA and emerging
markets around the globe. The surplus in GBP is generated from external
sales to Great Britian.
The hedging of the Volvo Group’s commercial currency exposure is
executed centrally. The Volvo Group’s consolidated currency portfolio
exposure is the value of forecasted flows in foreign currency. The Volvo
Group may hedge the part of the forecasted portfolio that is considered
highly probable to occur, however during 2021 only future cash flows for
specific orders, decided on case by case basis, has been hedged. The
Volvo Group uses forward contracts and currency options to hedge the
future payment flows in foreign currency. The hedged amount of firm flows
for all periods fall within the framework of the Volvo Group’s financial risk
policy. The Volvo group has no outstanding forward and option contracts
for hedging commercial risks as of December 31, 2021.
Translation exposure from the consolidation of operating income in
foreign subsidiaries
In conjunction with the translation of operating income in foreign subsidi-
aries, the Volvo Group’s income is impacted if currency rates change. The
Volvo Group does not hedge this risk. Graph
4:6
shows the translation
effect in key currencies when consolidating operating income for 2021 in
foreign subsidiaries in the Volvo Group.
Read more in section Currency exposure of equity.
Sensitivity analysis for transaction exposure
1
The table
4:2
illustrates the impact on operating income if key currencies
for Volvo Group appreciate by 10% against all other currencies. Hedge
accounting is not applied on derivatives hedging cash flows in foreign
currency. As a consequence, the impact on equity equals the impact on
operating income before tax.
Volvo Group currency review
The table and graphs
4:3
to
4:7
show the currency impact on operating
income and illustrate the transaction exposure and currency impact on
operating income from commercial net flows in foreign currency , transla-
tion effect when consolidating operating income in foreign subsidiaries
and currency impact on sales in key currencies.
Read more about Volvo Group transaction exposure in section Commercial
currency exposure above.
Financial currency exposure
Loans and investments in the Volvo Group’s subsidiaries are performed
mainly in local currencies through Volvo Group Treasury, which minimizes
individual companies’ financial currency exposure. Volvo Group Treasury
uses various derivatives to facilitate lending and borrowing in different
currencies without increasing the risk for the Volvo Group. The net
financial position of the Volvo Group is affected by currency fluctuations
since financial assets and liabilities are distributed among the Volvo Group
companies that conduct their operations using different currencies.
Table
4:1
discloses the impact on income after financial items on Indus-
trial Operations net financial position, excluding pensions and similar net
obligations, if SEK were to strengthen by 10%.
Currency exposure of equity
The carrying amount of assets and liabilities in foreign subsidiaries are
affected by current exchange rates in conjunction with the translation of
assets and liabilities to SEK. To minimize currency exposure of equity, the
size of equity in foreign subsidiaries is continuously optimized with respect
to commercial and legal conditions and in connection with this activity,
payments of major internal dividends in foreign currency can be subject for
hedging. Currency hedging of equity may occur in cases where a foreign
subsidiary is considered overcapitalized. Net assets in foreign subsidiaries,
associated companies and joint ventures amounted at year end 2021 to
SEK 88 billion (84). The need to undertake currency hedging relating to
investments in associated companies, joint ventures and other companies
is assessed on a case-by-case basis.
On the map on the previous pages the Volvo Group’s net assets in
different currencies (SEK bn) are displayed.
Read more in Note 30 Financial instruments about Volvo Group’s policy choice
on hedge accounting.
1 The sensitivity analysis on currency rate risks is based on simplified assumptions.
It is not unlikely for a currency to appreciate by 10% in relation to other currencies.
In reality however, all currencies usually do not change in the same direction at
any given time, so the actual effect of exchange rate changes may differ from the
sensitivity analysis. Please refer to tables
4:1
4:2
84
Notes to the financial statements
The Volvo Group’s currency review
When the Volvo Group communicates the currency impact on operating income, the following factors are included:
Currency impact on operating income, Volvo Group, SEK billion 2021 2020 Change
Net flows in foreign currency –0.0
Realized and unrealized gains and losses on hedging contracts –0.0 –0.0 0.0
Unrealized gains and losses on receivables and liabilities in foreign currency –0.2 0.2 –0.4
Translation effect on operating income in foreign subsidiaries –2.1
Total currency impact on operating income, Volvo Group –2.5
Currency impact on net flows in foreign currency is detailed in graph
4:5
and translation effect on operating income in foreign subsidiaries
is detailed in graph
4:6
in key currencies.
4:3
Transaction exposure from commercial net flows in 2021 and 2020
–60
–45
–30
–15
0
15
30
SEK bn
Currency flow 2020 Currency flow 2021
SEK
KRW
AUD
CADNOKEUR
GBP
ZARUSD
Other
10 9 5 5 4 6 5 –7 –43 6
8 6 2 4 3 4 3 –6 –32 8
The graph above represents the transaction exposure from commercial
operating net cash flows in foreign currency, expressed as net surpluses
or deficits in key currencies.
Read more in section Commercial currency exposure.
4:4
Translation effect on operating income in 2021 versus 2020
Changes in currency rates compared to 2020 (Total SEK –2,121 M).
SEK M
–1,000
200
0
–200
–400
–600
–800
USD
–900
BRL
–548
EUR
–232
RUB
–195
CNY
–134
TRY
–87
KRW
–47
JPY
–27
PLN
49
Other
–1
Translation effect when consolidating operating income in foreign
subsidiaries for Volvo Group is presented in the graph above.
4:6
Currency impact on operating income from net flows in foreign
currency 2021 versus 2020
Changes in currency rates compared to 2020 (Total SEK –0.0 bn).
SEK bn
–0.6
–0.5
–0.4
–0.3
–0.2
–0.1
0
0.1
0.3
0.2
USD
–0.6
KRW
0.3
ZAR
0.2
Other
0.1
NOK
0.1
CNY
–0.1
Currency effect on operating income from net flows in foreign currency
in Volvo Group is presented in the graph above.
4:5
Currency impact on net sales in 2021 versus 2020
Changes in currency rates compared to 2020 (Total SEK –16,063 M).
–5,000
EUR
–3,083
BRL
–2,413
Other
–1,677
RUB
–935
CNY
–670
JPY
–604
KRW
–258
ZAR
227
USD
–6,649
SEK M
–6,000
–7,000
–4,000
–3,000
–2,000
–1,000
0
1,000
Currency effect on net sales from inflows in foreign currency and
translation effect when consolidating net sales in foreign subsidiaries
for Volvo Group is presented in the graph above.
4:7
85
Notes to the financial statements
CREDIT RISKS
Credit risk is defined as the risk that the Volvo Group does not receive pay-
ment for recognized accounts receivables and customer-financing receiv-
ables (commercial credit risk), that the Volvo Group’s investments are
unrealizable (financial credit risk) and that potential profit is not realized
due to the counterparty not fulfilling its part of the contract when using
derivative instruments (financial counterparty risk).
POLICY
The objective of the Volvo Group’s credit risk management is to define,
measure and monitor the credit exposure in order to minimize the risk of
losses deriving from credit to customers and suppliers, financial credit risk,
counterparty risk and customer finance activities within Financial Services.
Commercial credit risk
The Volvo Group’s credit granting is steered by group policies and
customer-classification rules. The credit portfolio should contain a distri-
bution among different customer categories and industries. The credit
risk is managed through active credit monitoring, follow-up routines and,
where applicable, product repossession. Moreover, regular monitoring
ensures that necessary allowances are made for expected credit losses on
financial assets. Risk management practices and the impact on estimation
uncertainty and critical judgement due to the covid-19 pandemic for Finan-
cial Services are presented in note 15 Customer-financing receivables and
for Industrial Operations in note 16 Receivables. Moreover, note 15 includes
information on gross exposure for customer-financing receivables by past
due status and in note 16 accounts receivables, a gross exposure for
accounts receivables by past due status is presented in relation to allow-
ance for expected credit losses.
The customer-financing receivables in the Volvo Group amounted to
net SEK 152 billion (129) on December 31, 2021. The credit risk of this
portfolio is distributed over a large number of retail customers and dealers.
Collateral is provided in the form of the financed products. In the credit
granting the Volvo Group strives for a balance between risk exposure and
expected return. Syndication of customer-financing receivables is infre-
quently made in order to reduce concentration risk.
The Volvo Group’s accounts receivables as of December 31, 2021
amounted to net SEK 41 billion (36).
Read more in Note 15 Customer-financing receivables about Volvo Group’s
concentration of credit risk in Financial Services.
Read more in Note 16 Receivables.
Financial credit risk
The Volvo Group’s financial assets are to a large extent managed by Volvo
Group Treasury. All investments must meet the requirements of high
liquid ity and low credit risk. According to the Volvo Group’s financial risk
policy, this includes using counterparties for investments and derivative
transactions with a credit rating better or equivalent to A– from one of the
well-established credit rating institutions or similar.
Cash and cash equivalents including marketable securities as of December
31, 2021 amounted to SEK 62 billion (85) and consists primarily of bank
account positions.
Read more in Note 18 Cash and cash equivalents.
Financial counterparty risk
The use of derivatives involves a counterparty risk, in that a potential loss
may not be possible to offset (in full or in part) against a potential gain if the
counterparty fails to fulfill its part of the contract. The Volvo Group is
actively working with limits per counterpart in order to reduce the risk for
high net amounts towards individual counterparts. To reduce the expos ure
further the Volvo Group enters into master netting agreements, so called
ISDA agreements, with all counterparts eligible for derivative transactions.
The netting agreements provide the possibility for assets and lia bilities to
be offset under certain circumstances, such as in the case of the counter-
part’s insolvency. A Credit Support Annex (CSA) often accompanies the
ISDA agreement. The CSA stipulates the terms and conditions under
which the two parties are required to make cash transfers to each other in
order to further reduce the exposure from the net open positions. The net-
ting agreements have no effect on the financial performance or the finan-
cial position of the Volvo Group, since derivative transactions are accounted
for on a gross basis. Table
4 :8
shows the effect of netting agreements and
cash transfers on the Volvo Group’s gross exposure from outstanding
interest and currency risk derivatives as of December 31, 2021.
Read more in Note 30 Financial instruments about the Volvo Group’s gross
exposure from positive derivatives per type of instrument.
CREDIT RISKS
The impact from netting agreements and cash transfers on the Volvo Group’s gross exposure from derivatives as of Dec 31, 2021
SEK M Gross amount
Netting
agreements Cash transfers Net position Change
Interest and currency risk derivatives reported as assets 2,930 –1,102 –1,240 588 80%
Interest and currency risk derivatives reported as liabilities 2,379 –1,102 –1,128 148 94%
4:8
86
Notes to the financial statements
LIQUIDITY RISKS
Liquidity risk is defined as the risk that the Volvo Group would be unable
to finance or refinance its assets or fulfill its payment obligations.
POLICY
The Volvo Group ensures sound financial preparedness by always keeping
a certain percentage of its sales in liquid assets, mainly as bank account
positions in banks rated at least A- from one of the well-established credit
rating institutions or similar. A sound balance between current and non-
current debt maturities, as well as non-current committed credit facilities,
is intended to secure liquidity preparedness, and thus the Volvo Group’s
payment capability.
The Volvo Group’s cash and cash equivalents amounted to SEK 62 billion
(85) on December 31, 2021. In addition to this, granted but unutilized
credit facilities amounted to SEK 42 billion (42). Graph
4:9
discloses
expected future cash flows related to financial liabilities. Capital flow refers
to expected payments of loans, lease liabilities and derivatives, see note
22 Liabilities. Expected interest flow refers to the future interest payments
on loans, lease liabilities and derivatives based on interest rates antici-
pated by the market. The interest flow is recognized within cash flow from
operating activities. The maturity structure of the unutilized credit facilities
is disclosed in note 22, in table
22:3
. The predominant part of expected
future cash flows that will occur in 2023 and 2024 is an effect of the
Volvo Group’s normal business cycle, with shorter duration in the portfolio
within Financial Services compared to Industrial Operations.
Financial Services measure the degree to which the duration of borrow-
ing and lending matches. The calculation of the matching degree excludes
equity, which amounted to 8% in Financial Services. At year-end 2021,
the degree of such matching was 99% (98) for the segment Financial
Services, which was in line with the Volvo Group’s policy. Volvo Group
Treasury has, for practical as well as business reasons, the mandate to
mismatch their portfolio for Financial Services between a matching ratio
of 80120%. At year-end 2021, the matching ratio was 94% (99). Any
gains or losses from the mismatch impact the segment Group functions &
other within industrial Operations.
POLICY
Changes in commodity prices are included in the product cost calculation.
Increased commodity prices are therefore reflected in the sales price of
the Volvo Group’s final products. Purchasing agreements with commodity
suppliers may also be long-term in nature or structured in a way to
de crease the volatility in commodity prices.
OTHER PRICE RISKS
Commodity risks
Commodity risk refers to the risk that changed commodity prices will
affect the consolidated earnings within the Volvo Group. Procurement of
commodities such as steel, precious metals and electricity are made in the
Volvo Group on a regular basis where prices are set in the global markets.
A hybrid bond amounting to EUR 1.5 billion was issued in the Volvo
Group in 2014 in order to further strengthen the Volvo Group’s financial
position and prolong the maturity structure of the debt portfolio. The first
tranche of this bond (EUR 0.9 billion) was repaid in 2020. The remaining
tranche (EUR 0.6 billion) has a first call in 2023 and is classified as a loan
with an original duration of 61.6 years, subordinated to all other financial
liabilities currently outstanding.
Read more in Note 14 Leasing about the maturity for non-current lease liabilities
in table
14:4
.
Future cash flow including lease liabilities and derivatives
related to non-current and current financial liabilities
1, 2
–60
0
–40
–50
–30
–20
–10
SEK bn
2028 or later
Capital flow Interest flow
2023 2024 2025
2022
2026 2027
–49.4 –49.5 –25.9 –12.8 –7.7 –0.4
–3.5 –2.6 –1.2 –0.6 –0.2 –0.1
–7.9
–0.2
4:9
1 In addition to derivatives included in graph
4:9
there are also derivatives in the
Volvo Group related to financial liabilities with a positive fair value recognized as
assets, which are expected to give a future capital flow of SEK 2.0 billion (5.5)
and a future interest flow of SEK
–0.0 billion (–0.1).
2 The interest payments related to the hybrid bond are included with an amount
of SEK 0.6 billion (0.9), which pertains to the period through the first call date
for the remaining tranche, in 2023. The interest payments that follow in the event
that the call option is not exercised have as yet not been established.
LIQUIDITY RISKS
OTHER PRICE RISKS
87
Notes to the financial statements
ACCOUNTING POLICY
Joint ventures
Joint ventures are companies in which the Volvo Group has joint control
together with one or more external parties. Investments in joint ventures
are recognized by applying equity method accounting. The Volvo Group's
most significant holdings in joint ventures are VE Commercial Vehicles,
Ltd., (VECV) and cellcentric GmbH & Co. KG (cellcentric). Both invest-
ments are joint ventures since common agreement is needed for impor-
tant matters related to the governance in the joint ventures. The invest-
ment in VECV aims at strengthening the Volvo Group’s position in the
market in India. As of March 1, 2021, the Volvo Group acquired 50 percent
of the shares in the existing Daimler Truck Fuel Cell GmbH & Co. KG and
formed a joint venture with Daimler Truck AG. The parties agreed to
rename the company to cellcentric GmbH & Co. KG (cellcentric). The joint
venture will develop, produce, and commercialize fuel-cell systems for
use in heavy-duty trucks as the primary focus. Both VECV and cellcentric
are included in the Trucks segment.
Associated companies
Associated companies are companies in which the Volvo Group has a sig-
nificant influence. A strong indication of such influence is when the
Group’s holding is more than 20% but less than 50% of the voting rights.
Investments in associated companies are recognized by applying equity
method accounting. The ownership in the Chinese automotive manufac-
turer Dongfeng Commercial Vehicles Co., Ltd (DFCV) is classified as an
associated company and is included in the Trucks segment.
Equity method
The Volvo Group’s share of the companies’ income/loss recognized
according to the equity method is included in the Volvo Group’s income
statement as income/loss from investments in joint ventures and associ-
ated companies. Where appropriate, the income has been reduced by
depreciation of surplus values and the effect of applying different account-
ing policies has been considered. Income from companies recognized in
accordance with the equity method is included in operating income since
the Volvo Group’s investments are business related in nature. For practical
reasons, some of the associated companies are included in the consoli-
dated financial statements with a certain time lag, normally up to one quarter.
Dividends from joint ventures and associated companies are not included
in the consolidated income. The carrying amount of investments in joint
ventures and associated companies are affected by the Volvo Group’s
share of the companies' net income, less depreciation of surplus values
and dividends received. Investments in joint ventures and associated com-
panies are also affected by the Volvo Group’s share of the companies' other
comprehensive income and by the translation difference from translating
the companies' equity in the consolidation of the Volvo Group.
When applying the equity method, losses recognized by joint ventures
or associates could indicate impairment and additional impairment losses
might be recognized. For instance, a significant or prolonged decline in
the fair value of the shares is an indication of impairment. However, invest-
ments accounted for in accordance with the equity method cannot
amount to a negative carrying value and losses are therefore not adjusted
for if the holding is of a negative amount. Additional losses are provided
for to the extent that the Volvo Group has incurred legal or constructive
obligations to make payments on behalf of the joint venture or the associ-
ated company.
Other shares and participations
Other shares and participations recognizes holding of shares in which the
Volvo Group does not hold a significant influence. This generally means
the Volvo Group’s holding of shares corresponds to less than 20% of the
voting rights. Listed shares are recognized at fair value through other
comprehensive income since the shares are not held for trading. For
unlisted shares and participations, a fair value cannot be reasonably
measured, hence these are measured at amortized cost. Earned or paid
interest attributable to these assets is recognized in the income state-
ment as part of net financial items, in accordance with the effective inter-
est method. Dividends received attributable to these assets are recog-
nized as income from other investments within operating income.
Read more in Note 30 Financial instruments, regarding classification and
valuation of financial instruments.
5
Investments in joint ventures, associated companies and other shares and participations
88
Notes to the financial statements
Summarized income statements 2021 2020
VECV
cellcentric
(10 months)
Other joint
ventures Total VECV
Other joint
ventures Total
Net sales 13,912 88 616 14,615 8,847 304 9,151
Operating income
1
248 –1,053 7 –798 –219 –40 –259
Interest income and similar credits 57 – 0 57 53 1 54
Interest expense and similar charges –51 – 0 –51 –43 0 –43
Other financial income and expenses 0 –4 –2 –6 –1 – –1
Income taxes –85 – –2 –87 83 8 91
Income for the period
2
169 –1,057 4 –884 –128 –31 –159
Other comprehensive income
3
–13 3 1 –9 –1 –5 –6
Total comprehensive income 156 –1,054 5 –893 –129 –36 –165
5:2
1 Depreciation and amortization of SEK 678 M (500) are included within operating income.
2 Income for the period in joint ventures includes depreciation of surplus values.
3 Including the Volvo Group’s share of other comprehensive income related to joint ventures. Translation differences from translating joint ventures’ equity in the Volvo
Group are excluded.
Summarized balance sheets Dec 31, 2021 Dec 31, 2020
VECV cellcentric
Other joint
ventures Total VECV
Other joint
ventures Total
Non-current assets 5,522 13,057 491 19,070 5,368 90 5,457
Marketable securities, cash and cash
equivalents 1,629 380 50 2,059 1,813 63 1,876
Other current assets 6,007 390 200 6,597 4,150 216 4,366
Total assets 13,158 13,827 741 27,726 11,331 368 11,699
Equity
1
5,741 13,312 320 19,374 5,173 286 5,459
Non-current financial liabilities 527 – – 529 667 – 667
Other non-current liabilities 209 159 302 669 240 2 242
Current financial liabilities 4,666 – 20 4,686 3,426 21 3,447
Other current liabilities 2,014 355 100 2,469 1,826 59 1,885
Total equity and liabilities 13,158 13,827 741 27,726 11,331 368 11,699
5:3
1 Including translation differences from translating joint ventures’ equity in the Volvo Group.
Net financial position for the joint ventures (excluding post-employment benefits) amounted to SEK 1,575 M (1,624) as of December 31, 2021. As of
December 31, 2021, the Volvo Group’s share of contingent liabilities in its joint ventures amounted to SEK 106 M (93). Dividends received during 2021
from VECV amounted to SEK 26 M (
–).
Joint ventures
The Volvo Group's investments in joint ventures are listed below.
Investments in joint ventures
Dec 31, 2021
Percentage holding
Dec 31, 2021
Carrying value
Dec 31, 2020
Percentage holding
Dec 31, 2020
Carrying value
VE Commercial Vehicles, Ltd., (VECV) 45.6 2,618 45.6 2,359
cellcentric 50.0 6,678 – –
Other holdings in joint ventures¹ 122 108
Investments in joint ventures 9,418 2,467
5:1
1 Other holdings in joint ventures include investments in World of Volvo AB and Force Réseau. During 2021, the Volvo Group acquired the remaining 70 percent of shares in
the former joint venture SOPROVI Algérie SPA, hence the company is now a subsidiary within the Volvo Group.
Read more in Note 3 Acquisitions and divestments of operations.
The following tables present summarized financial information for the Volvo Group’s joint ventures:
89
Notes to the financial statements
Associated companies
The Volvo Group’s investments in associated companies are listed below.
Investments in associated companies
Dec 31, 2021
Percentage holding
Dec 31, 2021
Carrying value
Dec 31, 2020
Percentage holding
Dec 31, 2020
Carrying value
Dongfeng Commercial Vehicles Co., Ltd (DFCV) 45.0 10,324 45.0 9,574
Other holdings in associated companies
1
944 1,118
Investments in associated companies 11,268 10,693
5:4
1 Other holdings in associated companies include the investment in Blue Chip Jet II HB and WirelessCar Sweden AB.
The following tables present summarized financial information for the Volvo Group’s associated companies:
Summarized income statements
2021 2020
DFCV
Other associated
companies Total DFCV
Other associated
companies Total
Net sales 57,045 3,818 60,863 68,546 4,730 73,276
Operating income 880 141 1,022 3,492 17 3,509
Income for the period
1
731 39 769 3,679 –32 3,647
Other comprehensive income
2
–5 – –5 2 – 2
Total comprehensive income 726 39 764 3,681 –32 3,649
5:5
1 Income for the period in associated companies includes depreciation/amortization of surplus values and internal transactions.
2 Including the Volvo Group’s share of other comprehensive income related to associated companies. Translation differences from translating the associated companies’
equity in the Volvo Group are excluded.
Summarized balance sheets
Dec 31, 2021 Dec 31, 2020
DFCV
Other associated
companies Total DFCV
Other associated
companies Total
Non-current assets 20,647 1,207 21,854 19,590 1,605 21,195
Current assets 43,733 1,432 45,164 55,160 2,181 57,341
Total assets 64,380 2,639 67,019 74,750 3,786 78,537
Equity¹ 21,684 1,229 22,913 20,303 1,770 22,073
Non-current liabilities 5,090 483 5,573 4,544 432 4,976
Current liabilities 37,606 927 38,533 49,904 1,584 51,488
Total equity and liabilities 64,380 2,639 67,019 74,750 3,786 78,537
5:6
1 Including the translation differences from translating associated companies’ equity in the Volvo Group.
Dividend received during 2021 from DFCV amounted to SEK 767 M (1,058).
90
Notes to the financial statements
Other shares and participations
The carrying amount of the Volvo Group’s holding of shares and partici-
pations in other companies as of December 31, 2021, is disclosed in the
table below.
Read more in Note 30 Financial Instruments, regarding classification and
valuation of financial instruments.
Holding of shares in listed
and non-listed companies
Dec 31, 2021
Carrying value
Dec 31, 2020
Carrying value
Holdings in listed companies
1
51 0
Holdings in non-listed companies 488 276
BS
Other shares and
participations 539 276
5:8
1 Changes in fair value is measured through other comprehensive income and
amounts to SEK 48 M (
–8).
Income/loss from investments in joint
ventures and associated companies
2021 2020
Income/loss joint ventures
VECV 80 –55
cellcentric –522 –
Other companies 2 –15
Subtotal –440 –70
Income/loss associated companies
DFCV
1
362 1,776
Other companies 11 45
Subtotal 373 1,821
Revaluation, write-down and gain on
divestment of shares
Other companies 13 –2
Subtotal 13 –2
IS
Income/loss from investments in joint
ventures and associated companies² –54 1,749
5:7
1 Income/loss includes an internal profit elimination of net SEK 37 M (39) and
an adjustment to Volvo Group Accounting policies of SEK 71 M (130).
2 Income/loss from investments in joint ventures include the Volvo Group’s share
of depreciation of surplus values of SEK – M (–) and associated companies
include depreciation of surplus values of SEK 37 M (39)
91
Notes to the financial statements
ACCOUNTING POLICY
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker. The chief oper-
ating decision maker, identified as the Group Executive Board, makes
strategic decisions and is responsible for allocating resources and assess-
ing financial performance of the operating segments.
The Volvo Group comprises ten business areas: Volvo Trucks, Mack
Trucks, Renault Trucks, Volvo Autonomous Solution, Volvo Construction
Equipment, Volvo Buses, Volvo Penta, Arquus, Volvo Financial Services,
and Volvo Energy.
Each business area, except for the truck brands, Arquus, Volvo Autono-
mous Solution and Volvo Energy is seen as a separate segment. Arquus is
part of the segment Group functions & Other. The truck brands, Volvo
Autonomous Solution and Volvo Energy are seen as one segment since the
operations are highly integrated, strategic allocation of resources are done
to the total segment and the independence for each truck brand, Volvo
Autonomous Solution and Volvo Energy are lower compared to other seg-
ments. The business area UD Trucks was sold on April 1, 2021.
On October 1, 2021 the Volvo Group reorganized its bus operation
whereby Nova Bus has been moved from the segment Buses to Group
Functions & Other.
The Volvo Group has shared operations in both the Trucks segment and
in the segment Group functions & Other. Shared operations for produc-
tion, development and logistics for powertrain and parts are included in
the Trucks segment. Volvo Group IT and Volvo Group Real Estate are seen
as business support functions and are part of Group functions & Other.
The cost of these operations is shared between the different business
areas based on utilization according to principles set by the Volvo Group.
6
Segment reporting
2021 Trucks
Con-
struction
Equipment Buses¹
Volvo
Penta
Group functions
& Other
incl. elim.¹
Industrial
Operations
Financial
Services
Elimina-
tions
Volvo
Group
Net sales, external
customers 228,573 91,722 12,884 13,710 12,186 359,075 13,140 – 372,216
Net sales, internal 2,309 309 767 727 –2,125 1,986 297 –2,283 0
IS
Net sales 230,881 92,031 13,652 14,437 10,061 361,062 13,437 –2,283 372,216
Expenses
–203,496 –79,803 –13,577 –12,348 –12,001 –321,225 –10,149 2,285 –329,088
IS
Income from
investments in joint
ventures and associ-
ated companies –36 0 4 3 –24 –54 – – –54
IS
Operating income 27,349 12,228 78 2,092 –1,964 39,783 3,289 2 43,074
IS
Interest income
and similar credits 362 – –4 358
IS
Interest expense
and similar charges –1,172 0 4 –1,167
IS
Other financial
income and expense 926 – – 926
IS
Income after financial items 39,899 3,289 2 43,190
Other segment information
Depreciation, amortiza-
tion and impairment –13,317 –2,097 –716 –504 2,337 –14,297 –4,423 – –18,720
Restructuring costs 143 –3 18 0 0 159 –1 – 157
Gains/losses from
divestments 1,649 –5 – – 0 1,643 – – 1,643
Investments in
in-/tangible assets 10,708 1,338 347 750 590 13,732 9,302 –21 23,014
BS
Investments in
joint ventures and
associated companies 19,746 0 92 42 806 20,685 – – 20,685
BS
Assets held
for sale – – – –
BS
Liabilities held
for sale – – – –
6:1
1 The operations of Nova Bus have been reclassified from the Buses segment into the segement of Group Functions & Other as of October 1, 2021. To facilitate
compara bility, financial numbers for 2021 have been restated in this report.
92
Notes to the financial statements
2020 Trucks
Con-
struction
Equipment Buses¹
Volvo
Penta
Group functions
& Other
incl. elim.¹
Industrial
Operations
Financial
Services
Elimina-
tions
Volvo
Group
Net sales, external
customers 206,198 81,230 14,066 11,400 11,872 324,766 13,679 – 338,446
Net sales, internal 2,064 223 646 491 –1,719 1,706 281 –1,987 0
IS
Net sales 208,262 81,453 14,712 11,891 10,154 326,472 13,960 –1,987 338,446
Expenses –194,236 –71,870 –15,247 –10,493 –10,458 –302,303 –12,396 1,989 –312,710
IS
Income from
investments in joint
ventures and associ-
ated companies 1,738 – 6 4 1 1,749 – – 1,749
IS
Operating income 15,764 9,583 –529 1,402 –303 25,919 1,564 2 27,484
IS
Interest income
and similar credits 372 – –73 299
IS
Interest expense
and similar charges –1,422 0 73 –1,349
IS
Other financial
income and expense –518 – – –518
IS
Income after financial items 24,351 1,564 2 25,917
Other segment information
Depreciation, amortiza-
tion and impairment –15,117 –2,304 –764 –580 2,837 –15,928 –4,671 – –20,599
Restructuring costs –1,649 –574 –140 –223 –72 –2,659 –44 – –2,703
Gains/losses from
divestments 43 8 –31 – 4 25 – – 25
Investments in
in-/tangible assets 7,848 1,104 350 583 415 10,300 8,632 – 18,933
BS
Investments in
joint ventures and
associated companies 12,280 0 77 38 765 13,160 – – 13,160
BS
Assets held
for sale 29,362 29,362 4,934 – 34,296
BS
Liabilities held
for sale –6,638 –6,638 –4,649 – –11,286
6:2
1 The operations of Nova Bus have been reclassified from the Buses segment into the segement of Group Functions & Other as of October 1, 2021. To facilitate
comparability, financial numbers for 2020 have been restated in this report.
Read more in Note 31 Changes in Volvo Group financial reporting 2021.
Reporting by
market
Net sales¹ Non-current assets
2
2021 2020 2021 2020
Europe 158,070 134,708 74,941 71,509
of which Sweden 10,160 10,283 26,435 26,063
of which France 30,806 28,349 12,274 10,910
of which the UK 17,511 13,915 8,398 7,692
North America 98,771 81,372 22,459 17,972
of which USA 81,324 65,872 20,522 16,342
South America 30,424 21,499 2,064 1,939
of which Brazil 21,794 13,934 1,582 1,464
Asia 63,154 81,111 5,394 5,451
of which China 29,675 36,294 2,311 2,118
of which Japan 5,933 19,636 – 236
Other markets 21,797 19,755 2,662 2,553
IS
BS
Total 372,216 338,446 107,520 99,424
6:3
1 The reporting of net sales by market is based on where the
delivery of the goods or services took place.
2 Non-current assets include tangible and intangible assets
excluding goodwill.
93
Notes to the financial statements
7
Revenue
ACCOUNTING POLICY
The recognized net sales in Industrial Operations pertain to revenues from
sales of vehicles and services. Revenue from vehicles and services are
recognized when control has been transferred from Volvo Group to the
customer. Control refers to the customers’ ability to use vehicles or ser-
vices in its operations and to obtain the associated cash flow related to
the use. Vehicles and services are sold separately or as a combined offer.
In combined offers where the vehicle and services are separable from
each other and the customer can benefit from the vehicle and the service
independently, the transaction price is allocated between vehicles and
services based on stand-alone selling price according to price lists.
The recognized net sales in Financial Services pertain to interest
income related to finance leases and installment credits as well as income
from operating lease contracts. Interest income is recognized during the
underlying contract period and income from operating leasing is recog-
nized over the leasing period.
Vehicles
Vehicles include sales of new vehicles, machines and engines as well as
sales of used vehicles, machines, trailers, superstructures and special
vehicles. A standard contractual warranty is included as part of the sales,
read more in note 21 Other provisions about product warranty. The customer
can pay for the vehicle at the point of sale or defer the payment by entering
into agreements such as installment credits and finance lease.
Revenue is recognized at a specific point in time, when control of the
vehicle has been transferred to the customer, normally when the vehicle
has been delivered to the customer. The value of rebates, returns and var-
iable sales price have been considered as part of the revenue recognition.
If the sale of the vehicle is combined with a residual value commitment
(buybacks and tradebacks) the criterion of transferring control is based on
if the customer has a significant economic incentive to exercise the option
to return the vehicle or not. A significant economic incentive exists if the
repurchase price is higher than the assessed fair market value i.e. net real-
izable value at the end of the residual value commitment period, or if the
historical returns indicate that it is probable that the customer will return
the vehicle at the end of the commitment period. Thus, the control has not
been transferred and the sales transaction is recognized as an operating
lease transaction. The revenue and expense are recognized over the resid-
ual value commitment period in the income statement. Assets under
operating leases, a residual value liability, and a deferred lease income are
recognized in the balance sheet. The asset is depreciated over the com-
mitment period and the deferred lease income is recognized as revenue
over the same period. The residual value liability amount remains
unchanged until the end of the commitment period. If the vehicle is
returned at the end of the commitment period, the residual value liability
is paid to the customer and the vehicle is reclassified from assets under
operating lease to inventory.
Read more in Note 14 Leasing about lease income on assets under
operating lease.
Read more in Sustainability notes and section EU Taxonomy regulation disclosures
about taxonomy eligible turnover.
If the customer is not considered to have a significant economic incentive
to return the vehicle, the sales transaction is recognized in accordance
with the right of return model. Revenue corresponding to the sales amount
less the buyback amount is recognized at the initial sale, as well as a pro-
portionate share of cost of goods sold. The remaining revenue is recog-
nized as a refund liability and the remaining cost of goods sold as a right of
return asset during the commitment period. If the vehicle is not returned
the refund liability is recognized as revenue and the right of return asset is
recognized as cost of goods sold at the end of the commitment period.
Services
Services include sale of spare parts, maintenance services, repairs, extended
coverage, connectivity solutions and other aftermarket products. The con-
trol of the service has been transferred to the customer when the Volvo
Group incurs the associated cost to deliver the service and the customer
can benefit from the use of the delivered services. For spare parts, revenue
is normally recognized at one point time, which is when it is delivered to the
customer. For maintenance services, connectivity solutions and other
aftermarket products, revenue is recognized over time, i.e. normally during
the contract period. When payment for maintenance contracts is received
in advance, the payment is recognized as a contract liability.
Services also includes sales in Financial Services related to finance
lease, installment credits and operating leases. During 2021, revenue
from Financial Services operations amounted to SEK 13,437 M (13,960).
Read more in Note 6 Segment reporting regarding net sales by segment and
market.
Read more in Note 14 Leasing about lease income on assets under operating
lease and finance income om customer-financing receivables.
SOURCE OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Sales with residual value commitments
When the Volvo Group enters into sales transactions of vehicles with resid-
ual value commitments (buybacks and tradebacks) the judgment whether
control has been transferred from Volvo Group to the customer and at
what point in time revenue shall be recognized is critical. The judgment
made is when a significant economic incentive exists or not for the cus-
tomer to return the vehicle at the end of the commitment period. The
assessment of significant economic incentive is performed at the incep-
tion of the contract and the outcome at the end of the commitment period
can differ from the initial assessment. Factors that are considered and
requires judgment is the assessed fair market value i.e. net realizable value
at the end of the residual value commitment period and historical returns.
The future mix of vehicles and services is driven by customer demand for
products and solutions with lower environmental impact. Supply chain and
production disturbances due to covid-19 and the gradual introduction of
battery electric and fuel cell electric products imply to some extent uncer-
tainties in the assessment of fair market value.
Read more in Note 13 Tangible assets for a description of residual value risks
and the assessment of fair market value.
Variable sales price
In some sales transactions, the sales price is variable such as residual
value guarantees. In assessing the variable sales price, the expected value
method is used and revenue is recognized when it is highly probable that
a reversal will not occur. Both the expected value method and the assess-
ment of highly probable requires judgments to be able to make estimates.
The estimates are made at the contract start with continuous assessment
at each reporting period.
94
Notes to the financial statements
Disaggregation of
revenue
Trucks
Construction
Equipment Buses¹
Volvo
Penta
Group func tions
& Other
incl. elim.¹
Industrial
Operations
Financial
Services
Elimina-
tions
Volvo
Group
2021
Net sales per
product group
Vehicles 175,509 79,390 10,459 10,282 7,026 282,666 – –2,279 280,387
Services 55,373 12,641 3,192 4,155 3,035 78,396 13,437 –4 91,829
Net sales 230,881 92,031 13,652 14,437 10,061 361,062 13,437 –2,283 372,216
Net sales per
geographical region
Europe 107,798 29,524 5,886 7,464 3,623 154,296 5,929 –2,155 158,070
North America 65,308 16,583 4,089 2,949 5,427 94,356 4,519 –105 98,771
South America 23,569 3,951 882 474 –67 28,810 1,618 –4 30,424
Asia 21,360 36,427 1,371 2,698 455 62,310 843 – 63,154
Africa and Oceania 12,846 5,546 1,423 851 624 21,291 528 –20 21,797
Net sales 230,881 92,031 13,652 14,437 10,061 361,062 13,437 –2,283 372,216
Timing of revenue
recognition
Revenue of vehicles and
services recognized at
the point of delivery 213,656 89,780 13,073 14,437 7,628 338,575 – –223 338,352
Revenue of vehicles and
services recognized over
contract period 17,225 2,251 578 0 2,432 22,486 13,437 –2,061 33,863
Net sales 230,881 92,031 13,652 14,437 10,061 361,062 13,437 –2,283 372,216
7:1
1 The operations of Nova Bus have been reclassified from the Buses segment into the segement of Group Functions & Other as of October 1, 2021. To facilitate
compara bility, financial numbers for 2021 have been restated in this report.
Disaggregation of
revenue
Trucks
Construction
Equipment Buses¹
Volvo
Penta
Group func tions
& Other
incl. elim.¹
Industrial
Operations
Financial
Services
Elimina-
tions
Volvo
Group
2020
Net sales per
product group
Vehicles 149,902 70,146 11,794 8,365 7,190 247,397 – –1,946 245,451
Services 58,360 11,306 2,919 3,526 2,964 79,075 13,960 –41 92,995
Net sales 208,262 81,453 14,712 11,891 10,154 326,472 13,960 –1,987 338,446
Net sales per
geographical region
Europe 92,127 23,191 5,765 6,064 3,309 130,457 6,116 –1,865 134,708
North America 52,038 13,020 3,223 2,562 5,659 76,501 4,907 –36 81,372
South America 15,830 2,245 1,793 345 –79 20,133 1,380 –14 21,499
Asia 35,441 39,095 2,397 2,228 927 80,088 1,022 1 81,111
Africa and Oceania 12,826 3,902 1,535 691 338 19,293 535 –73 19,755
Net sales 208,262 81,453 14,712 11,891 10,154 326,472 13,960 –1,987 338,446
Timing of revenue
recognition
Revenue of vehicles and
services recognized at
the point of delivery 189,798 79,605 14,150 11,891 7,442 302,887 – –484 302,403
Revenue of vehicles and
services recognized over
contract period 18,464 1,848 563 0 2,711 23,585 13,960 –1,503 36,043
Net sales 208,262 81,453 14,712 11,891 10,154 326,472 13,960 –1,987 338,446
7:2
1 The operations of Nova Bus have been reclassified from the Buses segment into the segement of Group Functions & Other as of October 1, 2021. To facilitate
comparability, financial numbers for 2020 have been restated in this report.
Read more in Note 31 Changes in Volvo Group financial reporting 2021.
95
Notes to the financial statements
Contract and right of return assets
Dec 31, 2021
Of which due
within 12 months
Of which due
after 12 months Dec 31, 2020 Dec 31, 2019
Contract assets 3,779 1,199 2,581 5,945 6,423
Right of return assets 1,889 315 1,574 1,152 1,280
Parts return assets 167 127 40 138 165
Total 5,835 1,641 4,195 7,235 7,868
7:3
Contract assets are recognized within other receivables and include reve-
nue that has been recognized but not yet invoiced for work performed.
Right of return assets and parts return assets represents the product cost
for the assets that might be returned to the Volvo Group.
Contract liabilities are recognized within other liabilities and include
advance payments received from customers, e.g. advance payments for
service contracts and extended coverage, for which revenue is recognized
when the service is provided. Refund liabilities related to the right to return
products and residual value guarantees are included with an amount that
is expected to be paid to the customer if the vehicle or spare part is
returned. In service contracts, the revenue expected to be recognized
over the remaining term of the contract for services not yet delivered
amounted to SEK 23,732 M (18,715) as of December 31, 2021. Approxi-
mately 34% are expected to be recognized as revenue during 2022 and
the remaining 66% as revenue during 20232025. The change in con-
tract and refund liabilities are mainly due to increased deferred service
revenue. During 2021, revenue has been recognized with SEK 16,692 M
(14,396) that was included in the contract liabilities at the beginning of
the period.
Contract and refund liabilities
Dec 31, 2021
Of which due
within 12 months
Of which due
after 12 months Dec 31, 2020 Dec 31, 2019
Contract liabilities
Deferred service revenue 18,155 3,715 14,440 15,826 16,419
Advances from customers 7,435 4,511 2,923 8,010 7,707
Other deferred income 1,928 1,599 329 1,570 1,427
Accrued expenses for dealer bonuses
and rebates 5,009 4,998 11 5,255 6,659
Refund liabilities 2,435 737 1,698 1,543 1,726
Total 34,962 15,560 19,401 32,204 33,938
7:4
Other operating income and
expenses
2021 2020
Gains/losses on divestment
of Group companies
1
1,643 25
Change in allowances and write-offs for
doubtful customer-financing receivables
2
–266 –1,892
Change in allowances and write-offs for
other doubtful receivables
3
–263 176
Damages and litigations
4
–775 –715
Restructuring costs
5
157 –2,703
Volvo profit sharing program 0 –138
Other income and expenses –250 –212
IS
Total 246 –5,459
8:1
1 Including a capital gain of SEK 1,653 M from the divestment of UD Trucks.
Read more in Note 3 Acquisitions and divestments of
operations, about gains/losses on divestment.
2
Read more in Note 15 Customer-financing receivables.
3 Read more in Note 16 Receivables.
4 Including costs for legal advisors for claims related to the EU antitrust
investigation (2016).
5 In 2020 costs of SEK 2,210 M related to headcount reductions were included.
Read more in Note 4 Goals and policies in financial risk management regarding
the Volvo Group's management of credit risk and credit reserves.
8
Other operating income and expenses
96
Notes to the financial statements
ACCOUNTING POLICY
Income tax for the period includes current and deferred taxes. Current
taxes are calculated on the basis of the tax regulations prevailing in the
countries where the group companies have operations.
Deferred taxes are recognized on differences that arise between the tax-
able value and carrying value of assets and liabilities as well as on tax-loss
carryforwards. Deferred tax assets are recognized to the extent it is prob-
able that they will be utilized against future taxable profits.
Deferred tax liabilities related to temporary differences on investments
in subsidiaries, joint ventures and associated companies are recognized in
the balance sheet except when the Volvo Group controls the timing of the
reversal of the temporary difference related to accumulated undistributed
earnings and it is probable that a reversal will not be done in the foresee-
able future.
Tax laws in Sweden and certain other countries allow companies to defer
payment of taxes through allocations to untaxed reserves. In the Volvo
Group financial statements, untaxed reserves give rise to temporary differ-
ences which are recognized as deferred tax liabilities.
Tax liabilities are recognized for income tax charges that are probable as
a result of identified risks. Hence, when it is probable that the taxation
authority or court will not accept an uncertain income tax treatment under
tax law, adjustments of the tax liability are made for the estimated out-
come. Tax claims for which no adjustment of the tax liability is considered
required are generally reported as contingent liabilities.
Read more in Note 24 Contingent liabilities and contingent assets.
SOURCE OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Deferred taxes
The Volvo Group recognizes deferred tax assets related to tax-loss carry-
forwards. The deferred tax assets are recognized based on a thorough
assessment in order to ensure that it is probable that sufficient taxable
profits will be generated in the coming years that will enable the tax-loss
carryforwards to be utilized. The assessment is based on an evaluation of
business plans. In addition, the possibility to offset tax assets and tax lia bil-
ities and the fact that the major part of the tax-loss carryforwards is related
to countries with long or indefinite periods of utilization is considered.
If deferred tax assets related to tax-loss carryforwards are not expected
to be realized based on current business plans, valuation allowances are
recognized. If actual results differ from the business plans, or if business
plans for future periods are adjusted, changes in the valuation allowance
may be required. Such recognitions and adjustments could have a
significant impact on the financial position and the income for the period.
Uncertainty over income tax treatments and claims
The Volvo Group regularly evaluates income tax positions to determine if a
tax liability or a contingent liability shall be recognized. The judgment is
based on several factors, such as changes in facts and circumstances, the
progress of the case and experience in similar cases. The actual outcome of
income tax positions may deviate from the expected outcome and materi-
ally affect future financial statements.
ACCOUNTING POLICY
In other financial income and expenses unrealized revaluation on deriva-
tives used to hedge interest rate exposure as well as realized result and
unrealized revaluation on derivatives used to hedge future cash flow expo-
sure in foreign currency are recognized. The derivatives are recognized at
fair value through the income statement and no hedge accounting is
applied. The unrealized revaluation on derivatives used to hedge interest
rate exposure was mainly related to the debt portfolio within Industrial
Operations and customer-financing portfolio within Financial Services.
Read more in Note 1 Accounting policies about receivables and liabilities
in foreign currency.
Read more in Note 30 Financial instruments regarding the accounting
policy and effects on net income and cash flow for financial assets at fair value
through the income statement.
Other financial income and
expenses
2021 2020
Unrealized revaluation of derivatives
used to hedge interest rate exposure 924 –379
Realized result and unrealized revalua-
tion on derivatives used to hedge future
cash flow exposure in foreign currency 32 –22
Financial instruments at fair value
through income statement 956 –401
Exchange rate gains and losses
on financial assets and liabilities –56 –205
Financial income and expenses
related to taxes 281 334
Costs for Treasury function,
credit facilities, etc. –256 –245
IS
Total
1
926 –518
9:1
1 Other financial income and expenses attributable to financial instruments
amounted to SEK 900 M (–606). The amount is specified in note 30 Financial
instruments in table
30:3
.
9
Other financial income and expenses
10 Income taxes
97
Notes to the financial statements
Distribution of Income taxes 2021 2020
Current taxes relating to the period –9,132 –6,853
Adjustment of current
taxes for prior periods 393 278
Deferred taxes originated or
reversed during the period –960 926
Remeasurements of deferred tax assets –248 –194
IS
Total income taxes –9,947 –5,843
10:1
The Swedish corporate income tax rate amounted to 21% (21) in 2021.
The table below explains the major reasons for the difference between the
Swedish corporate income tax rate and the Volvo Group’s effective tax
rate, based on income after financial items.
Reconciliation of effective tax rate % 2021 2020
Swedish corporate income tax rate 21 21
Difference between corporate tax
rate in Sweden and other countries 3 3
Non-taxable income –2 –3
Non-deductible expenses 0 1
Current taxes related to prior years –1 –1
Remeasurement of deferred taxes 2 1
Other differences 1 1
Effective tax rate for the Volvo Group 23 23
10:2
The effective tax rate for the Volvo Group, as of December 31, 2021, was
mainly impacted by the country mix in the Volvo Group's earnings.
Specification of deferred
tax assets and liabilities
Dec 31,
2021
Dec 31,
2020
Deferred tax assets:
Unused tax-loss carryforwards 1,066 2,186
Other unused tax credits 479 755
Intercompany profit in inventories 994 1,270
Write down of inventories 494 499
Valuation allowance for
doubtful receivables 1,251 1,068
Provisions for warranties 3,241 2,861
Provisions for residual value risks 341 274
Lease liabilities 1,146 1,252
Provisions for post-
employment benefits 3,186 4,477
Provisions for restructuring measures 50 126
Other deductible temporary
differences 6,563 5,714
Deferred tax assets before deduction
for valuation allowance 18,810 20,481
Valuation allowance –527 –828
Deferred tax assets after deduction
for valuation allowance 18,283 19,653
Netting of deferred tax
assets and liabilities –7,336 –9,058
BS
Deferred tax assets, net 10,947 10,595
Deferred tax liabilities:
Accelerated depreciation on property,
plant and equipment 1,832 1,552
Accelerated depreciation
on leasing assets 2,138 2,225
Right-of-use assets, leased 1,104 1,207
LIFO valuation of inventories 418 352
Capitalized product and
software development 2,177 2,271
Untaxed reserves 2,239 2,239
Other taxable temporary differences 2,348 2,472
Deferred tax liabilities 12,255 12,318
Netting of deferred tax
assets and liabilities –7,329 –9,053
BS
Deferred tax liabilities, net 4,926 3,265
Deferred tax assets and liabilities, net
1
6,021 7,330
10:3
1 The deferred tax assets and liabilities are recognized in the balance sheet partially
on a net basis, after taking into account offsetting possibilities. Deferred tax
assets and liabilities have been measured at the tax rates that are expected to be
applied during the period when the asset is realized or the liability is settled,
according to the tax rates and tax regulations that have been resolved or enacted
at the balance sheet date.
98
Notes to the financial statements
The total valuation allowance for deferred tax assets amounted to SEK
527 M (828) as of December 31, 2021, whereof SEK 405 M (690), con-
sisted of an allowance for a tax credit in Brazil.
As of December 31, 2021, the Volvo Group’s gross unused tax-loss
carry forwards amounted to SEK 4,096 M (9,350) pertaining to deferred
tax assets of SEK 1,066 M (2,186) recognized in the balance sheet. Out of
the total deferred tax asset attributable to unused tax-loss carryforwards,
SEK 685 M (884) pertained to France and SEK 0 M (929) to Sweden.
The gross unused tax-loss carryforwards will expire according to the
following table.
Due date, unused tax-loss
carryforwards, gross
Dec 31,
2021
Dec 31,
2020
after 1 year 7 0
after 2 years 25 5
after 3 years 14 47
after 4 years 11 164
after 5 years 10 23
after 6 years or more
1
4,029 9,110
Total 4,096 9,350
10:4
1 Tax-loss carryforwards with long or indefinite periods of utilization were mainly
related to France. Tax-loss carryforwards with indefinite periods of utilization
amounted to SEK 3,524 M (8,839) which corresponded to 86% (95) of the total
unused tax-losses carryforward.
Changes in deferred tax assets
and liabilities, net
2021 2020
Deferred tax assets and liabilities,
net, opening balance 7,330 8,899
Recognized in income statement –1,208 732
Recognized in other comprehensive
income, whereof:
Remeasurements of defined-
benefit pension plans –1,699 406
Reclassification to assets and liabilities
held for sale – –1,446
Translation differences and other changes 1,598 –1,261
Deferred tax assets and liabilities, net,
as of December 31 6,021 7,330
10:5
The cumulative amount of undistributed earnings in foreign subsidiaries,
which the Volvo Group currently intends to indefinitely reinvest outside
of Sweden and which no deferred income tax have been accounted for,
amounted to SEK 28 billion (28) at year end. Undistributed earnings
pertaining to countries where the dividends are not taxable are excluded.
Read more in Note 4 Goals and policies in financial risk management about how
the Volvo Group handles currency exposure of equity.
11 Non-controlling interest
ACCOUNTING POLICY
Owners with a non-controlling interest have a limited ownership of shares
and voting rights in a subsidiary, thereby also limited rights to the subsidi-
ary's equity. Non-controlling interest equity is presented separately from
equity attributable to owners of AB Volvo. In acquisitions, non-controlling
interests are valued either at fair value or to a proportionate share of the
acquired company’s net assets. Ownership changes in non-controlling
interests, not resulting in change of control, are recognized within equity.
The Volvo Group has a few non-wholly owned subsidiaries, of which Shan-
dong Lingong Construction Machinery Co. (Lingong), in China, is the larg-
est company with non-controlling interest. Owners with non- controlling
interests hold a 30% shareholding in the company. During 2021, the profit
allocated to the non-controlling interest in Lingong amounted to SEK 430
M (742). The accumulated amount allocated to the non- controlling interest
within equity of Lingong amounts to SEK 3,000 M (2,806).
The following table presents summarized financial information for
Shandong Lingong Construction Machinery Co.
Summarized income statement 2021 2020
Net sales 24,319 24,814
Operating income 1,515 2,734
Income for the period 1,435 2,474
Other comprehensive income
1
1,231 –704
Total comprehensive income
for the period
1
2,666 1,770
Dividends paid to non-controlling interest 606 768
11:1
Summarized balance sheet
Dec 31,
2021
Dec 31,
2020
Non-current assets 3,166 3,589
Marketable securities,
cash and cash equivalents 4,831 5,564
Other current assets 17,918 14,809
Total assets 25,915 23,962
Non-current liabilities 86 702
Current liabilities 15,829 13,906
Total liabilities 15,915 14,608
Equity attributable to:
Owners of AB Volvo
1
7,000 6,548
Non-controlling interest
1
3,000 2,806
11:2
1 Includes exchange differences from translating equity in foreign subsidiaries
in the Volvo Group.
99
Notes to the financial statements
ACCOUNTING POLICY
Volvo Group applies the cost method for recognition of intangible assets,
consisting of goodwill, capitalized product and software development
and other intangible assets.
Read more in Sustainability notes and section EU Taxonomy regulation
disclosures about taxonomy eligible capital expenditure.
Goodwill
Goodwill is recognized as an intangible asset with indefinite useful life. For
non-depreciable assets such as goodwill, impairment tests are performed
annually, as well as if there are indications of impairments during the year.
Goodwill is allocated and tested at the level of cash-generating units which
are identified as the Volvo Group’s operating segments. However, in the seg-
ment Group Functions & Other two new cash-generating units, Nova Bus and
Designwerk are included. If the carrying amount of the tested cash-generating
unit exceeds the calculated recoverable amount, an impairment loss is recog-
nized for the difference. The recoverable amount for a cash-generating unit is
determined by the value in use, which is based on a discounted cash flow
model with a forecast period of five years. The valuation is based on a business
plan which is an integral part of the Volvo Group’s financial planning process
and represents management’s best estimate of the development of the oper-
ations. Assumption of 2% (2) long-term market growth beyond the forecast
period and the expected development of the operations in relation to this envi-
ronment is a basis for the valuation. In the model, the Volvo Group is expected
to maintain stable capital efficiency over time. Other parameters considered in
the calculation are operating income, mix of products and services, expenses
and level of capital expenditures. The Volvo Group uses a discount rate at 10%
(10) before tax for 2021.
In 2021, the recoverable amount of Volvo Group’s operations exceeded
the carrying amount for all cash-generating units, thus no impairment was
recognized. The Volvo Group has also analyzed whether a negative adjust-
ment of several percentage points on the used assumptions for discount
rate and operating income would result in impairment for goodwill, how-
ever none of the cash-generating units would be impaired as a result of
this analysis. The operating parameters applied in the valuation are based
on management’s strategy and could indicate higher value than historical
performance for each cash-generating unit. Furthermore, the Volvo Group
is operating in a cyclical industry why performance could vary over time.
Headroom differs between the cash-generating units and they are sen-
sitive to changes in the assumptions described above to a varying degree.
Therefore, the Volvo Group continuously follows the performance of the
cash-generating units whose headroom is dependent on the fulfillment of
the Volvo Group’s assessments. Instability in the recovery of the market
and volatility in interest and currency rates may lead to indications of a
need for impairment. The most important factors for the future operations
of the Volvo Group are described in the Volvo Group’s operating seg-
ments, as well as in the Risk management section.
Research and development
Expenditures for the development of new products and software are recog-
nized as intangible assets if such expenditures, with a high degree of cer-
tainty, will result in future financial benefits for the company. Intangible
assets are amortized over its estimated useful life.
The rules require stringent criteria to be met for these development
expenditures to be recognized as assets. For example, it must be possible to
prove the technical functionality of a new product or software prior to its
development expenditure being recognized as an asset. In normal cases,
this means that expenditures are capitalized only during the industrialization
phase of a product development project. Other research and development
costs are recognized in the income statement as incurred.
The Volvo Group has developed a process for conducting product develop-
ment projects, which has six phases focused on separate parts of the project.
Every phase starts and ends with a reconciliation point, known as a gate, for
which the criteria must be met for the project’s decision making committee to
allow the project to progress to the next phase. During the industrialization
phase, the industrial system is prepared for serial production and the product
is launched. A corresponding process is developed for software development.
Other intangible assets
Other intangible assets include trademarks, distribution networks, licenses
and other rights. When participating in industrial projects in partnership
with other companies the Volvo Group in certain cases pays an entrance fee
to participate, which is capitalized as an intangible asset.
Amortization and impairment with finite useful life
Intangible assets with finite useful life are amortized on a straight line
basis over their estimated useful life. Amortization is based on the cost of
the assets, adjusted by impairments when applicable and estimated useful
lives. Amortization is recognized in the respective function to which it
belongs, meaning that amortization of product development is part of the
research and development expenses in the income statement. Impair-
ment tests for amortizable assets are performed if there are indications of
impairment. In addition, impairment tests are performed annually for cap-
italized development cost for products and software not yet in use by cal-
culating the recoverable amount. The recoverable amount is the higher of
the fair value less costs of disposal and the value in use. The value in use is
measured as the discounted future cash flows, which the asset is expected
to generate either by itself or from the lowest cash-generating unit to
which the asset belongs. If the recoverable amount is less than the carry-
ing amount, an impairment is recognized and the carrying amount of the
asset is reduced to the recoverable amount.
Estimated useful life
Trademarks Max 5 years
Distribution networks 10 years
Product and software development 38 years
Other intangible assets 35 years
12:1
SOURCE OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Impairment of goodwill and other intangible assets
When conducting impairment tests of goodwill and other intangible assets,
estimates have to be made to determine the recoverable amounts of
cash-generating units. The recoverable amount is based upon manage-
ment’s projections of future cash flows. Headroom differs between the
cash-generating units and are to a varying degree sensitive to changes in
assumptions and the business environment. The broadening of the customer
offer with focus to switch to more sustainable solutions accelerates invest-
ments in research and development. The magnitude of investments and the
assessment of future useful life is uncertain due to technology and infra-
structure development, emission regulations, government incentives and
customer demand. While management believes that estimates of future
cash flows and other assumptions made are reasonable, there are uncer-
tainties which could materially affect the valuations.
12
Intangible assets
100
Notes to the financial statements
Intangible assets, acquisition costs
Goodwill
Capitalized product and
software development
Other intangible
assets
Total intangible
assets
Opening balance 2020 22,981 48,431 5,956 77,369
Investments
1
– 2,263 759 3,023
Sales/scrapping – –3,829 –326 –4,155
Acquired and divested operations
1
–13 – 0 –13
Translation differences –1,229 –714 –354 –2,297
Reclassification at divestment
1
499 796 841 2,136
Reclassifications and other –10 –287 –31 –328
Acquisition cost as of Dec 31, 2020 22,228 46,661 6,846 75,735
Investments
1
– 3,078 644 3,722
Sales/scrapping – –137 –8 –144
Acquired and divested operations
1
–236 –4,120 –2,627 –6,983
Translation differences 692 85 129 906
Reclassification at divestment
1
1,229 4,147 1,960 7,336
Reclassifications and other 11 9 –110 –91
Acquisition cost as of Dec 31, 2021 23,924 49,723 6,833 80,480
12:2
Intangible assets, accumulated amortization
and impairment
Goodwill
Capitalized product and
software development
Other intangible
assets
Total intangible
assets
Opening balance 2020 – 35,533 5,168 40,700
Amortization – 2,818 175 2,993
Impairment – 0 150 150
Sales/scrapping – –3 824 –326 –4,150
Acquired and divested operations
1
– – 0 0
Translation differences – –634 –230 –864
Reclassification at divestment
1
– 2,134 499 2,632
Reclassifications and other – –302 –4 –305
Accumulated amortization and impairment as of Dec 31, 2020 – 35,725 5,432 41,157
Amortization – 2,659 135 2,793
Impairment – – – –
Sales/scrapping – –126 –7 –133
Acquired and divested operations
1
– –2,828 –1,837 –4,664
Translation differences – 67 101 168
Reclassification at divestment
1
– 2,827 1,365 4,192
Reclassifications and other – 2 –104 –102
Accumulated amortization and impairment as of Dec 31, 2021 – 38,325 5,086 43,411
BS
Net value in balance sheet as of December 31, 2020
2
22,228 10,936 1,414 34,577
BS
Net value in balance sheet as of December 31, 2021
2
23,924 11,399 1,748 37,070
12:3
1 Read more in Note 3 Acquisitions and divestments of operations, for a description of acquired and divested operations as well as assets and liabilities held for sale.
2 Acquisition costs less accumulated amortization and impairments.
1 As of October 1, 2021, the Volvo Group
reorganized its bus operation whereby
goodwill related to Nova Bus has been
reallocated from Buses to Other
cash-generating units.
Goodwill per cash-
generating unit
Dec 31,
2021
Dec 31,
2020
Trucks 12,620 11,993
Construction Equipment 8,923 8,568
Buses
1
826 794
Penta 356 298
Other cash-generating units
1
1,198 575
Total goodwill value 23,924 22,228
12:4
101
Notes to the financial statements
ACCOUNTING POLICY
The Volvo Group applies the cost method for measurement of tangible
assets, consisting of property, plant, equipment and investment property
as well as assets under operating leases.
Buildings include owner-occupied properties and investment proper-
ties. Investment properties are properties owned for the purpose of
obtaining rental income and appreciation in value. Investment properties
are recognized at cost. For disclosure purposes, information regarding the
estimated fair value of investment properties is based on an internal dis-
counted cash flow projection as relevant observable market inputs for the
assets are not available. The required return is based on current property
market conditions for comparable properties in comparable locations.
Hence, the applied valuation method to measure fair value is classified as
level 3 of the fair value hierarchy and there have not been any changes in
valuation method during the year. Land contains land and land improve-
ments. Machinery and equipment consists of production related assets
such as machinery, type-bound tools and other equipment. Construction
in progress are assets under construction and advanced payments. Right-
of-use assets relates to lease contracts with the Volvo Group as a lessee.
Assets under operating leases are mainly owned by the Volvo Group.
These transactions are accounted for as operating lease transactions and
consists of contractual operating lease agreements with customers
within Financial Services and rental fleet which are assets used in a fleet
for rental business within Industrial Operations. Some rental fleet assets
are leased by the Volvo Group and later sub-leased to customers as oper-
ating leases. Sales with residual value commitments within Industrial
Operations are also recognized within assets under operating leases.
Read more in Note 7 Revenue about sales with residual value commitments.
Read more in Note 14 Leasing about right-of-use assets and assets under
operating leases.
Read more in Sustainability notes and section EU Taxonomy regulation
disclosures about taxonomy eligible capital expenditure.
Depreciation and impairment
Property, plant, equipment and investment property are depreciated over
their estimated useful lives. Land is not depreciated. Depreciation is rec-
ognized on a straight-line basis based on the cost of the assets, adjusted
by residual value when applicable, and estimated useful lives. Right-of-
use assets are generally depreciated over the lease term on a straight-line
basis. Assets under operating leases are depreciated on a straight-line
basis over the contract period. During the contract period, the depreciable
amount is adjusted by accelerated depreciation and/or write-downs. The
adjustment is recognized through the income statement to correspond to
estimated future net realizable value to continuously reflect potential
residual value risks at the end of the contract period. Depreciation is
recog nized in the respective function to which it belongs. Impairment
tests are performed if there are indications of impairment by calculating a
recoverable amount which is the higher of the asset’s fair value less cost
of disposal and its value in use.
Estimated useful life
Type-bound tools 3 to 8 years
Operating leases, rental fleet 3 to 5 years
Sales with residual value commitments 3 to 5 years
Machinery and equipment 5 to 20 years
Buildings and investment properties 20 to 50 years
Land improvements 20 years
13:1
SOURCE OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Impairment of tangible assets
Impairment tests are performed if there is any indication that a tangible
asset has been impaired. The impairment tests are based on estimation of
the recoverable amount of the asset, or the cash-generating unit to which
the asset belongs. To determine the recoverable amount, projections of
future cash flows are used, which are based upon internal business plans
and forecasts. The ongoing transition of the transport sector towards new
technologies with battery electric and fuel cell vehicles bring uncertainties
regarding current and future investments in production facilities as well as
estimated useful life. However, many assembly lines can produce both
electric trucks and trucks with combustion engines which limits invest-
ment needs and risk for impairment. While management believes that esti-
mates of future cash flows and other assumptions made are reasonable,
there are uncertainties which could materially affect the valuations.
Residual value risks
Volvo Group is exposed to residual value risks related to assets under
operating leases which are the risks that the Volvo Group in the future
would have to dispose used vehicles at a loss if the price development of
these products is worse than what was expected when the contracts
were entered. The assessment of residual value risks is based upon an
estimation of the used vehicle’s future net realizable value (fair market
value). The estimated future net realizable value of the vehicles at the end
of the contract period is monitored individually on a continuing basis.
Thus, a decline in prices for used vehicles may negatively affect the Volvo
Group’s operating income. High inventories in the truck industry and the
construction equipment industry and low demand may have a negative
impact on the prices of new and used vehicles. In monitoring estimated
net realizable value of each vehicle included as assets under operating
leases, management considers current price level of the used product
model. The price level is impacted by value of optional equipment, mile-
age, current condition, expected future price development, change of
market conditions including the shift towards battery electric and fuel
cells vehicles, alternative distribution channels, inventory lead-time,
repair and reconditioning costs, handling costs, indirect costs associated
with the sale of used vehicles and legislative demands.
13
Tangible assets
102
Notes to the financial statements
Reclassifications
Reclassifications and other presented in the tables
13:2
and
13:3
mainly
consist of construction in progress, rental fleet and assets related to sales
with residual value commitments (buyback and tradebacks).
For construction in progress, reclassification occurs when the asset is
available for use by transferring the assets to the respective category
within property, plant and equipment.
For rental fleet and sales with residual value commitments, reclassifi-
cations occur when the vehicle is sold or rented out to customers by trans-
ferring the vehicle from inventory to assets under operating leases. If the
vehicle is returned by the end of the residual value commitment period or
the leasing period, the vehicle is reclassified back to inventory.
Investment properties
The acquisition value of investment properties at year-end amounted to
SEK 95 M (93). Reclassifications amounted to SEK 1 M (0). Accumulated
depreciation amounted to SEK 38 M (33) at year-end, of which SEK 4 M
(4) refers to 2021. The net carrying value amounted to SEK 57 M (60).
The estimated fair value of investment properties amounted to SEK 102 M
(91) at year-end and 97% (97) of the area available for lease was leased
out during the year. Operating income was affected by rental income from
investment properties that amounted to SEK 10 M (11) and direct costs
that amounted to SEK 6 M (7).
Tangible assets,
acquisition cost
Property, plant, equipment
and investment property
Assets under operating
leases
1
Buildings Land
Machinery
and equip-
ment
Construc-
tion in
progress
Right-
of-use
assets
1
Operating
leases
Rental
fleet
Sales w.
residual
value
commit-
ments
2
Total
tangible
assets
Opening balance 2020 32,847 6,962 78,460 6,887 8,706 32,402 5,343 25,301 196,908
Investments 480 45 1,523 3,686 1,612 8,564 – – 15,910
Sales/scrapping –502 –150 –2,758 –2 –580 –10,669 – – –14,661
Acquired and divested operations
3
–94 –3 –172 – – – – – –270
Translation differences –2,246 –453 –5,242 –370 –663 –2,288 –454 –1,475 –13,191
Reclassified at divestment
3
–129 –72 2,150 –96 –72 – – –206 1,576
Reclassifications and other 1,298 216 2,002 –3,489 449 –275 –188 –288 –275
Acquisition costs as of Dec 31, 2020 31,655 6,544 75,964 6,617 9,452 27,734 4,701 23,332 185,998
Investments 371 110 2,031 6,297 1,211 9,271 – – 19,292
Sales/scrapping –271 –63 –1,363 – –707 –10,063 – – –12,468
Acquired and divested operations
3
–8,160 –5,809 –6,964 –102 –648 – 2 –379 –22,060
Translation differences 1,301 189 2,234 334 414 1,585 204 807 7,068
Reclassified at divestment
3
8,460 5,862 7,389 168 831 – – 363 23,074
Reclassifications and other 1,350 275 2,919 –4,522 411 242 –247 973 1,400
Acquisition costs as of Dec 31, 2021
34,705 7,107 82,209 8,792 10,965 28,770 4,660 25,095 202,304
13:2
1 Read more in Note 14 Leasing about right-of-use assets and assets under operating leases.
2
Read more in Note 7 Revenue about sales with residual value commitments.
3
Read more in Note 3 Acquisitions and divestments of operations, for a description of acquired and divested operations as well as assets and liabilities held for sale.
103
Notes to the financial statements
Tangible assets,
accumulated depreciation
and impairments
Property, plant, equipment
and investment property
Assets under operating
leases
1
Buildings Land
Machinery
and equip-
ment
Construc-
tion in
progress
Right-
of-use
assets
1
Operat-
ing
leases
Rental
fleet
Sales w.
residual
value
commit-
ments
2
Total
tangible
assets
Opening balance 2020 17,068 1,299 60,016 15 1,968 9,800 1,529 8,391 100,084
Depreciation 1,226 75 4,271 – 2,021 4,574 729 3,059 15,954
Impairment –6 9 1 – 0 0 –11 1,510 1,502
Sales/scrapping –424 –10 –2,618 – –355 –4,805 – – –8,211
Acquired and divested operations
3
–38 –1 –152 – 0 0 – – –191
Translation differences –1,119 –79 –3,159 – –218 –682 –131 –401 –5,790
Reclassified at divestment
3
–34 –13 1,375 – 167 – – 33 1,527
Reclassifications and other 15 –4 –79 –15 –84 –375 –483 –4,929 –5,955
Accumulated depreciation and
impairments as of Dec 31, 2020 16,688 1,276 59,656 0 3,498 8,511 1,632 7,662 98,923
Depreciation 1,182 92 4,061 – 1,931 4,320 704 2,995 15,286
Impairment – – –1 – –1 35 –5 613 640
Sales/scrapping –182 –7 –1,267 – –536 –4,601 – – –6,593
Acquired and divested
operations
3
–5,161 –194 –5,954 – –316 – 2 –57 –11,680
Translation differences 714 39 1,717 – 154 491 64 254 3,433
Reclassified at divestment
3
5,285 199 6,251 – 376 – – 57 12,168
Reclassifications and other –10 1 –16 – –100 375 –828 –3,668 –4,247
Accumulated depreciation and
impairments as of Dec 31, 2021 18,516 1,406 64,446 – 5,006 9,131 1,568 7,856 107,930
BS
Net value in balance sheet
as of Dec 31, 2020
4
14,967 5,268 16,308 6,617 5,953 19,223 3,069 15,670 87,075
BS
Net value in balance sheet
as of Dec 31, 2021
4
16,189 5,701 17,763 8,792 5,959 19,638 3,092 17,239 94,374
13:3
1 Read more in Note 14 Leasing about right-of-use assets and assets under operating leases.
2
Read more in Note 7 Revenue about sales with residual value commitments.
3
Read more in Note 3 Acquisitions and divestments of operations, for a description of acquired and divested operations as well as assets and liabilities held for sale.
4 Acquisition costs less accumulated depreciation and impairments.
104
Notes to the financial statements
ACCOUNTING POLICY
Volvo Group as the lessor
Leasing contracts are defined in two categories, operating and finance
leases, depending on the contracts’ financial implications.
Operating leases are offered from Financial Services (contractual oper-
ating leases) and from Industrial Operations (rental fleet agreements).
Sales with residual value commitments (buybacks and tradebacks) are
also accounted for as operating lease transactions when the customer has
a significant economic incentive to exercise the option to return the vehicle
and the control therefore has not been transferred to the customer. Oper-
ating lease agreements are recognized as tangible assets in assets under
operating leases and are valued at cost less accumulated depreciation and
impairment, if needed. The cost of an asset comprises the acquisition value
and any initial direct costs related to the contract. Depreciation of the asset
is recognized on a straight-line basis over the contract period. During the
period the depreciable amount is adjusted through the income statement
by depreciations or write-downs to correspond to the estimated future
realizable value to reflect residual value risks at the end of the contract
period. Lease income is equally distributed over the contract period and
recognized within net sales.
Read more in Note 7 Revenue, about sales with residual value commitments.
Read more in Note 13 Tangible assets, about residual value risks related to assets
under operating lease.
Finance leases are offered from Financial Services. As Industrial Opera-
tions manufacture the vehicles which are leased from Financial
Services to the customers, the Volvo Group is acting as a manufacturer
lessor. Hence, a finance lease asset gives rise to a selling profit which is
recognized within Industrial Operations. Finance lease contracts are rec-
ognized as non-current and current customer-financing receivables
within Financial Services. The asset is measured at an amount equal to
the net investment in the finance lease contract corresponding to the
gross investment (future minimum lease payments and unguaranteed
residual value) discounted with the rate in the finance lease contract and
reduced by unearned finance income and allowance for expected credit
losses. Assessment of allowance for expected credit losses is reflected in
the valuation of customer-financing receivables and recorded at initial
recognition and reassessed during the contract period. Lease income is
recognized as interest income within net sales in Financial Services. Vari-
able lease payments not dependent on an index or rate are recognized as
income as they occur. Payments received from finance lease contracts are
distributed between interest income and amortization of the receivable.
Read more in Note 15 Customer-financing receivables, about finance leases.
Volvo Group as the lessee
Lease contracts are recognized as right-of-use (RoU) assets as well as
interest-bearing lease liabilities in the balance sheet. Lease liabilities are
recognized within other loans and are measured by the present value of
future lease payments. The lease payments are discounted by using a rate
reflecting what the Volvo Group would have to pay to borrow funds to
acquire a similar asset, with similar collateral and similar term. RoU assets
are presented as tangible assets and are valued at cost less accumulated
depreciation and impairment, if needed. The cost of an RoU asset contains
the initial amount of the lease liability adjusted for any lease payments
made before the commencement date, less any lease incentives received.
Moreover, any initial direct costs are included, as well as an estimate of
costs to be incurred in dismantling, removing or restoring the underlying
asset. The leased asset is depreciated on a straight-line basis over the
lease term, or over the useful life of the underlying asset if the ownership is
transferred to the Volvo Group at the end of the lease term. The lease
expense is recognized as depreciation of the asset within operating income
and interest expense within the finance net. Payments made are distributed
between interest paid and amortization of the lease liability.
Lease contracts with the Volvo Group as the lessee are primarily con-
tracts for real estate (such as office buildings, warehouses and dealer
premises), company cars and production related assets. For real estate
and company car leases, service components are normally a considerable
portion of the contracts and are therefore separated. The service compo-
nents are recognized as operating expenses and not included in the RoU
asset and the lease liability. For other lease contracts, both the leased
asset and services are included in the RoU asset and the lease liability.
If a lease contract includes variable lease payments not dependent on
an index or rate, or include a low value asset or has a lease term that is
twelve months or less, the lease payments are recognized as operating
expenses as they occur.
SOURCE OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Measurement of lease liabilities and right-of-use assets
When entering a lease contract, judgments related to contract scope,
lease term and interest rate to be used when discounting future lease pay-
ments are made which affect the measurement of the lease liability and
the RoU asset.
Assessment of contract scope includes judgments whether a leased
asset and/or a service component is identified in the contract. In com-
bined contracts, the total contract amount is allocated between the
leased asset and the service by using a market stand-alone price.
When determining the lease term of a contract, judgments are also
required. The lease term includes the non-cancellable period. If the Volvo
Group is reasonably certain to use an option to extend the lease, or not to
use an option to terminate the lease in advance, this is also considered.
The contracts contain a range of different conditions. Extension and ter-
mination options are mainly related to real estate leases. Thus, all relevant
facts and circumstances that create an economic incentive to include
optional periods are evaluated. The importance of the underlying asset in
the operations and its location, availability of suitable alternatives, signifi-
cant leasehold improvements, level of rentals in optional periods com-
pared to market rates as well as past practice are examples of factors
included in the assessment. Lease terms are negotiated on an individual
basis and are reassessed if an option is exercised.
Judgments are also required to determine the interest rate when dis-
counting future lease payments and whether the interest rate implicit in
the lease can be readily determined and thereby used, or if the Volvo
Group’s incremental borrowing rate should be used.
14
Leasing
105
Notes to the financial statements
Volvo Group as the lessor
Lease income
Dec 31,
2021
Dec 31,
2020
Finance leases
Finance income on customer-
financing receivables 2,516 2,625
Total 2,516 2,625
Operating leases
Lease income on assets under
operating lease 10,937 11,532
Total 10,937 11,532
14:1
During 2021, the profit from sale of vehicles subject to finance leases
amounted to SEK 3,624 M (2,863) and was recognized within Industrial
Operations.
As of December 31, 2021, future lease income from non-cancellable
finance and operating leases (minimum lease fees excluding sales with
residual value commitments) amounted to SEK 77,181 M (70,293).
Read more in Note 15 Customer-financing receivables about finance leases.
Maturity analysis of lease
payments receivable
Finance
leases
Operating
leases
2022 22,222 8,041
2023 15,854 5,652
2024 10,364 3,663
2025 5,738 1,493
2026 2,574 670
2027 or later 708 202
Total undiscounted lease payments 57,460 19,721
Unguaranteed residual value 1,123
Unearned finance income –4,052
Allowance for expected credit losses –1,429
Customer-financing receivables
(current and non-current) 53,102
14:2
Volvo Group as the lessee
Lease liabilities
Dec 31,
2021
Dec 31,
2020
Non-current lease liabilities 4,469 4,434
Current lease liabilities 1,632 1,552
Total lease liabilities 6,101 5,986
14:3
Non-current lease liabilities maturities, SEK M
1301 855 636 402 304 972
2023 2024 2025 2026 2027 2028 or later
14:4
During 2021, total cash outflow related to leases amounted to SEK 2,922 M
(3,231), with a distribution of SEK 834 M (975) within operating cash flow
and SEK 2,088 M (2,256) within financing activities.
106
Notes to the financial statements
Carrying amount of right-of-use assets
as of Dec 31, 2021
Buildings Land
Machinery
and
equipment
Company
cars
Asset under
operating lease
and rental
fleet
1
Total
Acquisition cost
Opening balance 2021 6,841 579 801 1,231 439 9,891
Additions to right-of-use assets
2
1,207 95 166 45 –16 1,497
Acquisition cost as of Dec 31, 2021 8,048 674 967 1,276 423 11,388
Accumulated depreciation
Opening balance 2021 –2,341 –99 –366 –693 –141 –3,640
Depreciation –1,313 –29 –190 –399 –64 –1,995
Other changes 104 3 46 271 48 472
Accumulated depreciation as of Dec 31, 2021 –3,550 –125 –510 –821 –157 –5,163
Carrying amount in balance sheet as of Dec 31, 2021 4,498 549 457 455 266 6,225
Carrying amount of right-of-use assets
as of Dec 31, 2020
Buildings Land
Machinery
and
equipment
Company
cars
Asset under
operating lease
and rental
fleet
1
Total
Acquisition cost
Opening balance 2020 6,548 512 639 1,007 418 9,124
Additions to right-of-use assets
2
293 67 162 224 21 767
Acquisition cost as of Dec 31, 2020 6,841 579 801 1,231 439 9,891
Accumulated depreciation
Opening balance 2020 –1,331 –68 –207 –362 –131 –2,099
Depreciation –1,358 –40 –187 –436 –64 –2,085
Other changes 348 9 28 105 54 544
Accumulated depreciation as of Dec 31, 2020 –2,341 –99 –366 –693 –141 –3,640
Carrying amount in balance sheet as of Dec 31, 2020 4,500 480 435 538 298 6,251
14:5
1 Refers to assets leased by the Volvo Group which are later sub-leased to customers as operating lease.
2 Additions to RoU assets mainly relate to new lease contracts signed.
Recognized in the income statement 2021 2020
Interest expense on lease liabilities within Financial Services –1 –2
Depreciation of right-of-use assets –1,995 –2,085
Short term lease expense –462 –530
Low value asset expense –91 –114
Variable lease expense –39 –47
Income from sub-leasing right-of-use assets 155 140
Gains or losses arising from sale and leaseback transactions 13 –
Gains or losses on right-of-use assets 5 2
Recognized in operating income –2,415 –2,636
Interest expense on lease liabilities within Industrial Operations –237 –282
Recognized in net financial items –237 –282
14:6
107
Notes to the financial statements
ACCOUNTING POLICY
Installment credits, dealer financing and other receivables within customer-
financing receivables are held as part of a business model whose objective
is of collecting contractual cash flows. The contractual cash flows are
solely payments of principal and interest and are measured at amortized
cost in accordance with the effective interest method. Finance lease con-
tracts are valued at amortized cost, for further information on recognition
and classification see note 14 Leasing.
The Volvo Group is applying the simplified expected credit loss model
for customer-financing receivables, under which the loss allowance is
measured at an amount equal to lifetime expected credit losses. The
allowance is recorded at initial recognition and is reassessed during the
contract period.
Interest income on customer-financing receivables is recognized within
net sales, mainly within Financial Services. Changes to the allowance for
expected credit losses are recognized in other operating income and expense.
SOURCE OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Allowance for expected credit losses
The assessment of allowances for expected credit losses on customer-
financing receivables is dependent on estimates including assumptions
regarding past dues, repossession rates and quality level of repossessed
collateral.
A collective assessment is made for customer-financing receivables
that are not credit impaired. The assets are grouped based on shared risk
characteristics such as type of customer, geographical area, initial credit
risk rating, collateral type and date of initial recognition to evaluate the
credit losses collectively. Historical information regarding credit loss
experience is used to forecast future losses, adjusted for current and fore-
casted conditions in the different regions based on management’s evalu-
ation of macro-level and portfolio-level factors, such as GDP, oil prices,
unemployment rates etc.
Since the covid-19 pandemic started, the assessment process has been
intensified. The collective assessment for customer-financing receivables
that are not credit impaired is reviewed and adjusted on a more detailed
level, in order to identify individual segments in each market that are signif-
icantly impacted by the pandemic, to forecast future losses on those spe-
cific markets. As a critical part in the collective assessment, the largest
customers in each market are reviewed individually based on the financial
condition of each customer and the value of the underlying collateral. The
impact from government support programs linked to the pandemic and
modifications through extended payment terms and their discontinuance
is taken into consideration, and is monitored closely for on-going payment
performance and signs of impairment. The recent impacts from rising
interest rates and supply shortages is also taken into consideration. Worst
case scenarios from historical information regarding credit loss experience
is also used in order to estimate the potential impact of the pandemic.
Overall, in the collective assessment the historical information regard-
ing credit loss experience is still used as a base and is adjusted based on
information from the detailed assessment from the largest customers.
This provides a basic understanding of how the assessment process has
evolved since the pandemic, and how it impacts customers in various seg-
ments in each market to estimate expected credit losses on the rest of the
customer-financing receivables portfolio.
15
Customer-financing receivables
An individual assessment is made for credit impaired customer-financing
receivables based on the financial condition of the customers and the value
of the underlying collateral and guarantees. The Volvo Group considers a
financial asset credit impaired if it meets one or more of the following
criteria; when there are indications that the customer is unlikely to pay,
such as bankruptcy filing, unauthorized transfer of collateral, at surrender of
collateral etc. or, at the latest, when the customer fails to make contractual
payment within 90 days of when the receivable falls due.
Risk management practices
Other than the dealer financing, customer-financing receivables extend
over several years, but normally the customers make monthly payments
throughout the term to reduce the outstanding exposure. The customer-
financing receivables are secured by the financed commercial vehicles and
equipment. However, in the case of customer default, the value of the
repossessed commercial vehicles and equipment may not necessarily
cover the outstanding financed amount. In order to mitigate this risk,
Financial Services has strong portfolio management processes based on
prudent credit approval, active monitoring of individual loan performance,
utilization of in-house and external collections, portfolio segmentation
analysis, and on-going monitoring of the economic, political and industry
conditions in each market. In addition, other credit enhancements such as
down payments, personal guarantees, credit insurance, liens on other
property owned by the borrower etc. may be required at the time of origi-
nation or when there are signs of impairment. When customer- financing
receivables exceed 90 days of overdue collateral repossession is initiated,
although there may be circumstances where repossession is initiated earlier.
When the collateral is repossessed, the net realizable value is established
and the vehicle is transferred to inventory and becomes part of the Volvo
Group’s normal business activity of selling used vehicles and equipment
and the expected loss on the customer-financing receivable is written off.
If repossession has not occurred on customer-financing receivables
exceeding 180 days of overdue the expected loss on the receivable is written
off. Financial Services continues to engage in enforcement activity on all
customer financing- receivables written off during the year to attempt to
recover the contractual amount not previously received from the customer.
Read more in Note 4 Goals and policies in financial risk management,
for a description of credit risks, interest risks and currency risks.
As of December 31, 2021, the total allowances for impairment in Financial
Services amounted to 1.82% (2.07) of the total credit portfolio in the seg-
ment. This reserve ratio is used as an important measure for Financial
Services and includes operating leases and inventory. Allowances for
expected credit losses for customer-financing receivables has increased
since the beginning of the year from SEK 2,900 M to SEK 3,308 M pri-
marily due to fluctuations in exchange rates. The increase in expected
credit losses due to a higher volume in the credit portfolio were partly
offset by a decrease in expected credit losses, due to improved financial
performance of the customers within Financial Services, leading to a
lower reserve ratio. Part of the increase in allowance for expected credit
losses due to the pandemic recognized last year, is still recognized in cus-
tomer-financing receivables not credit impaired as not all specific cus-
tomers have been identified as credit impaired. Once a customer is iden-
tified as impaired a reclassification is made from the not credit impaired
towards the credit impaired.
108
Notes to the financial statements
The effective interest rate for non-current customer-financing receivables
amounted to 4.92% (4.87) as of December 31, 2021.
The effective interest rate for current customer-financing receivables
amounted to 4.77% (4.71) as of December 31, 2021.
Non-current customer-
financing receivables
Dec 31,
2021
Dec 31,
2020
Installment credits 49,081 40,732
Finance leases 32,279 28,576
Other receivables 2,026 1,239
BS
Non-current customer-
financing receivables 83,386 70,547
15:1
Non-current customer- financing receivables maturities, SEK M
2023 2024 2025 2026
2027 or later
2,38837,630 23,065 13,776 6,529
15:2
Current customer-
financing receivables
Dec 31,
2021
Dec 31,
2020
Installment credits 26,183 21,427
Finance leases 20,823 18,571
Dealer financing 18,952 16,485
Other receivables 2,160 1,502
BS
Current customer-
financing receivables 68,118 57,985
15:3
Credit risk in customer-
financing receivables
Dec 31,
2021
Dec 31,
2020
Customer-financing receivables gross 154,812 131,431
Allowance for expected credit losses for
customer-financing receivables –3,308 –2,900
Whereof allowance for credit impaired
–617 –611
Whereof allowance for not credit impaired –2,691 –2,289
Customer-financing receivables,
net of allowance 151,504 128,531
15:4
1 When a receivable becomes credit impaired a transfer of allowance is made to
allowance for credit impaired receivables.
2 Change in accounting treatment for operating leases within Financial services.
Change of allowance
for expected credit
losses for customer-
financing receivables
2021 2020
Not
credit
impaired
Credit
impaired
Not
credit
impaired
Credit
impaired
Opening balance 2,289 611 1,982 361
New valuation allowance
charged to income 519 238 1,461 269
Reversal of valuation
allowance charged to
income –65 –76 –3 –52
Utilization of valuation
allowance related to
actual losses –0 –386 –0 –702
Movements between not
credit impaired/credit
impaired
1
–188 188 –802 802
Translation differences 129 43 –297 –68
Reclassification
2
111 – – –
Syndication transactions
and other –104 – –52 0
Allowance for
expected credit losses
for customer- financing
receivables as of
December 31 2,691 617 2,289 611
15:5
Customer-financing receivables,
gross exposure
Dec 31, 2021 Dec 31, 2020
Not due 130 3190 >90 Total Not due 130 3190 >90 Total
Customer-financing receivables total 141,281 7,915 4,803 813 154,812 118,974 8,248 2,657 1,551 131,431
Whereof not credit impaired 140,441 7,415 4,390 113 152,359 118,250 8,021 2,237 102 128,610
Whereof credit impaired 840 500 413 700 2,454 725 227 420 1,449 2,821
15:6
109
Notes to the financial statements
ACCOUNTING POLICY
Receivables are measured at amortized cost. The Volvo Group is applying
the simplified expected credit loss model for accounts receivables, under
which the loss allowance is measured at an amount equal to lifetime
expected credit losses. The allowance is recorded at initial recognition
and is reassessed during the contract period. Changes to the allowance
for expected credit losses for accounts receivables are recognized in other
operating income and expense.
Read more in Note 30 Financial instruments in section derecognition
of financial assets, about receivables subject to discounting activities.
16
Receivables
During 2021, the majority of the customers have come to an end of their
modification periods and have resumed their original payment levels. So
far, the customers are generally able to meet their payment obligations as
a result of the increased government support programs and the financial
relief for companies during the modification periods provided by Financial
Services and other obligors. An improved macroeconomic enviroment
such as increased transport and construction activity have also been ben-
eficial for their financial situation, in conjunction with the additional liquid-
ity provided by the Central Banks towards the credit markets. The allow-
ance for expected credit losses on customer financing-receivables is
expected to decrease as the global economy recovers and grows from
current levels. However, there are still concerns as to how the portfolio will
perform as government moratoriums and support programs wind down.
Read more in Note 30 Financial instruments, for information on the gain
or loss recognized in the operating income arising from derecognition of
customer-financing receivables in table
30:3
.
Table
15:6
represents the gross credit exposure on customer-financing
receivables within the Volvo Group per age interval. The lifetime expected
credit loss allowance for customer-financing receivables not credit
impaired amounted to SEK 2,691 M (2,289) and allowance for customer-
financing receivables credit impaired amounted to SEK 617 M (611),
included in tables
15:4
and
15:5
. The remaining exposure was secured
by liens on the financed commercial vehicles and equipment and, in cer-
tain circumstances, other credit enhancements such as personal guaran-
tees, credit insurance, liens on other property owned by the borrower etc.
Collaterals taken in possession that meet the criteria for recognition in the
balance sheet amounted to SEK 104 M (155) as of December 31, 2021.
SOURCE OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Allowance for expected credit losses
Accounts receivables are short term by nature and consequently the risk
assessment horizon is short. Due to the prevailing business model in the
construction equipment industry in China there is also a minor part of
accounts receivables with long payment terms to customers. A collective
assessment is made on accounts receivables not credit impaired. Histori-
cal information regarding credit loss experience is used to forecast future
losses, adjusted for current and forecasted conditions. An individual
assessment is made on credit impaired accounts receivables based on the
financial condition of the customer.
The covid-19 pandemic is in a new phase where many countries have
eased their restrictions and made changes to the government support
programs implemented last year. However, the duration and future devel-
opment of the pandemic is still unknown. As a consequence, the assess-
ment of valuation allowances for expected credit losses for accounts
receivables continues to be in focus in order to ensure allowances are in
alignment with the new phase of the economic environment.
Concentration of credit risk
Customer concentration
The ten largest customers within Financial Services account for 5.7%
(5.6) of the total asset portfolio. The rest of the portfolio is attributable to
a large number of customers and the credit risk is therefore spread across
many customers. During 2021 SEK 9.8 billion (6.8) of customer financing
receivables were syndicated in order to reduce concentration risks.
Concentration by geographical market
Graph
15:7
discloses the concentration of Financial Services portfolio
divided into geographical markets.
Read more in Note 4 Goals and policies in financial risk management about
credit risks.
Read more in the Board of Directors’ report about Financial Services’
development during the year.
Geographic market, percentage of customer-financing portfolio (%)
Europe, 39.7%
North America, 39.0%
Asia, 7.1%
South America, 9.9%
Africa and Oceania, 4.3%
15:7
110
Notes to the financial statements
1 The amount is the current part of other interest-bearing receivables in note 30
Financial instruments, table
30:1
.
2 The amount is the current part of Interest and currency risk derivatives in note 30
Financial instruments, table
30:1
.
3
Read more in Note 7 Revenue, about contract and right of return assets.
Current receivables
Dec 31,
2021
Dec 31,
2020
Other interest-bearing receivables
1
1,255 199
Accounts receivables 40,776 35,660
Prepaid expenses and accrued income 3,225 2,700
VAT receivables 4,205 2,638
Interest and currency risk derivatives
2
840 1,612
Contract and right of return assets
3
1,641 3,845
Other receivables 7,526 5,950
Current receivables, after deduction of
allowance for expected credit losses on
accounts receivable s 59,468 52,605
16:2
1 Whereof reclassification to other non-current receivables of SEK –104 M (55).
Read more in Note 30 Financial instruments.
Change of allowance
for expected credit losses
on accounts receivables
2021 2020
Opening balance 771 1,021
New allowance charged to income 433 378
Reversal of allowance charged to income –177 –418
Utilization of allowance related to actual losses –144 –196
Translation differences 61 –71
Reclassifications, etc
1
–99 57
Allowance for expected credit losses on
accounts receivables as of December 31 846 771
16:3
Age analysis of accounts receivables
Dec 31, 2021 Dec 31, 2020
Not Due 130 3190 >90 Total Not Due 130 3190 >90 Total
Accounts receivables gross 37,173 1 ,813 1,258 1,377 41,622 32,788 1,692 557 1,394 36,431
Allowance for expected credit losses
on accounts receivables –241 –59 –53 –493 –846 –183 –11 –28 –549 –771
BS
Accounts receivables net 36,932 1,753 1,205 885 40,776 32,605 1,680 529 846 35,660
16:4
Risk management practices
Credit risks are managed through active credit monitoring and follow-up
routines in accordance with the Volvo Group Credit management direc-
tive. This directive includes different steps to perform when an invoice is
not paid at due date. When an increased credit risk is verified, for example
through a bankruptcy, or when an allowance has been unchanged for two
years and it can be demonstrated that all required steps have been per-
formed the allowance is reversed and the accounts receivables are written
off. Apart from certain exceptions the Volvo Group continues to engage
in enforcement activity even after a write-off in order to recover the con-
tractual amount not previously received.
A significant part of accounts receivables is related to the construction
equipment industry in China. Due to the prevailing business model in
China there is also a minor part of accounts receivables with long pay-
ment terms to customers. Should construction and mining activity in
China decline rapidly and substantially, this may negatively impact cus-
tomers’ and dealers’ ability to honor their obligations to the Group and
consequently have an adverse effect on the Group’s financial result.
Renegotiated receivables are on the same level as last year, with the
majority of the exposure related to renegotiated receivables within Con-
struction Equipment in China. Renegotiated receivables continue to be
closely monitored for on-going payment performance and signs of impair-
ment.
As of December 31, 2021, the total allowance for expected credit losses
for accounts receivables amounted to 2.03% (2.12) of total accounts
receivables.
Read more in Note 4 Goals and policies in financial risk management, regarding
credit risk.
Non-current receivables
Dec 31,
2021
Dec 31,
2020
Other interest-bearing receivables
1
436 203
Interest and currency risk derivatives
2
2,090 4,437
Contract and right of return assets
3
4,195 3,390
Other receivables 4,257 4,733
Non-current receivables 10,978 12,763
16:1
1 The amount is the non-current part of other interest-bearing receivables in note
30 Financial instruments, table
30:1
.
2 The amount is the non-current part of Interest and currency risk derivatives in
note 30 Financial instruments, table
30:1
.
3
Read more in Note 7 Revenue, about contract and right of return assets.
111
Notes to the financial statements
17
Inventories
ACCOUNTING POLICY
Inventories are measured at the lower of cost and net realizable value.
The cost is established by using the first-in, first-out principle (FIFO)
and is based on a standard cost method, including costs for all direct man-
ufacturing expenses and the attributable share of capacity and other
manu facturing-related costs. The standard costs are reviewed regularly
and adjustments are made based on current conditions. Manufacturing
costs are based on normal capacity utilization which are allocated to inven-
tory while unabsorbed cost due to changes in production volume are rec-
ognized in the income statement as incurred. Costs for research and devel-
opment, selling, administration and financial expenses are not in cluded.
Net realizable value is calculated as the selling price less costs attribut-
able to the sale.
SOURCE OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Write-down of inventories
The calculation of net realizable value involves estimation of a future sales
price, which is dependent on several parameters, such as market demand,
model changes and development of used products prices. If the esti-
mated net realizable value is lower than cost, a write down of invent ories
is made.
Inventories
Dec 31,
2021
Dec 31,
2020
Finished products 32,297 26,589
Production materials etc. 31,619 21,036
BS
Inventories 63,916 47,625
17:1
The total value of inventories, net after write-downs, was SEK 63,916 M
(47,625) as of December 31, 2021. Inventories recognized as cost of sold
products during the period amounted to SEK 273,872 M (244,512).
Change in write-down of inventories 2021 2020
Opening balance 3,452 4,303
Change in write-down of
inventories charged to income 334 554
Scrapping –373 –510
Translation differences 171 –259
Reclassifications etc. –3 –637
Write-down of inventories
as of December 31 3,581 3,452
17:2
112
Notes to the financial statements
ACCOUNTING POLICY
Cash and cash equivalents include highly liquid interest-bearing securities
that are considered easily convertible to cash. These include market able
securities and reverse repurchase agreements, with a date of maturity
within three months at the time of investment. Interest-bearing securities
with a date of maturity exceeding three months at the time of investment
are recognized as marketable securities.
Read more in Note 30 Financial instruments, about accounting policies for
financial instruments.
Cash and cash equivalents
Dec 31,
2021
Dec 31,
2020
Cash in banks 46,286 60,571
Marketable securities with original
duration less than 3 months
1
1,803 2,327
Time deposits in banks 14,038 14,495
Reverse repurchase agreements
2
– 7,812
BS
Cash and cash equivalents 62,126 85,206
18:1
1 Additionally the Volvo Group recognized outstanding marketable securities
with original duration exceeding 3 months of SEK 167 M (213) in government
securities as of December 31, 2021.
2 A reverse repurchase agreement is a financial transaction where one party
commits to buy securities from a counterpart with the agreement to sell back
the securities at an agreed price at a set future date.
18 Cash and cash equivalents
Cash and cash equivalents as of December 31, 2021, include SEK 2.8 billion
(2.5) that is not available for use by the Volvo Group and SEK 8.7 billion
(11.0) where other limitations exist, mainly cash and cash equivalents in
countries where exchange controls or other legal restrictions apply. There-
fore, it is not possible to immediately use these cash and cash equivalents
in other parts of the Volvo Group, however there is normally no limitation to
use them for the Volvo Group’s operation in the respective country.
113
Notes to the financial statements
Information regarding shares 2021 2020
Number of outstanding shares, December 31, in millions 2,033 2,033
Average number of shares before dilution in millions 2,033 2,033
Average number of shares after dilution in millions 2,033 2,033
Average share price, SEK 208.80 158.23
Net income attributable to owners of AB Volvo 32,787 19,318
Basic earnings per share, SEK 16.12 9.50
Diluted earnings per share, SEK 16.12 9.50
19:4
Series A shares Series B shares Total
Outstanding shares 2021 2020 2021 2020 2021 2020
Outstanding shares opening balance 448,113,346 456,184,336 1,585,338,738 1,577,267,748 2,033,452,084 2,033,452,084
Converting Series A shares to Series B shares –3,125,400 –8,070,990 3,125,400 8,070,990 – –
Outstanding shares as of December 31 444,987,946 448,113,346 1,588,464,138 1,585,338,738 2,033,452,084 2,033,452,084
19:3
Change in other reserves
Holding of
shares at
fair value
Opening balance 2021 230
Remeasurements of holdings of
shares at fair value 48
Disposal –270
Balance as of December 31, 2021 8
19:1
Information regarding
number of shares
Dec 31,
2021
Dec 31,
2020
Own Series A shares – –
Own Series B shares – –
Total own shares – –
Own shares in % of total
registered shares – –
Outstanding Series A shares 444,987,946 448,113,346
Outstanding Series B shares 1,588,464,138 1,585,338,738
Total outstanding shares 2,033,452,084 2,033,452,084
Total registered Series A shares 444,987,946 448,113,346
Total registered Series B shares 1,588,464,138 1,585,338,738
Total registered shares 2,033,452,084 2,033,452,084
Average number of
outstanding shares 2,033,452,084 2,033,452,084
19:2
ACCOUNTING POLICY
Earnings per share before dilution is calculated as income for the period,
attributable to the owners of AB Volvo, divided by AB Volvo’s average
number of outstanding shares for the fiscal year. Diluted earnings per
share is calculated as income for the period attributable to the owners of
AB Volvo, divided by AB Volvo’s average number of outstanding shares
after dilution for the fiscal year. If during the year there were potential
shares redeemed or expired, they are included in the average number of
shares used to calculate the earnings per share after dilution.
The Annual General Meeting, held on March 31, 2021, resolved that an
ordinary dividend of SEK 6.00 (–) per share and an extraordinary dividend
amounted to SEK 9.00 (–) should be paid to shareholders.
On April 1, 2021, the Volvo Group divested UD Trucks. An Extraordinary
General Meeting was held on June 29, 2021 and the meeting resolved that
the proceeds from the divestment should be paid to the shareholders
through an extra distribution of SEK 9.50 per share.
The share capital of the Parent company amounted to SEK 2,562 M
(2,562) on December 31, 2021 and is divided into two series of shares, A
and B. Both series carry the same rights, except that each Series A share
carries the right to one vote and each Series B share carries the right to
one tenth of a vote. The shares’ quota value is SEK 1.26 (1.26). During
2021 AB Volvo converted a total of 3,125,400 Series A shares to Series B
shares. Unrestricted equity in the Parent company as of December 31,
2021 amounted to SEK 61,311 M (54,801).
Read more in Changes in equity in the Parent company about AB Volvo’s share
capital.
19
Equity and number of shares
114
Notes to the financial statements
ACCOUNTING POLICY
The Volvo Group’s post-employment benefits, such as pensions, health-
care and other benefits are mainly settled by means of regular payments
to independent authorities or bodies that assume pension obligations and
administer pensions through defined contribution plans.
The remaining post-employment benefits are defined benefit plans
where the obligations remain within the Volvo Group and are secured by
proprietary pension foundations. The Volvo Group’s defined benefit plans
relate mainly to subsidiaries in the USA and comprise both pensions and
other benefits, such as healthcare. Other large-scale defined benefit
plans apply to white collar employees in Sweden (mainly through the ITP
pension plan) and employees in France, Great Britain and Belgium.
Actuarial calculations are made for all defined benefit plans in order to
determine the present value of the obligation for benefits vested by its
current and former employees. The actuarial calculations are prepared
annually and are based upon actuarial assumptions that are determined at
the end of the reporting period. Changes in the present value of obliga-
tions due to revised actuarial assumptions and experience adjustments
constitute remeasurements.
Provisions for post-employment benefits in the Volvo Group’s balance
sheet correspond to the present value of obligations at year-end, less fair value
of plan assets. All changes in the net defined liability (asset) are recognized
when they occur. Service cost and net interest expense (income) are recog-
nized in the income statement, while remeasurements such as actuarial gains
and losses are recognized in other comprehensive income. Special payroll tax
is included in the pension liability in pension plans in Sweden and Belgium.
For defined contribution plans, expenses for premiums are recognized
in the income statement as incurred.
SOURCE OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Assumptions when calculating post-employment benefits
Provisions and costs for post-employment benefits, mainly pensions and
health care benefits, are dependent on actuarial assumptions. The actuarial
assumptions and calculations are made separately for each defined benefit
plan. The most significant assumptions are discount rate and inflation.
Inflation assumptions are based on an evaluation of external market
indicators. A sensitivity analysis is included in graph
20:6
and shows the
effect on the defined benefit obligations if significant assumptions are
changed. There are also other assumptions made such as salary increases,
retirement rates, mortality rates, health care cost trends rates and other
factors. The salary increase assumptions reflect the historical trend, the
near-term and long-term outlook and assumed inflation. Retirement and
mortality rates are based primarily on officially available mortality statistics.
Healthcare cost trend assumptions are based on historical data as well as
the near-term outlook and an assessment of likely long-term trends. The
Volvo Group has engaged a global actuary in order to ensure that a profes-
sional assessment is made and that assumptions are consistently devel-
oped across jurisdictions. The actuarial assumptions are reviewed annually
by the Volvo Group and modified when deemed appropriate.
Even tough the covid-19 pandemic still was present around the globe,
the movements on the financial markets during 2021 led to significant
improvments in funding status of the group’s pension plans.
20
Provisions for post-employment benefits
Assumptions applied for
actuarial calculations
Dec 31,
2021
Dec 31,
2020
Sweden
Discount rate, %
1
2.00 1.45
Inflation, % 1.75 1.75
Expected salary increase, % 2.40 2.40
Assumed life expectancy on
retirement at age 65 (Male/Female)
Retiring today (member age 65), year 20.923.5 20.923.5
Retiring in 25 years
(member age 40 today), year 22.724.6 22.724.6
USA
Discount rate, %
1, 2
1.152.81 0.532.42
Inflation, % 2.20 2.20
Expected salary increase, % 3.50 3.003.50
Assumed life expectancy on
retirement at age 65 (Male/Female)
Retiring today (member age 65), year 20.522.3 20.522.2
Retiring in 25 years
(member age 40 today), year 22.424.1 22.324.0
France
Discount rate, %
1
1.19 0.87
Inflation, % 1.50 1.50
Expected salary increase, % 2.50 2.50
Great Britain
Discount rate, %
1
1.80 1.40
Inflation, % 3.30 2.90
Expected salary increase, % 0.00 0.00
Assumed life expectancy on
retirement at age 65 (Male/Female)
Retiring today (member age 65), year 22.123.8 22.023.7
Retiring in 25 years
(member age 40 today), year 23.926.4 23.826.3
Belgium
Discount rate, %
1
1.21 0.81
Inflation, % 1.50 1.50
Expected salary increase, % 2.51 2.52
20:1
1 The discount rate for each country is determined by reference to market yields on
high quality corporate bonds. In countries where there is no functioning market in
such bonds, the market yields on government bonds are used. The discount rate
for the Swedish pension obligation is determined by extra polating current market
rates along the yield curve of mortgage bonds.
2 For all plans except three the discount rate used is within the range 2.472.81%
(1.972.42).
The following tables disclose information about defined benefit plans. The
Volvo Group recognizes the difference between the obligations and the
plan assets in the balance sheet. The disclosures refer to assumptions
applied for actuarial calculations, recognized costs during the financial
year and the value of obligations and plan assets at year-end. The tables
also include a reconciliation of obligations and plan assets during the year.
115
Notes to the financial statements
Pension costs 2021 2020
Current year service costs 1,943 1,558
Interest costs 1,062 1,314
Interest income –917 –1,128
Past service costs
1
–67 –710
Gain/loss on settlements –51 –
Pension costs for the period,
defined benefit plans 1,971 1,034
Pension costs for defined contribution plans 2,958 2,597
Total pension costs for the period 4,928 3,631
20:3
1 Past service costs in 2020 includes a positive effect of SEK 721 M from the
announced freeze of two defined benefit plans in the USA, a change of inflation
index from RPI to CPI for two defined benefit plans in Great Britian, a freeze of
current defined benefit plan in the Netherlands and a curtailment impact in France.
The analysis in graph
20:6
presents the sensitivity of the defined benefit
obligations when changes in the applied assumptions for discount rate
and inflation are made. The sensitivity analysis is based on a change in
an assump tion while holding all other assumptions constant. In practice,
this is not probable, and changes in some of the assumptions may be
correlated. Depending on specific plan and benefit design, the sensitivity
effect on the obligation differs for the respective assumptions.
Sweden
Pensions
USA
Pensions
France
Pensions
Great Britain
Pensions
Belgium
Pensions
USA
Other benefits
Average duration of the obligations, years 23.0 11.9 13.1 18.3 12.3 10.5
20:5
Costs for the period, post-employ-
ment benefits other than pensions
2021 2020
Current year service costs 110 86
Interest costs 104 142
Interest income –28 –28
Past service costs 4 –15
Gain/loss on settlements – –
Remeasurements 148 79
Total costs for the period 338 265
20:4
Summary of provisions for
post-employment benefits
Dec 31,
2021
Dec 31,
2020
Obligations –65,122 –67,920
Fair value of plan assets 55,317 51,203
Net provisions for post-employment
benefits –9,805 –16,718
20:2
116
Notes to the financial statements
Obligations in defined benefit plans
Sweden
Pensions
USA
Pensions
France
Pensions
Great
Britain
Pensions
Belgium
Pensions
USA
Other
benefits
Other
plans Total
Obligations opening balance 2020
23,964 21,675 2,733 8,068 3,562 3,620 4,713 68,335
Acquisitions, divestments and other changes 0 56 0 –4 0 38 –898 –807
Current year service costs
1
431 502 178 1 265 19 248 1,644
Interest costs 405 636 32 157 39 103 85 1,456
Past service costs 99 –357 –89 –182 – 0 –63 –592
Settlements – – – – – 0 –3 –3
Employee contributions – – – – 0 30 40 70
Remeasurements
2
:
– Effect of changes in demographic assumptions – –135 17 –163 – –39 3 –316
– Effect of changes in financial assumptions 1,524 2,070 4 910 132 306 9 4,956
– Effect of experience adjustments 749 –51 –30 –231 17 65 41 560
Exchange rate translation 0 –2,711 –109 –752 –148 –436 –241 –4,396
Benefits paid –494 –1,413 –57 –272 –118 –342 –291 –2,987
Obligations as of December 31, 2020
3
26,677 20,273 2,680 7,533 3,750 3,363 3,644 67,920
of which
Funded defined benefit plans –26,073 –19,560 –18 –7,534 –3,749 0 –2,405 –59,339
Acquisitions, divestments and other changes 0 –6 – – –3 0 66 56
Current year service costs 861 547 170 0 213 51 211 2,053
Interest costs 385 459 24 123 31 70 74 1,165
Past service costs 69 55 – – –106 –0 –19 –1
Settlements – –1,140 – – – – –2 –1,142
Employee contributions – – – – – 29 53 82
Remeasurements
4
:
– Effect of changes in demographic assumptions – 59 0 – – –23 –37 –1
– Effect of changes in financial assumptions –3,255 –1,155 –109 –179 –186 –172 –130 –5,185
– Effect of experience adjustments –238 –37 –111 – –59 152 27 –267
Exchange rate translation – 2,154 52 742 73 348 135 3,505
Benefits paid –551 –1,389 –106 –286 –106 –338 –288 –3,064
Obligations as of December 31, 2021 23,948 19,819 2,600 7,934 3,607 3,480 3,735 65,122
of which
Funded defined benefit plans –23,517 –19,088 –15 –7,934 –3,579 – –2,567 –56,699
20:7
1 In 2020, current year service cost for Sweden includes a positive effect of SEK 604 M from a correction of actuarial calculations.
2 In 2020, remeasurements for Sweden includes a negative effect of SEK 1,663 M for corrections of actuarial calculations.
3 Obligation as of December 31, 2020 for Sweden includes an increase of SEK 1,059 M related to a correction of actuarial calculations.
4 Out of the total remeasurement of the defined benefit obligation, SEK 5,601 M (
– 5,121) has been recognized in Other Comprehensive Income, and –148 M (–79) in the
Income Statement.
−
+
2,950
1,262
188
774
174
216
0
7
13
28
414
162
238
3,225
–2,579
–1,136
–172
–679
–159
–191
–210
Effect on obligation, SEK M
Sweden Pensions
USA Pensions
USA Other benefits
Other plans
France Pensions
Great Britain Pensions
If inflation decreases 0.5% If inflation increases 0.5%
Sweden Pensions
USA Pensions
USA Other benefits
Other plans
France Pensions
Great Britain Pensions
Belgium Pensions
SENSITIVITY
ANALYSIS 2021
If discount rate increases 0.5% If discount rate decreases 0.5%
Belgium Pensions
–2,340
0
–6
–398
–11
–28
–150
20:6
117
Notes to the financial statements
Fair value of plan assets in funded plans
Sweden
Pensions
USA
Pensions
France
Pensions
Great
Britain
Pensions
Belgium
Pensions
USA
Other
benefits
Other
plans Total
Plan assets opening balance 2020
14,680 22,301 15 8,040 2,685 –12 2,301 50,010
Acquisitions, divestments and other changes 0 45 – –4 0 49 –169 –79
Interest income 250 656 0 162 30 0 58 1,156
Settlements – – – – – – 0 0
Remeasurements 964 2,062 0 908 104 0 27 4,065
Asset ceiling – – – –749 – – –1 –750
Employer contributions 1,998 0 0 147 209 39 152 2,545
Employee contributions – 28 – – 0 263 40 331
Exchange rate translation 0 –2,771 –1 –752 –110 –4 –170 –3,808
Benefits paid 1 –1,404 – –272 –114 –302 –175 –2,266
Plan assets as of December 31, 2020 17,892 20,917 15 7,480 2,804 33 2,063 51,203
Acquisitions, divestments and other changes 0 –3 –1 – 0 – 51 47
Interest income 264 478 0 123 23 – 56 944
Settlements – –1,090 – – – – – –1,090
Remeasurements
1
2,368 –119 0 –561 171 – –46 1,813
Asset ceiling – – – 464 – – 16 479
Employer contributions 322 – – 65 163 – 215 766
Employee contributions – 30 – – – – 54 84
Exchange rate translation – 2,188 0 740 54 3 85 3,070
Benefits paid –1 –1,387 0 –286 –102 0 –223 –2,000
Plan assets as of December 31, 2021 20,845 21,013 14 8,024 3,113 37 2,271 55,317
20:8
1 Out of the total remeasurement of the plan assets, SEK 2,292 M (3,314) has been recognized in Other Comprehensive Income.
Net provisions for post-employment benefits
Sweden
Pensions
USA
Pensions
France
Pensions
Great
Britain
Pensions
Belgium
Pensions
USA
Other
benefits
Other
plans Total
Net provisions for post-employment benefits
as of December 31, 2020 –8,784 643 –2,665 –53 –947 –3,330 –1,581 –16,718
of which reported as:
BS
Net pension assets – 1,512 – 81 – 120 0 1,712
BS
Provisions for post-employment benefits
–8,784 –869 –2,665 –134 –947 –3,449 –1,581 –18,430
Net provisions for post-employment benefits as
of December 31, 2021 –3,102 1,194 –2,586 91 –494 –3,443 –1,464 –9,805
of which reported as:
BS
Net pension assets – 2,234 – 104 – 34 – 2,372
BS
Provisions for post-employment benefits –3,102 –1,040 –2,586 –13 –494 –3477 –1,464 –12,177
20:9
SEK 6,654 M, whereof SEK 322 M (1,998) during 2021, have been made
to the foundation. The plan assets in the Volvo Group’s Swedish pension
foundation are invested in Swedish and foreign stocks and mutual funds,
and in interest-bearing securities and alternative assets, in accordance with
a strategic allocation that is determined by the foundation’s Board of Direc-
tors. As of December 31, 2021, the fair value of the foundation’s plan assets
amounted to SEK 20,822 M (17,871), of which 35% (45) was invested in
equity instruments. At the same point in time, retirement pension obliga-
tions attributable to the ITP plan amounted to SEK 23,496 M (26,048).
Sweden
The main defined benefit plan in Sweden is the ITP2 plan which is based
on final salary. The plan is semi-closed, meaning that only new employees
born before 1979 enters the ITP2 solution. The Volvo Group’s pension
foundation in Sweden was formed in 1996 to secure obligations relating
to retirement pensions for white collar workers in Sweden in accordance
with the ITP plan. Plan assets amounting to SEK 2,456 M were contrib-
uted to the foundation at its formation, corresponding to the value of the
pension obligations at that time. Since its formation, net contributions of
118
Notes to the financial statements
Swedish companies can secure new pension obligations through balance
sheet provisions or pension fund contributions. Furthermore, a credit insur-
ance policy must be taken out for the value of the obligations. In addition to
benefits relating to retirement pensions, the ITP plan also includes, for
example, a collective family pension, which the Volvo Group finances
through an insurance policy with the Alecta insurance company. According
to an interpretation from the Swedish Financial Reporting Board, this is a
multi-employer defined benefit plan. For the fiscal year 2021, the Volvo
Group did not have access to information from Alecta that would have
enabled this plan to be recognized as a defined benefit plan. Accordingly,
the plan has been recognized as a defined contribution plan. The Volvo
Group estimates it will pay premiums of about SEK 243 M to Alecta in
2022. The collective consolidation level measures the apportionable assets
in relation to the insurance commitment. According to Alecta’s consolida-
tion policy for defined benefit pension insurance, the collective consolida-
tion level is normally allowed to vary between 125% and 175%. Alecta’s
preliminary consolidation ratio amounts to 172% (148). If the consolidation
level falls short or exceeds the normal interval, one measure may be to
increase the contract price for new subscription or to introduce premium
reductions.
The Volvo Group’s share of the total saving premiums for ITP2 in Alecta
as of December 31, 2021 amounted to 0.24% (0.18) and the share of the
total number of active policy holders amounted to 1.72% (1.78).
All employees in Sweden benefit from a jubilee awards plan according
to which they receive a certain number of shares after they have rendered
25, 35 and 45 years of services. This plan is accounted for as a share-
based payment program, where the fair value of the equity-settled pay-
ments is determined at the grant date. The plan is recognized as other
liabilities. Due to the postponement of share allotment in 2020 as a con-
sequence of covid-19, share allotment for both 2020 and 2021 have been
made in the current year.
USA
In the USA, the Volvo Group has tax qualified pension plans, post- retirement
medical plans and non-qualified pension plans. The tax qualified pension
plans are funded while the other plans are generally unfunded. There are
five funded defined benefit plans, whereof all are closed to new entrants.
Three out of five plans are open for future accruals. The Volvo Group’s
subsidiaries in the USA mainly secure their pension obligations through
transfer of funds to pension plans. The US Retirement Trust manages the
assets related to the five funded plans. The strategic allocation of plan
assets must comply with the investment policy as decided by the Board
of Directors of the Trust. All members of the board are nominated by the
company although each member is subject to strict regulatory require-
ments on fiduciary responsibility. As of December 31, 2021, the total
value of pension obligations secured by pension plans of this type
amounted to SEK 19,088 M (19,560). At the same point in time, the total
value of the plan assets in these plans amounted to SEK 21,013 M
(20,917), of which 13% (11) was invested in equity instruments.
The regulations for securing pension obligations stipulate certain mini-
mum levels concerning the ratio between the value of the plan assets and
the value of the obligations. During 2021 and 2020 no contributions were
made by the Volvo Group to the USA pension plans.
Cash and cash equivalents, 869 (2%)
Equity instruments, 11,274 (20%)
Debt instruments, 38,771 (69%)
Real estate, 1,682 (3%)
Assets held by insurance company, 2,658 (5%)
Other assets, 584 (1%)
Plan assets by category as of December 31, 2021
¹
Cash and cash equivalents, 1,359 (3%)
Equity instruments, 11,580 (22%)
Debt instruments, 36,018 (69%)
Real estate, 1,412 (3%)
Assets held by insurance company, 1,447 (3%)
Other assets, 359 (1%)
Plan assets by category as of December 31, 2020
20:10
Fair value of plan assets Dec 31, 2021 Dec 31, 2020
Cash and cash equivalents 869 1,357
With a quoted market price
Equity instruments 8,476 9,400
Debt instruments 38,413 35,358
Real estate 20 167
Derivatives –15 –3
Other 1,001 500
With an unquoted market price
Other 7,074 5,397
Total
1
55,838 52,176
20:11
1 Excluding asset ceiling of SEK 521 M (973).
119
Notes to the financial statements
France
In France, the Volvo Group has two types of defined benefit plans,
Indemnité de Fin de Carrière (IFC) and jubilee awards plan. The plans are
unfunded. The IFC is compulsory in France. The benefits are based on the
Collective Bargaining Agreement applicable in the company, on the
employee’s seniority at retirement date and on the final pay. The benefit
payment is due only if employees are working for the company when they
retire. The jubilee award plan is an internal agreement and the benefit is
based on the employee’s seniority career at 20, 30, 35 and 40 years. As
of December 31, 2021, the total value of pension obligations amounted to
SEK 2,600 M (2,680).
Great Britain
In Great Britain, the Volvo Group has five defined benefit pension plans,
which are all funded. The pension funds are set up as separate legal enti-
ties, which are governed by a professional trustee. All plans are closed to
new entrants and closed for future accruals to existing members. The allo-
cation of plan assets must comply with the investment strategy agreed
between the company and the professional trustee. For three of the plans,
if a net surplus is recognized in the balance sheet when the pension
scheme runs-off, the Volvo Group has an unconditional right to the sur-
plus of that plan or plans. For two plans this is not strictly legally the case
and therefore an asset ceiling is applied. As of December 31, 2021, the
total value of pension obligations amounted to SEK 7,934 M (7,533). At
the same point in time, the total value of the plan assets in these plans
amounted to SEK 8,024 M (7,480), of which 5% (6) was invested in equity
instruments. During 2021, the Volvo Group contributed SEK 65 M (147)
to the Great Britain pension plans.
Belgium
In Belgium, the Volvo Group has four traditional defined benefit pension
plans based on final salary, whereof all are closed to new entrants. All plans
are open for future accruals. Two are funded via an external pension fund
with a legally ringfenced Volvo section and two are funded via the group
insurance product referred to in Belgium as Branch 21. Benefits are paid as
a lump sum at retirement. There is also an open defined contribution pen-
sion plan as well as a local profit sharing program whereby any pay-outs are
contributed to a defined contribution pension plan managed by the own
pension fund or through a group insurance. All defined contribution pension
plans in Belgium have a statutory minimum return guarantee and are there-
fore accounted for as defined benefit plans. The strategic asset allocation
of plan assets must comply with the investment policy as proposed by the
Volvo Group and formally adopted by the Board of Directors of the pension
fund. As of December 31, 2021, the total value of pension obligations
amounted to SEK 3,607 M (3,750). At the same point in time, the plan
assets of these plans amounted to SEK 3,113 M (2,804), of which 27%
(27) was invested in equity instruments. During 2021, the Volvo Group
contributed SEK 163 M (209) to the Belgium pension plans.
Investment strategy and risk management
The Volvo Group manages the allocation and investment of pension plan
assets with the purpose of meeting the long term objectives. The main
objectives are to meet present and future benefit obligations, provide
sufficient liquidity to meet such payment requirements and to provide a
total return that maximizes the ratio of the plan assets in relation to the
plan liabilities by maximizing return on the assets at an appropriate level of
risk. The final investment decision often resides with the local trustee, but
the investment policy for all plans ensures that the risks in the investment
portfolios are well diversified. The primary risk mitigating activity in the
long run is to close defined benefit plans to new entrants or to future accru-
als for existing members and replace these plans with defined contribution
plans when and where possible. The risks related to already accrued pension
obligations, e.g. longevity and inflation, as well as buy out premiums and
matching strategies are monitored on an ongoing basis in order to further
limit the Volvo Group’s exposure where and when possible.
In the last couple of years, some of the defined benefit plans have been
closed to new entrants and replaced by defined contribution plans in order
to reduce risk for the Volvo Group.
In Sweden, the minimum funding target is decided by PRI Pensions-
garanti. This is mandatory in order to stay in the system and get insurance
for the pension liability. The contributions usually represent one year’s new
accrued benefits plus any shortfall towards the minimum funding target
unless there is a surplus according to local scheme valuation principles.
In the USA, the minimum funding target is decided by the company in
order to avoid penalties, keep flexibility and avoid extensive filing with the
Internal Revenue Service and participants in the pension plan. The mini-
mum contributions usually represent one year’s accrued benefits plus a
seventh of any deficit unless a scheme is showing a surplus according to
local scheme valuation principles.
In Great Britain, there is no minimum funding ratio. There is a regulatory
requirement for each scheme to perform triennial valuations whereby
any scheme showing a deficit must develop a recovery plan that returns
the scheme to a fully funded basis within a reasonable timeframe. The
recovery plan shall be agreed with the company and submitted to the
regulator for approval.
In Belgium, the minimum funding level is regulated by law and monitored
by the financial supervisory authority, FSMA. The framework for the mini-
mum funding requirement is based on a discount rate, which is based on
the expected return of the plan assets. The pension fund must be fully
funded on this basis at all times. The contribution policy of the pension fund
is designed to provide stability in contributions over the duration of the plan.
In 2022, the Volvo Group estimates to transfer an amount of SEK 0.51.0
billion to pension plans.
120
Notes to the financial statements
ACCOUNTING POLICY
Provisions are recognized in the balance sheet when a legal or construc-
tive obligation exists as a result from a past event, it is probable that an
outflow of resources will be required to settle the obligation and the
amount can be reliably estimated. When these criteria are not met, a con-
tingent liability may be recognized.
Provisions for product warranty
Provisions for product warranty are recognized as cost of sales and
include contractual warranty and campaign warranty. Provisions for con-
tractual warranty are recognized when the products are sold. Provision for
campaigns in connection with specific quality problems are recognized
when the campaign is decided.
Provisions for technical goodwill
Technical goodwill is coverage in excess of contractual warranty or cam-
paigns in order to maintain a good business relation with the customer.
The provisions for technical goodwill are determined based on historical
statistics for customers where an element of constructive obligation exists.
Provisions for extended coverage
An extended coverage is a product insurance sold to a customer to cover
a product according to specific conditions for an agreed period as an addi-
tional insurance to the factory contractual warranty. The provision is
intended to cover the risk that the expected cost of providing services
under the extended coverage contract exceed the expected revenue.
Provisions in insurance operations
Volvo Group has a captive insurance company and the provisions in insur-
ance operations are related to third party claims addressed to companies
within the Volvo Group. The claims reserve also includes a provision for
unreported losses based on past experience. The unearned premium
reserve is reported as an accrued expense within other current liabilities.
Provisions for restructuring costs
A provision for decided restructuring measures is recognized when a
detailed plan for the implementation of the measures is complete and
when this plan is communicated to those who are affected. A provision
and costs for termination benefits as a result of a voluntary termination
program is recognized when the employee accepts the offer. Normally
restructuring costs are included in other operating income and expenses.
Provisions for residual value risks
Residual value risks are the risks that the Volvo Group in the future would
have to dispose used vehicles at a loss if the price development of these
products is worse than expected when the contracts were entered. The
residual value risks pertain to operating lease contracts and sales transac-
tions with residual value commitments (buybacks and tradebacks) where
the Volvo Group has a residual value commitment. The majority of these
contracts are recognized as assets under operating leases or as right of
return asset in the balance sheet. During the period, the depreciable
amount is adjusted through the income statement to correspond to esti-
mated future net realizable value to continuously reflect potential residual
value risks at the end of the contract period.
Read more in Note 13 Tangible assets about residual value risks.
Residual value commitments that are independent from the sales trans-
action are not recognized as assets under operating leases or as right of
return in the balance sheet, hence the potential residual value risks related
to these contracts are recognized as provisions. To the extent the residual
value exposure does not meet the definition of a provision, the gross exposure
is reported as a contingent liability.
Read more in Note 24 Contingent liabilities and contingent assets.
Provisions for service contracts
Service contracts offer the customer preventive maintenance according to
an agreed service plan. The provision is intended to cover the risk that the
expected cost of providing services and repairs under the service contract
exceeds the expected revenue.
Other provisions
Other provisions mainly includes provisions for legal disputes, provisions for
externally issued credit guarantees and other provisions, unless separately
specified.
Long-term provisions as above are expected to be settled within 2 to 3
years.
SOURCE OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
The uncertainties about the amount or timing of outflows vary for different
kind of provisions. Regarding provisions for product warranty, technical
goodwill, extended coverage, residual value risks and service contracts,
the provisions are based on historical statistics and estimated future
costs, which is why the provided amount has a high correlation with the
outflow of resources. Regarding provisions for disputes, like tax and legal
disputes, the uncertainty is higher.
Provisions for product warranty
Warranty provisions are estimated with consideration of historical statis-
tics with regard to known changes in warranty claims, warranty periods,
the average time-lag between faults occurring until claims are received by
the company and anticipated changes in quality indexes. The actual out-
come of product warranties may deviate from the expected outcome and
materially affect the warranty costs and provisions in future periods.
Re funds from suppliers, that decrease the Volvo Group’s warranty costs,
are recognized to the extent these are considered to be certain.
Other provisions
The Volvo Group works actively to ensure compliance with applicable
environmental laws and regulations, which are often complex and uncer-
tain. If the Volvo Group fails to meet climate related targets or regulatory
requirements it could be subject to significant penalties and other sanc-
tions which could materially affect the financial statements.
Provisions for legal proceedings
The Volvo Group regularly reviews the development of significant out-
standing legal disputes in which the Volvo Group companies are parties,
both regarding civil law and tax disputes, in order to assess the need for
provisions and contingent liabilities in the financial statements. Among the
factors that the Volvo Group considers in making decisions on provisions
and contingent liabilities are the nature of the dispute, the amount claimed,
the progress of the case, the opinions of legal and other advisers, experi-
ence in similar cases, and any decision of the Volvo Group’s management
as to how the Volvo Group intends to handle the dispute. The actual out-
come of a legal dispute may deviate from the expected outcome of the
dispute. The difference between actual and expected outcome of a dispute
might materially affect future financial statements, with an adverse impact
upon the Volvo Group’s operating income, financial position and liquidity.
Provisions for legal disputes are included within other provisions in
table
21:1
.
Read more in Note 24 Contingent liabilities and contingent assets.
21
Other provisions
121
Notes to the financial statements
Carrying
value as of
Dec 31,
2020 Provisions Reversals Utilizations
Acquired and
divested
operations
2
Trans lation
differences
Other
reclassi-
fications
2
Carrying
value as of
Dec 31, 2021
Of which
due within
12 months
Of which
due after
12 months
Provisions
for product
warranty
1
14,389 7,618 –1,228 –6,504 –467 644 718 15,170 7,746 7,424
Provisions
for technical
goodwill 1,051 210 –461 –213 –102 57 118 660 330 330
Provisions
for extended
coverage 517 276 –55 –231 – 46 –48 505 282 223
Provisions
in insurance
operations 623 173 –91 –19 – 54 0 740 – 740
Provisions for
restructuring
costs 1,786 22 –181 –1,043 – 26 –5 605 517 88
Provisions
for residual
value risks 494 978 –423 –721 –4 18 –8 334 145 189
Provisions
for service
contracts 403 667 –179 –386 –36 26 –89 406 248 158
Other
provisions 4,808 2,669 –1,001 –1,789 –66 205 –76 4,750 2,686 2,064
BS
Total 24,071 12,613 –3,619 –10,906 –675 1,076 610 23,170 11,954 11,216
21:1
1 Including a provision for emission control component. For more information see below.
2
Read more in Note 3 Acquisitions and divestments of operations, for a description of acquired and divested operations as well as assets and liabilities held for sale.
The Volvo Group has detected that an emissions control component used
in certain markets and models, may degrade more quickly than expected,
affecting the vehicles emission performance negatively. The Volvo Group
made a provision of SEK 7 billion impacting the operating income in 2018,
relating to the estimated costs to address the issue. Negative cash flow
effects started in 2019 and will continue in the coming years. The Volvo
Group will continuously assess the size of the provision as the matter
develops.
To adjust its operations to lower demand due to the covid-19 pandemic,
the Volvo Group reduced the white-collar workforce globally during 2020.
A provision for restructuring charges of SEK 3,200 M was recognized in
the second quarter of 2020 whereof SEK 992 M was released in the fourth
quarter of 2020. Additionally SEK 159 M was released in the fourth quarter
of 2021.
122
Notes to the financial statements
ACCOUNTING POLICY
Loans are measured at amortized cost using the effective interest rate
method. A hybrid bond issued by the Volvo Group is classified as debt in
the Volvo Group’s financial reporting as it constitutes a contractual obliga-
tion to make interest payments and repay the nominal amount of the debt
to the holder of the instrument.
Read more in Note 30 Financial instruments for accounting policies related to
financial instruments.
Non-current liabilities
The tables below disclose the Volvo Group’s non-current liabilities with
the largest loans listed by currency. Loans in the Volvo Group’s subsidiaries
are mainly denominated in local currencies through Volvo Group Treasury
which minimizes the currency exposure in the individual companies. Volvo
Group Treasury uses various derivatives to facilitate lending and borrowing
in different currencies without increasing the risk for the Volvo Group.
Read more in Note 4 Goals and policies in financial risk management on how the
funding for Industrial operations and Financial Services respectively is managed
and presented in the Volvo Group’s balance sheet.
22
Liabilities
Non-current bond loans and other loans
Currency/start year/maturity
Actual interest rate
Dec 31, 2021, %
Effective interest rate
Dec 31, 2021, % Dec 31, 2021 Dec 31, 2020
Bond loans
EUR 2012202120232078
1
0.004.79 0.004.79 50,052 34,969
SEK 2018202120232025 0.392.31 0.392.31 24,282 25,741
NOK 2019202020232024 1.792.62 1.802.65 2,820 3,580
HKD 20192024 2.31 2.31 840 765
USD 20192029 2.96 2.96 452 409
JPY 20202023 0.70 0.70 919 927
BS
Total bond loans
2, 3
79,365 66,391
Other loans
USD 2014202020232024 0.493.00 0.713.00 2,875 6,522
EUR 2012201820232026 0.002.34 0.002.34 4,031 6,760
MXN 2020202120242026 6.007.14 6.167.37 1,449 742
JPY 2019202020232024 0.371.24 0.371.24 1,570 1,585
BRL 2013202120232028 3.009.82 3.009.82 5,258 3,500
AUD 2019202020232024 0.971.51 0.971.52 119 315
CNY 2019202120232024 3.404.99 3.404.99 1,222 2,409
Loans in other currencies 1,901 2,091
Lease liabilities 4,469 4,434
Revaluation of outstanding derivatives to SEK
4
1,917 416
BS
Total other loans
2, 3
24,812 28,775
22:1
1 Including the remaining tranche of the hybrid bond of EUR 0.6 billion with a first call date in 2023 and final maturity in 2078.
2 Loans to finance the credit portfolio in Financial Services amounted to SEK 73,180 M (50,332) in bond loans and SEK 18,141 M (23,149) in other loans.
3 Non-current loans of SEK 3,030 M (6,638) were secured by assets pledged.
Read more in Note 23 Assets pledged.
4
Read more in Note 30 Financial instruments, table
30:1
regarding non-current part of outstanding interest and currency risk derivatives.
5
Read more in Note 7 Revenue regarding contract and refund liabilities, and sales with residual value commitments.
Other non-current liabilities Dec 31, 2021 Dec 31, 2020
Deferred leasing income
5
5,129 4,647
Residual value liabilities
5
9,049 8,540
Deferred service revenue
5
14,440 12,268
Refund liabilities
5
1,698 1,042
Advances from customers
5
2,923 1,583
Outstanding interest and currency risk derivatives
4
80 643
Other liabilities 3,512 2,701
BS
Total other liabilities 36,831 31,424
22:2
123
Notes to the financial statements
Maturity
Year
Bond loans and
other loans
Not utilized
non-current credit
facilities
2023 49,461 5,511
2024 25,867 16,340
2025 12,765 –
2026 7,720 20,454
2027 455 –
2028 or later 7,909 –
Total 104,177 42,305
22:3
Read more in Note 14 Leasing, table
14:4
for maturities of non-current lease
liabilities.
The Volvo Group issued a hybrid bond in 2014 of EUR 1.5 billion. After
repayment of the first tranche in 2020, EUR 0.6 billion with a first call
date in 2023 remains. The predominant part of loans that mature in 2023
is an effect of the Volvo Group’s normal business cycle, with shorter dura-
tion in the Financial Services portfolio compared to Industrial Operations.
Granted but not utilized credit facilities consist of stand-by facilities for
loans. A fee is charged for granted credit facilities and recognized in the
income statement within other financial income and expenses.
Read more in Note 9 Other financial income and expenses.
Current liabilities
Current bond loans and other loans
Dec 31,
2021
Dec 31,
2020
Bond loans 21,747 30,904
BS
Total bond loans
1,2
21,747 30,904
Other loans 25,812 25,572
Lease liabilities 1,632 1,552
Revaluation of outstanding derivatives to SEK
3
255 230
BS
Total other loans
1,2
27,700 27,354
22:4
1 Loans to finance the credit portfolio in Financial Services amounted to SEK
21,747 M (30,904) in bond loans and SEK 21,819 M (19,945) in other loans.
2 Current loans of SEK 3,138 M (7,645) were secured by assets pledged.
Read more in Note 23 Assets pledged.
3
Read more in Note 30 Financial instruments, table
30:1
regarding current
part of outstanding interest and currency risk derivatives.
Other current loans include current maturities of non-current loans of
SEK 12,112 M (16,943).
Other current liabilities
Dec 31,
2021
Dec 31,
2020
Advances from customers
1
4,511 6,427
Wages, salaries and withholding taxes 13,287 11,697
VAT liabilities 4,447 4,295
Accrued expenses for dealer
bonuses and rebates
1
4,998 5,247
Other accrued expenses 11,744 10,138
Deferred leasing income
1
3,250 3,116
Deferred service revenue
1
3,715 3,558
Other deferred income
1
1,599 1,266
Residual value liabilities
1
4,882 4,705
Refund liabilities
1
737 501
Other financial liabilities 237 279
Interest and currency risk derivatives
2
127 66
Other liabilities 6,444 5,274
BS
Total other liabilities 59,978 56,569
22:5
1 Read more in Note 7 Revenue, regarding contract and refund liabilities,
and sales with residual value commitments.
2
Read more in Note 30 Financial instruments, table
30:1
regarding
current part of outstanding interest and currency risk derivatives.
Table
22:5
presents the Volvo Group’s other current liabilities. Non-
interest-bearing current liabilities also include trade payables of SEK
76,745 M (59,611) and current tax liabilities of SEK 4,287 M (4,599).
Non-interest-bearing current liabilities amounted to SEK 141,010 M
(130,890), or 74% (69) of the Volvo Group’s total current liabilities.
Assets pledged
Dec 31,
2021
Dec 31,
2020
Property, plant and
equipment mortgages 48 48
Assets under operating leases 246 181
Customer-financing receivables 6,449 14,731
Total assets pledged 6,742 14,960
23:1
Non-current and current loans of SEK 6,168 M (14,283) were secured by
assets pledged to an amount of SEK 6,742 M (14,960).
Under the terms of asset-backed securitizations, SEK 5,977 M (14,135) of
securities have been issued tied to US-based loans, secured by customer-
financing receivables, SEK 6,449 M (14,731), with trucks and construction
equipments as collaterals. In 2021 no securities were signed (4,991).
Read more in Note 22 Liabilities.
23
Assets pledged
124
Notes to the financial statements
ACCOUNTING POLICY
A contingent liability is recognized for a possible obligation, for which it is
not yet confirmed that a present obligation exists that could lead to an
outflow of resources. Alternatively, there is a present obligation that does
not meet the definitions of a provision or a liability as it is not probable that
an outflow of resources will be required to settle the obligation or a suffi-
ciently reliable estimate of the amount of the obligation cannot be made.
A contingent asset is a possible asset that arises from past events that
will be confirmed by uncertain future events not wholly within the control
of the Volvo Group. A contingent asset is disclosed where an inflow of
economic benefits is probable.
Contingent liabilities
Dec 31,
2021
Dec 31,
2020
Credit guarantees issued for
customers and others 7,421 4,419
Tax claims 4,926 4,008
Residual value commitments 402 795
Other contingent liabilities 5,222 4,610
Total contingent liabilities 17,971 13,832
24:1
Total contingent liabilities at December 31, 2021, amounted to SEK 17,971 M
(13,832).
Credit guarantees issued amounted to SEK 7,421 M (4,419). The recog-
nized amount for credit guarantees corresponds to the gross exposure and
has not been reduced by the value of counter guarantees received or other
collaterals such as the right to repossess products. The value of counter
guarantees and other collaterals reducing the exposure is dependent on
the development of used products prices and on the possibility to repos-
sess products.
A major part of the credit guarantees pertains to the credit guarantees
related to Chinese dealers and retail customers within Construction
Equipment.
Tax claims amounted to SEK 4,926 M (4,008) and pertain to charges
against the Volvo Group for which the criteria for recognizing a tax liability
or a provision were not met. Global companies such as the Volvo Group
are occasionally involved in tax processes of varying scope and in various
stages. Volvo Group regularly assesses these tax processes. When it is
probable that additional taxes must be paid and the outcome can be rea-
sonably estimated, the required provision is made. Out of total tax claims,
SEK 1.3 billion (1.2) is related to a transfer price audit in Brazil and SEK
2.2 billion (1.7) are related to two custom duties audits in India.
Residual value commitments amounted to SEK 402 M (795) and were
attributable to sales transactions with residual value commitments (buy-
backs and tradebacks) that are independent from the sales transaction
and therefore not recognized as assets in the balance sheet. The amount
corresponds to the gross exposure and has not been reduced by the esti-
mated net selling price of used products taken as collaterals. To the extent
the used products pertaining to those transactions are expected to be
disposed at a loss, a provision for residual value risk is recognized.
Read more in Note 21 Other provisions about provisions for residual value risks.
Other contingent liabilities amounted to SEK 5,222 M (4,610) and include
for example bid and performance clauses and legal proceedings.
Legal proceedings
Starting in January 2011, the Volvo Group, together with a number of
other truck manufacturers, was investigated by the European Commis-
sion in relation to a possible violation of EU antitrust rules. In July 2016
the European Commission issued a settlement decision against the Volvo
Group and other truck manufacturers finding that they were involved in an
antitrust infringement which, in the case of the Volvo Group, covered a
14-year period from 1997 to 2011. The Volvo Group paid a monetary fine
of EUR 670 million.
Following the adoption of the European Commission’s settlement deci-
sion, the Volvo Group has received and is defending itself against a signifi-
cant number of private damages claims brought by customers and other
third parties alleging that they suffered loss, directly or indirectly, by reason
of the conduct covered in the decision. The claims are being brought in
various countries (including EU Member States, the United Kingdom and
Israel) by large numbers of claimants either acting individually or as part of a
wider group or class of claimants. Further claims are likely to be commenced.
At this stage it is not possible to make a reliable estimate of any liability
that could arise from any such proceedings. However, the litigation is sub-
stantial in scale and an adverse outcome or outcomes of some or all of the
litigation, depending on the nature and extent of such outcomes, may
have a material negative impact on the Volvo Group’s financial results,
cash flows and financial position.
The Volvo Group is also involved in a number of legal proceedings other
than those described above. The Volvo Group’s assessment is that such
other legal proceedings in aggregate are not likely to entail any risk of
having a material effect on the Volvo Group’s financial position.
Detected premature degradation of emissions control component
The Volvo Group has detected that an emissions control component used in
certain markets and models, may degrade more quickly than expected,
affecting the vehicles emission performance negatively. The Volvo Group has
made a provision that will be continuously assessed as the matter develops.
Read more in Note 21 Other provisions.
Total contingent assets at December 31, 2021 amounted to SEK – M (1,252).
24
Contingent liabilities and contingent assets
125
Notes to the financial statements
ACCOUNTING POLICY
Government grants are financial grants from governmental or supra-
national bodies that are received in exchange for fulfillment of certain con-
ditions by the Volvo Group. The financial grants are recognized in the
financial statement when there is a reasonable assurance that the condi-
tions will be complied with and that the grants will be received.
Government grants related to assets are presented in the balance sheet
either as deferred income or as a deduction of the carrying amount of the
related assets. Government grants related to income are reported as a
deferred income in the balance sheet and recognized in the income state-
ment to match the related costs. If the costs incurred before the grants have
been received, but there is an agreement that grants will be received, grants
are recognized in the income statement to match the related costs.
In 2021, government grants of SEK 895 M (3,473) were received, and
SEK 936 M (3,107) were recognized in the income statement.
During the covid-19 pandemic, grants related to various governmental
short-term layoff programs were received by the Volvo Group. Out of the
total amount of grants received, SEK 189 M (2,672) were received in rela-
tion to the short-term layoff programs. SEK 268 M (2,248) were recog-
nized in the income statement as a deduction of the related costs for per-
sonnel. The grants were mainly received from the authorities in Canada
and the United States.
Read more in note 27 Personnel, table
27:4
and
27:5
.
Government grants also includes tax credits of SEK 309 M (351) related to
product development, which were primarily received in France and in the
United States. Other grants were mainly received from Swedish, Chinese
and US governmental organizations and from the European Commission.
25
Transactions with related parties
26
Government grants
ACCOUNTING POLICY
The Volvo Group engages in transactions with some of its related parties,
such as associated companies and joint ventures. The transactions arise in
the ordinary course of business and are conducted on commercial terms
and market prices. They mainly consist of sales of vehicles, parts, equip-
ment and services as well as purchases of parts, engines and vehicles for
resale. Transactions between AB Volvo and its subsidiaries have been
eliminated in the consolidated financial statements and transactions with
the Board of Directors and the Group Executive Board consist of remuner-
ations, which are not disclosed in this note.
Read more in Note 5 Investments in joint ventures, associated companies and
other shares and participations.
Read more in Note 27 Personnel about remunerations to the Board of Directors
and the Group Executive Board.
Read more in Corporate Governance Report about Board of Directors and
Group Executive Board.
The Volvo Group’s transactions with related parties are presented in table
25:1
and
25:2
.
Sales of goods,
services and other
income
Purchases of
goods, services
and other expense
2021 2020 2021 2020
Associated companies 899 1,547 60 53
Joint ventures 1,575 1,837 935 726
25:1
Receivables Payables
Dec 31,
2021
Dec 31,
2020
Dec 31,
2021
Dec 31,
2020
Associated companies 48 242 30 24
Joint ventures 353 330 69 71
25:2
126
Notes to the financial statements
other Executives. The holding requirements for the Executives shall cease
upon termination of an Executive’s employment, and the Board of Direc-
tors may grant such other exceptions to the requirements as the Board
deems appropriate.
Further cash remuneration may be awarded in extraordinary circum-
stances, provided that such extraordinary arrangements are limited in
time and only made on an individual basis, either for the purpose of recruit-
ing or retaining Executives, or as remuneration for extraordinary perfor-
mance beyond the individual’s ordinary tasks. Such remuneration may not
exceed an amount corresponding to 100 per cent of the annual base sal-
ary. Any resolution on such remuneration shall be made by the Board of
Directors based on a proposal from the Remuneration Committee.
For the President and CEO, pension benefits shall be granted on the
basis of a defined contribution plan. The pensionable salary shall include
base salary only. The pension contributions for the President and CEO
attributable to the annual base salary shall amount to not more than 35
per cent of the base salary.
Other benefits may include, for example, life insurance, medical and
health insurance, and company cars. Premiums and other costs relating to
such benefits may amount to not more than 3 per cent of the annual base
salary for the President and CEO.
For other Executives, pension benefits shall be granted on the basis of
a defined contribution plan except where law or collective agreement
require a defined benefit pension. The pensionable salary shall include
base salary and, where required by law or collective agreement, short-
term incentives. The total pension contributions for other Executives shall
amount to not more than 35 per cent of base salary, unless a higher per-
centage results from the application of law or collective agreement.
Other benefits may include, for example, life insurance, medical and
health insurance, and company cars. Premiums and other costs relating to
such benefits may amount to not more than 10 per cent of the annual base
salary for other Executives.
Remuneration for Executives that reside outside Sweden or reside in
Sweden but having a material connection to or having been residing in a
country other than Sweden may be duly adjusted to comply with manda-
tory rules or local practice, taking into account, to the extent possible, the
overall purpose of these guidelines.
In addition to remuneration set out above, Executives who relocate for
the purposes of the position or who work in other multiple countries may
also receive such remuneration and benefits as are reasonable to reflect
the special circumstances associated with such arrangements, taking into
account the overall purpose of these guidelines and alignment with the
general policies and practices within the Volvo Group applicable to cross
border work.
Termination of employment
Upon termination of an Executive’s employment, the notice period may
not exceed twelve months. Base salary during the notice period and seve-
rance pay may not together exceed an amount corresponding to the base
salary for two years.
Executives that reside outside Sweden or reside in Sweden but having
a material connection to or having been residing in a country other than
Sweden may be offered notice periods for termination and severance pay-
ment as are reasonable to reflect the special circumstances, taking into
account the overall purpose of these guidelines and alignment with the
general policies and practices within the Volvo Group.
Criteria for awarding variable cash remuneration, etc.
Short-term and long-term incentives shall be linked to predetermined and
measurable criteria. The criteria – which for example may relate to EBIT, cash
flow, return on capital employed or similar ratios, or sustainability targets
ACCOUNTING POLICY
Incentive programs
The Volvo Group has a long-term and a short-term incentive program that is
accounted for in accordance with IAS 19 Employee benefits. During the
vesting period, the incentive program is recognized as an expense and as a
short-term liability.
Policy for remuneration to seni or executives, approved by the
Annual General Meeting on 31 March 2021
The Annual General Meeting 2021 decided upon the following policy on
remuneration and other terms of employment for the members of the
Volvo Group Executive Board.
These guidelines are forward-looking, i.e. they are applicable to remu-
neration agreed, and amendments to remuneration already agreed, after
the proposed adoption of these guidelines by the 2021 annual general
meeting. These guidelines do not apply to any remuneration decided or
approved by the general meeting. Any new share-based incentive plans
will, where applicable, be resolved by the general meeting, but no such
plan is currently proposed.
The guidelines’ promotion of the Volvo Group’s business strategy,
long-term interests and sustainability
It is a prerequisite for the successful implementation of the Volvo Group’s
business strategy and safeguarding of its long-term interests, including
its sustainability, that the Group can recruit, retain and develop top exec-
utives. These guidelines enable AB Volvo to offer Executives a competi-
tive total remuneration. More information regarding the Volvo Group’s
business strategy is available in the Volvo Group Annual and Sustainability
Report.
Types of remuneration
Volvo Group remuneration to Executives shall consist of the following
components: base salary, short-term and long-term variable incentives,
pension benefits and other benefits.
Short-term incentives may, for the President and CEO, amount to a
maximum of 100 per cent of the base salary and, for other Executives,
a maximum of 80 per cent of the base salary.
Long-term incentives may, for the President and CEO, amount to a
maximum of 100 per cent of the base salary and, for other Executives,
a maximum of 80 per cent of the base salary. The current long-term incen-
tive plan for the Group’s senior management, including the Executives,
was introduced in connection with the 2016 annual general meeting. The
objective of the program is to align the interests of the senior manage-
ment with those of the shareholders. To achieve this, the program oper-
ates on a four-year cycle; with a performance based annual award, which
is invested in Volvo shares with a mandatory lock-in period of three years.
There will be no payout under the long-term incentive program if the
Annual General Meeting that is held in the year following the performance
year, decides not to distribute any dividends to the shareholders. The pro-
gram is funded on an annual basis by an award, measured against perfor-
mance criteria established by the Board of Directors. The after tax portion
of this payment must be immediately invested in AB Volvo shares which
must be held for a minimum of three years. In this way, the Executives will
build up a shareholding in the company and have a vested interest over the
longer term development in the value of the shares. At the end of the three
year period, the Executives may sell their shares, if they meet the require-
ment for owning shares valued at two years of the pre-tax base salary for
the President and CEO and one year of the pre-tax base salary for the
27
Personnel
127
Notes to the financial statements
– shall be devised to promote the Volvo Group’s strategy and long-term
value creation and strengthen the link between achieved performance tar-
gets and reward. The criteria for short-term and long-term incentives shall
be determined by the Board of Directors annually. The satisfaction of the
criteria shall be measured over periods of one year each.
To which extent the criteria for awarding variable remuneration has
been satisfied shall be determined when the relevant measurement period
has ended. The Board of Directors is responsible for the determination of
variable remuneration to all Executives.
Claw-back and adjustments
Executives participating in the Volvo Group’s current short-term and long-
term incentive plans are obliged, in certain circumstances and for speci-
fied periods of time, to repay, partially or in its entirety, variable incentive
awards already paid if payments have been made by mistake or been
based on intentionally falsified data or in the event of material restatement
of the Volvo Group’s financial results. Furthermore, the Board of Directors
may decide on adjustments of pay-out under the incentive plans (before
payment has been made) in case of extraordinary circumstances or to
adjust for unforeseen one-timers.
Salary and employment conditions for employees
In the preparation of the Board of Directors’ proposal for these remunera-
tion guidelines, the Board has considered that the various benefits offered
to the Executives need to be aligned with the general structures applica-
ble for employees of AB Volvo at levels that are competitive in the market.
Thus, salary and employment conditions for other AB Volvo employees
have been taken into account by including information thereon in the
Remuneration Committee’s and the Board of Directors’ basis of decision
when evaluating whether the guidelines and the limitations set out herein
are appropriate.
The decision-making process to determine,
review and implement the guidelines
The Board of Directors has established a Remuneration Committee. The
Committee’s tasks include preparing the Board of Directors’ decision to
propose guidelines for executive remuneration. The Board of Directors
shall prepare a proposal for new guidelines at least every fourth year and
submit it to the general meeting. The guidelines shall be in force until new
guidelines are adopted by the general meeting. The Remuneration Com-
mittee shall also monitor and evaluate plans for variable remuneration for
Executives, the application of the guidelines for executive remuneration as
well as the current remuneration structures and compensation levels in the
Group. The members of the Remuneration Committee are independent of
AB Volvo and its executive management. The President and CEO and
other members of the executive management do not participate in the
Board of Directors’ processing of and resolutions regarding remunera-
tion-related matters in so far as they are affected by such matters.
Derogation from the guidelines
The Board of Directors may temporarily resolve to derogate from the
guidelines, in whole or in part, if in a specific case there is special cause for
the derogation and a derogation is necessary to serve the Volvo Group's
long-term interests, including its sustainability, or to ensure the Group's
financial viability. As set out above, the Remuneration Committee's tasks
include preparing the Board of Directors' resolutions in remuneration-related
matters. This includes any resolutions to derogate from the guidelines.
Description of material changes to the guidelines and how the views of
shareholders' have been taken into consideration
During 2020, the Remuneration Committee and the Board of Directors
have consulted with shareholders individually and collectively and have
followed up on comments and questions received from shareholders in
connection with the annual general meeting in June 2020 and otherwise
during the year. For further information, please refer to the section Con-
sideration of shareholder views in the Remuneration Report 2020. The
Remuneration Committee and the Board have for 2021 and onwards
decided to change the company’s pension commitments to its President
and CEO, Deputy CEO and other Executives employed in Sweden, aiming
to simplify the pension commitments and bring them more in line with the
prevailing pension schemes for similar individuals in the Swedish market,
without materially altering the remuneration from an economical perspec-
tive. Due to the forward-looking nature of the remuneration policy, the
amendments apply to new employment contracts entered into after
approval of the amended policy by the annual general meeting 2021 and
for existing employment contracts if changes are agreed to by the Execu-
tives in scope.
Fees paid to the Board of Directors
According to a resolution adopted at the Annual General Meeting 2021,
fees to the Board of Directors appointed at the Annual General Meeting for
the period until the close of the Annual General Meeting 2022 shall be paid
as follows: The Chairman of the Board should be awarded SEK 3,700,000
(3,600,000) and each of the other members SEK 1,100,000 (1,060,000)
with exception of the President and CEO of AB Volvo, who does not
receive a director’s fee. In addition, SEK 390,000 (380,000) should be
awarded to the Chairman of the Audit Committee and SEK 180,000
(175,000) to each of the other members of the Audit Committee, and SEK
Remuneration to the Group
Executive Board
SEK
Fixed remuneration Variable remuneration
Fixed salary
Other
benefits
1
Short-term
incentives
Long-term
incentives
Other
remunerations
2
Pension
premiums
President and CEO 16,308,335 299,575 14,157,306 10,608,905 745,091 7,218,565
Deputy CEO 8,843,217 151,640 6,132,094 4,595,140 343,792 3,624,790
Other members of the
Group Executive Board
3
86,395,346 18,247,173 57,600,553 45,229,106 653,353 27,201,038
Total 2021 111,546,898 18,698,388 77,889,953 60,433,152 1,742,236 38,044,393
Total 2020 100,732,038 20,477,118 58,792,001 58,792,001 3,000,000 41,485,746
27:1
1 Other benefits mainly pertain to company cars and, various insurances and expatriate support costs.
2 Other remunerations include payments to Swedish individuals in connection to a change in their pension benefits
(2020; compensation in connection with employment in the Group).
3 The Group Executive Board comprised, excluding the President and CEO and Deputy CEO, of 13 (13) members at the end of the year.
128
Notes to the financial statements
165,000 (160,000) to the Chairman of the Remuneration Committee and
SEK 118,000 (115,000) to each of the other members of the Remunera-
tion Committee. During 2020 the Board members decided to voluntarily
abstain from 20 per cent of their Board and Committee remuneration dur-
ing the period from the Annual General Meeting 2020 to the Annual Gen-
eral Meeting 2021. For more information, please refer to the Corporate
Governance Report.
Terms of employment and remuneration to the President and CEO
Fixed salary, short-term and long-term incentives
The President and CEO is entitled to a remuneration consisting of a fixed
annual salary and short-term and long-term incentives. During the financial
year 2021, the short-term incentives are based on operating income and
cash flow for the Volvo Group; the long-term incentives are based on operat-
ing income and return on capital employed. The short-term and long-term
incentives, each, amounts to a maximum of 100% of the annual base salary.
For the financial year 2021, the President and CEO received a fixed salary
including vacation payment of SEK 16,308,335 (14,517,854) and a short-
term incentive of SEK 14,157,306 (10,720,811). The salary in 2020 was
lower than the President and CEO’s contractual salary due to a reduction in
connection with the extraordinary situation caused by the covid-19 pan-
demic. The short-term incentive was 88.1% (70.3) of the annual base salary.
As part of the agreement to change the pension set-up as per July 1, 2021,
(as further described below under Pensions to the President and CEO) a
base salary increase of 4.46% was granted as per the same date and a lump
sum cash payment of SEK 745,091 was paid out later during the year. Other
benefits, mainly pertaining to a company car, amounted to SEK 299,575
(251,546).
The President and CEO was also participating in the long-term incen-
tive program decided by the Board of Directors in 2021. During the finan-
cial year the outcome of the long-term incentive program amounted to
SEK 10,608,905 (10,720,811), which was 66.1% (70.3) of the base sal-
ary. The full net amount shall be invested in Volvo B shares. There is to be
no pay-out of the amount if the Annual Meeting held in 2022 decides not
to distribute any dividends to the shareholders for 2021.
Pensions
During the period from January 1 to June 30, 2021, the President and
CEO was covered both by pension benefits provided under collective bar-
gain agreements and by the Volvo Management Pension (VMP) and Volvo
Executive Pension (VEP) plans. Both VMP and VEP were defined contri-
bution plans. The pensionable salary consisted of the annual salary, vaca-
tion pay and a calculated short-term variable pay. The premium for the
VMP plan was SEK 30,000 per year plus 20% of pensionable salary over
30 income base amounts and the premium for the VEP plan was 10% of
pensionable salary. There were no commitments other than the payment
of the premiums.
During this period, the President and CEO was also covered by Volvo
Företagspension, a defined contribution plan for additional retirement
benefits. For 2021, the cost amounts to SEK 4,764 (8,568).
As of July 1, 2021, all previous pension commitments were replaced.
Hence, during the period from July 1 to December 31, 2021, the President
and CEO was covered by a pension benefit in the form of a defined contri-
bution (DC) plan with a contribution amounting to 35% of the annual
base salary. There were no commitments other than the payment of the
contributions.
Total pension premiums for the President and CEO amounted to SEK
7,218,565 (7,714,902) in 2021.
Severance payments
The President and CEO has a 12 months' notice period upon termination by
AB Volvo and a 6 months' notice period upon termination on his own initia-
tive. If terminated by the company, the President and CEO is entitled to a
severance payment equivalent to 12 months’ salary. In the event of new
employment during the severance period, the severance pay is reduced
with an amount equal to 100% of the income from the new employment.
Terms of employment and remuneration to the Deputy CEO
Fixed salary, short-term and long-term incentives
The Deputy CEO receives short-term and long-term incentives in addition
to a fixed salary. During the financial year 2021, the short-term incentives
are based on operating income and cash flow for the Volvo Group; the
long-term incentives are based on operating income and return on capital
employed. In 2021, short-term and long-term incentives, for the Deputy
CEO, could each amount to a maximum of 80% of the annual base salary.
For the financial year 2021, the Deputy CEO received a fixed salary
including vacation payment of SEK 8,843,217 (7,871,465) and a short-
term incentive of SEK 6,132,094 (4,647,870). The salary in 2020 was
lower than the Deputy CEO’s contractual salary due to a reduction in con-
nection with the extraordinary situation caused by the covid-19 pandemic.
The short-term incentive was 70.5% (56.3) of the annual base salary.
As part of the agreement to change the pension set-up as per July 1,
2021, (as further described below under Pensions to the Deputy CEO) a
base salary increase of 5.39% was granted as per the same date and a
lump sum cash payment of SEK 343,792 was paid out later during the year.
Other benefits, mainly pertaining to car and insured benefits, amounted to
SEK 151,640 (91,810).
The Deputy CEO also participated in the long-term incentive program
decided by the Board of Directors in 2021. The long-term incentive amounted
to SEK 4,595,140 (4,647,870), which was 52.8% (56.3) of the annual
base salary and the full net amount shall be invested in Volvo B shares.
There is to be no pay-out of the amount if the Annual Meeting held in
2022 decides not to distribute any dividends to the shareholders for 2021.
Pensions
During the period from January 1 to June 30, 2021, the Deputy CEO was
covered both by pension benefits provided under collective bargain
agreements and by the Volvo Management Pension (VMP) and Volvo
Executive Pension (VEP) plans. Both VMP and VEP were defined contri-
bution plans. The pensionable salary consisted of the annual salary, vaca-
tion pay and a calculated short-term variable pay. The premium for the
VMP plan was SEK 30,000 per year plus 20% of pensionable salary over
30 income base amounts and the premium for the VEP plan was 10% of
pensionable salary. There were no commitments other than the payment
of the premiums.
During this period, the Deputy CEO was also covered by Volvo Företag-
spension, a defined contribution plan for additional retirement benefits.
For 2021, the cost amounts to SEK 4,764 (8,568).
During the period from July 1 to December 31, 2021, the Deputy CEO con-
tinued to participate in the collective bargain agreement (ITP). However, all
other pension plans were replaced by a new Volvo Executive Pension (VEP)
plan. This is a defined contribution (DC) plan with a contribution amounting to
35% of the annual base salary exceeding 30 income base amounts (SEK
2,046,000 in 2021). There were no commitments other than the payment of
the contributions.
Total pension premiums for the Deputy CEO amounted to SEK 3,624,790
(4,049,242) in 2021.
129
Notes to the financial statements
Severance payments
The employment contract for the Deputy CEO contains rules governing
severance payments when AB Volvo terminates the employment. The
notice period upon termination by the company shall not exceed 12 months
and the notice period upon termination by the Deputy CEO shall not
exceed 6 months. In addition, in the event of termination by the company,
the Deputy CEO is entitled to a maximum of 12 months’ severance pay.
Remuneration to the Group Executive Board
Fixed salary, short-term and long-term incentives
Members of the Group Executive Board receive short-term and long-term
incentives in addition to fixed salaries. During the financial year 2021, the
short-term incentives are based on operating income and cash flow for the
Volvo Group; the long-term incentives are based on operating income and
return on capital employed. In 2021, short-term and long-term incentives,
for Group Executive Board members excluding the President and CEO,
could each amount to a maximum of 80% of the annual base salary.
For the financial year 2021, fixed salaries amounted to SEK 86,395,346
(78,342,719) for the Group Executive Board members excluding the Presi-
dent and CEO and the Deputy CEO, and a compensation in connection
with a change in pension plans for Swedish Executive Board members to an
amount of SEK 653,353 (3,000,000; compensation in connection with
employment in the Group). The salaries in 2020 were lower than the contrac-
tual salaries due to a reduction in connection with the extraordinary situa-
tion caused by the covid-19 pandemic. The short-term incentive amounted
to SEK 57,600,553 (43,423,320) for the Group Executive Board mem-
bers excluding the President and CEO and the Deputy CEO. Short-term
incentive was in average 68.3% (56.3) of the annual base salary. As part of
the agreement to change the pension set-up as per July 1, 2021, (as further
described below under Pensions to the Group Executive Board) for the
Group Executive Board members in the Swedish pension plan, base salary
increases between 5.50% – 8.13% were granted as per the same date and
lump sum cash payments between SEK 0 – 246,135 were paid out later
during the year. Other benefits, including company cars, housing and expa-
triate support costs, amounted to SEK 18,247,173 (20,133,762).
The Group Executive Board also participated in the long-term incentive
program decided by the Board of Directors in 2021. During the financial
year the outcome of the long-term incentive amounted to SEK 45,229,106
(43,423,320) for the Group Executive Board members, excluding the
President and CEO and the Deputy CEO, which was 52.8% (56.3) of the
annual base salaries and the full net amount shall be invested in Volvo B
shares. There is to be no pay-out of the amount if the Annual Meeting held
in 2022 decides not to distribute any dividends to the shareholders for
2021.
Pensions
During the period from January 1 to June 30, 2021, the Group Executive
Board members enrolled in the Swedish pension plan were covered both
by pension benefits provided under collective bargain agreements (ITP)
and by the Volvo Management Pension (VMP) and the Volvo Executive
Pension (VEP) plans. Both VMP and VEP were defined contribution plans.
The pensionable salary consisted of the annual salary, vacation pay and a
calculated short-term variable pay. The premium for the VMP plan was
SEK 30,000 per year plus 20% of pensionable salary over 30 income
base amounts and the premium for the VEP plan was 10% of pensionable
salary. There were no commitments other than the payment of the premiums.
The Group Executive Board members enrolled in the Swedish pension plan
were also covered by Volvo Företagspension, a defined contribution plan for
additional retirement benefits. For 2021, the cost amounts to SEK 4,764
(8,568) per member.
During the period from July 1 to December 31, 2021, the Group Execu-
tive Board members enrolled in the Swedish pension plan continued to
participate in the collective bargain agreement (ITP). However, all other
pension plans were replaced by a new Volvo Executive Pension (VEP)
plan. This is a defined contribution (DC) plan with a contribution amount-
ing to 35% of the annual base salary exceeding 30 income base amounts
(SEK 2,046,000 in 2021). There were no commitments other than the
payment of the contributions.
Pension premiums for the Group Executive Board, excluding the President
and CEO and the Deputy CEO, amounted to SEK 27,201,038 (29,721,602)
in 2021.
Severance payments
The employment contracts for Group Executive Board members contain
rules governing severance payments when AB Volvo terminates the
employment. For Executives resident in Sweden, the notice period upon
termination by the company shall not exceed 12 months and the notice
period upon termination by the Executive shall not exceed 6 months. In
addition, in the event of termination by the company, the Executive is enti-
tled to a maximum of 12 months’ severance pay.
Executives resident outside Sweden or resident in Sweden but having
a material connection to or having been resident in a country other than
Sweden may be offered notice periods for termination and severance pay-
ment that are competitive in the country where the Executives are or have
been resident or to which the Executives have a material connection, pref-
erably solutions comparable to the solutions applied to Executives resi-
dent in Sweden.
Volvo Group's total cost for remuneration and benefits to the Group
Executive Board
The total cost for remuneration and benefits to the Group Executive Board
amounted to SEK 380 M (345) and pertained to fixed salaries, short-term
and long-term incentives, other benefits and pensions. It also included
social fees on salaries and benefits, special payroll tax and additional
costs for other benefits.
Long-term incentive programs
Long-term incentive program valid from 2016
The Board of Directors have in 2016 approved a long-term cash-based
incentive program comprising the top 300 persons from senior manage-
ment, including Executives, in the Volvo Group. For more information,
please refer to Types of remuneration on page 127.
130
Notes to the financial statements
Wages, salaries and other
remunerations
SEK M
2021 2020
Board and
Presidents
of which
variable salaries
Other
employees
4
Board and
Presidents
of which
variable salaries
Other
employees
AB Volvo
1
73.5 34.4 404.9 62.5 28.8 338.0
Subsidiaries 706.2 184.9 41,404.9 770.7 139.9 39,715.6
Volvo Group total 779.7 219.3 41,809.8 833.2 168.7 40,053.6
27:4
Wages, salaries and other
remunerations and social costs
SEK M
2021 2020
Wages, salaries
remuneration
4
Social costs Pension costs
Wages, salaries
remuneration Social costs Pension costs
AB Volvo
2
478.4 138.8 156.0 400.5 120.4 123.5
Subsidiaries 42,111.1 9,287.3 4,772.0 40,486.3 9,150.0 3,507.1
Volvo Group total
3
42,589.5 9,426.1 4,928.0 40,886.7 9,270.3 3,630.7
27:5
1 Including current and former Board members, President and CEO, Deputy CEO and Executive Vice Presidents.
2 The parent company’s pension costs, pertaining to Board members and Presidents are disclosed in note 3 Administrative expenses in the annual report of the parent company.
3 Of the Volvo Group’s pension costs, SEK 89 M (92) pertain to Board members and Presidents, including current and former Board members, Presidents, Deputy CEO
and Executive Vice Presidents. The Volvo Group’s outstanding pension obligations to these individuals amount to SEK 625 M (609). The cost for non-monetary benefits
in the Volvo Group amounted to SEK 2,877 M (2,853) of which SEK 30 M (41) pertained to Board members and Presidents. The cost for non-monetary benefits in the
parent company amounted to SEK 6.0 M (9.0) of which SEK 0.0 M (0.1) to Board members and President.
4 Including compensation from authorities of SEK 268 M (2,248) due to the extraordinary situation following the covid-19 pandemic.
Average number of
employees
2021 2020
Number of employees of which women, % Number of employees of which women, %
AB Volvo
Sweden 283 49 301 51
Subsidiaries
Sweden 20,538 24 20,150 23
Western Europe (excl. Sweden) 20,383 17 21,037 17
Eastern Europe 6,584 20 6,754 20
North America 16,301 21 15,875 20
South America 6,358 17 5,736 17
Asia 11,384 16 17,429 14
Other countries 2,128 19 2,292 20
Volvo Group total 83,958 20 89,573 19
27:2
Board members
and other senior executives
2021 2020
Number at year-end of which women, % Number at year-end of which women, %
AB Volvo
Board members
1
11 45 11 36
CEO, Deputy CEO and other senior executives 15 27 15 27
Volvo Group
Board members 555 25 573 23
Presidents and other senior executives 597 27 613 26
27:3
1 Board members elected by the Annual General meeting.
131
Notes to the financial statements
Other non-cash items 2021 2020
Allowance for expected credit losses on
accounts receivables/customer-financing
receivables 534 1,725
Gains/losses on divested operations
1
–1,643 –25
Unrealized exchange rate gains/losses
on accounts receivables and payables 34 50
Unrealized exchange rate gains/losses
on other operating assets and liabilities 114 –270
Provision for incentive programs 1,523 1,053
Gains/losses on disposals of
in-/tangible assets 27 55
Gains/losses on divestments of
shares and participations 15 43
Income from investments in joint ventures 67 –1,751
Service cost related to pensions 2,053 1,645
Deferred sales with residual value
commitments –3,154 –3,137
Provision for restructuring –160 1,685
Other changes –409 144
Total other non-cash items –998 1,217
29:1
1 In 2021 Volvo Group divested the UD Trucks operations with a capital gain of
SEK 1.7 billion.
Read more in Note 3 Acquisitions and divestment of operations, about gain/
loss from divestments.
Fees to the auditors 2021 2020
Deloitte
– Audit fees 105 105
whereof to Deloitte AB 35 30
– Audit-related fees 6 7
whereof to Deloitte AB 2 2
– Tax advisory services 1 2
whereof to Deloitte AB – –
– Other fees 6 7
whereof to Deloitte AB – –
Total 118 121
Audit fees to others 3 3
Volvo Group Total 121 124
28:1
28
Fees to the auditors
ACCOUNTING POLICY
Cash flow statement
The cash flow statement is prepared in accordance with the indirect
method. The cash flows of foreign group companies are translated at aver-
age rates. Changes in group structure, acquisitions and divestments are
recognized gross, excluding cash and cash equivalents, and are included in
cash flow from investing activities, in the items Acquired operations and
Divested operations.
Read more in Note 18 Cash and cash equivalents.
29
Cash flow
The audit assignment involves review of the Annual report and financial
accounting and the administration by the Board and the President.
Audit-related assignments mean quality assurance services required by
enactment, articles of association, regulations or agreement. The amount
includes the fee for reviewing the half-year report. Tax services include
both tax consultancy and tax compliance services. All other tasks are
defined as other.
132
Notes to the financial statements
ACCOUNTING POLICY
Financial assets and liabilities are recognized on the transaction date accord-
ing to the contractual terms of the instrument. Transaction expenses are
included in the assets’ fair value, except in cases in which the change in value
is recognized in the income statement. The transaction costs that arise in
conjunction with the admission of financial liabilities are amortized over the
term of the loan as financial cost.
A financial asset is derecognized from the balance sheet when the
rights to the cash flows from the asset have expired at maturity or when
all significants risks and benefits related to the asset have been trans-
ferred to a third party.
The fair value of financial assets is determined based on valid market
prices, when available. If market prices are unavailable, the fair value is deter-
mined for each asset through the use of various measurement techniques.
The fair value of financial instruments is classified based on the degree that
market values have been utilized when measuring fair value. The majority
of financial instruments measured at fair value held by Volvo Group is clas-
sified as level 2. The valuation of level 2 instruments is based on market
conditions using quoted market data existing at each balance sheet date.
The basis for the interest is the zero-coupon-curve in each currency which
is used to calculate the present value of all the estimated future cash flows.
For forward exchange contracts the basis is the forward premium based
on current spot rate for each currency and future date. The fair value is then
discounted based on the forward rates as per the balance sheet date.
Holding of shares are classified as level 1 for listed shares and level 3 for
non-listed shares. Call options are classified as level 3 and are based on the
Black & Scholes option pricing formula.
Financial assets measured at amortized cost
Customer-financing receivables are held as part of a business model
whose objective is to collect contractual cash flows. The contractual cash
flows are solely payments of principal and interest and are valued at amor-
tized cost in accordance with the effective interest method. In this cate-
gory the Volvo Group also includes accounts receivables and holding of
shares in non-listed companies for which a fair value cannot reasonably be
determined. The carrying value for financial assets measured at amortized
cost has been analyzed and compared with an estimated fair value. The
carrying value is a reasonable approximation of the fair value.
Read more in Note 5 Investments in joint ventures, associated companies and
other shares and participations.
Read more in Note 15 Customer-financing receivables.
Read more in Note 16 Receivables.
30
Financial instruments
Changes in loans 2021 Cash flows Non-cash items
December
31, 2020
New
borrowings
Repayment of
borrowings
Reclass i-
fications
and other
changes
1
Unrealized
currency
effects
Currency
translation
December 31,
2021
Current bond loans and other loans 58,258 54,274 –88,200 27,772 –5,127 2,470 49,447
Non-current bond loans and other loans 95,166 36,101 –5,981 –26,913 1,501 4,302 104,177
Interest and currency risk derivatives –5,496 – – – 3,484 – –2,013
Realized derivatives – – –766 – – – –
Other – –1,234
2
–1,165 – – – –
Cash flow impact from changes in loans 89,141 -96,113
Changes in loans 2020 Cash flows Non-cash items
December
31, 2019
New
borrowings
Repayment of
borrowings
Reclass i-
fications
and other
changes
1
Unrealized
currency
effects
Currency
translation
December 31,
2020
Current bond loans and other loans 56,135 66,452 –115,109 55,091 4,133 –8,445 58,258
Non-current bond loans and other loans 101,616 63,614 –5,128 –55,676 –1,104 –8,155 95,166
Interest and currency risk derivatives –1,328 – – – –4,169 – –5,496
Realized derivatives – – –895 – – – –
Other – –1,612
2
– – – – –
Cash flow impact from changes in loans 128,453 –121,132
29:2
1 Includes new loans from acquired operations, which are included as cash flow from financing activities in the item Acquired operations, and remeasurements
of lease liabilities which had no impact on cash flow. In 2020, SEK 584 M was reclassified from current and non-current other loans to liabilities held for sale.
In 2021, no reclassification to liabilities held for sale was made.
2 During 2021, new lease liabilities of SEK 1.2 billion (1.6), included in non-current other loans, were adjusted as non-cash items.
Net borrowings decreased by SEK 7.0 billion (–7.3), mainly due to an improved
operating cash flow.
Syndications were performed in Financial Services to an amount of
SEK 9.8 billion (6.8). All syndications impacted cash flow this year.
Read more in Note 22 Liabilities regarding Current loans and
Non-current loans.
Read more in Board of Director's report about Cash flow statement
and Financial position.
133
Notes to the financial statements
1 The Volvo Group’s gross exposure from derivatives reported as assets is reduced
by 80% (87) by netting agreements and cash deposits to SEK 588 M (758).
2 The input data used in the valuation model for calculating the fair value has not
changed during 2021.
3 The Volvo Group’s gross exposure from derivatives reported as liabilities is reduced
by 94% (64) by netting agreements and cash deposits to SEK 148 M (492).
4 In the Volvo Group balance sheet, financial liabilities include loan-related deriva-
tives amounting to SEK –2,173 M (–647). The credit risk is included in the fair
value of loans.
Read more in Note 4 Goals and policies in financial risk management.
Carrying amounts and fair values on financial instruments
SEK M
Dec 31, 2021 Dec 31, 2020
Carrying
value
Fair
value
Carrying
value
Fair
value
Assets
Financial assets measured at fair value through the income statement
Interest and currency risk derivatives
1
Note 16 2,930 2,930 6,049 6,049
Other derivatives
2
564 564 564 564
BS
Marketable securities Note 18 167 167 213 213
3,661 3,661 6,826 6,826
Financial assets measured at fair value through other comprehensive income
Holding of shares in listed companies Note 5 51 51 – –
Financial assets measured at amortized cost
BS
Accounts receivables Note 16 40,776 40,776 35,660 35,660
Customer-financing receivables Note 15 151,504 151,504 128,531 128,531
Holding of shares in non-listed companies Note 5 488 488 276 276
Other interest-bearing receivables Note 16 1,692 1,692 402 402
194,460 194,460 164,870 164,870
BS
Cash and cash equivalents Note 18 62,126 62,126 85,206 85,206
Liabilities Note 22
Financial liabilities measured at fair value through the income statement
Interest and currency risk derivatives
3
2,379 2,379 1,356 1,356
Financial liabilities measured at amortized cost
4
Non-current bond loans and other loans 102,259 103,536 94,750 97,024
Current bond loans and other loans 49,192 49,329 58,027 58,188
BS
Trade Payables 76,745 76,745 59,611 59,611
228,197 229,610 212,388 214,823
30:1
Financial assets measured at fair value through other
comprehensive income
In this category the Volvo Group includes holding of shares in listed compa-
nies as the shares are not held for trading. Changes in fair value is measured
through other comprehensive income and amounted to SEK 48 M (–8).
Read more in Note 5 Investments in joint ventures, associated companies and
other shares and participations.
Financial assets and liabilities measured at fair value
through the income statement
Volvo Group’s financial assets and liabilities held for trading are recog-
nized at fair value through the income statement. As presented in table
30:1, these instruments are derivatives, used for hedging interest and
currency risks and marketable securities, further presented in note 18
Cash and cash equivalents.
Derivatives used for hedging interest rate exposure financing the cus-
tomer financing porfolio within Financial Services as well as the debt port-
folio in Industrial Operations are included in this section. Unrealized gains
and losses from fluctuations in the fair value of the financial instruments are
recognized in other financial income and expenses. The Volvo Group
intends to hold these derivatives to maturity, which is why, over time, the
market valuation will be offset by the interest-rate fixing on borrowing and
lending in Financial Services, and thus not affect net income or cash flow.
Financial instruments used for hedging currency risks arising from
future firm commercial cash flows are also recognized in this section.
Realized result and unrealized revaluation of derivatives are recognized in
other financial income and expenses to be able to net all internal flows
before entering into external derivatives to hedge future currency risk.
During 2021 no hedging has been performed on future firm commercial
cash flows. When hedging future cash flows for specific orders the classi-
fication in the income statement is decided on a case by case basis. In
2021, gains and losses from derivatives hedging currency risks for spe-
cific orders of SEK –3 M (–47) have been recognized in operating income
and SEK 32 M (63) in other financial income and expenses.
Read more in Note 9 Other financial income and expenses.
Read more in Note 4 Goals and policies in financial risk management.
Hedge Accounting is not applied by the Volvo Group.
Information regarding carrying amounts and fair values
In table
30:1
, carrying amounts are compared with fair values for all of
the Volvo Group’s financial instruments.
134
Notes to the financial statements
Derecognition of financial assets
The Volvo Group is involved in discounting activities to reduce financial risks.
An evaluation is performed to establish whether substantially all the risks
and rewards have been transferred to an external party when entering into
an agreement. The Volvo Group’s intention is not to be involved in
discounting activities if not substantially all the risks and rewards can be
transferred to an external party. As of December 31, 2021, there were no
transferred financial assets in the Volvo Group that did not fulfill the
requirements for derecognition.
Financial assets are derecognized from the balance sheet when the
rights to the cash flows from the assets have expired or when substantially
all risks and rewards have been transferred. Involvement in these assets is
reflected in the Volvo Group’s balance sheet as part of the external credit
guarantees. They are valued at best estimate and recognized as provisions
in the balance sheet to an amount of SEK 0.2 billion (0.1).
The Volvo Group’s maximum loss exposure is considered being the total
recourse relating to transferred and derecognized assets that are part of the
recognized credit guarantees, i.e. the total amount the Volvo Group would
have to pay in case of default of the customers. The likelihood for all custom-
ers going into default at the same time is considered to be low. The gross
exposure for the Volvo Group amounted to SEK 7.4 billion (4.4) related to
credit guarantees issued for customers and others and is part of the Volvo
Group’s contingent liabilities. This amount has not been reduced by the value
of counter guarantees received or other collaterals such as the right to repos-
sess the products.
Read more in Note 21 Other provisions.
Read more in Note 24 Contingent Liabilities.
Gains, losses, interest income and interest expenses from
financial instruments
Table
30:3 shows how gains and losses, as well as interest income and
interest expenses have affected income after financial items in the Volvo
Group divided by the different categories of financial instruments.
In table
30:2
, outstanding derivatives hedging currency and interest rate risks are presented.
Outstanding derivative instruments Dec 31, 2021 Dec 31, 2020
SEK M Nominal amount Carrying value Nominal amount Carrying value
Interest-rate swaps
– receivable position 112,571 2,779 126,549 5,448
– payable position 202,829 –2,265 167,422 –1,214
Forward and futures
– receivable position – 0 248 –
– payable position – – 666 –73
Foreign exchange derivatives
– receivable position 13,457 150 25,779 596
– payable position 10,719 –114 7,255 –67
Options purchased
– receivable position 2,000 1 10,409 2
– payable position 3,068 – 0 –
Options written
– receivable position – – – –
– payable position – – 205 –2
Total 551 4,691
30:2
135
Notes to the financial statements
1 Accrued and realized interest related to financial assets and liabilities measured
at fair value through the income statement is included in the amounts for gains
and losses.
2 The Volvo Group uses forward contracts and currency options to hedge the value
of future cash flows in foreign currency. Both unrealized and realized result of
currency risk contracts is included in the table. The amount includes gains/losses
of SEK – 261 M due to hedging of cash-flow in foreign currency from dividends
paid to group companies.
3 Information regarding changes in allowance for expected credit losses on accounts
receivables is provided in note 16 Receivables and note 8 Other operating income
and expenses. The amount includes gains/losses of SEK 228 M from revaluation
of receivables in foreign currency related to dividends paid to group companies.
4 The amount includes gains/losses due to derecognition of assets where SEK 266 M
(177) is related to the sale of customer-financing receivables and SEK 99 M (91) is
related to early buy-out revenue. Information regarding changes in allowance for
expected credit losses on customer-financing receivables is provided in note 15
Customer-financing receivables and note 8 Other operating income and expenses.
5 Changes in fair value on shares and participations in listed companies through
other comprehensive income amounted to SEK 48 M (–8).
Read more in Note
5 Investments in joint ventures, associated companies and other shares and
partici pations.
6 Interest expenses attributable to financial liabilities measured at amortized cost
recognized in operating income include interest expenses for financing operating
lease activities, which are not classified as financial instruments.
7 In gain/loss, interest income and expenses related to financial instruments
recognized in net financial items, SEK 900 M (–606) was recognized in
other financial income and expenses.
Read more in Note 9 Other financial
income and expenses.
8 Interest expenses attributable to pensions reported in net financial items of
SEK 219 M (294) are not included in this table.
Read more in Note 4 Goals and policies in financial risk management.
Recognized in operating income
2021 2020
SEK M
Gain/
Loss
Interest
income
Interest
expense
Gain/
Loss
Interest
income
Interest
expense
Financial assets and liabilities at fair value through the income statement
Currency risk derivatives
1, 2
–264 – – –47 – –
Marketable securities 13 – – – – –
Financial assets measured at amortized cost
Accounts receivables/trade payables
3
32 – – –102 – –
Cash and cash equivalents 46 – – – – –
Customer-financing receivables
4
366 7,020 – 267 7,208 –
Holding of shares in listed companies
5
0 – – 20 – –
Holding of shares in non-listed companies –16 – – 14 – –
Financial liabilities measured at amortized cost
6
– – –2,451 – – –2,992
Impact on operating income 177 7,020 –2,451 152 7,208 –2,992
Recognized in net financial items
7, 8
2021 2020
SEK M
Gain/
Loss
Interest
income
Interest
expense
Gain/
Loss
Interest
income
Interest
expense
Financial assets and liabilities at fair value through the income statement
Marketable securities 0 0 – –28 1 –
Interest and currency rate risk derivatives
1, 2
–2,784 –7 –1,075 7,473 –1 –1,246
Financial assets measured at amortized cost
Cash and cash equivalents – 365 – – 299 –
Financial liabilities measured at amortized cost 3,684 – 126 –8,051 – 192
Impact on net financial items
7, 8
900 358 –949 –606 299 –1,055
30:3
136
Notes to the financial statements
UD Trucks
On April 1, 2021, the Volvo Group divested UD Trucks. In the section for
Trucks, certain items of interest are presented excluding UD Trucks to
facilitate the comparability of the Volvo Group’s financial performance
between the periods. Thus, UD Trucks net sales, certain income statement
31
Changes in Volvo Group financial reporting 2021
items of interest, net order intake and deliveries for the first quarter 2021
and the full year 2020 when UD Trucks was part of the Volvo Group are
presented below for comparison purposes. UD Trucks had a marginally
positive impact on the Volvo Group’s adjusted operating income.
Net sales, SEK M First quarter 2021 Full year 2020
Europe 4 14
North America 27 97
South America 42 116
Asia 4,751 20,218
Africa and Oceania 613 2,259
Total net sales 5,438 22,703
Of which
Vehicles 3,346 13,855
Services 2,092 8,848
Certain Income Statement items of interest, SEK M First quarter 2021 Full year 2020
Research and development expenses –242 –1,102
Selling expenses –793 –3,642
Administrative expenses –87 –257
Net order intake, Number of trucks First quarter 2021 Full year 2020
Europe – –
North America 33 63
South America 83 374
Asia 3,556 11,979
Africa and Oceania 1,345 3,668
Total net order intake 5,017 16,084
Of which
Heavy-duty (>16 tons) 3,885 12,365
Medium-duty (716 tons) 874 3,080
Light-duty (<7 tons) 258 639
Deliveries, Number of trucks First quarter 2021 Full year 2020
Europe – –
North America 16 37
South America 109 244
Asia 3,028 12,424
Africa and Oceania 841 2,753
Total deliveries 3,994 15,458
Of which
Heavy-duty (>16 tons) 3,005 12,181
Medium-duty (716 tons) 771 2,695
Light-duty (<7 tons) 218 582
31:1
137
Notes to the financial statements
Nova Bus
On October 1, 2021, the Volvo Group reorganized its bus operation
whereby Nova Bus has been moved from the Buses segment into the seg-
ment Group Functions & Other. To facilitate the comparability between
the periods, the financial statements for 2020 and 2021 of the segments
Buses and Group Functions & Other have been restated. Thus, net sales,
operating income, deliveries and other segment information for 2020 are
presented below for comparison purposes. The reorganization has not
affected the total amounts for Industrial Operations and the Volvo Group.
Segment reporting
Buses
Group Functions & Other
incl. Eliminations
SEK M
Previously
reported
2020
Restate-
ment
After
restatement
2020
Previously
reported
2020
Restate-
ment
After
restatement
2020
Net sales, external customers 18,955 –4,890 14,066 6,983 4,890 11,872
Net sales, internal 836 –190 646 –1,908 190 –1,719
Net sales 19,791 –5,079 14,712 5,074 5,079 10,154
Expenses –20,320 5,073 –15,247 –5,384 –5,073 –10,458
Income from investments in joint ventures
and associated companies 6 – 6 1 – 1
Operating income –522 –7 –529 –309 7 –303
Adjustments¹ –77 – –77 1,059 – 1,059
Adjusted operating income –445 –7 –452 –1,370 7 –1,363
Operating margin, % –2.6 –0.1 –3.6 – – –
Adjusted operating margin, % –2.2 –0.1 –3.1 – – –
Other segment information
Depreciation, amortization and impairment –801 37 –764 2,874 –37 2,837
Restructuring costs –140 – –140 –72 – –72
Gains/losses from divestments –31 – –31 4 – 4
Investments in in-/tangible assets 431 –81 350 334 81 415
Investments in joint ventures and associated companies 77 – 77 765 – 765
Assets held for sale – – – 29,362 – 29,362
Liabilities held for sale – – – –6,638 – –6,638
31:2
1 For more information on adjusted operating income, please see section for Key ratios.
138
Notes to the financial statements
Disaggregation of revenue
Buses
Group Functions & Other
incl. Eliminations
SEK M
Previously
reported
2020
Restate-
ment
After
restatement
2020
Previously
reported
2020
Restate-
ment
After
restatement
2020
Net sales per product group
Vehicles 16,072 –4,278 11,794 2,912 4,278 7,190
Services 3,720 –801 2,919 2,163 801 2,964
Net sales 19,791 –5,079 14,712 5,074 5,079 10,154
Net sales per geographical region
Europe 5,765 – 5,765 3,309 – 3,309
North America 8,302 –5,079 3,223 580 5,079 5,659
South America 1,793 – 1,793 –79 – –79
Asia 2,397 – 2,397 927 – 927
Africa and Oceania 1,535 – 1,535 338 – 338
Net sales 19,791 –5,079 14,712 5,074 5,079 10,154
Timing of revenue recognition
Revenue of vehicles and services
recognized at the point of delivery 19,214 –5,065 14,150 2,378 5,065 7,442
Revenue of vehicles and services
recognized over contract period 577 –15 563 2,696 15 2,711
Net sales 19,791 –5,079 14,712 5,074 5,079 10,154
31:3
Deliveries by market
Buses
Number of buses
Previously
reported
2020
Restate-
ment
After
restatement
2020
Europe 1,565 – 1,565
North America 1,644 –790 854
South America 1,152 – 1,152
Asia 1,097 – 1,097
Africa and Oceania 757 – 757
Total deliveries 6,215 –790 5,425
Of which
Fully electric 227 –4 223
Hybrids 473 –390 83
31:4
139
Parent company
Parent company
NOTE PAGE
Accounting policies
Revenue and intra-group transactions
Administrative expenses
Other operating income and expenses
Income from investments
in group companies
Income from investments in joint
ventures and associated companies
Income from other investments
Interest expenses and similar charges
Other financial income and expenses
Appropriations
Income taxes
Intangible and tangible assets
Investments in shares and participations
Other non-current receivables
Other receivables
Untaxed reserves
Provisions for post- employment benefits
Other provisions
Non-current liabilities
Other liabilities
Contingent liabilities
Cash flow
140
Parent company
Parent company AB Volvo
Corporate registration number 5560125790.
The amounts within parentheses refer to the preceding year, 2020.
Board of Directors’ report
AB Volvo is the parent company of the Volvo Group and is headquartered in
Gothenburg, Sweden. The operations comprise of the Volvo Group’s head-
quarters with staff, together with some cor porate functions.
Income from investments in group companies include dividends
amounting to SEK 48,654 M (1,128).
The carrying value of shares and participations in group companies
amounted to SEK 67,683 M (71,857), of which SEK 66,720 M (70,554) per-
tained to shares in wholly owned subsidiaries. The corresponding share-
holders’ equity in the subsidiaries (including equity in untaxed reserves but
excluding non-controlling interests) amounted to SEK 129,512 M (144,701).
Investments in joint ventures and associated companies amounted to
SEK 8,938 M (8,938). In the consolidated accounts for the Volvo Group
these are accounted for according to the equity method. The equity portion
in joint ventures and associated companies pertaining to AB Volvo amounted
to SEK 11,150 M (10,177).
Financial net debt amounted to SEK 42,877 M (7,565).
AB Volvo’s risk capital (equity plus untaxed reserves) amounted to
SEK 81,210 M (74,700) corresponding to 60% (90) of total assets.
Income statement
SEK M 2021 2020
Net sales Note 2 266 327
Cost of sales Note 2 –485 –327
Gross income –219 0
Administrative expenses Note 2, 3 –1,329 –1,185
Other operating income and expenses Note 4 101 128
Operating income –1,447 –1,057
Income from investments in group companies Note 5 44,931 413
Income from investments in joint ventures and associated companies Note 6 787 1,058
Income from other investments Note 7 –1 –1
Interest income and similar credits 1 0
Interest expenses and similar charges Note 8 –546 –587
Other financial income and expenses Note 9 –17 –19
Income after financial items 43,708 –193
Appropriations Note 10 15,813 1,020
Income taxes Note 11 –3,190 653
Income for the period 56,331 1,480
Other comprehensive income
Income for the period 56,331 1,480
Other comprehensive income, net of income taxes – –
Total comprehensive income for the period 56,331 1,480
141
Parent company
Balance sheet
SEK M Dec 31, 2021 Dec 31, 2020
Assets
Non-current assets
Tangible assets Note 12 7 7
Financial assets
Shares and participations in group companies Note 13 67,683 71,857
Investments in joint ventures and associated companies Note 13 8,946 8,946
Other shares and participations Note 13 1 1
Other non-current receivables Note 14 487 –
Deferred tax assets Note 11 242 298
Total non-current assets 77,366 81,109
Current assets
Current receivables
Receivables group companies 56,546 1,735
Other receivables Note 15 1,235 85
Total current assets 57,781 1,820
Total assets 135,147 82,929
Equity and liabilities
Equity
Restricted equity
Share capital 2,562 2,562
Statutory reserve 7,337 7,337
Unrestricted equity
Non-restricted reserves 390 390
Retained earnings 4,590 52,930
Income for the period 56,331 1,480
Total equity 71,210 64,699
Untaxed reserves Note 16 10,000 10,000
Provisions
Provisions for post-employment benefits Note 17 275 268
Other provisions Note 18 – 3
Total provisions 275 271
Non-current liabilities Note 19
Liabilities to group companies 5,739 5,589
Other liabilities 6 6
Total non-current liabilities 5,745 5,595
Current liabilities
Trade payables 133 87
Other liabilities to group companies 45,414 1,789
Tax liabilities 1,836 1
Other liabilities Note 20 534 487
Total current liabilities 47,917 2,364
Total equity and liabilities 135,147 82,929
142
Parent company
Cash flow statement
SEK M 2021 2020
Operating activities
Operating income –1,447 –1,057
Depreciation and amortization 0 0
Other non-cash items Note 22 69 –45
Total change in working capital whereof 625 –105
Change in accounts receivable 14 –107
Change in trade payables 55 134
Other changes in working capital 556 –132
Interest and similar items received 1 0
Interest and similar items paid –546 –597
Other financial items –16 –23
Dividends received from group companies Note 5 15,933 1,127
Dividends received from joint ventures and associated companies Note 6 1,213 876
Group contributions received 1,020 25,792
Income taxes paid –2,261 –1,108
Cash-flow from operating activities 14,591 24,860
Investing activities
Investments in in-/tangible assets Note 12 – –
Disposals of in-/tangible assets Note 12 0 0
Investments of shares in group companies Note 13 –4,580 –300
Divestments of shares in group companies Note 5, 13 4,504 –
Investments of shares in non-group companies Note 13 –1 –125
Divestment of shares in non-group companies Note 13 – 176
Interest-bearing receivables Note 14 –150 –
Cash-flow after net investments 14,364 24,611
Financing activities
New borrowings Note 22 35,456 –
Repayment of borrowings Note 22 – –24,611
Dividends to owners AB Volvo –49,820 –
Other 0 –
Change in cash & cash equivalents 0 0
Cash & cash equivalents, beginning of year – –
Cash & cash equivalents, end of year – –
143
Parent company
Changes in equity
Restricted equity Unrestricted equity
SEK M Share capital
Statutory
reserve
Share premium
reserve
Retained
earnings Total
Total
equity
Balance at December 31, 2019 2,554 7,337 390 52,938 53,328 63,219
Income for the period – – – 1,480 1,480 1,480
Other comprehensive income
Other comprehensive income for the period – – – – – –
Total income for the period – – – 1,480 1,480 1,480
Transactions with shareholders
Dividends to owners of AB Volvo – – – – – –
Other changes 8 – – –8 –8 0
Transactions with shareholders 8 – – –8 –8 0
Balance at December 31, 2020 2,562 7,337 390 54,410 54,800 64,699
Income for the period – – – 56,331 56,331 56,331
Other comprehensive income
Other comprehensive income for the period – – – – – –
Total income for the period – – – 56,331 56,331 56,331
Transactions with shareholders
Dividends to owners of AB Volvo – – – –49,819 –49,819 –49,819
Share based payments – – – –1 –1 –1
Transactions with shareholders – – – –49,820 –49,820 –49,820
Balance at December 31, 2021 2,562 7,337 390 60,921 61,311 71,210
Read more in Note 19 Equity and number of shares in the consolidated financial statements about the share capital of the parent company.
144
Parent Company
145
The amounts within parentheses refer to the preceding year, 2020.
1 Accounting policies
The parent company has prepared its financial statements in accordance
with the Swedish Annual Accounts Act (1995:1554) and RFR 2, Account-
ing for legal entities. According to RFR 2, the parent company shall apply
all the International Financial Reporting Standards endorsed by the EU as
far as this is possible within the framework of the Swedish Annual
Accounts Act.
The changes in RFR 2 applicable to the fiscal year beginning January 1,
2021, has not had any significant impact on the parent company.
There are no announced changes in RFR 2 applicable to the fiscal year
beginning January 1, 2022 or later.
The accounting policies applied by the Volvo Group are described in the
respective notes in the consolidated financial statements. The main devi-
ations between the accounting policies applied by the Volvo Group and
the parent company are described below.
Shares and participations in group companies and Investments in joint
ventures and associated companies are recognized at cost in the parent com-
pany and test for impairment is performed annually. In accordance with RFR
2, the parent company includes costs related to acquisition of a business in
the acquisition value. Dividend is recognized in the income statement. All
holding of shares are recognized as financial assets and the result is reported
in the income from financial items.
The parent company applies the exception in the application of IFRS 9
which concerns accounting and measurement of financial contracts of guar-
antee in favor of subsidiaries and associated companies. The parent company
recognizes the financial contracts of guarantee as contingent liabilities.
RFR 2 includes an exception in regard to IFRS 16, allowing all lease
contracts to be accounted for as operational lease contract when the
parent company is a lessee.
Group contributions are recognized in accordance with the alternative rule
in RFR 2 and are presented as appropriations.
According to RFR 2, application of the regulations in IAS 19 regarding
defined benefit plans is not mandatory for legal entities. However, IAS 19
shall be applied for supplementary disclosures when applicable. RFR 2
refers to the Swedish law on safeguarding of pension commitments
(“tryggandelagen”) related to recognition of provisions for post-employment
benefits in the balance sheet and of plan assets in pension foundations.
Volvo Group applies IAS 19 Employee Benefits in the consolidated
financial statements. This implies differences, which may be significant,
in the accounting of defined benefit pension plans as well as in the
accounting of plan assets invested in the Volvo Pension Foundation.
The accounting principles for defined benefit plans differ from IAS 19
mainly relating to:
• Pension liability calculated according to Swedish accounting principles
does not take into account future salary increases.
• The discount rate used in the calculations is set by PRI Pensions garanti
and Finansinspektionen, respectively.
• Changes in the discount rate, actual return on plan assets and other
actuarial assumptions are recognized directly in the income statement
and in the balance sheet.
• Deficit must be either immediately settled in cash or recognized as a
liability in the balance sheet.
• Surplus cannot be recognized as an asset, but may in some cases be
refunded to the company to offset pension costs.
Notes to financial statements
2 Revenue and intra-group transactions
The recognized net sales of SEK 266 M (327) pertain mainly to revenues
from sale of services to group companies SEK 238 M (288). Revenue is
recognized when the control of the service has been transferred to the
customer, which is when the parent company incurs the associated cost to
deliver the service and the customer can benefit from the use of the deliv-
ered services.
Purchases from group companies amounted to SEK 322 M (232).
3 Administrative expenses
Personnel
Wages, salaries and other remunerations amounted to SEK 478 M (418),
social costs to SEK 139 M (120) and pension costs to SEK 143 M (210).
During 2020 government grants due to the extraordinary situation raised by
covid-19, were received by SEK 23 M. Of these, SEK 6 M have been repaid
to the authorities in Sweden during 2021. No such government grants have
been received during 2021. Pension cost of SEK 14 M (10) pertained to
Board Members and the President. The parent company has outstanding
pension obligations of SEK 5 M (1) to these individuals.
The number of employees at year end was 284 (289).
Read more in Note 27 Personnel in the consolidated financial statements about
the average number of employees, wages, salaries and other remunerations
including incentive program as well as Board members and senior executives by
gender.
Depreciation
Administrative expenses include depreciation of SEK 0 M (0) and pertains
to machinery and equipment.
Fees to the auditors 2021 2020
Deloitte AB
– Audit fees 17 17
– Audit-related fees 9 3
– Other fees 0 0
Total 26 20
3:1
Read more in Note 28 Fees to the Auditors in the consolidated financial state-
ments for a description of the different categories of fees.
Parent Company
146
4 Other operating income and expenses
Other operating income and expenses include royalty received by SEK 107
M (202), write-offs of receivables by SEK 0 M (33) and donations, grants
and Volvo profit sharing program costs by SEK 9 M (14).
5 Income from investments in group companies
Income from investments in
group companies
2021 2020
Dividends received
Volvo Autonomous Solutions AB, Sweden 21,176 –
Volvo Construction Equipment AB, Sweden 5,779 –
Volvo Treasury AB, Sweden 5,000 –
Volvo China Investment Co. Ltd, China 3,064 394
VNA Holding Inc., USA 2,678 –
Volvo Lastvagnar AB, Sweden 2,550 –
Volvo Powertrain AB, Sweden 1,800 –
Volvo Investment AB, Sweden 1,700 –
JSC Volvo Vostok, Russia 1,308 214
Volvo Penta AB, Sweden 1,030 –
Volvo Information Technology AB, Sweden 1,000 –
Volvo Group Venture Capital AB, Sweden 650 –
Volvo Financial Services AB, Sweden 500 –
Volvo Group Italia SpA, Italy 132 243
Volvo Group UK Ltd., Great Britain 109 –
Volvo Malaysia Sdn Bhd, Malaysia 80 63
Volvo Group Insurance Försäkrings AB, Sweden 75 –
Volvo Danmark AS, Denmark 20 –
Volvo Information Technology GB Ltd.,
Great Britain 3 –
Volvo Automotive Finance (China) Ltd, China – 196
Volvo Norge AS, Norway – 18
Subtotal 48,654 1,128
Impairment of shares
Volvo Equipamentos de Construcao
Latin America, Brazil – –490
Volvo Italia Spa, Italy – –225
Subtotal – –715
Reversal impairment of shares
UD Trucks Corporation, Japan 1,260 –
Subtotal 1,260 –
Income from divestment of shares
UD Trucks Corporation, Japan –4,980 –
Volvo Logistic UK Ltd., Great Britain 0 –
Volvo Information Technology GB Ltd.,
Great Britain –3 –
Subtotal –4,983 –
Income from investments in group companies 44,931 413
5:1
6
Income from investments in joint ventures and
associated companies
Income from investments in joint ventures and associated companies
includes dividend from Dongfeng Commercial Vehicles Co., Ltd by SEK 767
M (1,058) and from VE Commercial Vehicles, Ltd. by SEK 20 M (–).
7 Income from other investments
AB Volvo has not had any transactions from other investments which have
had a significant impact on the financial statements.
8 Interest expenses and similar charges
Interest expenses and similar charges totaling SEK 546 M (587) include
interest of SEK 546 M (587) to subsidiaries.
9 Other financial income and expenses
Other financial income and expenses include exchange rate gains and
losses, costs for credit rating and stock exchange listing cost.
10 Appropriations
Appropriations include a net of group contributions of SEK 15,813 M
(1,020) and reversal of additional depreciation of SEK 0 M (0).
Parent Company
Income taxes were distributed as follow:
Income taxes 2021 2020
Current taxes relating to the period –3,078 –111
Adjustment of current taxes for prior period –56 673
Deferred taxes –56 91
IS
Total income taxes –3,190 653
11:1
Deferred taxes relate to estimated tax on temporary differences.
Deferred taxes have been revaluated based on the tax rate that are
expected for the period when the asset is realized or the liability is adjusted.
Table
11:2
discloses the principal reasons for the difference between the
corporate income tax of 20.6% (21.4) and the tax for the period:
Income taxes for the period 2021 2020
Income before taxes 59,521 827
Income tax according to applicable tax rate –12,261 –177
Capital gains/losses –1,072 0
Non-taxable dividends 10,185 468
Tax effect due to changed income tax rate 0 –3
Non-taxable revaluations of shareholdings 0 2
Other non-deductible expenses –14 –210
Other non-taxable income 281 0
Adjustment of current taxes for prior period –56 673
Withholding tax –259 –93
Remeasurement of deferred tax assets –4 4
Current tax on standardized method 10 –11
Income taxes for the period –3,190 653
11:2
Specification of deferred
tax assets
Dec 31,
2021
Dec 31,
2020
Provisions for post-employment benefits 242 298
BS
Deferred tax assets 242 298
11:3
Intangible assets,
acquisition costs
Other
intangible
assets
Total
intangible
assets
Opening balance 2020 116 116
Acquisition cost as of
20201231 116 116
Acquisition cost as of
20211231 116 116
Intangible assets,
accumulated
amortization
Other
intangible
assets
Total
intangible
assets
Opening balance 2020 116 116
Accumulated amortization
as of 20201231 116 116
Accumulated amortization
as of 20211231
116 116
BS
Net value in balance sheet
as of December 31, 2020
1
– –
BS
Net value in balance sheet
as of December 31, 2021
1
– –
Tangible assets,
acquisition costs
Machinery
and equip-
ment
Total
tangible
assets
Opening balance 2020 17 17
Sales/scrapping –1 –1
Acquisition cost as of
20201231 16 16
Sales/scrapping –1 –1
Acquisition cost as of
20211231 15 15
Tangible assets,
accumulated
depreciation
Machinery
and equip-
ment
Total
tangible
assets
Opening balance 2020 10 10
Depreciation 0 0
Sales/scrapping –1 –1
Accumulated depreciation
as of 20201231 9 9
Depreciation 0 0
Sales/scrapping –1 –1
Accumulated depreciation
as of 20211231 8 8
BS
Net value in balance sheet
as of December 31, 2020
1
7 7
BS
Net value in balance sheet
as of December 31, 2021
1
7 7
1 Acquisition value, less accumulated depreciation, amortization and
impairment.
12:1
12 Intangible and tangible assets 11 Income taxes
147
Parent Company
13 Investments in shares and participations
Shares and participations in group companies
During 2021 investment in Volvo Fuel Cell Holding AB has been made by
SEK 3,000 M and in Volvo Energy AB including a shareholder´s contribu-
tion by SEK 200 M. Shareholder´s contribution has been paid to Volvo
Investment AB by SEK 1,380 M. Shares in UD Trucks have been divested
by SEK 8,928 M. Shares in Volvo Equipamentos de Construcao Latin
America has been received in form of dividend from Volvo Autonomous
Solutions AB by SEK 176 M. The whole investment in Volvo Equipamen-
tos de Construcao Latin America has been transferred to Volvo Construc-
tion Equipment AB in form of shareholder´s contribution by SEK 516 M.
During 2020, shareholder´s contribution was paid to Volvo Logistics
AB by SEK 300 M. Impairment of investment in Volvo Equipamentos de
Construcao Latin America was made by SEK 490 M and in Volvo Italia
Spa by SEK 225 M.
Investments in joint ventures and associated companies
During 2021 no transactions have affected the value of investments in joint
ventures and associated companies.
During 2020 investment in World of Volvo AB by SEK 125 M was made
with 50% ownership. The investment was classified as a joint venture
together with Volvo Car Corporation. The participation of 50% in Blue
Chip Jet II HB was divested by SEK 176 M.
Other shares and participations
No significant transactions have affected the value of other shares and
participations during 2021 and 2020.
Holding of shares in joint ventures, associated
companies and other shares and participations
Dec 31, 2021 Dec 31, 2021 Dec 31, 2020
Registration
number
Percentage
holding
1
Carrying
value
2
Carrying
value
2
Dongfeng Commercial Vehicles Co. Ltd., China – 45.0 7,197 7,197
VE Commercial Vehicles Ltd., India
3, 4
– 34.7 1,616 1,616
World of Volvo AB, Sweden
4
5592339849 50.0 125 125
Other investments – 9 9
Total carrying value, joint ventures, associated companies and other shares and participations 8,947 8,947
13:2
Changes in AB Volvo´s holding of
shares and participations
Group
companies
Joint ventures
and associated
companies
Other shares and
participations
2021 2020 2021 2020 2021 2020
Opening balance 71,857 72,272 8,946 8,997 1 1
Acquisitions/New issue of shares 3,176 – – 125 – –
Divestments/Redemption of shares –11,196 – – –176 – –
Shareholder’s contribution 2,096 300 – – 1 1
Impairment of shares and participations – –715 – – –1 –1
Reversal impairment of shares and participations 1,750 – – – – –
BS
Carrying value, as of December 31 67,683 71,857 8,946 8,946 1 1
13:1
1 The percentage holding refers to the parent company AB Volvo’s holding.
2 Refers to AB Volvo’s carrying value of its holding.
3 The total holding by Volvo Lastvagnar AB and AB Volvo is 45.6%.
4 In Volvo Group the companies are reported as joint ventures, consolidated according to equity method.
148
Parent Company
AB Volvo owns, directly or indirectly, 279 (285) legal entities. The direct owned entities are listed in below table.
Holding of shares in group companies
Dec 31, 2021 Dec 31, 2020
Registration
number
Percentage
holding
1
Carrying
value
2
Carrying
value
2
Volvo Lastvagnar AB, Sweden 5560139700 100 8,711 8,711
Volvo Autonomous Solutions AB, Sweden 5565399853 100 8,134 8,134
UD Trucks Corporation, Japan – – – 8,928
Volvo Bussar AB, Sweden 5561973826 100 3,033 3,033
Volvo Construction Equipment AB, Sweden 5560219338 100 8,076 7,559
AB Volvo Penta, Sweden 5560341330 100 586 586
VNA Holding Inc., USA – 100 3,688 3,688
Volvo Financial Services AB, Sweden 5560005406 100 2,667 2,667
Volvo Treasury AB, Sweden 5561354449 100 13,044 13,044
Volvo Investment AB, Sweden 5565194494 100 4,268 2,888
Volvo Lastvagnar Sverige AB, Sweden 5565318572 100 2,355 2,355
Volvo Fuel Cell Holding AB, Sweden 5592756729 100 3,000 –
Volvo China Investment Co Ltd., China – 100 1,302 1,302
Volvo Automotive Finance (China) Ltd., China – 100 491 491
Volvo Group UK Ltd., Great Britain
3
– 35 350 350
Volvo Group Mexico SA, Mexico – 100 543 543
Volvo Group Venture Capital AB, Sweden 5565424370 100 369 369
Volvo Powertrain AB, Sweden 5560000753 100 898 898
Volvo Information Technology AB, Sweden 5561032698 100 1,511 1,511
Volvo Parts AB, Sweden 5563659746 100 200 200
Volvo Group Insurance Försäkrings AB, Sweden 5164018037 100 182 182
Volvo Business Services AB, Sweden 5560295197 100 118 118
Volvo Danmark AS, Denmark – 100 157 157
VFS Servizi Financiari Spa, Italy
4
– 25 101 101
Kommersiella Fordon Europa AB, Sweden 5560493388 100 2,693 2,693
Volvo Norge AS, Norway – 100 50 50
Volvo Malaysia Sdn Bhd., Malaysia – 100 48 48
JSC Volvo Vostok, Russia
5
– 75 177 177
Volvo Group Italia Spa, Italy
6
– 65 335 335
Volvo Logistics AB, Sweden 5561979732 100 385 385
Volvo Information Technology GB Ltd., Great Britain – – – 3
VFS Latvia SIA, Latvia – 100 9 9
VFS Int Romania Leasing Operational, Romania – 100 2 2
Volvo Equipamentos de Construcao, Latin America, Brazil – – – 340
Volvo Energy AB, Sweden 5592854169 100 200 –
Other holdings – 0 0
Total carrying value group companies
7
67,683 71,857
13:3
1 The percentage holding refers to the parent company AB Volvo’s holding.
2 Refers to AB Volvo’s carrying value of its holding.
3 Total holding by Volvo Lastvagnar AB and AB Volvo is 100%.
4 Total holding by Volvo Group Italia Spa and AB Volvo is 100%.
5 Total holding by AB Volvo and Volvo Trucks Region Central Europe GmbH is 100%.
6 Total holding by Renault Trucks (SAS), Volvo Lastvagnar AB, Volvo Bussar AB, AB Volvo Penta and AB Volvo is 100%.
7 AB Volvo´s share of shareholder´s equity in subsidiaries (including equity in untaxed reserves) was SEK 129,512 M (144,701).
149
Parent Company
17 Provisions for post-employment benefits
The parent company has two types of pension plans, defined contribution
plans and defined benefit plans.
Defined contribution plans: post-employment benefit plans where the
company makes regular payments to separate entities and has no legal or
constructive obligation to pay further contributions. The expenses for
defined contribution plans are recognized during the period when the
employee provides service.
Defined benefit plans: post-employment benefit plans where the compa-
ny’s undertaking is to provide predetermined benefits that the employee will
receive on or after retirement. These benefit plans are secured through
balance sheet provisions or pension fund contributions. Furthermore, a credit
insurance policy has been taken out for the value of the obligations. The main
defined benefit plan is the ITP2 plan which is based on final salary. The plan is
semi-closed, meaning that only new employees born before 1979 have the
possibility to choose the ITP2 solution. The ITP2 plan for the company is
funded in Volvo Pension Foundation. Pension obligations are calculated annu-
ally, on the balance sheet date, based on actuarial assumptions.
The defined benefit obligations are calculated based on the actual salary
levels at year-end and based on a discount rate of 3.84% (3.84) for the ITP2
plan and
–0.1% (0.3) for other pension obligations. Assumptions for discount
rates and mortality rates are determined annually by PRI Pensionsgaranti for
ITP2 and Finansinspektionen for other pension obligations, respectively.
The Volvo Pension Foundation was formed in 1996 to secure obliga-
tions relating to retirement pensions in accordance with the ITP plan.
Since its formation, net contributions of SEK 332 M have been made to
the foundation by the parent company.
Provisions for post-employment benefits in the parent company’s
balance sheet correspond to the present value of obligations at year end,
less fair value of plan assets.
Obligations in defined
benefit plans
Funded Unfunded Total
Obligations opening balance 2020 700 248 948
Service costs 26 19 45
Interest costs 28 1 29
Benefits paid –23 0 –23
Obligations as of
December 31, 2020 731 268 999
Service costs 24 20 44
Interest costs 29 0 29
Benefits paid –25 –13 –38
Obligations as of
December 31, 2021 759 275 1,034
17:1
Fair value of plan assets in funded plans
Plan assets opening balance 2020 931
Actual return on plan assets 126
Contributions and compensation
to/from the fund 0
Plan assets as of December 31, 2020 1,057
Actual return on plan assets 153
Contributions and compensation to/from the fund 0
Plan assets as of December 31, 2021 1,210
17:2
14 Other non-current receivables
Dec 31,
2021
Dec 31,
2020
Other non-interest bearing receivables 337 –
Other interest bearing recevables 150 –
BS
Total non-current receivables 487 –
14:1
Other non-interest bearing receivables include an amount of SEK 337 M
(
–) and refers to an earnout connected to the divestment of UD Trucks.
Read more in Note 3 Acquisitions and divestments of operations in the
consolidated financial statements about the divestment of UD Trucks.
15 Other receivables
Dec 31,
2021
Dec 31,
2020
Accounts receivable 5 14
Prepaid expenses and accrued income 172 20
Other receivables 1,058 51
BS
Total other receivables 1,235 85
15:1
Prepaid expenses and accrued income include an amount of SEK 144 M
(
–) and refers to an earnout connected to the divestment of UD Trucks.
There is no valuation allowance for doubtful receivables at the end
of the year. Fair value is not considered to differ from carrying value.
16 Untaxed reserves
Dec 31,
2021
Dec 31,
2020
Tax allocation reserve 10,000 10,000
Accumulated additional depreciation:
Machinery and equipment – 0
BS
Total untaxed reserves 10,000 10,000
16:1
150
Parent Company
Provisions for post-employment
benefits
Dec 31,
2021
Dec 31,
2020
Obligations
1
–1,034 –999
Fair value of plan assets 1,210 1,057
Surplus (+) / deficit (–) 176 58
Limitation on assets in accordance with
RFR2 (when plan assets exceed
corresponding obligations) –451 –326
BS
Net provisions for
post-employment benefits
2
–275 –268
17:3
1 The ITP2 obligations amount to SEK –746 M (–714).
2 ITP2 obligations, net, amount to SEK 0 M (0).
Pension costs 2021 2020
Service costs 44 46
Interest costs
1
29 29
Interest income
1
–27 17
Pension costs for defined benefit plans 46 92
Pension costs for defined contribution plans 44 62
Special payroll tax/yield tax
2
50 51
Cost for credit insurance FPG 3 5
Total costs for the period 143 210
17:4
1 Interest income, net of SEK 29 M (17) is included in financial items.
2 Special payroll tax/yield tax are calculated according to Swedish
Tax law and accrued for in current liabilities.
18 Other provisions
Other provisions include provisions for restructuring measures of SEK – M (3).
19 Non-current liabilities
Maturity
20232027 5,741
2028 or later 4
BS
Total non-current liabilities 5,745
19:1
20 Other liabilities
Dec 31,
2021
Dec 31,
2020
Wages, salaries and withholding taxes 324 282
Accrued expenses and prepaid income 204 191
Other liabilities 6 14
BS
Total other liabilities 534 487
20:1
No collateral is provided for current liabilities.
21 Contingent liabilities
Contingent liabilities as of December 31, 2021, amounted to SEK 284,913 M
(278,457) of which SEK 284,861 M (278,410) pertained to group companies.
Credit guarantees are included to an amount corresponding to the
credit limits. Credit guarantees amounted to SEK 272,306 M (266,286).
The total amount pertained to group companies.
The utilized portion at year-end amounted to SEK 135,841 M (138,757),
of which SEK 135,826 M (138,743) pertained to group companies.
22 Cash flow
Other non-cash items 2021 2020
Loss on divestment of shares and
participations 219 –
Transfer price adjustments, net –160 –85
Other changes 10 40
Total other non-cash items 69 –45
22:1
Change in loans
Non-current
liabilities to
group companies
Loan
Volvo Treasury AB
Current
liabilities to
group companies
Loan/Cashpool
Volvo Treasury AB
December 31, 2019 5,589 26,323
Cash flows
new borrowings – –
Cash flows repay-
ments of borrowings – –24,611
Reclassification – –
Other – –4
December 31, 2020 5,589 1,708
Cash flows
new borrowings 150 35,306
Cash flows repay-
ments of borrowings – –
Reclassification – –
Other – –1
December 31, 2021 5,739 37,013
22:2
151
PAGE
About the report 152
Impacts, stakeholders and material topics 153
Climate and environment 154
Governance, strategy, opportunities & risks 154
Risk management, metrics & targets 156
TCFD-index 157
Energy and emissions 158
Water, Waste 161
Materials of concern, Compliance 161
Biodiversity 162
Sustainable Finance 162
EU Taxonomy regulation disclosures 162
Research and development investments 163
Employees and development 164
Employment 164
Labor and management relations 165
Diversity and equal opportunities 165
Training and education 166
PAGE
Safety 167
Customer health and safety 167
Occupational health and safety 168
Human rights 170
Human rights governance 170
Policy commitment and salient risks 170
Value chain approach 170
Awareness and grievance mechanism 171
Specific reports 172
Responsible sales 174
Suppliers 175
Supplier social assessment 176
Supplier environmental assessment 176
Sustainable minerals program 176
Business ethics and compliance 177
Compliance, Anti-corruption,
Whistle-blower reporting 177
Tax, Public policy 178
Organizational profile and reporting practices 178
About the report
These Sustainability notes include the Volvo Group’s col-
lected sustainability disclosures. As sustainability topics
are top strategic issues and well integrated in the busi-
ness and operating model of the Volvo Group, additional
sustainability disclosures can be found in other parts of
the report, see below.
Governance
The overall governance of sustainability is described in the
Corporate Governance report on page 183 and 190.
Strategy and Business model
The Volvo Group´s strategy includes sustainability priori-
ties and is presented on pages 1043. Our business model
is outlined on pages 1825. With business operations in
more than 190 countries whereof many are classified as
high-risk countries from an environmental, human rights or
corruption perspective we need to ensure that we pursue
our business operations in a responsible manner. Environ-
mental, social and financial sustainability aspects as well
as ethical business conduct are integrated into the Volvo
Group overall strategy and business model and also incor-
porated into our processes and policies.
Policies
The Volvo Group Code of Conduct is a Group-wide policy
that sets the standards on how we conduct business; eth-
ically and in compliance with applicable laws and regula-
tions. It applies everywhere we operate, for our employees
and everyone else who works on our behalf. In addition to
the Code of Conduct, the Volvo Group’s policies on com-
petition, human rights, data privacy, anti-corruption and
export control, tax and environment are complemented
with compliance programs and management systems for
effective policy deployment. In line with our decentral-
ized model each business area is responsible to ensure
compliance with the Volvo Group’s minimum require-
ments and standards for sustainable and responsible
business conduct. Business areas are also free to comple-
ment existing policies and compliance programs with
more stringent requirements.
Risks and mitigation
The Volvo Group’s enterprise risk management process
includes sustainability-related risks. Principal risks, includ-
ing several sustainability-related risks, are reported in the
overall Risks and uncertainties section, see pages 7075.
These Sustainability Notes include a more detailed over-
view on risks and mitigation activities and complements
information where sustainability topics has not yet been
qualified as a principal Group wide risk.
Key Performance Indicators
KPI’s in relation to the environment, employees, social
factors, human rights and business ethics are reported
for each material topic in these Sustain ability notes.
Reporting standards used
This report has been prepared in accordance
with the Global Reporting Initiative’s (GRI)
Standards “Core” option. GRI is complemented
by other relevant frameworks where stated,
including the Task Force on Climate-related
Financial Disclosures initiative (TCFD). GRI and
UN Global Compact’s guide Business Reporting
in the Sustainable Development Goals (SDGs)
have been used to translate the disclosures
herein to a number of the 169 SDG targets.
Topics related to this report
Complementary information is available on
volvogroup.com/asr2021. This includes:
• GRI index, also available on
volvogroup.com/gri2021
• SASB index, Industrial Goods and Machinery
• Locations of major operations
• Membership in associations
• Code of Conduct and related policies
Sustainability Notes
152
Impacts, stakeholders and material topics
Report content
Volvo Group’s sustainability disclosures are prepared to provide
stakeholders with relevant information about the Group’s economic,
environmental and social impact. In defining the report content, the
Volvo Group applies GRI’s reporting principles on stakeholder inclu-
siveness, sustainability context, materiality and completeness and
seeks to implement the recommendations of the TCFD.
Strategic framework
The Volvo Group’s framework to drive sustainability and performance
revolves around climate, resources and people, and is aligned with
the Sustainable Development Goals and targets from the United
Nations. Our sustainability priorities have been concluded in dialogue
with a network of sustainability professionals and management of all
Truck Divisions, Business Areas as well as the Executive Manage-
ment of the Volvo Group and the Board of Directors.
Consulting stakeholders
Stakeholder perspectives are considered throughout strategy devel-
opment and deployment. The approach is to have an open dialogue
with a wide range of stakeholders on sustainable business. In this
work, input from stakeholders is sought via key functions within the
Volvo Group and includes views from customers, investors, employ-
ees, supply chain partners and stakeholders in the community.
While different stakeholder groups raise concerns or ask for specific
information on different topics certain sustainability topics are com-
mon for most stakeholder groups. During 2021 such topics have
revolved mainly around climate impacts and mitigations. We have also
discussed human rights, health and strategies around employment,
such as diversity and training. Read more about our main stakeholder
groups and their topics of interest, materiality and reporting on vol-
vogroup.com. In addition to stakeholder input and risk assessments,
materiality maps and frameworks from external sources, such as
SASB, are used to confirm that relevant areas are included in the
reporting.
Translated into GRI topics, material topics are briefly described in
the table below. More details are provided under the specific sustain-
ability notes on the following pages and complemented by the risk
descriptions on pages 154177.
Additional topics are mentioned briefly but not reported according
to GRI, e.g. waste, water, biodiversity, materials, lobbying, and tax
practices. They are included for specific stakeholders’ information.
Material topics and summary of main impacts
GRI topic Comment on the main impacts and boundaries
Economic performance Risks and opportunities mainly relate to the transitional aspects of customer demands, emission regulation,
technology development and scarce materials.
Energy and emissions With the focus on climate change and the need to transition to a low carbon economy, reducing environmental
impacts from customers’ use of our products is a key business driver. Over 95% of energy and emissions
related to the product’s lifecycle occur in the customer use phase. It is also important to reduce emissions in
Volvo Group’s own operations and transportation of goods.
Employment Continuously improving workplaces, creating jobs and adapting to market demands are primarily tied to
the Volvo Group’s own operations.
Labor management relations A respectful social dialogue creates better workplaces and can help effective management of operations.
The main focus is on own operations but also part of supplier requirements.
Diversity and equal opportunities Diversity drives performance for the Volvo Group and equal opportunities in the community.
Training and education Training enables matching of competency to needs for employees, the Volvo Group and customers and
helps to create employment opportunities.
Occupational health and safety The main focus is on own operations and employees’ work situation but also a significant part of supplier
requirements.
Customer health and safety Health and safety related to the product use phase and the wider impact on road safety and end users’
occupational safety.
Supplier environmental
and social assessments
Suppliers make up the extended operations of the Group. Influence is mainly bound to tier one and focus
areas are social topics as well as innovation for reduced environmental impact.
Human rights
(including sub-topics)
Includes potential human rights impacts within Volvo Group’s operations, the supply chain, operations of
business partners and in relation to the use of sold products.
Anti-corruption Volvo Group renounce all form of corruption. It distorts the market, interfere with free competition, violate
laws and undermine social development.
Sustainability notes / Impacts, stakeholders and material topics
153
Sustainability notes / Climate and environment
Climate and environment
GOVERNANCE, STRATEGY, OPPORTUNITIES AND RISKS
Connection to Agenda 2030 and reporting standards
Main connections to the UN SDGs and targets
7.3 Double energy efficiency
11.2 Sustainable transport systems
12.2 Sustainable management of natural resources
13.3 Knowledge and capacity building to meet climate change
Referenced reporting standards
GRI 201 – Economic performance
TCFD recommendations
The Volvo Group supports the TCFD. The below is the second time the
Volvo Group is reporting having regard to TCFD and this report sets forth
the Group’s disclosures on its overall governance, strategy and manage-
ment of climate related risks and opportunities, including relevant climate
related metrics and targets. The Volvo Group recognizes that there contin-
ues to be more work to be done in developing the disclosures to align with
each of the 11 recommendations of the TCFD and to take account of new
guidance on metrics, targets and transition plans published in October
2021. A number of climate-related projects and activities planned for 2022
will assist to further develop these disclosures.
Governance
The AB Volvo Board of Directors and the Executive Board are ultimately
responsible for the oversight of the Volvo Group’s climate-related risks
and opportunities and are responsible for setting the strategic direction of
the Group, as further detailed on page 180195 in the Corporate Govern-
ance Report.
A number of cross-functional working groups consolidates and pre-
pares information for consideration in strategic decision-making at the
Board of Director and Executive Board level. Two such groups with rep-
resentation from executive management have meet regularly during year,
focusing on the Group’s climate goals and on sustainability disclosures,
respectively. This work has included, among other things, reviewing the
Group’s climate targets on a regular basis and reporting to the Board of
Directors and Executive Board on progress against these targets.
Strategy
The Volvo Group supports the ambitions of the Paris Agreement – to keep
the increase of the global average temperature to well below 2 °C above
pre-industrial levels and to pursue efforts to limit the temperature increase
to 1.5 °C. The Volvo Group welcomes the conclusion of the Glasgow Cli-
mate Pact at COP26 in November 2021 which saw the parties reaffirm
this commitment. While the Group recognizes the challenges this repre-
sents, in light of recent estimates that an increase between 1.8 °C and 2.4
°C is more likely, the Group has committed to the SBTi Business Ambition
for 1.5 °C and set ambitious science-based targets in relation to its Scope
3 emissions in pursuit of its own net-zero targets.
To achieve ambitions of the Paris Agreement, emissions need to decline
rapidly across all of society’s main sectors, including buildings, industry,
transport and energy, and in the transport sector, there is an increasing
need for products with lower emissions of GHGs and for solutions using
technologies that increase resource efficiency. The ongoing transition of
the transport sector towards new technologies and new service-based
business models bring significant business opportunities as well as tran-
sitional risks for the Volvo Group. It has been important for the Group
therefore to integrate climate-related risks and opportunities into the
overall Volvo Group strategy and business and operating model.
Climate-related risks
As part of this integration, through the Group’s Enterprise Risk Manage-
ment process (see page 70) the Volvo Group has identified a number of
climate-related risks, as set out below. These can be divided into two cat-
egories, transitional climate risks and physical climate risks. Transitional
climate risks include for instance technology-related risks, policy- and
legal-related risks, market risks and reputational risks. Physical climate
risks include both acute physical risks, such as extreme weather events,
and chronic physical risks, for instance those arising due to changing
weather patterns, rising mean temperature and rising sea levels.
Transitional climate risks
The Volvo Group has identified a number of climate-related transitional
risks, which are incorporated into the Volvo Group Enterprise Risk Man-
agement process. Transitional risks may be material for the Volvo Group in
the short, medium and long term. These risks, including their potential
impact, are described in more detail on page 7075 under the following
risk categories:
• Regulations, page 71
• Transformation risk, page 71
• New business models, page 72
• Reliance on suppliers and scarce materials, page 72
• Climate risk, page 73.
Physical risks
Based on the main scenario outlined in the Volvo Group’s strategy – a
1.5 °C scenario – the physical risks are not identified as material in the
short- to medium-term perspective. Climate-related acute physical risks,
such as extreme weather events, as well as chronic physical risks are likely
to increase in the long-term if the global warming significantly exceeds a
1.5 °C scenario. Physical risks will be closely monitored, reviewed and
reported on if they emerge as material from a Group perspective.
Climate-related opportunities for the Volvo Group
The transition of the transport sector offers significant challenges for the
Volvo Group, but alongside that it also offers a number of business oppor-
tunities. The Volvo Group strives to lead the development of new technol-
ogies and is continuing to develop an extensive portfolio of products and
services using new technologies. The ambition is to continue to provide
high quality products and services to our customers, while at the same
time enabling our customers to reduce their environmental impact.
154
Sustainability notes / Climate and environment
Carbon fuel Carbon neutral
100%
0%
Share
of new
vehicles
2030 2040 20502020
Battery electric
Fuel cell electric
FC share?
ICE share?
Carbon neutral electricity
Carbon neutral hydrogen
BioLNG
HVO, electrofuels, hydrogen etc.
Internal Combustion Engine (ICE)
ICE liquefied methane
Running fleet
Illustrative scenario for 1.5 °C
The Volvo Group is broadening its offer of products that can be powered
by renewable energy through the introduction of electric vehicles as described
on page 2832. The Group also invests in fuel cell technology with the ambi-
tion to have a heavy-duty hydrogen offer available during the second half of
this decade. In parallel, the Volvo Group continues to offer products that can
be powered by renewable liquid and gaseous fuels like HVO (hydrogenated
vegetable oil) and biogas, see page 36. In addition to new technology prod-
ucts, the Volvo Group has developed a range of service solutions that help to
reduce the number of transports needed by optimizing fill rates, consolidat-
ing transports and choosing the most effective routing.
Customer demand for products and solutions with lower environmental
impact is increasing, although the transition pace differs between business
areas and regions. When using electricity as main power source in transport
operations, the operational cost are reduced. At the same time, the capital
cost increases. The transition to electrification also depends on external fac-
tors such as the existence of a functioning charging infrastructure and access
to renewable energy sources to power battery electric and fuel cell electric
products. Customer demand in different markets is dependent on factors
such as availability of the necessary infrastructure and energy, governmental
incentives for green technologies and the removal of fossil-fuel subsidies. The
Volvo Group strives to have products and solutions available in pace with
customer demand using a highly flexible production system.
The Volvo Group has issued a Green Financial Framework to enable access
to additional capital for the development and production of sustainable tech-
nologies for the transport sector.
Scenario analysis
In order to help understand the risk posed by climate change and their
potential impacts on the Volvo Group, the Group has begun work on its
climate change scenario analysis. This includes exploring climate scenarios
from the IEA and IPCC, as well as secondary sources interpreting those
scenarios specifically in relation to the transport sector. At this stage, this
exercise is still in early stages, with further work planned for 2022. At pres-
ent, the main scenarios are the “well below 2 °C scenario” , and “1.5 °C
scenario” , as set out below.
Climate scenarios
As part of setting the target levels in SBTi for the Volvo Group Business
Areas, analyzes have been performed in order to understand the level of
emission reductions needed in order to adopt to the emission reduction
pathways aligned with the ambitions in the Paris agreement on well below
2 °C and 1.5 °C ambitions. This has covered usage of the target models
developed by the SBTi including climate scenarios from the IEA and IPCC.
The analyzes provide inputs on important factors such as modelling cus-
tomer demand, regulatory requirements, infrastructure roll-out, access to
renewable energy and governmental incentives for clean technologies
which in turn are essential inputs to the respective Business Areas’ plans.
Potential pathways to a 1.5 °C or a well below 2 °C scenario include a
successful decarbonization of the transport sector as well as the energy
sector. The transition to electrification depends not only on the product and
service offering, but also on external factors such as the existence of a func-
tioning infrastructure and access to renewable energy sources to power
battery electric and fuel cell electric products. Recognizing the need for
collaboration on a system-wide basis, the Volvo Group has taken part in a
number of multi-stakeholder initiatives, including the WWF Climate Savers
programme as part of which we 20152020 drove 14 initiatives to promote
energy efficiency, reduced carbon emissions and positively influence the
value chain. The Volvo Group looks forward to continuing such collabora-
tion, including on a cross-sector basis, in the future.
As part of our analysis, the Volvo Group has performed GHG emission
reduction scenarios based on the composition of the annual volume and
GHG emissions of products forecasted to be put on different markets
The illustration describes a pathway to reach the ambitions of the Paris
Agreement and to achieve net-zero greenhouse gas emissions. Since it
takes approximately ten years to renew a running fleet, the aim is to by
2040 offer products propelled by low GHG energy sources. The exact
future product mix cannot be foreseen but, in this scenario, the running
fleets in the transportation sector are likely to include different technolo-
gies that can be powered by renewable energy. These solutions can be
battery-electric, fuel cell-electric or vehicles propelled with low GHG
intensity energy sources for combustion engine drivelines. In order to
reach the ambitions of the Paris Agreement, this shift needs to happen
on a global scale.
155
over time. The Business Areas and Truck Divisions have undertaken sce-
nario analyses, including modelling customer demand, regulatory require-
ments, infrastructure roll-out, access to renewable energy, governmental
incentives for clean technologies, etc. The analysis showed that, without
action, the scenario presented risks to us. However, while these would need
to be managed, some of these changes also present material opportunities.
The results of the analysis have since been fed into the relevant Business
Area and Truck Division business strategies to support development and
offering of the right mix of products for each respective market over time.
This may include electrified products as well as conventional combustion
engine products powered by renewable liquid and gaseous fuels.
Financial planning
The Volvo Group’s investment plan includes a technology roadmap to
increase zero-emission vehicles or low-emission vehicles that can enable
net-zero transport solutions. These include solutions based on electric
and hydrogen drivelines as well as sustainable biofuels.
Investments in property, plant and equipment will increase in connec-
tion with the Group building up capacity for battery-electric and fuel
cell-electric vehicles. However, thanks to the Group’s modular product
architecture both electric trucks and trucks with combustion engines can
be produced on the same assembly lines, thus limiting the investments
needed for this transition in the industrial system.
Many plants that are currently producing components for combustion
engines will gradually introduce production of components for electric
vehicles. Investments in research and development are accelerated to
help customers switch to more sustainable solutions. A substantial part of
the investments is already today directed towards products and services
based on zero-exhaust emission technology, and we expect this share to
increase gradually. However, the actual outcome will depend on several
factors, such as technology and infrastructure development, emission
regulations, government incentives and customer demand. Read more
about sustainable finance on pages 162163.
Risk management
The Volvo Group works with a Group-wide Enterprise Risk Management
(ERM) process, which is a systematic and structured process to consoli-
date and analyze risks and mitigations as well as to follow up on the risks
that might impact the Group’s business.
In accordance with the decentralized Volvo Group governance model,
each Business Area and Truck Division is accountable for its own risk
management. For more information on risk identification and manage-
ment, see page 70. Once risks have been identified, Truck Divisions, Busi-
ness Areas and Group functions report them in the ERM process using an
integrated multi-disciplinary approach. The ERM process includes all
types of risks for the Volvo Group, so the processes for identifying,
assessing and managing climate and other sustainability related risks are
fully integrated into the Volvo Group’s wider risk management.
The risks identified in the ERM process undergo a materiality analysis.
The Group recognizes that some externalities impact the business in sev-
eral ways and climate change is a good example of this as it poses both
long-term strategic risks, for instance as a result of technology shifts and
increasing government regulations, and short to medium term risks, for
example in relation to customer satisfaction, physical disruptions of the
production system and requirements of environmental regulation. The
materiality analysis is conducted with internal and external stakeholders,
and the risks that are classified as material are risks which can, separately
or in combination, have a material adverse effect on the Group’s business,
strategy, financial performance, cash flow, shareholder value or reputa-
tion. These risks are considered to be the most prominent risk factors for
the Volvo Group, see page 70.
Metrics and targets
Recognizing that climate change is one of the biggest challenges of our
time, the Volvo Group has set ambitious science-based targets. The cor-
nerstone of these targets is the Group’s ambition to achieve net-zero green-
house gas emissions by 2040, a key element of which will require the
Group to develop ranges that help reduce our customers’ emissions. Devel-
oping products and solutions that reduce the GHG footprint of our custom-
ers is thus the priority in the Volvo Group climate strategy. In this transition
work, the Volvo Group has established several metrics and targets to
assess and manage climate related and environmental risks and opportuni-
ties in relation to its products and operations.
Focus on scope 3 – use of sold products
The most significant part of product life-cycle emissions – over 95% – occurs
during the use of sold products, when the end-users drive or operate vehicles
and machines. Electric vehicle sales and research and development metrics
are directly linked to reducing use phase GHG-emissions.
Focus on scope 1 and 2 emissions from own production and operations
Emissions from our own operations and from purchased energy. Targets
and ambitions are set to increase energy efficiency for operations and to
reduce the carbon intensity of the energy used.
Focus on other scope 3 emissions, risks or opportunities
Emissions from own transportation and distribution make up a smaller part of
the life-cycle impact but is strategically important due to the sector served by
the Volvo Group. The Volvo Group works with third party logistics providers
to increase the use of efficient transport modes and to reduce unnecessary
transports by e.g., increasing fill rates and more efficient routing.
Related information on public policy advocacy is also found on page 178.
Sustainability notes / Climate and environment
156
METRICS AND TARGETS OVERVIEW
Metrics Ambition or target
Overall
• Scope 1, scope 2, and scope 3 emissions
• Net-zero by 2040
Focus on scope 3 – use of sold products
• Scope 3 emissions during use of sold products per segment or industry
• Sales volumes from electric vehicles
• Research and development expenses to zero tailpipe emission
technology and other GHG reducing technologies
• Interim targets by business segment
SBTi validated – see next page for details
• 35% electric sales by 2030
• Long-term, net-zero value chain GHG emissions by 2040
Focus on own production and operations
• Scope 1 and 2 emissions
• Energy saving initiatives GWh
• Reduce scope 1 and 2 emission by 50% 2030
SBTi validated – see next page for details
• Energy saving initiatives of 150 GWh implemented 20212025
Focus on other risks / opportunities
• Freight CO emissions per produced unit
• Reduce freight CO emissions per produced unit by 30% 2025
compared to 2018
In addition, the Group also constantly considers the environmental footprint from its own operations. Additional metrics are listed on the next pages.
See Energy and Emissions on page 158 and Waste, Water and Environmental Compliance on page 161.
Index of TCFD recommended disclosures
Page reference
Governance
The organizations governance around
climate-related issues and opportunities
The Board’s oversight of climate-related risks and opportunities. 154, 183
The Management’s role in assessing and managing climate-related risks and
opportunities.
154, 190
Strategy
Actual and potential impacts of climate-
related risks and opportunities on the
organization’s business, strategy and
financial planning where such information
is material
The climate-related risks and opportunities the organization has identified
over the short, medium and long term.
154156
The impact of climate-related risks and opportunities on the organization’s
businesses, strategy and financial planning.
155
The resilience of the organization’s strategy taking into consideration
different climate-related scenarios, including a 2 °C or lower scenario.
155156
Risk Management
Actual and potential impacts of climate-
related risks and opportunities on the
organization’s business, strategy and
financial planning where such information
is material
The company’s processes for identifying and assessing climate- related risks. 70, 156
The organization’s processes for managing climate-related risks. 70, 156
The processes for identifying, assessing and managing climate-related risks
are integrated into the organization’s overall risk management.
70, 156
Metrics and targets
Actual and potential impacts of climate-
related risks and opportunities on the
organization’s business, strategy and
financial planning where such information
is material
The metrics used by the organization to assess climate-related risks and
opportunities in line with its strategy and risk management process.
156157
The Scope 1, Scope 2 and, if appropriate, Scope 3 GHG emissions and the
related risks.
156160
The targets used by the organization to manage climate-related risks and
opportunities and performance against targets.
155160
Sustainability notes / Climate and environment
157
ENERGY AND EMISSIONS
Connection to Agenda 2030 and reporting standards
Main connections to the UN SDGs and targets
7.3 Double rate of energy efficiency
8.4 Resource efficiency in production
11.2 Sustainable transport systems
12.2 Sustainable management of natural resources
Referenced reporting standards
GRI 302 – Energy
GRI 305 – Emissions
TCFD recommendations
The Volvo Group’s Environmental Policy is the steering document address-
ing risks and opportunities in areas such as emissions, resource use, chem-
icals and residuals. Strategic priorities related to environment and climate
are based on product life cycle assessments and aim to reduce emissions
and other climate-related risks where they make the most impact.
Emission metrics, targets and disclosures are based on the Greenhouse
Gas (GHG) Protocol corporate standard. Within scope 3, category 11 use
of sold products is currently disclosed as being identified as the material
category in the baseline GHG inventory representing over 95% of the total
emission footprint. When nothing else is stated, GHG emissions are
adjusted for acquisitions and divestments according to the accounting
principles of the GHG protocol. The Volvo Group has reported climate-re-
lated information, targets and results since the beginning of the 2000s.
The approach of managing climate-related risks has served the Volvo
Group well, both in terms of reducing emissions in line with targets set and
in terms of developing new technologies and business plans to meet the
transition towards fossil-free transports.
Science-based targets for Scope 1, 2 and 3 emissions
The Volvo Group committed to the Science-Based Targets initiative (SBTi)
“Business Ambition for 1.5 °C” in 2020 and had validated targets set in June
2021. The Volvo Group is targeting a net-zero value chain offer by 2040.
Given that the average life-time of the Group’s products is approximately 10
years, this should allow the Group to achieve net-zero value chain green-
house gas emissions by 2050. The pace of change is particularly important,
and the Group has set ambitious milestone targets along the way.
The targets are set in different ways for the Group’s different businesses.
What they have in common is that they are all contributing to the ambitions
of the Paris agreement.
Part of value chain Scope 1, 2 or 3 Approximate share based
on baseline GHG inventory
2021 2020 2019
Mton Volvo Group’s Science Based Targets
are set to reach net-zero value chain
GHG emissions by mid-century at the
latest. The ambition is to reach this
already by 2040.
Production,
technical
centers, ware-
houses and
dealerships
Scope 1
Direct emissions
<0.5% 0.245 0.205 0.245
Scope 2
Indirect emissions from
purchased energy
<0.5% 0.114 0.121 0.124
Use of sold
products
Scope 3 use phase¹
Indirect emissions from
use of sold products
~95% 286 241 323
1. The reported data is in six months arrear for emissions from use of sold products for
trucks and buses to obtain logged usage data.
Other indirect
emissions
Other Scope 3 Approximately 4% of the greenhouse gas inventory are
related to purchased goods and services, transportation
and distribution, waste generated in operations business
travel, employee commuting etc.
These other indirect emission are not yet
included in the report. However, internal
targets exists for certain areas such as
transportation.
Sustainability notes / Climate and environment
158
Methods and data collection
Scope 1 and 2 emissions method and data collection
Environmental impacts and greenhouse gas inventory are established
according to the Greenhouse Gas Protocol’s Corporate Accounting and
Reporting Standard, which is a standardized framework for quantifying
and reporting GHG emissions in CO-equivalents (COe).
Less than 1% of life cycle emissions are connected to scope 1 and 2, includ-
ing production plants, engineering centers, offices and dealerships. These are
under the Volvo Group’s direct management and higher level of control.
Scope 3 use phase emissions method and data collection
Scope 3 emission results are reported to indicate the progress toward the
net-zero SBTi targets for the Volvo Group products. The methodology for
calculating emissions from use of sold products has been designed to meet
the requirements provided in the relevant standards of the GHG Protocol;
namely the GHG Protocol Corporate Standard, the GHG Protocol Corporate
Value Chain (Scope 3) Accounting and Reporting Standard, and Technical
Guidance for Calculating Scope 3 Emissions, which includes expected life-
time emissions from all applicable products sold in the reporting period.
The target methodology and boundaries are following the SBTi Trans-
port Science Based Target setting guidance and the target setting
requirements and tools from the SBTi. The methodology is based on
activity data on product annual usage, years in service, energy consump-
tion and associated well to wheel GHG emission factors for the different
energy sources utilized (diesel, electricity etc.).
In absence of a normalized test procedure for Trucks, manufacturers
are invited to present and justify their own estimates or simulations based
on fuel consumption and specific activity data. The applied expected activ-
ity data and other parameters are associated with a level of uncertainty
and may be subject to change due to implementation of regulations or
global, regional, or national policy changes, or improved data quality. From
a sensitivity analysis perspective, changes in any of the parameters will
impact outcome, but changes of assumptions of products’ years in service
currently have more significant impact on calculated results.
Furthermore, the calculations do not take into account all aspects of e.g.
the efficiency improvements in increased load in tones per vehicle km
which is an important measure to increase the efficiency in the transport
sector and reduce emissions of GHG. Since the calculation methodology
is being developed, and e.g. different sources for emission factors and
methods may be used for determining the activity data (annual usage, dis-
tance travelled etc.), the Volvo Group’s emission data may not be fully com-
parable to that of other entities. We also expect that the Group’s method to
calculate the emission footprint may be developed further over time, and
this may well alter results and, to ensure proper comparison, the baseline.
If the calculation method is developed or assumptions used are adjusted in
any material way, we intend to report on that in a transparent manner. As
matters currently stand, the data is directionally useful but is subject to the
limitations expressed above.
Other scope 3 emissions
The remaining part of indirect emissions account for approximately 4% of
emissions in scope. These are included in the work for net-zero value chain
greenhouse gas emissions, but they are not yet subject to validated sci-
ence-based targets. For some areas, targets are already existing, for exam-
ple freight transports.
Targets and results 2021
Calculated GHG emissions from use of sold products have been reduced
from approximately 323 million tons in 2019 to 286 million tons in 2021.
The Volvo Group has introduced a range of solutions with improved energy
and fuel efficiency, but the main effect so far comes from lower sales vol-
umes of trucks compared with the baseline in 2019.
SBTi approved targets, from baseline 2019
Status 2021
–3%
Target 2030
–50%
absolute emissions
SCOPE 12
Own operations
Status 2021
+7%
Target 2030
–40%
emissions per
vehicle km
Status 2021
+17%
Target 2030
–30%
absolute emissions
SCOPE 3
USE PHASE
Construction
equipment
Status 2021
–5%
Target 2034
–37.5%
absolute emissions
SCOPE 3
USE PHASE
Volvo Penta
Status 2021
–2%
Target 2030
–40%
emissions per
vehicle km
SCOPE 3
USE PHASE
Trucks
SCOPE 3
USE PHASE
Buses
Trucks
Within the trucks segment calculated GHG-emissions per vehicle kilom-
eter have been reduced by 2% in 20192021. This is mainly due to fuel
consumption improvements. See pages 2837 for examples of fuels effi-
ciency and electrification.
Buses
For buses, the result of emission per vehicle-kilometer was 7% higher
2021 compared with 2019. The increase in relative emissions is mainly
the result of the sales mix with a higher proportion of city buses compared
to coaches. The driving pattern of city buses with stop and go results in
higher emissions per vehicle-kilometer than coaches.
Construction equipment
Sales of machines have increased significantly, especially in Asia, which
has resulted in calculated scope 3 GHG emissions increasing by 17%
from the baseline 2019. Over the longer term, the plan is that electrified
and more energy-efficient products will enable reduced total emissions.
Volvo Penta
Total calculated GHG emissions were 5% lower than compared to 2019.
The result is mainly an effect of sales volumes.
Own operations
In the Volvo Group’s own scope 1 and 2 emissions were 3% lower 2021
compared to 2019. Investments to reduce energy consumption by 15 GWh
has been implemented during 2021. Although some of these initiatives are
relatively small compared to the total energy usage, all energy-conservation
activities implemented today save energy over many years. Supply chain
disruptions have during the year led to certain irregularities in manufactur-
Sustainability notes / Climate and environment
159
Detailed energy and emission performance
The reporting scope has been expanded in 2021 to align with SBTi require-
ments. A new baseline is set to 2019. Results for 2020 and 2019 are
restated and are not comparable to previous reports. The main changes are
that approximately 300 dealership locations have been added and UD
Trucks has been divested.
Calculated scope 3 emissions, category 11, use of sold products
Metric tons x1,000,000 COe 2021 2020 2019
Trucks total 180 143 219
Buses total 5 8 14
Construction Equipment 82 74 70
Volvo Penta 19 16 20
Total use of sold product 286 241 323
Scope 1 and 2 GHG emissions and sources of emissions
Metric tons x1,000 COe 2021 2020 2019
Natural gas Scope 1 114 97 115
Diesel Scope 1 81 71 82
Other Scope 1 50 37 48
Total scope 1 Scope 1 245 205 245
Electricity Scope 2 102 107 106
District heating Scope 2 12 14 17
Total scope 2, market based Scope 2 114 121 124
Total scope 2, location based Scope 2 204 193 215
Total Scope 1 and 2 359 326 369
Scope 1, 2 GHG emissions intensity
Scope 1 and 2 2021 2020 2019
Net sales, Industrial operations, SEK M 361 326 418
Products delivered, (x1,000) 307 267 333
CO (scope 1 and 2) by net sales 0.99 1.00 0.88
CO (scope 1 and 2) by products delivered 1.17 1.22 1.12
ing scheduling which have reduced the effectiveness and results of the
work done to reduce energy consumption and associated emissions of
greenhouse gas.
Overall, as the Volvo Group is operating in cyclical industries which are
linked to economic activity, such as the GDP development, sales volumes
and utilization of the rolling fleet of products can vary considerably from one
year to the next. Consequently, the overall GHG-emissions will in the short
term depend on where we are in the business cycle. Also, since the Group
is selling its products in more than 190 markets, shifts in the regional and
market mix can also have a significant impact on the GHG emissions due to
different carbon intensity in the energy mix. Product mix also is another
factor which may have a significant impact. For example, in 2021 the strong
volume growth in China for Volvo Construction Equipment contributed to
an increase of the absolute GHG emissions for this business area.
The actual development will also depend on a number of external fac-
tors, such as our customers’ access to low-carbon electricity, low-carbon
fuels such as liquefied biogas, charging stations and in the longer-term
hydrogen as a low-emission alternative etc.
The Volvo Group has already launched several electric vehicles and
machines. However, a broader range of electric products is still to be
launched, which is expected to accelerate the reduction of the Group’s
GHG emissions. Customer adoption of these electric vehicles and
machines and their access to low-carbon electricity will be key to reach
our ambition of a net-zero GHG emissions by 2040.
Out of scope CO emissions
Metric tons x1,000 2021 2020 2019
Biogenic CO 10 5 6
Energy within and outside the organization
(Connected to scope 1 and 2 emissions)
Energy GWh 2021 2020 2019
Natural gas Scope 1 559 473 563
Diesel Scope 1 314 271 311
Other Scope 1 197 149 179
Electricity Scope 2 1,099 952 1,086
District heating Scope 2 255 197 216
Total 2,423 2,043 2,355
Whereof renewable energy % 40% 37% 35%
Relative energy use 2021 2020 2019
Net sales,
Industrial operations, SEK bn 361 326 418
Energy / net sales
MWh /
SEK M 6.7 6.3 5.6
Executed energy saving initiatives
The target is to implement energy saving investments 20212025 that
together save 150 GWh per year from 2025.
Accumulated GWh 2021 2020 2019
Annual implemented initiatives GWh 15 37 40
Other emissions to air
Nitrogen oxides (NO
X
), sulphur oxides (SO
X
) and solvents
Metric tons 2021 2020 2019
NO
X
tons 223 192 291
SO
X
tons 5.0 3.7 8.5
Solvents (VOC) tons 1,304 1,224 1,406
Sustainability notes / Climate and environment
160
WATER, WASTE AND ENVIRONMENTAL COMPLIANCE
Connection to Agenda 2030 and reporting standards
Main connections to the UN SDGs and targets
6.4 Increase water use efficiency
8.4 Improve resource efficiency in production
12.2 Sustainable management of natural resources
12.4 Responsible management of chemicals
12.5 Reduce waste generation
Referenced reporting standards
GRI 307 – Environmental Compliance 2016
The Volvo Group’s Environmental Policy is the steering document for
managing risks in areas such as emissions, resource use, chemicals and
residuals. It is based on the principles of life cycle management and con-
tinuous improvement.
The Group’s ISO 14001 certified environmental management system
covers approximately 95% of production facilities and 90% of distribu-
tion centers. The management system is used in a hierarchical way to
deploy effective environmental work in the Group’s divisions and business
areas. This means that the Business Areas and Truck Divisions are all
responsible for their environmental performance in the same way as for
financial or other performance. Environmental management is also part of
supplier assessments, read more on page 175176.
Several data points below have been corrected from what was reported
in 2020. Adjustments are not considered significant.
Water
Risks of effluents are mitigated through active environmental manage-
ment and control in the Group’s operations.
Water use is included in this report due to specific interest and tracking
from certain stakeholders.
Water consumption in production
2021 2020 2019
Total water consumption, Mega-liters 4,628 4,856 5,389
Relative water consumption,
Cubic meters/SEK M net sales 12.8 14.9 12.9
At Group level, only total water consumption is available, not by source.
Waste and recycling
Volvo Group’s sites either have in place or are in the process of developing
landfill-free objectives. This work is supported by a directive and guide-
lines setting out the criteria for when a Volvo Group site can be considered
a landfill-free site.
Waste by type and disposal method
Metric tons 2021 2020 2019
Recycling, metal scrap from
operations 111,260 82,076 103,404
Recycling, other metal scrap 16,865 13,338 18,609
Recycling, non-metal 158,776 139,272 130,543
% recycling of total 86% 86% 75%
Composting 2,433 1,868 2,314
Incineration with energy recovery 23,269 18,171 29,165
% recycled, composted or
energy recovery 94% 93% 85%
Incineration without energy
recovery 2,027 1,634 2,150
Treatment by professional waste
contractor 11,116 9,943 19,588
Landfill 5,858 6,043 26,792
Landfill, only inert material 470 691 2,546
Total residuals 332,075 273,037 335,111
Whereof hazardous wastes 53,314 51,712 50,909
Materials of concern
Some of the materials used in Volvo Group’s products come in scarce sup-
ply and some materials and substances are potentially hazardous. The
Group works to reduce its dependency on such materials and substances
with the aim to protect both people and the environment and to secure
sustainable supply. In collaboration with partners, the Volvo Group proac-
tively evaluates alternatives in the design and supply processes to mini-
mize and eliminate use of scarce materials and substances of concern.
Scarce materials may lead to a variety of difficulties such as high prices
and increased risk for corrupt behavior or adverse human rights impacts
when sourced from high-risk areas. Volvo Group is implementing a dedi-
cated supplier Sustainable Minerals Program, currently focusing on tin,
tungsten, tantalum, gold and cobalt, to support sourcing of materials in a
responsible way. The program is built on the five-step framework of the
OECD due diligence guidance for responsible supply chains of minerals
from conflict- affected and high-risk areas with respect to social and envi-
ronmental topics, as well as on the tools of the Responsible Minerals Initi-
ative, to which the Volvo Group is a member.
Environmental compliance
No significant environmental incidents or spills were recorded during
2021. In 2021 the Volvo Group had 12 licensed facilities in Sweden. For
some facilities the environmental permits are under review due to planned
changes.
Sustainability notes / Climate and environment
161
Sustainability notes / Climate and environment
The EU Taxonomy is a classification system for sustainable economic
activities. The Taxonomy disclosure requirements are new in this year’s
reporting. This disclosure is based on current understanding of the rules
and may be amended in the future to align with new regulatory guidance
provided and developing reporting practices, as knowledge of the Taxon-
omy requirements matures.
In this year’s disclosure, information is based on the guidance provided
under the draft Commission notice on the interpretation of certain legal
provisions of the Disclosures Delegated Act under Article 8 of EU Taxon-
omy Regulation on the reporting of eligible economic activities and assets,
dated February 2, 2022 (the ’Draft Commission Notice’) with respect to
the Taxonomy eligibility requirements. However, as alternative approaches
to determining eligibility exist, additional Taxonomy-eligibility information
have on a voluntary basis been included for transparency purposes.
The Volvo Group has identified that certain of its economic activities
qualify as eligible to be considered “environmentally sustainable” under the
Taxonomy Regulation ((EU) 2020852) and its delegated acts (the “Taxon-
omy”). The Group manufactures low carbon technology for transport and
other low carbon technologies which are eligible pursuant to sections 3.3
Manufacture of low-carbon technologies for transport (’3.3 Activities’) and
3.6 Manufacture of other low-carbon technologies (’3.6 Activities’) of
Annex 1 to Commission Delegated Regulation (EU) 20212139 (the “Dele-
gated Climate Act”). The activities identified are defined as enabling activi-
ties in relation to the climate change mitigation objective.
Both the manufacture of low-carbon technologies for transport, and
the manufacture of other low-carbon technologies are of strategic impor-
tance in the Volvo Group’s transition towards a net-zero greenhouse gas
emission value chain. See more on page 155.
None of the activities of, or Volvo Group investments in, joint ventures
are included in this report.
So far, the Volvo Group considers its eligible activities pursuant only to
the climate change mitigation objective, and 3.3 Activities and 3.6 Activ-
ities are conducted in different operating segments of the Group. No
activities should hence have been double counted for purposes of calcu-
lating the Taxonomy KPIs presented.
The methodology applied for disclosure is described in the table below.
Sustainable finance
EU TAXONOMY REGULATION DISCLOSURES
Biodiversity
The Volvo Group strives to consider and manage both direct and indirect
environmental impacts. Regarding biodiversity, the value chain perspec-
tive can be divided in three main areas – our own operations, supplied
material and impact during use of sold products.
Within the own operations, risks are considered both for the establish-
ment of new operations as well as for the ongoing operation. The Group
has implemented minimum environmental requirements helping to pre-
vent negative environmental impact from material environmental aspects.
The requirements are applicable for all operations in absence of more
stringent regulatory requirements.
Upstream in the value chain, Group supply chain partners are evaluated
with similar requirements.
One of the biodiversity risks in the transport sector is the production of
fuels. Biobased fuels continue to be important alternatives to conven-
tional diesel in several markets to reduce fossil greenhouse gas emissions
in the short term. However, the availability of sustainable biofuels does
not meet demand in all areas.
Table 1:
Mandatory Taxonomy disclosure¹
Table 2:
Voluntary Taxonomy information²
Turnover
Operating
expenses
Capital
expenditure Turnover
Operating
expenses
Capital
expenditure
Group total (denominator) SEK M 372,216 15,537 13,051 372,216 15,537 13,051
Eligible activities Code
Manufacture of low carbon technologies for transport 3.3 % 53 76 78 53 76 78
Manufacture of other low carbon technologies 3.6 % 0.1 2 0.3 25 21 12
Total share taxonomy eligible activities % 53 78 79 78 97 90
Non eligible activities % 47 22 21 12 3 10
1 This mandatory disclosure is based on a broad interpretation of eligibility for 3.3 Activities and a stricter for 3.6 Activities, in accordance with the approach explained in
the Draft Commission Notice. In relation to 3.3 Activities, the Draft Commission notice sets forth that the reference to “low carbon” should not be taken into account
when determining Taxonomy-eligibility. This interpretation therefore considers that the vast majority of the Group’s transport vehicles are Taxonomy-eligible. For 3.6
Activities, eligibility depends on the objective of the activity, which should be aimed at substantial life cycle greenhouse gas (GHG) emissions savings in other sectors of
the economy.
2 This voluntary information is based on a broad interpretation of eligibility for both 3.3 Activities and 3.6 Activities, meaning that the vast majority of machinery could be
eligible, in the same way as transport vehicles.
162
Sustainability notes / Sustainable finance
DISCLOSURES ON RESEARCH AND DEVELOPMENT INVESTMENTS
A significant part of the Volvo Group’s research and development expenses
are related to emission-reduction activities, such as improved fuel effi-
ciency, enabling low-carbon fuels, electrification, as well as energy and
transport efficiency. Volvo Group’s research and development expenses
have been divided into four main categories. This classification is new in
this year’s reporting. The classification of various research and develop-
ment projects is continuously evaluated and may be amended in the future.
• Low- and zero-emission projects – directly associated with prod-
ucts with low or zero tailpipe emissions.
• Platform and enabler projects – to develop technology common for
both conventional products as well as low or zero emission vehicles
based on the Group’s modular architecture (CAST). This includes
development of technology such as common electrical architecture,
cabs, aerodynamics, connectivity and safety features.
• Fuel efficiency and other environmental improvement projects –
with the aim to improve environmental performance of internal com-
bustion engine vehicles, e.g. fuel efficiency, emission reduction, bio-
LNG and other low-carbon fuel projects.
• Neutral projects – projects in this category may result in environmental
benefits but which have not been assessed as significant.
In 2021, approximately 60% of the Volvo Group’s gross R&D expenses¹
were considered either low and zero emission, fuel efficiency and pollution-
prevention, or platform and enabler projects.
During the year, the Volvo Group also invested SEK 6.5 billion in the fuel
cell joint venture cellcentric. Neither the investment, nor the expenses asso-
ciated with cellcentric are included in the above figures.
1 Excluding effects from capitalization and amortization.
Low/zero emission, 20%
Platform/enabler, 26%
Fuel efficiency/other
environmental improvement, 14%
Neutral, 40%
R&D expenses
The NACE-code system is a statistical classification system of economic
activities in the European Union, established by Regulation (EC) No
18932006 and referenced in the Taxonomy. This has been used as overall
guidance to identify potentially eligible economic activities. Activities from
spare parts, components, and products outside NACE-code C29.1 and C28
are not considered as eligible.
Qualitative information related to turnover
The Taxonomy disclosure in Table 1 on eligible turnover includes revenues
from all new vehicles as well as repair and maintenance in 3.3 Activities,
and revenues from new zero-emission machinery in the 3.6 Activities.
The voluntary Taxonomy information in Table 2 includes eligible revenues
from all new vehicles and machinery, as well as repair and maintenance.
The total turnover reported covers the revenue recognized as explained
in note 7, see page 94, and includes revenues from the Volvo Group’s
industrial operations as well as from financial and operating leases.
Qualitative information related to operating expenses
The Taxonomy disclosure in Table 1 on eligible operating expenses include
non-capitalized research and development costs for new product
development as well as maintenance on existing products. It includes
expenses related to transport vehicles in Activity 3.3, and expenses
related to low- and zero-emission machines in Activity 3.6.
The voluntary Taxonomy information in Table 2 includes eligible expenses
as above, related to the vast majority of the both 3.3 and 3.6 Activities.
The operating expenses reported covers the non-capitalized research
and development costs from the Volvo Group’s industrial operations.
These are the operating expenses so far estimated as material in relation
to the disclosure requirements. As internal processes are enhanced and
further guidance and advice on interpretation of the regulation is pro-
vided, the total relevant operating expenses as well as share of Taxonomy
eligible operational expenses may be adjusted.
Qualitative information related to capital expenditures
The Taxonomy disclosure in Table 1 on eligible capital expenditures includes
capitalized expenditures for product development and property, plant and
equipment related to transport vehicles in 3.3 Activities, and capitalized
expenditures for product development and property, plant and equipment
related to low- and zero-emission machines in 3.6 Activities.
The voluntary Taxonomy information in Table 2 includes eligible capital
expenditures for product development and property, plant and equipment
related related to the vast majority of the both 3.3 and 3.6 Activities.
Capitalized product development and property, plant and equipment
reported are included in the information provided, see notes 1213 on pages
100103 for details.
Volvo Group modular product architecture
Many of the products developed, produced and sold are based on the
Group’s modular system CAST (Common Architecture and Shared Tech-
nology) to drive commonality and efficiency in the value chain. This ena-
bles low and zero-emission vehicles and conventional vehicles to be
based on the same vehicle platform and produced on the same assembly
lines. Consequently, expenses and tangible and intangible investments
are rarely exclusive to one type of product, but common across products
and sites.
163
Employees and development
Connection to Agenda 2030 and reporting standards
Main connections to the UN SDGs and targets
4.3 Equal access to affordable, technical, vocational
and higher education
4.4 Increase the number of people with relevant skills
5.1 End discrimination against women and girls
5.5 Ensure women’s full participation in leadership and
decision making
Referenced reporting standards
GRI 401 – Employment 2016
GRI 402 – Labor management relations 2016
GRI 404 – Training and education 2016
GRI 405 – Diversity and equal opportunities 2016
The Volvo Group Code of Conduct is the foundation for responsible busi-
ness conduct that builds trust with stakeholders in societies where the
Group operates. As an integral part of daily operations, the leaders of Busi-
ness Areas, divisions and functions are accountable for areas such as
employment practices, labor relations, people development and diversity.
To do this effectively, they are supported by both local and central HR pro-
fessionals, expertise and leadership. In addition to the topics listed herein,
different countries, regions and units may address specific areas in line
with the local context and needs.
EMPLOYMENT
To create an inclusive, safe, and engaging work environment built on care
for people is an essential focus area for Volvo Group. Recognizing that
digitalization, electromobility and automation are making a significant
impact on the business and ways of working, the Volvo Group People &
Culture strategy describes the people dimension of the journey towards
2030. The view on people as the company’s most valuable asset will not
diminish with increasing automation and digitalization. Instead, a compe-
tence shift in multiple dimensions is fundamental for Volvo Group’s per-
form and transform strategy. The approach is to invest in people, to
encourage lifelong learning, to grow talent, and to create a people centric
culture where everyone is encouraged to contribute.
This competence shift will help Volvo Group to realize its People Com-
mitment – to reduce lost time accidents by 50%, to have at least 35%
female employees in general and in leadership positions, to have at least
85% employee engagement and at least 85% of employees recom-
mending Volvo Group as a great place to work, by 2030.
Employee turnover and new employee hires
Employee turnover
1
, %
Per age, gender
and total
2021
Year of age and total
2020
Year of age and total
<40 40+ All <40 40+ All
Europe 10 7 8 10 7 8
Men 10 7 8 10 7 8
Women 9 8 8 10 7 8
North America 17 9 12 35 20 25
Men 16 9 12 36 21 26
Women 19 8 12 32 17 22
South America 8 5 7 16 19 17
Men 9 5 7 15 18 16
Women 8 6 7 18 24 19
Asia/Pacific 12 8 7 10 9 8
Men 12 8 7 10 8 7
Women 12 7 9 14 11 11
Africa 6 7 7 13 12 12
Men 6 7 7 13 13 13
Women 4 9 6 11 10 11
Group total 11 8 9 15 10 12
Men 11 8 9 15 10 12
Women 11 8 9 15 10 12
1 The total employee turnover rate is the proportion of employees who
left Volvo Group both voluntary (such as retirements and resignations)
and involuntary (including due to redundancy).
New hires
Per age, gender
and total
2021
Year of age and total
2020
Year of age and total
<40 40+ All <40 40+ All
Europe 3,817 1,293 5,110 1,514 621 2,135
Men 2,621 997 3,618 1,115 468 1,583
Women 1,196 296 1,492 399 153 552
North America 2,374 1,127 3,501 1,161 750 1,911
Men 1,881 855 2,736 909 558 1,467
Women 493 272 765 252 192 444
South America 1,165 227 1,392 640 95 735
Men 934 171 1,105 496 80 576
Women 231 56 287 144 15 159
Asia/Pacific 1,150 150 1,300 830 89 919
Men 882 126 1008 695 66 761
Women 268 24 292 135 23 158
Africa 85 11 96 55 9 64
Men 58 8 66 39 9 48
Women 27 3 30 16 16
Group total 8,591 2,808 11,399 4,200 1,564 5,764
Men 6,376 2,157 8,533 3,254 1,181 4,435
Women 2,215 651 2,866 946 383 1,329
Sustainability notes / Employees and development
164
Over time, Volvo Group has developed pragmatic solutions and ways of
working to adjust according to changing demands. Volvo Group works in
close dialogue with employee representatives for the deployment of solu-
tions that help to maintain and strengthen the competence needed for the
Group as well as reducing negative social consequences. This can include
utilizing time-banks to reduce labor time, furlough, re-skilling or upskilling
for continued employability, early retirement, financial compensation,
internal mobility programs and outplacement via third parties.
LABOR AND MANAGEMENT RELATIONS
Volvo Group bases the relation between the company and employees,
including employee representatives and unions, on honesty, transpar-
ency, fairness and creativity. These basic principles were jointly developed
with the Global Works Council members and guide how to act together
when maneuvering Volvo Group through necessary business changes.
One cornerstone in this relationship is a yearly Volvo Global Dialogue in
which about 50 employee representatives from over 20 different coun-
tries meet with the CEO and Volvo Group Management members to dis-
cuss the current business situation and strategic initiatives of the Group,
but also specific future opportunities in respect of new Business Areas,
digitalization and needed competence shifts.
In 2021, the CEO and members of the Executive Board have had sev-
eral more meetings with the Global Works Council and European Works
Council than usual. Such dialogues have been even more important due to
the uncertainty on production and deliveries as consequences from the
covid-19 effects and supply chain disturbances. Virtual meetings have
enabled higher frequency and even closer dialogue between labor and
management representatives.
Three ordinary and two deputy members appointed by employee
organizations are part of the AB Volvo Board of Directors.
Process regarding operational changes
Prior to major organizational changes, the employee representatives
and relevant authorities are informed and consulted in accordance
with legal and contractual requirements. In 2021, the Group con-
ducted eight information meetings with the European Works Coun-
cil, complemented by 72 meetings with local employee representa-
tives and unions in different countries to consult on changes and
their specific impact on a local level.
An estimated 45% of regular employees around the world are
members of an independent trade union. Approximately 72% of
employees globally are covered by Collective Bargaining Agreements.
This shows a significantly higher union density rate or coverage of
collective bargaining than the average compared to the International
Labor Organization statistics, especially in the Group’s major markets
like Sweden, the US, Poland and Brazil.
DIVERSITY AND EQUAL OPPORTUNITIES
Diversity and inclusion in the workplace drive performance by enriching
creativity, encouraging innovation, and improving decision making.
Volvo Group has been working systematically with diversity and inclu-
sion for over a decade. The work includes a wide range of aspects, such as
culture, generations, competence, background and gender. It also includes
facilitation and support of networks for employees on sexual orientation
and gender identity, as well as employees with diverse abilities. The overall
ambition is to attract a wide range of people, to grow and develop them and
attain the skills and competencies needed for today as well as for the future.
As part of its People Commitment, Volvo Group has set a target of hav-
ing at least 35% female employees, both in general and in management
positions by 2030. One of the overall aims is that management and work-
force reasonably reflect the diversity of the regions and businesses of the
Group. To increase the level of gender diversity, Volvo Group is working in
multiple dimensions. The Group’s recruitment strategy strives for gender
neutral job-ads and an all-gender inclusive recruitment process, with
mixed interview panels, that results in diverse recruitment shortlists. To
increase the female talent pool both in the short-term and long-term per-
spective, Volvo Group engages in activities designed to increase the gen-
der diversity and boost females’ interest in tech and manufacturing jobs,
e.g. through internship programs, career return programs and coopera-
tion with technical schools and NGOs.
In the empowerment, performance and accountability driven working
environment of Volvo Group, the responsibility for promoting diversity lies
in the hands of Truck Divisions, Business Areas, Group Functions and each
employee. Different countries, regions and units may have different diver-
sity challenges. To maximize the positive effects of diversity and inclusion,
the leaders and team members of each business area and function are
responsible for making it an integral part of their daily operations and to
drive specific diversity goals and actions that fit their business context.
On the corporate level, the Volvo Group follows age and gender as key
indicators of diversity. The total gender balance is assessed as a total of
the workforce, for line management positions and at the senior manage-
ment level, as described in the gender diversity table below.
Diversity of governance bodies and employees
Age diversity of the
Volvo Group workforce, %
2021
<40 / 40+
2020
<40 / 40+
2019
<40 / 40+
Europe 36 / 64 36 / 64 37 / 63
North America 36 / 64 33 / 67 34 / 66
South America 61 / 39 61 / 39 59 / 41
Asia / Pacific 57 / 43 51 / 49 44 / 56
Africa 54 / 46 54 / 46 56 / 44
Group average 40 / 60 40 / 60 40 / 60
Gender diversity of the
Volvo Group workforce, %
2021
Women /
Men
2020
Women /
Men
2019
Women /
Men
Europe 22 / 78 21 / 79 21 / 79
North America 21 / 79 21 / 79 14 / 86
South America 18 / 82 17 / 83 17 / 83
Asia / Pacific 17 / 83 14 / 86 14 / 86
Africa 26 / 74 24 / 76 24 / 76
Group average 21 / 79 19 / 81 19 / 81
Gender diversity over time, share of women, %
2021 2020 2019 2018 2017
All employees 21 19 19 18 19
Manager (all levels) 23 20 20 19 19
Presidents and other
senior executives 27 26 26 25 25
AB Volvo Board
(Elected by the AGM) 45 36 40 40 36
Sustainability notes / Employees and development
165
ExcelHer supports female talents to return to the workplace
To fulfill the aspirations to create an inclusive workplace and increase
access to hire more female talent, Volvo Group India has conceptual-
ized an initiative focused on empowering women in re-launching
their professional journey. ExcelHer, a unique career restart program
created exclusively for women, is just one of many efforts to create
an inclusive workplace. The nine-month long career returnship pro-
gram aims to help women on a career break for more than a year, by
supporting them in getting up-to-date with the technical or func-
tional skills, building their leadership competencies, and helping
society benefit from this talent pool.
During the assignment the participants gain access to personal
development and mentorship from business leaders. At the end of
the internship, the returnees have the opportunity to explore full-
time roles with Volvo Group in India based on the individual’s perfor-
mance and business requirements. Since its inception, the program
has received great response and the first class of around 25 women
professionals are already on-board.
TRAINING AND EDUCATION
Leadership, learning and development is a vital contributor to the trans-
formation of the Group and to employees’ employability. Volvo Group Uni-
versity is focused on providing high quality training in competence areas
that are common across business areas, divisions or functions. This spans
from leadership development, across sales and price management, agile
methodologies and compliance training, to technology related topics
such as electromobility and automation. Learning comes in many shapes,
and most of people’s development takes place during the course of a
working day, in the teams. It is facilitated by the company throughout the
employment cycle. To ensure access to training, despite the limitations
due to the pandemic, a large part of instructor lead programs is adapted
for a virtual delivery. The quality of the experience is maintained, or even
enhanced, and the diversity of participants has improved. It has further
opened up possibilities for employees outside the major sites to join train-
ing activities and to build networks across the Group.
Business operations drive development of the competences specific to
their needs. During times of production stops trainer-led sessions and
online training are made available to the teams, organized as “learning
camps”. It allows a large number of employees to expand their knowledge
in critical areas. A multitude of digital learning solutions on different sub-
jects, and in a variety of formats, is available to all employees via mobile
and computer. These provide a base for individual development, as well as
learning and reflecting together in teams.
Programs for upgrading employee skills and transition
assistance programs
The Group offers programs specifically designed for leadership
development and for job roles that require upgraded skills or that
will be transitioned over time.
The E-mobility journey in Blainville
Transforming the technology competence
base is fundamental to Volvo Group’s future
success. To succeed, Volvo Group is re-
shaping the approach to technology, intro-
ducing new ways of working and shifting
the competencies.
The Blainville plant was the first facility in the Group producing
fully electric trucks. A complete competence shift program was
established based on experiences from Volvo Bus, Volvo Group Uni-
versity together with the Business Unit, Group Trucks Operations
and Group Trucks Technology experts. Together they adjusted the
existing learning portfolio and developed additional programs to
make the learning offer fit the local needs.
By 2021, 2,500 participants, operators and managers of the elec-
tromobility ecosystem have acquired the needed competences in
electromobility business understanding and urban fully electric truck
technologies. The electrical safety program, compliant with French
regulation for high voltage handling were also part of the compe-
tence shift program. Thanks to the training, a safe production start
was secured with maintained efficiency, good business understand-
ing and a gradual shift towards new skills in the Blainville plant.
Vocational training is an important factor in driving prosperity. In addition to
training for employees and distributors, the Group initiates, supports or runs
vocational training programs across the world focusing on practical skills for
mechanics, bus or truck drivers and machine operators. Volvo Group special-
ists can be directly involved as teachers or trainers and in some countries the
Group cooperates with technical colleges and universities.
In several markets, the Volvo Group and its customers have experi-
enced a mismatch between skills and business needs. In many of these
markets the Volvo Group therefore works together with national and inter-
national aid agencies to provide the education needed for increasing
employment and opportunities for people to be self-sufficient.
Such projects aim at creating employment opportunities in the heavy-
duty machinery and commercial vehicles industry. The projects are
designed to improve the relevance and quality of technical and vocational
training and education in our sector and to ensure that experienced and
new professionals are equipped with marketable skills that enhance their
employability. See example from Zambia on the next page.
Sustainability notes / Employees and development
166
Connection to Agenda 2030 and reporting standards
Main connections to the UN SDGs and targets
3.6 Halve road traffic accidents
8.8 Promote safe working environments
11.2 Provide access to safe, affordable and sustainable
transport systems for all, improving road safety.
Referenced reporting standards
GRI 416 – Customer health and safety 2016
Volvo Group has a value chain approach to customer health and safety
that considers the effects on customers, end users and indirect stake-
holders. The Group’s business and the products it offers target a wide
range of application areas and impact many categories of people, such as
drivers and operators, commuters, as well as other traffic system users
like cyclists and pedestrians.
The vision is zero accidents with Volvo Group products, and the offer-
ing of world-leading products and solutions for sustainable transports is
an important part of getting closer to our vision.
Volvo Group’s products are used in complex and challenging environ-
ments. Every year, 1.3 million people lose their lives in road traffic accidents
worldwide, and many million are seriously injured. In addition, there are
occupational health and safety risks in and around vehicles and machines,
both on the road and in construction and work sites. Issues such as noise
and air pollution are also considered in customer health and safety.
A holistic approach means addressing all these concerns in a proactive
and systematic way. Volvo Group works systematically with in-depth
accident research to understand the context and challenges facing cus-
tomers in their operations. This knowledge is then used in product devel-
opment to achieve continuous improvements. Volvo Group also works
with partners in academia and policy makers to promote progress in road
traffic safety and enable safer solutions to be brought to the market.
Designing the best solutions to address these global health and safety
challenges is delivering both on the Volvo Group’s commitment to the
Sustainable Development Goals and to offer the most competitive solu-
tions to customers and business partners. The knowledge gained on
safety is shared via communication and training programs in many mar-
kets where the Group operates to raise awareness and promote a safe
driving behavior.
Assessment of the health and safety impacts
All product lines are assessed for health and safety impacts. Such assess-
ment can include product assessments, audits of different processes in the
design, development, production and use phases, as well as research inves-
tigations from real accidents. Please read more on volvogroup.com/safety.
CUSTOMER HEALTH AND SAFETY
Safety
Strengthening the employability of Zambian youth
Vocational training helps to match jobs and improves safety in vehicle
operations. The Zambian Industrial Training Academy (ZAMITA academy)
established a center of excellence in 2016, to upskill the workforce on
operations and maintenance of modern heavy equipment used in the
mining, construction and transport industries. This is part of an overall
National Development plan to systematically improve vocational training and
increasing the supply of skilled workers and create one million new Zambian
jobs over a five-year period. The managing partners of the academy, United
Nations Industrial Development Organization (UNIDO), the Embassy of
Sweden in Zambia, the Volvo Group and the Government of Zambia has
pledged to continue supporting the academy for the coming years.
In recent years, the academy was expanded to serve the commercial
transport sector workforce development in Ndola, Zambia. The second
phase of the project aims to increase the capacity of ZAMITA through a
multi-lateral public-private partnership program to overcome the skills
shortage in the commercial transport sector. Volvo Trucks Southern
Africa is involved for technology transfer, updating the curriculum, sup-
plying the necessary infrastructure and staff development training.
The ZAMITA academy has boosted its efforts in generating productive
employment for young Zambian men and women. This and similar initia-
tives help to close the skills gap, facilitate safe operations and empower
the next generation workforce in finding meaningful employment. At
year-end 2021, the academy had trained over one thousand students
since its inception.
Sustainability notes / Safety
167
Connection to Agenda 2030 and reporting standards
Main connections to the UN SDGs and targets
3.3 End epidemics of communicable diseases
8.8 Promote safe working environments
Referenced reporting standards
GRI 403 – Occupational health and safety 2018
The health, safety and wellbeing of employees and business partners is
always the first priority of the Volvo Group. Health and safety are material
issues in several aspects of Volvo Group’s direct operations as well as in
activities that occur along the value chain. The Volvo Group Health and
Safety Policy gives direction on how workplace safety, health and well-
being shall be handled within the Group. The policy covers both direct
employees and consultants.
In 2021, the Group continued to deal with the effects of the covid-19
pandemic. Significant efforts were put in place to hinder and slow down
the spread of the pandemic and protect employees. New workplace rou-
tines with preventive hygiene and safety measures for production units,
offices and meeting areas were implemented. Remote work has been
widely enabled, including ergonomics guidance and an expanded IT infra-
structure to secure technical functionality of digital meetings and collab-
oration tools. Internal and external communication channels have been
used to keep the workforce informed about the pandemic situation, busi-
ness updates and of specific behavioral protocols. In many countries,
Volvo Group has arranged on-site vaccination via third party health ser-
vice providers. Only business critical business travel was conducted.
In addition, the Group has sought to balance remote work with proactive
approaches towards mental health and wellbeing, to avoid isolation, e.g.
through raising awareness and ensuring adequate support is available. As
an example, mental health webinars and sessions on how to boost resil-
ience were organized.
Volvo Group has further continued its focus on a safe return to the work-
place with high activity levels across the Group. Prevention of serious and
fatal incidents, with targeted approaches towards high-risk activities, has
been another focus area during this year.
Safety is the first item on the agenda in Business Review Meetings with
all business areas and their units. Throughout 2021, the Group has empha-
sized how health, safety and wellbeing is its first priority and communi-
cated this commitment widely by senior leaders across the Group. Within
the Group, a global network of over 200 expert practitioners on occupa-
tional health and safety – including doctors, nurses, safety engineers, psy-
chologists, and ergonomists collaborate to find and share best practices.
Occupational health and safety management system
Each business area, division and function is accountable and responsible
for managing health, safety and wellbeing. Volvo Buses and Volvo Con-
struction Equipment have continued to certify their parts of the manage-
ment systems according to ISO 45001. Others have been developing
internal safety management systems with regular assessments and
coaching as an integral part the Volvo Group Management System
(VGMS) and Volvo Production System (VPS). This helps to ensure that
there are written procedures, internal controls, clear ownership and man-
agement review, and that deviations are acted upon. The scope of preven-
tion work includes both physical and psychological health, and workplace
safety. It covers all employees working for Volvo Group on- or off-site, as
well as the period of time spent commuting to and from work.
Hazard identification, risk assessment and incident investigation
Volvo Group and its subsidiaries apply tools and processes to manage risk
and create productive working environments. Risk assessments are carried
out on a regular basis at all levels from shop floor to office. Health and safety
professionals ensure the quality of risk assessments and involve line man-
agement and union representatives in this work. Potential risks are in focus
during internal assessments and external audits, where typically a sample
of risk assessments and corrective and preventative actions are reviewed.
Managers and employees are reviewed in their knowledge of their own
major risks. Measures to mitigate or eliminate the identified risks are
defined and implemented, and risk assessments are reviewed and updated
periodically or after any incident has occurred.
Recordable accidents are reported and followed up at the unit level and
further up in the organization, continuing up to the Group level. Investiga-
tions resulting in corrective and preventative actions must be deployed after
each recordable accident. In cases where the issue is linked to risks that
may be relevant for other units – the causes of the accident and the correc-
tive and preventative measure to avoid a repeat are shared with other rele-
vant units within the global health and safety network. In certain cases,
directives are built to be deployed throughout the company as part of a
preventative measure.
Based on the risk assessment carried out for a specific machine, process
or work area, employees receive training so they understand the risks and
how to manage them – through following defined procedures or wearing
personal protective equipment, for example. When defining corrective or
preventative actions in response to identified risk, the Volvo Group Health
and Safety Policy requires that the hierarchy of control measures principles
be applied. The first option is hazard elimination. If hazard elimination is not
possible, substitution, engineering controls, administrative controls and
personal protective equipment are applied. The policy is distributed and
made visible on the walls of factories and offices within the company.
Employees are asked to report accidents, incidents and unsafe acts and
conditions – as they are a vital source of improvements and highlight
opportunities to better control the associated risk. The Volvo Group’s Code
of Conduct and related processes make it clear that any management
reprisals against individuals making such reports in good faith are not tol-
erated. If a manager or colleague acts against the Code of Conduct – a
whistle blower process can be used to escalate this.
Health and safety coordinators are employed to support team leaders
and managers in the organization. Periodic training is also organized on
health and safety procedures, roles and responsibilities for managers and
health and safety coordinators.
Ergonomics in focus
Ergonomics is a prioritized area across the Volvo Group and individual
workstations are regularly assessed for improvements. Operators,
employees and consultants also receive training on occupational ergo-
nomics tailored to specific areas, whether manufacturing, administration
or when working from home. Training centers on many of the Group’s
sites also offer and promote training courses opportunities on focused
themes within ergonomics.
Ergonomics guidelines exist for specific roles. In manufacturing for
example, guidelines summarize the main ergonomics specifications and
provide general principles for an ergonomic-based approach to worksta-
tions design and layout.
OCCUPATIONAL HEALTH AND SAFETY
Sustainability notes / Safety
168
Occupational health services
Occupational health services are provided to employees at most units and
vary from one country to another depending on the specific needs of the
unit, the level of health service provided and local legislation. In many
countries and locations, health services are supported by company doc-
tors and nurses, psychologists, physiotherapists and ergonomists.
In some countries/organizations such services can be supplied by third
parties. If so, they are required to ensure data privacy in accordance with
applicable regulations. Occupational health services play a major role in
health promotion. These service providers manage confidential data-
bases and can help to provide anonymized reports about relevant health
aspects – diabetes, cardiovascular disease, stress levels, etc. – to imple-
ment relevant preventive and corrective actions.
Worker participation, consultation and communication
on occupational health and safety
Worker representatives are appointed to health and safety committees by
employees. Depending on the type of business area, health and safety
committees operate on the factory level, retail office level or unit level.
The main objective of the committees is to bring together worker and
management representatives, define actions and jointly agree on meas-
ures needed to improve health and safety performance. Committees
meet on a regular basis and decisions taken shall be communicated to the
workforce, acted upon and followed up. The committees could also be
involved in accident and incident investigations and support in additional
corrective or preventative measures.
Worker training on occupational health and safety
All employees and consultants are provided health and safety training as
well as other Code of Conduct training as part of their induction training.
More specific training is provided depending on the job responsibilities.
Specific training for potentially hazardous jobs – such as working with
electricity or hazardous substances, at heights and in high heat conditions
– is mandatory for employees working in these environments, and needs
to be repeated on a regular basis. All training is provided during working
hours. The effectiveness of these trainings is assessed locally depending
on each organization and country.
Promotion of worker health
The Volvo Group has for a long time provided various health promoting
activities beyond occupational safety. These programs are often provided
by external partners. Health promotion programs may cover topics such as
preventing communicable diseases, substance abuse, obesity, healthy life-
style, physical exercise, nutrition, sleep and stress management. The psy-
chological work environment is growing in focus, and many tools are avail-
able to support in preventing issues and promoting good mental health.
There are various types of tools that can be used depending on specific and
individual needs. The confidentiality of individuals is protected in line with
general data privacy laws. Throughout the year many countries have used
pulse surveys and engagement tools to understand attitudes and feelings
in general, and in particular to a shift where work-life is affected by remote
work and social distancing. This approach has been useful and actions
have been taken in response.
Prevention and mitigation of occupational health and safety impacts
directly linked by business relationships
In accordance with the Volvo Group’s Supplier Code of Conduct, on-site
audits are performed at suppliers on a wide variety of sustainability topics.
Health and safety are central elements to this process. Read more about
this on page 170171 – Supplier social assessments.
Occupational safety, as well as road safety, are central elements in the
Group’s offer to end-users. Volvo Group provides customer solutions and
training to increase safe behavior and safe product use. Please read more
about customer health and safety on next page.
Workers covered by an occupational health and safety
management system
The Volvo Group Management System includes health and safety manage-
ment based on legal requirements and covers all employees and consultants,
and these are all included in the safety reporting presented below.
The percentage of employees and consultants who have been covered
by an internal audit cannot be reported for the previous year. The data is
not available.
By December 2021, 64 sites covering around 30% of Volvo Group’s
employees have chosen to certify their operations according to ISO 45001.
Volvo Buses and Volvo Construction Equipment are two business areas that
have chosen to certify their entire operations.
Work-related injuries
Volvo Group measures the accident and accident rates in all locations
including plants, workshops and offices in all countries of operations. In
2021, the accident rate was 1.03 per 200,000 worked hours.
Health and safety data is reported at operating unit level and consoli-
dated at Business Area/Truck Division and Group level. The data is col-
lected quarterly at the Group level and on a monthly basis by several busi-
ness areas and truck divisions. Work is ongoing to facilitate consolidation
of data across the Group. While many different KPIs are reported for dif-
ferent needs, lost time accidents and lost time accident rate are the KPIs
used on Group level.
High-consequence or serious work-related injuries and related hazards are
not consolidated at Group level but are shared in health and safety networks
to for learning purposes and risk mitigation.
Rates of injury and number of work-related fatalities 20142021
Lost time acci-
dent rate (LTAR)
per 200,000
worked hours.
Number of
accidents with
lost time
1,109 980 809 789 972 1,004 656 735
Number of fatali-
ties Employees 3 0 0 3 1 0 0 0
Number of fatali-
ties Contractors 0 0 0 0 2 0 0 0
161514 17 18 19 20 21
1.061.381.59 1.00 1.22 1 .22 0.87 1.03
Sustainability notes / Safety
169
Connection to Agenda 2030 and reporting standards
Main connections to the UN SDGs and targets
5.1 End discrimination against women and girls
8.7 Take immediate and effective measures to eradicate forced
labour, end modern slavery and human trafficking
8.8 Protect labor rights and promote safe and secure working
environments for all workers
Referenced reporting standards
GRI 406 – Non-discrimination 2016
GRI 407 – Freedom of association and collective bargaining 2016
GRI 408 – Child labor 2016
GRI 409 – Forced or compulsory labor 2016
GRI 412 – Human rights assessments 2016
UN Guiding Principles Reporting framework
The Volvo Group is committed to respecting internationally recognized
human rights. Negative human rights impacts may potentially materialize
not only within our own organization, but also through our business rela-
tionships and in the value chain. We also seek to address adverse human
rights impacts with which the Volvo Group is involved. We are continuing to
strengthen and align our human rights work with the following international
frameworks:
• UN International Bill of Human Rights.
• ILO’s eight fundamental conventions.
• UN Global Compact.
• UN Guiding Principles on Business and Human Rights.
• OECD Guidelines for Multinational Enterprises.
• Children’s Rights and Business Principles.
These frameworks provide guidance in contexts with elevated human
rights risks and where local regulations are sometimes insufficient or
inadequately enforced. The Volvo Group reports on its human rights-
related work under applicable laws and regulations, including national
laws under the EU’s non-financial reporting directive, and the Modern
Slavery legislation in Australia and the United Kingdom. In 2021, we pub-
lished Modern Slavery Statements for relevant companies within the
Volvo Group in line with these legal disclosure requirements.
Human rights governance and oversight
The Volvo Group’s human rights governance follows our allocation of busi-
ness accountability and includes several cross-functional governance fora
across the company. At the Group level, the strategic direction on human
rights is steered by the Volvo Group Human Rights Board with relevant
members from the Executive Board.
Group functions such as Corporate Responsibility, Legal and Compli-
ance, and People and Culture, together with the Truck Divisions and Busi-
ness Areas identify, assess, and monitor human rights-related risks within
our operating environment. The human rights due diligence and mitigation
efforts adopt a risk-based approach considering country-specific risk lev-
els and our operational context in the country, inherent risks in certain pur-
chasing categories and sales segments, and potential concerns brought to
our attention by internal and external stakeholders.
Human Rights Policy commitment
The Volvo Group launched a standalone Human Rights Policy in 2021. This
policy sets the common threshold for our commitment to respect human
rights and applies to all Volvo Group entities, employees and others
working at our sites.
The human rights policy is complemented by the Volvo Group’s Code of
Conduct and specific policies, directives, and guidelines developed by our
Truck Divisions and Business Areas on several human rights-related areas.
These include health and safety, responsible purchasing through our Sup-
plier Code of Conduct (updated in 2021), human resources, responsible
sales, and whistleblowing.
Salient human rights risks
The Volvo Group’s sustainability ambitions are divided into the three areas of
climate, resources and people. Human rights risks may be associated with
our activities and business relationships in all three of these areas. The
Human Rights Policy describes the Volvo Group’s ten salient human rights
risks across these three areas.
CLIMATE RESOURCES PEOPLE
Climate &
environmental
impacts
Hazardous materi-
als & substances
Minerals & metals
from conflict-
affected and
high-risk areas
Health, safety & facilities
Fair employment & work-
ing conditions
Freedom of association
& collective bargaining
Non-discrimination
& fair treatment
Forced labor & modern
slavery
Child labor & children’s
rights
Sales to conflict-affected
& high-risk areas
These risks have been identified through the implementation of human
rights due diligence across the value chain, the enterprise risk manage-
ment process, ongoing dialogues with unions, inputs from grievance chan-
nels including the Volvo Group Whistle mechanism, and collaboration with
peers and others. While these risks are the current areas of focus, we will
remain alert to the potential for other human rights risks that may arise.
Many of these topics are also part of the mandatory training for all employ-
ees on the Volvo Group Code of Conduct and other human rights-related
training and awareness initiatives.
Human Rights
Sustainability notes / Human Rights
170
Human rights due diligence across the value chain
Our human rights work is designed to identify, prevent, and mitigate
potential or actual adverse human rights risks and impacts.
To facilitate systematic and ongoing human rights due diligence through-
out the Volvo Group, we adopt and implement a Human Rights Plan listing
prioritized activities. We strive to align the processes and methodology with
the UN Guiding Principles on Business and Human Rights, and other recog-
nized international best practices.
Our own operations
Our Truck Divisions and Business Areas undertake human rights due diligence
in relevant parts of their value chains including their own operations. At a
Group level, we carry out country-by-country human rights reviews with
the ambition to cover all operations, employees, and other personnel at our
sites in the reviewed country.
These involve desktop analyses, self-assessments, and in-person work-
shops with the local management and human resources personnel. Discus-
sions are also held with employees, on-site service providers, union repre-
sentatives and, where relevant, other stakeholders. The findings of each
country-level human rights review are communicated to relevant members
of the Executive Board. Following each review, action plans are developed
with ownership and accountability within the local management.
Human rights reviews have been performed in India (2017), South Africa
(2018), and Mexico (2019). After a pause in 2020 and 2021 due to the
covid-19 pandemic and following a review of the process and methodology
we are aiming to restart human rights reviews. The target is to perform
human rights reviews covering all own operations in countries with ele-
vated human rights concerns by 2025.
Our supply chain
The Volvo Group’s Supplier Code of Conduct sets minimum requirements,
and aspirations for our suppliers in the areas of climate, resources and
people, including human and labor rights, health and safety, responsible
sourcing of raw materials, environmental performance, and business eth-
ics. In 2021, we strengthened our Supplier Code of Conduct with firmer
requirements and targets including more explicit due diligence require-
ments on our direct suppliers to cover further tiers in the supply chain,
read more on page 175.
Business partners – truck assembly and bus body building
In addition to our owned manufacturing operations, the Volvo Group col-
laborates with private business partners to assemble trucks in certain
locations in Africa and Asia and build bus bodies on our chassis in line with
customer requirements globally.
Activities ongoing to secure that they respect human rights according
to Volvo Group’s standard includes social and environmental require-
ments in contractual agreements, self-assessments and on-site reviews.
In 2021, we followed up on a 2019 review at a truck assembly partner in
Malaysia focusing on employment practices. The review was carried out
on-site and the final analysis of the outcome is still under discussion
together with our truck assembly partner.
In 2021, Volvo Buses analyzed the risk profiles of its bus body builders
from a human rights perspective and included human and labor rights
related requirements as part of contractual agreements with body builders
identified as high risk.
Responsible business activities 2021
Supplier sustainability audit or training
Engagement with truck assembly and
bus body building partners
Screening of certain sales deals to
commercial end-users
Sustainability notes / Human Rights
171
In addition, the Volvo Group is involved in CSR Europe’s Responsible
Trucking Initiative. The initiative aims to improve employment and working
conditions for truck drivers in the road transport sector across Europe. In
2021, the initiative released new social guidelines for common expecta-
tions towards suppliers and sub-contractors on human rights, working con-
ditions and business ethics, read more at www.csreurope.org/.
Our sales channels and the use of products
Certain sales deals are assessed for risks related to human rights, primarily
in connection with direct sales deals involving customer financing and
support from export credit guarantees, sales to certain high-risk end users
such as the military and law enforcement. Certain sales deals are also
assessed in specific customer segments such as the fossil fuels sector,
mining, and sales to conflict-affected areas.
During 2021, Volvo Construction Equipment developed a new dealer
operating standard on responsible sales that includes certain mandatory
requirements as well as two aspirational levels thus providing an opportu-
nity to engage with our dealers on responsible sales. Volvo Trucks initiated
the strengthening of their standards and agreements with our sales busi-
ness partners such as distributors and dealers to include human rights-
related requirements. See page 174 for more details on our Responsible
sales approach, and specific activities undertaken in 2021.
Human rights awareness
Training and raising awareness for our colleagues and relevant business
partners is a key element of our human rights work. In 2021, the Executive
Management Teams of Volvo Trucks, Volvo Buses, Group Truck Opera-
tions, and Group People and Culture participated in human rights-related
awareness sessions.
In addition, several awareness sessions were organized by our Group
Functions, Truck Divisions and Business Areas in which more than 1,000
colleagues working in areas such as human resources, legal and compli-
ance, communication, purchasing, and sales participated. These overall
human rights awareness initiatives complement other specific training on
related topics such as diversity and inclusion, health and safety, non-dis-
crimination and anti-harassment, equal pay and living wage, responsible
purchasing, and responsible sales.
Stakeholder engagement related to human rights
We engage with our colleagues and external stakeholders including cus-
tomers, investors, NGOs, and other societal actors on our human rights
approach and performance. In 2021, our engagement with external stake-
holders primarily related to our overall human rights governance and policy,
sourcing from conflict-affected areas, and sales to military end-users and
to customers in certain markets. See pages 174 for more details on respon-
sible sales including our response and actions on stakeholder concerns.
Grievance channels and access to remedy
Our employees, representatives of the Volvo Group, and external stake-
holders can report any instances of breach of our Code of Conduct and
other policies, including human rights violations, where the Volvo Group
or any of its representatives are believed to be involved. Grievances can be
reported through internal and publicly available grievance channels
described in our Code of Conduct, including the Volvo Group Whistle.
Reports can be made anonymously wherever permitted by local law.
The Volvo Group aims to provide for or cooperate in the remediation of
negative human rights impacts if our activities have caused or contributed
to them and seek to play a role in the remediation of negative human rights
impacts that we may be directly linked to in our operations, products, ser-
vices, or business relationships.
See page 177 for more information on our grievance channels and the
types of concerns reported in 2021.
Specific disclosures on salient human rights risks
Climate and environmental impacts
We recognize the importance of the transition to a low carbon economy envisaged by the Paris Agreement, and that a safe and clean environment is
essential for the full enjoyment of human rights. We have set Science-Based Targets and are actively working to reduce climate and environmental
impacts in our operations and our value chain. > Read more on page 158159
Hazardous materials and substances
We have a target to phase out potentially hazardous materials and substances, where possible, and to secure their safe and responsible handling
throughout the value-chain.
Minerals and metals from conflict-affected and high-risk areas
A dedicated Sustainable Minerals Program supports our efforts to pursue due diligence for supply chain transparency and to promote responsible
sourcing, extraction, and handling of such materials. > Read more on page 176
Health and safety
As a human centric company, safety is a priority in everything we do. We have a vision for zero accidents with Volvo Group products and in our
workplaces. > Read more on page 168169
Sustainability notes / Human Rights
172
Fair employment and working conditions
The Volvo Group assesses potential gaps in employment and working conditions in our due diligence activities in own operations and in the supply
chain. Our policies such as the Code of Conduct, Human Rights Policy, Supplier Code of Conduct, and global and local human resources guidelines
spell out our expectations.
In 2021, we took the initiative to develop a framework on fair living wages covering our own operations globally to increase awareness and iden-
tify any potential gaps. We will continue to develop and implement this framework in 2022 and beyond to address any identified gaps. To support
this work, the Volvo Group partnered with the Fair Wage Network in order to further strengthen our competence in this area, and to align our princi-
ples with international best practices.
Freedom of association and collective bargaining
Legal compliance is the foundation for Volvo Group’s activities. Varying country legislation on union independence means the approach to managing
freedom of association and collective bargaining may differ from one country to another. The Volvo Group respects the right of all employees to form
and join an association to represent their interests as employees, to organize, and to bargain collectively or individually, as well as the right to refrain
from joining a union.
We assess risks related to freedom of association and collective bargaining as part of our overall human rights due diligence in our own opera-
tions and in the supply chain. Human and labor rights issues, as well as other relevant topics, can also be raised during the Volvo Global Dialogue
– a global forum where employee representatives engage in discussions with the Volvo Group’s executive management.
Our Supplier Code of Conduct requires suppliers to respect their employees’ right to freedom of association and their right to collective bargaining.
It also provides that where local law sets restrictions on the right to freedom of association and collective bargaining, the supplier shall allow alternative
forms of worker representation, association, and bargaining.
> Read more on labor management relations on page 165 and responsible purchasing on page 175.
Non-discrimination and fair treatment
At the Volvo Group, we do not tolerate harassment and discrimination and aim to mitigate unconscious bias.
In 2021, 38 allegations perceived as related to discrimination or harassment were reported via the Volvo Group Whistle, included in the category
”Fair Workplace Management” on page 177. All reports were investigated, with six being in progress at year-end. Over half of the closed reports
were unsubstantiated. Most cases resulted in some corrective actions, such as training, coaching or changes to processes or routines. Relevant dis-
ciplinary measures were taken in the substantiated cases.
The Volvo Group provides awareness trainings to prevent harassment and discrimination. This is done with the Volvo Group Code of Conduct as
the core foundation. In addition, special courses on prevention of harassment and discrimination are offered for managers in some jurisdictions, for
example the training Civil Treatment for Leaders in the US and the workshop Active Measures, held in Sweden to enable a workplace environment
with zero tolerance for harassment and discrimination.
> Read more about our approach on diversity, equity, and Inclusion on page 165.
Forced labor and modern slavery
The Volvo Group assesses risks related to forced and compulsory labor as part of our overall human rights due diligence in our own operations and rele-
vant parts of the value chain. In 2021, no cases of forced or compulsory labor were identified at own operations or during supplier sustainability audits.
During the year, we published Modern Slavery Statements for relevant companies within the Volvo Group in line with legal disclosure requirements
.
The covid-19 pandemic has resulted in increased forced labor and modern slavery risks and we continue to monitor for these elevated risks in our
supply chain. In 2021, our Code of Conduct training for all employees also had a focused module on Modern Slavery.
> Read more about Code of Conduct training on page 177.
Child labor and children’s rights
The Volvo Group assesses risks related to child labor and children’s rights as part of our overall human rights due diligence in our own operations and
relevant parts of the value chain. In 2021, no cases of child labor were identified at own operations or in supplier sustainability audits.
When considering human rights, we look at a range of aspect where we can have an impact. On road traffic safety, One area close to our business
is road traffic safety and in this context, children’s rights as road users are emphasized. Our global campaign Stop. Look. Wave. is designed to teach
children all around the world about traffic safety and to spread the awareness of the rights of all road users.
In connection with our Sustainable Minerals Program in the supply chain, we are also considering how the Volvo Group can be more involved on
the ground to prevent child and forced labor in the conflict minerals supply chains through collaboration with local civil society organizations.
> See pages 167 for more information on road and traffic safety, and responsible purchasing on pages 175176.
Sales to conflict-affected and high-risk areas
The sale and use of our products in conflict and other high-risk contexts could result in potential adverse human rights impacts. Therefore, we
review certain sales deals – involving customer financing and support from export credit guarantees, sales to certain high-risk end users such as
military and law enforcement end-users, and sales to conflict-affected areas.
> In addition to this chapter, see pages 174 for an overview of activities related to responsible sales.
Sustainability notes / Human Rights
173
The Volvo Group has processes and policies with the aim to ensure that
our business is conducted in compliance with applicable laws and regula-
tions, including sanctions and export control regimes. In addition, we
assess certain sales deals for risks related to human rights, environmental
factors, and business ethics as part of knowing the customer or end-user.
These assessments are primarily carried out in connection with direct
sales involving customer financing and support from export credit guaran-
tees, and sales to certain high-risk end users, such as the military, and
sales to conflict-affected areas.
Assessment of commercial sales deals
When assessing sales deals, we use credible tools for risk identification.
The findings are assessed, described, and escalated to relevant fora
within our Business Areas or to Group Functions. Actions for identified
findings typically include engagement with our customers with the aim to
support them to mitigate identified risks. In some cases, we may also
engage with other external organizations such as embassies or NGOs. If
the risks are considered too high and difficult to mitigate, we may decide
not to proceed. In our assessments, we consider country risk levels, cus-
tomer segments, end-users and intended end-use of our products. Our
Business Areas have the responsibility to perform these assessments,
with support from Group Functions when needed.
In 2021, Volvo Trucks, Renault Trucks, Volvo Construction Equipment
and Volvo Buses assessed approximately 170 sales deals, involving cus-
tomer financing and sales to certain high-risk markets. Some of these
assessments identified issues related to potential adverse impacts on the
environment and communities, lack of respect for human and labor rights,
poor employment conditions, occupational health and safety, and unethical
business behavior.
Sales to military end-users
The Volvo Group’s Business Areas are required to escalate potential sales to
military end-users in certain countries for assessment by Group Functions
before submitting an offer. Military end-users include the armed forces and
other armed law enforcement agencies, and the country risk level considers
factors such as the existence of arms embargos, armed conflicts, political
instability, and human rights-related risks. This process is governed by an
internal directive on military sales and is on top of any export license require-
ments from national authorities. The European Union’s common rules gov-
erning control of exports of military technology and equipment include sev-
eral criteria on respect for human rights and international humanitarian law
which member states are expected to consider when granting such export
licenses.
Human rights and international humanitarian law are considered in
addition to compliance, public affairs, and reputation aspects. In 2021,
Volvo Group assessed approximately 40 potential transactions to
selected military and government end-users in various countries. Depend-
ing on the country of end-use, sales deals either require a decision by the
Volvo Group’s Military Sales Committee (comprising relevant members of
our executive management) or a recommendation from Group Functions
to the Business Area for its own decision.
Stakeholder questions on sales to certain markets
In addition to questions around our approach on sales to military end-users,
the Volvo Group has received specific questions on use of the Group’s
products in Israel and in jade mining in northern Myanmar.
In Israel, the sale of our trucks, buses, construction equipment and other
products is made via a private importer. These sales are not targeted towards
any specific areas within Israel and the products could be used in many dif-
ferent applications by different users. Further, our products have a long-life
span and may be rented out and change ownership many times during their
life cycle and we are limited in our possibilities to influence how and where
our products will be used throughout their entire life cycle.
In 2018, a Swedish NGO published a report on environmental and human
rights-related risks in the jade mining sector in northern Myanmar also fea-
turing our products. Volvo Construction Equipment has since then engaged
with an external organization to assess human rights risks in the country.
The efforts were acknowledged by the NGO’s follow-up report in 2020.
Since 2020, our dealer is no longer selling to the jade mining sector. The
2021 military coup brought renewed focus on our sales to Myanmar. Fol-
lowing the coup, an internal coordination team was formed by Volvo Con-
struction Equipment to closely monitor the political situation. Together with
our dealer, we have intensified due diligence of sales deals focusing on the
end-user and intended end-use.
Governance and awareness
As part of the continuous improvement, the Volvo Group’s business areas
continued to strengthen their approach to responsible sales including
governance, screening procedures, and training and awareness. In 2021,
approximately 440 colleagues in sales and customer finance representing
Volvo Trucks and Volvo Buses participated in awareness sessions related
to responsible sales.
Connection to Agenda 2030 and reporting standards
Main connections to the UN SDGs and targets
8.8 Protect labor rights and promote safe and secure working
environments for all workers
Responsible sales
Example of sales deal screened
A screening of a mining customer in Africa highlighted recent allega-
tions of water pollution. Volvo Construction Equipment raised the
issue with the dealer and the customer to understand their view on
the allegations. The customer, a local company, independently com-
missioned a nearby university to test water samples at the outlets of
the mine. The water analysis and university report verified the mine
was not the source of the problem.
Sustainability notes / Responsible sales
174
Connection to Agenda 2030 and reporting standards
Main connections to the UN SDGs and targets
8.8 Protect labor rights and promote safe working environments
12.4 Responsible management of chemicals and waste
13.3 Knowledge and capacity building to meet climate
change mitigation
Referenced reporting standards
GRI 414 – Supplier social assessment 2016
GRI 308 – Supplier environmental assessment 2016
The Group relies on a global network of supply chain partners to innovate,
produce and deliver parts, systems or complete solutions for the product
and services offered by Volvo Group. A global supply chain can mean a
range of environmental and social risks. The ongoing digitalization, auto-
mation and electrification in the transport and infrastructure industries
also increases use of new and potentially scarce materials as well as reli-
ance on new suppliers and associated risks.
Supply chain due diligence
The basis of the Volvo Group Responsible Purchasing program are our
supply chain due diligence activities based on commitment, assessment,
reaction and reporting.
Commitment
The Supply Partner Code of Conduct outlines the minimum sustainability
requirements, which suppliers shall comply with in the areas of human
rights, working conditions, health and safety, responsible sourcing of raw
materials, environmental performance and business ethics. It also
includes aspirations through which suppliers are encouraged to go
beyond the basic requirements to further advance sustainable perfor-
mance and impact in the areas covered by the Code of Conduct. The Sup-
ply Partner Code of Conduct was strengthened and updated in 2021 to
align with the Volvo Group's sustainability ambitions in the areas of cli-
mate, resources and people. The updated Code of Conduct outlines
amongst other the mandatory pathway for all suppliers to establish net-
zero greenhouse gas emission supply chains by 2040 at the latest and our
suppliers’ obligation to demonstrate their accountability towards circularity.
The Volvo Group Human Rights Policy launched during 2021, also outlines
the Volvo Group position regarding Human Rights, see more on page 170.
Assessment
The supplier screening and auditing is centrally coordinated by Volvo
Group Purchasing and covers primarily tier one suppliers. A risk-based
approach is used to prioritize screenings and audits. Prioritization is made
by reviewing risks by country or market, commodities, processes or work
areas of the suppliers. In addition to this overall risk mapping, environ-
mental, human rights and other social risks can be flagged during any type
of supplier audit, training or visit. For this purpose, the Volvo Group carries
out most audits and reviews with internal resources with a shared respon-
sibility between procurement staff and specialized auditors, whose tasks
it is to ensure that proper actions are taken to resolve identified gaps.
Screenings are done from desktop studies using Volvo Group’s inter-
nally developed risk tool and external risk heat maps, in combination with
supplier self-assessments. Risk assessments are also done based on the
usage of certain specifically identified minerals and materials. The Volvo
Group has identified a range of minerals and materials with higher sus-
tainability risks as critical, including but not limited to tin, tantalum, tung-
sten and gold and materials used in our electrification journey such as
cobalt, lithium, nickel and graphite. But also materials connected with
high CO emissions such as aluminum/bauxite and iron ore/steel. Read
more about our Sustainable Minerals Program on next page.
Auditing of suppliers is traditionally carried out at suppliers’ locations
by Volvo Group specialists. Despite the covid-19 situation with travel
restrictions and on-site audits being very challenging to perform, the
Group has carried out 45 on-site supplier audits during the year. The Code
of Conduct audit procedure is based on a checklist with questions focus-
ing on a wide range of aspects, such as human rights, working conditions,
environment and business ethics. The responsibility of improvements and
corrective actions always lies with the suppliers themselves, where
non-compliance cases are managed by the responsible buyer together
with the auditor until resolved. First and foremost, the work focuses on
establishing a strong partnership and developing a sustainable supply
base. Those who fail to address critical issues risk having their contracts
terminated. All Volvo Group Purchasing employees receive regular man-
datory trainings on the concept of sustainability and on the content of our
Code of Conduct.
In 2021, 97% of the total Volvo Group direct material spend was to
suppliers who were self-assessed on environmental and social criteria,
93% with a recorded approved score. In high-risk areas, this percentage
was 99%, where 96% have recorded an approved score.
In total, 1,340 sustainability self-assessments were carried out in 2021.
The result of the self-assessment is an initial screening used in the supplier
selection process. Suppliers with a non-approved score that have been
onboarded as business partners have been activated into a corrective
action plan process.
In addition, new suppliers of direct material in high-risk countries are
subject to due diligence, through screening or audit. Indirect material sup-
pliers are audited when the suppliers are located in a high-risk country and
the annual spend exceeds a certain pre-defined financial threshold.
After a long break due to covid-19 restrictions, onsite audits have slowly
been resumed in certain countries where travel has been possible, mainly
India and China. Live supplier sustainability trainings under the umbrella of
Drive Sustainability have also been re-launched in a digital format and during
2021 Volvo Group has invited and onboarded suppliers located in Russia,
France, India and Turkey. We have also actively participated and invited sup-
pliers to the Drive Sustainability e-learning, offering a basic introduction to
Drive Sustainability and sustainable purchasing. During 2021, a total of
1,100 number of supplier employees completed the e-learning.
Suppliers
SUPPLIER SOCIAL AND ENVIRONMENTAL ASSESSMENTS
Sustainability notes / Suppliers
175
Social impacts in the supply chain and actions taken
In 2021, deviations were found within the areas of health and safety,
working hours and sustainability communication towards sub-suppliers.
In the area of health and safety, the deviations related mainly to hazardous
waste disposal. In the area of working hours, the findings were related to
excessive working hours and in the area of supplier communication, the
deviations were found around inconsistent sub-supplier Codes of Con-
duct, lack of cascading requirements and information and training to
sub-contractors about social, environmental or business ethics require-
ments. The findings from the audits are communicated back to the suppli-
ers. The suppliers are expected to set up and implement a corrective
action plan in a timely manner. Such corrective actions are then monitored
by the responsible buyer in cooperation with the auditor and the Respon-
sible Purchasing Team. All have confirmed corrective actions to be taken.
Environmental impacts in the supply chain and actions taken
In 2021, minor deviations related to hazardous waste management were
found, these were connected to the deviations above. From an environ-
mental perspective these were seen as minor, but from a health and
safety perspective they were considered more significant. All have con-
firmed corrective actions to be taken.
An important environmental focus in the supply chain focuses on the
transition to net-zero greenhouse gas emissions. This includes both com-
ponents and solutions used in Volvo Group’s products but will increas-
ingly also include emission performance at suppliers. During 2021, emis-
sion hot spots in the supply chain have been identified based on updated
life cycle assessments. We have also identified prioritized suppliers based
on greenhouse gas intensity, based on both current as well as expected
future technology. This analysis will be used to set up individual and spe-
cific decarbonization plans with selected suppliers. These supply chain
ambition follows the Volvo Group’s overall ambition to enable customers
to go fossil free by 2040.
Sustainable Minerals Program
As part of our Supply Chain Due Diligence program, the Volvo Group has
a specific focus on a range of selected minerals and materials. The Volvo
Group’s ambition is to support its suppliers to secure sustainable supply
chains of these minerals and the ultimate aim is to secure an environmen-
tally and socially sound supply chain of components and minerals. Con-
flict minerals and cobalt are part of our Sustainable Minerals Program
where we accelerate the supply chain activities even more and go deeper
and wider to make risk assessments and drive sustainable corrective
actions. Tin, tantalum, tungsten, gold and cobalt are part of our global
supply chains and are used in a variety of materials and components. As
part of this work, Volvo Group is a member of RMI (Responsible Minerals
Examples of industry collaborations for sustainable supply chains
The Responsible Minerals Initiative (RMI) is a collaborative platform
addressing responsible mineral sourcing issues in global supply
chains. Volvo Group is working with RMI with the aim to ensure
responsible and sustainable sourcing of tin, tantalum, tungsten and
gold (sometimes referred to as conflict minerals), as well as cobalt.
Through RMI, participants develop and gain access to tools and
resources to ensure regulatory compliance and support responsible
sourcing of minerals from conflict- affected and high-risk areas.
DRIVE Sustainability is a network of eleven leading automotive com-
panies working towards enhancing sustainability throughout the
automotive industry by leveraging a common voice and by engaging
with our supply chain partners, stakeholders and related sectors on
impactful activities. Volvo Group is active in several working groups
within the initiative to leverage a circular and sustainable automotive
value chain. During 2021, the Drive Sustainability network was
extended to Drive+ where tier 1 suppliers are invited to become mem-
bers in order to strengthen the dialogue, collaboration and under-
standing in order to achieve common sustainable supply chains. Drive
Sustainability also during 2021 launched the Raw Material Outlook
Platform, an open platform helping the automotive industry to man-
age and remediate sustainability risks of raw materials through value
chain mapping and Sustainability/ESG risk identification.
The Global Battery Alliance a public-private collaboration platform
under the umbrella of the World Economic Forum. The vision is to
create a circular and sustainable battery value chain set on ten guid-
ing principles covering issues from the circular recovery of battery
materials, ensuring transparency of greenhouse gas emissions and
their progressive reduction, to eliminating child and forced labor.
Initiative, see information to the right). In 2021, 821 tier one companies
are selected in the Volvo Group’s sustainable minerals program with the
aim to create transparency and visibility in the supply chains of conflict
minerals and cobalt by using the Conflict Minerals and Cobalt Reporting
template of the RMI.
Several of the invited companies already collaborate and all invited will
be assessed on the parameters of (a) strength of Human Rights Due Dili-
gence program and (b) association to smelters or refiners of concern in
their supply chain. The long-term ambition of the Sustainable Minerals
program is to drive full transparency by 2025 where all supply chain part-
ners in scope are to be compliant with our Responsible Purchasing stand-
ards and requirements.
Sustainability notes / Suppliers
176
Connection to Agenda 2030 and reporting standards
Main connections to the UN SDGs and targets
16.5 Substantially reduce corruption and bribery
Referenced reporting standards
GRI 205 – Anti-corruption 2016
COMPLIANCE PROGRAMS
Legal compliance forms the basis for everything we do in the Volvo Group.
It covers many different areas and is guided by people of expertise and
knowledge across the Group, and spans across topics such as emissions
regulations, competition and anti-corruption laws, anti-money launder-
ing, export control regulations and data privacy.
Our Code of Conduct states that we compete in a fair manner on the
merits of our products and services and not participate in or endorse any
corrupt practices. These principles of compliance are implemented
through dedicated resources and compliance programs, including policies
and guidelines, a comprehensive range of e-learning and tailored face-to-
face training, counselling and support, as well as auditing and reviews. In
addition, the Volvo Group has implemented Whistleblowing channels that
can be used by internal and external parties for all compliance areas.
ANTICORRUPTION
The Volvo Group strictly prohibits and condemns all forms of corruption,
including bribery. This is not only because it is illegal, but also because of
a strong conviction that corruption distorts the market, interferes with
free competition, violates laws and undermines social development.
Volvo Group employees at all levels are prohibited from participating, or
otherwise becoming involved, in any form of corruption, including offering
or accepting, directly or indirectly, bribes, excessive gifts or hospitality or
facilitation payments. The Volvo Group expects all its business partners to
maintain the comparable anti-corruption principles and does not tolerate
that they get involved in corruption in any form.
The exposure of the Volvo Group and its employees to corruption risks
stems from various risk factors. For instance, the company has a global
footprint with business operations in many countries, including countries
that are considered to be high-risk from a corruption perspective. The
Volvo Group business involves high-value contracts and direct and indirect
participation in private and public tender procedures. Further, the com-
pany is exposed to third-party compliance risks due to its interactions with
a broad range of business partners and other third parties, such as officials
or representatives of government bodies or institutions.
The Volvo Group has established a dedicated anti-corruption policy and
detailed instructions and guidelines to complement the Volvo Group Code
of Conduct. Among other things, these include books and records require-
ments, a mandatory risk-based anti-corruption due diligence process for
new and existing business partners, rules and procedures for facilitation
payments, gift and hospitality, third party remuneration, sponsorships and
charitable donations. Where deemed necessary we have further docu-
ments in adjacent areas such as anti-money laundering and fraud report-
ing. Group Compliance is responsible for designing and developing the
Volvo Group anti-corruption compliance program and monitors the imple-
mentation across the Group. A network of compliance officers in the busi-
ness areas and divisions work closely with Group Compliance to ensure
the implementation in their respective areas.
Volvo Group uses a combination of audits, management control sys-
tems and internal controls to ensure adherence to the Code of Conduct.
Further, the Code of Conduct encourages all employees to speak up and
report suspected violations to their managers or other management repre-
sentatives. Another way to raise a concern is through the Volvo Group
Whistle, available on volvogroup.com.
Communication and training about anti-corruption
Volvo Group’s top management, Group Compliance and other internal stake-
holders regularly communicate the importance of anti-corruption compli-
ance in various forms. Training is a central element of the Volvo Group’s com-
pliance programs. Following a risk-based approach, the Volvo Group
provided instructor led anti-corruption training to more than 4,300 employ-
ees in 2021. Anti-corruption is also addressed in Volvo Group’s annual Code
of Conduct e-learning completed by more than 37,000 employees.
WHISTLEBLOWER REPORTING
In Volvo Group, we believe that a vivid speak-up culture is a crucial ele-
ment for the company’s success, can help uncover misconduct, and pre-
vent violations of the law. The Volvo Group Whistle, is hosted by a third
party and open to anyone within or outside the company to ask a question
or report a concern related to the Volvo Group Code of Conduct. In 2021,
an updated Whistleblowing and Investigations Policy was published to
emphasize Volvo Group’s commitment of non-retaliation and whistle-
blower protection, including confidentiality, right to anonymity, and other
key aspects of proper handling of the reported concerns. The policy builds
on legal requirements from different jurisdictions, including the European
Union Directive 20191937 on the protection of persons who report
breaches of Union law.
The Whistleblowing and Global Investigations function is an independ-
ent unit within Group Compliance. In 2021, Group Compliance received
121 concerns through several available reporting channels. All reports
were investigated. We observed an increased activity compared to the
previous year. Nine of the reported cases were categorized as suspected
corruption or conflict of interest of which one was closed substantiated,
with appropriate disciplinary and remediation actions taken.
Whistleblower concerns escalated to Group Compliance
2021 2020
Type of concerns reported No. % No. %
Fair workplace violations 48 40% 39 40%
Offences against company assets 24 20% 27 28%
Business conduct offences 25 21% 10 10%
Offenses endangering the environ-
ment or health and safety 13 11% 3 3%
Violations of privacy or private sphere 4 3% 1 1%
Offenses against financial integrity 0 0% 2 2%
Inquiries 7 6% 15 15%
121 100% 97 100%
Business ethics and compliance
Sustainability notes / Business ethics and compliance
177
Organizational profile and reporting practices
Reporting cycle
The reporting cycle is annual. No significant restatements have been
made. The reporting period is January 1, 2021 to December 31, 2021. The
date of the most recent report was February 26, 2021.
Name of the organization
The name of the company issuing this report is AB Volvo (publ). The com-
pany is the parent company of the Volvo Group.
Activities, brands, products and services
The Volvo Group is one of the world’s leading manufacturers of trucks,
buses, construction equipment and marine and industrial engines. The
Group also provides complete solutions for financing and service. The Volvo
Group’s brand portfolio consists of Volvo, Volvo Penta, Rokbak, Renault
Trucks, Prevost, Nova Bus, Mack and Arquus. We partner in alliances and
joint ventures with the SDLG, Eicher, Dongfeng and cellcentric brands.
Location of headquarters and operations
The Volvo Group is headquartered in Gothenburg, Sweden, and has pro-
duction facilities in 19 countries and sells its products in more than 190
markets. The company was founded in Sweden in 1927 where the Volvo
Group still operates a significant part of its operations. Other significant
operations are found in the US, Brazil, India, France and China.
For more information about major production facilities, please refer to
volvogroup.com/asr2021.
Ownership and legal form
AB Volvo (publ) is a publicly held company, and its shares are listed on the
stock exchange Nasdaq Stockholm, Sweden.
Scale of the organization
Net sales amounted to SEK 372 billion in 2021. See page 92 for segment
reporting. Refer to page 213 for a summary of products delivered.
TAX POLICY – KEY PRINCIPLES
The Volvo Group has a clear policy on how to manage tax across the organ-
ization. The policy is adopted by the Volvo Board of Directors and estab-
lishes the following key principles:
The Volvo Group shall comply with the tax laws and regulations in all
countries where we operate. Tax compliance is a matter of legal adher-
ence and responsible business behavior. Tax compliance therefore
requires consideration of both the wording and the spirit of the law. Where
tax laws and regulations are unclear, prudence shall be observed by apply-
ing a high standard of professional integrity to maintain the Volvo Group’s
reputation as a compliant taxpayer contributing to society wherever oper-
ations take place.
The Volvo Group strives to comply with domestic and international tax
reporting requirements and shall act transparently towards Tax Authori-
ties, by providing them with all relevant information requested to assess
the Group’s compliance with tax laws and regulations.
The Volvo Group seeks to ensure that taxes are paid where value is cre-
ated by adhering to applicable transfer pricing rules and guidelines as
developed by the OECD and other standard setting and regulatory bodies.
The Volvo Group shall manage its operations in a tax conscious manner,
notably by avoiding double taxation, safeguarding its deferred tax assets
and applying tax consolidation according to local legislations. The Volvo
Group does not engage in aggressive tax planning activities through
structures in tax havens or otherwise.
The average corporate tax rate of the Volvo Group for the last five years
is 23% (24).
PUBLIC POLICY
The Volvo Group has a continuous dialogue with authorities, regulators
and policymakers on issues relevant for us and our customers’ business
and operations. The dialogue is guided by yearly priorities approved by the
Executive Board. The Group is engaged in direct and indirect advocacy
related to public policy, mainly in the EU and the US. Associated costs are
reported to lobby registers for transparency. In 2021, the total staff cost
for lobbying in the EU and the US was approximately SEK 14 M.
The Volvo Group observes neutrality with regard to political parties and
their representatives. The Volvo Group Code of Conduct and related poli-
cies serve as the foundation for our position on public policy.
The Volvo Group’s advocacy efforts, direct or indirect via its member-
ships in associations are based on the following guiding principles, set by
the Executive Board:
1. In line with the Paris Climate Agreement
2. Fair and free trade
3. Level playing field
4. Technology neutrality
5. Global standards
6. Long-term prerequisites
7. Clarity and predictability
Volvo Group is member of several trade associations, providing a possibility
to monitor and comment on proposed regulations and policies. During the
year, the Group has reviewed its material memberships and their positions on
climate change. This is an important element in the work towards net-zero
value chain greenhouse gas emissions.
In 2021, 14 organizations were reviewed based on their importance for
Volvo Group’s business and industry, that they operate in regions or coun-
tries where Volvo Group has significant business, and the possibility for
Volvo Group to influence the position of the association. Seven of the
assessed organizations were considered as aligned with Volvo Group’s posi-
tion and strategy supporting the ambition of the Paris Climate Agreement,
seven were found to be partly aligned. Volvo Group will continue to follow up
the partly aligned positions striving towards harmonized climate ambitions.
A list of memberships is available on volvogroup.com/lobbying.
Sustainability notes / Business ethics and compliance
178
Supply chain
As one of the world’s leading manufacturers of trucks, buses, construction
equipment and marine and industrial engines, the Volvo Group is highly
reliant on robust global and local supply chains to deliver components,
parts and complete services and systems.
In 2021, the Volvo Group bought goods and services for SEK 254 billion.
Significant changes to the organization and its supply chain
In 2021, the Group finalized the divestment of UD Trucks, which had certain
impact on financial and environmental reporting, see note 3 on page 81.
Precautionary principle or approach
A precautionary principle is applied. This is exemplified by the life-cycle man-
agement approach taken when developing trucks, buses, construction equip-
ment and other vehicles and machinery. Applying life- cycle approach provides
insights for decision making on environmental gains and potential trade-offs.
This approach is the foundation for the Volvo Group Environmental Policy.
External initiatives
The Volvo Group is a signatory of the UN Global Compact. It further recog-
nizes and supports several international conventions and principles,
including the International Bill of Human Rights, the ILO eight fundamen-
tal conventions, the UN Guiding Principles on Business and Human Rights
and the OECD Guidelines for Multinational Enterprises. In addition, the
Group participates in a number of initiatives and collaboration platforms
more specifically targeting CO emission reductions, such as:
• Science Based Targets initiative (SBTi) – a partnership between CDP,
the United Nations Global Compact, World Resources Institute and the
WWF. The purpose is to provide technical assistance and expert
resources to companies who set science-based targets in line with the
latest climate science.
• Race to Zero – another part of the United Nations initiatives for cli-
mate action. By committing to the Business Ambition for 1.5 °C, the
Volvo Group is automatically committed in the Race to Zero.
• First Movers Coalition – a cross-industry platform to make purchasing
commitments in order to create early markets for critical technologies
needed to achieve net-zero by 2050.
• H2Accelerate – an industry collaboration focusing on creating the
conditions for the mass-market roll-out of hydrogen trucks in Europe.
• European Clean Hydrogen Alliance – aims at an ambitious deploy-
ment of hydrogen technologies by 2030, bringing together renewable
and low-carbon hydrogen production, demand in industry, mobility and
other sectors, and hydrogen transmission and distribution. With the
alliance, the EU wants to build its global leadership in this domain, to
support the EU’s commitment to reach carbon neutrality by 2050.
• Energy Transition Commission – a global coalition from across the
energy landscape committed to achieving net-zero emissions by
mid-century.
• The Global Battery Alliance – a public-private collaboration platform
working to help establish a sustainable battery value chain.
• Responsible Minerals Initiative – a broad industry collaborative plat-
form addressing responsible mineral sourcing issues in global supply
chains. Develop and provide tools and resources to make sourcing
decisions that improve regulatory compliance.
Data collection
Quantitative data for the sustainability disclosures are consolidated in
different systems.
Environmental data is reported at site level following the setup of the
environmental management system. The data is controlled internally by
an environmental coordination network and consolidated at Group level.
Health and safety data is reported at operating unit level and consoli-
dated at Business Area/Truck Division and Group level.
Other employee-related data is reported and quality assured at legal
entity level, consolidated and quality assured at a shared service center
and controlled and reviewed at Group level.
Compliance-related information is gathered using a case management
system from the Code of Conduct help and whistleblower reporting line
provided by a third party.
Qualitative data is collected from a range of functions responsible for
driving each material sustainability topic.
External assurance
The Volvo Group has secured external assurance of certain parts of its sus-
tainability-related activities. Limited assurance has been done on the topics
of Energy and Emissions as reported on pages 158160 and activities
undertaken as part of the Volvo Group’s commitment to SBTi as described
on page 158159 and further on volvogroup.com/climate, where the sepa-
rate assurance letter is also available.
The Group’s auditors issue a statutory opinion in accordance with the
audit standard RevR 12 as defined on page 203 of the Annual and Sus-
tainability Report under the title The auditor’s opinion regarding the stat-
utory sustainability report.
Information on employees and other workers
Total number of employees by employment contract, by gender and region
Permanent Temporary Agency/consultants Total workforce
Men Women Men Women
Europe 38,173 10,355 1,195 721 7,860 58,306
North America 13,383 3,573 184 65 796 18,001
South America 4,839 1,021 723 218 140 6,941
Asia and Pacific 8,687 1,685 413 143 806 11,736
Africa 621 203 23 21 2 870
Group total 65,703 16,837 2,538 1,168 9,604 95,850
Total number of employees by employment type, by gender
Full time Part time Agency/consultants Total workforce
Men Women Men Women
Group total 67,494 17,459 747 546 9,604 95,850
Sustainability notes / Organizational profile and reporting practices
179
Corporate Governance Report 2021
Corporate Governance
Report 2021
The Swedish Corporate Governance Code
AB Volvo’s shares are admitted to trading on the stock exchange Nasdaq
Stockholm’s main market. As a listed company, Volvo applies the
Swedish Corporate Governance Code (the Code), which is available at
www.corporategovernanceboard.se.
This Corporate Governance Report has been prepared in accordance
with the Swedish Annual Accounts Act and the Code, and is separate
from the Annual and Sustainability Report. The report has been reviewed
by, and includes a report from, Volvo's auditors.
Corporate Governance Model
At the General Meetings of AB Volvo, which is the parent company of the
Volvo Group, the shareholders exercise their voting rights with regard to
for example the composition of the Board of Directors of AB Volvo and the
election of auditors.
An Election Committee, appointed by the Annual General Meeting,
submits proposals to the General Meeting concerning the election of
Board members and Board Chairman as well as proposals for resolutions
concerning remuneration of the Board. When applicable, the Election
Committee also submits proposals to the General Meeting for the election
of external auditors and for resolutions concerning fees to the auditors.
The Board is ultimately responsible for Volvo’s organization and the
management of its operations.
In addition, the Board appoints the President and CEO of AB Volvo.
The CEO is in charge of the daily management of the Group in accordance
with the guidelines provided by the Board.
The Volvo Group appreciates sound corporate governance as a fundamental
base in promoting its long-term strategic objectives and in achieving a
trusting relation with shareholders and other key stakeholders. High standards
when it comes to transparency, reliability and ethical values are guiding
principles within the Volvo Group’s operations.
180
Corporate Governance Report 2021
Audit Committee
Election Committee
Auditor
AB VOLVO
Business Areas/
Truck Divisions
Vote at the General Meetings
Elects Board
Prepare
part of the
Board’s work.
Elects Auditor
Appoints
Election
Committee
The auditors review
the interim report for
the period January 1
to June 30 and audit
the annual report
and consolidated
financial statements.
Appoints President/CEO
Shareholders
General Meeting
1
2
5
Remuneration
Committee
6
3
7
President/CEO
Operations
Board of Directors
Submits proposals concerning election of Board
members, auditors and Election Committee for
the upcoming Annual General Meeting.
4
9
10
Group Executive Board
10
Group Internal Audit
Internal Control over
Financial Reporting
8
11
181
Corporate Governance Report 2021
Volvo has issued two classes of shares: series A and series B. At a General
Meeting, series A shares carry one vote and series B shares one-tenth of
a vote. The two share classes carry equal rights in the assets and earnings
of the company. According to a special share conversion clause in the Arti-
cles of Association, holders of series A shares are entitled to request that
their series A shares be converted to series B shares. Implementation of
such conversions, which occurs on a regular basis, entail that the total
number of votes in the company decreases.
The share register of AB Volvo is maintained by Euroclear Sweden AB.
On December 31, 2021, Volvo had 358,253 shareholders according to
the share register. The largest shareholder, in terms of votes on that date
was AB Industrivärden, with 27.7 percent of the votes. As per the same
date, Geely Holding held 16.0 percent of the votes, AMF Insurance &
Funds held 5.4 percent of the votes, Alecta held 4.2 percent of the votes
and AFA Insurance held 2.3 percent of the votes.
For more information about the Volvo share and its shareholders,
please refer to the Board of Director’s Report on pages 6869 of the
Annual and Sustainability Report.
SHARES AND SHAREHOLDERS
1
General
The General Meeting is Volvo’s highest decision-making body. The Annual
General Meeting is held within six months of the end of the financial year,
normally in Gothenburg, Sweden.
In addition to what follows from applicable law regarding shareholders’
right to participate at General Meetings, under Volvo’s Articles of Associa-
tion shareholders must give notice of their attendance (within the time
stated in the convening notice) and, when applicable, notify the company
of any intention to bring assistants.
A shareholder who wants the General Meeting to consider a particular mat-
ter must submit a request to the Board in sufficient time prior to the General
Meeting to the address provided on Volvo’s website, www.volvogroup.com.
The Annual General Meeting 2021 was held on March 31, 2021 and an
Extraordinary General Meeting was held on June 29, 2021 to resolve on
an extraordinary dividend. To reduce the risk of spreading the covid-19
virus and considering the authorities’ regulations and advice on avoiding
public gatherings, both the Annual General Meeting 2021 and the Extraor-
dinary General Meeting were carried out through postal voting, without
any physical attendance, pursuant to temporary legislation. As communi-
cated by the Swedish Corporate Governance Board in March 2020, this is
not to be considered a deviation from the Code.
Annual General Meeting 2022
Volvo’s Annual General Meeting 2022 will be held on Wednesday, April 6,
2022. For further information about the Annual General Meeting 2022,
please refer to the end of the Annual and Sustainability Report and Volvo’s
website, www.volvogroup.com.
GENERAL MEETING
2
Duties
The Election Committee is elected by the General Meeting. The Election
Committee shall perform the tasks that are incumbent upon the Election
Committee according to its instructions from the General Meeting and
the rules of the Code. The main task is to prepare and present proposals to
the Annual General Meeting on behalf of the shareholders for the election
of Board members, Chairman of the Board and Board remuneration and,
when applicable, proposals for auditors and fees to the auditors.
In addition, the Election Committee presents proposals for members of
the Election Committee for the following year, in accordance with prevail-
ing instructions for Volvo’s Election Committee.
Composition
In accordance with the current instructions for Volvo’s Election Commit-
tee (adopted by the Annual General Meeting 2019), the Annual General
Meeting shall elect five members to serve on the Election Committee, of
ELECTION COMMITTEE
whom four shall represent the largest shareholders in the company in
terms of votes, who have expressed their willingness to participate in the
Election Committee. In addition, one of the members shall be the Chair-
man of the AB Volvo Board. Volvo’s Annual General Meeting 2021
resolved to appoint the following individuals as members of the Election
Committee:
• Bengt Kjell (AB Industrivärden)
• Anders Oscarsson (AMF and AMF Funds)
• Ramsay Brufer (Alecta)
• Carine Smith Ihenacho (Norges Bank Investment Management)
• Carl-Henric Svanberg, Chairman of the Board
The Election Committee appointed Bengt Kjell as Chairman of the Election
Committee.
3
182
Corporate Governance Report 2021
BOARD OF DIRECTORS
4
Duties
The Board is ultimately responsible for Volvo’s organization and manage-
ment of the company’s operations. The Board is responsible for the
Group’s long-term development and strategy, for regularly controlling and
evaluating the Group’s operations and for the other duties set forth in the
Swedish Companies Act.
Composition
In 2021, AB Volvo’s Board consisted of eleven members elected by the
Annual General Meeting and three members and two deputy members
appointed by employee organizations.
The Annual General Meeting 2021 re-elected Matti Alahuhta, Eckhard
Cordes, Hanne de Mora, Eric Elzvik, Kurt Jofs, Martin Lundstedt, Kathryn
V. Marinello, Martina Merz, Helena Stjernholm and Carl-Henric Svanberg
as Board members and Martha Finn Brooks was elected as new Board
member. The previous Board member James W. Griffith did not stand for
re-election. The Annual General Meeting re-elected Carl-Henric Svanberg
as Chairman of the Board. A more detailed presentation of each Board
member is set out in the “Board of Directors” section on pages 186187.
Prior to the Annual General Meeting 2021, the Election Committee
announced that it had applied the provisions of rule 4.1 of the Code as board
diversity policy. The aim is that the Board as a collective should possess the
required mix in terms of background and knowledge, whereby an even gen-
der distribution is taken into particular account. The result of the Election
Committee’s application of the diversity policy is a Board that represents a
mix of both professional experience and knowledge as well as geographical
and cultural backgrounds. 45 percent (five out of eleven) of the Board mem-
bers elected by the Annual General Meeting are women.
Independence requirements
The Board of Directors of AB Volvo is subject to the independence require-
ments prescribed in the Code.
Prior to the Annual General Meeting 2021, the Election Committee
presented the following assessment of the independence of Board mem-
bers elected at the Annual General Meeting 2021.
Carl-Henric Svanberg, Matti Alahuhta, Eckhard Cordes, Hanne de
Mora, Eric Elzvik, Martha Finn Brooks, Kurt Jofs, Kathryn V. Marinello
and Martina Merz were all considered independent of the company and
company management, as well as the company’s major shareholders.
Martin Lundstedt, as President of AB Volvo and CEO of the Volvo
Group, was considered independent of the company’s major shareholders
but not of the company and company management.
Helena Stjernholm was considered independent of the company and
company management but not in relation to one of the major sharehold-
ers, due to her capacity as President and CEO of AB Industrivärden.
Work procedures
Every year, the Board adopts work procedures for the Board’s work.
The work procedures outline how the Board’s duties should be distributed,
including the specific role and duties of the Chairman, instructions for the divi-
sion of duties between the Board and the President and for the reporting of
financial information to the Board. The Board has also adopted specific instruc-
tions for the Board’s committees, which are linked to the work procedures.
The Board’s work in 2021
The Board’s work is mainly performed within the framework of formal
Board meetings and through meetings in the committees of the Board. In
addition, regular contact is maintained between the Chairman of the
Board and the CEO in order to discuss ongoing business and to ensure
that the Board’s decisions are executed.
In 2021, there were ten regular Board meetings, two extraordinary
Board meetings and one statutory Board meeting. Due to the covid-19
pandemic, several of the Board meetings during 2021 were held as video
conferences. In light thereof, the Board has decided that, from both a sus-
tainability and efficiency perspective, some of the ordinary Board meet-
ings should continue to be held as video conferences also after the pan-
demic. The attendance of the Board members at the Board meetings in
2021 is presented in the table on page 185. The company’s auditor
attended one Board meeting during the year.
During 2021, the Board has continued to monitor the measures taken
to address the challenges and consequences of the covid-19 pandemic,
with continuous focus on the health and safety of Volvo Group colleagues,
customers and business partners as well as to maintain a tight cost con-
trol and focus on cash flow. The global shortage of semiconductors and
other components has been a challenge throughout the year as well as the
ramp-up of production to meet the strong demand, both of which have
been closely monitored by the Board.
The focus on sustainability has increased further during 2021 and the Volvo
Group’s sustainability work and objectives are an integrated part of the Volvo
Group’s business and are regularly reported to the Board by the Volvo Group
management. In addition, work is on-going to strengthen the reporting and
enable consolidated follow-ups within the area of sustainability. In 2021 the
Volvo Group’s climate targets were validated by the Science Based Targets
initiative (for further information, see pages 158160) and the Board adopted
the Volvo Group Human Rights Policy as well as the Volvo Group Tax Policy.
The speed of transformation of the industry is accelerating and, in light
thereof, the Board has devoted most of its time to strategic topics, with
particular focus on disruptive technologies related to digitalization, con-
nectivity, automation and electromobility. These technologies play an
essential part in the Group’s positioning in the transformation of the
industry towards climate-neutral and sustainable transportation and
infrastructure solutions. During 2021, the Volvo Group has entered into
several partnerships with focus on autonomous solutions, electrification
and charging infrastructure. These include, among others, partnering with
Aurora to jointly develop autonomous transport solutions, the completion
of the transaction to form a fuel-cell joint venture with Daimler Truck AG
and the signing of a binding agreement with Daimler Truck and the Traton
Group to create a joint venture to install and operate a high-performance
public charging network for battery electric, heavy-duty long-haul trucks
and coaches across Europe. In addition, the strategic alliance with Isuzu
became operational in 2021. Furthermore, the Board has taken the deci-
sion to invest in a truck plant in China in order to strengthen Volvo Trucks’
position in the Chinese market in this period of transformation.
By allocating time to business reviews of the Group’s various Truck Divi-
sions and Business Areas the Board remains continuously up to date on the
status and development of the Group’s transformation work and strategies in
relation thereto. Furthermore, the Board has devoted time to talent review and
succession planning and on the review and follow-up of the company’s quality
work. Related to this work, the Board usually makes a yearly visit to the com-
pany’s operations throughout the world. In October 2021, the Board travelled
in Sweden and visited the Volvo Group’s truck plant in Tuve (Göteborg) and the
Volvo Group’s construction equipment operations in Eskilstuna and Braås.
During 2021, the Board decided on an overall financial plan and invest-
ment framework for the Group’s operations. In addition, the Board regu-
larly monitors the Group’s earnings and financial position and maintains
continuous focus on risk related issues such as overall risk management
183
Corporate Governance Report 2021
and ongoing legal disputes and investigations. Furthermore, the Board
regularly reviews the management’s short and long-term incentive pro-
grams to ensure that they fulfill their purpose and drive the right behaviour
in the current business environment.
Finally, during 2021, the Board resolved, in light of the Volvo Group's
improved profitability, resilience in downturns and strong financial posi-
tion and following the sale of UD Trucks, to propose that the proceeds
from the sale of UD Trucks was to be distributed to the shareholders as an
extraordinary dividend.
Evaluation of the Board’s work
In 2022, the Board performed its yearly evaluation of the Board’s work
during the previous year. The purpose of the evaluation is to further
develop the Board’s efficiency and working procedures and to determine
the main focus of the Board’s coming work. In addition, the evaluation
serves as a tool for determining the competence required by the Board
and for analyzing the competence that already exists in the current Board.
By that, the evaluation also serves as input for the Election Committee’s
work with proposing Board members.
As part of the yearly evaluation, Board members were asked to complete
a questionnaire and assess various areas related to the Board’s work from
their own perspective. The areas evaluated for 2021 included the Board’s
composition, understanding of key stakeholders, the management and
focus of Board meetings, Board support and committees and how the
Board addresses issues related to strategy and strategic priorities, sustain-
ability, potential risks, succession planning and people oversight. The areas
covered by the evaluation may differ from one year to another to reflect the
development of the Board’s work and the Volvo Group and for 2021, par-
ticular focus was kept on the transformation of the vehicle industry and, in
light thereof, strategic topics and priorities for the Volvo Group, mainly
relating to sustainability, digital development and new technologies.
Separate evaluations were conducted of the Board as a collective, of
the Chairman of the Board, the Audit Committee and the Remuneration
Committee. The results of the evaluations of the Board as a collective and
of the Chairman will be discussed by the Board. The results of the evalua-
tions of the committees will be discussed by the relevant committee. In
addition, the results of the evaluations of the Board as a collective and of
the Chairman are shared with the Election Committee.
Remuneration of Board Members
The Annual General Meeting resolves on fees to be paid to the Board mem-
bers elected by the Annual General Meeting. For information about Board
remuneration adopted by the Annual General Meeting 2021, please refer to
Note 27 in the Group’s notes in the Annual and Sustainability Report. The
Board members decided to voluntarily abstain from 20 percent of their
Board and Committee remuneration during the time period from the Annual
General Meeting 2020 to the Annual General Meeting 2021 as a result of
the adverse financial consequences caused by the covid-19 pandemic.
Remuneration of Board members, 2021
(from AGM on March 31, 2021)
SEK
Chairman of the Board 3,700,000
Board member
1
1,100,000
Chairman of the Audit Committee 390,000
Member of the Audit Committee 180,000
Chairman of the Remuneration Committee 165,000
Member of the Remuneration Committee 118,000
1 With the exception of the CEO.
Duties
The Board has an Audit Committee primarily for the purpose of supervis-
ing the accounting and financial reporting processes and the audit of the
annual financial statements.
The Audit Committee’s duties include preparing the Board’s work to
assure the quality of the Group’s financial reporting by reviewing interim
reports, the Annual and Sustainability Report and the consolidated
accounts. The Audit Committee also has the task of reviewing and over-
seeing the Group’s legal and taxation matters as well as compliance with
laws and regulations that may have a material impact on financial report-
ing. Furthermore, the Audit Committee has the task of reviewing and
overseeing the impartiality and independence of the company’s auditors.
The Audit Committee is also responsible for evaluating both internal and
external auditors’ work and, when applicable, handling the tender process
for audit services. In addition, it is the Audit Committee’s task to preap-
prove what other services, beyond auditing, the company may procure
from the auditors. The Audit Committee also adopts guidelines for trans-
actions with companies and persons closely associated with Volvo. Further,
the Audit Committee evaluates the quality, relevance and effectiveness of
the Group’s system for internal control over financial reporting, as well as
with respect to the internal audit and risk management, and discharge any
other duties of an audit committee according to law or its instructions.
Finally, the Audit Committee oversees developments within the ESG
(Environmental, Social and Governance) standards, and the Group’s
reporting in these areas.
Composition and work in 2021
At the statutory Board meeting following the Annual General Meeting
2021, the following Board members were appointed members of the
Audit Committee:
• Hanne de Mora
• Eric Elzvik
• Helena Stjernholm
Hanne de Mora was appointed Chairperson of the Audit Committee.
The Audit Committee met with the external auditors without the pres-
ence of management on two occasions in 2021 in connection with Audit
Committee meetings. The Audit Committee regularly met with the Head
of Group Internal Audit in connection with Audit Committee meetings.
The Election Committee’s assessment of independence of the Audit
Committee members prior to the Annual General Meeting 2021 is pre-
sented above under the “Independence requirements” section on page 183.
The Audit Committee and the external auditors, among other tasks,
discussed the external audit plan and the view of risk management. The
Audit Committee held nine regular meetings and one extraordinary meet-
ing during 2021. The attendance of Board members at the committee
meetings is presented in the table on page 185. The Audit Committee
reports the outcome of its work to all members of the Board on a regular
basis and the minutes of the Audit Committee meetings are available for
all Board members.
The Board’s committees
5
AUDIT COMMITTEE
184
Corporate Governance Report 2021
6
REMUNERATION COMMITTEE
Duties
The Board has a Remuneration Committee for the purpose of preparing
and deciding on issues relating to the remuneration of senior executives in
the Group. The duties of the Committee include making recommendations
to the Board on the Board’s decisions regarding terms of employment and
remuneration of the CEO and the Deputy CEO of AB Volvo, principles for
the remuneration, including pensions and severance payments, of other
members of the Group Executive Board and principles for variable salary
systems, share based incentive programs and for pension and severance
payment structures for other senior executives in the Group.
The Remuneration Committee shall also monitor and evaluate ongoing
programs and programs concluded during the year for the variable remu-
neration of senior executives, application of the remuneration policy for
remuneration to the Volvo Group Executive Board, and the current remu-
neration structures and levels in the Group.
The Board shall prepare a remuneration report for each financial year
detailing the remuneration that is covered under the remuneration policy.
The remuneration report shall include the total remuneration, i.e. both
compensation that has been and remains to be paid out, and outline how
such remuneration correlates to the remuneration policy. The remunera-
tion report also provides details on the remuneration of AB Volvo’s Presi-
dent and CEO and Deputy CEO. The remuneration report shall be submit-
ted to the Annual General Meeting for approval.
Composition and work in 2021
At the statutory Board meeting following the Annual General Meeting
2021, the following Board members were appointed members of the
Remuneration Committee:
• Carl-Henric Svanberg
• Matti Alahuhta
• Kurt Jofs
• Mikael Sällström
Carl-Henric Svanberg was appointed Chairman of the Remuneration
Committee.
The Election Committee’s assessment of the independence of members of
the Remuneration Committee in accordance with the requirements in the
Code, prior to the Annual General Meeting 2021, is presented under “Inde-
pendence requirements” on page 183.
The Remuneration Committee held four regular meetings during 2021. The
attendance of Board members at committee meetings is presented in the
table below. The Remuneration Committee reports the outcome of its work to
all members of the Board on a regular basis.
1 Matti Alahuhta partly attended the ordinary Board meeting in February 2021.
2 Eckhard Cordes partly attended the ordinary Board meeting in September 2021.
3 Martha Finn Brooks joined the Board in March 2021 and has since attended all Board meetings during 2021, except
for one of the ordinary Board meetings in October 2021 and part of the ordinary Board meeting in December 2021.
4 James W. Griffith resigned from the Board in March 2021.
5 Kurt Jofs was appointed member of the Remuneration Committee in March 2021.
6 Kathryn Marinello partly attended the ordinary Board meetings in June, September and December 2021.
7 Martina Merz partly attended the ordinary Board meetings in February, June and September 2021.
8 Hanne de Mora partly attended the statutory meeting in March 2021 and the extraordinary meeting in November 2021.
9 Mikael Sällström partly attended one of the ordinary Board meetings in October 2021.
Member
Board meet-
ings (13 incl.
statutory)
Audit
Committee
(10)
Remunera-
tion Com-
mittee (4)
Carl-Henric Svanberg 13 4
Martin Lundstedt 13
Matti Alahuhta¹ 13 4
Eckhard Cordes² 12
Eric Elzvik 13 10
Martha Finn Brooks³ 9
James W. Griffith 3 1
Kurt Jofs
5
13 3
Kathryn Marinello
6
13
Martina Merz
7
13
Hanne de Mora
8
13 10
Total number of meetings 13 10 4
Member
Board meet-
ings (13 incl.
statutory)
Audit
Committee
(10)
Remunera-
tion Com-
mittee (4)
Helena Stjernholm 13 10
Lars Ask,
employee representative 12
Mats Henning,
employee representative 13
Mikael Sällström,
employee representative
9
12 4
Camilla Johansson,
employee representative 13
Mari Larsson,
employee representative 13
Total number of meetings 13 10 4
The Board’s composition and attendance at meetings January 1, 2021 – December 31, 2021
185
Corporate Governance Report 2021
Board members appointed by the employee organizations
Lars Ask
Employee representative, ordinary member
Mats Henning
Employee representative, ordinary member
Mikael Sällström
Employee representative, ordinary member
Member of the Remuneration Committee
Camilla Johansson
Employee representative, deputy member
Mari Larsson
Employee representative, deputy member
Sofia Frändberg
Secretary to the Board
Master of Laws
Born 1959 1961 1959 1966 1978 1964
Member of the
Volvo Board
Ordinary member since April 6, 2016.
Deputy member from June 16, 20092016.
Since May 9, 2014. Since September 7, 2009. Deputy member since April 6, 2016. Deputy member since May 22, 2015. Secretary to the Board since April 1, 2013.
Background within Volvo With Volvo since 1982. With Volvo since 1982. With Volvo 19801999 and since 2009. With Volvo since 1997. With Volvo since 2004. Executive Vice President Group Legal &
Compliance and General Counsel.
Holdings in Volvo,
own and related parties
116 Series B Shares. 293 Series A shares, 655 Series B shares. 293 Series A shares, 155 Series B shares. 643 Series A shares, 155 Series B shares. 605 Series A shares, 155 Series B shares. 1,738 Series A shares, 59,007 Series B shares.
Board of Directors
Board members
elected by the
Annual General
Meeting
Carl-Henric Svanberg
Chairman of the Board,
Chairman of the Remuneration
Committee
Matti Alahuhta
Member of the Remuneration
Committee
Eckhard Cordes Eric Elzvik
Member of the Audit
Committee
Martha Finn Brooks
Kurt Jofs
Member of the Remuneration
Committee
Martin Lundstedt
President and CEO
Kathryn V. Marinello Martina Merz Hanne de Mora
Chairperson of the Audit
Committee
Helena Stjernholm
Member of the Audit
Committee
Education MSc in Applied Physics,
Linköping Institute of Tech-
nology, BSc Business Admin-
istration, University of Uppsala.
MSc, Dr Sc.
Doctor of Science, Helsinki
University of Technology.
MBA and PhD, University of
Hamburg.
MSc Business Administra-
tion, Stockholm School of
Economics.
BA Economics and Political
Science, Yale University.
MBA International Business
from Yale School of Manage-
ment, Yale University.
MSc, KTH Royal Institute of
Technology, Stockholm.
MSc, Chalmers University of
Technology.
BA from State University of
New York at Albany, MBA &
Doctorate from Hofstra
University.
BS from University of Coopera-
tive Education, Stuttgart.
BA in Economics from HEC
in Lausanne, MBA from
IESE in Barcelona.
MSc Business Administra-
tion, Stockholm School of
Economics.
Born 1952 1952 1950 1960 1959 1958 1967 1956 1963 1960 1970
Member of the
Volvo Board
Chairman of the Volvo Board
since April 4, 2012.
Since April 2, 2014. Since April 1, 2015. Since April 5, 2018. Since March 31, 2021. Since June 18, 2020. Since April 6, 2016. Since April 2, 2014. Since April 1, 2015. Since April 14, 2010. Since April 6, 2016.
Position and Board
memberships
Chairman of the European
Round Table of Industry
(ERT).
Board Chairman: DevCo Part-
ners Oy.
Board Member: Kone Corpo-
ration.
Partner in Cevian Capital and
EMERAM Capital Partners.
Board Chairman: Bilfinger SE.
Member of the Executive
Committee of Eastern
European Economic Relations
of German Industry.
Board Chairman: Global
Connect Group.
Board member: Telefon-
aktiebolaget LM Ericsson,
Landis+Gyr Group AG and
VFS Global.
Board Member: Jabil,
Constellium, CARE USA
and CARE Enterprise Inc.
Board Member: Telefonaktie-
bolaget LM Ericsson, Feal AB
and Arjeplog Hotel Silverhat-
ten AB.
President and CEO of AB
Volvo. Board Chairman: Per-
mobil AB. Board Member: The
European Automobile Manu-
facturers’ Association (ACEA)
and Autoliv Inc. Member of
the Royal Swedish Academy
of Engineering Sciences (IVA)
and the European Round Table
of Industry (ERT).
President and CEO of PODS.
Board Chairperson: Concen-
trix. Board Member: Ares
Acquisition Corporation.
President and CEO of
Thyssen krupp AG.
Board Member: SAF Holland
SA.
Board Chairperson: Micro-
caps AG
Board Member: IMD Super-
visory Board and Nestlé S.A.
President and CEO of
AB Industri värden.
Board Member: AB
Industri värden, Sandvik AB
and Telefon aktie bolaget LM
Ericsson.
Principal
work experience
Has held various positions at
Asea Brown Boveri (ABB)
and Securitas AB, President
and CEO of Assa Abloy AB,
President and CEO of Telefo-
naktiebolaget LM Ericsson,
Board Chairman of BP plc,
member of External Advisory
Board of the Earth Institute at
Columbia University and the
Advisory Board of Harvard
Kennedy School. Previous
assignments also include
Chairman of the Royal Swed-
ish Academy of Engineering
Sciences (IVA).
Has held several manage-
ment positions in the Nokia
Group – President of Nokia
Telecommunications, Presi-
dent of Nokia Mobile Phones
and Chief Strategy Officer of
the Nokia Group, President of
Kone Corporation 2005–
2014 and 20062014 also
CEO. Previous Board assign-
ments include Vice Chairman
of Metso Outotec and mem-
ber of the Board in ABB Ltd.
Started within Daimler Benz
AG in 1976, where he has
held several manage ment
positions, such as Head of the
trucks and buses business,
Head of Group Controlling,
Corporate Development and
M&A in AEG AG and CEO of
Mercedes Car Group.
Previously CEO of Metro AG,
senior advisor at EQT and
Board member of Air Berlin,
SKF, Carl Zeiss and Rhein-
metall AG. Since 2012
partner in Cevian Capital and
EMERAM Capital Partners
respectively.
Joined ABB in 1984 and has
held several management
positions in the Finance
function at ABB in Sweden,
Singa pore and Switzerland
– most recently as Group
CFO between 2013 and 2017
and previously as CFO for the
Divisions Discrete Automa-
tion & Motion and Automa-
tion Products and a position
as Head of M&A and New
Ventures and also as Head of
Corporate Development. Cur-
rently, senior industrial
advisor to EQT.
Has held various manage-
ment positions in Cummins
truck and bus businesses
from 19862002. From
20022005 Martha was
CEO, Rolled Products and
SVP in Alcan Inc. and from
20052009 she was the
President and COO of Novelis
Inc., global leader in alu-
minum rolled products and
recycling. Martha has been
a Board Member of Harley-
Davidson, International Paper,
Bombardier, and privately
held Algeco Scotsman.
Previous positions include
Executive Vice President and
responsible for Telefonaktie-
bolaget LM Ericsson’s Net-
works business 20032008,
CEO of Segerström & Sven-
sson 19992001, CEO of
Linjebuss 19961999 and
various positions within ABB
and Telefonaktiebolaget LM
Ericsson. Previous Board
assignments include Board
Chairman of Vesper Holding
AB and of Höganäs AB.
President and CEO of Scania
20122015. Prior to that, var-
ious managerial positions at
Scania since 1992. Co-chair-
man of the UN Secretary -
General’s High-Level Advisory
Group on Sustainable Trans-
port 20152016. Previous
Board assignments include
Board member of Concentric
AB.
Several management posi-
tions at Citibank, Chemical
Bank New York (now JP Mor-
gan Chase), First Bank Sys-
tems and First Data Corpora-
tion, Division President
General Electric Financial
Assurance Partnership Mar-
keting and Division President
General Electric Fleet Ser-
vices, President and CEO of
Ceridian Corporation and sub-
sequently also Chairman,
Board Chairman, President
and CEO of Stream Global
Services, Inc. Senior Advisor,
Ares Management, LLC.
Board Member of Nielsen,
RealPage, General Motors
Co. and MasterCard US. Until
2020 President and CEO of
Hertz Global Holdings.
Until January 2015, CEO for
Chassis Brakes International.
Has, during almost 25 years
held various management posi-
tions in Robert Bosch GmbH,
most recently as Executive Vice
President Sales and Marketing
in the Chassis System Brakes
division combined with respon-
sibility for regions China and
Brazil and previously CEO of the
subsidiary Bosch Closure Sys-
tems, also member of the Board
of Management of Brose
Fahrzeugteile GmbH & Co.
Credit Analyst Den Norske
Creditbank in Luxemburg
1984. Various positions
within brand management
and controlling within
Procter & Gamble 1986-
1989, Partner McKinsey &
Company, Inc. 19892002,
one of the founders and
owners, also Board Chairper-
son of the global consulting
firm and talent pool a-con-
nect (group) AG from 2002
until May 2021. Previous
Board assignments also
include Board member of
Metso Outotec Oyj.
Between 1998 and 2015,
employed by the private
equity firm IK Investment
Partners (former Industri
Kapital) where she held
various positions. She was
a Partner with responsibility
for the Stockholm office.
She was also a member of
IK’s Executive Committee.
Prior to that she worked as
a consultant for Bain &
Company.
Holdings in Volvo,
own and related parties
2,000,000 Series B shares. 146,100 Series B shares. None. 7,475 Series B shares. 4,000 American depositary
receipts representing Volvo B
shares (ADRs).
41,215 Series B shares. 223,755 Series B shares. None. 4,500 Series B shares. 18,230 Series B shares. 8,000 Series B shares.
186
Corporate Governance Report 2021
Deputies appointed by the employee organizations Secretary to the board
Lars Ask
Employee representative, ordinary member
Mats Henning
Employee representative, ordinary member
Mikael Sällström
Employee representative, ordinary member
Member of the Remuneration Committee
Camilla Johansson
Employee representative, deputy member
Mari Larsson
Employee representative, deputy member
Sofia Frändberg
Secretary to the Board
Master of Laws
Born 1959 1961 1959 1966 1978 1964
Member of the
Volvo Board
Ordinary member since April 6, 2016.
Deputy member from June 16, 20092016.
Since May 9, 2014. Since September 7, 2009. Deputy member since April 6, 2016. Deputy member since May 22, 2015. Secretary to the Board since April 1, 2013.
Background within Volvo With Volvo since 1982. With Volvo since 1982. With Volvo 19801999 and since 2009. With Volvo since 1997. With Volvo since 2004. Executive Vice President Group Legal &
Compliance and General Counsel.
Holdings in Volvo,
own and related parties
116 Series B Shares. 293 Series A shares, 655 Series B shares. 293 Series A shares, 155 Series B shares. 643 Series A shares, 155 Series B shares. 605 Series A shares, 155 Series B shares. 1,738 Series A shares, 59,007 Series B shares.
Board of Directors
Board members
elected by the
Annual General
Meeting
Carl-Henric Svanberg
Chairman of the Board,
Chairman of the Remuneration
Committee
Matti Alahuhta
Member of the Remuneration
Committee
Eckhard Cordes Eric Elzvik
Member of the Audit
Committee
Martha Finn Brooks
Kurt Jofs
Member of the Remuneration
Committee
Martin Lundstedt
President and CEO
Kathryn V. Marinello Martina Merz Hanne de Mora
Chairperson of the Audit
Committee
Helena Stjernholm
Member of the Audit
Committee
Education MSc in Applied Physics,
Linköping Institute of Tech-
nology, BSc Business Admin-
istration, University of Uppsala.
MSc, Dr Sc.
Doctor of Science, Helsinki
University of Technology.
MBA and PhD, University of
Hamburg.
MSc Business Administra-
tion, Stockholm School of
Economics.
BA Economics and Political
Science, Yale University.
MBA International Business
from Yale School of Manage-
ment, Yale University.
MSc, KTH Royal Institute of
Technology, Stockholm.
MSc, Chalmers University of
Technology.
BA from State University of
New York at Albany, MBA &
Doctorate from Hofstra
University.
BS from University of Coopera-
tive Education, Stuttgart.
BA in Economics from HEC
in Lausanne, MBA from
IESE in Barcelona.
MSc Business Administra-
tion, Stockholm School of
Economics.
Born 1952 1952 1950 1960 1959 1958 1967 1956 1963 1960 1970
Member of the
Volvo Board
Chairman of the Volvo Board
since April 4, 2012.
Since April 2, 2014. Since April 1, 2015. Since April 5, 2018. Since March 31, 2021. Since June 18, 2020. Since April 6, 2016. Since April 2, 2014. Since April 1, 2015. Since April 14, 2010. Since April 6, 2016.
Position and Board
memberships
Chairman of the European
Round Table of Industry
(ERT).
Board Chairman: DevCo Part-
ners Oy.
Board Member: Kone Corpo-
ration.
Partner in Cevian Capital and
EMERAM Capital Partners.
Board Chairman: Bilfinger SE.
Member of the Executive
Committee of Eastern
European Economic Relations
of German Industry.
Board Chairman: Global
Connect Group.
Board member: Telefon-
aktiebolaget LM Ericsson,
Landis+Gyr Group AG and
VFS Global.
Board Member: Jabil,
Constellium, CARE USA
and CARE Enterprise Inc.
Board Member: Telefonaktie-
bolaget LM Ericsson, Feal AB
and Arjeplog Hotel Silverhat-
ten AB.
President and CEO of AB
Volvo. Board Chairman: Per-
mobil AB. Board Member: The
European Automobile Manu-
facturers’ Association (ACEA)
and Autoliv Inc. Member of
the Royal Swedish Academy
of Engineering Sciences (IVA)
and the European Round Table
of Industry (ERT).
President and CEO of PODS.
Board Chairperson: Concen-
trix. Board Member: Ares
Acquisition Corporation.
President and CEO of
Thyssen krupp AG.
Board Member: SAF Holland
SA.
Board Chairperson: Micro-
caps AG
Board Member: IMD Super-
visory Board and Nestlé S.A.
President and CEO of
AB Industri värden.
Board Member: AB
Industri värden, Sandvik AB
and Telefon aktie bolaget LM
Ericsson.
Principal
work experience
Has held various positions at
Asea Brown Boveri (ABB)
and Securitas AB, President
and CEO of Assa Abloy AB,
President and CEO of Telefo-
naktiebolaget LM Ericsson,
Board Chairman of BP plc,
member of External Advisory
Board of the Earth Institute at
Columbia University and the
Advisory Board of Harvard
Kennedy School. Previous
assignments also include
Chairman of the Royal Swed-
ish Academy of Engineering
Sciences (IVA).
Has held several manage-
ment positions in the Nokia
Group – President of Nokia
Telecommunications, Presi-
dent of Nokia Mobile Phones
and Chief Strategy Officer of
the Nokia Group, President of
Kone Corporation 2005–
2014 and 20062014 also
CEO. Previous Board assign-
ments include Vice Chairman
of Metso Outotec and mem-
ber of the Board in ABB Ltd.
Started within Daimler Benz
AG in 1976, where he has
held several manage ment
positions, such as Head of the
trucks and buses business,
Head of Group Controlling,
Corporate Development and
M&A in AEG AG and CEO of
Mercedes Car Group.
Previously CEO of Metro AG,
senior advisor at EQT and
Board member of Air Berlin,
SKF, Carl Zeiss and Rhein-
metall AG. Since 2012
partner in Cevian Capital and
EMERAM Capital Partners
respectively.
Joined ABB in 1984 and has
held several management
positions in the Finance
function at ABB in Sweden,
Singa pore and Switzerland
– most recently as Group
CFO between 2013 and 2017
and previously as CFO for the
Divisions Discrete Automa-
tion & Motion and Automa-
tion Products and a position
as Head of M&A and New
Ventures and also as Head of
Corporate Development. Cur-
rently, senior industrial
advisor to EQT.
Has held various manage-
ment positions in Cummins
truck and bus businesses
from 19862002. From
20022005 Martha was
CEO, Rolled Products and
SVP in Alcan Inc. and from
20052009 she was the
President and COO of Novelis
Inc., global leader in alu-
minum rolled products and
recycling. Martha has been
a Board Member of Harley-
Davidson, International Paper,
Bombardier, and privately
held Algeco Scotsman.
Previous positions include
Executive Vice President and
responsible for Telefonaktie-
bolaget LM Ericsson’s Net-
works business 20032008,
CEO of Segerström & Sven-
sson 19992001, CEO of
Linjebuss 19961999 and
various positions within ABB
and Telefonaktiebolaget LM
Ericsson. Previous Board
assignments include Board
Chairman of Vesper Holding
AB and of Höganäs AB.
President and CEO of Scania
20122015. Prior to that, var-
ious managerial positions at
Scania since 1992. Co-chair-
man of the UN Secretary -
General’s High-Level Advisory
Group on Sustainable Trans-
port 20152016. Previous
Board assignments include
Board member of Concentric
AB.
Several management posi-
tions at Citibank, Chemical
Bank New York (now JP Mor-
gan Chase), First Bank Sys-
tems and First Data Corpora-
tion, Division President
General Electric Financial
Assurance Partnership Mar-
keting and Division President
General Electric Fleet Ser-
vices, President and CEO of
Ceridian Corporation and sub-
sequently also Chairman,
Board Chairman, President
and CEO of Stream Global
Services, Inc. Senior Advisor,
Ares Management, LLC.
Board Member of Nielsen,
RealPage, General Motors
Co. and MasterCard US. Until
2020 President and CEO of
Hertz Global Holdings.
Until January 2015, CEO for
Chassis Brakes International.
Has, during almost 25 years
held various management posi-
tions in Robert Bosch GmbH,
most recently as Executive Vice
President Sales and Marketing
in the Chassis System Brakes
division combined with respon-
sibility for regions China and
Brazil and previously CEO of the
subsidiary Bosch Closure Sys-
tems, also member of the Board
of Management of Brose
Fahrzeugteile GmbH & Co.
Credit Analyst Den Norske
Creditbank in Luxemburg
1984. Various positions
within brand management
and controlling within
Procter & Gamble 1986-
1989, Partner McKinsey &
Company, Inc. 19892002,
one of the founders and
owners, also Board Chairper-
son of the global consulting
firm and talent pool a-con-
nect (group) AG from 2002
until May 2021. Previous
Board assignments also
include Board member of
Metso Outotec Oyj.
Between 1998 and 2015,
employed by the private
equity firm IK Investment
Partners (former Industri
Kapital) where she held
various positions. She was
a Partner with responsibility
for the Stockholm office.
She was also a member of
IK’s Executive Committee.
Prior to that she worked as
a consultant for Bain &
Company.
Holdings in Volvo,
own and related parties
2,000,000 Series B shares. 146,100 Series B shares. None. 7,475 Series B shares. 4,000 American depositary
receipts representing Volvo B
shares (ADRs).
41,215 Series B shares. 223,755 Series B shares. None. 4,500 Series B shares. 18,230 Series B shares. 8,000 Series B shares.
187
Corporate Governance Report 2021
Volvo’s auditors are elected by the Annual General Meeting. The auditors
review the interim report for the period January 1 to June 30 and audit the
annual financial statements and consolidated accounts. The auditors also
review the Corporate Governance Report and confirms whether the
Group has presented a Sustainability Report. The auditors report the
results of their audit in the Audit Report and in an opinion on the Corpo-
rate Governance Report, and provides an opinion on whether the guide-
lines for remuneration to senior executives have been complied with,
which they present to the Annual General Meeting.
The current auditor, Deloitte AB, was elected at the Annual General
Meeting 2018 for a period of four years. Jan Nilsson is responsible for the
audit of Volvo and is the Auditor-in-Charge.
For information about Volvo’s remuneration of the auditors, please refer
to Note 28 “Fees to the auditors” in the Group’s notes in the Annual and
Sustainability Report.
EXTERNAL AUDITING
7
Volvo’s internal audit function, Group Internal Audit, provides the Board
and the Group Executive Board with an independent, risk based and
objective assurance on the effectiveness and the efficiency of the govern-
ance, risk management and control systems of the Volvo Group. Group
Internal Audit runs from time to time advisory work as well. Group Internal
Audit helps the organization to accomplish its objectives by bringing a
systematic, disciplined approach to evaluate and to improve the effective-
ness of risk management, control and governance processes.
Group Internal Audit performs internal audits in selected focus areas,
identified through an independent risk assessment process involving key
stakeholders, input from past audits and from the other assurance func-
tions including the external auditors. This audit plan is approved by the
Audit Committee. In addition, special assignments requested by manage-
ment and the Audit Committee are performed. The audits cover, among
other things, assessments on the adequacy and effectiveness of the Volvo
Group’s processes for controlling its activities and managing its risks and
evaluation of compliance with policies and directives.
The head of Group Internal Audit reports directly to the CEO, the
Group’s General Counsel and the Board’s Audit Committee.
For additional information on internal control over financial reporting,
see pages 194195.
GROUP INTERNAL AUDIT
8
188
Corporate Governance Report 2021
GOVERNANCE PRINCIPLES AND ORGANIZATIONAL STRUCTURE
9
Volvo’s strategy
The Volvo Group’s mission is to “Drive prosperity through transport and
infrastructure solutions”. The Volvo Group has the ambition to drive pros-
perity socially, environmentally and financially, by striving for transport
and infrastructure solutions that are safe, fossil-free and productive. The
Volvo Group drive the transformation in its industry to shape the world we
want to live in. Based on the updated Group’s strategic priorities and
Volvo Group 2030 ambitions, each Business Area defines its own opera-
tional plans. The long-term plans, such as the Group’s industrial and prod-
uct plans, are also crucial parts of the Group’s strategic direction. For
more information about the Volvo Group’s strategy, please refer to pages
1017 of the Annual and Sustainability Report.
Governance documents
Another key component of the Group’s governance is its policies and
directives, such as the Code of Conduct and policies pertaining to invest-
ments, financial risks, accounting, financial control and internal audit,
which contain Group-wide operating and financial rules for the opera-
tions, as well as responsibility and authority structures.
Organizational structure
The Volvo Group is organized into five Group Functions, three Truck Divi-
sions and ten Business Areas. The five Group Functions (Group Finance,
Group Legal & Compliance, Group People & Culture, Group Communica-
tion and Group Digital & IT) are tasked with supporting the entire organi-
zation with expertise within each Group Function area, developing stand-
ards through policies, directives and guidelines and providing services
and/or products for the entire Group.
The Volvo Group’s truck business is supported by the three Truck Divi-
sions: Group Trucks Technology (GTT), Group Trucks Purchasing (GTP)
and Group Trucks Operations (GTO).
The business of the Volvo Group is organized in ten Business Areas:
Volvo Trucks, Renault Trucks, Mack Trucks, Volvo Construction Equip-
ment, Volvo Buses, Volvo Penta, Volvo Autonomous Solution (VAS), Volvo
Financial Services (VFS), ARQUUS and, as of February 2021, the newly
established Business Area Volvo Energy. On April 1, 2021 the Volvo Group
divested UD Trucks.
Each Business Area and Truck Division has its own quarterly Business
Review Meeting (BRM) to support strategic development and business
performance, where key decisions for the respective Truck Divisions or
Business Areas are made.
For cross-functional alignment and interaction between different func-
tions and organizations and for taking specific decisions which are some-
times not part of the line organizations ordinary responsibilities, several
cross-functional decision forums have been formalized, including: People
Board, Digital and IT BRM, Connected Solutions Board, Product Board,
Quality Board and Sales & Operations Planning Executive decision meeting.
With this governance model, Volvo can utilize the synergies of having
global organizations for product development, purchasing and manufac-
turing, while maintaining clear leadership and responsibility for each busi-
ness area to make sure that customer needs are met. The aim of the gov-
ernance model is that all Business Areas are driven according to the same
distinct business principles, whereby each Business Area can follow and
optimize its own earnings performance and cash flow generation in the
short- and long-term.
Volvo Group organization
Group People & Culture
Group Digital & IT
Group Communication
Group Finance
Deputy CEO
Group Legal & Compliance
Group CEO
BUSINESS AREAS
TRUCK DIVISIONS
Mack
Trucks
Renault
Trucks
Volvo
Trucks
Volvo
CE
Volvo
Buses
Volvo
Penta
ARQUUS VFS
Volvo
Energy
VAS
Group Trucks Technology
Group Trucks Operations
Group Trucks Purchasing
Extended Group Management members
Group Executive Board members
Valid as per December 31, 2021
Executive Assistant &
Head of CEO Office
189
Corporate Governance Report 2021
The CEO is responsible for managing the day-to-day operations of the
Volvo Group and is authorized to make decisions on matters that do not
require AB Volvo Board approval. The CEO leads the operations of the
Volvo Group, e.g. through the Group Executive Board, the extended
Group Management and the cross-functional forums.
The Group Executive Board is the highest operational decision forum
and is chaired by the President and CEO of the Volvo Group, Martin Lund-
stedt. Furthermore, the members of the Group Executive Board are the
Deputy CEO, Executive Vice Presidents of the Group Functions, Execu-
tive Vice Presidents and Presidents of Volvo Trucks, Renault Trucks, Mack
Trucks, Volvo Construction Equipment and Volvo Energy as well as the
Executive Vice Presidents of the Truck Divisions.
The members of Group Management report directly to the CEO and
include the Presidents of Volvo Buses, Volvo Penta, Volvo Autonomous
Solutions (VAS), Volvo Financial Services (VFS) and ARQUUS respec-
tively. The Group Executive Board and Group Management meet to align
on Group matters on a quarterly basis.
Remuneration of the Group Executive Board
AB Volvo’s Annual General Meeting shall, at least every fourth year,
resolve on a remuneration policy for remuneration to the members of the
Group Executive Board, based on a proposal from the Board. For informa-
tion about the remuneration policy adopted by the Annual General Meet-
ing 2021, please refer to Note 27 “Personnel” in the Group’s notes in the
Annual and Sustainability Report.
Changes to the Group Executive Board and Group Management
As of February 1, 2021 Anna Westerberg replaced Håkan Agnevall as
President of Volvo Buses and joined Group Management. In February
2021 Joachim Rosenberg, member of the Volvo Group Executive Board,
was appointed President of the new business area Volvo Energy.
In February 2022 it was announced that Tina Hultkvist has been
appointed Chief Financial Officer and new member of the Volvo Group
Executive Board as of 15 March 2022. She will hence succeed Jan Ytter-
berg, who will continue as Volvo Group senior advisor.
Sustainability and climate related matters
Sustainability is of strategic importance to the Group and the accountabil-
ity to drive sustainability performance primarily lies with the Truck Divi-
sions and Business Areas. The organizational structure described in this
Corporate Governance Report applies to all strategic topics within the
Volvo Group, including climate and sustainability matters. For sustainabil-
ity related matters, the Volvo Group relies on an integrated approach to
ensure that environmental, social and economic topics are considered in
all relevant decision-making. Opportunities and risks related to sustaina-
bility are identified in all Truck Divisions and Business Areas, and may
relate to e.g. government regulation, technology development, customer
satisfaction and physical risks. The principal risks are consolidated in the
Volvo Group’s enterprise risk management process and managed by the
Group Executive Board and the Truck Divisions, Business Areas and
Group Functions.
On Group level, the work is coordinated by cross-functional forums and
working groups assigned by one or several Group Executive Board mem-
bers with representatives from the relevant Truck Divisions and Business
Areas. These forums and working groups prepare the material for deci-
sion-making at Group Executive Board level, to be executed in the respec-
tive Truck Divisions, Business Areas and/or Group Functions.
The most relevant cross-functional forums and working groups for sus-
tainability related matters are:
• The Product Board, headed by the Chief Technology Officer, where
climate related opportunities and risks are managed primarily as part
of the transition towards fossil-free transportation.
• The People Board, headed by the Executive Vice President and Head
of People & Culture, which focuses on all significant employee related
matters such as training, health and safety, diversity, inclusion and
talent management.
• The Environmental Committee, a delegated committee from Group
Legal & Compliance where Group Functions, Truck Divisions and
Business Areas representatives coordinate environmental manage-
ment with the mission to secure the effective work of the Volvo
Group’s Environmental Policy and management system.
• The Human Rights Board, chaired by the Executive Vice President
Group Communication and the Senior Vice President, Corporate
Responsibility with Group Executive Board members who coordinate
the implementation of the Group’s Human Rights policy and work.
GROUP EXECUTIVE BOARD AND GROUP MANAGEMENT
10
190
Corporate Governance Report 2021
191
Corporate Governance Report 2021
Martin Lundstedt
President and CEO
Jan Gurander
Deputy CEO
Roger Alm
Executive Vice President
Volvo Group and
President Volvo Trucks
Bruno Blin
Executive Vice President
Volvo Group and
President Renault
Trucks
Sofia Frändberg
Executive Vice President
Group Legal &
Compliance and
General Counsel
Andrea Fuder
Executive Vice President
Volvo Group Trucks
Purchasing and
Chief Purchasing
Officer for Volvo Group
Jens Holtinger
Executive Vice President
Group Trucks
Operations
Melker Jernberg
Executive Vice
President Volvo
Group and President
Volvo Construction
Equipment
Diana Niu
Executive Vice
President Group
People & Culture
Scott Rafkin
Executive Vice
President and Chief
Digital Officer for
Volvo Group
Joachim
Rosenberg
Executive Vice
President Volvo
Group and President
Volvo Energy
Lars Stenqvist
Executive Vice
President Group
Trucks Technology
and Volvo Group
Chief Technology
Officer
Martin Weissburg
Executive Vice
President Volvo
Group and President
Mack Trucks
Kina Wileke
Executive Vice
President Group
Communication
Jan Ytterberg
Executive Vice
President Group
Finance and CFO
MSc. MSc. MBA. Master of Laws. MSc and MBA. MSc in Mechanical
Engineering, Chalmers
University of
Technology.
MSc in Mechanical
Engineering.
MBA and BA in
Economics.
BBA (Bachelors in
Business Adminis-
tration), University
of Massachusetts at
Amherst.
MSc Industrial
Engineering and
Management, MSc
Financial Econom-
ics, MSc Business
and Economics.
MSc Industrial
Engineering.
Master of Business
Management, BSc
Industrial Manage-
ment.
MA in journalism. MSc in Business
Administration and
Economics.
1967 1961 1962 1963 1964 1967 1970 1968 1966 1969 1970 1967 1962 1974 1961
President and CEO of
AB Volvo and member
of the Group Execu tive
Board since Octo ber
2015. Presi dent and
CEO of Scania 2012–
2015. Prior to that,
various managerial
positions at Scania
since 1992.
Co-chairman of the UN
Secretary-General’s
High-Level Advisory
Group on Sustainable
Transport 20152016.
Previous Board
assignments include
Board member of
Concentric AB.
Deputy CEO since
2018. Deputy CEO &
CFO 20162018. CFO
& Executive Vice Presi-
dent Volvo Group
20142016. CFO &
Senior Vice President
Finance Volvo Car Cor-
poration 20112013.
CFO MAN Diesel &
Turbo SE 2010. CFO
MAN Diesel SE 2008–
2009. Group Vice Pres-
ident and CFO Scania
AB 20012006. Presi-
dent of Business Unit
Finance AB Volvo
19992001. Senior
Vice President &
Finance Director Scania
AB 19981999. Mem-
ber of the Group Execu-
tive Board since 2014.
With Volvo 19992001
and since 2014.
Executive Vice Presi-
dent Volvo Group and
President Volvo Trucks
since 2018. Senior Vice
President Volvo Trucks
Europe 20162018.
Senior Vice President
Volvo Group Trucks
Northern Europe 2015–
2016. President Volvo
Group Trucks Latin
America 20122014.
President Volvo Trucks
Latin America 2010–
2011. Managing Direc-
tor Volvo Trucks, Region
East 20042009.
Member of the Group
Executive Board since
January 2019. With
Volvo since 1989.
After having worked
for several companies in
the manufacturing,
quality and purchasing
areas, he joined Renault
Trucks Purchasing in
1999. Has held several
senior positions over
the years until being
appointed Senior Vice
President of Volvo
Group Purchasing. Has
also served as Senior
Vice President, Group
Truck Sales South
Europe from January
20132016. Executive
Vice President Volvo
Group and President
Renault Trucks since
2016. Member of the
Group Executive Board
since March 2016. With
Volvo since 1999.
Member of the Group
Executive Board since
April 2013. Head of
Corporate Legal at AB
Volvo 19982013. Cor-
porate Legal Counsel at
AB Volvo 19941997.
Has worked in Quality
and Logistic and held
various senior positions
at Volkswagen’s Pur-
chasing organization
since 1992. Head of
Purchasing at Scania
20122016. Executive
Vice President Volvo
Group Trucks Purchas-
ing and Chief Purchas-
ing Officer for Volvo
Group since 2017.
Member of the Group
Executive Board since
2017. With Volvo since
2017.
Executive Vice Presi-
dent Group Trucks
Operations since 2020.
Senior Vice President
Europe & Brazil Manu-
facturing Group Trucks
Operations 2016–
2020. Vice President
Powertrain Production
Skövde Plant 2012–
2016. Has held several
leading positions within
the Volvo Group. Mem-
ber of the Group Execu-
tive Board since Octo-
ber 2020. With Volvo
since 1995.
Executive Vice Pres-
ident Volvo Group
and President Volvo
Construction Equip-
ment since 2018.
CEO and President
at Höganäs AB
20142017. Execu-
tive Vice President,
Business Area
EMEA at SSAB
20112014. Has
held various posi-
tions at Scania AB
since 1989, most
recently as Senior
Vice President
Buses and Coaches
at Scania AB 2007-
2011. Member of the
Group Executive
Board since January
2018. With Volvo
since 2018.
Executive Vice Pres-
ident Group People
& Culture since
2019. Joined Volvo
Group in February
2005, with SVP HR
jobs in two Business
Areas, Trucks Asia
Pacific and Volvo
Construction Equip-
ment. Worked for
Telefonaktiebolaget
LM Ericsson from
July 1993 to January
2005 in a number of
leadership positions.
Member of the
Group Executive
Board since January
2019.
Executive Vice Pres-
ident and Chief Digi-
tal Officer Volvo
Group since 2020.
President Volvo
Financial Services
20142019. Chief
Financial Officer
Volvo Financial Ser-
vices 20102014.
Senior Vice Presi-
dent Global Opera-
tions Volvo Financial
Services 2003–
2009. Senior Vice
President Risk Volvo
Financial Services
20012002.
Prior to 2001, held
several senior posi-
tions with Volvo Car
Finance North
America. Prior to
Volvo, Business
Assurance and Capi-
tal Markets Manager
Coopers & Lybrand
LLC. Member of the
Group Executive
Board since January
2020. With Volvo
since 2001.
Executive Vice Pres-
ident Volvo Group
and President Volvo
Energy since 2021.
Executive Vice Pres-
ident Volvo Group
and Chairman UD
Trucks 20162021.
Executive Vice Pres-
ident Group Trucks
Sales 20152016.
Executive Vice Pres-
ident Group Trucks
Sales & Marketing
APAC 20122014.
President Volvo
Group Asia Truck
Operations 2007-
2011. Vice President
Volvo Group Alliance
Office 2007. Vice
President Volvo
Powertrain 2005-
2007. Consultant
with McKinsey &
Company 1996–
2004. Member of
the Group Executive
Board since 2012.
With Volvo since
2005.
Executive Vice Pres-
ident Group Trucks
Technology and
Volvo Group Chief
Technology Officer
since October 2016.
Head of R&D and
CTO at Volkswagen
Truck & Bus 2015–
2016. Senior Vice
President Vehicle
Definition R&D at
Scania 20072015.
Prior to that various
senior positions at
Scania since 1992.
Member of the
Group Executive
Board since October
2016. With Volvo
since October 2016.
Fellow of the Royal
Swedish Academy of
Engineering Sci-
ences (IVA).
President Mack
Trucks since 2018.
President Volvo
Construction Equip-
ment 20142017.
President & CEO
Volvo Financial Ser-
vices 20102014.
President Volvo
Financial Services
Americas 2005–
2010. Prior to Volvo,
President Woodard
LLC, President
Great Dane Financial
Services and Senior
Vice President
ORIX. Member of
the Group Executive
Board since March
2016. With Volvo
since 2005.
Responsible for
Group Communica-
tions since 2018.
With the Volvo
Group since 2008,
most recently as
Senior Vice Presi-
dent Brand, Com-
munication &
Marketing Volvo
Penta 20162017,
Senior Vice Presi-
dent External Corpo-
rate Communi cation
Volvo Group 2012–
2016 and CEO Com-
munication Volvo
Group 20082012.
Has held a number
of positions in TV4
Group 19982008.
Member of the
Group Executive
Board since 2018.
Executive Vice Pres-
ident Group Finance
and CFO since
2018. CFO of Husq-
varna Group 2015–
2018. Executive
Vice President and
CFO of Scania
Group 20062015.
Various positions in
accounting and
finance, Scania
Group 19872006.
Member of the
Group Executive
Board since
November 2018.
With Volvo since
2018.
Chairman of Permobil
AB. Board Member of
the European Automo-
bile Manufacturers’
Association (ACEA)
and Autoliv Inc. Mem-
ber of the Royal Swed-
ish Academy of Engi-
neering Sciences (IVA)
and of the European
Round Table of Indus-
try (ERT).
Board Member of
Teknikföretagen
and Skanska AB.
Secretary to the AB
Volvo Board since April
2013.
Member of the Advisory
Board of cellcentric
GmbH & Co. KG.
Member of the Board of
the German-Swedish
Chamber of Commerce.
Member of the
Board of Concentric
AB since April 2021.
Board Member of
International Cham-
ber of Commerce
(ICC), Sweden.
223,755 Series B
shares.
83,306 Series B
shares.
398 Series A shares,
26,332 Series B
shares.
32,033 Series B
shares.
1,738 Series A shares,
59,007 Series B
shares.
1,600 Series A shares,
47,623 Series B shares.
16,788 Series B shares.
31,120 Series B
shares.
54,169 Series B
shares.
37,342 Series B
shares.
87 Series A shares,
228,536 Series B
shares.
32,062 Series B
shares.
124,163 Series B
shares.
344 Series A shares,
18,761 Series B
shares.
18,925 Series B
shares.
EducationBorn
Principal work
experience
Board
memberships
Holdings in
Volvo, own
and related
parties
Group Executive Board
192
Corporate Governance Report 2021
Martin Lundstedt
President and CEO
Jan Gurander
Deputy CEO
Roger Alm
Executive Vice President
Volvo Group and
President Volvo Trucks
Bruno Blin
Executive Vice President
Volvo Group and
President Renault
Trucks
Sofia Frändberg
Executive Vice President
Group Legal &
Compliance and
General Counsel
Andrea Fuder
Executive Vice President
Volvo Group Trucks
Purchasing and
Chief Purchasing
Officer for Volvo Group
Jens Holtinger
Executive Vice President
Group Trucks
Operations
Melker Jernberg
Executive Vice
President Volvo
Group and President
Volvo Construction
Equipment
Diana Niu
Executive Vice
President Group
People & Culture
Scott Rafkin
Executive Vice
President and Chief
Digital Officer for
Volvo Group
Joachim
Rosenberg
Executive Vice
President Volvo
Group and President
Volvo Energy
Lars Stenqvist
Executive Vice
President Group
Trucks Technology
and Volvo Group
Chief Technology
Officer
Martin Weissburg
Executive Vice
President Volvo
Group and President
Mack Trucks
Kina Wileke
Executive Vice
President Group
Communication
Jan Ytterberg
Executive Vice
President Group
Finance and CFO
MSc. MSc. MBA. Master of Laws. MSc and MBA. MSc in Mechanical
Engineering, Chalmers
University of
Technology.
MSc in Mechanical
Engineering.
MBA and BA in
Economics.
BBA (Bachelors in
Business Adminis-
tration), University
of Massachusetts at
Amherst.
MSc Industrial
Engineering and
Management, MSc
Financial Econom-
ics, MSc Business
and Economics.
MSc Industrial
Engineering.
Master of Business
Management, BSc
Industrial Manage-
ment.
MA in journalism. MSc in Business
Administration and
Economics.
1967 1961 1962 1963 1964 1967 1970 1968 1966 1969 1970 1967 1962 1974 1961
President and CEO of
AB Volvo and member
of the Group Execu tive
Board since Octo ber
2015. Presi dent and
CEO of Scania 2012–
2015. Prior to that,
various managerial
positions at Scania
since 1992.
Co-chairman of the UN
Secretary-General’s
High-Level Advisory
Group on Sustainable
Transport 20152016.
Previous Board
assignments include
Board member of
Concentric AB.
Deputy CEO since
2018. Deputy CEO &
CFO 20162018. CFO
& Executive Vice Presi-
dent Volvo Group
20142016. CFO &
Senior Vice President
Finance Volvo Car Cor-
poration 20112013.
CFO MAN Diesel &
Turbo SE 2010. CFO
MAN Diesel SE 2008–
2009. Group Vice Pres-
ident and CFO Scania
AB 20012006. Presi-
dent of Business Unit
Finance AB Volvo
19992001. Senior
Vice President &
Finance Director Scania
AB 19981999. Mem-
ber of the Group Execu-
tive Board since 2014.
With Volvo 19992001
and since 2014.
Executive Vice Presi-
dent Volvo Group and
President Volvo Trucks
since 2018. Senior Vice
President Volvo Trucks
Europe 20162018.
Senior Vice President
Volvo Group Trucks
Northern Europe 2015–
2016. President Volvo
Group Trucks Latin
America 20122014.
President Volvo Trucks
Latin America 2010–
2011. Managing Direc-
tor Volvo Trucks, Region
East 20042009.
Member of the Group
Executive Board since
January 2019. With
Volvo since 1989.
After having worked
for several companies in
the manufacturing,
quality and purchasing
areas, he joined Renault
Trucks Purchasing in
1999. Has held several
senior positions over
the years until being
appointed Senior Vice
President of Volvo
Group Purchasing. Has
also served as Senior
Vice President, Group
Truck Sales South
Europe from January
20132016. Executive
Vice President Volvo
Group and President
Renault Trucks since
2016. Member of the
Group Executive Board
since March 2016. With
Volvo since 1999.
Member of the Group
Executive Board since
April 2013. Head of
Corporate Legal at AB
Volvo 19982013. Cor-
porate Legal Counsel at
AB Volvo 19941997.
Has worked in Quality
and Logistic and held
various senior positions
at Volkswagen’s Pur-
chasing organization
since 1992. Head of
Purchasing at Scania
20122016. Executive
Vice President Volvo
Group Trucks Purchas-
ing and Chief Purchas-
ing Officer for Volvo
Group since 2017.
Member of the Group
Executive Board since
2017. With Volvo since
2017.
Executive Vice Presi-
dent Group Trucks
Operations since 2020.
Senior Vice President
Europe & Brazil Manu-
facturing Group Trucks
Operations 2016–
2020. Vice President
Powertrain Production
Skövde Plant 2012–
2016. Has held several
leading positions within
the Volvo Group. Mem-
ber of the Group Execu-
tive Board since Octo-
ber 2020. With Volvo
since 1995.
Executive Vice Pres-
ident Volvo Group
and President Volvo
Construction Equip-
ment since 2018.
CEO and President
at Höganäs AB
20142017. Execu-
tive Vice President,
Business Area
EMEA at SSAB
20112014. Has
held various posi-
tions at Scania AB
since 1989, most
recently as Senior
Vice President
Buses and Coaches
at Scania AB 2007-
2011. Member of the
Group Executive
Board since January
2018. With Volvo
since 2018.
Executive Vice Pres-
ident Group People
& Culture since
2019. Joined Volvo
Group in February
2005, with SVP HR
jobs in two Business
Areas, Trucks Asia
Pacific and Volvo
Construction Equip-
ment. Worked for
Telefonaktiebolaget
LM Ericsson from
July 1993 to January
2005 in a number of
leadership positions.
Member of the
Group Executive
Board since January
2019.
Executive Vice Pres-
ident and Chief Digi-
tal Officer Volvo
Group since 2020.
President Volvo
Financial Services
20142019. Chief
Financial Officer
Volvo Financial Ser-
vices 20102014.
Senior Vice Presi-
dent Global Opera-
tions Volvo Financial
Services 2003–
2009. Senior Vice
President Risk Volvo
Financial Services
20012002.
Prior to 2001, held
several senior posi-
tions with Volvo Car
Finance North
America. Prior to
Volvo, Business
Assurance and Capi-
tal Markets Manager
Coopers & Lybrand
LLC. Member of the
Group Executive
Board since January
2020. With Volvo
since 2001.
Executive Vice Pres-
ident Volvo Group
and President Volvo
Energy since 2021.
Executive Vice Pres-
ident Volvo Group
and Chairman UD
Trucks 20162021.
Executive Vice Pres-
ident Group Trucks
Sales 20152016.
Executive Vice Pres-
ident Group Trucks
Sales & Marketing
APAC 20122014.
President Volvo
Group Asia Truck
Operations 2007-
2011. Vice President
Volvo Group Alliance
Office 2007. Vice
President Volvo
Powertrain 2005-
2007. Consultant
with McKinsey &
Company 1996–
2004. Member of
the Group Executive
Board since 2012.
With Volvo since
2005.
Executive Vice Pres-
ident Group Trucks
Technology and
Volvo Group Chief
Technology Officer
since October 2016.
Head of R&D and
CTO at Volkswagen
Truck & Bus 2015–
2016. Senior Vice
President Vehicle
Definition R&D at
Scania 20072015.
Prior to that various
senior positions at
Scania since 1992.
Member of the
Group Executive
Board since October
2016. With Volvo
since October 2016.
Fellow of the Royal
Swedish Academy of
Engineering Sci-
ences (IVA).
President Mack
Trucks since 2018.
President Volvo
Construction Equip-
ment 20142017.
President & CEO
Volvo Financial Ser-
vices 20102014.
President Volvo
Financial Services
Americas 2005–
2010. Prior to Volvo,
President Woodard
LLC, President
Great Dane Financial
Services and Senior
Vice President
ORIX. Member of
the Group Executive
Board since March
2016. With Volvo
since 2005.
Responsible for
Group Communica-
tions since 2018.
With the Volvo
Group since 2008,
most recently as
Senior Vice Presi-
dent Brand, Com-
munication &
Marketing Volvo
Penta 20162017,
Senior Vice Presi-
dent External Corpo-
rate Communi cation
Volvo Group 2012–
2016 and CEO Com-
munication Volvo
Group 20082012.
Has held a number
of positions in TV4
Group 19982008.
Member of the
Group Executive
Board since 2018.
Executive Vice Pres-
ident Group Finance
and CFO since
2018. CFO of Husq-
varna Group 2015–
2018. Executive
Vice President and
CFO of Scania
Group 20062015.
Various positions in
accounting and
finance, Scania
Group 19872006.
Member of the
Group Executive
Board since
November 2018.
With Volvo since
2018.
Chairman of Permobil
AB. Board Member of
the European Automo-
bile Manufacturers’
Association (ACEA)
and Autoliv Inc. Mem-
ber of the Royal Swed-
ish Academy of Engi-
neering Sciences (IVA)
and of the European
Round Table of Indus-
try (ERT).
Board Member of
Teknikföretagen
and Skanska AB.
Secretary to the AB
Volvo Board since April
2013.
Member of the Advisory
Board of cellcentric
GmbH & Co. KG.
Member of the Board of
the German-Swedish
Chamber of Commerce.
Member of the
Board of Concentric
AB since April 2021.
Board Member of
International Cham-
ber of Commerce
(ICC), Sweden.
223,755 Series B
shares.
83,306 Series B
shares.
398 Series A shares,
26,332 Series B
shares.
32,033 Series B
shares.
1,738 Series A shares,
59,007 Series B
shares.
1,600 Series A shares,
47,623 Series B shares.
16,788 Series B shares.
31,120 Series B
shares.
54,169 Series B
shares.
37,342 Series B
shares.
87 Series A shares,
228,536 Series B
shares.
32,062 Series B
shares.
124,163 Series B
shares.
344 Series A shares,
18,761 Series B
shares.
18,925 Series B
shares.
EducationBorn
Principal work
experience
Board
memberships
Holdings in
Volvo, own
and related
parties
Group Executive Board
193
Corporate Governance Report 2021
The Board is responsible for the internal controls according to the Swedish
Companies Act and the Code. The purpose of this report is to provide
share-holders and other interested parties with an understanding of how
internal control is organized at Volvo with regard to financial reporting. The
description has been designed in accordance with the Swedish Annual
Accounts Act and is thus limited to internal control over financial reporting.
Introduction
Volvo has a function for internal control with the objective to provide sup-
port for management, allowing them to continuously provide solid internal
controls relating to financial reporting. Work that is conducted through
this function is primarily based to ensure compliance with directives and
policies, and to create effective conditions for specific control activities in
key processes related to financial reporting. The Audit Committee is regu-
larly informed of the results of the work performed by the Internal Control
function within Volvo with regard to risks, control activities and follow-up
on the financial reporting.
Volvo also has an internal audit function, Group Internal Audit, which
among other things, independently monitors that companies in the Group
follow the principles and rules that are stated in the Group’s directives,
policies and instructions for financial reporting. The head of the Group
Internal Audit function reports directly to the CEO, to the Group’s General
Counsel and the Board’s Audit Committee.
Control environment
Fundamental to Volvo’s control environment is the business culture that is
established within the Group and in which managers and employees
operate. Volvo works actively on communication and training regarding
INTERNAL CONTROL OVER FINANCIAL REPORTING
11
Volvo Group Internal Control Program
Yearly evaluation of the effectiveness of internal control
over financial reporting (ICFR) within the Volvo Group.
* FPP – Financial Policies and Procedures;
VICS – Volvo Internal Control Standard
R
e
m
e
d
i
a
t
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o
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FPP* VICS*
Volvo Group Internal
Control Programme
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s
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Nils Jaeger
President of Volvo Autonomous
Solutions
Emmanuel Levacher
President and CEO of
ARQUUS
Heléne Mellquist
President of Volvo Penta
Marcio Pedroso
President of Volvo Financial
Services
Anna Westerberg
President of Volvo Buses
Born 1969 1962 1964 1968 1975
Principal work
experience
Responsible for Volvo Autono-
mous Solutions since 2020.
With the Volvo Group since
2014, most recently as Presi-
dent of Volvo Financial Ser-
vices EMEA. Prior to joining
Volvo Group, several leading
positions within Deere & Com-
pany, including the position as
Vice President International
Finance, Europe, CIS, N&ME
EAST, Northern Africa and
Global Trade Finance.
During his 30 years in the
automobile industry (Renault
Trucks, Renault, Volvo), Emma-
nuel has held multiple opera-
tional and strategic functions
in contact with markets on the
five continents. He has also
built a solid experience with
French and foreign govern-
ments, state authorities and
public and diplomatic institu-
tions.
20192020 Senior Vice
President of Volvo Trucks
Europe, 20162019 Senior
Vice President of Volvo Trucks
International and 20122016
CEO of TransAtlantic AB.
19882011 Heléne has held
several leading position within
the Volvo Group.
Between 2015 and 2019 Presi-
dent of Volvo Financial Services
Americas. President of Brazil
and Chile for Volvo Financial
Services 20112014. Vice
President Latin America Mar-
kets for Volvo Financial Ser-
vices 20102011. Marcio has
held other senior positions and
special assignments across
Americas and Europe in the
Volvo Group, 20012010. Prior
to 2001, held various leadership
positions outside of Volvo in
insurance and corporate finance.
President of Volvo Buses since
2021. Senior Vice President,
Volvo Group Connected Solu-
tions 20172021. Prior that
President for Volvo Group Ven-
ture Capital 20142017 and
Vice President, Product Man-
agement Industrial, Volvo
Penta 20102014. With Volvo
since 2009.
Extended Group Management team
194
Corporate Governance Report 2021
To the general meeting of the shareholders of AB Volvo (publ)
corporate identity number 5560125790
Engagement and responsibility
It is the board of directors who is responsible for the corporate govern-
ance statement for the financial year 2021010120211231 on pages
180195 and that it has been prepared in accordance with the Annual
Accounts Act.
The scope of the audit
Our examination has been conducted in accordance with FAR’s standard
RevU 16 The auditor’s examination of the corporate governance statement.
This means that our examination of the corporate governance statement
is different and substantially less in scope than an audit conducted in
accordance with International Standards on Auditing and generally
accepted auditing standards in Sweden. We believe that the examination
has provided us with sufficient basis for our opinions.
Opinions
A corporate governance statement has been prepared. Disclosures in
accordance with chapter 6 section 6 the second paragraph points 26
the Annual Accounts Act and chapter 7 section 31 the second paragraph
the same law are consistent with the annual accounts and the consoli-
dated accounts and are in accordance with the Annual Accounts Act.
Göteborg, February 24, 2022
Deloitte AB
Signature on Swedish original
Jan Nilsson
Authorized Public Accountant
This is a translation of the Swedish language original. In the event of any differences
between this translation and the Swedish language original, the latter shall prevail.
AUDITOR’S REPORT ON THE CORPORATE GOVERNANCE STATEMENT
the company’s basic values included in the Group’s Code of Conduct, to
ensure that the business conducted by the organization is characterized
by good ethics, integrity and is in compliance with the law.
The foundation of the internal control process relating to the financial
reporting is based on the Group’s directives, policies and instructions, as
well as the organization’s responsibility and authority structure. The prin-
ciples for Volvo’s internal controls and directives and policies for the finan-
cial reporting are contained in the Volvo Group Management System, a
group wide management system comprising, among other things,
instructions, rules and principles.
Risk assessment
Risks relating to financial reporting are evaluated and monitored by the
Board through the Audit Committee inter alia through identifying risks
that could be considered as material, and through the mitigating generic
controls. The risk assessment is based on a number of criteria, such as the
complexity of the accounting principles, revaluation principles of assets or
liabilities, complex and/or changing business circumstances, etc. The
risks together with mitigating generic controls are collected in a frame-
work for internal control over financial reporting, Volvo Internal Control
Standard (VICS).
Control activities
In addition to the Board and its Audit Committee, the management
groups and other decision-making bodies in the Group constitute overall
supervisory bodies. Business processes are designed to ensure that
potential errors or deviations in the financial reporting are prevented, dis-
covered and corrected by implementing control activities that correspond
to the generic controls defined in the VICS framework. Control activities
range from review of outcome results against earlier periods and forecasts
in management group meetings to specific reconciliation of accounts and
analyses of the ongoing processes for financial reporting.
Information and communication
Policies and instructions relating to the financial reporting are updated
and communicated on a regular basis from management to all affected
employees. The Group’s financial reporting function has direct operating
responsibility for the daily financial reporting and works to ensure a uniform
application of the Group’s policies, principles and instructions for the financial
reporting and to identify and communicate shortcomings and areas of
improvement in the processes for financial reporting.
Follow-up
Ongoing responsibility for follow-up rests with the Group’s financial
reporting function. In addition, the Group Internal Audit and the Internal
Control function conduct review and follow-up activities in accordance
with what is described in the introduction of this report. More specifically,
the Internal Control function runs and coordinates evaluation activities
through the “Volvo Group Internal Control Programme”, with the purpose
of systematically evaluating the quality of the internal control over finan-
cial reporting on an annual basis. An annual evaluation plan is established
and presented to the Audit Committee. This evaluation program com-
prises three main areas:
1. Group-wide controls: Self-assessment procedure carried out by man-
agement teams at business area, Group Function and company levels.
The main areas evaluated are compliance with the Group’s financial
directives and policies and the Group’s Code of Conduct.
2. Process controls at transaction level: Processes related to the financial
reporting are evaluated by testing procedures/controls based on the
framework for internal control over financial reporting, Volvo Internal
Control Standards (VICS).
3. General IT controls: Processes for maintenance, development and
access management of financial applications are evaluated by testing
procedures and controls.
The results of the evaluation activities are reported to Group management
and the Audit Committee. During 2021, the Internal Control function
reported two times to the Audit Committee regarding the annual evalua-
tion plan, status on outstanding issues and final assessment of the control
environment.
Göteborg, February 24, 2022
AB Volvo (publ)
195
Other information 2021
The Board of Directors proposes that the Annual General Meeting adopts
the following policy for remuneration to senior executives. As compared
to the current remuneration policy, adopted at the Annual General Meet-
ing 2021, two changes are proposed. First, in order to bring the total
remuneration towards a more market competitive level, it is proposed to
increase the maximum long-term incentive opportunity level for the Pres-
ident and CEO, from maximum 100 per cent of base salary as of today to
maximum 150 per cent of the base salary. To increase the long-term
incentive, where the pay-out is 100 per cent invested into Volvo shares
subject to a three-year holding period, will also further strengthen the
alignment with long-term shareholder interests. Secondly it is proposed
to clarify that, in addition to short-term incentives, long-term incentives
will be regarded as pensionable salary, if required by law or collective
agreement.
The Board of Directors’ of AB Volvo (publ) proposal for guidelines for
remuneration to the Volvo Group Executive Board (remuneration policy)
These guidelines (AB Volvo’s remuneration policy) concern the remunera-
tion and other terms of employment for the members of the Volvo Group
Executive Board (“Executives”).
The guidelines are forward-looking, i.e. they are applicable to remuner-
ation agreed, and amendments to remuneration already agreed, after the
proposed adoption of these guidelines by the 2022 annual general meeting.
These guidelines do not apply to any remuneration decided or approved
by the general meeting. Any new share-based incentive plans will, where
applicable, be resolved by the general meeting, but no such plan is cur-
rently proposed.
The guidelines’ promotion of the Volvo Group’s business strategy,
long-term interests and sustainability
It is a prerequisite for the successful implementation of the Volvo Group’s
business strategy and safeguarding of its long-term interests, including its
sustainability, that the Group can recruit, retain and develop senior man-
agement. These guidelines enable AB Volvo to offer Executives a compe-
titive total remuneration. More information regarding the Volvo Group’s
business strategy is available in the Volvo Group Annual and Sustainability
Report.
Types of remuneration
Volvo Group remuneration to Executives shall consist of the following
components: base salary, short-term and long-term variable incentives,
pension benefits and other benefits.
Short-term incentives may, for the President and CEO, amount to
a maximum of 100 per cent of the base salary and, for other Executives, a
maximum of 80 per cent of the base salary.
Long-term incentives may, for the President and CEO, amount to a maxi-
mum of 150 per cent of the base salary and, for other Executives, a maxi-
mum of 80 per cent of the base salary. The current long-term incentive
plan for the Group’s senior management, including the Executives, was
introduced in connection with the 2016 annual general meeting. The
objective of the program is to drive long-term value creation and align the
interests of the senior management with those of shareholders. To achieve
this, the program operates on a four-year cycle: with a performance based
annual award, which is invested in Volvo shares with a mandatory lock-in
period of three years. There will be no payout under the long-term incen-
tive program if the Annual General Meeting that is held in the year follow-
ing the performance year, decides not to distribute any dividends to the
shareholders. The program is funded on an annual basis by an award,
measured against performance criteria established by the Board of Direc-
tors. The after-tax portion of this payment must be immediately invested
in AB Volvo shares which must be held for a minimum of three years. In
this way, the Executives will build up a shareholding in the company and
have a vested interest over the longer-term development in the value of
the shares. At the end of the three-year period, the Executives may sell
their shares, if they meet the requirement for owning shares valued at two
years of the pre-tax base salary for the President and CEO and one year of
the pre-tax base salary for the other Executives. The holding requirements
for the Executives shall cease upon termination of an Executive’s employ-
ment, and the Board of Directors may grant such other exceptions to the
requirements as the Board deems appropriate.
Further cash remuneration may be awarded in extraordinary circum-
stances, provided that such extraordinary arrangements are limited in time
and only made on an individual basis, either for the purpose of recruiting or
retaining Executives, or as remuneration for extraordinary performance
beyond the individual’s ordinary tasks. Such remuneration may not exceed
an amount corresponding to 100 per cent of the annual base salary. Any
resolution on such remuneration shall be made by the Board of Directors
based on a proposal from the Remuneration Committee.
For the President and CEO, pension benefits shall be granted on the
basis of a defined contribution plan. The pensionable salary shall include
base salary only. The pension contributions for the President and CEO
attributable to the annual base salary shall amount to not more than 35
per cent of the base salary.
Other benefits may include, for example, life insurance, medical and
health insurance, and company cars. Premiums and other costs relating to
such benefits may amount to not more than 3 per cent of the annual base
salary for the President and CEO.
For other Executives, pension benefits shall be granted on the basis of
a defined contribution plan except where law or collective agreement
require a defined benefit pension. The pensionable salary shall include
base salary and, where required by law or collective agreement, incen-
tives. The total pension contributions for other Executives shall amount
to not more than 35 per cent of base salary, unless a higher percentage
results from the application of law or collective agreement.
Other benefits may include, for example, life insurance, medical and
health insurance, and company cars. Premiums and other costs relating to
such benefits may amount to not more than 10 per cent of the annual base
salary for other Executives.
Remuneration for Executives that reside outside Sweden or reside in
Sweden but having a material connection to or having been residing in a
country other than Sweden may be duly adjusted to comply with manda-
tory rules or local practice, taking into account, to the extent possible, the
overall purpose of these guidelines.
Proposed policy for remuneration to senior executives
196
Other information 2021
In addition to remuneration set out above, Executives who relocate for
the purposes of the position or who work in other multiple countries may
also receive such remuneration and benefits as are reasonable to reflect
the special circumstances associated with such arrangements, taking
into account the overall purpose of these guidelines and alignment with
the general policies and practices within the Volvo Group applicable to
cross border work.
Termination of employment
Upon termination of an Executive’s employment, the notice period may
not exceed twelve months. Base salary during the notice period and sev-
erance pay may not together exceed an amount corresponding to the base
salary for two years.
Executives that reside outside Sweden or reside in Sweden but having
a material connection to or having been residing in a country other than
Sweden may be offered notice periods for termination and severance pay-
ment as are reasonable to reflect the special circumstances, taking into
account the overall purpose of these guidelines and alignment with the
general policies and practices within the Volvo Group.
Criteria for awarding variable cash remuneration, etc.
Short-term and long-term incentives shall be linked to predetermined and
measurable criteria. The criteria – which for example may relate to EBIT,
cash flow, return on capital employed or similar ratios, or sustainability
targets – shall be devised to promote the Volvo Group’s strategy and
long-term value creation and strengthen the link between achieved per-
formance targets and reward. The criteria for short-term and long-term
incentives shall be determined by the Board of Directors annually. The
satisfaction of the criteria shall be measured over periods of one year each.
To which extent the criteria for awarding variable remuneration has been
satisfied shall be determined when the relevant measurement period has
ended. The Board of Directors is responsible for the determination of vari-
able remuneration to all Executives.
Claw-back and adjustments
Executives participating in the Volvo Group’s current short-term and long-
term incentive plans are obligated, in certain circumstances and for spec-
ified periods of time, to repay, partially or in its entirety, variable incentive
awards already paid if payments have been made by mistake or been
based on intentionally falsified data or in the event of material restatement
of the Volvo Group’s financial results. Furthermore, the Board of Directors
may decide on adjustments of pay-out under the incentive plans (before
payment has been made) in case of extraordinary circumstances or to
adjust for unforeseen one-timers.
Salary and employment conditions for employees
In the preparation of the Board of Directors’ proposal for these remunera-
tion guidelines, the Board has considered that the various benefits offered
to the Executives need to be aligned with the general structures applica-
ble for employees of AB Volvo at levels that are competitive in the market.
Thus, salary and employment conditions for other AB Volvo employees
have been taken into account by including information thereon in the
Remuneration Committee’s and the Board of Directors’ basis of decision
when evaluating whether the guidelines and the limitations set out herein
are appropriate.
The decision-making process to determine,
review and implement the guidelines
The Board of Directors has established a Remuneration Committee. The
Committee’s tasks include preparing the Board of Directors’ decision to
propose guidelines for executive remuneration. The Board of Directors
shall prepare a proposal for new guidelines at least every fourth year and
submit it to the general meeting. The guidelines shall be in force until new
guidelines are adopted by the general meeting. The Remuneration Com-
mittee shall also monitor and evaluate plans for variable remuneration for
Executives, the application of the guidelines for executive remuneration
as well as the current remuneration structures and compensation levels in
the Group. The members of the Remuneration Committee are independ-
ent of AB Volvo and its executive management. The President and CEO
and other members of the executive management do not participate in the
Board of Directors’ processing of and resolutions regarding remunera-
tion-related matters in so far as they are affected by such matters.
Derogation from the guidelines
The Board of Directors may temporarily resolve to derogate from the guide-
lines, in whole or in part, if in a specific case there is special cause for the
derogation and a derogation is necessary to serve the Volvo Group’s long-
term interests, including its sustainability, or to ensure the Group’s financial
viability. As set out above, the Remuneration Committee’s tasks include
preparing the Board of Directors’ resolutions in remuneration-related mat-
ters. This includes any resolutions to derogate from the guidelines.
Description of changes to the guidelines, etc
In order to bring the total remuneration towards more market competitive
level, it is proposed to increase the maximum long-term incentive oppor-
tunity level for the President and CEO, from maximum 100% of base sal-
ary as of today to maximum 150% of the base salary. In addition, increas-
ing the long-term incentive where the pay-out is 100% invested into
Volvo shares subject to a three-year holding period will further strengthen
the alignment with long-term shareholder interests.
The only further changes proposed to the Remuneration Policy are edi-
torial changes as well as a clarification on pensionable salary in relation to
incentives.
During 2021, the company has carefully considered feedback received
from shareholders and proxy advisors in connection with the Annual Gen-
eral Meeting 2021 and otherwise during the year. For further information,
please refer to the section Looking ahead to 2022 in the Remuneration
Report 2021.
Additional information regarding executive remuneration in the Volvo
Group is available in the Volvo Group Annual and Sustainability Report.
197
Other information 2021
Proposed disposition of unappropriated earnings
According to the Board of Directors’ opinion, the proposed dividend
will not affect the Company’s or the Group’s ability to fulfill their payment
obligations and the Company and the Group are well prepared to handle
both changes in the liquidity and unexpected events.
The Board of Directors is of the opinion that the Company and the Group
have capacity to assume future business risks as well as to bear contingent
losses. The proposed dividend is not expected to adversely affect the
Company’s and the Group’s ability to make further commercially justified
investments in accordance with the Board of Directors’ plans.
In addition to what has been stated above, the Board of Directors has
considered other known circumstances which may be of importance for
the Company’s and the Group’s financial position. In doing so, no circum-
stance has appeared that does not justify the proposed dividend.
If the Annual General Meeting resolves in accordance with the Board
of Directors’ proposal, SEK 34,875,878,573.08 will remain of the
Company’s non-restricted equity, calculated as per year end 2021.
The Board of Directors has the view that the Company’s and the
Group’s shareholders’ equity will, after the proposed dividend, be suffi-
cient in relation to the nature, scope and risks of the business.
The Board of Directors and the President certify that the annual finan-
cial report has been prepared in accordance with generally accepted
accounting principles and that the consolidated accounts have been pre-
pared in accordance with the international set of accounting standards
referred to in Regulation (EC) No 16062002 of the European Parliament
and of the Council of 19 July 2002 on the application of international
accounting standards, and give a true and fair view of the position and
profit or loss of the Company and the Group, and that the management
report for the Company and for the Group gives a fair review of the devel-
opment and performance of the business, position and profit or loss of the
Company and the Group, and describes the principal risks and uncertain-
ties that the Company and the companies in the Group face.
AB Volvo SEK
Retained earnings 4,979,927,622.05
Income for the period 2021 56,330,828,043.03
Total retained earnings 61,310,755,665.08
The Board of Directors proposes that the
above sum be disposed of as follows:
SEK
To the shareholders, an ordinary dividend
of SEK 6.50 per share and an extraordinary
dividend of SEK 6.50, for a total of 26,434,877,092.00
To be carried forward 34,875,878,573.08
Total 61,310,755,665.08
The record date for determining who is entitled to receive dividends is
proposed to be Friday April 8, 2022.
In view of the Board of Directors’ proposal to the Annual General Meeting
to be held April 6, 2022 to decide on the distribution of an ordinary dividend
of SEK 6.50 per share and an extraordinary dividend of SEK 6.50 per
share, the Board of Directors hereby makes the following statement in
accordance with Chapter 18, Section 4 of the Swedish Companies Act.
The Board of Directors concludes that the Company’s restricted equity is
fully covered after the proposed dividend. The Board of Directors further
concludes that the proposed dividend is justifiable in view of the parameters
set out in Chapter 17, Section 3, second and third paragraphs of the Swedish
Companies Act. In connection herewith, the Board of Directors wishes to
point out the following:
The proposed dividend reduces the Company’s solvency from 52.7%
to 41.2% and the Group’s solvency from 27.9% to 24.0%, calculated as
per year end 2021. The Board of Directors considers this solvency to be
satisfactory with regard to the business in which the Group is active.
Göteborg, February 24, 2022
Carl-Henric Svanberg
Board Chairman
Matti Alahuhta
Board member
Eckhard Cordes
Board member
Eric Elzvik
Board member
Martha Finn Brooks
Board member
Kurt Jofs
Board member
Martin Lundstedt
President, CEO and Board member
Kathryn V. Marinello
Board member
Martina Merz
Board member
Hanne de Mora
Board member
Helena Stjernholm
Board member
Lars Ask
Board member
Mats Henning
Board member
Mikael Sällström
Board member
Our audit report was issued on February 24, 2022
Deloitte AB
Jan Nilsson
Authorized Public Accountant
198
Other information 2021
Audit report for AB Volvo (publ)
To the general meeting of the shareholders of AB Volvo (publ) corporate
identity number 5560125790
REPORT ON THE ANNUAL ACCOUNTS AND
CONSOLIDATED ACCOUNTS
Opinions
We have audited the annual accounts and consolidated accounts of AB
Volvo (publ) for the financial year 2021010120211231. The annual
accounts and consolidated accounts of the company are included on
pages 44151, 196198 and 204206 in this document.
In our opinion, the annual accounts have been prepared in accordance
with the Annual Accounts Act and present fairly, in all material respects,
the financial position of the parent company as of 31 December 2021 and
its financial performance and cash flow for the year then ended in accord-
ance with the Annual Accounts Act. The consolidated accounts have been
prepared in accordance with the Annual Accounts Act and present fairly,
in all material respects, the financial position of the group as of 31 Decem-
ber 2021 and their financial performance and cash flow for the year then
ended in accordance with International Financial Reporting Standards
(IFRS), as adopted by the EU, and the Annual Accounts Act. The statutory
administration report is consistent with the other parts of the annual
accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders
adopts the income statement and balance sheet for the parent company
and the group.
Our opinions in this report on the annual accounts and consolidated
accounts are consistent with the content of the additional report that has
been submitted to the parent company’s audit committee in accordance
with the Audit Regulation (5372014) Article 11.
Basis for Opinions
We conducted our audit in accordance with International Standards on
Auditing (ISA) and generally accepted auditing standards in Sweden. Our
responsibilities under those standards are further described in the Audi-
tor’s Responsibilities section. We are independent of the parent company
and the group in accordance with professional ethics for accountants in
Sweden and have otherwise fulfilled our ethical responsibilities in accord-
ance with these requirements. This includes that, based on the best of our
knowledge and belief, no prohibited services referred to in the Audit Reg-
ulation (5372014) Article 5.1 have been provided to the audited company
or, where applicable, its parent company or its controlled companies
within the EU.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions.
Key Audit Matters
Key audit matters of the audit are those matters that, in our professional
judgment, were of most significance in our audit of the annual accounts
and consolidated accounts of the current period. These matters were
addressed in the context of our audit of, and in forming our opinion
thereon, the annual accounts and consolidated accounts as a whole, but
we do not provide a separate opinion on these matters.
Allowance for Expected Credit Losses for Customer-Financing
and Accounts Receivables
Risk description
Volvo Group applies a simplified expected credit loss model for customer-
financing, as well as accounts receivables, under which the loss allowance
is measured at an amount equal to lifetime expected credit losses. The
allowance is recorded at initial recognition and is reassessed during the
contract period. The accounting principles for expected credit losses and
management’s significant judgments applied in relation thereto are fur-
ther described in Note 15 “Customer-Financing Receivables” and Note 16
“Receivables” to the annual report.
The determination of the allowance for expected credit losses for
receivables require management to make significant qualitative judg-
ments, including assumptions regarding current and forecasted market
conditions and individual assessment of the largest customers and busi-
ness segments. The ongoing covid-19 pandemic, in combination with
macroeconomic factors, has resulted in increased market volatility and
increased uncertainties in certain geographies. Further, there is a high
degree of uncertainty and subjectivity in determining the severity and
duration of the pandemic and its impact on the Volvo Group’s customers
and business segments. Changing market conditions in certain geograph-
ical markets increases the complexities in managements qualitative judg-
ments and estimates. As such, historical credit loss information used
within the expected credit loss model to forecast future credit losses may
not adequately reflect the current and future economic environment.
Our Audit Approach
Our audit procedures included, but were not limited to:
• Evaluating the design and implementation of relevant internal controls
implemented within the allowance for expected credit loss process.
• Assessing the reasonableness of the expected credit loss model and
methodology used including reviewing management’s written poli-
cies, procedures, and accounting position papers around the model.
• Performing audit procedures to test the completeness and accuracy
of the underlying data and information used in management’s
expected credit loss model and management overlays.
• Independently reperforming the calculations within the model to
ensure the output is accurate and carried out retrospective review to
assess the reliability of model’s historical ability to estimate future
credit losses.
• Assessing and challenging the reasonableness of management’s sig-
nificant assumptions in relation to severity of default at portfolio level
as well as at customer-by-customer level by evaluating the financial
position of the customer in certain cases, frequency of default and
management overlays, including inspection of documentation sup-
porting key assumptions and considerations taken by management.
• For customer financing receivables, our procedures included involving
our financial service industry valuation experts, where relevant, with
specific knowledge and expertise who assisted in evaluating the rea-
sonableness of the methodology and models used.
199
Other information 2021
Provisions for losses from claims from customers and other third parties
– EC Antitrust Settlement
Risk description
In July 2016, the European Commission and Volvo Group reached a settle-
ment with regards to antitrust allegations made by the European Com-
mission against Volvo Group and other companies in the truck manufac-
turing industry. Following the adoption of the European Commission’s
settlement decision, the Company has received and may continue to
receive a significant number of third-party damage claims from custom-
ers and other third parties alleging that they suffered loss, directly or indi-
rectly, by reason of the conduct covered in the decision.
The accounting principles for legal disputes is further described in Note
21 “Other Provisions” and Note 24 “Contingent Liabilities” to the annual
report. The recognition and measurement of any provisions recorded or
quantification of contingent liabilities to be disclosed for such legal dis-
putes is complicated, requires expert legal input, and involves considera-
tion of potential future outcomes of the claims which at this stage are
uncertain. Due to these complexities, the valuation of any such provisions or
contingent liabilities is significantly impacted by management’s ultimate
judgments and best estimates. On December 31, 2021, the Company has
not been able to make a reliable estimate of the amount of any provision or
contingent liability that could arise from these claims.
Our Audit Approach
Our audit procedures included, but were not limited to:
• Holding discussions with management and audit the relevant docu-
mentation and conclude how management and the board assessed
the claims.
• Holding discussions with internal legal department and with Volvo
Group’s external legal advisors in order to obtain an understanding
of matters relevant to the claims.
• Reviewing internal minutes and relevant assessments prepared for
management and Board to corroborate the consistency of information
received.
• Assessing the appropriateness of the Company’s final accounting
conclusions.
• Assessing the adequacy of the disclosures around the legal proceedings.
Impairment risk for vehicles sold with residual value commitment
Risk description
When the sale of the vehicle is combined with a residual value commit-
ment and it is concluded that control with respect to the vehicle sold has
not been transferred, the sales transaction is recognized as an operating
lease transaction and an asset is recognised in the balance sheet. These
assets carry a risk that the ultimate disposal of the used vehicles could lead
to a loss if the price development of these vehicles is worse than what was
expected when the contracts were entered. The assessment of the risk is
based on the estimation of the used vehicle’s future fair market value. The
accounting principles for vehicles sold with residual value commitment
and management’s significant judgments applied in relation thereto are
further described in Note 13 “Tangible Assets” to the annual report.
Fair market values are dependent on the situation in the used vehicle
markets prevailing when the vehicles are expected to be returned. The
future-oriented valuation is based on several assumptions and involves
high degree of estimation for example on conditions of the vehicles
returned and expected repair costs, future price developments due to
change of market conditions and distribution channels used for ultimate
disposal of the vehicles. Due to the ongoing covid-19 pandemic and other
market developments, for example shortage of new trucks in the market,
during 2021 the prices of used trucks are volatile. Consequently, there is
a high degree of uncertainty and subjectivity in determining the Fair Market
Value of the trucks sold under residual value commitments.
Our Audit Approach
Our audit procedures included, but were not limited to:
• Evaluating the design and implementation of relevant internal controls
implemented within the determination of fair market value process.
• Assessing the reasonableness of the methodology used in determina-
tion of fair market value including reviewing management’s written
policies, procedures, and accounting position papers.
• Performing audit procedures to test the completeness and accuracy
of the underlying data and information used by management in deter-
mining the fair market value.
• Assessing and challenging the reasonableness of management’s sig-
nificant assumptions in relation to fair market values of used vehicles
based on current market trends and future market developments,
expected repair costs and distribution channels. Management’s
assessment was evaluated based on enquiries and inspection of docu-
mentation supporting key assumptions and considerations taken by
management.
Other information than the annual accounts and consolidated accounts
The Board of Directors and the President are responsible for other informa-
tion. The other information includes the Remuneration report, and the pages
143, 152195, 199203 and 207215 in this document which does not
include the annual accounts and consolidated accounts or our Auditors
report.
Our opinion on the annual accounts and consolidated accounts does
not cover this other information and we do not express any form of assur-
ance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated
accounts, our responsibility is to read the information identified above and
consider whether the information is materially inconsistent with the
annual accounts and consolidated accounts. In this procedure we also
take into account our knowledge otherwise obtained in the audit and
assess whether the information otherwise appears to be materially mis-
stated.
If we, based on the work performed concerning this information, con-
clude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors and the President
The Board of Directors and the President are responsible for the prepara-
tion of the annual accounts and consolidated accounts and that they give
a fair presentation in accordance with the Annual Accounts Act and, con-
cerning the consolidated accounts, in accordance with IFRS as adopted
by the EU. The Board of Directors and the President are also responsible
for such internal control as they determine is necessary to enable the
preparation of annual accounts and consolidated accounts that are free
from material misstatement, whether due to fraud or error.
200
200
Other information 2021
In preparing the annual accounts and consolidated accounts, The
Board of Directors and the President are responsible for the assessment
of the company’s and the group’s ability to continue as a going concern.
They disclose, as applicable, matters related to going concern and using
the going concern basis of accounting. The going concern basis of
accounting is however not applied if the Board of Directors and the Pres-
ident intends to liquidate the company, to cease operations, or has no real-
istic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director’s
responsibilities and tasks in general, among other things oversee the
company’s financial reporting process.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether the
annual accounts and consolidated accounts as a whole are free from
material misstatement, whether due to fraud or error, and to issue an audi-
tor’s report that includes our opinions. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs and generally accepted auditing standards in Sweden
will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the eco-
nomic decisions of users taken on the basis of these annual accounts and
consolidated accounts.
A further description of our responsibilities for the audit of the annual
accounts and consolidated accounts is located at the Swedish Inspector-
ate of Auditors website: www.revisorsinspektionen.se/revisornsansvar.
This description forms part of the auditor’s report.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
Opinions
In addition to our audit of the annual accounts and consolidated accounts,
we have also audited the administration of the Board of Directors and the
President of AB Volvo (publ) for the financial year 2021010120211231
and the proposed appropriations of the company’s profit or loss.
We recommend to the general meeting of shareholders that the profit
to be appropriated in accordance with the proposal in the statutory
administration report and that the members of the Board of Directors and
the President be discharged from liability for the financial year.
Basis for Opinions
We conducted the audit in accordance with generally accepted auditing
standards in Sweden. Our responsibilities under those standards are fur-
ther described in the Auditor’s Responsibilities section. We are independ-
ent of the parent company and the group in accordance with professional
ethics for accountants in Sweden and have otherwise fulfilled our ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions.
Responsibilities of the Board of Directors and the President
The Board of Directors and President are responsible for the proposal for
appropriations of the company’s profit or loss. At the proposal of a dividend,
this includes an assessment of whether the dividend is justifiable consider-
ing the requirements which the company’s and the group’s type of opera-
tions, size and risks place on the size of the parent company’s and the
group’s equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company’s organization
and the administration of the company’s affairs. This includes among other
things continuous assessment of the company’s and the group’s financial
situation and ensuring that the company’s organization is designed so that
the accounting, management of assets and the company’s financial affairs
otherwise are controlled in a reassuring manner. The President shall man-
age the ongoing administration according to the Board of Directors’ guide-
lines and instructions and among other matters take measures that are
necessary to fulfill the company’s accounting in accordance with law and
handle the management of assets in a reassuring manner.
Auditor’s responsibility
Our objective concerning the audit of the administration, and thereby our
opinion about discharge from liability, is to obtain audit evidence to assess
with a reasonable degree of assurance whether any member of the Board
of Directors or the President in any material respect:
• has undertaken any action or been guilty of any omission which can
give rise to liability to the company, or
• in any other way has acted in contravention of the Companies Act, the
Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations of the
company’s profit or loss, and thereby our opinion about this, is to assess
with reasonable degree of assurance whether the proposal is in accord-
ance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with generally accepted auditing
standards in Sweden will always detect actions or omissions that can give
rise to liability to the company, or that the proposed appropriations of the
company’s profit or loss are not in accordance with the Companies Act.
A further description of our responsibilities for the audit of the manage-
ment’s administration is located at the Swedish Inspectorate of Auditors
website: www.revisorsinspektionen.se/revisornsansvar. This description
forms part of the auditor’s report.
THE AUDITOR’S EXAMINATION OF THE ESEF REPORT
Opinion
In addition to our audit of the annual accounts and consolidated accounts,
we have also examined that the Board of Directors and the President have
prepared the annual accounts and consolidated accounts in a format that
enables uniform electronic reporting (the Esef report) pursuant to Chapter
16, Section 4 a of the Swedish Securities Market Act (2007:528) for AB
Volvo (publ) for the financial year 2021010120211231.
Our examination and our opinion relate only to the statutory require-
ments. In our opinion, the Esef report #[checksum] has been prepared in a
format that, in all material respects, enables uniform electronic reporting.
Basis for opinion
We have performed the examination in accordance with FAR’s recommen-
dation RevR 18 Examination of the Esef report. Our responsibility under
this recommendation is described in more detail in the Auditors’ responsi-
bility section. We are independent of AB Volvo (publ) in accordance with
professional ethics for accountants in Sweden and have otherwise fulfilled
our ethical responsibilities in accordance with these requirements.
We believe that the evidence we have obtained is sufficient and appro-
priate to provide a basis for our opinion.
201
201
Other information 2021
Responsibilities of the Board of Directors and the President
The Board of Directors and the President are responsible for the prepara-
tion of the Esef report in accordance with the Chapter 16, Section 4 a of
the Swedish Securities Market Act (2007:528), and for such internal con-
trol that the Board of Directors and the President determine is necessary
to prepare the Esef report without material misstatements, whether due
to fraud or error.
Auditor’s responsibility
Our responsibility is to obtain reasonable assurance whether the Esef
report is in all material respects prepared in a format that meets the
requirements of Chapter 16, Section 4(a) of the Swedish Securities Market
Act (2007:528), based on the procedures performed.
RevR 18 requires us to plan and execute procedures to achieve reason-
able assurance that the Esef report is prepared in a format that meets
these requirements.
Reasonable assurance is a high level of assurance, but it is not a guar-
antee that an engagement carried out according to RevR 18 and generally
accepted auditing standards in Sweden will always detect a material mis-
statement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could reason-
ably be expected to influence the economic decisions of users taken on
the basis of the Esef report.
The audit firm applies ISQC 1 Quality Control for Firms that Perform
Audits and Reviews of Financial Statements, and other Assurance and
Related Services Engagements and accordingly maintains a comprehen-
sive system of quality control, including documented policies and proce-
dures regarding compliance with professional ethical requirements, pro-
fessional standards and legal and regulatory requirements.
The examination involves obtaining evidence, through various proce-
dures, that the Esef report has been prepared in a format that enables
uniform electronic reporting of the annual accounts and consolidated
accounts. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement in the
report, whether due to fraud or error. In carrying out this risk assessment,
and in order to design audit procedures that are appropriate in the circum-
stances, the auditor considers those elements of internal control that are
relevant to the preparation of the Esef report by the Board of Directors
and the President, but not for the purpose of expressing an opinion on the
effectiveness of those internal controls. The examination also includes an
evaluation of the appropriateness and reasonableness of assumptions
made by the Board of Directors and the President.
The procedures mainly include a technical validation of the Esef report,
i.e., if the file containing the Esef report meets the technical specification
set out in the Commission’s Delegated Regulation (EU) 2019815 and a
reconciliation of the Esef report with the audited annual accounts and
consolidated accounts.
Furthermore, the procedures also includes an assessment of whether
the Esef report has been marked with iXBRL which enables a fair and
complete machine-readable version of the consolidated statement of
financial performance, financial position, changes in equity and cash flow.
Deloitte AB, was appointed auditor of AB Volvo by the general meeting
of the shareholders on April 5, 2018 and has been the company’s auditor
since April 5, 2018.
Göteborg, February 24, 2022
Deloitte AB
Signature on Swedish original
Jan Nilsson
Authorized Public Accountant
This is a translation of the Swedish language original. In the event of any differences
between this translation and the Swedish language original, the latter shall prevail.
202
AUDITOR’S REPORT ON THE STATUTORY
SUSTAINABILITY REPORT
To the general meeting of the shareholders of AB Volvo (publ)
corporate identity number 5560125790
Engagement and responsibility
It is the board of directors and Managing Director who are responsible for
the statutory sustainability report for the financial year 20210101–
20211231 as set out on page 44 and that it has been prepared in accord-
ance with the Annual Accounts Act.
The scope of the audit
Our examination has been conducted in accordance with FAR’s standard
RevR 12 The auditor’s opinion regarding the statutory sustainability report.
This means that our examination of the statutory sustainability report is
substantially different and less in scope than an audit conducted in
accordance with International Standards on Auditing and generally
accepted auditing standards in Sweden. We believe that the examination
has provided us with sufficient basis for our opinion.
Opinion
A statutory sustainability report has been prepared.
Göteborg, February 24, 2022
Deloitte AB
Signature on Swedish original
Jan Nilsson
Authorized Public Accountant
This is a translation of the Swedish language original. In the event of any differences
between this translation and the Swedish language original, the latter shall prevail.
203
Other information 2021
Other information 2021
Key Ratios
The Volvo Group uses key ratios with the aim to provide valuable informa-
tion to management, investors and analysts when analyzing trends and
financial performance of the Group. The key ratios are not defined by
IFRS, unless otherwise is stated, and may differ from similar measures
used by other companies and are therefore not always comparable. The
measures should be considered as a complement to, and not a substitute
for, the financial information presented in compliance with IFRS. Defini-
tions and reconciliations of significant key ratios are presented in the
annual report. If the reconciliation is not directly reflected in the financial
statements, a separate reconciliation is presented below.
Basic earnings per share (defined by IFRS)
Definition: Income for the period attributable to shareholders of AB Volvo
divided by the weighted average number of shares outstanding during the
period. For reconciliation see note 19 Equity and number of shares.
Cash flow
Definition: The combined changes in the Group’s cash and cash equiva-
lents during the fiscal year. Changes in cash and cash equivalents are
specified with reference to changes in operating activities, changes in
investing activities, which add up to operating cash flow, as well as
changes in net investments and financing activities. For reconciliation see
Consolidated cash flow statements.
Diluted earnings per share (defined by IFRS)
Definition: Income for the period attributable to the shareholders of AB
Volvo divided by the average number of shares outstanding plus the aver-
age number of shares that would be issued as an effect of ongoing share-
based incentive programs and employee stock option programs. For rec-
onciliation see note 19 Equity and number of shares.
EBITDA and EBITDA margin
Definition: EBITDA is the operating income before depreciation and
amortization of tangible and intangible assets. The key figure EBITDA
margin is calculated as operating income adjusted with depreciation and
amortization, in relation to net sales.
Industrial Operations
SEK M 2021 2020
Net sales 361,062 326,472
Operating income 39,783 25,919
Amortization product and software development 2,622 2,733
Amortization other intangible assets 135 334
Depreciation tangible assets 11,540 12,861
Total depreciation and amortization 14,297 15,928
Operating income before depreciation and
amortization (EBITDA) 54,080 41,847
EBITDA margin, % 15.0 12.8
Equity ratio
Definition: Total equity divided by total assets.
Industrial Operations Volvo Group
SEK M 2021 2020 2021 2020
Total equity 129,619 135,127 144,118 148,142
Total assets 371,022 377,579 515,856 510,821
Equity ratio, % 34.9 35.8 27.9 29.0
Gross margin
Definition: Gross income divided by net sales.
Industrial Operations Volvo Group
SEK M 2021 2020 2021 2020
Net sales 361,062 326,472 372,216 338,446
Gross income 84,013 73,539 89,753 79,127
Gross margin, % 23.3 22.5 24.1 23.4
Interest coverage
Definition: Operating income plus interest income and similar credits
divided by interest expense and similar charges.
Industrial Operations
SEK M 2021 2020
Operating income 39,783 25,919
Interest income and similar credits 362 372
Operating income and interest
income and similar credits 40,145 26,291
Interest expenses and similar charges –1,172 –1,422
Interest coverage, times 34.3 18.5
Net capitalization of research and development cost
Definition: Capitalized research and development cost reduced by amor-
tizations.
Volvo Group
SEK M 2021 2020
Capitalization 3,031 2,163
Amortization –2,479 –2,548
Net capitalization of research
and development cost 552 –385
Net financial position
Definition: Cash and cash equivalents, marketable securities and interest-
bearing receivables reduced by interest-bearing liabili ties, lease liabilities
and provisions for post-employment benefits. For reconciliation see table
Net financial position, which is presented after the balance sheet for the
Volvo Group. Net financial position is also presented excluding provisions
for post-employment benefits and lease liabilities, net.
204
Other information 2021
Operating income, operating margin, adjusted operating
income and adjusted operating margin
Definition operating income: Operating income is profit before interest
and tax, also known as EBIT (Earnings before interest and tax) and is a
measure of profit from the ordinary business operations. For reconciliation
see the Income statements Volvo Group.
Definition operating margin: Operating income divided by net sales.
Definition adjusted operating income: Adjusted operating income is profit
2021
Quarter Trucks
Construction
Equipment Buses¹
Volvo
Penta
Group
functions
& Other
incl. elim¹
Industrial
opera-
tions
Financial
Services
Elimi-
nations
Volvo
GroupSEK M
Net sales 230,881 92,031 13,652 14,437 10,061 361,062 13,437 –2,283 372,216
Operating income 27,349 12,228 78 2,092 –1,964 39,783 3,289 2 43,074
Depreciation of Assets held for sale 1 – – – – 246 246 – – 246
Divestment of UD Trucks 2 1,653 – – – – 1,653 – – 1,653
Restructuring charges related to
headcount reductions 4 128 0 20 0 2 150 9 0 159
Year 1,781 0 20 0 248 2,049 9 0 2,059
Adjusted operating income 25,567 12,228 59 2,092 –2,212 37,733 3,279 2 41,015
Operating margin, % 11.8 13.3 0.6 14.5 – 11.0 – – 11.6
Adjusted operating margin, % 11.1 13.3 0.4 14.5 – 10.5 – – 11.0
2020
Quarter Trucks
Construction
Equipment Buses¹
Volvo
Penta
Group
functions
& Other
incl. elim¹
Industrial
opera-
tions
Financial
Services
Elimi-
nations
Volvo
GroupSEK M
Net sales 208,262 81,453 14,712 11,891 10,154 326,472 13,960 –1,987 338,446
Operating income 15,764 9,583 –529 1,402 –303 25,919 1,564 2 27,484
Depreciation of Assets held for sale 1 – – – – 234 234 – – 234
Depreciation of Assets held for sale 2 – – – – 315 315 – – 315
Depreciation of Assets held for sale 3 – – – – 291 291 – – 291
Depreciation of Assets held for sale 4 – – – – 287 287 – – 287
Restructuring charges related to
headcount reductions 2 –2,335 –615 –85 –50 –70 –3,155 –45 – –3,200
Restructuring charges related to
headcount reductions 3 28 –12 –8 –8 – 0 – – 0
Restructuring charges related to
headcount reductions 4 821 140 16 12 1 990 2 – 992
Year –1,486 –488 –77 –46 1,059 –1,037 –43 – –1,081
Adjusted operating income 17,251 10,071 –452 1,448 –1,363 26,955 1,606 2 28,564
Operating margin, % 7.6 11.8 –3.6 11.8 – 7.9 – – 8.1
Adjusted operating margin, % 8.3 12.4 –3.1 12.2 – 8.3 – – 8.4
1 The operations of Nova Bus have been reclassified from the Buses segment into the segement of Group Functions & Other as of October 1, 2021. To facilitate comparability,
financial numbers for 2021 and 2020 have been restated in this report. Read more in Note 31 Changes in Volvo Group financial reporting 2021.
before interest and tax as well as significant expenses or income of a one-
time character.
Definition adjusted operating margin: Adjusted operating income divided
by net sales.
205
Other information 2021
Penetration rate
Definition: Share of unit sales financed by Financial Services in relation to
total number units sold by the Volvo Group in markets where financial
services are offered.
Financial Services
Number of units 2021 2020
Number of financed units 69,556 61,047
Number of units sold where
financial services are offered 228,867 201,525
Penetration rate, % 30 30
Return on capital employed
Definition: Operating income plus interest income and similar credits
divided by weighted average capital employed.
Industrial Operations
SEK M 2021 2020
Operating income, 12 months rolling 39,783 25,919
Interest income and similar credits,
12 months rolling 362 372
Operating income and interest income and
similar credits, 12 months rolling 40,145 26,291
Weighted average capital employed 158,849 179,029
Return on capital employed, 12 months rolling, % 25.3 14.7
Return on operating capital
Definition: Operating income divided by weighted average operating capital.
Industrial Operations
SEK M 2021 2020
Operating income 39,783 25,919
Weighted average operating capital 76,589 88,305
Return on operating capital, 12 months rolling, % 51.9 29.4
Return on total equity
Definition: Income for the period divided by weighted average total equity.
Volvo Group
SEK M 2021 2020
Income for the period 33,243 20,074
Weighted average total equity 141,805 145,343
Return on total equity, 12 months rolling, % 23.4 13.8
Sales growth adjusted for currency and acquired and divested operations
Definition: Sales growth adjusted for currency and acquired and divested operations, divided by net sales for the prior year.
Industrial Operations Volvo Group
SEK M 2021 2020 2021 2020
Net sales 361,062 326,472 372,216 338,446
Increase/decrease of net sales for the year 34,589 –91,889 33,771 –93,534
Currency rates 15,403 13,941 16,063 14,768
Acquired and divested units 17,122 0 17,122 0
Adjusted Increase/decrease of net sales for the year 67,115 –77,948 66,955 –78,766
Sales growth adjusted for currency and acquired and divested units, % 20.6 –18.6 19.8 –18.2
Self-financing ratio
Definition: Cash flow from operating activities divided by net investments in tangible assets, intangible assets and leasing vehicles as defined in the
Consolidated cash flow statement.
Industrial operations Volvo Group
SEK M 2021 2020 2021 2020
Cash flow from operating activities 41,664 25,862 33,647 30,610
Investment in in-/tangible assets and leasing vehicles, net 12,224 7,317 16,002 10,974
Self-financing ratio, % 341 353 210 279
206
Other information 2021
Eleven-year Summary
The reporting in the eleven-year summary is based on IFRS. Respective year is presented in accordance with the Generally
Accepted Accounting Practice (GAAP) for that year. Earlier years are not restated when new accounting standards are applied.
Consolidated income statement
SEK M 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Net sales 372,216 338,446 431,980 390,834 334,748 301,914 312,515 282,948 272,622 303,647 310,367
Cost of sales –282,463 –259,319 –326,895 –303,478 –254,581 –231,602 –240,653 –220,012 –212,504 –235,085 –235,104
Gross income 89,753 79,127 105,085 87,357 80,167 70,312 71,862 62,937 60,118 68,562 75,263
Research and development
expenses –18,027 –16,798 –18,539 –15,899 –16,098 –14,631 –15,368 –16,656 –15,124 –14,794 –13,276
Selling expenses –23,959 –26,510 –33,037 –30,890 –28,582 –26,867 –27,694 –27,448 –28,506 –28,248 –26,001
Administrative expenses –4,870 –4,621 –5,901 –5,798 –5,642 –5,121 –5,769 –5,408 –5,862 –5,669 –7,132
Other operating income
and expenses 246 –5,459 –221 –2,273 –1,061 –3,135 –4,179 –7,697 –3,554 –2,160 –1,649
Income from investments in
joint ventures and associated
companies –54 1,749 1,859 1,948 1,407 156 –143 46 96 –23 –81
Income from other investments –15 –3 285 33 135 112 4,609 50 –30 –47 –225
Operating income 43,074 27,484 49,531 34,478 30,327 20,826 23,318 5,824 7,138 17,622 26,899
Interest income and
similar credits 358 299 320 199 164 240 257 328 381 510 608
Interest expenses
and similar charges –1,167 –1,349 –1,674 –1,658 –1,852 –1,847 –2,366 –1,994 –2,810 –2,476 –2,875
Other financial income
and expenses 926 –518 –1,345 –870 –385 11 –792 931 11 –301 297
Income after financial items 43,190 25,917 46,832 32,148 28,254 19,230 20,418 5,089 4,721 15,355 24,929
Income taxes –9,947 –5,843 –10,337 –6,785 –6,971 –6,008 –5,320 –2,854 –919 –4,097 –6,814
Income for the period 33,243 20,074 36,495 25,363 21,283 13,223 15,099 2,235 3,802 11,258 18,115
Attributable to:
Owners of AB Volvo 32,787 19,318 35,861 24,897 20,981 13,147 15,058 2,099 3,583 11,039 17,751
Non-controlling interest 456 755 635 466 302 75 41 136 219 219 364
33,243 20,074 36,495 25,363 21,283 13,223 15,099 2,235 3,802 11,258 18,115
Income statement Industrial Operations
SEK M 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Net sales 361,062 326,472 418,361 378,320 323,809 291,459 303,582 275,999 265,420 296,031 303,589
Cost of sales –277,048 –252,933 –319,055 –296,109 –248,382 –225,797 –236,311 –217,251 –209,307 –231,216 –233,097
Gross income 84,013 73,539 99,306 82,210 75,428 65,662 67,271 58,748 56,113 64,815 70,492
Research and
development expenses –18,027 –16,798 –18,539 –15,899 –16,098 –14,631 –15,368 –16,656 –15,124 –14,794 –13,276
Selling expenses –21,575 –24,284 –30,483 –28,642 –26,495 –24,946 –25,857 –25,778 –26,904 –26,582 –25,181
Administrative expenses –4,859 –4,611 –5,887 –5,756 –5,602 –5,081 –5,728 –5,367 –5,824 –5,639 –4,753
Other operating income
and expenses 300 –3,673 230 –1,828 –640 –2,531 –3,473 –6,931 –2,710 –1,600 –1,045
Income/loss from investments
in joint ventures and
associated companies –54 1,749 1,859 1,948 1,407 156 –143 46 96 –23 –82
Income from other investments –15 –4 285 33 135 112 4,610 49 –31 –46 –225
Operating income 39,783 25,919 46,771 32,067 28,135 18,740 21,312 4,111 5,616 16,130 25,930
207
Other information 2021
Consolidated balance sheets
SEK M 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Intangible assets 37,070 34,577 36,668 38,104 35,893 37,916 36,416 37,115 36,588 40,373 39,507
Property, plant and equipment 54,405 49,113 53,496 55,673 53,348 55,875 53,618 55,181 52,233 55,004 54,540
Assets under operating leases 39,969 37,962 43,326 43,103 37,166 34,693 32,531 31,218 25,672 29,022 23,922
Shares and participations 21,225 13,436 13,113 11,875 11,225 12,420 12,050 9,839 6,327 2,890 1,874
Inventories 63,916 47,625 56,644 65,783 52,701 48,287 44,390 45,533 41,153 40,409 44,599
Customer-financing receivables 151,504 128,531 142,982 126,927 109,378 110,821 102,583 99,166 83,861 80,989 78,699
Interest-bearing receivables 3,702 5,880 2,743 3,393 3,501 2,393 2,938 2,555 1,389 5,635 3,638
Other receivables 81,772 73,982 81,432 82,509 72,961 70,814 61,932 68,448 59,943 55,531 59,877
Cash and cash equivalents 62,293 85,419 61,660 47,093 36,270 25,172 24,393 33,554 29,559 28,889 37,241
Assets held for sale – 34,296 32,773 203 51 525 3,314 288 8,104 – 9,348
Assets 515,856 510,821 524,837 474,663 412,494 398,916 374,165 382,896 344,829 338,742 353,244
Total equity
1
144,118 148,142 141,678 125,831 109,011 97,764 85,610 80,048 77,365 86,914 85,681
Provision for post-employment
benefits 12,177 18,430 19,988 16,482 14,476 14,669 13,673 16,683 12,322 6,697 6,665
Other provisions 28,095 27,335 30,835 32,165 25,477 26,408 27,207 28,010 19,900 21,787 20,815
Interest-bearing liabilities 153,624 153,424 157,752 135,857 127,676 141,048 132,607 147,985 135,001 131,842 130,479
Other liabilities 177,842 152,204 164,171 164,328 135,854 118,879 114,495 110,042 99,891 91,502 104,888
Liabilities held for sale – 11,286 10,413 – – 148 573 130 350 – 4,716
Total equity and liabilities 515,856 510,821 524,837 474,663 412,494 398,916 374,165 382,896 344,829 338,742 353,244
1
of which non-controlling
interests 3,073 2,847 3,083 2,452 1,941 1,703 1,801 1,723 1,333 1,266 1,100
Assets pledged 6,742 14,960 21,220 15,988 12,791 10,592 9,428 7,680 5,078 4,099 1,832
Contingent liabilities 17,971 13,832 13,732 14,247 15,242 16,056 15,580 15,940 17,290 17,763 17,154
Balance sheets Industrial Operations
SEK M 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Intangible assets 36,971 34,423 36,467 37,889 35,716 37,768 36,314 37,010 36,479 40,267 39,385
Property, plant and equipment 54,356 49,045 53,411 55,631 53,308 55,812 53,554 55,087 52,146 54,899 54,446
Assets under operating leases 32,150 29,460 33,794 32,700 24,051 22,752 20,616 19,484 17,013 21,263 16,749
Shares and participations 21,209 13,421 13,095 11,866 11,215 12,409 12,042 9,825 6,321 2,884 1,871
Inventories 63,715 47,273 56,080 65,366 52,231 48,080 44,194 45,364 40,964 40,057 43,828
Customer-financing receivables 2,537 1,695 1,570 1,560 1,358 1,698 11 1,828 1,406 1,397 1,702
Interest-bearing receivables 3,723 6,301 4,916 3,882 4,966 4,415 3,738 2,777 2,195 11,011 6,734
Other receivables 96,758 84,413 99,082 101,347 85,822 75,759 68,223 70,413 60,679 54,324 59,062
Cash and cash equivalents 59,603 82,186 57,675 43,907 32,447 20,875 21,210 31,105 28,230 27,146 35,951
Assets held for sale – 29,362 28,427 203 51 525 3,314 288 8,104 – 9,348
Assets 371,022 377,579 384,517 354,351 301,165 280,093 263,216 273,181 253,537 253,248 269,076
Total equity 129,619 135,127 127,150 113,144 97,790 86,579 75,151 70,105 68,467 78,321 76,682
Provision for post-employment
benefits 12,095 18,282 19,850 16,374 14,391 14,608 13,621 16,580 12,249 6,663 6,635
Other provisions 24,918 23,794 27,055 28,476 22,680 22,545 23,936 25,054 17,575 19,653 19,101
Interest-bearing liabilities 19,919 35,017 32,326 25,328 27,001 33,944 32,562 48,180 52,491 54,472 55,394
Other liabilities 184,471 158,721 172,209 171,029 139,303 122,269 117,374 113,131 102,405 94,139 106,548
Liabilities held for sale – 6,638 5,927 – – 148 573 130 350 – 4,716
Total equity and liabilities 371,022 377,579 384,517 354,351 301,165 280,093 263,216 273,181 253,537 253,248 269,076
208
Other information 2021
Consolidated cash flow statements
SEK bn 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Operating income 43.1 27.5 49.5 34.5 30.3 20.8 23.3 5.8 7.1 17.6 26.9
Depreciation and amortization 18.7 20.6 20.6 18.4 16.9 16.7 16.8 15.9 17.4 14.7 13.9
Other non-cash items –1.0 1.2 –2.8 9.7 1.4 –0.4 –0.5 6.1 2.4 1.4 1.3
Change in working capital –17.5 –13.7 –18.2 –23.7 –4.7 –13.9 –9.0 –14.1 –10.8 –21.9 –15.1
Dividends received from joint ventures and
associated companies 0.8 1.1 0.5 – – – – – – – –
Financial items and income tax –10.4 –5.0 –10.1 –7.7 –6.3 –5.7 –4.6 –5.0 –5.1 –8.0 –7.3
Cash flow from operating activities 33.6 30.6 39.0 31.2 37.6 17.5 25.9 8.7 11.0 3.8 19.7
Investments in in-/tangible assets –12.5 –8.8 –12.0 –10.7 –7.7 –9.5 –8.8 –8.6 –12.2 –14.6 –12.6
Investments in leasing assets –9.3 –8.6 –10.0 –10.1 –11.5 –10.8 –10.5 –10.1 –8.2 –10.0 –7.4
Disposals of in-/tangible assets and leasing
assets 5.8 6.3 7.4 6.2 5.4 9.0 6.0 5.0 3.4 3.1 3.3
Investments and divestments of shares, net –7.4 –0.5 0.1 1.0 2.2 0.2 –2.0 0.1 0.0 –1.2 –0.1
Acquired and divested operations, net 22.0 0.4 1.3 –0.2 0.9 1.4 0.4 7.4 0.9 3.4 –1.6
Interest-bearing receivables including
marketable securities –0.1 1.1 –1.0 0.1 1.6 2.5 3.6 –4.8 0.5 3.7 2.6
Cash flow after net investments 32.2 20.7 24.9 17.4 28.5 10.4 14.5 –2.3 –4.6 –11.8 3.9
Change in loans, net –7.0 7.3 9.3 1.9 –9.0 –2.2 –13.2 6.7 13.0 14.1 8.7
Repurchase of own shares – – – – – – – – – – –
Dividend to AB Volvo’s shareholders –49.8 – –20.3 –8.6 –6.6 –6.1 –6.1 –6.1 –6.1 –6.1 –5.1
Dividend to non-controlling interests –0.6 –0.8 0.0 0.0 0.0 –0.2 0.0 0.0 –0.2 0.0 0.0
Other –0.1 –0.1 0.2 0.0 0.0 0.0 0.0 –0.1 0.1 0.0 0.0
Change in cash and cash equivalents
excluding translation differences –25.4 27.1 14.0 10.7 12.8 1.9 –4.8 –1.8 2.2 –3.8 7.5
Translation differences on cash and
cash equivalents 2.3 –3.4 0.5 0.1 –0.7 1.0 –0.4 1.1 –0.5 –0.8 –0.1
Change in cash and cash equivalents –23.1 23.7 14.5 10.8 12.1 2.9 –5.2 –0.7 1.7 –4.6 7.4
Operating cash flow Industrial Operations
SEK bn 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Operating income 39.8 25.9 46.8 32.1 28.1 18.7 21.3 4.1 5.6 16.1 26.0
Depreciation and amortization 14.3 15.9 15.8 13.8 12.6 12.6 12.6 12.7 14.5 12.0 11.4
Other non-cash items –1.4 –0.8 –3.6 8.9 0.9 –1.1 –1.1 5.3 1.5 0.8 0.6
Change in working capital –2.3 –11.0 –0.5 –11.0 –0.2 –14.7 –1.9 –3.3 –2.0 –9.2 –4.2
Dividends received from joint ventures and
associated companies 0.8 1.1 0.5 – – – – – – – –
Financial items and income taxes –9.5 –4.2 –9.5 –7.5 –5.6 –5.6 –4.0 –4.5 –4.9 –7.3 –6.9
Cash flow from operating activities 41.7 25.9 49.0 36.4 35.8 9.9 26.7 14.3 14.7 12.4 26.9
Investments in in-/tangible assets –12.5 –8.7 –11.9 –10.7 –7.7 –9.4 –8.8 –8.6 –12.2 –14.6 –12.6
Investments in leasing assets –0.0 –0.0 –0.1 –0.0 –0.1 –0.1 –0.3 –0.5 –1.5 –3.6 –1.4
Disposals of in-/tangible assets
and leasing assets 0.4 1.4 1.4 0.9 0.4 3.2 0.7 1.1 0.5 0.9 1.2
Operating cash flow 29.4 18.5 38.3 26.6 28.4 3.5 18.3 6.4 1.5 –4.9 14.1
209
Other information 2021
Key ratios
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Gross margin, %
1
23.3 22.5 23.7 21.7 23.3 22.5 22.2 21.3 21.1 21.9 23.7
Research and development expenses
as percentage of net sales
1
5.0 5.1 4.4 4.2 5.0 5.0 5.1 6.0 5.7 5.0 4.4
Selling expenses as percentage
of net sales
1
6.0 7.4 7.3 7.6 8.2 8.6 8.5 9.3 10.1 9.0 8.0
Administration expenses as
percentage of net sales
1
1.3 1.4 1.4 1.5 1.7 1.7 1.9 1.9 2.2 1.9 2.3
Operating income before depreciation
and amortization (EBITDA), SEK M
1
54,080 41,847 62,568 45,858 40,732 31,373 33,886 16,784 20,089 28,117 37,376
EBITDA margin, %
1
15.0 12.8 15.0 12.1 12.6 10.8 11.2 6.1 7.6 9.5 12.3
Net capitalization of research and
development, SEK M 552 –385 1,006 791 –876 90 –550 –1,441 787 2,264 1,197
Return on capital employed in
Industrial Operations, % 25.3 14.7 28.4 22.4 – – – – – – –
Return on operating capital in
Industrial Operations, % 51.9 29.4 52.3 39.0 32.5 21.5 25.0 4.5 5.9 16.5 28.8
Return on total equity, % 23.4 13.8 27.0 21.3 20.8 14.9 18.4 2.8 5.0 12.9 23.1
Interest coverage, times
1
34.3 18.5 28.1 19.5 15.3 10.3 9.1 2.2 2.1 6.7 9.6
Self-financing ratio, % 210 279 268 213 272 155 194 64 84 18 118
Self-financing ratio
Industrial Operations, % 341 353 458 373 483 155 316 180 112 72 210
Net Financial position excl.
post -employment benefits
and lease liabilities SEK M
1
66,227 74,691 62,596 43,926 26,339 –1,151 349 –9,924 –19,828 –19,023 –14,974
Net financial position excl. post-
employment benefits and lease
liabilities as percentage of total equity
1
51.1 55.3 49.2 38.8 26.9 –1.3 0.5 –14.2 –29.0 –24.3 –19.5
Net Financial position incl. post -
employment benefits and lease
liabilities SEK M
1
50,356 50,959 37,267 29,101 12,200 –15,679 –13,237 –26,378 –32,066 –22,978 –19,346
Net financial position incl. post-
employment benefits and lease
liabilities as percentage of total equity
1
38.8 37.7 29.3 25.7 12.5 –18.1 –17.6 –37.6 –46.8 –29.3 –25.2
Equity ratio 27.9 29.0 27.0 26.5 26.4 24.5 22.9 20.9 22.4 25.7 24.3
Equity ratio, Industrial Operations 34.9 35.8 33.1 31.9 32.5 30.9 28.6 25.7 27.0 30.9 28.5
Equity ratio
excluding non-controlling interest 27.3 28.4 26.4 26.0 26.0 24.1 22.4 20.5 22.0 25.2 23.9
1 Pertains to the Industrial Operations.
Exports from Sweden
SEK M 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Volvo Group, total 108,538 92,746 118,543 117,887
107,958 91,962 86,731 78,174 88,560 84,314 91,065
210
Other information 2021
Business area statistics
Net sales
1
SEK M 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Trucks Europe 107,798 92,127 112,125 111,237 99,642 91,468 83,767 72,757 73,640 76,365 83,451
North America 65,308 52,038 85,731 70,233 52,405 51,849 73,017 53,696 40,314 42,650 37,042
South America 23,569 15,830 23,753 16,021 12,789 10,613 11,624 19,669 23,318 21,172 26,847
Asia 21,359 35,441 37,610 36,664 36,998 33,464 31,589 29,264 26,740 36,531 37,840
Africa and Oceania 12,846 12,826 17,427 16,203 14,646 13,256 13,982 15,518 14,462 15,565 13,741
Total 230,881 208,262 276,647 250,358 216,480 200,650 213,978 190,904 178,474 192,283 198,920
Construction
Equipment
Europe 29,524 23,191 30,300 27,291 22,977 19,739 17,732 17,215 16,356 16,518 17,765
North America 16,583 13,020 17,404 15,575 12,234 10,724 11,843 10,784 8,319 12,027 7,829
South America 3,951 2,245 2,532 2,304 1,760 1,414 2,207 3,234 3,314 3,788 4,163
Asia 36,427 39,095 33,932 33,781 25,058 15,765 16,424 18,458 21,911 27,033 29,999
Africa and Oceania 5,546 3,902 4,437 5,287 4,468 3,088 2,802 3,164 3,539 4,192 3,745
Total 92,031 81,453 88,606 84,238 66,497 50,731 51,008 52,855 53,437 63,558 63,500
Buses Europe 5,886 5,765 7,369 7,036 7,753 7,861 7,284 6,139 5,429 6,200 6,631
North America 4,089 8,302 15,543 13,244 12,512 11,345 10,635 6,721 5,929 6,675 7,532
South America 882 1,793 3,281 1,393 1,148 1,363 1,425 2,559 1,836 2,794 2,715
Asia 1,371 2,397 2,617 2,094 3,135 3,067 2,557 1,892 2,055 2,853 2,953
Africa and Oceania 1,423 1,535 2,209 2,060 1,530 1,749 1,678 1,334 1,457 1,774 1,992
Total 13,652 19,791 31,019 25,826 26,078 25,386 23,580 18,645 16,707 20,295 21,823
Volvo Penta Europe 7,464 6,064 6,671 7,487 5,727 4,973 4,462 3,779 3,714 3,620 4,274
North America 2,949 2,532 3,180 2,912 2,456 2,191 2,161 1,584 1,491 1,486 1,379
South America 474 345 319 299 289 291 365 386 297 306 335
Asia 2,698 2,228 2,439 2,443 2,082 1,891 1,855 1,615 1,692 1,867 2,130
Africa and Oceania 851 691 679 599 566 546 562 425 356 352 341
Total 14,437 11,891 13,287 13,741 11,119 9,893 9,406 7,790 7,550 7,631 8,458
Volvo Aero Europe – – – – – – – – – 2,404 2,893
North America – – – – – – – – – 2,657 3,300
South America – – – – – – – – – 0 7
Asia – – – – – – – – – 109 104
Africa and Oceania – – – – – – – – – 49 52
Total – – – – – –
– – – 5,219 6,356
Other and eliminations 10,061 5,074 8,802 4,157 3,635 4,799 5,610 5,806 9,252 7,044 4,532
Net sales Industrial Operations 361,062 326,472 418,361 378,320 323,809 291,459 303,582 275,999 265,420 296,031 303,589
Financial
Services
Europe 5,929 6,116 6,279 6,063 5,431 5,116 5,278 5,120 4,686 4,703 4,663
North America 4,519 4,907 5,534 4,600 4,234 4,202 4,033 2,999 2,900 2,833 2,326
South America 1,618 1,380 1,555 1,276 1,368 1,235 1,116 1,122 1,009 1,195 1,131
Asia 843 1,022 1,010 800 543 476 548 638 707 795 571
Africa and Oceania 528 535 492 332 235 213 224 232 237 257 192
Total 13,437 13,960 14,870 13,070 11,812 11,242 11,199 10,111 9,539 9,783 8,883
Eliminations –2,283 –1,987 –1,252 –555 –873 –787 –2,265 –3,162 –2,336 –2,167 –2,104
Volvo Group total 372,216 338,446 431,980 390,834 334,748 301,914 312,515 282,948 272,622 303,647 310,367
Of which:
Vehicles
2
282,666 247,397 332,558 299,356 252,063 223,996 237,430
Services 78,396 79,075 85,804 78,963 71,747 67,463 66,152
Financial Services 13,437 13,960 14,870 13,070 11,812 11,242 11,199
Eliminations –2,283 –1,987 –1,252 –555 –873 –787 –2,265
1 Volvo Aero was divested on October 1, 2012.
2 Including construction equipment and Volvo Penta engines.
211
Other information 2021
Operating margin
% 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Trucks 11.8 7.6 11.4 7.8 9.4 7.5 9.1 2.2 3.4 5.3 9.2
Construction Equipment 13.3 11.8 13.4 14.4 11.9 4.4 4.0 1.2 4.9 9.1 10.7
Buses 0.6 –2.6 4.3 2.2 3.6 3.6 3.6 0.5 –1.1 0.3 5.1
Volvo Penta 14.5 11.8 14.1 17.0 12.9 12.8 11.5 9.3 8.3 7.1 9.8
Volvo Aero – – – – – – – – – 14.7 5.7
Volvo Group Industrial
Operations 11.0 7.9 11.2 8.5 8.7 6.4 7.0 1.5 2.1 5.4 8.5
Financial Services 24.5 11.2 18.6 18.4 18.6 18.6 17.9 16.9 16.0 15.3 10.9
Volvo Group 11.6 8.1 11.5 8.8 9.1 6.9 7.5 2.1 2.6 5.8 8.7
Operating income
1
SEK M 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Trucks 27,349 15,764 31,552 19,541 20,383 15,020 19,517 4,157 6,145 10,216 18,227
Construction Equipment 12,228 9,583 11,910 12,125 7,917 2,246 2,044 652 2,592 5,773 6,812
Buses 78 –522 1,337 575 928 911 860 92 –190 51 1,114
Volvo Penta 2,092 1,402 1,876 2,341 1,439 1,269 1,086 724 626 541 825
Volvo Aero – – – – – – – – – 767 360
Financial Services 3,289 1,564 2,766 2,411 2,192 2,086 2,006 1,712 1,522 1,492 969
Other –1.962 –308 91 –2,515 –2,532 –707 –2,195 –1,514 –3,557 –1,217 –1,408
Operating income/loss
Volvo Group 43,074 27,484 49,531 34,478 30,327 20,826 23,318 5,824 7,138 17,622 26,899
Regular employees at year-end
Number
1
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Trucks 50,974 56,483 59,142 58,891 55,026 52,154 54,668 58,067 58,542 61,256 62,315
Construction Equipment 13,847 13,404 13,756 13,419 12,788 13,397 13,889 14,901 14,663 14,788 18,422
Buses 5,117 6,608 8,324 8,178 7,943 7,353 7,270 6,900 6,648 7,514 8,529
Volvo Penta 1,832 1,798 1,800 1,713 1,622 1,530 1,470 1,422 1,412 1,361 2,549
Volvo Aero – – – – – – – – – – 3,179
Financial Services 1,546 1,511 1,538 1,401 1,363 1,328 1,340 1,339 1,355 1,362 1,323
Other 9,224 7,688 8,015 8,527 8,362 8,277 9,827 10,193 12,913 12,436 1,845
Volvo Group, total 82,540 87,492 92,575 92,129 87,104 84,039 88,464 92,822 95,533 98,717 98,162
1 As of 2012, employees in business units are not allocated to the business areas.
Environmental performance
More detailed information and management approach are further described in Sustainability Notes on page 158161.
Absolute values and related to net sales 2021 2020 2019¹ 2018 2017 2016 2015 2014 2013 2012 2011
Energy usage (GWh; MWh/SEK M) 2,423; 6.7 2,043; 6.3 2,355; 5.6 2,196; 5.8 2,068; 6.4 2,076; 7.1 2,077; 6.8 2,168; 7.9 2,320; 8.7 2,483; 8.5 2,471; 8.1
Direct GHG emissions, COe, scope 1 (1,000 tons; tons /SEK M) 245; 0.7 205; 0.6 245; 0.6 223; 0.6 207; 0.6 211; 0.7 220; 0.7 231; 0.8 255; 1.0 273; 0.9 255; 0.8
Indirect GHG emissions, COe scope 2 (1,000 tons; tons/SEK M) 114; 0.3 121; 0.4 124; 0.3 198; 0.5 192; 0.6 196; 0.7 192; 0.6 218; 0.8 243; 0.9 260; 0.9
Indirect GHG emissions, COe scope 3 use of sold products (Mton) 286 241 323
Water consumption (1,000 m
3
; m
3
/SEK M) 4,628; 12.8 4,865; 14.9 5,389; 12,9 4,870; 12.9 4,817; 14.9 4,430; 15.2 4,919; 16.2 4,982; 18.1 5,815; 21.9 7,372; 25.2 7,970; 26.2
NO
X
emissions (tons; kilos/SEK M) 223; 0.6 192; 0.6 291; 0.7 360; 1.0 301; 0.9 333; 1.1 344; 1.3 332; 1.2 347; 1.3 413; 1.4 474; 1.6
Solvent emissions (tons; kilos/SEK M) 1304; 3.6 1,224; 3.7 1,406; 3.4 2,148; 5.7 1,681; 5.2 1,792; 6.1 1,885; 6.2 2,472; 9.0 2,221; 8.4 2,358; 8.1 2,554; 8.4
Sulphur dioxide emissions (tons; kilos/SEK M) 5.0; 0.01 3.7; 0.01 8.5; 0.02 13.6; 0.04 13.3; 0.04 12.9; 0.04 32.1; 0.1 37.9; 0.1 23.4; 0.1 26; 0.1 34; 0.1
Hazardous waste (tons; kilos/SEK M) 53,314; 148 51,712; 159 50,909; 122.0 38,601; 102.0 31,941; 98.6 27,649; 94.9 27,824; 91.6 24,944; 90.4 28,395; 107.0 32,547; 111.4 25,943; 85.5
Net sales, Industrial operations (SEK bn) 361.1 326.5 418.4 378.3 323.8 291.5 303.6 276.0 265.4 292.2 303.6
1 New reporting scopes established with baseline 2019. Numbers for 2020 and 2019 have been restated or added in this report for comparability.
1 Between 2009 and 2011, the benefits from the synergies created in the business units are transferred back to the various business areas.
Operating income in 2014 included expected credit losses of 660. See section for Key ratios regarding adjusted items.
212
Other information 2021
Environmental performance
More detailed information and management approach are further described in Sustainability Notes on page 158161.
Absolute values and related to net sales 2021 2020 2019¹ 2018 2017 2016 2015 2014 2013 2012 2011
Energy usage (GWh; MWh/SEK M) 2,423; 6.7 2,043; 6.3 2,355; 5.6 2,196; 5.8 2,068; 6.4 2,076; 7.1 2,077; 6.8 2,168; 7.9 2,320; 8.7 2,483; 8.5 2,471; 8.1
Direct GHG emissions, COe, scope 1 (1,000 tons; tons /SEK M) 245; 0.7 205; 0.6 245; 0.6 223; 0.6 207; 0.6 211; 0.7 220; 0.7 231; 0.8 255; 1.0 273; 0.9 255; 0.8
Indirect GHG emissions, COe scope 2 (1,000 tons; tons/SEK M) 114; 0.3 121; 0.4 124; 0.3 198; 0.5 192; 0.6 196; 0.7 192; 0.6 218; 0.8 243; 0.9 260; 0.9
Indirect GHG emissions, COe scope 3 use of sold products (Mton) 286 241 323
Water consumption (1,000 m
3
; m
3
/SEK M) 4,628; 12.8 4,865; 14.9 5,389; 12,9 4,870; 12.9 4,817; 14.9 4,430; 15.2 4,919; 16.2 4,982; 18.1 5,815; 21.9 7,372; 25.2 7,970; 26.2
NO
X
emissions (tons; kilos/SEK M) 223; 0.6 192; 0.6 291; 0.7 360; 1.0 301; 0.9 333; 1.1 344; 1.3 332; 1.2 347; 1.3 413; 1.4 474; 1.6
Solvent emissions (tons; kilos/SEK M) 1304; 3.6 1,224; 3.7 1,406; 3.4 2,148; 5.7 1,681; 5.2 1,792; 6.1 1,885; 6.2 2,472; 9.0 2,221; 8.4 2,358; 8.1 2,554; 8.4
Sulphur dioxide emissions (tons; kilos/SEK M) 5.0; 0.01 3.7; 0.01 8.5; 0.02 13.6; 0.04 13.3; 0.04 12.9; 0.04 32.1; 0.1 37.9; 0.1 23.4; 0.1 26; 0.1 34; 0.1
Hazardous waste (tons; kilos/SEK M) 53,314; 148 51,712; 159 50,909; 122.0 38,601; 102.0 31,941; 98.6 27,649; 94.9 27,824; 91.6 24,944; 90.4 28,395; 107.0 32,547; 111.4 25,943; 85.5
Net sales, Industrial operations (SEK bn) 361.1 326.5 418.4 378.3 323.8 291.5 303.6 276.0 265.4 292.2 303.6
1 New reporting scopes established with baseline 2019. Numbers for 2020 and 2019 have been restated or added in this report for comparability.
Regular employees at year-end
Number 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Sweden 21,022 20,598 21,094 20,887 19,965 19,235 20,412 21,384 22,588 23,052 24,663
Europe, excluding Sweden 27,378 27,678 29,033 28,807 27,596 26,955 27,662 29,449 29,746 30,382 30,458
North America 16,956 15,559 17,750 17,845 15,882 14,245 15,534 15,217 16,397 16,569 15,427
South America 5,860 5,448 5,466 5,228 4,774 4,762 5,380 6,353 6,275 5,977 5,234
Asia 9,305 16,121 16,863 16,888 16,526 16,469 17,046 17,793 17,953 20,222 19,924
Africa and Oceania 2,019 2,088 2,369 2,474 2,361 2,373 2,430 2,626 2,574 2,515 2,456
Volvo Group total 82,540 87,492 92,575 92,129 87,104 84,039 88,464 92,822 95,533 98,717 98,162
Delivered units
Number 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Heavy-duty trucks (>16 tons) 170,295 140,652 201,092 193,886 171,963 158,025 176,589 173,650 170,307 172,798 179,779
Medium-duty trucks (716 tons) 13,907 10,736 12,700 14,065 14,331 15,691 14,749 15,114 16,779 32,935 34,631
Light trucks (<7 tons) 18,256 15,453 18,977 18,539 16,108 16,708 16,137 14,360 13,188 18,284 23,982
Total trucks 202,458 166,841 232,769 226,490 202,402 190,424 207,475 203,124 200,274 224,017 238,391
Number 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Trucks Europe 98,600 79,814 104,145 110,349 105,432 97,909 86,448 72,458 82,088 84,355 95,113
North America 47,629 32,056 62,308 53,877 37,941 39,193 64,507 57,714 44,755 47,806 42,613
South America 28,718 17,684 23,729 16,146 11,073 9,442 11,069 23,741 29,137 23,443 29,274
Asia 17,842 27,009 29,435 32,276 35,476 31,502 31,979 32,399 28,692 51,514 56,165
Africa and Oceania 9,669 10,278 13,152 13,842 12,480 12,378 13,472 16,812 15,602 16,899 15,226
Total 202,458 166,841 232,769 226,490 202,402 190,424 207,475 203,124 200,274 224,017 238,391
Construction
Equipment
Europe 20,453 15,762 21,420 19,567 17,519 14,700 12,539 14,174 13,522 12,545
North America 6,217 5,025 7,278 7,218 5,685 5,105 5,710 7,127 5,240 6,782
South America 4,263 2,335 2,004 2,023 1,372 1,175 2,036 3,669 3,568 3,908
Asia 65,635 68,232 53,664 50,716 36,254 21,072 22,339 33,648 44,892 49,263
Africa and Oceania 3,303 2,406 2,519 3,130 3,297 2,254 2,094 2,699 3,564 2,982
Total 99,871 93,760 86,885 82,654 64,127 44,306 44,718 61,317 70,786 75,480
Buses Europe 1,388 1,565 2,350 2,142 2,645 2,676 2,431 2,221 2,146 2,491 2,695
North America 1,118 1,644 3,084 2,796 2,973 2,659 2,398 1,590 1,752 1,826 3,014
South America 726 1,152 1,917 973 784 1,149 1,415 2,985 2,434 2,560 2,620
Asia 585 1,097 1,465 1,451 2,186 1,849 1,656 1,242 1,822 2,945 3,417
Africa and Oceania 705 797 915 1,064 805 1,220 925 721 756 856 1,040
Total 4,522 6,215 9,731 8,426 9,393 9,553 8,825 8,759 8,910 10,678 12,786
213
Other information 2021
Volvo share statistics
Data per share
1
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Basic earnings, SEK
1
16.12 9.50 17.64 12.25 10.08 6.47 7.42 1.03 1.77 5.44 8.75
Ordinary dividend, SEK 6.50
8
6.00 0 5.00 4.25 3.25 3.00 3.00 3.00 3.00 3.00
Extraordinary dividend, SEK 16.00
9
9.00 0 5.00 0 0 0 0 0 0 0
Share price at year end (B share), SEK 209.65 193.80 156.90 115.95 152.70 106.40 79.10 84.70 84.45 88.80 75.30
Dividend yield (B share), %
2
10.7 7.7 0 8.6 2.8 3.1 3.8 3.5 3.6 3.4 4.0
Effective return (B share), %
3
20 33 35 –21 48 39 –3 4 –2 22 –34
Price/earnings ratio (B share)
4
13.0 20.4 8.9 9.5 14.8 16.4 10.7 82.2 47.7 16.3 8.6
EBIT multiple
5
8.3 12.5 6.1 6.5 9.9 11.7 7.7 26.3 19.6 9.0 5.1
Payout ratio, %
6
140 158 0 82 41 50 40 291 169 55 34
Total equity, SEK
7
69 72 68 61 52 47 41 39 38 43 42
Return on total equity, % 23.4 13.8 27.0 21.3 20.5 14.9 18.4 2.8 5.0 12.9 23.1
Other share data
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Number of shareholders at year end 362,144 283,731 250,798 245,663 240,521 237,654 234,989 237,871 246,265 242,482 251,715
Number of Series A shares
outstanding at year end, million 445 448 456 457 459 472 485 492 499 526 643
Number of Series B shares
outstanding at year end, million 1,588 1,585 1,577 1,576 1,573 1,560 1,546 1,537 1,530 1,502 1,385
Average number of shares
outstanding, million 2,033 2,033 2,033 2,032 2,032 2,031 2,030 2,028 2,028 2,028 2,027
Number of Series A shares traded
in Stockholm during the year, million 88.1 65.7 43.8 51.8 46.7 67.2 51.7 86.3 53.0 45.4 130.5
Number of Series B shares traded
in Stockholm during the year, million 1,065.9 1,407.6 1,146.1 1,293.8 1,341.3 1,667.9 2,052.1 2,068.7 1,878.5 2,081.2 2,944.1
1 Basic earnings per share is calculated as income for the period divided
by average number of shares outstanding.
2 Proposed dividend in SEK per share divided by share price at year end.
3 Share price at year end, including proposed dividend during the year,
divided by share price at beginning of the year.
4 Share price at year end divided by basic earnings per share.
5 Market value at year end less net financial position and non-controlling
interests divided by operating income.
6 Cash dividend divided by basic earnings per share.
7 Total equity for shareholders in AB Volvo divided by number of shares
out stand ing at year end.
8 Proposed by the Board of Directors to the Annual General Meeting 2022.
9 Of which SEK 9.50 per share in dividend relating to the distribution of the proceeds
from the sale of UD Trucks paid out in July 2021 and SEK 6.50 per share proposed by
the Board of Directors to the Annual General Meeting 2022.
The largest shareholders in
AB Volvo, December 31, 2021
Number
of shares
Share of
votes, %
Share of
capital, %
Industrivärden 174,200,000 27.7 8.6
Geely Holding 167,247,516 16.0 8.2
AMF Insurance & Funds 69,775,433 5.4 3.4
Alecta 66,231,010 4.2 3.3
AFA Insurance 15,003,079 2.3 0.7
BlackRock 69,062,595 2.1 3.4
AP4 Fund 16,476,306 1.7 0.8
Norges Bank Investment
Management 46,764,623 1.6 2.3
Vanguard 51,343,420 1.5 2.5
Swedbank Robur Funds 66,544,164 1.4 3.3
Total 742,648,146 64.0 36.5
Distribution of shares,
December 31, 2021
Number of
shareholders
% of
total votes
Share of
capital, %
11,000 shares 308,069 2.9 3.1
1,00110,000 shares 49,694 5.9 6.8
10,001100,000 shares 3,834 3.3 4.6
100,001– 547 87.9 85.5
Total 362,144 100.0 100.0
214
Other information 2021
Annual General Meeting, April 6, 2022
The Annual General Meeting of AB Volvo will be held on Wednesday, April
6, 2022. For further information about the Annual General Meeting 2022,
please refer to Volvo’s website, www.volvogroup.com.
Volvo’s Election Committee
The following persons are members of Volvo’s Election Committee:
Bengt Kjell Chairman of the Election Committee (AB
Industrivärden), appointed by the Annual
General Meeting.
Anders Oscarsson (AMF and AMF Fonder), appointed by the
Annual General Meeting.
Ramsay Brufer (Alecta), appointed by the Annual General
Meeting.
Carine Smith Ihenacho (Norges Bank Investment Management),
appointed by the Annual General Meeting.
Carl-Henric Svanberg Chairman of the Board, appointed by the
Annual General Meeting.
Among other duties, the Election Committee is responsible for submitting
to the Annual General Meeting proposals for candidates to serve as members
of the Board of Directors, Chairman of the Board and proposal for auditors if
applicable. The Election Committee also proposes the amount of the fees
to be paid to the Board of Directors.
Preliminary financial calendar
Annual General Meeting 2022 April 6, 2022
Report on the first quarter 2022 April 22, 2022
Report on the second quarter 2022 July 19, 2022
Report on the third quarter 2022 October 20, 2022
The reports are available on www.volvogroup.com and www.volvogroup.se
on date of publication and are also sent electronically to shareholders
who have advised Volvo that they wish to receive financial information.
Historical and current time series reflecting the Volvo Group’s market
information are published regularly on www.volvogroup.com and on
www.volvogroup.se.
Contacts
Investor Relations:
Christer Johansson +46 739 02 25 22
Johan Bartler +46 739 02 21 93
Anders Christensson +46 765 53 59 66
E-mail: investorrelations@volvo.com
Corporate Responsibility:
Jonas André +46 739 02 63 80
E-mail: csr@volvo.com
Aktiebolaget Volvo (publ) 5560125790
Investor Relations, VGHQ
SE405 08 Göteborg
Sweden
Tel +46 31 66 00 00
www.volvogroup.com
215
AB Volvo (publ)
SE40508 Göteborg, Sweden
Telephone +46 31 66 00 00
www.volvogroup.com
AB Volvo, Investor Relations and Group Accounting
The Volvo Group drives prosperity through transport and infrastructure solutions,
offering trucks, buses, construction equipment, power solutions for marine and
industrial applications, financing and services that increase our customers’ uptime
and productivity. Founded in 1927, the Volvo Group is committed to shaping the
future landscape of sustainable transport and infrastructure solutions. The Volvo
Group is headquartered in Gothenburg, Sweden, employs 95,000 people and serves
customers in more than 190 markets. In 2021, net sales amounted to SEK 372 billion
(EUR 37 billion). Volvo shares are listed on Nasdaq Stockholm.