Annual report
Page 1
Annual Report 2025 Essity is a global, leading hygiene and health company. Every day our brands care for the hygiene and health of a billion people across 150 countries. Essity Aktiebolag (publ)
Page 2
“ In 2025, I assumed the role of CEO of Essity. I see significant potential in the company and have taken on this assignment with great enthusiasm, working together with our employees to improve the quality of life for more people and accelerate profitable growth.” Read more in the CEO’s message on pages 6–7. The Board of Directors’ Report and financial statements Introduction Invest in Essity 3 The year at a glance 4 CEO’s message 6 The share The share 8 Information to shareholders 10 Strategy External environment and market 11 Strategy for value creation 14 Targets and outcomes 25 Business areas Health & Medical 29 Consumer Goods 31 Professional Hygiene 33 Group Operations and structure 35 Acquisitions, investments and divestments 36 Financial overview 37 Other Group information 40 Risks and risk management 41 Sustainability statements General disclosures 48 Environmental disclosures 61 Social disclosures 77 Governance disclosures 92 Additional disclosures 95 Corporate governance report Corporate governance 100 Board of Directors and Auditors 106 Executive Management Team 108 Financial statements including notes Contents 110 Financial statements, Group 112 Financial notes, Group 119 Financial statements, Parent company 171 Financial notes, Parent company 173 Proposed disposition of earnings 178 Reports from the auditors Auditor’s report 180 Auditor’s review reports of the sustainability statements 184 Other information Description of costs and Raw materials 187 Production facilities 188 Financial ten-year summary 189 Calendar and contact points 191 Contents The 2025 Annual Report for Essity Aktiebolag (publ) has been submitted by the Board of Directors and describes the company’s overall objectives and strategies and earnings for the year. The aim is to describe the business from an environmental, social and governance perspective. The Board of Directors’ Report and financial statements are presented on pages 8–10 and 25–186 and include the auditor’s report. The Board of Directors’ Report also includes Essity’s statutory Sustainability Report, which has been prepared in accordance with the requirements of the Swedish Annual Accounts Act and the associated European Sustainability Reporting Standards (ESRS). The official 2025 Annual Report is prepared in Swedish in European Single Electronic Format (ESEF). Refer to essity.com to access Essity’s financial reports. The Annual Report is also published as a PDF in Swedish and English. These have not been prepared according to ESEF and thus do not constitute official versions. The English version is a translation of the Swedish original. All files were submitted for publication on March 2, 2026. The 2025 Annual Report reflects Essity’s organizational structure up to and including December 31, 2025. As of January 1, 2026, Essity has a new organizational structure with four business areas: Health & Medical, Personal Care, Consumer Tissue and Professional Hygiene. Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 3
Essity is a global, leading hygiene and health company that strives to improve well-being for people around the world. Every day, our products and services im- prove the quality of life of a billion people across 150 countries. Essity’s long-term shareholder value builds on five main drivers. Leading in attractive and growing markets Essity is active in hygiene and health markets that benefit from strong megatrends such as an increasing and aging population, rising living standards and a growing awareness of hygiene and health. These trends fuel long-term demand and create attractive growth opportunities. With a strong global footprint, Essity is well positioned to leverage this potential. Strong brands and innovation capabilities Essity has leading market positions in 90% of branded sales, with globally recognized brands such as TENA and Tork, and strong local brands. Our success is built on continuous innovation and in-depth customer and consumer insight, resulting in relevant product launches for customers and consumers worldwide. A value-creating strategy Essity’s vision is to be the undisputed global leader in hygiene and health. Our strategy aims to create value for customers, consumers, patients, communities, employees, and share- holders through profitable growth. Our financial targets are to achieve annual organic sales growth of >3% and an EBITA margin excl. IAC of >15%. Essity prioritizes expansion in high-yielding segments, fast-growing sales channels and attractive geo - graphies. This is supported by a winning corporate culture combining a strong focus on results with collaboration and care for each other, the environment and our customers and consumers. Sustainability at the core To lead in sustainability is a strategic priority for Essity and a key factor for long-term profitable growth. The Group’s targets include science-based climate targets, and the ambition is to achieve net zero emissions by 2050, one of several environment, social and governance (ESG) commitments. Essity’s sustain- ability work receives continuous recognition, for example through its inclusion in the Dow Jones Sustainability Index, a position on CDP’s global A list, the highest grade AAA in MSCI’s ESG rating and the EcoVadis Platinum medal. Strong financial position and higher earnings per share Essity has a solid financial position with stable cash flow, a strong balance sheet and continuous dividend growth. Between 2018 and 20253), dividends increased by 52% and earnings per share by 64%. Essity initiated its second share buyback program in 2025, in line with the ambition to make buybacks a recurring part of the Group’s capital allocation. Invest in Essity Net sales, SEKbn4) EBITA excl. IAC, SEKbn4) 1) Including holdings of treasury shares. 2) Relates to average number of part-time and full-time employees during the year and calculated as an average over five quarters. 3) Board of Directors’ dividend proposal. 4) 2018–2020 excluding Vinda’s published figures. In 2021–2023, Vinda was classified as discontinued operations. Employees, approximately2) 36,000 Market capitalization, December 31, 20251) 184 SEKbn Proposed dividend per share, SEK3) 8.75 Earnings per share, SEK 18.37 20252024202320222021202020192018 102.0 109.6 102.2 101.5 131.3 147.1 145.5 138.5 +36% 20252024202320222021202020192018 11.8 13.9 14.7 11.5 12.0 18.9 20.3 19.6 +66% ® Essity | Annual Report 2025 3Essity | Annual Report 2025 Introduction Invest in Essity The year at a glance CEO’s message The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 4
Agreement to acquire feminine care business Essity entered into an agreement to acquire Edgewell’s feminine care business, including the brands Carefree, Stayfree and o.b. in North America and Playtex globally. The acquisition, that was completed on February 2, 2026, supports Essity’s strategy to focus on high-yielding categories and to strengthen market positions in North America. Sustainability recognition During the year, Essity’s sustainability efforts were recognized through several awards. The company was awarded the EcoVadis Platinum medal1), was included in the Dow Jones Sustainability Index, and secured a place on CDP’s global A list. Examples of awards: Organic growth and high profitability In 2025, Essity’s net sales amounted to SEK 138bn and EBITA excl. IAC to SEK 19.6bn. Sales increased organically in a challenging market environment and the EBITA margin excl. IAC amounted to 14.1%, the highest in five years. All business areas demonstrated positive organic growth. Market-driven innovation In 2025, Essity launched several products, including TENA ProSkin Stretch Day and Night, a unique incontinence product that supports both patients and caregivers while helping to reduce continence care costs; Actimove Manus Air for improved treatment of wrist fractures; the upgraded Nosotras Invisible Day Pad, Essity’s thin pad range offering high comfort and enhanced leakage protection through SmartPROTECT™; and Tork Matic Sensor Dispenser, a paper hand towel dispenser with batteries lasting up to six years, setting a new standard in the industry. Essity strengthens conditions for profitable growth New organizational structure As of January 1, 2026, Essity has a new organi- zational structure with four business areas: Health & Medical, Personal Care, Consumer Tissue and Professional Hygiene. With this change, each business area has end-to-end responsibility for the value chain, and decision-making is decentralized. Launch of cost savings program Essity has initiated a cost savings program, primarily within sales and administration, that is expected to produce annual savings of approximately SEK 1bn, with full effect by the end of 2026. The cost savings will mainly be invested to generate profitable volume growth. New share buyback program On April 24, 2025, Essity initiated a new share buyback program of SEK 3bn for Essity Class B shares, in line with Essity’s ambition to use share buybacks as a recur- ring part of the company’s capital allocation. The program will extend until the 2026 Annual General Meeting at the latest, and repurchased shares are expected to be canceled. Ulrika Kolsrud new President and CEO Essity’s Board of Directors appointed Ulrika Kolsrud as President and CEO on May 9, 2025. She assumed her position on June 1, 2025. She most recently held the position of President of the Health & Medical business area. Ulrika Kolsrud succeeded Magnus Groth. 1) Ecovadis Platinum Medal | ESSITY AB (PUBL) Essity | Annual Report 2025 4 The year at a glance Introduction Invest in Essity The year at a glance CEO’s message The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 5
Key figures EBITA excl. IAC, SEKm 19,572 EBITA margin excl. IAC +14.1% Operating cash flow, SEKm 14,998 ROCE excl. IAC +17.2% Net sales, SEKm 138,494 Organic sales growth +0.9% Net sales by distribution channel Retail trade, 54% Business-to-business, 26% Healthcare sector, 20% Net sales by region Europe, 61% North America, 16% Latin America, 17% Asia, 2% Other, 4% Net sales by business area Health & Medical, 20% Consumer Goods, 54% Professional Hygiene, 26% EBITA excl. IAC by business area Health & Medical, 24% Consumer Goods, 46% Professional Hygiene, 30% Net sales by category Medical Solutions, 8% Incontinence Products Health Care, 12% Incontinence Products Retail, 8% Feminine Care, 9% Baby Care, 5% Consumer Tissue, 32% Professional Hygiene, 26% USA, 14% Germany, 12% UK, 8% Mexico, 8% France, 7% Spain, 7% Colombia, 3% Group’s ten largest markets, % of net sales Netherlands, 3% Italy, 3% Sweden, 3% Other, 32% Emerging markets accounted for 26% of net sales. Essity | Annual Report 2025 5 Introduction Invest in Essity The year at a glance CEO’s message The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 6
w Ulrika Kolsrud, President and CEO Stability and progress in a turbulent world In 2025, we continued to develop our customer and consumer offerings through important innovations, made a strategic acquisition, and took action to strengthen Essity’s competitiveness and capture market share. We increased our sales organically and achieved our highest margin in five years in a turbulent world and weak economic condi- tions. Our earnings performance confirms the strength of our portfolio of leading hygiene and health products that people trust every day. It also reflects the commitment of our employees, who improve the daily lives of consumers, patients, customers and care- givers worldwide. 6Essity | Annual Report 2025 Introduction Invest in Essity The year at a glance CEO’s message The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 7
Organic sales growth Sales for the year amounted to SEK 138bn. We reported organic growth in all business areas, with a particularly strong perfor- mance in profitable categories such as Incontinence Products, Feminine Care and Medical Solutions, as well as in strategic segments of Professional Hygiene. In parallel, volume growth was impacted by weaker market conditions. Lower activity in the hotel and restaurant sector dampened demand in Professional Hygiene, while the Baby Care market continued to be impacted by low birth rates. Our ability to nonetheless deliver positive organic growth is a testament to the strength of our offering. Higher margin, earnings per share and dividend We delivered profit of SEK 19.6bn and a margin of 14.1%, our highest margin in five years. Earnings per share increased by 7%. A stable cash flow helped us maintain a strong financial position, enabling continued investment in growth and shareholder returns. The second share buyback program of SEK 3bn was launched in April and the Board of Directors is proposing a 6% increase in the dividend to SEK 8.75 per share for the 2025 fiscal year. Innovation for sustainable growth and strengthened market positions Innovation is one of Essity’s key tools for generating profitable and sustainable growth and strengthening our market positions. We launched a wide range of new and differentiated offerings across all categories during the year. For example, we introduced TENA ProSkin Stretch Day & Night for more effective inconti- nence care, launched a new automatic version of the TORK PeakServe dispenser, improved Saba and Nosotras menstrual protection with SmartProtect technology, and upgraded Cutimed Siltec Sorbact for faster wound healing. These launches represent just some of the innovations that strengthened customer value and our competitiveness in 2025. Our innovation efforts are guided by market needs. During the year, this meant a particular focus on offerings tailored to the consumers’ different financial situations. In Consumer Tissue, for example, we strengthened the value-based segment by upgrad- ing Cushelle Simply Soft and Lotus Comfort. We continuously monitor the impact of launches, in terms of both product performance and market share. In 2025, we reached our highest level so far for product superiority, which demonstrates the extent to which consumers prefer Essity products over competing alternatives. This, combined with our strong brands and effective commercial activities, meant that we in the fourth quarter captured market share in more than 65% of our branded sales in the retail trade. Acquisition in Feminine Care in North America Feminine Care is a category where we are continuously gaining market share, and where our ambition is to expand geo graphi- cally and leverage our strong innovation capabilities and effective marketing. At the end of 2025, we acquired Edgewell’s feminine care business in North America. With the Carefree, Stayfree and Playtex brands in our portfolio, we are building a stronger Personal Care business in North America, in line with our strategy to focus on categories with high potential for profitable growth in attractive geographies. Change to support faster growth rate In 2025, I assumed the role of CEO of Essity. I see significant potential in the company and have taken on this assignment with great enthusiasm, working together with our employees to improve the quality of life for more people and accelerate profitable growth. We operate in attractive market segments that benefit from trends such as a growing, aging population. Essity is well posi- tioned for profitable growth through its strong brands, leading positions, innovation strength, integrated sustainability agenda, winning corporate culture and strong balance sheet. At the same time, we need to increase our growth rate and advance more quickly toward our financial targets. Therefore, we have initiated changes to strengthen our flexibility and make us more agile and customer-centric, intensifying our focus on our most attractive segments. The new organization with decentralized decision-making went into effect on January 1, 2026, and the sales and administration cost savings program has been initiated. The aim is to create better conditions for Essity to accelerate growth and invest in profitable development for an even stronger Essity going forward. Finally, I want to extend a big thank you to our employees for your important contributions, and our customers and share- holders for your continued trust. Ulrika Kolsrud President and CEO A visit to our facility in Emmerich, Germany, where a skilled team uses advanced textile technology to manufacture JOBST medical compression garments. “ Our earnings performance confirms the strength of our portfolio of leading hygiene and health products that people trust every day.” Essity | Annual Report 2025 7 Introduction Invest in Essity The year at a glance CEO’s message The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 8
The share The Essity share is quoted on Nasdaq Stockholm Main Market and the market capitalization was SEK 184bn1) at December 31, 2025. Total shareholder return and share price 2025 The total shareholder return for Essity’s Class B share for the year was –8%. The total shareholder return for the OMX Stockholm 30 Index was 20% and for the Peer Group Index2) –12%. In 2025, the price of Essity’s Class B share decreased 10%. The OMX Stock- holm 30 Index rose 16% and the Peer Group Index declined 14%. The closing price of Essity’s Class B share at year-end was SEK 265.20. The highest closing price for Essity’s Class B share during the year was SEK 310.40, which was noted on March 10, 2025. The lowest closing price was SEK 239.60 on September 22, 2025. Dividend Policy Essity aims to provide long-term stable and rising dividends to its shareholders. When cash flow from current operations exceeds what the company can invest in profitable expansion over the long-term, and under the condition that the capital structure target is met, the surplus could be distributed to the shareholders. Index On Nasdaq Stockholm, Essity is included in the OMX Stockholm 30 Index, OMX Nordic 40 Index and OMX Nordic Consumer Staples Index. In addition to indexes directly linked to Nasdaq Stockholm, Essity is included in other indexes, such as the FTSE All World Index and the MSCI Household Products Index within Consumer Staples. Essity is also represented in sustainability indexes such as the Dow Jones Sustainability Index, OMX Stockholm 30 ESG Responsible Index, FTSE4Good Europe and holds the highest grade AAA in MSCI’s ESG rating. Share trading3) In 2025, approximately 367 million Essity shares were traded on Nasdaq Stockholm, corresponding to a value of approximately SEK 99.3bn. Average daily trading for Essity on Nasdaq Stockholm amounted to approximately 1.5 million shares, corre- sponding to a value of approximately SEK 399m. During the year, trading on CBOE had a turnover of approximately 852 million Total shareholder return 2025 Earnings per share, 2025 SEK 18.37 Proposed dividend per share, 20251) SEK 8.75 Essity B Peer Group4) OMX Stockholm 30 1) Board of Directors’ dividend proposal. 2) Earnings per share for continuing operations. Earnings per share for total operations were impacted positively by the capital gain from the divest- ment of the holding in Vinda and amounted to SEK 29.83. 3) Total operations. 4) Peer Group comprises a selection of competing companies in Essity’s business areas of Health & Medical, Consumer Goods and Professional Hygiene. /percent.tabSEK /zero.tab /five.tab /one.tab/zero.tab /one.tab/five.tab /two.tab/zero.tab 2025202420232022 7. 2 57.93 7.7 5 13.60 8.25 1 7.0 92) 8.751) 18.37 /zero.tab/period.tab/zero.tab /one.tab/period.tab/five.tab /three.tab/period.tab/zero.tab /four.tab/period.tab/five.tab /six.tab/period.tab/zero.tab /seven.tab/period.tab/five.tab Earnings, dividend and dividend yield Earnings per share3), SEK Dividend per share, SEK Dividend yield, % 70 80 90 100 110 120 130 DecNovOctSepAugJulJunMayAprMarFebJan Index 1) Including holdings of treasury shares. 2) Peer Group comprises a selection of competing companies in Essity’s business areas of Health & Medical, Consumer Goods and Professional Hygiene. 3) Data compiled by Modular Finance. Essity shares, on LSE Group approximately 226 million shares and other trading venues approximately 98 million shares. Shareholder structure 55% of the share capital is owned by investors registered in Sweden and 45% by foreign investors. AB Industrivärlden is the largest owner, holding 11.4%. The USA, UK and Norway account for the highest percentage of shareholders registered outside Sweden. Share structure Essity’s share capital comprises two share classes, Class A shares and Class B shares. Every Class A share carries entitlement to ten votes and every Class B share to one vote. Class A and Class B shares confer the same entitlement to receive dividends. Both share classes are listed on Nasdaq Stockholm Main Market and are part of the Large cap segment. Buyback program The SEK 3bn buyback program that commenced on June 17, 2024 was completed on March 13, 2025. A new buyback program of SEK 3bn was initiated on April 24, 2025 and extends until the 2026 Annual General Meeting at the latest. In 2025, Essity repurchased 11,895,826 own Class B shares for a total value of SEK 3,160m. As of December 31, 2025, treasury shares represent SEK 33,919,750 (1.4%) of the total share capital based on a quotient value of SEK 3.39. The repurchased shares are expected to be canceled. The share buyback will be financed using cash flow from current operations after the ordinary dividend with the ambition to continue with share buybacks over time as a recurring part of Essity’s capital allocation. Beta coefficient The beta coefficient for Essity’s Class B share was 0.15 in 2025. A beta coefficient of less than 1 indicates that the share is less sensitive to market fluctuations than average. Shareholder communication and share analysts Information about the company is available at essity.com/ investors/ in the form of reports, presentations and financial data together with a current list of analysts that cover Essity. Essity | Annual Report 2025 8 Introduction The share The share Information to shareholders Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 9
Data per share All performance measures include items affecting comparability unless otherwise stated. SEK per share unless otherwise indicated 2025 2024 Earnings per share before and after dilution1) 18.37 29.83 Earnings per share excl. IAC2) 3) 19.44 19.29 Average price during the year 268.98 280.80 Closing price, December 31 265.20 295.70 Cash flow from current operations 12.96 13.54 Cash flow from operating activities2) 22.44 24.52 Dividend4) 8.75 8.25 Dividend yield, % 3.3 2.8 P/E ratio5) 14 10 P/E ratio excl. items affecting comparability5) 14 15 EV/EBITA6) 11 12 EV/EBITA excl. IAC6) 11 12 Beta coefficient7) 0.15 0.18 Pay-out ratio, % 48 28 Equity 125 127 Number of registered shares, December 31 (millions) 693.1 702.3 Number of shares outstanding, December 31 (millions)8) 683.0 694.9 Average number of shares before and after dilution, (millions)8) 689.0 700.3 1) Total operations. 2) Continuing operations. 3) Excluding amortization of acquisition-related intangible assets. 4) Board of Directors’ dividend proposal. 5) Share price at year-end divided by earnings per share. 6) Market capitalization plus net debt plus non-controlling interests (EV) divided by EBITA (EBITA = operating profit before amortization of acquisition-related intangible assets). 7) Share price volatility compared with the entire stock exchange. 8) Excluding treasury holding. Shareholder structure Holding No. of share- holders No. of shares Capital (%) Votes (%) 1–1,000 94,316 19,265,003 2.8 3.2 1,001–10,000 13,627 36,692,460 5.3 5.9 10,001–20,000 722 10,167,463 1.5 1.4 20,001– 864 626,929,563 90.4 89.5 Total 109,579 693,054,489 100.0 100.0 Source: Euroclear, December 30, 2025. Ticker names Nasdaq Stockholm ESSITY A, ESSITY B Bloomberg ESSITYA:SS, ESSITYB:SS REUTERS ESSITYa.ST, ESSITYb.ST Essity’s largest shareholders At December 30, 2025, the following companies, foundations and mutual funds were the ten largest registered shareholders based on voting rights: Shareholders Votes (%) Holding (%) AB Industrivärden 29.5 11.4 AMF Insurance and Funds 6.3 1.4 Norges Bank Investment Management 5.4 2.2 T. Rowe Price Funds 3.2 5.5 BlackRock 2.2 3.9 Vanguard Funds 2.2 3.8 Skandia 2.1 0.9 Swedbank Robur Funds 1.9 3.4 Handelsbanken Fonder 1.7 3.0 Carnegie Fonder 1.5 2.6 Other owners 44.0 61.9 Total 100.0 100.0 Of which treasury holding 0.8 1.4 Source: Euroclear, December 30, 2025. Sweden, 55% USA, 22% UK, 5% Norway, 4% Luxembourg, 4% Other countries, 10% Total foreign ownership, 45% Source: Euroclear, December 30, 2025. Share distribution Class A Class B Total Number of registered shares 58,200,658 634,853,831 693,054,489 Of which treasury holding 10,005,826 10,005,826 In 2025, 1,772,996 Class A shares were converted to Class B shares at the request of shareholders. The total number of votes in the company subsequently amounted to 1,216,860,411. Source: Euroclear, December 30, 2025. Ownership by country Essity | Annual Report 2025 9 Introduction The share The share Information to shareholders Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 10
Information to shareholders Annual General Meeting The Annual General Meeting will be held on Thursday, March 26, 2026 at 2:00 p.m. at Stockholm Waterfront Congress Centre, Nils Ericsons Plan 4, Stockholm (registration from 1:00 p.m.). The shareholders also have the opportunity to exercise their voting rights by voting in advance (so-called postal voting) ahead of the Annual General Meeting. Shareholders may thereby choose to exercise their voting rights at the Annual General Meeting 2026 by attending in person, through a proxy or by advance voting in the manner described in the notice. Notice convening the Annual General Meeting can be found on essity.com. Nomination Committee • Helena Stjernholm, AB Industrivärden, the Chairman of the Nomination Committee • Anders Hansson, AMF and AMF Funds • Celia Grip, Swedbank Robur Funds • Anders Jonsson, Livförsäkringsbolaget Skandia • Jan Gurander, Chairman of the Board of Essity The Nomination Committee prepares, among other things, the proposal for election of Board members. For further information, refer to the Corporate governance report on pages 100–109. Dividend The Board of Directors proposes an increase in the dividend of 6% to SEK 8.75 (8.25) per share. Based on the number of shares outstanding on December 31, 2025, the dividend corresponds to a total amount of SEK 5,977m (5,711). The record date for entitle- ment to receive dividends is proposed as March 30, 2026 and payment is expected to be made on April 2, 2026. For Essity’s financial calendar 2026–2027 and other information, see page 191. Essity | Annual Report 2025 10 Introduction The share The share Information to shareholders Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 11
Digitalization means increased opportunities for value creation. Interaction with consumers through various digital platforms and channels is increasing. Essity is leveraging digitalization across the value chain, strengthening e-com- merce and direct-to-consumer models, and adopting new technologies where these create value for customers and consumers while increasing business performance. Generative artificial intelligence (AI) is increasingly used to personalize content, enhance efficiency and productivity of operations, and support innova- tion. Essity is investing in AI literacy training to unlock opportunities across the organization, drive innovation and ensure regulatory compliance. External environment Essity continuously analyses its external environment to identify opportunities, risks and drivers for profitable growth. Several trends within areas such as demographics, hygiene and health, sustainability and digitalization provide favorable conditions for good growth in the global hygiene and health market. Hygiene and health are fundamental to human well-being. Awareness of the connection between hygiene and health remains high post-pandemic, with the emphasis on preven- tive measures and self-care, such as good hand hygiene and cleaning procedures at home and in public spaces. Antimicrobial resistance is a growing threat with global health and economic implications, highlighted by the World Health Organization. Demand for hygiene products is driven by improved access to health services in emerging markets and growth in preventive spending in mature countries. Self-care is increasingly important in health promotion and disease prevention, which is reflected in consumer behaviors and product offerings in the market. Essity’s portfolio encompasses a broad range of superior hygiene and health products and services for medical care, self- care and preventive care. A growing global population and longer life expectancy are driving demand for hygiene and health products. An aging population is creating increasing demand for care, fueled by the rising prevalence of incontinence and other chronic conditions such as lymphedema. An increasing disparity between rising care demands and limited resources is placing mounting pressure on healthcare systems. Younger generations, particularly Generation Z (1997–2012), Generation Alpha (2013–2024), and Generation Beta (from 2025) are and will become increasingly influential. Generation Z values authenticity, ethics and sustainability. Generation Alpha is entering the period care market, as menarche often occurs in early adolescence. Like Generation Z, they are digital natives, active on social media. Generation Beta, is starting to be born now and will shape future trends. Essity targets all age groups to meet the needs for innovative hygiene and health solutions at all stages of life. Environmental and social sustainability, including climate change, human rights and equal opportunities, remains strong and important. Climate change and greenhouse gas emissions are at the forefront, alongside water conservation, biodiversity protection, circular economy practices, and waste reduc- tion. Regulatory pressure is increasing, with measures such as nature restoration, water resilience, and extended producer responsi - bility gaining momentum. Social priorities, including human rights, diversity, equity, and inclusion, are essential to building resilient and fair societies. Sustainability is an integral part of Essity’s business strategy and is embedded in our daily work. Demographics Sustainability Hygiene and health Digitalization Essity | Annual Report 2025 11 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 12
Essity’s global hygiene and health market 2025 720 SEKbn ˜2–3% 1) The addressable market refers to category and market combinations where Essity already operates (certain category and regional exceptions apply). Source: Information compiled by Essity for presentation purposes based on external market sources and internal estimates. Asia 15 SEKbn ˜3–4% Europe 370 SEKbn ˜1–2% Latin America 100 SEKbn ˜2–3% Other 45 SEKbn ˜4–5% North America 190 SEKbn ˜2–3% Essity’s addressable1) hygiene and health market = Expected annual market growth, CAGR (Compound Annual Growth Rate) 2025–2031 Growth potential in different regions The penetration and use of hygiene and health products and services vary between regions – from relatively high in mature markets to relatively low in emerging markets. For example, consumption per capita of incontinence products in Latin America is only about one fourth of that in Western Europe, and tissue consumption in Eastern Europe is only about one third of that in Western Europe. Several trends are driving the increased demand in emerging markets, including achievement of higher living standards, urbanization-induced expansion of the retail trade and e-commerce, heightened awareness of hygiene and health and greater access to medical care. Essity aims to defend and grow leading market positions in mature markets and capitalize on growth opportunities in emerging markets. Essity’s addressable global hygiene and health market in 2025 amounted to approximately SEK 530bn in mature markets and to approximately SEK 190bn in emerging markets. Per business areas Health & Medical Europe, 43% North America, 37% Asia, 8% Latin America, 6% Other, 6% Läs mer på sidan 29. Consumer Goods Europe, 63% Latin America, 19% North America, 15% Other, 3% Läs mer på sidan 31. Professional Hygiene North America, 46% Europe, 32% Latin America, 9% Other, 13% Läs mer på sidan 33. Essity | Annual Report 2025 12 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 13
Global Europe North America Latin America Professional Hygiene 1 1 2 1 Incontinence Products 1 1 5 1 Medical Solutions1) 2 1 8 2 Consumer Tissue 3 1 – 3 Feminine Care 5 3 – 1 Baby Care 5 2 – – Essity’s market positions Source: The information has been compiled by Essity for presentation purposes based on external market sources and internal estimates covering all markets in the listed categories. 1) Consolidated position, which includes the Wound care, Compression Therapy and Orthopedics product segments. Source: The information has been compiled by Essity for presentation purposes based on external market sources and internal estimates covering all markets in the listed categories. 0 100 200 300 400 500 600 0 500 1,000 1,500 2,000 2,500 3,000 0 100 200 300 400 0 10 20 30 40 Incontinence Products Number of products per person with incontinence/year Baby Care Number of baby diapers per child up to the age of 2.5 years/year Feminine Care Number of menstrual products per woman aged 15–49 years/year Tissue Kg per capita/year North America Western Europe Eastern Europe Latin America Asia Use JOBST Confidence has been developed to help patients with lymphedema and lipedema move freely while receiving effective compression therapy. ® Essity | Annual Report 2025 13 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 14
Breaking barriers to well-being Value for our stakeholders • Enable more people every day to enjoy a fuller life • Contribute to a more sustainable and circular society • Generate increased shareholder value through profitable growth Business areas Group targets Vision To be the undisputed global leader in hygiene and health Mission Develop, supply and sell superior hygiene and health products, solutions and services • Health & Medical • Consumer Goods • Professional Hygiene Profitable and sustainable growth • Annual organic sales growth of >3% • EBITA Margin excl. IAC >15% • Solid investment grade rating • Long-term stable and rising dividends • Sustainability includes, among other things, science-based targets with the ambition to achieve net zero emissions by 2050 and that all production waste should be subject to material or energy recovery by 2030 Purpose Vision and mission Intangible key resources and value creation in the strategy and business model Intangible assets are a central part of the Group’s value creation and contribute to increased competitiveness and long-term sustainability-driven growth. Employee expertise and a culture characterized by collaboration and a focus on results are crucial to implementing the strategy. Patent-protected innovation, new products and strong brands strengthen our market position, deepen customer relations and drive sustainable growth and profitability. Essity uses advanced digital technologies and data analysis to optimize production, as well as its own platforms for sales, distribution and customer insight, which creates operational synergies and strengthens the business model. Read more under the respective success factors in the strategy on pages 15–34 and in the sustainability section on pages 47–99 Value creation for our stakeholders – Essity’s strategic framework Strategy Where to play: ChannelCategory Geography Operational leadershipInnovation SustainabilityPeople & culture Brand building How to win: Essity | Annual Report 2025 14 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 15
Where to play Category choices We focus on hygiene and health categories where product performance and brand preference matter. Hygiene and health are the essence of well-being. Essity’s port- folio of hygiene and health products and services play an essen- tial role in improving well-being for the benefit of consumers, patients, caregivers and customers across the globe. Essity enables superior hygiene outcomes and experiences, at home and away from home, by supporting the effectiveness and efficiency of hygiene routines, and by preventing, treating and monitoring health conditions. Across our businesses, we are guided by consumer insights and delivering superior product performance to meet the needs and expectations of consumers, patients, caregivers and customers. Essity currently touches the lives of 1 billion people every day in 150 countries, meaning that 7 billion people have yet to discover our products. We strive to reach more people with our leading hygiene and health products, improve quality of life and create impact for those we reach, while building long-term shareholder value. Profitable growth opportunities – nurture the core and expand for more Essity continues to develop its portfolio towards more profitable segments and prioritizes expansion in areas where the company can leverage its core competencies and strengthen its opportu- nities to succeed in the market. We tap into expanding markets where favorable trends fuel profitable growth opportunities. Essity’s key priority is to leverage, grow and strengthen our core business while enabling profitable expansion into new cate- gories and business models with high growth potential, low capital intensity and high yields. Examples include digital and preventive products in conti- nence care under the TENA Brand. The TENA SmartCare Change Indicator is a reusable sensor that notifies caregivers when a TENA product needs changing, improving care efficiency and comfort for individuals living with incontinence. As part of expanding the portfolio, TENA has furthermore introduced SmartCare Bladder Sensor, a clinically validated product avail- able in selected European markets. This wearable ultrasound device helps individuals to better manage urinary incontinence by monitoring bladder fullness in real time. It sends discreet alerts to a smartphone or smartwatch when it is time to visit the toilet, helping reduce leaks, boosting confidence and improving overall quality of life. Value-creating acquisitions Acquisitions have played a crucial role in building the Essity of today, and they continue to be a way to broaden the company and strengthen the product portfolio and geographical footprint. Essity aims to capture growth opportunities through acquisitions in all business areas, primarily within the categories of Medical Solutions, Incontinence Products, Feminine Care and Profes- sional Hygiene. In Medical Solutions, Essity focuses mainly on advanced wound care while in Professional Hygiene prioritizes acquisitions in areas such as soap, disinfectants, and wiping and cleaning products. In 2025, Essity entered into an agreement to acquire Edgewell’s feminine care business in North America, including the Carefree, Stayfree and o.b. brands for that region, as well as Playtex glob- ally. The acquisition was completed in the beginning of 2026 and will strengthen Essity’s market position in the region. ChannelCategory Geography TENA has expanded its portfolio with SmartCare Bladder Sensor, a clinically validated product available in selected European markets. The wearable ultrasound device helps manage incontinence by monitoring the bladder in real time. Essity | Annual Report 2025 15 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 16
Where to play Geographic choices We strive for growing positions in North America, Latin America and East Asia, while strengthening and expanding our European presence. Essity sees global growth opportunities in all three business areas. Growth is prioritized where the company already holds strong market positions and where these are supported by favor- able market trends. Our strong market positions in Europe offer a solid base for scale and further expansion. In addition, North America represents a significant growth opportunity. Over time, Essity strives to increase the company’s share of sales and earnings in emerging markets, mainly in Latin America and Asia, where consumption of hygiene and health products and services is lower than in mature markets. Europe Essity’s addressable European hygiene and health market amounts to approximately SEK 370bn, with expected growth of approximately 1–2% between 2025 and 2031. A key priority for Europe is to defend our strong leading market positions and to grow in key markets through differentiation and innovation, and by extending the portfolio into adjacent categories. North America Essity’s addressable hygiene and health market in North America amounts to approximately SEK 190bn, with expected growth of approximately 2–3% between 2025 and 2031. Essity has a market presence across all three business areas and is a market leader in leakproof apparel with the Knix brand. Over the past number of years, acquisitions have been completed in all business areas to strengthen the portfolio of products and brands. The aim is to continue growing profitably, both organically and through acquisitions. Latin America Essity’s addressable Latin American hygiene and health market amounts to approximately SEK 100bn, with expected growth of approximately 2–3% between 2025 and 2031. We are present in several categories across all three business areas in many Latin American countries. The Group holds strong brands and market positions in Latin America, with leading positions in the Consumer Goods categories of Feminine Care and Incontinence ChannelCategory Geography Products. Additionally, we are growing our Health & Medical and Professional Hygiene business areas. The region offers opportu- nities for further profitable growth based on increasing penetra- tion levels across categories and higher per-capita consumption levels. Essity aims to continue expanding its footprint across the region. Asia Essity’s addressable Asian hygiene and health market amounts to approximately SEK 15bn, with expected growth of approximately 3–4% between 2025 and 2031. This will be driven by population growth, higher living standards and rising disposable incomes. After the divestment of the Vinda holding, we retain a presence in Asia through continued licensing of Essity’s brands in Tissue and Personal Care. In Health & Medical, Essity has strongholds in selected countries in Asia, such as Indonesia, Thailand and India. Asia accounts for 2% of Essity’s net sales, primarily in Health & Medical. We remain committed to our long-term goal of devel- oping a strong presence in Asia across all three business areas. Other regions Essity is present in all categories across all three business areas in Australasia. In the Middle East and Africa, we maintain a selective presence through direct sales or distribution agree- ments and have successfully established strongholds in several categories. We continuously evaluate strategic expansion opportunities that offer synergies and drive profitable growth. For instance, Libero is a leading brand of baby diapers in Kuwait. In Professional Hygiene, Essity has strengthened its footprint in the Middle East with the launch of the first “Made in UAE” Tork product, developed in collaboration with a local paper mill and converter to meet the specific needs of the regional market. During the year, Essity established a new regional headquarters for its Health & Medical business in Riyadh, Saudi Arabia, to strengthen operations and expand market presence to accelerate growth. New Tork soap formulas developed for the MEIA region are made for warmer climates. Essity | Annual Report 2025 16 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 17
Where to play Channel choices We aim to be present in all relevant channels for consumers, patients, caregivers and customers. Presence in channels for relevant target groups Essity aims to have a presence across all relevant online and offline channels where consumers, patients, caregivers and customers are present. By delivering superior experiences, an effective go-to-market model and best-in-class service, we strive to build strong relationships with consumers, patients, care- givers and customers. Essity’s products and services are distrib- uted through the retail trade, distributors, pharmacies, hospitals and e-commerce. Accelerate e-commerce and increase digital visibility Digitalization continues to transform how we market and sell our products and services and how we build relationships. To enable more personalized and data-driven engagement, Essity is complementing traditional offline distribution by strengthening its presence in digital channels. By deepening digital interaction, sharper insights into buyer and user needs and behaviors are gained, allowing us to communicate and engage with them more effectively, deliver more relevant experiences and strengthen brand loyalty. The direct-to-consumer and direct-to-customer models open new opportunities to raise awareness and engage- ment, attract new target groups, and deepen relationships with existing ones. Essity is expanding its digital presence in categories such as menstrual health, incontinence and professional hygiene. For example, our menstrual brands use platforms such as TikTok to reach out to and educate young girls about puberty and men- struation. In Brazil, we launched the country’s first dedicated e-commerce platform for incontinence products, which grew sales across channels and secured our market-leading position. In the B2B area, Essity is enhancing the customer journey by offering a more consumer-like experience through personalized digital platforms. Initiatives such as the improved Tork web shop enhance usability and performance for distribution partners. As expectations rise, we continue to invest in seamless omni- channel experiences that meet customers’ changing needs. Essity also has a strong presence on leading retailer and distributor e-commerce platforms, ensuring broad availability and visibility in different markets. ChannelCategory Geography Our feminine care brands use platforms such as TikTok to reach out to and educate young girls about puberty and menstruation. Essity | Annual Report 2025 17 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 18
How to win People and culture A culture where people thrive We are convinced that good leadership is fundamental to creating a strong culture, high employee engagement and achieving world-class results. Essity’s leaders support innovation, development and collaboration. Expectations on leaders at the company are clearly defined and serve as the basis for our leader- ship recruitment and development. Essity provides a portfolio of leadership programs that are deployed globally to ensure excel- lence in leadership fundamentals and to build capabilities for the future. Our diverse workforce and inclusive culture are a competitive advantage. To bring out the best in everyone, Essity strives to create an inclusive environment where employees are listened to, motivated to do great things, get support to develop and where learning is part of everyday activities. We constantly chal- lenge ourselves to deliver better results, while continuously seeking to improve our work methods. Attracting, recruiting and growing talent Essity attracts, recruits and develops today’s talent for the Essity of tomorrow. The company is recognized as an attractive employer in the countries where Essity operates and has been named one of Sweden’s most attractive employers by Karriär- företagen. We build relationships with future talent, focusing on communicating our employer offering which is based on three themes: Innovate for Good, Excel Together and Be You with Us. Essity rewards employees using a total reward approach, which entails a combination of monetary and non-monetary compo- nents. We offer competitive remuneration comprising salary, variable remuneration, pension and other benefits. Essity follows local salary structures and respects internationally established rules for minimum wages and adequate compensation. The vari- able remuneration programs cover most employees at Essity. Essity’s workplace philosophy encompasses a work environment featuring attractive offices and flexibility, as well as Group-wide health and safety programs. To provide a consistent employee experience, a global onboarding program has been imple- mented to enable new employees to effectively onboard to Essity. The employee experience is regularly monitored in our MyVoice engagement survey. Learning as part of everyday work When people grow, Essity grows. We focus on growing talent from within, ensuring a healthy talent flow across functions and organizations. The continuous development of employees and leaders is crucial for Essity’s long-term success and its oppor- tunity to attract and retain the right talent and skills. Learning and development are fundamental elements of our employees’ everyday life and take place through practical experience, training and interactions with colleagues. We drive the deve l- opment of talent and individual development plans based on Operational leadershipInnovation SustainabilityBrand building business requirements, personal strengths and identified devel- opment areas. Our aim is that everyone will learn as they work and that leaders will prioritize development for their employees and themselves. Employees engage in regular dialogues with their line manager to define goals and concrete activities to develop in their current roles and toward their next career step. The Essity University offers training and development formats for employees to ensure the cultivation of capabilities required for a future-fit organization. Emphasis is placed on leadership capabil- ities as well as functional capabilities, provided through training curriculums in Essity academies. An inclusive, safe and healthy workplace Essity is dedicated to promote sustainability and well-being for our employees. Our workplaces should be safe, attractive and inclusive, and support a positive employee experience. Essity aims to have a work environment free from accidents and with a healthy working culture, actively promoting employees’ physical, mental and social well-being, for a sustainable work life. I Care is our global excellence program aimed at creating a safe and healthy work environment. As part of this program, we have implemented the Global Employee Assistance Program for all employees and their households to provide them with support in the event of challenging life situations. Essity continues to realize our diversity, equity and inclusion plans, including by embedding them in our people practices. Essity’s commitment to diversity, equity and inclusion is outlined in the Group’s goal for gender distribution at management levels. Read more on pages 77–84. People & culture Beliefs We collaborate across teams, functions and businesses We have the courage to take the lead We care for our customers, consumers, the environment and each other We are committed to delivering superior results Essity’s Beliefs & Behaviors Our purpose Breaking barriers to well-being forms the foundation of Essity’s corporate culture and is reflected in our Beliefs & Behaviors, which serve as a compass for how we work. We strive to build a future-fit organization and culture where people and business thrive. The culture is based on our purpose and reflected in our Beliefs & Behaviors. This yields high engagement, makes Essity an attractive employer and creates business value. Essity | Annual Report 2025 18 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 19
How to win Leading brands We build superior brands with leading brand equity for improved well-being. Strong market positions Essity has a portfolio of leading purposeful brands with signifi- cant brand equity. Our goal is to achieve category leadership, securing the number one or two branded market positions across our portfolio. Essity holds the number one or two position in approximately 90% of branded sales Essity’s diverse range of products and services are focused on elevating standards in hygiene and health. Through targeted marketing campaigns, we address and eliminate hygiene and health-related taboos and stigmas. The value of our marketing investments is enhanced by engaging with consumers, patients, caregivers and customers through digital channels. Together with product innovation, this creates strong, purposeful and appreciated brands. Essity has launched several important brand-building campaigns and initiatives, for example: • The global feminine care campaign “Never Just a Period” was a standout winner at the 2025 Cannes Lions Festival of Creativity, earning one Gold Lion and three Bronze Lions across cate gories. This bold campaign challenges societal taboos around mens- truation by highlighting the diverse experiences of women, from first periods to fertility, contraception, menstrual pain, and menopause, and aims to close the period knowledge gap. • The TENA “Rethink Bladder Leaks” campaign challenges stigma around incontinence by empowering women to speak openly, promoting proper product use, and reframing bladder leaks as a normal part of life and not something shameful. It features bold storytelling, influencer engagement, and educa- tional tools to drive awareness and behavioral change about incontinence. • The Leukoplast “Undeserved” campaign highlights disparities in wound care, championing the belief that healing should be a universal right, not a privilege. Through powerful real-life stories of patients impacted by bias such as skintone, age and life circumstances, the campaign advocates for inclusive care and access to healing for all. Operational leadershipInnovation SustainabilityBrand building People & culture Through the #EverySqueezeCounts initiative, TENA provides training guides and support to gyms and personal trainers – so that more women can exercise without worrying about urine leakage. Essity | Annual Report 2025 19 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 20
How to win Innovation leadership Consumer and customer insights drive innovation and growth. Innovation makes us the first choice Continuous innovation is crucial to achieving product superi- ority, strengthening brand loyalty and creating commercial value, while improving people’s well-being and promoting a more sustainable society. Innovation takes place not only in products, but also in marketing, business models, technology and processes, all with the aim of driving profitable growth and strengthening market positions. At Essity we focus on impactful innovations with high returns and speed to market. We leverage our global presence, economies of scale and local insights to deliver superior and sustainable user experiences. Innovation plays a critical role in safeguarding our pricing power, securing competitive cost positions, and drive growth through meaningful differentiation. Sustainable innovations that improve everyday life Essity focuses on innovations that enhance hygiene and health outcomes and experiences and reduce the company’s environ- mental footprint, all while yielding profitable growth. Our target is that at least 50% of Essity’s innovations are to generate social and/or environmental improvements annually. In 2025, the outcome was 80%. Examples of key innovations this year Essity continues to leverage and scale its innovations and drive product superiority to differentiate ourselves in the market. During 2025, Essity launched several innovations across all three business areas: In Health & Medical, the TENA product lines Complete +Care Ultra and TENA ProSkin for sensitive skin, have expanded to include new sizes up to 4XL. These are designed to better serve individuals with larger or taller body types. This range expansion is part of Essity’s efforts to better serve people with specific needs in incontinence care by making products more comfort- able and effective. Essity continues to focus on TENA Total Care, a holistic value proposition for long-term care settings. The goal is to improve continence care outcomes while enhancing operational effi- ciency and sustainability in health care. TENA Total Care inte- grates absorbent hygiene products, skin care, digital health technologies and training into a unified care model. Actimove® Manus Air is an innovative wrist brace engineered to support distal radius fracture healing while elevating the experi- ence for both patients and caregivers. Designed for efficiency and comfort, it offers a faster application process, reducing the time required by up to 50%, and is water resistant and more portable compared to traditional splints. Essity has launched Cutimed® Siltec® Sorbact® globally, expanding our wound care portfolio with an innovative product that combines Essity’s advanced healing foam technology with Sorbact’s bacteria-binding action. It helps manage infection and support healing without contributing to antimicrobial resistance. This strengthens our position in advanced wound care and supports growth in key healthcare markets. In Consumer Goods, Essity is expanding its patented coreless toilet paper technology to new markets and product categories. Essity is the first company that has established coreless toilet paper and household towels in consumer markets, distinctly differentiating the company in the marketplace. This innovation offers longer-lasting rolls, reduces CO2 emissions by up to 6% over a product life cycle, and cuts down on transportation and storage needs. The Lotus Just1 coreless toilet paper was launched in France in 2025, with Germany (under the Zewa brand) and other European markets to follow. Another example of our focus on consumer needs is TENA MEN Protective Boxer, incontinence pants for men with a new design that provides a more comfortable and discreet fit. The product has built-in protection with SpeedDry Zone textile technology for rapid absorption. In Professional Hygiene, The Tork Matic® Automatic Hand Towel Roll Dispenser is a high-capacity, sensor-activated dispenser designed for hygienic, efficient and intuitive hand drying in public and professional washrooms. The battery life of up to six years sets a new industry benchmark, significantly reducing mainte- nance time. The dispenser is part of Essity’s Tork brand and is widely used in such sectors as healthcare, hospitality and food service. Essity has also launched two new soap formulations under the Tork brand, Scented Foam Soap and Scented Liquid Soap, specifically designed to perform well in warmer climates. Operational leadershipInnovation SustainabilityBrand building People & culture TENA MEN Protective Boxer with a new design, comfortable and discreet fit and built-in protection with SpeedDry Zone for fast absorption. Essity | Annual Report 2025 20 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 21
How to win Operational leadership Driving consumer and customer centricity through operational efficiency, agility and continuous improvement. At the end of 2025, Essity announced measures to create better conditions for profitable growth and further enhance its opera- tional leadership. Actions include an organizational change that decentralizes decision-making and strengthens end-to-end accountability for each product category, and the launch of a cost savings program. The change will simplify Essity’s structure while maintaining economies of scale where relevant. This will further enhance customer and consumer focus, increase speed, agility, and operational efficiency. The cost savings program primarily targets sales and administrative expenses and is expected to generate annual savings of approximately SEK 1bn, with full effect by the end of 2026. Part of this amount will be achieved through organizational changes. The cost savings will mainly be invested in profitable volume growth. Essity addresses operational efficiency across the entire business, from research and development, marketing and sales to the company’s customer-centric supply chain. We achieve exceptional efficiency and service excellence through digitali- zation, with a continuous focus on improvement, cost savings and sustainability. Commercial excellence Essity is implementing go-to-market models designed around customer needs and consumer buying journeys. The foundation of our market success lies in consistently maximizing the perfor- mance of our sales engine, driving commercial effectiveness and efficiency, while elevating customer experience and delivering superior, reliable service. We also harness technology and automation to enhance productivity and strengthen customer relationships. Furthermore, we are continuously advancing our customer-centric omnichannel approaches to ensure seamless interactions and adaptability to evolving buying behaviors. Safety first At Essity, the safety, health and well-being of our employees are our highest priorities. Through our I Care program, with its inno- vative tools and methodologies, we maintain a culture that empowers all Essity employees to come home from work safe and healthy every day. In 2025, the Frontline Health and Well-being program, part of I Care, was launched across six manufacturing sites, reinforcing Essity’s commitment to creating a healthier and more supportive work environment. This initiative focuses on three key pillars of employee well-being: physical, mental and social health. At Essity, we believe that enhancing well-being is essential to improving both safety performance and overall productivity. This year’s progress reflects our continued dedication to the I Care journey, our holistic strategy for excellence in risk management, environmental stewardship, safety, health, and well-being. The progress of total recordable injury (TRI) is tracked as one of our Group targets. The target was a 75% reduction in TRI frequency by 2025 compared to 2019. The outcome for 2025 is –66%. Read more on pages 81–84. Suppliers Essity supports sustainable development across its value chain. We provide products to our customers and consumers that are made and delivered with respect for people and the environ- ment. To facilitate this, we source from suppliers that share our values. There is a specific focus on supplier value creation, meaning that opportunities are sought with existing and poten- tial suppliers to develop products that can potentially reduce our carbon footprint while ensuring a resilient and cost-efficient supply chain. This also includes optimizing logistics and distribu- tion and implementing digital products and breakthrough tech- nologies that can lead to significant efficiency improvements and reduced waste and energy consumption. Operational leadershipInnovation SustainabilityBrand building People & culture At Essity, the health and safety of our employees is a top priority. Essity | Annual Report 2025 21 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 22
How to win Manufacturing Excellence Within the framework of Manufacturing Excellence, Essity works with continuous improvements through its focus on people, processes innovation, efficiency, quality and sustainability. This drives employee engagement and increases productivity. It reflects how we achieve strong performance in manufacturing by developing the capabilities of our teams, for example by increased responsibility for the equipment. Sustainability in our supply chain We strive to reduce waste, logistics and distribution costs while increasing productivity and optimizing material and energy utili- zation. This helps to lower the environmental footprint, ensuring cost savings through an optimized production structure, efficiency improvements and digitalization, in addition to raw material and energy savings. These measures facilitate growth without a corresponding increase in the pace of investments. During 2025, savings in cost of goods sold amounted to approxi- mately SEK 0,5bn at the same time as Scope 1 and 2 carbon emissions were reduced by 27% compared to 2016. Supply chain transformation Competitive advantages are created through a comprehensive customer-centric supply chain that utilizes proven and innovative planning and logistics platforms. This yields increased resilience, improved delivery times and strengthened relationships with customers and suppliers, thereby enhancing service for customers and consumers. We are making progress in leveraging Essity’s planning and logistics platforms. We have captured customer and consumer demand signals with innovative machine learning modules. We have also shipped products across more than 60 countries from our Smart Hubs in Europe and North America, delivering efficiency gains including transportation emission reductions. Digitalization Essity is leveraging digitalization across the value chain and adopting new technologies where these create value for customers and consumers while increasing business perfor- mance. Our aim is to optimize and improve internal operations through AI and advanced analytics, and to increase automation and robotization of production, distribution, logistics and administration. In 2024, Essity signed the European Artificial Intelligence Pact, and during 2025 we actively reinforced our commitment to responsible AI development and initiated preparations for the EU AI Act. To meet EU standards for safety, fairness and accountabil- ity, we established governance structures, adopted transparency measures and promoted AI literacy, all aligned with our AI Ethics Policy. Through the digital transformation program, Essity Way of Winning (EWoW), deployment to the first wave of countries has been completed. This will provide a critical foundation for harmonized processes and quality data, thereby enabling continuous improvements in analytics and automation. We are investing in analytics tools to understand and improve supply chain performance. Essity’s production facilities monitor more than 50 million data points every hour and by processing this data, material and energy usage is optimized to reduce green- house gas emissions and waste. On critical production lines, we moved to 100% automatic product inspection. For maintenance, we are utilizing AI to prevent mechanical unplanned downtime, with a quantified cost avoidance. Production optimization tools enable production facilities to reduce greenhouse gas emissions by adapting process setpoints and through real-time monitoring of energy consumption. Operational leadershipInnovation SustainabilityBrand building People & culture Our goal is to optimize and improve internal processes through AI and advanced analytics, as well as to increase automation and roboti- zation in production, distribution, logistics, and administration. Essity | Annual Report 2025 22 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 23
How to win Sustainability leadership A core enabler of long-term value creation At Essity, sustainability is a core pillar embedded in our strategic framework, guiding how we operate, grow and innovate. By aligning environmental, social and governance priorities with our financial targets and growth ambitions, we build resilience, strengthen our competitiveness, support long-term growth and generate measurable impact for people, society and the environment. As global demographics and societies evolve, hygiene and health play a critical role in improving well-being, participation and productivity for individuals, while enhancing performance and outcomes for organizations and communities. We are committed to continuous innovation and responsible growth to deliver better, more sustainable products that further extend these impacts. A healthy environment is also crucial for long-term well-being. Climate change, water stress and resource scarcity impact people, societies, and businesses worldwide. Essity is commit- ted to reducing our environmental footprint while meeting the growing demand for hygiene and health products. Essitys Sustainability Playing Field Essity’s Sustainability Playing Field defines the company’s key social and environmental priorities, serving as our framework for action. It guides how we drive meaningful societal change and reduce our environmental footprint. Our social priorities Under the social pillar of our Sustainability Playing Field, the focus is on five key topics: hygiene and health; diversity, equity and inclusion (DEI); occupational health and safety; product safety; business ethics and human rights. Together, these topics form the foundation of our social sustainability agenda, defining how we create value for people and society. The social impact of hygiene and health is at the core of our business. Essity focuses on the following four areas in hygiene and health: women’s health, the care economy, infection preven- Sustainability Playing Field tion, and hygiene and sanitation. Through Essity’s brands and partnerships, we expand access to essential hygiene products, provide practical knowledge, and promote hygiene standards that directly improve health and well-being in communities. We advocate for access to women’s health, promote menstrual equity, and support inclusive global health dialogues through the World Economic forum’s Global Alliance for Women’s Health (until 2025) and UNFPA’s Coalition for Reproductive Justice. Essity also provides innovative products in the areas of menstru- ation, incontinence and compression that enable better out- comes and experiences. Moreover, our wide-reaching brand campaigns break taboos and stigmas in women’s health. Campaigns such as TENA’s #NoLoveLikeIt elevate the visibility of informal family carers, highlighting their contributions in care infrastructures and the support they need. Essity also aims to help close the care gap by providing innovative products that enable efficient and high-quality care, whether delivered by professionals or family caregivers. Operational leadershipInnovation SustainabilityBrand building People & culture Essity | Annual Report 2025 23 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 24
How to win As part of the focus on hygiene and health, we promote hygiene awareness as a foundation for good health and well-being. In 2025, Tork launched the first coalition with the American Restroom Association, International Paruresis Association, and the consultancy Other Tomorrows to advance inclusive hygiene in public restrooms. Preventing infections is key to limiting antimicrobial resis- tance. Essity’s hand hygiene, surface hygiene, wound care and continence care products help stop infections in healthcare settings, public spaces and homes. Essity strengthens patient safety and improves health outcomes worldwide by prioritizing prevention, education and antimicrobial stewardship. We ensure that our operations support and protect employees and business partners through our commitment to diversity, equity and inclusion, occupational health and safety, business ethics and human rights. Key initiatives include achieving gender-balanced leadership, strengthening our I Care program to maintain a safe and supportive work environment across our operations. We are also upholding our Global Supplier Standard and Business Partner Code of Conduct to reinforce ethical practices across our value chain. Every day, Essity reaches more than one billion people world- wide with hygiene and health products. We ensure transparency and maintain the highest safety standards across our portfolio, enabling consumers and users to make responsible and confi- dent product choices. Our environmental priorities Our environmental priorities span climate action through decarbonization, responsible fiber sourcing, water stewardship, plastics reduction and waste management. We take account- ability for resource use and ecosystems, ensuring that our opera- tions and products minimize environmental impact and support circular products. Clear targets, roadmaps and programs are in place for each area to deliver measurable results. Decarbonizing our own operations is a central component of Essity’s climate action plan. Guided by the Science Based Targets initiative, we take measurable steps to reduce emissions, build resilience across operations and supply chains to strengthen competitiveness and safeguard our ability to operate globally. Advancing toward net zero We are working toward a net zero business by 2050, with a 2030 target to reduce emissions by 35% across the full value chain, from our own operations and purchased goods and services to transportation and product and production waste. While 2050 remains our long-term goal, we are focused on achieving measurable reductions in areas we directly control by 2030, prioritizing those with the greatest impact and collaborating with partners to drive progress across the broader value chain. Tissue production accounts for more than 80% of our manu- facturing emissions, making tissue sites a central focus of our decarbonization efforts. Each site is analyzed individually to implement tailored solutions, including improving energy effi- ciency, transitioning to lower-emission and renewable energy sources and exploring new technologies to further reduce emissions. Programs such as M-Save and E-Save optimize mate- rials and energy use, helping us make measurable progress toward our science-based targets. Renewable energy deploy- ment is adapted to local conditions: Lilla Edet in Sweden runs on biogas, Kawerau in New Zealand uses geothermal steam, and Kostheim in Germany demonstrated hydrogen-based carbon-neutral tissue production. Le Theil is the first Essity site in France using biomass. In March 2026, another biomass boiler will be inaugurated at the French privet label division site in Kunheim. Innovation for sustainable products Innovation is a key enabler of both environmental and social impact. Essity develops products, processes, services and ways of working that deliver measurable benefits for people and the planet. At least half of our innovations target social or environ- mental improvements, including products designed for end-of- life recycling or composting. Scaling these products requires collaboration with governments and authorities, and advocacy for systemic change, particularly in regions with high landfill use. Through continuous innovation, Essity ensures that our products remain effective, relevant and impactful across society. Alignment with new disclosure requirements From 2025 onwards, Essity will report under the Corporate Sustainability Reporting Directive (CSRD) and European Sustain- ability Reporting Standards (ESRS). Essity is prepared for the requirements under these frameworks, and our sustainability statements on page 47 provide further details on our material sustainability matters. For the sixth consecutive year, Essity has been acknowledged for its leadership in sustainability by the global non-profit environ- mental organization CDP. Essity has been recognized on CDP’s 2025 Supplier Engagement Leaderboard list for its efforts in involving suppliers in climate change initiatives. For the fourth consecutive year, Essity has been included in S&P Global’s Sustainability Yearbook. The company is ranked industry best in the Household Products category. Additionally, Essity has been listed in the Dow Jones Sustainability Index (DJSI), one of the world’s most prestigious sustainability indices. Another prestigious recognition is the one Essity received from EcoVadis, which awarded us the prestigious platinum medal this year. This places us among the top 1% of companies globally and reflects our strong commitment to sustainability. Operational leadershipInnovation SustainabilityBrand building People & culture Essity | Annual Report 2025 24 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 25
Essity creates value for customers, consumers, communities, employees, and shareholders through profitable and sustainable growth. The concept of profitable and sustainable growth has been broken down into a number of Group targets and policies. Annual organic sales growth Target: Outcome 2025: >3% 0.9% Dividend Policy Target: Outcome 2025: Long-term stable and rising dividends Capital Structure Policy Target: Outcome 2025: Maintain a solid investment grade rating In 2025, organic sales growth amounted to 0.9%, of which volume accounted for 0.0% and price/mix 0.9%. The Board of Directors proposes an increase in the dividend of 6% compared with 2024 to SEK 8.75 per share for the 2025 fiscal year. Read the dividend policy in its entirety on page 8. 1) Board of Directors’ dividend proposal. Net debt amounted to SEK 26,543m. Net debt in relation to EBITDA excl. IAC was 1.03. EBITA margin excl. IAC Target: Outcome 2025: >15% 14.1% In 2025, earnings were positively impacted by higher sales prices, while increased costs of goods sold had a negative impact. ” Solid investment grade rating” 8.75 1) SEK Financial targets and outcomes 2025202420232022 1 7.3 % 5.8% 0.2% 0.9% 2025202420232022 9.2% 12.8% 14.0% 14.1% Dividend per share, SEK 2025202420232022 7. 2 5 7.7 5 8.25 8.751) +20.7% TENA Discreet Ultra Pads deliver on the emotional need for maximum discretion, in addition to their superior protection. Essity | Annual Report 2025 25 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 26
Health and safety Decrease in total recordable incident rate Target 2025 (compared with 2019): Outcome 2025: –75% – 66% Total recordable incident (TRI) include Lost time accidents (LTA), Restricted work cases (RWC), Medical treatment cases (MTC), Permanent disabilities (P) and Fatalities (F). All of Essity’s production facilities are conducting purposeful and systematic work with safety issues. Science-based climate targets Reduction of absolute greenhouse gas emissions, Scope 1 and 2, and Scope 3 Target 2030 (compared with 2016): Outcome 2025: Scope 1 and 2 –35% Scope 1 and 2 – 27% Scope 3 –35% Scope 3 –15% Essity’s climate-affecting emissions are divided into three different classes (Scope) depending on origin. Scope 1 and 2 are directly linked to Essity’s production. Scope 3 reports indirect emissions in the value chain. Water Reduction of freshwater intake at tissue sites in water-stressed regions Target 2032 (compared with 2022): Outcome 2025: –25% –12% Fresh fiber Share of FSC®- or PEFC-certified fresh fiber Target (annual): Outcome 2025: 100% 99.7% Essity’s target is to reduce freshwater intake by 25% at eight tissue paper facilities in water-stressed regions by 2032, using 2022 as the baseline. This addresses the water consumption at sites with the highest risk of water stress and focuses on reduction of water intake. Through certifications such as the Forest Stewardship Council™ (FSC™ C003255) and the Programme for the Endorsement of Forest Certification (PEFC/16-33-1406), Essity ensures sustainable fiber sourcing, thereby preventing deforestation and promoting biodiversity. Sustainable innovations Share that yielded social and/or environmental improvements Target (annual): Outcome 2025: >50% 80% Our target for sustainable innovations is that at least 50% of Essity’s innovations will annually yield social and/or environmental improvements. Essity tracks the sales from launched innovations against both social and environmental improvement criteria. Innovations are classified as sustainable if meeting either one or both criteria. Gender distribution at management level Gender distribution on all management levels is to be between 40 and 60% for each respective gender Goal (annual): Outcome 2025: 40/60% 36/64% Essity’s goal is that gender distribution at all management levels (Executive Management Team, senior management, middle management) is to be within the interval 40/60%, where the majority group based on gender is to constitute no more than 60%. The goal is reported at an aggregate outcome level for the three management levels. For the outcome in 2025, 36% were women and 64% were men. Sustainability targets, goals and outcomes Essity | Annual Report 2025 26 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 27
Business ethics and Code of Conduct Share of new employees who received training in the Code of Conduct Target (annual): Outcome 2025: 100% 92% The Code of Conduct describes how employees are to act, how the company operates, stakeholder expectations of Essity and Essity’s commitment to human rights. All wholly owned subsidiaries are bound by the Code of Conduct. Responsible sourcing Share of total purchase cost from suppliers that comply with Essity’s Global Supplier Standard Target 2025: Outcome 2025: 95% 95% Packaging Share of packaging manufactured from renewable and/or recycled material Target 2025: Outcome 2025: 85% 81% Essity has a Global Supplier Standard to ensure responsible business operations and respect for human rights in the company’s supply chain. Essity is striving for 100% recyclability and 85% renewable or recycled material in the company’s packaging. This target applies to both paper and plastic packaging for Essity’s brands. Production waste Subject to material or energy recovery Target 2030: Outcome 2025: 100% 72% Resource efficiency and the reduction of waste are important in Essity’s production facilities. The target is that all production waste will be subject to material and energy recovery by 2030, which reduces greenhouse gas emissions. Lotus Just1 SansTube – our best toilet paper. One sheet is enough. Now more sustainable with paper packaging, no tube, and less waste. Essity | Annual Report 2025 27 Introduction The share Strategy External environment and market Strategy for value creation Targets and outcomes Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 28
Professional Hygiene Read more on page 33. Health & Medical Read more on page 29. Consumer Goods Read more on page 31. Our business areas Essity operates in an attractive hygiene and health market with leading market positions and strong brands. The Group’s three business areas in 2025 were Health & Medical, Consumer Goods, and Professional Hygiene. Within the respective business areas’ customer and sales channels, we offer innovative products and services for improved well-being of consumers, patients, caregivers and customers, and invest in long-term increased value creation. 20% of net sales 2025 54% of net sales 2025 26% of net sales 2025 Essity | Annual Report 2025 28 Introduction The share Strategy Business areas Our business areas Health & Medical Consumer Goods Professional Hygiene Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 29
Key figures 27,468 Net sales, SEKm 1.0% Organic sales growth 4,946 EBITA excl. IAC, SEKm 18.0% EBITA margin excl. IAC Holistic health and medical products along the continuum of care Health & Medical Essity is a global leader in health and medical products, shaping the future of care through well- known brands such as TENA, JOBST, Leukoplast, Actimove, Cutimed and Hydrofera Blue. Oper- ating worldwide, we offer products in continence care, wound care, compression therapy and orthopedics. We combine medical expertise with knowledge of patient, caregiver and consumer needs. By pro- viding innovation, education and digital tools, we support practices that generate better care out- comes, enhanced dignity, and more efficient care. Our solutions are delivered through pharmacies, medical device stores, hospitals, distributors, care institutions and e-commerce, ensuring accessi- bility across the continuum of care. We are continuously strengthening our efforts aimed at preventing and managing the health conditions we address, with the ambition to lead in one of the world’s fastest-growing sectors. The market growth is driven by an aging population, a higher prevalence of chronic diseases, and increasing care needs. The business area includes two categories: Incontinence Products Health Care Under the globally leading brand TENA, we offer a comprehensive range of incontinence products, skincare products and digital products. These are designed to support dignity, comfort and skin health and improve care efficiency in hospitals, care institutions and home settings. • Global market leader in incontinence care • Market leader in Europe and Latin America, growing presence in North America • Digital innovations such as TENA SmartCare improve conditions for patients and caregivers Medical Solutions Our medical solutions business delivers special- ized products and services across wound care, compression therapy and orthopedics, supporting healing, mobility and quality of life. Wound care Under the well-known brands Leukoplast, Cutimed and Hydrofera Blue, we offer a compre- hensive range of products for both acute and chronic wounds, designed for both health care institutions and home care. • #2 in Europe and #5 globally • Includes surgical tapes, post-op dressings, fixation for larger skin areas and specialized bandages • Unique technologies such as Sorbact® and Sorbion® support healing at every stage Compression therapy With the globally leading brand JOBST, we provide compression garments and bandages that help manage venous and lymphatic conditions. We offer both mass-produced and customized, tailor- made products. • Leading market positions in Europe and North America • Includes, among others, arm sleeves, stockings and wraps • Used for medical conditions, travel and athletic recovery Orthopedics Through Actimove and Delta-Cast, used by professionals and patients worldwide, we offer solutions for injury recovery and chronic conditions, such as osteoarthritis. • #3 globally • Includes braces, splints, casts and athletic tapes • Designed for skeletal, muscular and joint support Essity | Annual Report 2025 29 Introduction The share Strategy Business areas Our business areas Health & Medical Consumer Goods Professional Hygiene Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 30
Key figures 2025 2024 % Net sales, SEKm 27,468 28,599 –4% Organic sales growth, % 1.0 3.9 Gross profit margin excl. IAC, % 44.1 44.9 EBITA excl. IAC, SEKm 4,946 5,509 –10% EBITA margin excl. IAC, % 18.0 19.3 ROCE excl. IAC, % 15.0 16.3 Operating cash flow, SEKm 4,639 4,859 –5% Investments in non-current assets, net SEKm –878 –923 –5% Average number of employees 8,463 8,496 0% Change in net sales % 2025 vs 2024 Total –4.0 Volume 1.1 Price/Mix –0.1 Organic growth 1.0 Acquisitions – Divestments – Currency translation –5.0 Organic sales growth % 2024 vs 2023 % of net sales Incontinence Products Health Care –0.1 58 Medical Solutions 2.6 42 Net sales Net sales increased organically 1.0% as a result of higher volumes. Sales prices and the product mix were unchanged. Growth was positive in Europe and North America. In Inconti- nence Products Health Care, volumes were higher while sales prices were lower. The product mix was somewhat negative. Growth was restricted by weaker conditions in the healthcare sector in certain markets. Organic growth in Medical Solutions was mainly driven by higher volumes. Sales prices were also higher and the product mix was stable. Growth was positive in all therapeutic areas and was especially good in compression therapy and wound care. EBITA excl. IAC EBITA and the EBITA margin excl. IAC decreased. The cost of goods sold was higher, mainly driven by increased costs for raw materials and trade tariffs. Higher volumes had a positive impact on earnings, while sales and administration costs increased. Currency translation effects had a negative impact on earnings of SEK 290m compared with the preceding year. The year in brief • Positive organic growth • Higher volumes in both Incontinence Products Health Care and Medical Solutions • Good growth in compression therapy and wound care Net sales EBITA excl. IAC, SEKm EBITA margin excl. IAC, % Net sales, SEKm Organic sales growth, % EBITA excl. IAC Net sales By region Europe, 66% North America, 17% Asia, 6% Latin America, 5% Other, 6% Emerging markets accounted for 19% of net sales in Health & Medical. 2025202420232022 24,708 27,729 28,599 3.9 27,468 1.0 7.07.2 2025202420232022 2,904 4,037 5,509 19.3 4,946 18.0 14.6 11.8 Essity | Annual Report 2025 30 Introduction The share Strategy Business areas Our business areas Health & Medical Consumer Goods Professional Hygiene Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 31
Key figures 75,095 Net sales, SEKm 1.2% Organic sales growth 9,605 EBITA excl. IAC, SEKm 12.8% EBITA margin excl. IAC Personal and home hygiene for all stages of life Consumer Goods Essity is empowering people to improve well- being in all stages of life, from early childhood to a dignified old age. Our portfolio of products for personal and home hygiene spans from baby care and feminine care to incontinence care and consumer tissue, with leading brands such as Libero, Bodyform, TENA, Lotus, Zewa and Cushelle. With leading positions across key segments and markets, our innovation and marketing are driven by deep consumer insights. We deliver smart, sustainable and reliable products that go beyond function, supporting well-being, dignity and a sense of belonging. Our products are avail- able through the retail trade and e-commerce, ensuring a broad accessibility. The business area includes four categories: Incontinence Products Retail Under the globally leading brand TENA, we offer a broad range of incontinence products tailored for light to heavy needs, including TENA Discreet liners and pads and TENA Men. We also lead in leakproof apparel with brands such as Knix and Modibodi, sold primarily direct to consumer. • #2 globally and market leader in Europe and Latin America • #4 in North America • Essity’s TENA campaigns raise awareness about products for urinary leakage and improved quality of life Feminine Care We provide a full portfolio of feminine care products, from pads, panty liners and tampons to intimate soaps and wipes, leakproof apparel and menstrual cups. Our brands include Libresse, Bodyform, Nana, Saba, Nosotras, Libra, TOM Organic, Knix and Modibodi. • Market leader in Latin America and Australia and #3 in Europe • Innovation in fossil-free and plastic-free products • Successful digital brand and relationship building Baby Care With brands such as Libero and Lotus Baby, our core offering focuses on baby diapers, comple- mented by a range of baby care products including wipes, shampoo, lotion and baby oils. We also produce baby diapers for retailer brands. • #2 in Europe • Market leader in the Nordics • Focused on softness, performance, skin health and comfort Consumer Tissue We offer everyday essentials such as toilet paper, household towels, handkerchiefs, facial tissues, moist tissue and paper napkins under brands such as Lotus, Tempo, Zewa, Cushelle, Plenty, Regio and Familia. We also produce consumer tissue for retailer brands. • #3 globally • Market leader in Europe and #3 in Latin America • Essity’s launch of coreless toilet paper with more sheets is appreciated by consumers Essity | Annual Report 2025 31 Introduction The share Strategy Business areas Our business areas Health & Medical Consumer Goods Professional Hygiene Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 32
Net sales Net sales increased organically 1.2%, driven by higher volumes and sales prices. The product mix was somewhat negative. Growth was high in Latin America but negative in Europe and North America. Incontinence Products Retail reported high organic growth, primarily driven by strong volume growth but also higher sales prices and a favorable product mix. Growth was also good in Feminine Care, supported by higher volumes and sales prices as well as a positive mix development. The Baby Care market in Europe was challenging with low birth rates and intense competition. Growth in Baby Care was negative, mainly due to lower volumes. Organic sales decreased slightly in Consumer Tissue. Sales prices increased while volumes were lower and the product mix developed negatively. EBITA excl. IAC EBITA and the EBITA margin excl. IAC increased, mainly as a result of higher volumes and sales prices combined with lower costs of goods sold. Costs for sales and administration, including marketing, increased. Currency translation effects had a negative impact on earnings of SEK 694m compared with the preceding year. Change in net sales % 2025 vs 2024 Total –4.8 Volume 0.7 Price/Mix 0.5 Organic growth 1.2 Acquisitions – Divestments 0.0 Currency translation –6.0 Organic sales growth % 2025 vs 2024 % of net sales Incontinence Products Retail –0.2 58 Feminine Care 3.9 18 Baby Care –4.7 9 Consumer Tissue 7.6 15 Key figures 2025 2024 % Net sales, SEKm 75,095 78,892 –5% Organic sales growth, % 1.2 0.3 Gross profit margin excl. IAC, % 29.9 28.8 EBITA excl. IAC, SEKm 9,605 9,509 1% EBITA margin excl. IAC, % 12.8 12.1 ROCE excl. IAC, % 17.9 17.7 Operating cash flow, SEKm 6,735 7,680 –12% Investments in non-current assets, net SEKm –3,742 –3,862 –3% Average number of employees 18,569 18,070 3% The year in brief • Positive organic growth • Strong growth in Incontinence Products Retail • Higher EBITA and margin, excl. IAC Net sales Europe, 66% Latin America, 26% North America 4% Asia, 1% Other, 3% Net sales By region Emerging markets accounted for 33% of net sales in Consumer Goods. 2025202420232022 78,892 72,241 79,912 0.3 75,095 1.23.7 17.6 2025202420232022 9,509 9,605 6,354 9,797 12.1 12.812.3 8.8 EBITA excl. IAC, SEKm EBITA margin excl. IAC, % Net sales, SEKm Organic sales growth, % EBITA excl. IAC ® Essity | Annual Report 2025 32 Introduction The share Strategy Business areas Our business areas Health & Medical Consumer Goods Professional Hygiene Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 33
Key figures 35,904 Net sales, SEKm 0.3% Organic sales growth 6,364 EBITA excl. IAC, SEKm 17.7% EBITA margin excl. IAC Sustainable hygiene management solutions for every commercial segment Professional Hygiene Essity is the global market leader in professional hygiene, elevating standards across commercial environments through our trusted brand Tork. Our smart, sustainable systems for tissue, soap, sanitizer, cleaning and wiping enable all types of businesses, from offices and airports to hospitals and restaurants, to maintain high hygiene stan- dards and operate efficiently. Grounded in deep customer insight, we lead through innovation in sustainable hygiene, inclusive restroom design and data-driven technologies that enhance the user experience while boosting customer per- formance and resilience. Our offering is built on integrated solutions, a strong brand and omnichannel innovation, deliv- ered through distributors, e-commerce, and direct channels. The business area includes three core areas: Tissue, Services & Solutions We offer high-quality toilet paper, hand towels, napkins, reusable cloths and dispensing systems, designed for, among others, offices, industrial sites, airports, healthcare, hospitality, education and other public venues. • Unique proprietary dispenser systems such as Tork PeakServe and Tork Xpressnap • Digital innovations including Tork Vision Cleaning for data-driven facility management • Tork PaperCircle, the world’s first hand-towel recycling program, a circular system for businesses Wiping & Cleaning Our wiping and cleaning products help busi- nesses maintain clean, safe and productive environments. • Used in areas such as manufacturing, food processing and healthcare • Keeps surfaces clean and disinfected • Designed to reduce waste, save time and improve ergonomics Soap & Sanitizers We provide a full portfolio of hand hygiene products, including soaps, lotions, sanitizers and dispensers. • Promotes infection prevention and inclusive hygiene • Includes award-winning tools such as Tork VR Clean Hands training • Drives awareness of inclusive hygiene in restroom environments to increase under- standing of hygiene barriers in public spaces Essity | Annual Report 2025 33 Introduction The share Strategy Business areas Our business areas Health & Medical Consumer Goods Professional Hygiene Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 34
Net sales Net sales increased organically 0.3%. Sales prices were higher and the product mix was favorable with an increased share of premium products. Volumes were lower, negatively affected by reduced demand in the hotel and restaurant sector. Growth was positive in Europe and high in Latin America. In North America, growth was negative. EBITA excl. IAC EBITA and the EBITA margin excl. IAC declined, mainly due to the higher costs of goods sold and sales and administration. Higher sales prices combined with the favorable mix develop- ment had a positive impact on earnings, while lower volumes had a negative impact on earnings. Currency translation effects had a negative impact on earnings of SEK 429m compared with the preceding year. Change in net sales % 2025 vs 2024 Total –5.7 Volume –1.9 Price/Mix 2.2 Organic growth 0.3 Acquisitions – Divestments – Currency translation –6.0 Key figures 2025 2024 % Net sales, SEKm 35,904 38,067 –6% Organic sales growth, % 0.3 –2.5 Gross profit margin excl. IAC, % 32.3 31.7 EBITA excl. IAC, SEKm 6,364 6,829 –7% EBITA margin excl. IAC, % 17.7 17.9 ROCE excl. IAC, % 24.9 27.1 Operating cash flow, SEKm 5,346 6,149 –13% Investments in non-current assets, net SEKm –1,718 –1,904 –10% Average number of employees 7,330 7,038 4% The year in brief • Challenging market conditions • Positive organic growth • Strong growth in premium products Net sales Net sales By region Europe, 45% North America, 41% Latin America, 9% Asia, 1% Other, 4% Emerging markets accounted for 17% of net sales in Professional Hygiene. 2025202420232022 38,067 35,90434,393 39,481 –2.5 0.3 9.1 25.4 2025202420232022 6,829 6,634 3,843 6,288 17.9 17.7 15.9 11.2 EBITA excl. IAC, SEKm EBITA margin excl. IAC, % Net sales, SEKm Organic sales growth, % EBITA excl. IAC Essity | Annual Report 2025 34 Introduction The share Strategy Business areas Our business areas Health & Medical Consumer Goods Professional Hygiene Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 35
Organization1) 1) Essity has decided on a new organizational structure effective as of January 1, 2026. Read more on page 4. Global Marketing & Innovation Global Supply Chain Global Digital & Business Services Professional HygieneHealth & MedicalConsumer Goods EMEAConsumer Goods Americas President and CEO Executive Vice President and CFO Communications, Finance, Legal Affairs & Compliance, Human Resources, and Strategy, Business Development & Sustainability Group functions Business units Global units Operations and structure Up to and including 2025, Essity has reported its operations in the following three business areas: Health & Medical, Consumer Goods and Professional Hygiene. Health & Medical comprises the categories Incontinence Products Health Care and Medical Solutions. The offering includes incontinence products, wound care, compression therapy, orthopedics, skincare products and digital products with sensor technology. Consumer Goods encompasses the categories Incontinence Products Retail, Baby Care, Feminine Care and Consumer Tissue. The offering includes incontinence products, pads, diapers, wet wipes, skin cream, intimate soaps, leakproof apparel, menstrual cups, toilet paper, household towels, handkerchiefs, as well as facial tissues and napkins. Professional Hygiene comprises products within Tissue, Wiping, Cleaning, Soap, Sanitizers and dispensing systems as well as selected services. The offering includes toilet paper, paper hand towels, napkins, hand soap, hand lotion, hand sanitizers, dispensers, and cleaning and wiping products. Europe is Essity’s largest market. The Group also conducts sales primarily in North America and Latin America. Expansion takes place through organic growth and acquisitions. Organization In 2025, Essity had the following four business units: Consumer Goods Americas, which markets and sells products in the categories of Consumer Tissue, Baby Care, Feminine Care and Incontinence Products Retail in Latin America and North America. Consumer Goods EMEA, which markets and sells products in the categories of Consumer Tissue, Baby Care, Feminine Care and Incontinence Products Retail in Europe, the Middle East and Africa. Health & Medical, which markets and sells products in Inconti- nence Products Health Care in Europe, North America, the Middle East and Africa, and markets and sells products in Medical Solutions in Asia, Europe, North America, Latin America, Oceania, the Middle East and Africa. Professional Hygiene, which markets and sells complete hygiene solutions as well as service and maintenance in Europe, North America, Latin America, the Middle East and Africa. In Australasia, Essity markets and sells products primarily in Professional Hygiene as well as the categories of Incontinence Products and Feminine Care. Organizationally, Essity Australasia has been a separate unit. The financial reporting of the business units and Australasia is presented under the respective business areas in the company’s external financial reporting. In addition to the business units, Essity had three global units in 2025: Global Marketing & Innovation has global responsibility for customer and consumer brands as well as innovation regarding all product categories with the exception of Medical Solutions. Research and development (R&D) is coordinated and conducted from a global perspective. Product development is carried out in close cooperation with the local units, as well as through direct collaboration with customers. Global Supply Chain has global responsibility for sourcing, production, technology, logistics and distribution in relation to all product categories with the exception of Medical Solutions. Global Digital & Business Services has global responsibility for business services, IT and digitalization. In 2025, Essity had five Group functions: Communications, Finance, Human Resources, Legal Affairs & Compliance and Strategy, Business Development & Sustainability. Essity | Annual Report 2025 35 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 36
Acquisitions, investments and divestments Acquisition of Edgewell’s feminine care-business in North America In 2025, Essity entered into an agreement to acquire Edgewell Personal Care’s feminine care business in North America. The purchase price amounted to USD 340m (approximately SEK 3bn) on a cash and debt-free basis. The acquisition was completed on February 2, 2026, from which date the business is consolidated. The business includes liners, pads and tampons and includes the Carefree, Stayfree and o.b. brands in the USA, Canada and the Caribbean, the global rights to the Playtex brand in feminine care, and a production facility in Dover, Delaware, USA. The acquisition supports Essity’s strategy of focusing on cate- gories with high potential for profitable growth in attractive geographies and builds a stronger Personal Care business in North America. The goal is to further develop the well-known brands with the help of Essity’s established recipe for success in feminine care, which is based on leading innovation and effec- tive marketing, to strengthen market positions in the USA, the world’s largest hygiene market. Essity is currently a rapidly growing player in the feminine care category and is the market leader in Latin America and Australia with brands such as Saba, Nosotras and Libra. In Europe, Essity is the third largest player with several regionally leading brands, such as Libresse, Bodyform and Nana. 36Essity | Annual Report 2025 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 37
Financial overview Net sales Net sales decreased 4.8% compared with the corresponding period a year ago and amounted to SEK 138,494m (145,546). Sales increased organically 0.9%. All business areas reported positive organic growth. Volumes for the Group were stable, with higher volumes in Consumer Goods and Health & Medical. However, volumes were lower in Professional Hygiene, mainly due to lower demand in the hotel and restaurant sector. Higher prices had a positive impact on growth, mainly driven by Professional Hygiene and Consumer Goods. The product mix was stable for the Group. Operating profit The gross margin increased 0.9 percentage points to 33.3% (32.4). The gross margin excl. IAC amounted to 33.3% (32.7). Earnings were positively impacted by higher sales prices. The costs of goods sold increased, primarily due to higher raw mate- rial and distribution costs, including trade tariffs. Energy costs were lower. Savings in cost of goods sold amounted to approxi- mately SEK 500m. EBITA amounted to SEK 19,503m (19,475) and EBITA excl. IAC decreased 4% to SEK 19,572m (20,344). Excluding currency translation effects, EBITA excl. IAC increased 3%. The EBITA margin excl. IAC increased 0.1 percentage points to 14.1% (14.0). Sales and administration costs increased to 19.2% (18.8), of which marketing costs accounted for 5.2% (5.2). IAC amounted to SEK –69m (–939). Financial items Financial items decreased to SEK –1,384m (–1,931) mainly on account of lower average net debt. Tax The tax expense was SEK 4,443m (4,331), corresponding to a tax rate of 25.9% (26.5). The tax expense excl. IAC was SEK 4,454m (4,525), corresponding to a tax rate of 25.8% (26.2). Summary income statement SEKm 2025 2024 Net sales 138,494 145,546 EBITA excl. IAC 19,572 20,344 EBITA 19,503 19,475 Operating profit excl. IAC 18,600 19,234 Items affecting comparability (IAC) –69 –939 Operating profit 18,531 18,295 Financial items –1,384 –1,931 Profit before tax excl. IAC 17,230 17,303 Profit before tax 17,161 16,364 Income taxes excl. IAC –4,454 –4,525 Income taxes –4,443 –4,331 Profit for the period excl. IAC 12,776 12,778 Profit for the period1) 12,718 12,033 Profit for the period2) 12,718 21,048 Organic sales growth, % 0.9 0.2 Gross margin, % 33.3 32.4 Gross margin excl. IAC, % 33.3 32.7 EBITA margin, % 14.1 13.4 EBITA margin excl. IAC, % 14.1 14.0 Earnings per share, SEK1) 18.37 17.09 Earnings per share excl. IAC, SEK1) 3) 19.44 19.29 1) Continuing operations. 2) Total operations. 3) Excluding amortization of acquisition-related intangible assets. EBITA excl. IAC and EBITA margin excl. IAC EBITA excl. IAC, SEKm EBITA margin excl. IAC, % Net sales, SEKm Organic sales growth, % Net sales and organic sales growth Change in net sales % 2025 vs 2024 Total –4.8 Volume 0.0 Price/Mix 0.9 Organic growth 0.9 Acquisitions 0.0 Divestments 0.0 Currency translation –5.7 2025202420232022 131,320 147,147 145,546 138,494 17.3 5.8 0.2 0.9 2025202420232022 12,047 18,898 20,344 19,572 9.2 12.8 14.114.0 Essity | Annual Report 2025 37 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 38
Profit for the period Profit for the period, total operations, amounted to SEK 12,718m (21,048). Profit for the period, continuing operations, was SEK 12,718m (12,033). Cash flow Operating cash flow amounted to SEK 14,998m (17,242). Net cash flow for continuing operations was SEK 42m (25,635), and for discontinued operations SEK 0m (–467). Operating cash flow statement SEKm 2025 2024 Operating cash surplus 26,301 26,998 Change in inventories –916 –946 Change in operating receivables 853 –2,218 Change in operating liabilities –2,882 2,756 Investments in non-current assets, net –6,898 –7,332 Restructuring costs, etc. –741 –1,456 Investments in operating assets through leases –719 –560 Operating cash flow 14,998 17,242 Financial items –1,384 –1,931 Income taxes paid –4,713 –5,860 Other 27 34 Cash flow from current operations 8,928 9,485 Acquisitions of Group companies and other operations – –68 Divestments of Group companies and other operations 5 23,908 Cash flow before transactions with shareholders 8,933 33,325 Dividend –5,711 –5,443 Dividend to non-controlling interests –20 –23 Buyback of own shares –3,160 –2,224 Net cash flow, continuing operations 42 25,635 Net cash flow, discontinued operations – –467 Net cash flow, total operations 42 25,168 Investments in non-current assets Depreciation1) Investments in non-current assets, net The Group’s cash flow Divestments Cash flow from current operations Company acquisitions Cash flow before dividend–/two.tab/zero.tab/comma.tab/zero.tab/zero.tab/zero.tab –/one.tab/zero.tab/comma.tab/zero.tab/zero.tab/zero.tab /zero.tab /one.tab/zero.tab/comma.tab/zero.tab/zero.tab/zero.tab /two.tab/zero.tab/comma.tab/zero.tab/zero.tab/zero.tab /three.tab/zero.tab/comma.tab/zero.tab/zero.tab/zero.tab /four.tab/zero.tab/comma.tab/zero.tab/zero.tab/zero.tab 2025202420232022 SEKm /zero.tab /two.tab/comma.tab/zero.tab/zero.tab/zero.tab /four.tab/comma.tab/zero.tab/zero.tab/zero.tab /six.tab/comma.tab/zero.tab/zero.tab/zero.tab /eight.tab/comma.tab/zero.tab/zero.tab/zero.tab /one.tab/zero.tab/comma.tab/zero.tab/zero.tab/zero.tab 2025202420232022 SEKm 1) Excluding amortization of acquisition-related intangible assets and depreciation of right-of-use assets. Essity | Annual Report 2025 38 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 39
Financial position Net debt decreased SEK 4,226m compared with December 31, 2024 and amounted to SEK 26,543m. The Group’s interest- bearing gross debt amounted to SEK 34,669m at the end of the year. The average maturity period was 3.3 years. Compared with December 31, 2024, working capital increased SEK 1,491m. Working capital amounted to 9% (7) of net sales. Equity attribut- able to owners of the Parent company decreased SEK 2,689m compared with December 31, 2024. Profit for the period attribut- able to owners of the Parent company increased the equity of owners of the Parent company by SEK 12,656m. Net translation effects excluding tax reduced equity by SEK 8,162m. The decrease is mainly attributable to a stronger Swedish krona. The dividend of SEK 5,711m and the buyback of own shares of SEK 3,160m reduced equity attributable to owners of the Parent company. The Group’s total equity decreased SEK 2,701m compared with December 31, 2024. Consolidated balance sheet SEKm 2025 2024 Intangible assets 55,134 61,871 Property, plant and equipment 50,060 52,392 Other non-current assets 7,644 6,112 Total non-current assets 112,838 120,375 Current assets 54,278 64,909 Total assets 167,116 185,284 Equity 86,040 88,741 Non-current liabilities 40,280 51,253 Current liabilities 40,796 45,290 Total equity and liabilities 167,116 185,284 Financial position 2025 2024 Working capital, SEKm 12,237 10,746 Capital employed, SEKm 112,583 119,510 Net debt, SEKm 26,543 30,769 Debt/equity ratio, multiple 0.31 0.35 Debt payment capacity, % 74 59 Net debt/EBITDA 1.03 1.19 Net debt/EBITDA excl. IAC 1.03 1.16 Change in net debt SEKm 2025 2024 Net debt, January 1 –30,769 –53,703 Net cash flow 42 25,168 Remeasurements to equity 2,423 96 Investments in non-operating assets through leases –331 –581 Translation differences 2,092 –1,749 Net debt, December 31 –26,543 –30,769 Capital employed, share of Group ROCE excl. IAC and ROE excl. IAC Net debt and net debt/EBITDA excl. IAC ROCE excl. IAC ROE excl. IAC Net debt, SEKm Net debt/EBITDA excl. IAC Health & Medical, 29% Consumer Goods, 48% Professional Hygiene, 23% /zero.tab /five.tab /one.tab/zero.tab /one.tab/five.tab /two.tab/zero.tab /two.tab/five.tab 2025202420232022 /percent.tab 2025202420232022 62,869 53,703 30,769 26,543 3.33 2.00 1.16 1.03 Essity | Annual Report 2025 39 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 40
Other Group information Brands: Parent Company The Group’s Parent company, Essity Aktiebolag (publ), is a holding company with the main task of owning and managing shares in a number of business group companies and performing Group- wide management and administrative functions. The company’s corporate registration number is 556325-5511 and it is domiciled in Stockholm, Sweden. The company’s address is PO Box 200, SE-101 23 Stockholm. The recognized operating income 2025 amounted to SEK 393m (688), profit before appropriations and tax to SEK 11,015m (19,543) and the net profit for the year to SEK 12,234m (18,151). Investments in property, plant and equipment totaled SEK 2m (4) during the year. Cash and cash equivalents at year-end amounted to SEK 0m (0). Disposition of earnings Essity Aktiebolag (publ) Non-restricted equity in the Parent company: retained earnings 73,141,695,834 net profit for the year 12,233,992,788 Total 85,375,688,622 The Board of Directors and the President propose: to distribute to shareholders, a dividend of SEK 8.75 per share 5,976,675,8011) to be carried forward 79,399,012,8212) Total 85,375,688,622 1) Based on the number of shares outstanding, December 31, 2025. The final dividend amount will be based on the number of shares outstanding on the record date of March 30, 2026. 2) The company’s equity would have been SEK 1,091,909,955 higher if assets and liabilities had not been measured at fair value in accordance with Chapter 4, Section 14a of the Swedish Annual Accounts Act. Guidelines for remuneration of senior executives The most recent guidelines approved by the Annual General Meeting can be found under Note C2 on pages 141–142. The company’s application of the guidelines can be found under Note C2 and in the remuneration report for 2025, which is available at essity.com. For information on the company’s expenses for remuneration of senior executives, see Note C2 on page 143. Our period panties look and feel like regular panties. They also absorb all types of fluids and offer protection for up to 12 hours. ® Essity | Annual Report 2025 40 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 41
Essity is exposed to strategic, operational, and financial risks that may affect the Group’s operations. The company therefore has an established and systematic risk management process to identify, assess, and manage risks and mitigate their impact on operations. Risks and risk management Risk management The responsibility for risk management follows the company’s delegation scheme, from the Board of Directors to the President, and from the President to each Group function, global unit or business unit depending on the type of risk, where it occurs, which unit is affected and the measures required to manage the risk. The delegation scheme therefore means that some risks are managed centrally at Group level while other risks are managed by the respective unit or function. Essity’s risk management of financial risks and energy risks is centralized and handled by the Group’s internal bank. The financial risks are managed in accordance with the Group’s Finance Policy, which is adopted by Essity’s Board of Directors. Together with Essity’s Energy Risk Policy, the Finance Policy constitutes a frame- work for financial risk management. The financial risks are compiled and continuously monitored. The Group’s risk management department is responsible for insurable operational risks, such as risks related to production facilities and asset damage. Essity also has centralized risk management for information security risks and risks linked to ethics, personal data and human rights, which are managed by the Group’s IT department and compliance department, respectively. The identification and management of busi- ness risks is decentralized and is the responsibility of each business unit, global unit or function. Coordination and follow-up of identified business risks are managed centrally by the strategy department and form an essential part of the annual strategy process. Identified risks are assessed according to the likelihood of these occurring and the potential impact each risk could have on the Group. This process also includes specifying who is responsible for managing the respective risk, and measures for how the risk shall be mitigated and followed up. Development of the identified risks is monitored and assessed on an ongoing basis. The Executive Management Team and the Board of Directors are informed about the company’s risk management processes. Essity also has an internal audit function, which ensures that the organization complies with the adopted policies. Essity | Annual Report 2025 41 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 42
Changes in demographics, consumer behavior and preferences Risk: Changing demographics, sustainability requirements, con - sumer behavior and preferences alter demand from customers and consumers. There is a risk of a decline in demand for our products if we do not successfully satisfy customer and consumer needs and adapt our innovation program, product portfolio, sales channels, brand-building activities and communication accordingly. Action: Customer and consumer insight constitute the core of Essity’s innovation work. Through knowledge about people’s daily needs and challenges, we create an offering that improves quality of life for users. We continuously analyze customer and consumer data and listen to consumers, customers, experts and opinion formers to improve our offering. GDP trend and economic conditions Risk: Demand for Essity’s products is affected by general macro- economic fluctuations and the resulting changes to customer purchasing power and consumption patterns. For example, a tighter budget situation in the public sector or among business customers influences sales in both the healthcare sector and Professional Hygiene’s customers segments. Sales to the retail sector, which accounts for the bulk of sales of hygiene products, may also be affected by reduced purchasing power among consumers. Action: Essity continuously works to manage the effect of cyclical fluctuations, for example, through measures to reduce costs, increase efficiency and to create higher customer value through product innovations. Essity also works on differentiation to move toward product areas that are less sensitive to economic fluctuations. Global health risks Risk: Extensive outbreaks of disease entail risks for Essity’s opera- tions, not least in terms of the risks posed to our employees’ health and safety and their ability to carry out their work. Lockdowns, more stringent border security measures or other restrictions may cause disruptions at our production facilitates or in the supply chain. More extensive outbreaks of disease may also result in a temporary fall in demand for some of our products and changed consumer behavior. Political decisions and regulatory measures Risk: Essity conducts operations in many different countries. In some countries, the institutional structures are more established and developed, while the political, financial, legal and regulatory systems in other countries are less predictable. Changes in political, regula- tory or financial systems, as well as amendments to legislation, could have a negative impact on Essity in the form of higher costs or by impeding operations in other ways. In general terms, the business is subject to increasing regulatory requirements. Action: In connection with extensive outbreaks of disease, the highest priority is to take action to safeguard the health of employees. Essity takes a series of measures adapted to the local operations to reduce the risk of infection. Where necessary, the company also modifies its solutions for sourcing of raw materials, storage and logistics, and has increased digital interaction. Action: Essity works continuously to monitor, evaluate and anticipate changes in its business environment in the form of political decisions, dependencies and amended regulations in the areas that are of importance for the business. Essity participates in various national and international industry organizations, as well as in other types of partnerships and dialogues. The aim is to gain early knowledge of, and to contribute actively with expertise and solutions to, the development of areas of significance to our oper- ations. The public sector is both an important stakeholder group and a significant customer for Essity. The company is therefore working actively on matters relating to health and medical care, as well as care for the elderly. Environmental impact and climate change Risk: Essity’s operations and the products used in the manufacturing process have an impact on air, water, land, biodiversity and the climate. Essity is subject to extensive environmental regulations. More stringent environmental requirements, remediation of the envi- ronment in connection with plant closures or breaches of permits could incur higher costs. Read more about these risks on pages 47–99. Action: Essity’s strategy and sustainability targets stipulate guidelines for the Group’s measures within the environmental area. Essity’s actions to address environmental and climate- related risks are described on pages 47–99. Geopolitical risks Risk: A series of geopolitical events and developments risk impacting Essity’s business. The risk of political or military conflicts within or between states, trade disputes or other significant changes to international relations, as well as terrorist acts are examples of events that risk negatively impacting Essity’s business in various ways. New tariffs, export restrictions and sanctions may be introduced as a result of trade disputes and increased geopolitical tensions. Such measures could rapidly increase costs, obstruct the flow of goods and services, increase inflationary pressure and restrict access to essential materials. Action: Essity continuously monitors and assesses political developments in the countries and regions where Essity has operations and the geopolitical development that could other- wise affect Essity’s operations. A geopolitical risk assessment also constitutes part of the annual strategy process. When necessary, surveillance is extended and an assessment is made of which measures Essity can take to limit the impact on the company. Essity | Annual Report 2025 42 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 43
Dependence on major customers and sales channels Risk: Essity’s products are sold through retailers, pharmacies, e-commerce, distributors and resellers. Retail represents the single largest customer category. In general, there is a consolidation trend in several of Essity’s sales channels and markets, particularly in the retail trade and distributor landscape, through purchasing alliances and mergers, which could increase dependence on individual, large customers. In addition, an increasing importance of omnichannel in B2B sales is evident. Action: Essity’s customer structure is relatively dispersed, with customers in many different geographies and areas of business. In 2025, Essity’s ten largest customers, most of them retail companies and distributors, accounted for 24.9% of net sales. The company works to maintain strong long-term customer relationships in strategic customer segments, and to build relationships with new customers. Essity is increasing its share of e-commerce sales and drives omnichannel within B2B sales. Unethical business practices Risk: Essity works in a large number of countries and in environments where unethical business practices and violations of human rights may occur. The consequences of such business practices and violations may be severe in the form of various sanctions and fines. Violations also risk having a negative impact on the company’s reputation. Action: Essity has a program for regulatory compliance, which aims to minimize the risk of Essity taking part in or being associ- ated with unlawful or unethical business practices or committing violations of human rights. Read more about Essity’s actions on pages 92–94. Competition Risk: Essity is subject to considerable competition from other industry players offering similar products. Essity is also exposed to the risk that increased price pressure and alternative products and services or business models that meet customer or consumer needs may replace Essity’s offering, which risks jeopardizing the company’s position in the market. Action: Essity’s focus on customer and consumer insight guides its innovation activities, ensuring that new products and services are attractive and competitive. Essity develops the company’s offering to meet the needs of customers and consumers in terms of the products themselves, and to ensure that they are provided in the relevant sales channels. Read more about innovation on page 20. Employees Risk: To meet its targets, Essity is dependent on being able to recruit, retain and develop qualified and motivated employees. The higher degree of digitalization and accelerating technological development have led to a major skills shift in the world, which has affected the availability of skilled and qualified workers. Action: Through annual staffing, competency and succession planning, Essity ensures that employees are recruited and that these remain with the company and develop the right skills. Essity continuously strives to build a reputation for the company as an attractive employer, highlighting health and safety in the work- place, health promotion, market-based and competitive forms of employment, continuous learning and the possibility to take on new challenges in the Group. A modern and attractive corporate culture also plays a highly significant role in the recruitment of employees. Read more about Essity’s actions on pages 18 and 77–84. Production facilities Risk: Essity has around 70 production facilities and major ware- houses in some 30 countries. Fires, machinery breakdowns and other types of harmful incidents in plants (including damages caused by natural disasters) could lead to considerable value destruction, and loss of production and income, which ultimately, could have a negative impact on Essity’s market position. Action: Essity strives to create and maintain a balance between loss-prevention activities and insurance coverage. Essity invests continuously in loss-prevention measures. These efforts are conducted in accordance with established guidelines that include repeated risk inspections carried out by external risk engineers. Other important elements of loss-prevention activities are maintenance of production plants and machinery, staff training, and orderliness. All wholly owned production facilities are insured at replacement cost and for the loss of income. Within the EU, insurance is primarily conducted within the company’s own insurance company, with external reinsurance for major damages. Outside the EU, Essity cooperates with market-leading insurance companies. Suppliers Risk: Essity’s business is dependent on a large number of suppliers in its value chain. Supply chain interruptions and a sudden shortage of key input goods could result in increased costs and disruptions to the company’s production. Disruptions may be due to external factors such as natural disasters, geopolitical tensions, pandemics or cyberattacks, all of which could impact production continuity and delivery reliability. This, in turn, could lead to unfulfilled customer commitments and reputational damage. Suppliers could also cause problems for Essity through non-compliance with applicable legisla- tion and guidelines or by otherwise acting in an unethical manner. Action: Essity works proactively and conducts risk assessments to identify value chain vulnerabilities. Furthermore, Essity enters into supply contracts of various durations that ensure the delivery of key input goods. The Group has several suppliers for essentially all important input goods. In-depth collaboration also occurs with specially selected suppliers in the development of materials and processes. Essity continuously evaluates its suppliers to ensure compliance with agreements entered into. Particular importance is placed on suppliers operating in countries and industries deemed to be more vulnerable to risks. Key suppliers are assessed through questionnaires, on-site visits or independent audits. Essity | Annual Report 2025 43 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 44
Energy price Risk: Energy price risk is the risk that increased energy prices could adversely impact Essity’s operating profit. Essity is exposed to move- ments in the prices of electricity and natural gas, but the prices of other energy commodities also directly and indirectly impact Essity’s operating profit. Action: Essity centrally manages the energy price risk related to electricity and natural gas. According to Essity’s Energy Risk Policy, these price risks can be hedged for a period of up to 36 months. Exceptions are made for regulated and non-hedge- able markets. Essity also monitors the developments related to energy policy and decisions that may affect supply and price. Energy prices are hedged through financial instruments and, in part, through fixed pricing in existing supply contracts. Essity safeguards the supply of electricity and natural gas through centrally negotiated supply contracts. The portfolio of supply contracts and financial hedges is effectively spread to minimize Essity’s counterparty risk. In 2025, Essity purchased about 4 TWh (4; 4) of electricity and about 6 TWh (7; 7) of natural gas. The graph shows Essity’s price hedges in relation to forecast consumption of electricity and natural gas for the next three years. The graph includes financial hedges and hedging effected via supply contracts. For further information concerning financial price hedges, see Note E6 Derivatives and hedge accounting on page 156. Electricity Natural gas % 0 10 20 30 40 50 60 202820272026 Energy price hedges in relation to forecast consumption, December 31, 2025 Legal risks Risk: Legal risks are found within a number of diverse areas. Risks related to competition law, trade regulations, protection of intellectual property and confidential information, protection of personal data, violations of laws in the operations, contractual risks and changes in legislation are examples of legal risks that could have negative financial implications for Essity. In certain instances, they may also entail protracted and costly legal processes. Action: Essity constantly monitors developments in a number of areas and any legal risks are managed by internal lawyers in the various business areas in cooperation with external advisors as and when necessary. Information and IT Risk: Essity’s business is increasingly dependent on advanced information technology and digital platforms, making cybersecurity and the integrity of information critical to business continuity. The global threat landscape is constantly evolving, with increased risks of ransomware, AI-driven attacks and identity-based intrusion attempts. Disruptions or breaches of critical systems could lead to financial losses, production outages and negative impacts on key business processes. Faults or deficiencies in financial IT systems may compromise the reliability of financial reporting. Shortcomings in information security could have legal and regulatory implications as well as a negative impact on the company’s reputation. Essity views cybersecurity as a strategic risk and continuously monitors emerging threats and regulatory compliance. Action: Essity has a cybersecurity and IT governance framework designed to protect the business and ensure resilience. It includes standardized processes for system changes and day-to-day oper- ations, supported by an information security management system (ISMS) that is aligned with international standards. The ISMS is continuously updated based on risk assessments, technological developments and evolving regulatory requirements. Technical protection measures include prevention, detection, response and recovery measures. These are supplemented with advanced threat monitoring and incident response. Regular training and informa- tion security programs are mandatory for all employees to boost the human defense element. Oversight of information security risks is the responsibility of the Head of Global Digital & Business Services, who is a member of the Executive Management Team, ensuring accountability at the highest level. Essity continuously invests in cyber resilience. Cost of input goods Risk: Input goods account for a considerable part of Essity’s total operating expenses. The market price of input goods fluctuates over time and could influence Essity’s earnings positively or negatively. The price trend for a number of input goods over the past ten years is presented in the diagram below. Highest/lowest market prices (annual average) 2015–2025 per input goods Index 0 40 80 120 160 200 Recovered paper – SOP (USD) Oil-based material – Propylene (SAP) (EUR) Average price for the period Recovered paper – SOP (EUR) Pulp – NBSK (USD) Pulp – EUCA (USD) Action: Fiber (pulp and recovered paper) is a significant cost, mainly in the Consumer Goods and Professional Hygiene business areas. Essity is evaluating alternative types of fiber as a means of diversifying fiber sourcing in the future. The cost of oil-based materials is driven by the trend in oil prices and represents a major cost in the Consumer Goods business area and for various packaging materials. The trend in oil prices also impacts transport costs. The impact of price movements on input goods can be delayed through purchasing agreements with fixed durations. Efficiency improvements in the company’s operations, altered product specifications and price increases are examples of measures to offset the effect of rising costs for input goods. Essity’s costs for input goods are described on page 187. Essity | Annual Report 2025 44 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 45
Currency Transaction exposure Risk: Transaction exposure is the risk that exchange rate movements in export revenues as well as import expenses and other costs could negatively impact the Group’s operating profit and the cost of non-current assets. Translation exposure Risk: Translation exposure is the risk to which Essity is exposed when translating foreign Group companies’ balance sheets and income statements to SEK. Action: Essity manages translation exposure by distributing the liability across the various currencies where the Group owns assets so that key figures that are important for the company’s credit rating are protected in the long-term against exchange rate effects. At December 31, 2025, net debt amounted to SEK 26,543m (30,769; 49,964). Net debt distributed by currency Share of net debt, % Currency Net debt, SEKm 2025 2024 2023 EUR 13,963 53 51 48 SEK 3,324 13 17 24 CAD 2,826 11 5 1 MXN 2,756 10 7 4 AUD 2,635 10 6 12 USD 2,408 9 13 13 NZD 2,159 8 2 1 COP –963 –4 –2 –1 Other –2,565 –10 1 –2 Total 26,543 100 100 100 For further information relating to hedging of translation exposure, see Note E6 Derivatives and hedge accounting on page 156. Action:Translation exposure in the income statements of foreign Group companies is not hedged. The largest exposures are EUR, USD, MXN and GBP. The graphs below show the effect on net sales and EBITA excl. IAC of a strengthening or weakening of the Swedish krona, in the range of +5% to –5%, against all currencies. The calculations are based on 2025 outcomes. Action: Most of Essity’s business is conducted outside Sweden and transaction exposure therefore arises primarily in currencies other than SEK. The largest exposure comprises a purchase requirement for USD and selling requirements for GBP and MXN. The significant USD exposure is a consequence of the Group’s purchase of pulp that is invoiced in USD. Transaction exposure, resulting from exports and imports, can be hedged for a period of up to 18 months. Contracted future payments for non-current assets in foreign currencies can be hedged up to the full cost. The currencies with the greatest net volume were hedged as follows: USD 2.2 months, GBP 1.6 months and MXN 3.2 months. During the year, there was continuous hedging of, primarily, trade receivables and payables, as well as future payments for non-current assets. The majority of hedges mature during the first quarter of 2026. Net flows in 2025 SEKm 3,902 2,140 1,562 1,534 1,267 1,260 1,168 1,100 –885 –3,964 –12,202 3,118 –15,000 –10,000 –5,000 0 5,000 OtherUSDSEKEURHUFAUDCHFDKKNOKCADMXNGBP For further information relating to hedging of transaction exposure, see Note E6 Derivatives and hedge accounting on page 156. Translation effect on net sales 5 4 3 2 1 0 –1 –2 –3 –4 –5 7,500 –7,500 SEKm Change in exchange rate SEK, % 6,000 –6,0004,500 –4,5003,000 –3,0001,500 –1,5000 Translation effect on EBITA excl. IAC 5 4 3 2 1 0 –1 –2 –3 –4 –5 1,250 –1,2501,000 –1,000750 –750500 –500250 –2500 SEKm Change in exchange rate SEK, % Essity | Annual Report 2025 45 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 46
Credit Risk: Credit risk refers to the risk of losses due to a failure by Essity’s customers, or counterparties in financial agreements, to meet payment obligations. Liquidity and refinancing Risk: Liquidity and refinancing risk is the risk that Essity is unable to meet its payment obligations as a result of insufficient liquidity or difficulty in raising new loans. Interest rate Risk: Interest rate risk relates to the risk that changes to interest rates could have a negative impact on Essity. Essity is affected by interest rate movements through financial income and expenses, cash flow and the value of its financial assets and liabilities. Action: To ensure good access to loan financing, regardless of economic situation and on attractive terms, Essity strives to maintain a solid investment grade rating. Essity maintains a financial flexibility in the form of a liquidity reserve consisting of cash and cash equivalents and unutilized credit facilities totaling at least 10% of the Group’s forecast annual sales. Essity limits its refinancing risk by having a well-distributed maturity profile of its gross debt. The gross debt must have an average maturity in excess of three years, taking long-term unutilized credit facilities, which are not part of the liquidity reserves, into account. Surplus liquidity should primarily be used to repay external liabilities. Essity’s policy is to avoid terms that entitle the lender to terminate loans or adjust interest rates as a direct consequence of movements in Essity’s financial key ratios or credit rating. The Group’s financing is mainly secured by bank loans, bond loans and through issuance of commercial papers. The refinan- cing risk in short-term borrowing is mitigated through long-term credit facilities from bank syndicates and individual banks with favorable creditworthiness. Essity’s net debt decreased by SEK 4,226m in 2025. At year-end, the average maturity of gross debt (excluding leases and pensions) was 3.3 years (3.8; 3.5). If short-term loans would be replaced with long-term unutilized credit facilities, the average maturity would amount to 3.7 years. Unutilized short- and long-term credit facilities amounted to SEK 42,524m at year-end. In addition, cash and cash equivalents totaled SEK 8,487m. Liquidity reserve SEKm 2025 2024 2023 Unutilized credit facilities 42,524 57,303 66,340 Cash and cash equivalents 8,487 10,962 5,159 Total 51,011 68,265 71,499 SEKm 2025 2024 2023 Net sales 138,494 145,546 147,147 Liquidity reserve1) 37 47 49 1) Liquidity reserve as a percentage of net sales. For further information, see Note E2 Financial assets, cash and cash equivalents on page 153, Note E4 Financial liabilities on page 155 and Note E5 Liquidity risk on page 156. Credit risk in trade receivables – Action: Credit risk in trade receivables is managed through credit checks of customers using credit rating companies. The credit limit is set and regularly monitored. Trade receivables are recognized at the amount that is expected to be paid based on an assessment of the expected credit losses for the remaining lifetime of all trade receivables at the balance sheet date. For further information concerning trade receivables and recognition of expected credit losses, see Note E3 Trade receivables on page 154. Financial credit risk – Action: Essity’s Finance Policy regulates the maximum permitted counterparty risk depending on the counter- party’s credit rating from the credit rating agencies Standard & Poor’s, Moody’s and Fitch. The objective is that counterparties must have a minimum credit rating of BBB+ or equivalent from at least two of these credit rating agencies. Credit exposure in derivative instruments is calculated as the market value of the instrument on the balance sheet date. Credit exposure in derivative instruments amounted to SEK 506m (1,102; 1,989), gross. Taking net calculation agreements per counterparty into consideration, credit exposure of derivatives amounted to SEK 139m (355; 540). At year-end, the total credit exposure was SEK 8,801m (13,817; 5,847). Where trans- actions are linked to Credit Support Annex (CSA) agreements, the exposure is reported net of collateral received. This exposure includes credit risk of SEK 8,501m (13,318; 5,318) for financial investments. Refer to the table below for the distribution of credit risk by category. Financial credit exposure Category1) SEKm A B C Total Financial assets measured at fair value through other comprehensive income 106 106 Financial assets measured at amortized cost 4 20 24 Cash and bank balances 6,015 926 1,546 8,487 Derivative assets, net 166 4 170 Current investments 14 14 Total 6,199 930 1,672 8,801 1) A: Investment grade, a long-term credit rating from one or more of the agencies of at least: Moody’s (Baa3), Standard & Poor’s (BBB–) and Fitch (BBB–). B: Non-investment grade, a long-term credit rating lower than: Moody’s (Baa3), Standard & Poor’s (BBB–) and Fitch (BBB–). C: No credit rating (mainly assets that lack a separate credit rating and cash and cash equivalents in regulated markets). Action: Essity strives to achieve a solid distribution of its interest maturity dates to avoid large debt volumes of renewals occurring at the same time. Essity’s policy states that the average interest duration shall be a minimum of nine months and a maximum of 48 months. Essity’s financial items decreased in 2025. This was mainly due to lower net debt. Essity’s major funding currencies are EUR, SEK and USD, refer to the graph below. To achieve the desired interest rate duration, Essity uses financial derivatives. The average interest rate duration for the gross debt, including derivatives, was 24.3 months (11.5; 10.7) at year-end. The average interest rate for the total outstanding net debt including derivatives, amounted to 3.95% (4.70; 4.07) at year-end. Gross debt distributed by currency SEKm –5,000 0 5,000 10,000 15,000 20,000 OtherNZDAUDMXNCADUSDSEKEUR Read about sustainability related risks on pages 47–99. Essity | Annual Report 2025 46 Introduction The share Strategy Business areas Group Operations and structure Acquisitions, investments and divestments Financial overview Other Group information Risks and risk management Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 47
Sustainability statements For 2025, Essity presents for the first time sustainability statements fully aligned with the European Sustainability Reporting Standards (ESRS). The statements include indices and the European Union (EU) Taxonomy report as additional disclosures. They provide transparent insight into the Group’s material impacts, risks and opportunities and outline policies, actions and performance across key environmental, social and governance matters. As a leading global hygiene and health company, Essity actively contributes to the achievement of the United Nation’s (UN) Sustainable Development Goals focusing particularly on six goals on which the Group can have the greatest input given its expertise. Essity supports the UN Global Compact and works to overcome global challenges through cooperation and strategic partnerships. General Page General disclosures 48 Environmental Climate change 61 Water 69 Forest and fiber 71 Resource use and circular economy 73 Social Own workforce 77 Workers in the value chain 85 Consumers and end-users 89 Governance Business conduct 92 Additional disclosures Disclosure requirements in ESRS covered by the sustainability statements 95 List of data points that derive from other EU legislation 97 ESRS disclosure requirements incorporated by reference 98 EU Taxonomy report 99 S E G I A Content Essity | Annual Report 2025 47 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 48
General disclosuresI Basis for preparation of sustainability statements (BP-1, BP-2) Sustainability reporting frameworks and external assurance These sustainability statements have been prepared in accordance with the European Sustainability Reporting Standards (ESRS, EU 2023/2772) as incorporated into the Swedish Annual Accounts Act. The statements cover those sustainability matters considered material for the Group and its stakeholders, identified through Essity’s double materiality assessment. Some disclosures in the sustainability statements have been prepared with reference to other estab- lished standards and guidelines for sustainability reporting, such as the Greenhouse Gas (GHG) Protocol and the Science Based Targets initiative. Essity is not formally obliged to follow these frameworks and has not adopted them, but they have been taken into consideration in the preparation of the sustainability statements to strengthen relevance and consistency. Essity’s sustainability statements have been reviewed by the Group’s auditors Ernst & Young AB. Additional information about Essity’s work on social, environmental and governance matters is available at essity.com/sustainability. Consolidation The sustainability statements are prepared on a consolidated basis and encompass the Parent company Essity Aktiebolag (publ) and all companies in which Essity owns at least 50%, collectively referenced as the Group. The consolidation scope of the sustainability statements is therefore identical to the consolida- tion scope of the financial statements. Reported data includes information for the entire Group, regardless of the ownership structure. Any deviations from these principles are indicated in these sustainability statements. In March 2024, Essity divested its shares in the Asian hygiene company Vinda International Holdings Limited (Vinda). Any data relating to Vinda in comparative periods is presented together with the respec- tive data point. The Group has not chosen to omit information concerning intellectual property rights, know-how, innovation results, ongoing development work or issues under negotiation. The following phase-in provisions have been applied in line with ESRS 1 Appendix C: • ESRS 2 SBM-1 40 (b) Breakdown of total revenue by significant ESRS sector • ESRS 2 SBM-1 40 (c) List of additional significant ESRS sectors • ESRS 2 SBM-3 48 (e) Anticipated financial effects • ESRS E1-9 Anticipated financial effects • ESRS E3-5 Anticipated financial effects • ESRS E4-6 Anticipated financial effects • ESRS E5-6 Anticipated financial effects • S1-7 Characteristics of non-employee workers in the undertaking’s own workforce • S1-13 83 (a) and (b) Gender split for training and skills related information • S1-14 88 (d) and (e) Work-related ill-health related information No capital expenditures or operating expenses related to action plans according to Minimum Disclosure Requirements for Actions are reported. For an overview of all ESRS requirements that have been met, see page 95–97. Value chain Essity’s sustainability statements cover impacts, risks and opportunities identified through the double materiality assessment of the Group’s value chain. For more information on the double materiality assess- ment, see pages 58–60; for detailed information on the Group’s value chain, see pages 54–55. Reliability, estimates and uncertainty The primary source of estimates and uncertainties in Essity’s sustainability statements is data on GHG emissions. Estimation methods for emissions: • Scope 1 and 2 – Direct and indirect emissions from Essity’s own production facilities are calculated using primary activity data and relevant emission factors for fuels and electricity. Accuracy is con - sidered high. • Scope 3 – Other indirect emissions in the value chain, including upstream and downstream emissions, are estimated using a combination of primary and secondary supplier-specific data, industry averages and proxy data. This results in a higher degree of uncertainty due to variations and limited access to third-party data. Sources of uncertainty (Scope 3): • Data quality – The accuracy of Essity’s reported GHG emissions depends on the quality and complete- ness of the information provided by suppliers and other third parties. In general, accuracy is considered high when activity data is based on Essity’s own primary sources. When direct data is unavailable, estimates and proxy data are used. • Emission factors – The emission factors used in Essity’s calculations are based on supplier-specific information, internally calculated emission factors from life-cycle assessments and industry standards. These factors may apply to different geographic regions and are updated regularly. • Methodological choices – In accordance with the GHG Protocol, Essity applies several calculation methods for Scope 3 emissions, including the supplier-specific method, hybrid method, average data method and spend-based method. Improvement measures: Essity continuously improves the accuracy and reliability of its GHG emissions data. This commitment includes enhancing data collection processes, collaborating with suppliers for more precise data and regularly reviewing and updating calculation methods. Essity | Annual Report 2025 48 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 49
General disclosuresI Reliable management systems Essity has an International Organization for Standardization (ISO) 27001-certified information security management system that meets internal and external requirements for information security. Selected products and services are certified according to the ISO/IEC 27001:2013 standard. Reliable management systems certified by a third party are an important part of Essity’s sustainability work. Essity applies ISO 14001 and the EU Eco-Management and Audit Scheme (EMAS) as certified environmental management systems. Many production facilities remain certified according to ISO or EMAS. For the design, develop- ment and manufacturing of products classified as medical devices, relevant quality management systems are certified according to ISO 13485. Other facilities are certified according to ISO 9001. The Group con- tinues to implement ISO 45001 (Occupational Health and Safety Management Systems) to ensure consis- tent processes drive continuous improvement in the work environment at Essity’s production facilities. Certification, Essity’s main sites1), % 2025 ISO 14001 71 ISO 45001 76 ISO 9001 79 ISO 134852) 100 1) Production-volume based. A main site is a production facility that is wholly owned by Essity and that has at least 100 employees. 2) Refers to production facilities that produce for the EU. Timeframe, comparability and restatements Unless otherwise indicated, the sustainability statements cover the period from January 1, 2025 to December 31, 2025. The sustainability statements were published on March 2, 2026. Figures from previous years are included for comparison in tables or in parentheses. Essity provides tables with comparative data for the previous four reporting periods. In certain cases comparative data is not included because the relevant information was not collected or disclosed in earlier reporting periods or because adjustments in valuation methods have resulted in data that cannot be reliably compared with data from prior reporting periods. For reporting purposes, the following time horizons are used: • Short-term – up to 12 months • Medium-term – more than 12 months and up to five years • Long-term – more than five years Essity’s long-term perspective in monitoring global megatrends provides the foundation for the Group’s strategic direction. The detailed planning and execution of specific initiatives are generally aligned with a medium-term time horizon, ensuring both agility and responsiveness in a dynamic operating environment. The following principles apply to the adjustment of environmental as well as health and safety data for comparison years: • Newly acquired businesses are included in both current and past reporting as soon as possible • The data from divested companies is excluded in its entirety • Historical data for closed production facilities is retained Any adjustments to historical information according to the above principles have been disclosed and explained. Comparative sustainability data not impacted by these principles remains unchanged. Reported weights are disclosed in metric tons. Changes in the preparation and presentation of sustainability information are described alongside the relevant metrics. For such cases, Essity provides an explanation of the change and the reason for using adjusted measures to offer more useful information. If revised comparatives figures cannot be provided, this is indicated for the affected metrics. Essity has not identified any material errors in previous reporting periods. Essity | Annual Report 2025 49 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 50
The responsibilities of the Board of Directors and Executive Management Team (GOV-1, GOV-2) Sustainability is embedded throughout Essity’s operations and is an integral part of overall governance. The Board of Directors is the highest governing body that monitors and approves Essity’s strategy, including sustainability efforts, sustainability reporting and financial reporting. The double materiality assessment as well as the material sustainability matters and related impacts, risks and opportunities are reported to the Board at least annually. For more information, see pages 58–60. The Board approves the Group Sustainability Policy and the Code of Conduct. Other Group policies related to Essity’s material sustainability matters, impacts, risks and opportunities are delegated to Essity’s President and Chief Executive Officer (CEO). The CEO is responsible for the day-to-day administration of the Group and the execution of the sustainability strategy as well as the implementation of Group policies and related actions. This responsibility is further delegated to the Executive Management Team member for the relevant business unit or global unit and to different subject matter experts within the Group reporting to the relevant Executive Management Team member. Internal committees, such as the Climate Action Steering Committee, work toward Essity’s climate targets achievement via implementation of cross-functional strategies, coordination of key projects and priorities as well as risk analysis and mitigation. For information about the general duties, composition, diversity and experience of the Board of Directors and the Executive Management Team, see the Corporate Governance Report on pages 100–101, 103, 106–107. For further details, see page 98. Sustainability governance The purpose, implementation and follow-up of Essity’s sustainability work aim to ensure the Group’s com- mitments to its stakeholders, including customers, consumers, employees, suppliers, investors, decision makers and representatives of society. The Group’s commitments are expressed in strategies, policies, actions and targets. Those targets established by the Board of Directors are regularly monitored and reported annually. Delivery on the targets is ensured in the separate responsibility areas. To verify priorities and methods over time, Essity maintains an active and continuous dialogue with internal and external stakeholders. Based on this dialogue, Essity continuously develops its ambitions, strategies and policies to address the growing sustainability challenges. For more information on Essity’s interaction with key stakeholders, see pages 56–57. Given that sustainability is an integrated part of Essity’s strategy and operations, sustainability matters, impacts, risks and opportunities are subject to internal audits. Essity’s sustainability governance1) Internal and external frameworks and principles Board of Directors Climate Action steering committee Compliance Council2) DEI Council Executive Management Team = Cross-functional working groups that report to the Executive Management Team 1) Significant functions in the Group that influence sustainability work. For complete information on corporate governance, see pages 100–109. 2) The Compliance Council reports regularly to the Board of Directors. Internal auditor External auditor General disclosuresI Sustainability-related policies Essity has established several policies to promote consistency in decision-making and operational pract- ices across the organization while ensuring compliance with legal and regulatory requirements. These policies provide clear guidance to Essity’s employees and other stakeholders throughout the value chain regarding expected behaviors, procedures and best practices. By reflecting and reinforcing the Group’s values and corporate culture, the policies contribute to risk mitigation and responsible business conduct. All policies listed below, with the exception of the Remuneration Policy, have been approved by either the Board or the CEO and implemented by the Executive Management Team. The Remuneration Policy is approved by the shareholders at the Annual General Meeting. The policies are reviewed annually and are available on essity.com. The list below includes only those policies that address material sustainability matters identified through Essity’s double materiality assessment. In addition to the policies, Essity has developed position papers clarifying the Group’s view on key sustainability matters, which are published at essity.com/sustainability. Essity | Annual Report 2025 50 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 51
E S Global Risk, Environment, Safety and Health (RESH) Policy Content Included topics: • Zero incident mentality • Stakeholder needs and expectations • Identification of risks and opportunities • Protection of people, assets and reputation as well as business continuity • Provisions of safe and healthy physical and environmental conditions • Protection of the environment • Legal compliance • Training programs and continuous improvement • Management systems Material sustainability matters covered by policy • Climate change • Water • Own workforce Scope All activities and all employees, contractors and visitors External initiatives • ISO 14001 • ISO 45001 Stakeholder interest and engagement • Nature (silent stakeholder) • Own employees • Workers representatives • Communities E S G Global Supplier Standard incl. Supplier Code of Conduct Content Minimum requirements for suppliers regarding Code of Conduct, quality, product safety, environment and chemicals. Material sustainability matters covered by policy • Resource use and circular economy • Forest and fiber • Management of relationships with suppliers • Workers in the value chain – working conditions • Workers in the value chain – other work-related rights Scope All Essity suppliers External initiatives • UN Universal Declaration of Human Rights • International Labour Organization (ILO) Core Conventions • UN Global Compact • UN Guiding Principles on Business and Human Rights (UNGP) • Organisation for Economic Co-operation and Development OECD) Guidelines for Multinational Enterprises Stakeholder interest and engagement Vulnerable stakeholders in Essity’s upstream supply chain, such as local communities, children and workers, including immigrant workers E S G Code of Conduct Content Essity’s fundamental principles that govern the Group’s business practices and explain how Essity identifies and manages com- pliance risks, including definition of stakeholder expectations for ethical conduct and responsible operations. The Code explicitly prohibits all forms of forced or compulsory labor and child labor, reflecting Essity’s strong commitment to human rights and international labor standards. Material sustainability matters covered by policy • Climate change • Own workforce – working conditions • Own workforce – equal opportunities • Business conduct – corporate culture Scope All Essity employees External initiatives • UN Global Compact • International Bill of Human Rights • ILO Core Conventions • OECD Guidelines for Multinational Enterprises Stakeholder interest and engagement Stakeholders in the whole value chain S Remuneration Policy Content The fundamental principles of the Group’s compensation management. If collective agreements apply, they take prece- dence over the Remuneration Policy. The policy covers base salary and incentives (variable pay). Other benefits such as short-term incentives, pension plans and company cars are described in separate Essity policies. Material sustainability matters covered by policy Own workforce – equal opportunities Scope All employees at Essity unless legal obligations require otherwise External initiatives Local legislation Stakeholder interest and engagement Own employees S Diversity, Equity and Inclusion (DEI) Policy Content Essity’s commitment to fostering a fair, respectful and inclusive workplace. This policy is designed to promote equal oppor- tunities, prevent discrimination and harassment and ensure a safe working environment where all views are taken into consideration. Material sustainability matters covered by policy Own workforce – equal opportunities Scope All legal entities within the Group, including upstream and downstream activities External initiatives • Catalyst Partnership1) • Leading Executive Advancing Diversity Network (LEAD)2) • Unstereotype Alliance3) Stakeholder interest and engagement Stakeholders throughout the value chain G Anti-bribery and Corruption Policy Content Rules defining how Essity works to prevent corruption in all operations under the Group’s control. Essity does not tolerate any form of corruption or bribery and the overall objective is to prevent managers, Board members, agents or persons per- forming services for the Group or on behalf of Essity, from giving or receiving bribes of any kind. Material sustainability matters covered by policy Business conduct – corporate culture Scope All employees and companies within the Group External initiatives UN Convention against Corruption Stakeholder interest and engagement Stakeholders throughout the value chain G Human Rights Policy Content Essity’s principles and commitment to respecting human rights. Material sustainability matters covered by policy Business conduct – corporate culture Scope All legal entities within the Group with the exception of joint ventures External initiatives • UN Universal Declaration of Human Rights • ILO Core Conventions • UN Global Compact Stakeholder interest and engagement Vulnerable stakeholders throughout the value chain E Sustainability Policy Content Principles for value creation from environmental, social and economic perspectives through products that meet customer needs. Essity emphasizes the use of renewable and recyclable raw materials as well as the continuous assessment of and im - provements to the environmental performance of its products throughout their lifecycle. Material sustainability matters covered by policy • Climate change • Resource use and circular economy Scope All wholly owned companies External initiatives Forest Stewardship Council (FSC)/Programme for the Endorsement of Forest Certification (PEFC) Stakeholder interest and engagement Nature (silent stakeholder) E Fresh Wood-based Fiber Procurement Policy Content Essity’s requirements for suppliers delivering fresh wood- based fiber materials, including certification, transparency and sustainable forest management practices. Material sustainability matters covered by policy Forest and fiber Scope All wholly owned companies as well as all suppliers of fresh wood-based fiber materials External initiatives • FSC/PEFC • Global Diversity Framework • United Nations (UN) Intergovernmental Panel on Climate Change (IPCC) Stakeholder interest and engagement Nature (silent stakeholder) General disclosuresI 1) A global not-for-profit DEI organization 2) A European network that promotes DEI in the retail and consumer goods industry 3) A UN Women-convened initiative that aims to eradicate harmful stereotypes in media and advertising content Essity | Annual Report 2025 51 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 52
Integration of sustainability-related performance in incentive schemes (GOV-3) Sustainability-related targets are integrated into the Group’s long-term incentive scheme following a decision by Essity’s Board of Directors. The purpose of this integration is to link executive remuneration to the Group’s sustainability strategy and long-term value creation. This decision was approved by Essity’s shareholders at the Annual General Meeting. Further information on incorporating sustainability-related performance criteria into variable remunera- tion schemes can be found in Note C2 in the financial notes of the Group, under the subheading ”Variable remuneration” within the section ”Company’s application of guidelines” on page 142. Statement on due diligence (GOV-4) The table provides a mapping to where in the sustainability statements Essity provides information about its due diligence processes. Core elements of due diligence Sections in the sustainability statement Embedding due diligence in governance, strategy and business model • The responsibility of the Board of Directors and the Executive Management Team (GOV-2) • Integration of sustainability-related performance incentive schemes (GOV-3) • Strategy, business model and value chain (SBM-3) Engaging with affected stakeholders in all key steps of the due diligence • Interests and views of stakeholders (SBM-2) • Process for engagement with own workers and workers’ representatives (S1-2) • Process for engaging with value chain workers (S2-2) • Process for engaging with consumers and end-users (S4-2) Identifying and assessing negative impacts on people and the environment • Description of material impacts, risks and opportunities (SBM-3) • Description of the processes to identify and assess – material impacts, risks and opportunities (IRO-1) – material climate-related impacts, risks and opportunities (E1 IRO-1) – material water-related impacts, risks and opportunities (E3 IRO-1) – material forest and fiber-related impacts, risks and opportunities (E4 IRO-1) – material resource use and circular economy-related impacts, risks, dependencies and opportunities (E5 IRO-1) Taking actions to address negative impacts on people and the environment • Transition plan for climate change mitigation (E1-1) • Actions and resources in relation to climate change policies and Essity’s climate action plan (E1-3) • Actions and resources – related to water (E3-2) – related to forest and fiber (E4-3) • Actions related to resource use and circular economy (E5-2) • Taking actions to material impacts – on own workforce (S1-4) – on value chain workers (S2-4) – and opportunities on consumers and end-users (S4-4) • Governance, Whistleblower reporting and Anti-Corruption (all G1-3) Tracking the effectiveness of these efforts and communication Targets and metrics sections in Climate change (E1), Water (E3), Forest and fiber (E4), Resource use and circular economy (E5), Own Workforce (S1), Workers in the value chain (S2), Consumers and end-users (S4), Business conduct (G-1) General disclosuresI Risk management and internal control over sustainability reporting (GOV-5) Essity has integrated sustainability throughout its operations and analyzes risks and impacts where they occur to ensure effective management. The due diligence process identified and assessed actual and potential negative impacts on the environment and people, as well as risks to Essity’s operations and business performance. This process is divided into several parts to ensure a structured and consistent approach. In the area of business ethics and human rights, Essity conducts a human rights impact assess- ment and a supplier risk assessment. The human rights impact assessment is based on the UN’s Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. In addi- tion, the annual business risk assessment includes social and environmental risks and impacts related to Essity’s business activities. The physical impact of climate change on Essity’s facilities is analyzed using climate scenarios. The results from all processes and analyses are compiled and integrated into the double materiality assessment. Essity’s Internal Control Policy applies to all wholly owned companies, outsourced processes and functions. Joint ventures are included in the scope wherever possible through board representation. In 2025, Essity implemented a sustainability-specific internal control framework based on the principles of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control – Integrated Framework. This includes guidance published in 2023 on achieving effective internal control over sustainability reporting. In addition, it addresses reporting risks at entity, function and operating unit levels. Risk assessments are based on Essity’s double materiality assessment, which serves as the foundation for prioritizing risks in line with the Group’s sustainability objectives. For each material sustainability matter, qualitative factors such as governance, data integrity, value chain data availability and reliability, audit history, fraud indicators and IT dependencies are considered. Risks and areas for improvement are identified through reviews of processes at selected facilities and through self-assessments. These methods strengthen the control environment and support a systematic approach to managing risks and opportunities. Control activities have been implemented to reduce reporting risks with a focus on material data sources and key production sites. Measures include data input validation, segregation of duties, data reconciliation, deviation analysis and continuous monitoring of regulatory developments. Findings from risk assessments, internal control activities and internal audits are incorporated into operational processes to support continuous improvement and reliable reporting. Essity’s Internal Control function reports annually to the CEO and Chief Financial Officer on the effectiveness of internal controls and action plans for significant deficiencies. The Internal Audit function provides independent assurance and reports to the Audit Committee and the Board of Directors, which have ultimate responsibility for internal control over sustainability reporting. Essity | Annual Report 2025 52 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 53
Strategy Where to play: How to win: Channel Operational leadershipInnovation Sustainability Category People & culture Geography Brand building General disclosuresI Strategy, business model and value chain (SBM-1, SBM-3) Strategy and its relation to sustainability matters Sustainability matters are an integral part of Essity’s strategy. The Group’s purpose is to break barriers to well-being for consumers, patients, caregivers and customers worldwide, while creating value for soc- ieties and minimizing negative environmental impact. Essity’s vision is to be the undisputed global leader in hygiene and health. Essity’s strategic framework defines the Group’s choices on “where to play” and “how to win”. The focus is on hygiene and health categories, with product performance and brand preference representing key factors. The strategy aims to strengthen Essity’s positions in North America, Latin America and East Asia while optimizing its established presence in Europe. Essity ensures a strong market presence across all relevant channels for consumers, patients, caregivers and customers. Sustainability matters are fully integrated into Essity’s strategic decisions to ensure long-term success. • People & Culture – Essity aims to create an organization and culture enabling both people and business to thrive. The Group provides safe, attractive, inclusive and sustainable workplaces supported by committed employees who contribute to breaking barriers to well-being within a distinctive corporate culture. Essity prioritizes internal talent development through efficient flows between functions and units. Continuous development of employees and leaders is essential for the Group’s long-term success. Learning and skills development are therefore integral to Essity’s daily operations. • Brand Building – Essity has a strong portfolio of leading global and regional brands with significant brand equity. By leveraging the strength and broad reach of its brands, the Group implements effective marketing activities designed to strengthen brand preference, support consumer preference, support consumer confidence and address stigma in the hygiene and health categories in which Essity operates. • Innovation – Essity’s innovation efforts focus on sustainable products that enhance hygiene and health standards, reduce environmental impact and support profitable growth. The target is for at least 50% of the Group’s innovations to deliver social or environmental improvements. All launched innovations meet Essity’s product safety standards, ensuring compliance and responsible stewardship. • Operations – Essity drives efficiency in all business areas by focusing on continuous improvement. The health and safety of employees is among the Group’s highest priorities, alongside reducing environmental and climate-related impacts across the value chain. • Sustainability – Essity’s sustainability efforts are guided by the Group’s Sustainability Playing Field and are built on cross-functional priorities that drive long-term progress. The Group contributes to improved hygiene and health outcomes globally by focusing on key societal areas such as women’s health, infection prevention and control, hygiene, sanitation, and the care economy. Essity is committed to responsible business, focusing on DEI, occupational health and safety, product safety, business ethics and respect for human rights. All innovations are designed to improve hygiene and health while using responsibly sourced, recycled and alternative fibers and reducing dependence on fossil-based plastic. The objective is to reduce post-consumer product waste and improve water efficiency at the Group’s production facilities alongside reducing water-use throughout the product lifecycle. Essity continuously develops its ambitions, strategies, policies and practices to address sustainability challenges by implementing and adjusting targets, roadmaps and initiatives. Corporate sustainability targets measure progress toward the achievement of ambitions in areas such as emissions, water, fresh wood-based fiber, production waste, packaging, occupational health and safety, DEI, responsible sourcing, sustainable innovations and business conduct. Climate action remains a central strategic priority for Essity and one of the most complex areas to manage, as it requires coordination across the global value chain and all organizational units. Essity has established a governance framework for science-based targets including processes for data management, reporting, initiative planning and continuous follow-up. Essity focuses on reducing emissions across the value chain in line with its commitment to achieve net zero emissions by 2050. Priority actions focus on areas with the greatest environmental impact, such as emissions from tissue products, to accelerate measurable improvements. Most targets are global and independent of product groups or regions but require collaboration across the value chain with suppliers, customers and other stakeholders. Furthermore, Essity engages in industry associations and organizations to align actions with stakeholder expectations and sector-wide progress. Business model Essity develops, produces and sells products as well as services to improve hygiene and health standards both at home and away from home. Through effective hygiene routines and the prevention, treatment and monitoring of health conditions, Essity creates value for people and society. The business model focuses on profitable growth and added value in line with the Group’s mission. From a governance perspective, the Group is organized into business areas based on customer and sales channels. This structure enables the development of offerings in new and adjacent categories as well as an expanded range of services based on customer and consumer needs. In 2025, these business areas were Health & Medical, Consumer Goods and Professional Hygiene. Essity | Annual Report 2025 53 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 54
General disclosuresI Business areas Essity’s offering in Health & Medical comprises the categories Incontinence Products, Health Care and Medical Solutions. The offering includes incontinence products, wound care, compression therapy, orthopedics, skincare products and digital solutions with sensor technology under brands such as TENA, Leukoplast, Cutimed, JOBST, Actimove and DeltaCast. Distribution channels include pharmacies, medical device stores, hospitals, distributors, care institutions and e-commerce. Within Consumer Goods, Essity offers a portfolio comprising Incontinence Products Retail, Feminine Care, Baby Care and Consumer Tissue. The offering includes incontinence products, pads, diapers, wet wipes, skin cream, intimate soaps, leakproof apparel, menstrual cups, toilet paper, household towels, handkerchiefs, facial tissues and napkins. The products are sold under brands such as the global leader TENA and other strong brands including Libero, Libresse, Nosotras, Saba, TOM Organic, Lotus, Regio and Tempo. Distribution channels include retail trade and e-commerce. Professional Hygiene comprises complete hygiene solutions, including toilet paper, paper hand towels, napkins, hand soap, hand lotion, hand sanitizers, dispensers, cleaning and wiping products as well as service and maintenance under the globally leading Tork brand. Customers consist of companies and office buildings, healthcare facilities, industries, restaurants, hotels, stadiums and other public venues. Distribution channels include distributors and e-commerce. Resources Essity uses several resources to achieve its mission. The following resources are critical: • Financial capital: In 2025, Essity’s equity amounted to approximately SEK 86.0bn (88.7) and net debt was approximately SEK 26.5bn (30.8). • Human capital – Essity leverages the experience and skills of around 36,000 (36,000) employees to further develop Essity’s ambitions and achievements. • Intellectual capital – Research and development, patents, licenses, innovations, software and Essity’s corporate culture form the foundation of the Group’s success. • Physical capital – Essity uses raw materials, facilities and infrastructure within its production processes. • Natural capital – Forests, energy and water are necessary for Essity’s production processes. Essity aims to reduce its environmental footprint by increasing efficiency and reducing resource use. • Relational resources – The knowledge of people’s daily needs and challenges forms the basis of Essity’s product offering, which aims to improve people’s well-being and quality of life. Collaboration with Essity’s key stakeholders is essential to understand perspectives, strengthen decision-making and enhance overall performance. See the section on stakeholder interests and views on pages 56–57 for further details. Outputs • Innovations – Essity’s insights into customer and consumer needs and perspectives are key assets for driving sustainable innovations. Continuous innovation is critical to improving people’s hygiene, health and well-being and contributing to a more sustainable and circular society. In 2025, Essity operated a global innovation unit and had innovation centers in France, Mexico, Sweden, Germany and the USA. The reported costs for research and development in 2025 amounted to SEK 1.8bn (1.9), representing about 1.3% (1.3) of the Group’s net sales. • Procurement and manufacturing – Essity’s framework of manufacturing excellence works with con - tinuous improvements through its focus on process innovation, efficiency including digitalization and automation, quality and sustainability. The procurement organization is committed to sourcing from suppliers that share Essity’s values regarding respect for people and nature. • Marketing and sales – Through marketing and sales, Essity increases awareness of the Group’s brand, purpose and product brands to further improve hygiene and health standards. Marketing initiatives are conducted at both local and global levels. • Leading hygiene and health products and services – Essity produces and sells leading hygiene and health products and is the global market leader in incontinence products with the TENA brand and in Professional Hygiene with the Tork brand. • Value creation for stakeholders – Essity creates customer and consumer value through leading sustain- able products that enhance well-being and improve quality of life. Value is also created for employees, suppliers, governments, decision-makers and society at large through jobs in the value chain, compen- sation, taxes, improved well-being, sustainability initiatives and community engagement. For share- holders, returns are generated through dividends and favorable development of the Group’s share price. Essity maximizes long-term value creation by integrating financial, environmental and social aspects into all business decisions. Value chain The evaluation of Essity’s value chain forms the basis of the double materiality assessment. A profound understanding of Essity’s activities across the value chain is essential for analyzing sustainability matters, impacts, risks and opportunities. Essity conducted its first value chain assessment in 2023. The assessment is updated annually and covers the entire value chain, including upstream supplier activities, Essity’s own operations and down- stream activities such as customer sales. The value chain assessment describes the Group from a supplier and resource perspective and is based on the product segments of Tissue, Personal Care and Medical. Essity | Annual Report 2025 54 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 55
Leading products and services within hygiene and health Responsible marketing and sales Responsible procurement and sustainable manufacturing Sustainable innovations Stakeholder insightsResources Value creation for stakeholders Business model Value chain • Outbound logistics • Distribution • Product use • Disposal: Reduce, Reuse and Recycle • Purchase of raw materials and finished goods • Purchase of other goods and services • Inbound logistics • Research and development • Production/manufacturing • Warehousing • Sales and marketing, management and administration Upstream activities Own operations Downstream activities Upstream activities With more than 30,000 suppliers of raw materials, products and services, Essity is a significant purchaser of input materials for its production processes. The materials purchased vary across product categories, with responsibly sourced fresh pulp and recovered paper being key raw materials for the Group. Plastics are used in Personal Care and Medical products to ensure functionality. The remaining upstream activities have limited impact on emissions, energy and packaging materials. More than half of Essity’s suppliers are located in Europe, one third in North and South America and the remainder in Asia, illustrating Essity’s widespread influence on workers in the supply chain. Essity applies a proactive, risk-based approach in line with OECD guidelines and relevant human rights legislation to ensure responsible sourcing. Own operations The Group’s own operations form the core of Essity’s value chain, with production as the central activity. Nearly 30% of GHG emissions along the value chain originate from Essity’s production. Essity con- ducts operations that require various permits for its production facili- ties. These operations impact the environment through emissions to air and water, solid waste and noise. Essity operates approximately 70 production facilities in 28 countries globally. In addition to pro- duction, operations include warehousing, sales, marketing, as well as general and administrative activities. Essity also conducts research and development to create new and more sustainable products. Around 36,000 employees in about 60 countries work for Essity, illustrating the Group’s direct impact on people. See Note B2b in the financial statements on pages 133–134 for a detailed overview of the countries where Essity’s workforce is located. In 2025, Essity reported approximately SEK 138bn (146) in revenues. Downstream activities Essity conducts sales in around 150 countries, reaching one billion people daily through its products and brands. Service providers engaged in product distribution contribute to emissions and energy use in the distribution process. Most products reach consumers through retail businesses and distributors, but Essity also uses other customer and distribution channels. The majority of Essity’s portfolio consists of single-use products that become waste after usage, ending up in landfill or incinerated with the associated energy re - covery. During use and disposal of most of Essity’s products, water is consumed, for example, when washing hands or flushing toilet paper. Essity is actively working to transition from a linear to a more circular value chain. General disclosuresI Essity | Annual Report 2025 55 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 56
Interests and views of stakeholders (SBM-2) How stakeholder views inform Essity’s strategy and business model Stakeholder interests and views are essential for Essity’s long-term success. Through systematic dialogues with stakeholders, Essity identifies relevant matters and expectations as well as related risks and opportu- nities. These insights are used to strengthen relationships and are integrated into the Group’s strategy, sustainability ambitions and value creation model with the aim of creating long-term value. The Group’s commitment to achieving net zero emissions by 2050 and the remaining sustainability targets reflect these continuous dialogues. Essity’s priorities for people and culture are shaped by active engagement with both internal and external stakeholders, considering shareholder expectations, ongoing dialogue with employees and their representatives, global demographic and technology trends and regulatory requirements. This approach ensures that Essity’s operations align with the Group’s business strategy and future competence needs. The Group applies a structured process to manage social and ethical aspects throughout the value chain. Essity’s Global Supplier Standard, including the Supplier Code of Conduct, provides a framework for responsible sourcing. Through ongoing dialogue with suppliers, non-governmental organizations (NGOs) and industry partners, actions are implemented to strengthen human rights, working conditions and business ethics. Interaction with key stakeholders Customers and consumers Why Essity engages By understanding customer and consumer needs and challenges, Essity ensures the delivery of high-quality products and services that meet those needs. Key collaboration topics • Market share • Brand health • Customer and consumer insights • Quality • Sustainability Engagement channels • Sales representatives • Consumer in-home visits as well as usage and attitude studies • Consumer contact via phone and email • Brand health surveys • Customer satisfaction ratings • Consumer product testing • Laboratory testing • Trade shows and exhibitions • Market shares and household panels Outcomes • Clear understanding of the Group’s performance compared to competitors • Clear understanding of the needs of Essity’s customers Employees and their families Why Essity engages Essity aims to build a culture in which individuals thrive by engaging stakeholders to support a safe, sustainable and inclusive work environment. The purpose of engage- ment is to gather insights that inform strategic decisions, strengthen employee well-being and ensure alignment with external stakeholders. Key collaboration topics • Health and safety • Business ethics • Social dialogue • Employee well-being, experience and engagement • DEI • Training, skills development and career paths • Code of Conduct Engagement channels Essity’s stakeholder engagement is organized through structured channels and initiatives at global and local levels. These include: • Whistleblower system managed by external party available 24/7 in more than 25 languages • Employee Engagement Survey • Individual development plans • Internal communications (e.g. newsletters, CEO messages) • Continues constructive dialogue with employee representatives at both global and local levels • DEI initiatives such as Courageous Conversations, DEI leadership boards, DEI councils and DEI working groups • Governance bodies, such as the RESH Committee General disclosuresI Collaboration with internal and external stakeholders strengthens Essity’s ability to deliver superior products by understanding the needs and challenges of consumers and end-users. Partnerships with global and regional NGOs support education and provide resources that help individuals fully engage in society, supporting their human rights and fostering greater inclusion. The outcome of the systematic stakeholder dialogues is assessed in the separate responsibility areas. Material views and expectations that impact Essity’s strategy and business model are reported to the Board of Directors and the Executive Management Team. Stakeholder engagement The table below summarizes how Essity interacts with its key stakeholders. To verify priorities and methods over time, Essity maintains an active and continuous dialogue with internal and external stakeholders. Through the involvement of various internal and external stakeholder experts, the results of the dialogues with key stakeholders are integrated into Essity’s double materiality assessment. Outcomes Considering employee perspectives in decision-making by actively integrating stakeholder feedback, particularly from employees and employee representatives, into strategic and operational decisions. Key outcomes include: • Talent management strategy: Developed through engagement surveys and performance dialogues. • Well-functioning whistleblower system based on high awareness and trust in the system • Regular consultations with employee representatives enable informed and r esponsible decision making • Essity Learning Compass: Content and learning programs are continuously enhanced to support dynamic competence needs • Feedback from employees, local safety committees and managers leads to improvements in risk assessments and preventive health measures in the I Care program • The DEI strategy and roadmap are shaped in alignment with employees and managers from internal DEI forums with progress tracked against defined ambitions • Policies are continuously revised based on business needs and stakeholder feedback Essity | Annual Report 2025 56 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 57
Interaction with key stakeholders, cont. General disclosuresI Government and decision-makers Why Essity engages Essity strives to anticipate and contribute to public policy (political decisions, legislative framework) to create a favorable business environment and position Essity as a credible stakeholder in matters of public policy and societal interest. Through partnerships, Essity strengthens and enhances its reputation. Key collaboration topics • Business environment policy (geopolitics, trade, industry competitiveness, digitalization) • Hygiene and health policies (continence care, hygiene, women’s health, infection prevention and antimicrobial resistance (AMR)) • Environmental and climate policy Engagement channels • Stakeholder platforms and policy maker consultations • Regular meetings, dialogues and events • Position papers and case studies • Industry associations • Dialogue on industry-wide topics Outcomes • Understand the impact of public policy developments on Essity • Contribute to policy making and better outcomes • Early warning to prepare the business for impacts from the development of public policy decisions • Support the business in developing strategies to manage or create competitive advantages in conjunction with public policy changes • Position Essity to achieve the above and secure support from governments and decision-makers Local communities and society at large Why Essity engages Essity strives to be an active and dedicated partner in the communities in which the Group operates. By partnering with NGOs and civil society organizations, Essity provides education, products and resources that empower individuals to participate fully in society, both at a local and global level. Key collaboration topics • Environment and climate • Hygiene and health (care economy, women’s health, AMR) • Business environment (geopolitics, trade, industry competitiveness, digitalization) Engagement channels • Various programs in support of communities around the world • Partnerships with NGOs • Contribution to research projects • Foundations, donations, volunteering and sponsorships • Website and social media Outcomes • Availability of Essity products and services where needed • Understand society and public policy development impacts on Essity Suppliers and supply chain workers Why Essity engages Essity promotes strong relationships across the supplier network. The objective is to ensure compliance with the Supplier Code of Conduct. In this way, Essity meets customer requirements, strengthens the Group’s supplier relationships, remediates negative impacts on supply chain workers and secures access to sustainable raw materials. Key collaboration topics • Supplier Code of Conduct • Quality of products and services • Supply chain reliability and efficiency • Health and safety • Sustainability management practices • Due diligence, raw material chain of custody • Human rights training Engagement channels Essity collaborates with stakeholders in the supplier base using different approaches depending on the material or service provided. The focus is usually on high-risk industries and engagement through traceability and certification schemes, partner- ships with NGOs and training for selected suppliers through local organizations. Engagement channels are: • Regular self-assessment through Supplier Ethical Data Exchange (SEDEX) • Regular quality screening, due diligence and collaboration • Climate impact working groups • Capacity building initiatives • Ethical audits • Joint industry initiatives Outcomes • Compliance with the Supplier Code of Conduct • Reduced ethical and human rights risk in the value chain • Long-term relations with like-minded and strategically aligned suppliers • Feedback and evaluations from local collaboration partners Investors and analysts Why Essity engages Essity strives to create transparency and understanding of the Group’s operations, strategy, performance, risks and opportunities to support well-informed decisions by current and potential investors. Through proactive and continuous dialogue with investors and analysts, Essity meets expectations, responds to questions and strengthens credibility and trust. Essity provides complete and fair information to the market in a timely and impartial manner regarding factors that may affect the value of Essity shares. Key collaboration topics • Strategy and targets • Financial and business performance • Sustainability-related disclosures and performance • Risks and opportunities • Capital structure Engagement channels • Interim reports and presentations • Press releases, website and social media • Investor conferences and roadshows • Annual General Meeting • Annual Report • Capital market days Outcomes • Increased understanding among investors and analysts of Essity’s operations, strategy, performance, risks and opportunities • Improved understanding within Essity of investors’ and analysts’ perspectives and questions related to Essity’s operations, strategy, performance, risks and opportunities. Essity | Annual Report 2025 57 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 58
Description of material impacts, risks and opportunities (SBM-3, GOV-2) Essity has conducted a double materiality assessment to identify the Group’s most material sustainability matters along with related impacts, risks and opportunities across the value chain. The overview below outlines where these sustainability matters occur and the time horizons in which they are considered material. Detailed explanations are provided for each sustainability matter in the section describing material impacts, risks and opportunities. The following changes have been identified in the 2025 double materiality assessment compared with the 2024 version: In the 2024 double materiality assessment, gender equality and equal pay were consid- ered as one single sustainability matter linked to a potential negative impact. In the 2025 assessment, gender equality aspects have been integrated with diversity aspects, while equal pay has been identified as a separate material matter. This change clarifies Essity’s view that diversity is as an area that also encompasses gender equality while equal pay is highlighted as a separate and strategically important matter. Equal pay is still considered to have a potential negative impact while gender equality together with diversity is considered to have a potential positive impact on Essity’s employees. The methodology for assessing sustainability matters related to business conduct has also been revised. The potential positive impacts previously associated with corporate culture and supplier relationship management are now considered financial risks, as these areas primarily focus on risk mitigation and regulatory compliance. Furthermore, the protection of whistleblowers and matters related to corruption and bribery are no longer considered independently material, although they remain an integral part of Essity’s corporate culture. All identified financial risks are potential in nature and have not impacted the financial statements as of the reporting date. Potential effects depend on future developments. Essity’s management has estab- lished risk mitigation strategies and monitors these exposures to ensure timely action and minimize any potential financial effect. For information on the identification of material impacts, risks and opportunities and how they were assessed, see page 60, and regarding the definition of the defined time horizons, see page 49. E Sustainability matters Value chain Material impact Financial effect Time horizon Assessment Upstream activities Own operations Downstream activities Short-term Medium-term Long-term Climate change: Adaptation No material impact Potential negative financial effect Potential financial risk due to dependencies on natural resources and physical climate-related risks such as increased insurance costs and investments to manage extreme weather events such as heatwaves and floods. Since Essity relies heavily on forest-derived resources, climate change may increasingly threaten these, amplifying the Group’s financial risks. Climate change: Mitigation Actual negative material impact Potential negative financial effect Actual negative impact across the value chain due to GHG emissions generated in Scopes 1, 2 and 3, which are a key driver of climate change. Potential financial risk from transitional climate-related regulations such as increased carbon taxes, which may raise costs for Essity and its customers, particularly within schemes such as the EU Emissions Trading System (ETS). Investments to reduce greenhouse gas emissions and higher carbon taxes will also have financial effects. Climate change: Energy Actual negative material impact Potential negative financial effect Actual negative impact arises from energy-intensive operations and upstream activities relying on both fossil and renewable energy sources. This includes energy for material production, transportation, manufacturing and building operations. The value chains for Medical and Personal Care impact upstream activities through product sourcing, while the Tissue value chain impacts Essity’s own operations through raw material production. Potential financial risks occur due to raw material dependencies with potential price volatility, transitional risks and regulations. Investments in energy efficiency and resilience are expected to impact Essity financially over time as a result of these factors, including the risk of energy shortages. Water: Consumption, withdrawals and discharges Actual negative material impact Potential negative financial effect Actual negative impact in Essity’s own operations due to water consumption, withdrawal and discharge in production processes. Potential financial risk from dependencies and physical water-related risks such as water scarcity. Forest and fiber: Regulatory changes, shortage of fiber and alternative fibers Potential negative material impact Potential negative financial effect Potential negative impact upstream on forests and ecosystems during the sourcing of wood fiber and pulp. There is an indirect impact through suppliers; if forests are not well managed, there is a risk of deforestation, habitat degradation, climate change, pollution and negative impacts on local communities. Potential financial risk also arises from regulatory changes such as the EU Deforestation Directive and the Kunming-Montreal Global Biodiversity Framework which may negatively impact availability and cost. Circularity: Resource inflows, use of natural resources Actual negative material impact No financial effect Actual negative impact upstream due to resource-intensive processes, mostly linear inflows and the use of primary fossil fuel-based plastics. Essity’s products depend on various natural and synthetic fibers, such as polymers, plastics, pulp, cotton and chemicals, including packag- ing materials. Plastics are used to ensure necessary levels of sanitation, safety and functionality, but they contribute to negative climate impact and ultimately become waste. Circularity: Resource outflows, products and services Actual negative material impact Potential negative financial effect Actual negative impact downstream due to sales of consumables that are mostly linear, contributing to plastic pollution and landfill waste. Potential financial risk related to transitional risks and regulatory changes, such as those related to single-use products and extended producer responsibility, which may lead to increased costs. General disclosuresI Essity | Annual Report 2025 58 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 59
S Sustainability matters Value chain Material impact Financial effect Time horizon Assessment Upstream activities Own operations Downstream activities Short-term Medium-term Long-term Own workforce: Working conditions, health and safety Actual and potential negative material impact No financial effect Actual negative impact on Essity’s own workforce has been identified due to minor incidents and ergonomic hazards leading to lost time accidents (LTA). Although Essity did and does everything in its power to prevent accidents, one Essity employee has been permanently disabled in 2025, and one fatality of a contractor occurred. Essity assesses the likelihood of similar accidents in the medium and long-term time horizon as low and classifies them as potential negative impacts for these periods. Considering the impact and its potential severity, health and safety is always regarded as a material sustainability matter. Own workforce: Equal opportunity, diversity and gender equality Potential positive material impact No financial effect Potential positive impact in the medium and long-term time horizon through initiatives that promote equal treatment and opportunities for all. Examples include Courageous Conversations and integrating inclusion principles into recruitment training for line managers and Human Resources teams. Own workforce: Equal opportunity, training and skills development Potential positive material impact No financial effect Potential positive impact from initiatives that strengthen employees’ career opportunities and promote long-term career growth through continuous skills development. Essity supports continuous development through annual performance reviews and individual development plans. In addition, Essity operates academies that develop both leadership- and functional competencies. Own workforce: Equal opportunity, equal pay Potential positive material impact No financial effect Potential negative impact related to gender-based pay gaps among Essity’s employees. This impact is expected to decrease over time as a result of regular, global gender-related pay gap reviews designed to promptly identify and correct unjustified gaps. Workers in the value chain: Working conditions, working time and health and safety Actual negative material impact No financial effect Actual negative impact upstream related to working time as well as health and safety. Essity collaborates with suppliers operating in high-risk countries and sectors, such as service and logistics, raw material sourcing and manufacturing. Although the number of suppliers in high-risk countries is limited, supplier audits have revealed cases involving these sustainability matters that have been subsequently resolved. Workers in the value chain: Other rights and forced labor Potential negative material impact No financial effect Potential negative impact on workers in the value chain may occur due to a limited number of suppliers operating in countries and sectors with a high risk of human rights, labor rights and corruption violations. In these contexts, cases of forced labor may occur. Essity considers this impact material because the potential to remediate is low as Essity only has an indirect influence over its suppliers. Consumers and end-users: Hygiene and health Actual positive material impact Actual positive financial effect Actual positive impact downstream as Essity’s products and services help people live healthier and more active lives, creating a tangible positive impact on society. The purpose of breaking barriers to well-being aligns with Essity’s social focus areas: women’s health, the care economy, hygiene and sanitation as well as infection prevention and control. This impact generates revenue for every product sold and represents a significant actual financial opportunity. G Sustainability matters Value chain Material impact Financial effect Time horizon Assessment Upstream activities Own operations Downstream activities Short-term Medium-term Long-term Governance: Corporate culture No material impact Potential negative financial effect Potential financial risk as a negative corporate culture can lead to unethical business conduct, which in turn could lead to fines, reputational damage and consequently reduced revenues and profits as well as difficulties in attracting and, consequently, retaining talent within the Group. Governance: Management of relationships with suppliers No material impact Potential negative financial effect Potential financial risk resulting from unlawful and unethical conduct in the supply chain, such as human rights violations, which could lead to reputational damage, legal consequences and loss of revenue for Essity. Such events may also affect product availability and customer trust. General disclosuresI Essity | Annual Report 2025 59 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 60
Description of the processes to identify and assess material impacts, risks and opportunities and the related disclosures (GOV-2, SBM-3, IRO-1, IRO-2) Essity conducted its first double materiality assessment in 2023. The purpose of the assessment is to evaluate the Group’s impacts on the environment and people (inside-out perspective) and how sustain- ability matters may affect the Group’s financial performance (outside-in perspective). Essity’s process for the double materiality assessment included the following key steps: Step 1: Understanding Essity and assessing its value chain The double materiality assessment process requires a profound understanding of Essity’s operations. All necessary information is documented in Essity’s value chain assessment, which was reviewed with a focus on potential changes in core activities, key stakeholders and operational dependencies. All aspects of Essity’s value chains were included in the review: upstream activities, own operations and downstream activities. The confirmation of all key stakeholders ensured their appropriate involvement in the double materiality assessment. The outcome of the value chain assessment determined which standards were to be analyzed as part of the double materiality assessment. Step 2: Identification phase Based on the value chain assessment, sustainability matters were reviewed for actual and potential impacts, risks and opportunities. This review was based on previously published reports, internal documents, the results from Essity’s various risk assessment processes, external sources as well as input from stakeholders and stakeholder experts. A prioritized list of material impacts, risks and opportunities was validated through reviews with internal subject matter experts to confirm its completeness. For each sustainability matter, the scoring mechanism is based on predefined criteria used to assess impacts, risks and opportunities and to determine the respective scores. The mechanism was reviewed to improve comparability of the results, while maintaining relevance and effectiveness. Step 3: Assessment Workshops with stakeholder experts were conducted to quantitatively assess each sustainability matter from an impact and a financial perspective. The assessment was based on predefined criteria and covered short-, medium- and long-term time horizons. For definition of the time horizons, see page 49. Impact materiality For each sustainability matter, the impact was assessed based on severity and likelihood. Severity was scored on a scale from 1 to 5, based on the average score of the scale, scope and irremediability, with the latter only applicable to negative impacts. When evaluating negative impacts, risk factors associated with specific regions, such as water scarcity, and stakeholder groups, such as migrant workers, are taken into consideration. For human rights impacts, severity takes precedence over likelihood when determining materiality. Financial materiality For identified risks and opportunities, size and likelihood were respectively assessed on a scale from 1 to 5. This process also considered risks arising from identified impacts and dependencies. For each impact, risk and opportunity, it was assessed in which part of the value chain they occur. For more information about Essity’s value chain, see pages 54–55. Step 4: Determination The outcome of the workshops was consolidated and reviewed for consistency. A materiality threshold was applied to identify the material sustainability matters for Essity. The aggregated results were validated by the Executive Management Team, discussed with the Audit Committee and reported to the Board of Directors. Several action plans have been developed for the iden- tified material matters including targets, initiatives and measurable key performance indicators to track progress. The identification, assessment and management of sustainability-related impacts, risks and opportunities were integrated into the overall governance process through Essity’s risk assessment frame- work. Although this framework primarily addresses risks, it also considered sustainability impacts as these could evolve into risks. While several risk identification processes exist for different risk types, Essity’s approach aims to ensure a fair and consistent prioritization of all risks, based on impact and likelihood. The result of Essity’s double materiality assessment was integrated into due diligence processes within the Group. Through this process, material sustainability matters influenced Essity’s strategy and decision making, thereby shaping Essity’s business model and value chain. In essence, the identified material environmental, social and governance matters were all anchored and managed within the “how to win” pillars of Essity’s strategy. The close connection between Essity’s strategy and its material sustainability matters ensures the resilience of the Group’s strategy and business model. To assess the materiality of information for disclosures, a qualitative review was performed. The review evaluated whether information was relevant based on its significance to the sustainability matter and its ability to meet decision-making needs of users of the sustainability statements. If a specific information requirement was not considered aligned with a material impact, risk or opportunity, the data point or disclosure requirement was not disclosed. In 2025, all steps in the process were revised and remained largely consistent with prior years. The main change was the introduction of a new scoring methodology that integrates the double materiality assess- ment with Essity’s business risk assessment framework, enhancing consistency and comparability across risk management processes. The two dimensions, severity and likelihood, were combined to determine the overall materiality of each topic. Values above three in both dimensions were defined as material to prioritize impacts, risks and opportunities that were both likely to occur and deemed to have significant consequences. This approach ensured that resources were focused on areas with the greatest potential impact on stakeholders and material financial effect. In 2024, averages were used to determine final scores for impacts, risks and opportunities. General disclosuresI Essity | Annual Report 2025 60 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 61
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Climate changeE Why combating climate change matters Climate change is one of the defining challenges of our time and its effects are already visible today. Rising temperatures and related conseqences create social and economic risks, making urgent climate action essential. About one third of Essity’s greenhouse gas emissions originate from its own production. Reducing emissions from operations and across the value chain is a priority, supported by an action plan and ambitious, validated science-based targets in line with the Science Based Targets initiative (SBTi). Sustainability matters Value chain Material impact Financial effect Time horizon Upstream activities Own operations Downstream activities Short-term Medium-term Long-term Climate change adaptation No material impact Potential negative financial effect (transitional risk) Climate change mitigation Actual negative material impact Potential negative finan- cial effect (physical and transitional risk) Energy Actual negative material impact Potential negative finan- cial effect (physical and transitional risk) Governance Integration of sustainability-related performance incentive schemes (E1 ESRS 2 GOV-3) For information on the integration of climate-related targets in incentive programs, see note C2 in the financial notes of the Group on page 142. Strategy Transition plan for climate change mitigation (E1-1) Essity’s decarbonization journey is led by its science-based targets (SBTs), including near-term targets for 2030 and long-term targets for 2050, as well as the related SBTi framework. Essity has initiated extensive work on a comprehensive transition plan based on relevant emissions categories. The plan covers own manufacturing, energy sourcing, raw materials, transportation, product and production waste and includes targeted actions within each area. While the main focus is on own operations, Essity takes collaborative action across the entire value chain to drive emissions reductions. Aligned with the Paris Agreement Essity’s ambition is a net zero business and the action plan and action areas guide the Group toward achieving this. The ambition is accompanied by SBTs for Scope 1, 2 and 3, which have been validated by the SBTi. This means that the targets are aligned with the ambitions of the Paris Agreement to limit global warming to 1.5°C above pre-industrial levels. Essity’s plan to achieve net zero emissions by 2050 and its near-term emissions targets by 2030 were approved by the Executive Management Team and the Board of Directors. Each business area contributes to the SBTs by developing its own specific plans. These plans focus on the areas with the greatest environmental impact. A central steering group, governed by the Executive Management Team, coordinates the activities and continuously tracks progress. Essity’s climate action areas Essity’s climate action plan follows the SBTi framework where the action areas are defined according to the emission categories Scope 1, 2 and 3. Scope 1 and 2 are directly and indirectly linked to Essity’s pro- duction. Scope 3 includes other indirect emissions in Essity’s value chain. For Scope 1 and 2, both the near-term 2030 and long-term 2050 target have the same scope and boundary. Essity’s near-term Scope 3 SBT applies to the most important emission categories: key purchased raw materials and branded pack- aging (3.1), incoming and outgoing transportation (3.4), waste from the Group’s own production (3.5) and product waste after use (3.12). These categories represent most of the total Scope 3 emissions in the value chain. Essity’s climate action areas are: Energy and consumption mix (Scope 1 and 2) • Embed energy efficiency across operations through the E-save program, which is a Group-wide program that encompasses investments in energy-efficient technical solutions, daily improvement activities and a general shift in mindset toward energy use across Essity sites. • Continue the transition to energy sources with lower climate impact and an increased share of renewable energy • Modernize and optimize tissue production Reducing emissions from production waste (Scope 3.5) • Achieve zero production waste to landfill by transforming waste into value by increasing material and energy recovery • Sludge valorization by scaling proven waste valorization solutions and external partnerships • Pioneer circular innovations to transform waste into valuable resources Upstream collaboration with suppliers and partners (Scope 3.1) • Climate-aligned procurement by integrating climate data and carbon insights into procurement practices • Driving supplier climate action by creating shared decarbonization goals • Exploring low-carbon materials and preparing for scalable adoption Downstream collaboration and distribution (Scope 3.4) • Digital transport optimization to improve service, cost efficiency and minimize environmental impact • Continuous improvements through optimized product design and an efficient distribution network • Develop end-to-end collaboration and strategic partnerships for a sustainable, optimized value chain Reducing emissions from product waste (Scope 3.12) • Promote tissue composting and changed waste disposal practices • Paper towel recycling by scaling solutions like Tork PaperCircle® • Develop new materials and product concepts to drive multi-use and circular solutions Compliance with EU Paris-aligned benchmarks According to available information, Essity is not excluded from any EU benchmarks aligned with the Paris Agreement, as Essity’s operations are not covered by the current exclusion criteria. Essity | Annual Report 2025 61
Page 62
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Climate changeE Locked-in emissions Essity has a direct and indirect negative impact on the climate due to the emissions of greenhouse gases (GHG) across its value chain, including raw material procurement, production, waste and transportation. Locked-in GHG emissions arise across the value chain, including raw material sourcing, production pro- cesses, waste handling and transportation. Tissue production represents the largest share, driven by energy-intensive operations and long-lived industrial assets. Reducing these emissions is a central focus of ongoing climate strategy via implementation of cross-functional strategies, coordination of key decarbonization projects and priorities as well as risk analysis and mitigation. In the short- to mid-term perspective, some emissions can be considered locked-in due to existing infrastructure. Material impacts, risks and opportunities and their interaction with strategy and business model (E1 ESRS 2 SBM-3) Essity prioritizes climate actions with the greatest impact and collaborates with suppliers, customers and other business partners to strengthen efforts across the value chain. Decarbonization is embedded in the Group’s strategy and influences decisions on operations, investments and innovations. By aligning sustain- ability targets with financial targets, Essity strengthens both its resilience and its competitiveness. Based on the Group’s climate risk assessment, Essity has conducted an in-depth analysis of climate change adaptation, climate change mitigation and energy topics. Climate change adaptation Essity faces potential financial risks from extreme weather events such as heatwaves and floods, which may lead to increased insurance costs and the need for investments in risk mitigation measures. Depen- dence on natural resources, especially forest-based raw materials, increases vulnerability if climate change progresses and may affect long-term raw material availability and cost structure. If emission reductions do not materialize in line with the ambitions in the Paris Agreement, stricter regulations and/or carbon taxes may be introduced, impacting cost levels and profitability. Changes in consumption patterns may also affect future revenues and market share. Climate change mitigation Essity’s operations and value chain emit GHG, creating transitional risks from regulations and requiring investments to meet climate targets. Essity is committed to net zero emissions by 2050, supported by SBTs for Scope 1, 2 and 3. Failing to achieve these targets could lead to reputational damage, revenue loss and challenges in securing financing. Energy Energy-intensive processes in Essity’s operations and supply chain pose financial risks related to price volatility and changes in energy regulations. Investments in energy transition activities may increase costs, but opportunities exist to improve energy efficiency, adopt fossil-free energy and design low- carbon products. These measures can reduce emissions and attract customers. Essity’s strategy aligns with global trends where policymakers are introducing increasingly ambitious climate targets and requirements, driving greater investments in fossil-free energy production. For additional information on material impacts, risks and opportunities, see pages 58–59. Impact, risk and opportunity management Description of the processes to identify and assess material climate-related impacts, risks and opportunities (E1 ESRS 2 IRO-1) Essity’s detailed climate-risk analysis was first conducted in 2020. In 2022, a more in-depth scenario analysis was conducted based on two climate scenarios, valid for current operations as well as for business conti- nuity. The analysis is carried out with a long-term perspective of up to ten years to identify strategic actions and priorities. The conclusions from the climate-risk analysis have been continuously verified and integrated into strategic work. The analysis includes two key scenarios: • Scenario 1 – Global warming of 1.5°C • Scenario 2 – Global warming of 4°C The climate-risk analysis was used in the development of the transition plan for climate change as well as the activities and roadmaps related to the five key action areas. Key risks identified have been integrated into Essity’s Business Risks Library, which includes operational and strategic risks being assessed annually as part of Essity’s strategy process. Near Term 2030 emissions target, scope Long Term Net Zero 2050 emissions target, scope Essity’s greenhouse gas emissions inventory (10.1 million ton CO2e, base year 2016) 20% Rest of Scope 3 inventory 16% Key raw materials 3% Inbound transports 30% Fuel, electricity and purchased steam used in production 3% Production waste 5% Outbound transports 23% Consumer waste after use Scope 1 & 2Scope 3 Scope 3 Essity | Annual Report 2025 62
Page 63
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Scenario 1: Global warming of 1.5°C1) In this scenario, global warming is limited to no more than 1.5°C by 2100 through extensive global colla- boration with governments, industries, companies and individuals. This includes stricter legislation, green innovations and rising demand for environmentally friendly products and services. Carbon emissions are strictly limited, and carbon taxes are increased and extended, which promotes processes with low-carbon emissions and greater use of circularity for materials and products. Scenario 2: Global warming of 4°C2) In this scenario, global warming will reach 4°C by 2100 as a result of insufficient measures to reduce emissions and limit negative environmental impacts. Physical risks such as extreme weather becomes more frequent, sea levels rise, and desertification and deforestation accelerate. Resources such as raw materials, energy, water and food become increasingly scarce, leading to greater price volatility and uncertainty. Risks Description and impacts • Shifting regulatory landscape • Changed consumption patterns • Shortage of green energy and sustainable materials Transitional effects will impose stricter legislation for manufacturing processes, energy sources and material use: • Increased restrictions on carbon emissions through raised carbon taxes impact overall operational costs • Limitations or stricter demands on single-use products after use to reduce waste impact on operational costs • Limitations on water use in production impact production costs • Consumer behavior and preferences move toward lower use of plastics • Continued increase in demand leads to shortage of fresh wood-based fiber, resulting in raw material shortages and increased prices for raw materials Opportunities Description and impacts • Development of new business models • Sustainable innovations • Competitive advantages through Essity’s long-term and robust efforts to achieve lower resource use, innovative production methods and lower carbon emissions • Customers, consumers, investors and employees are attracted by changed consumption patterns in the form of increased demand for sustainable products with a lower carbon footprint, where companies with a strong sustainability profile are rewarded for their investments in and development of new business models and environmentally conscious products Risks Description and impacts • Extreme weather • Permanent shortage of key raw materials and access to water • Linear consumption patterns continue • Dynamic and globally disharmonized regulatory landscape Extreme weather and the continued rise of carbon emissions into the atmosphere may impact Essity’s business in areas such as: • Water scarcity and excessively high water temperatures impacting production stability and operational costs • Rising insurance costs and costs for reconstruction following extreme weather • Increased investments required to safeguard stable production and supply chain • Deforestation continues and forest fires limit availability of good quality certified wood fiber, impacting prices negatively and leading to raw material shortages • Lower living standards and changed consumption patterns • Permanent scarcity of natural resources, raw materials, energy and water may require site closures in specific areas and generally lead to higher prices for raw materials, energy, water and distribution • Increasing amount of waste to be managed by communities and countries will impose higher waste costs • Without bans, plastic use continues to increase, resulting in higher costs • Frequent shifts in the political landscape and regulations may impact cost of compliance and conducting business Opportunities Description and impacts • Competitive advantage • Leading hygiene and health products are prioritized • Safeguarded production and sourcing in at-risk regions builds trust in and loyalty to Essity’s brands Essity’s approach to identifying and assessing material climate-related impacts, risks and opportunities is outlined on page 60. Climate changeE 1) The scenario includes consideration of Shared Socioeconomic Pathways (SSP) scenarios 1-1.9 and the International Panel for Climate Change (IPCC) scenario (Representative Concentration Pathways (RCP) scenario 2.6). 2) The scenario includes consideration of SSP scenarios 3-7.0 and the IPCC scenarios (RCP scenario 6-8.5). Essity | Annual Report 2025 63
Page 64
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Policies related to climate change mitigation and adaptation (E1-2) Activities related to climate change adaptation, climate change mitigation, as well as energy, are aligned with several policies and steering documents such as Essity’s Sustainability Policy, the GHG Accounting Manual, the Fresh Wood-based Fiber Procurement Policy and the Code of Conduct. Essity’s Sustainability Policy defines the Group’s commitment to creating environmental, social and economic value. Near-term and long-term targets to reduce climate impact are continuously reviewed and challenged. The Group applies recognized environmental management systems to ensure appropri- ate governance and continuous improvement. Through responsible fiber sourcing, Essity ensures that none of the wood fiber in the Group’s products originates from controversial sources. All fresh wood fiber-based raw materials in Essity’s products must be Forest Stewardship Council (FSC) or the Programme for the Endorsement of Forest Certification (PEFC) certified or meet the FSC standard for controlled wood. Essity’s GHG Accounting Manual establishes guidelines for the accounting and reporting of GHG emissions in accordance with Scope 1, 2 and 3. The manual is aligned with the GHG Protocol Corporate Accounting and Reporting Standard as well as the Corporate Value Chain (Scope 3) Standard. Group Finance is responsible for and has approved the manual and material changes are reported to the Audit Committee as part of the Group’s governance process. To ensure long-term success in a competitive and increasingly regulated environment, Essity conducts systematic assessments and mapping of various risks related to GHG emissions. The Group’s GHG inven- tory serves multiple business objectives, including: • Managing climate-related risks and identifying reduction opportunities • Participation in emission trading systems (ETS) such as EU ETS and UK ETS • Public reporting and participation in voluntary climate initiatives such as the CDP and SBTi • Mandatory reporting, such as ESRS and the EU Taxonomy Essity’s Sustainability Policy and the GHG Accounting Manual are fully implemented within the Group. For information on Essity’s Sustainability Policy, see pages 50–51. Actions and resources in relation to climate change policies and Essity’s climate action plan (E1-3) Essity is on track to deliver absolute emission reductions of 35% for Scope 1 and 2, in line with the SBTi- validated near-term targets. For Essity’s indirect Scope 3 emissions, progress is being made with further actions to be implemented through 2030. During 2025, Essity continued its efforts in relation to global knowledge sharing, implementing best practices and digital follow-up of resource efficiency across production facilities. The Group also continued investing in state-of-the-art technology, such as heat and fiber recovery, replaced fossil fuels to biofuels and improved process controls and equipment. Essity has an extensive plan that includes the capital expenditure and operating expenditure for the i mplementation of planned actions and required resources. Essity’s climate action areas for 2030 Essity has defined five key action areas that are part of delivering its ambitious emissions reduction targets. The areas cover Scope 1, 2 and 3 emissions. Energy and consumption mix (Scope 1 and 2) Tissue production accounts for over 80% of manufacturing emissions, making these facilities the core of Essity’s decarbonization efforts. Essity focuses on using energy more efficiently through process im - provements and transitioning to lower-emission and renewable energy sources. Furthermore, future technologies are explored to further reduce emissions, while prioritizing actions that create real impact in the short term. All actions contribute to reducing Scope 1 and 2 emissions while boosting operational efficiency and resilience. Each site is analyzed individually and tailored solutions that deliver measurable results are implemented within the frame of the E-save program. E-save delivers annual reductions in energy consumption and direct emissions at Essity facilities. In 2025, several significant improvements were implemented, includ- ing the commissioning of a new steam storage system at the Mannheim mill in Germany, which reduced the need for additional steam for paper production and reduces GHG emissions by approximately 13,000 tons per year. Essity is continuing the transition to energy sources with lower emissions and an increased share of renewable energy. For example, at the tissue plant in Kawerau, New Zealand, Essity replaced fossil-based steam with geothermal energy during the reporting year. In a longer term perspective, Essity is working to reduce its climate footprint by exploring future tech- nologies aimed at reinventing tissue production. Together with the global technology company Voith, Essity is developing an innovative concept for tissue production using dry fiber technology. This tech- nology eliminates the need for water and drying energy, which in turn reduces direct GHG emissions in line with climate targets. Reducing emissions from production waste (Scope 3.5) Essity is committed to eliminating production waste from landfill and incineration, while improving material efficiency in production processes. By improving waste segregation and expanding reuse initiatives, byproducts are transformed into new resources that reduce emissions, lower disposal costs and enhance operational efficiency. A key focus area is to manage tissue sludge, which accounts for the majority of the production waste. Through partnerships and innovation, efforts are focused on reusing the material in a circular manner, for example by converting it into construction materials or using it for energy production. This contributes to reduced emissions and strengthening both environmental and business performance. Waste can also be turned into value by strengthening waste segregation and supplier collaboration, enabling higher material and energy recovery. Essity’s facility in Ecatepec, Mexico, exemplifies this prog- ress, achieving 100% waste valorization by transforming production waste into materials and energy for reuse, resulting in cost savings and reduced emissions. Essity also advances material recovery through partnerships, transforming waste into secondary materials that can be used in applications such as building materials and plastic products. Upstream collaboration with suppliers and partners (Scope 3.1) Essity is advancing sourcing strategies beyond operational improvements, partnering with strategic suppliers for long-term decarbonization. This includes embedding carbon intelligence into decisions, improving material efficiency and selecting lower-carbon alternatives that strike a balance between performance, climate impact, scalability and cost. Climate-aligned procurement involves embedding climate criteria into supplier selection and renewal processes, while Essity strengthens internal procurement capabilities to analyze and act on carbon data analytics in decision-making. Climate changeE Essity | Annual Report 2025 64
Page 65
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Essity uses Climate Action Contracts to formalize supplier commitments and create accountability for shared decarbonization goals. By collaborating on roadmaps and co-developed solutions, the approach moves beyond voluntary pledges toward measurable action, while suppliers are supported with tools and training to strengthen their carbon intelligence. At the same time, Essity works with a long-term perspec- tive with its suppliers to develop innovative material solutions, including alternatives with a lower carbon footprint and mass-balanced materials. Reducing emissions from transportation (Scope 3.4) Essity’s products are distributed globally to meet everyday hygiene and health needs. Together with trans- portation and distribution partners, Essity works to reduce the climate impact of transportation. These efforts include load utilization, route optimization and a shift to lower-emission modes of transportation, such as rail, sea and intermodal, wherever possible. Partnerships with carriers also increase transparency around shared emissions data. Essity is accelerating decarbonization by digitalizing transport load consolidation, freight assignment and delivery route optimization across its global distribution network. This transport technology enables smarter routing and scheduling for over one million shipments annually, improving load efficiency, cutting empty miles and enabling lane-based carbon dioxide emissions tracking. Essity is also expanding its use of renewable and alternative fuels by incorporating more electric, bio-fuel and gas-powered vehicles in its transportation networks. Reducing emissions from product waste (Scope 3.12) The majority of Essity’s products are single-use, designed to ensure hygiene and safety. While this meets essential health needs, it also creates environmental challenges since many of the products are dispos- able. Essity’s goal is to reduce the impact of product disposal through circular products and innovations without compromising health and well-being. Product design to align with established circular waste management systems, such as recycling and composting, ensures that they can be safely and efficiently recovered at the end of their life. Scaling these solutions requires collaboration with governments and authorities, particularly in regions with high landfill use, such as Latin America. By advocating for systemic change, Essity creates better conditions for inno- vation and sustainable end-of-life solutions. Essity can reduce the climate impact from product waste by scaling up the use of certified compostable household towel products, which are for example sold under Essity’s Zewa brand in Europe. These prod- ucts help influence waste disposal habits by encouraging composting at home, rather than sending paper towels to landfill. Essity also recycles used paper towels through Tork PaperCircle®, enabling scalable cir- cular products. Reusable and hybrid products also have the potential to transform future waste streams. Essity is advancing multi-use and circular products that cut waste after use. In 2024, the Group intro- duced fossil-free and plastic-free pads and panty liners in Feminine Care, exploring new materials and product concepts that support circularity and more sustainable consumption. Targets and metrics Targets related to climate change mitigation and adaptation (E1-4) Essity’s Sustainability Policy defines the Group’s commitment to environmental, social and economic value creation. Essity continuously reviews its targets to reduce its global impact on the climate through- out the complete value chain. Essity’s overall long-term ambition is linked to the Group’s commitment to follow the SBTs for Scope 1, 2 and 3, and to achieve net zero GHG emissions throughout the value chain by 2050. Essity has set the following targets through 2050: • Near-term target to reduce Scope 1 and 2 emissions by 35% by 2030. • Near-term target to reduce the most important Scope 3 emissions categories by 35% by 2030. This includes complete scope of incoming and outgoing transportation (3.4), waste from the Group’s own production (3.5) and most significant parts of key purchased raw materials and branded packaging (3.1), and product waste after use, excluding packaging (3.12). These categories represent most of the total Scope 3 emissions in the value chain. • Long-term commitment to achieve net zero emissions covering Scope 1, 2 and 3 by 2050. This includes above Near-term target scopes and all remaining Scope 3 emission categories. All emissions reduction targets are measured in absolute terms using 2016 as the baseline year. 2016 baseline year 2030 Near-term 2050 Long-term Emissions (kton CO2e) % reduction target Emissions target (kton CO2e) % reduction target Scope 1 and Scope 2 (location-based) 3,051 –35% 1,983 Net zero Scope 3: 3.4, 3.5 and 3.12 and key raw materials for 3.1 5,192 –35% 3,375 Net zero Total emissions, 2030 near-term scope 8,243 –35% 5,358 Scope 1, 2 and 3 1,890 Net zero Total emissions, 2050 long-term scope 10,133 Net zero Essity’s near-term targets for Scope 1, 2 and 3 are based on the SBTi Criteria and Recommendations (version 5.0 for Scope 1 and 2 and version 5.1 for Scope 3) and are aligned with the SBTi Corporate Net- Zero Standard and the well-below 2°C (WB2C) pathway. The targets include all Essity subsidiaries under the operational control approach, as defined in the GHG protocol. The target boundary includes biogenic emissions and removals from bioenergy feedstocks. The targets have been validated by SBTi, aligning with the Paris Agreement to limit global warming to 1.5°C above pre-industrial levels. The target-setting and approval process has been carried out by Essity’s central climate targets steering group with representation from valid internal functions. In addition, Essity works with various key stake- holders, such as public authorities and other policymakers, including the EU and OECD, intergovernmental organizations and non-governmental organizations, such as the SBTi. The CDP, World Resources Institute, UN Global Compact, We Mean Business Coalition and World Wide Fund for Nature (WWF) are partners of SBTi, which allows collaboration between companies and key stakeholders to address climate change mitigation and adaptation. Climate changeE Essity | Annual Report 2025 65
Page 66
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information No adjustments were made to targets in 2025. The main changes to the inventory methodology in 2025 were as follows: • Scope 1 and 2: Non-material emissions from warehouses (<0.05% of total emissions) have been excluded from reporting in all periods, in line with ESRS materiality principle. • Scope 3: Several improvements in data availability methodology were made: – 3.1. Improved collection of activity (volume) data and an updated database for emission factors, including more supplier-specific factors to enhance transparency in line with the ESRS. – 3.4. Improved data collection for activity (volume) data and review of transport distances for key raw materials. – 3.12. A new waste after-use model has been developed providing improved accuracy levels of climate impact and supporting circular products in line with the ESRS. Several of these improvements have resulted in more accurate emissions with better precision for the most recent years. In 2026 a more detailed analysis related to base year 2016 comparability will be carried out. Energy consumption and mix (E1-5) Energy efficiency, breakthrough technologies and the increased use of renewable energy are required to achieve Essity’s targets. Energy sources currently necessary for production include electricity, whether purchased or generated onsite, fuels such as fossil fuels and biomass, and purchased steam. The amount of these energy sources consumed in production is monitored and the data is used in emissions calcula- tions and for tracking progress toward the climate targets. Surplus heat is created during the onsite com- bustion of fuel, some of which is reused by Essity in production processes, while a smaller proportion share is sold externally to increase resource efficiency. The majority of Essity’s energy demand, both fuel and electricity, is for tissue production. Electricity is the primary energy source used to produce products in the Personal Care (Incontinence Products, Feminine Care and Baby Care) and Medical Solutions product categories. European Personal Care pro- duction facilities have purchased certified renewable electricity with guarantee of origin certificates since 2020. For grid electricity specification into renewable, fossil and nuclear sources, Essity has split the sources according to available country mix information (Source: U.S. Energy Information Administration, January 2026). The energy intensity per net revenue from activities in high-climate impact sectors was 79.0 (MWh/SEKm) for 2025. As Essity operates in the manufacturing sector, virtually all of the activities are part of the high-climate impact sector (99.7%). Total energy (net) and Essity’s net sales (see page 112) is used for the energy intensity ratio calculation. Energy 2025 2024 2023 2022 2021 Production, tons of products 3,235,496 3,276,060 3,261,236 3,503,931 3,410,084 Purchased electricity, MWh 3,887,080 3,879,374 3,836,438 4,190,350 4,038,948 Certified renewable electricity purchased 861,002 771,804 614,290 377,895 345,198 Grid electricity purchased, MWh 3,026,078 3,107,570 3,222,148 3,812,455 3,693,751 of which from renewable sources 1,219,951 1,269,418 1,280,811 1,489,711 1,399,731 of which from fossil sources 1,237,747 1,270,008 1,366,063 1,626,906 1,549,645 of which from nuclear sources 568,380 568,144 575,274 695,838 744,374 Purchased heat/steam, MWh 250,106 218,819 232,706 181,636 194,775 Heat/steam renewable 93,566 70,225 81,828 86,676 89,941 Geothermal steam 85,017 71,027 83,336 67,801 74,943 Heat/steam non-renewable 71,523 77,567 67,542 27,159 29,891 Total purchased electricity, heat/steam, MWh 4,137,185 4,098,193 4,069,144 4,371,986 4,233,724 Total purchased renewable electricity, heat/steam 2,259,536 2,182,474 2,060,264 2,022,083 1,909,813 Total purchased fossil electricity, heat/steam 1,309,270 1,347,575 1,433,605 1,654,065 1,579,536 Total purchased electricy from nuclear sources 568,380 568,144 575,274 695,838 744,374 Sustainability targets and assessment of outcome Science-based emissions targets, near-term Scope 1 and 2 Target 2030: –35% Outcome: –27% Scope 31) Target 2030: –35% Outcome: –15% 1) Essity’s near-term Scope 3 science-based target applies to the most important emission categories: key purchased raw materials and branded packaging, incoming and outgoing transportation, waste from the Group’s own production and product waste after use. 0 1 2 3 4 2025202420232016 Scope 1 Scope 2 3.1 2.22.22.2 Million tons CO2e Outcome 2016–2025: –27% Scope 3 Million tons CO2e 4.44.4 5.2 –15% 0 1 2 3 4 5 6 7 202520242016 Climate changeE Essity | Annual Report 2025 66
Page 67
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Gross Scope 1, 2 and Scope 3 and total greenhouse gas emissions (E1-6) Essity calculates greenhouse gas emissions across Scope 1, 2 and 3 in accordance with the GHG Protocol, applying the operational control approach. Scope 1 and 2 emissions include calculations directly linked to Essity’s production facilities, covering direct emissions from fuel consumption (Scope 1) and indirect emissions from the use of purchased energy (Scope 2). Scope 3 comprises estimated indirect emissions across Essity’s upstream and downstream value chain. The reported data for Scope 1 is based on onsite fuel use with associated emission factors. For Scope 2, data for emissions from electricity is calculated and disclosed according to location- and market-based methodology, using countries’ relevant grid mix emission factors for the two methods. Essity’s data for emissions from purchased steam is calculated based on the fuel used by the suppliers to generate the steam. The calculation of greenhouse gas emissions for Scope 1, 2 and estimations for Scope 3, as well as prog- ress tracking toward Essity’s science-based targets, encompasses carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O). Emission factors used: • Greenhouse gas emissions from incineration are calculated using emission factors for the fuel’s thermal value. Source: IPCC Guidelines 2006 (Scope 1 emissions). • Greenhouse gas emissions from purchased electricity are calculated using the country’s emission factor published by the International Energy Agency (IEA), 2022 (Scope 2 emissions, location-based). For market-based, emission factors used are AIB Residual Mix (2023), Green-e® residual mix (2022) and IEA (2022). • For Scope 3, emission factor sources vary and include factors from CEDA by Watershed and GLEC v3.1. For production waste to landfill, the waste streams containing fiber, such as deinking residuals and rejects from wastepaper, are reported into a centralized system that applies an emission factor to the disposed dry fiber portion. This emission factor is based on national averages considering incineration and land filling practices, including methane capture in each area. For the other key Scope 3 emissions categories, Essity conducts estimates of emissions using the Group’s data from purchased, transported, produced and sold volumes, known as primary data. The emission factors are obtained through third-party information from suppliers and service providers in manufacturing and transportation, as well as from publicly available statistics for waste management systems. Essity’s restatement principles are in line with the GHG Protocol. Prior year adjustments are made due to structural changes, such as acquisitions and divestments, improved or updated methodology and updated data from third-party suppliers. Climate changeE 2025 2024 2023 2022 2021 Total fuels, MWh 6,991,281 7,086,993 7,131,713 7,844,147 7,765,565 Biofuels 1,051,112 1,080,173 1,081,124 1,180,670 1,178,146 of which wood fuels 144,718 176,032 167,589 187,909 196,640 of which black liquor 771,855 773,496 787,234 862,038 901,298 of which other biofuels 134,539 130,645 126,301 130,723 80,208 Fossil fuels 5,940,169 6,006,820 6,050,589 6,663,477 6,587,419 of which natural gas 5,821,083 5,871,652 5,907,690 6,501,368 6,299,042 of which coal 5,667 6,153 5,045 5,788 159,353 of which oil 106,029 122,111 130,736 148,433 122,505 of which other fossil fuels 7,390 6,904 7,118 7,888 6,520 Photovoltaic electricity generated, MWh 17,629 9,118 678 – – Total energy (gross), MWh 11,146,096 11,194,305 11,201,535 12,216,133 11,999,289 Total renewable energy (gross) 3,328,277 3,271,766 3,142,066 3,202,753 3,087,959 Total fossil energy (gross) 7,249,439 7,354,395 7,484,195 8,317,541 8,166,955 Total energy from nuclear sources 568,380 568,144 575,274 695,838 744,374 Energy sold, MWh 201,288 148,829 44,990 250,944 248,838 Renewable energy sold 12,730 40,197 200 135,169 166,222 Fossil energy sold 188,558 108,632 44,790 115,774 82,617 Nuclear energy sold – – – – – Total energy (net), MWh 10,944,808 11,045,476 11,156,545 11,965,189 11,750,450 Total renewable energy 3,315,547 3,231,569 3,141,866 3,067,584 2,921,737 Total fossil energy 7,060,881 7,245,763 7,437,404 8,201,767 8,084,338 Total nuclear energy 568,380 568,144 575,274 695,838 744,374 Share of renewable energy in total energy consumption, % 30 29 28 26 25 Share of fossil sources in total energy consumption, % 65 66 67 69 69 Share of energy consumption from nuclear sources in total energy consumption, % 5 5 5 6 6 Energy, cont. Essity | Annual Report 2025 67
Page 68
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information GHG emissions, kton CO2e 2025 2024 2023 2022 2021 2016 Scope 1 GHG emissions Gross Scope 1 GHG emissions 1,215 1,230 1,239 1,365 1,371 1,538 Scope 1 GHG emissions from regulated emissions trading schemes, % 65 65 65 66 65 – Scope 1 GHG emissions reduction (as of emissions of base year), % 21 20 19 11 11 – Scope 2 GHG emissions Gross market-based Scope 2 GHG emissions 1,140 1,205 1,255 1,490 1,354 1,818 Scope 2 GHG emissions (market-based) reduction (as of emissions of base year), % 37 33 31 18 26 – Gross location-based Scope 2 GHG emissions 1,012 1,011 993 1,153 1,203 1,513 Scope 2 GHG emissions (location-based) reduction (as of emissions of base year), % 33 33 34 24 21 – Total Scope 1 and 2 (location-based) GHG emissions 2,227 2,240 2,231 2,518 2,573 3,051 whereof CO2 2,220 2,233 2,223 2,510 2,564 3,041 whereof N2O 3 4 3 4 4 5 whereof CH4 4 4 4 5 5 5 Prior year adjustment1) – 1 1 1 1 1 Total Scope 1 and 2 GHG emissions (location-based) reduction (as of emissions of base year), % 27 27 27 17 16 – 1) Updates of emission factors for Scope 2 (location-based) and minor corrections. Scope 3 GHG emissions, kton CO2e 2025 2024 2016 Scope 3 GHG emissions, corresponding to SBTi near-term target 2030 Total indirect (Scope 3) GHG emissions 4,402 4,436 5,192 whereof SC 3.1 Purchased goods and services (key raw materials) 1,488 1,471 1,608 whereof SC 3.4 Upstream transport and distribution 656 708 861 whereof SC 3.5 Production waste 89 103 277 whereof SC 3.12 End-of-life treatment of sold products 2,169 2,155 2,446 Scope 3 GHG emissions reduction, near-term target 2030 scope, % 15 15 – Other Scope 3 GHG emissions, included in long-term SBTi target 2050 2,335 2,199 1,890 Total Scope 3 GHG emissions 6,737 6,635 7,082 Total Scope 1, 2 and 3 GHG emissions, kton CO2e 2025 2024 2016 Total Scope 1, 2 and 3 GHG emissions (location-based) 8,965 8,876 10,133 GHG emissions intensity, location-based (total GHG emissions per net revenue), ton/kSEK1) 64.7 61.0 Percentage of total GHG emissions reduction from base year (location-based) 12 12 – Total Scope 1, 2 and 3 GHG emissions (market-based) 9,093 9,071 10,439 GHG emissions intensity, market-based (total GHG emissions per net revenue), ton/kSEK 65.7 62.3 Percentage of total GHG emissions reduction from base year (market-based) 13 13 – 1) See net revenue on page 112 in the financial statements. Air emissions: GHG Biogenic CO2-emissions, kton 2025 2024 2023 2022 2021 2016 Scope 1, from biofuel use 408 417 431 469 475 526 Scope 2, from purchased steam 50 42 44 37 39 2 Climate changeE Essity | Annual Report 2025 68
Page 69
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information WaterE Why water matters Water is essential for life and underpins healthy ecosystems. As climate change accelerates, water scarcity and declining water quality are becoming more pronounced, increasing risks for communities, industries and nature. Essity relies on water as a critical resource in tissue manufacturing, which places a clear responsibility on the Group to manage it carefully and effi- ciently. Responsible water use is therefore integral to Essity’s operations. The Group works continuously to reduce freshwater intake, improve water efficiency and strengthen water stewardship across its sites. Sustainability matters Value chain Material impact Financial effect Time horizon Upstream activities Own operations Downstream activities Short-term Medium-term Long-term Water consumption, withdrawals and discharges Actual negative material impact Potential negative financial effect Impact, risk and opportunity management Description of the processes to identify and assess material water-related impacts, risks and opportunities (E3 ESRS 2 IRO-1) Essity’s primary impact on water occurs in tissue production, where water is essential for transporting fiber during the manufacturing process. In water-stressed areas where Essity conducts such activities, limited water availability may affect production and ultimately challenge the Group’s social license to operate locally. To proactively address these risks, Essity conducts water baseline assessments and applies the World Wide Fund for Nature (WWF) Water Risk Filter across all facilities. These assessments are complemented by discussions with local stakeholders at selected facilities in regions experiencing water stress. For more information on the process for identifying and assessing material impacts, risks and oppor- tunities related to water, see page 60. Policies related to water (E3-1) Essity has identified water as a material sustainability matter due to its importance both for the environ- ment and for the Group’s operations. In areas with significant water risks, Essity is committed to reducing water consumption through targeted measures. This commitment is guided by the Essity’s Risk, Environ- ment, Safety and Health (RESH) Policy, which outlines Essity’s approach to meeting or exceeding applica- ble legal requirements related to environmental issues, including water. To ensure consistent and effective implementation, local procedures are in place and internal procedure documents on wastewater management and water stewardship have been developed to standardize practices across all facilities. These policies address water usage, water management and wastewater treatment, including the mainte- nance and optimization of continuous treatment systems. Together, these policies and procedures aim to mitigate water-related risks, ensure sustainable water extraction, and identify opportunities for efficiency improvements. Implementation and progress are regularly reviewed to ensure continuous improvement and development in line with Essity’s sustainability targets. For more information about Essity’s RESH Policy, see pages 50–51. Actions and resources related to water (E3-2) To advance Essity’s water reduction target and uphold the ambitions of the company’s Global RESH Policy, a series of focused actions are being taken today, with additional steps planned for the coming years. These efforts strengthen water stewardship by reducing overall water use, including freshwater intake and by improving how water resources are managed and protected across the operations. Although water demand is high at tissue production facilities, water consumption and actual loss is low, with most of the water being treated and returned to the environment. In tissue manufacturing, Essity uses water to transport fiber through the production process (referred to as process water) as well as water to cool machinery (referred to as cooling water). The water in use in the majority of cases is surface water. It is sometimes treated before use in production, for example, when it is purified from dissolved substances and suspended solid content. Process water is either treated at Essity facilities directly before being discharged to the environment or sent to third parties for treatment, in accordance with regulatory requirements. The cooling water is used to cool down equip- ment or processes through heat exchange and is therefore classified as indirect and non contact. It there- fore requires no specific treatment before being released to the environment again. Wastewater treatment technology has been installed in the majority of Essity’s production facilities, and investments continue to be made as new facilities are added. By recirculating and treating water multiple times within the tissue production process, water intake and pollutant loadings in effluent discharges are reduced. This approach also helps to reduce energy consumption for water heating. After use, water is monitored and treated before being discharged, in accordance with legal requirements or enhanced purification standards that exceed such requirements. During 2023, Essity conducted an assessment of water-related risks at all tissue production facilities using the WWF Water Risk Filter. The assessment showed that eight of Essity’s tissue production facilities are located in areas with high water-related stress due to a combination of limited water availability, strict regulation and potential reputational impact related to water use. In 2024, the assessment was followed up with site visits focused on comparing operational practices, collecting relevant examples and identifying areas for improvement. These insights formed the basis for setting ambitions and developing action plans with clearly defined targets. During 2025, Essity introduced two new global procedures in Water Stewardship and Wastewater Management. These were accompanied by training materials, self-assessment tools and a catalog of best practices to support implementation. An internal network was established between selected sites to enable knowledge sharing and joint analysis of water usage. Detailed site-level assessments were carried out at the eight facilities identified to establish immediate improvements, such as enhanced measurement and validation of existing processes. The results guided the development of site-specific action plans, finalized in 2025. These plans align with the RESH Policy to reduce environmental impact and are critical to achieving Essity’s defined target of a 25% reduction in freshwater intake at the eight prioritized sites by 2032. Essity | Annual Report 2025 69
Page 70
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information WaterE Water Reduction of freshwater intake at tissue sites in water-stressed regions Target: –25% Outcome: –12% 2025202420232022 7.07.27.37.9 –12% Mm 3 Progress will be monitored through data collection and analysis of water withdrawal at site level. Some sites have already taken measures, such as temporary production limitations during periods of high water stress. As part of its innovation efforts, Essity has entered an exclusive partnership with the global technology company Voith to develop a new manufacturing process for tissue. This technology has the potential to reduce water consumption by up to 95%, while also lowering energy use and greenhouse gas emissions. Targets and metrics Targets related to water (E3-3) In 2024, Essity established a voluntary target to reduce freshwater intake by 25% at eight tissue manu- facturing facilities located in water-stressed areas by 2032, using 2022 as the baseline year. The baseline value for freshwater intake across these facilities was 9 million m³. This target directly supports the objec- tive of Essity’s Global RESH Policy, which seeks to reduce environmental impact across operations in a way that meets or exceeds compliance requirements. In developing the target, Essity based its approach on numerical data from selected facilities and com- plemented this with comparisons to other sites within its own operations. This was done to calibrate the level of ambition and ensure that the target is relevant to the specific conditions of each facility. The WWF Water Risk Filter was used to assess and identify water-related risks at the sites. Stakeholder discussions were a central part of the process. Essity collaborated with WWF, conducted competitor analyses and involved local teams through water baseline assessments as well as in discussions on regulatory require- ments from local authorities. In 2025, Essity collected data from prioritized facilities to support its water reduction target. The purpose was to identify local conditions, evaluate potential solutions and build a shared knowledge base. Progress is monitored using site-level water intake data, with each facility assessed individually. This water reduction target is directly linked to Essity’s management of material impacts, risks and opportunities, particularly in water-stressed areas where water availability is a critical factor. Water consumption (E3-4) In 2025, Essity’s total water consumption was 8 million m³. Overall, the water intensity, meaning water consumption in relation to production volumes, was 37% at the eight tissue production facilities located in water-stressed areas, compared to Essity’s total water intensity for its tissue operations. The eight sites in water-stressed areas accounted for 8% of Essity’s total water intake. Water intensity, defined as water consumption divided by net revenue, was 678 m³ per EURm. No additional third-party assurance than the review of the assurance provider has been performed. Water Water, m3 2025 2024 2023 2022 2021 Water intake 91,907,673 93,101,005 96,841,727 96,545,885 92,977,493 of which surface water 67,595,438 68,681,640 71,489,848 71,213,430 69,820,630 of which ground water 19,115,643 18,640,289 19,497,706 19,217,593 17,273,492 of which municipal water systems 4,713,871 4,841,513 5,087,961 5,492,494 5,055,050 of which rainwater and water from third party 482,721 937,563 766,212 622,368 828,321 Water discharge 83,413,259 84,659,330 88,793,710 87,415,248 82,903,428 of which surface water 75,582,483 78,069,430 82,463,336 80,841,786 76,397,685 of which water to a third party 7,820,681 6,556,257 6,317,104 6,565,938 6,498,657 of which ground water 10,096 33,643 13,270 7,491 7,086 Water consumption1) 8,494,414 8,441,675 8,048,017 9,130,638 10,074,065 Water intensity, intake/production, m3/ton 2025 2024 2023 2022 2021 Tissue production facilities, total 35 35 36 34 34 Tissue production facilities, water-stressed areas 13 14 15 16 16 Essity’s water target, water-stressed areas 2025 2024 2023 2022 Fresh water intake, tissue sites, water-stressed areas, m3 6,967,159 7,200,666 7,315,113 7,916,601 Tissue sites, water-stressed areas, % change vs 2022 –12 –9 –8 1) Water consumption is water intake minus water discharged. Essity | Annual Report 2025 70
Page 71
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Forest and fiberE Why forest and fiber matters Global forests play an important role in Essity’s climate impact by absorbing carbon dioxide and influencing both local and global climate patterns. They also provide habitats for a wide range of species and contribute to the livelihoods of rural com- munities. Preserving forests is therefore essential for a functioning ecosystem. Essity is committed to sourcing fiber respon- sibly and increasing the use of recycled materials. Since fresh wood-based fiber remains an important raw material, Essity recognizes its role as a global pulp purchaser and works to minimize any negative impacts associated with fiber sourcing. Sustainability matters Value chain Material impact Financial effect Time horizon Upstream activities Own operations Downstream activities Short-term Medium-term Long-term Regulatory changes, shortage of fiber and alternative fibers Potential negative mate- rial impact Potential negative financial effect Strategy Material impacts, risks and opportunities and their interaction with our strategy and business model (E4 ESRS 2 SBM-3) Essity’s impact on forests and biodiversity primarily stems from the use of fresh wood-based fiber. While this is a key component of its products, it also carries potential negative impacts on ecosystems and local communities if not responsibly sourced. Unsustainable forest management can lead to deforestation, habitat degradation, pollution and climate change, posing material risks to both nature and the long-term viability of the business model. The rising global demand for forest resources is increasing pressure on supply chains, while stakehold- ers and regulators are setting stricter requirements for transparency, traceability and certified sourcing, particularly through such frameworks as the EU Deforestation Regulation and the Kunming-Montreal Global Biodiversity Framework. These regulatory developments also entail potential negative financial effects, as they may affect the availability and cost of certified raw materials. Essity is committed to sourcing fiber certified by the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC). The Group continuously works to improve processes for identifying and assessing impacts, dependencies and opportunities related to biodiversity throughout the value chain, in line with international standards and regulatory requirements. Integrating forest and fiber impacts and risks into business strategy and resilience planning (E4-1) Essity is strengthening supply chain resilience by securing future access to raw materials and addressing climate-related risks, particularly those related to forest and fiber sourcing. This includes broadening the base of fiber and raw materials to reduce dependency on individual sources. As part of this effort, a resil- ience analysis has been conducted focusing on pulp suppliers, taking transitional risks into account, including those related to evolving regulations and increasing transparency requirements. The analysis is based on assumptions regarding biodiversity loss, forest and fiber-related risks, regula- tory changes and shortages of both conventional and alternative fibers. Potential negative impacts upstream on forests and ecosystems may arise from wood fiber and pulp sourcing, especially if forests are not well-managed. To support enhanced due diligence, Essity is implementing IT systems to facilitate data exchange with pulp suppliers. Stakeholder discussions are a key component of this work, with Essity partnering with external organizations to gain knowledge and co-develop methods for assessing impacts on forests and ecosystems. The analysis is based on a long-term perspective and has identified potential negative financial effects, which serve as the basis for mitigation actions to strengthen long-term resilience and sustainability. Impact, risk and opportunity management Description of processes to identify and assess material forest and fiber-related impacts, risks, dependencies and opportunities (E4 ESRS 2 IRO-1) As part of Essity’s strategy to identify and manage material impacts, risks and opportunities related to bio- diversity and its influence on the business model, Essity has conducted an assessment of its own production facilities using the World Wide Fund for Nature (WWF) Biodiversity Risk Filter. The result, combined with the fact that the Group does not own or manage forest land, shows that no biodiversity-sensitive areas are impacted through Essity’s own operational activities. However, an indirect potential negative impact exists in the upstream value chain. For information on the process to identify and assess material impacts, risks and opportunities related to forest and fiber, see page 60. Policies related to forest and fiber (E4-2) Essity’s primary impact on forests and biodiversity arises from its use of fresh wood-based fiber. To manage related impacts, risks, dependencies and opportunities, Essity has adopted two key policies: the Fresh Wood-based Fiber Procurement Policy and the Global Supplier Standard. These guide responsible sourcing practices and ensure compliance through defined requirements and tools. Essity’s Fresh Wood-based Fiber Procurement Policy includes a target that all wood fiber raw materials are certified and sourced through a recognized third-party Chain of Custody system. All fresh wood-based fiber used in Essity’s products and packaging must be certified under FSC or PEFC. They must fulfill mini- mum FSC Controlled Wood standard, which guarantees the exclusion of unacceptable sources. Compli- ance is ensured through regular third-party audits and supplier reporting. Third-party audit reports are occasionally commissioned to obtain additional background information of a supply chain or to assess potential social or environmental impacts. All suppliers must hold FSC Chain of Custody certification. FSC Controlled Wood defines low-risk sources of wood that comply with FSC principles and excludes illegal, high-conservation risk or socially harmful sources, supporting responsible forest management. Unaccept- able sources include: 1. Illegally harvested wood 2. Wood harvested in violation of human rights 3. Wood from forests in which high conservation values are threatened by forest management activities 4. Wood from forests being converted to plantations or non-forest use 5. Wood from forests in which genetically modified trees are planted Essity | Annual Report 2025 71
Page 72
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Forest and fiberE Fresh fiber Share of FSC- and PEFC-certified fresh fiber Target: 100% Outcome: 99.7% Through certifications such as FSC and PEFC, Essity ensures sustainable fiber procurement, thereby preventing deforestation and promoting biodiversity. 2025202420232022 97.0% 98.1% 98.8% 99.7% To ensure traceability, all pulp suppliers must disclose the origin and species of wood used via a standard- ized questionnaire. This enables risk assessments and supports compliance with stakeholder and regula- tory requirements. Essity continues to expand public reporting on fiber sourcing, certification and traceability performance. For more information on the Fresh Wood-based Fiber Procurement Policy and the Global Supplier Standard, see pages 50–51. Actions and resources related to forest and fiber (E4-3) Essity is committed to responsible fiber sourcing and increasing the use of recycled fiber. This is achieved through partnerships, certifications and innovation across the supply chain. These efforts ensure that high environmental and social standards are maintained, without relying on biodiversity offsets. Partnerships Essity participates in the Consumer Goods Forum Forest Positive Coalition of Action, which combats global forest degradation and deforestation while preserving biodiversity. The coalition’s roadmap for pulp, paper and fiber-based packaging helps members source materials from responsibly managed forests, promotes certifications, recycling and the use of recycled materials, and encourages the implementation of time- bound commitments and concrete actions. Certifications Essity has reinforced its requirements for wood and fiber traceability and its commitment to forest certifi- cation. International third-party certifications, FSC and PEFC, which support responsible forest manage- ment and safeguard social dimensions such as labor conditions, community engagement and Indigenous rights. Essity’s products are made of material from FSC-certified forests, recycled materials and other con- trolled sources, reflecting the ambition to enable positive impact across the value chain. Essity supports non-certified suppliers and forest owners in achieving certification, increasing the availability of responsibly sourced materials. Globally, regionally and nationally, Essity promotes the development of international certification systems. For its own operations, Essity uses ISO 14001 and EMAS-certified environmental management systems to continually improve environmental performance. Investments in innovation To further strengthen circularity and reduce reliance on virgin wood-based pulp, Essity invests in expanding recycling capacity. This improves resource efficiency and reduces climate impact. A recent investment in Hondouville, France, enables the facility to recycle over 25,000 metric tons per year, equivalent to 60% of all collected, sorted and recycled food and beverage cartons in France. The recovered fibers are used in the fiber mix for Tork-branded products within Professional Hygiene, reducing dependency on fresh wood-based fiber. Targets and Metrics Targets related to forest and fiber (E4-4) Essity’s target is to source 100% of fresh wood-based fiber through internationally recognized third-party certification systems, such as FSC or PEFC. All fresh wood-based fiber must be traceable through a recog- nized Chain of Custody system and, at a minimum, meet the FSC Controlled Wood standard. The target has been in place since 2015 and is measured annually as the share (in metric tons) of certified fresh wood-based fiber purchased, relative to the total volume of fresh fiber purchased. It applies globally and remains consistent regardless of new supplier onboarding or regional expansion. Essity utilizes certification to avoid negative impact on biodiversity and ecosystems and the Group does not use biodiversity offsets. Essity’s fiber sourcing target supports ecological integrity by aligning with certification systems that safeguard against environmental degradation. These targets consider ecological thresholds, which are limits beyond which ecosystems risk irreversible harm. By ensuring that sourcing practices support the continued functioning and resilience of forest ecosystems, Essity meets disclosure expectations related to environmental pressures such as land-use change, biodiversity loss and resource extraction. The target-setting process is informed by input from suppliers, non-governmental organizations and certification bodies, as well as guidance from external frameworks such as the Kunming-Montreal Global Biodiversity Framework and UN’s Intergovernmental Panel on Climate Change (IPCC). Progress, challenges and corrective actions are disclosed annually to ensure transparency and accountability. Fiber use, pulp and recycled paper1) 2025 2024 2023 2022 2021 Fiber used, million tons 3.5 3.5 3.6 5.2 5.0 of which, pulp consumption 1.9 1.9 1.8 3.3 3.2 share of total fiber use, % 55 54 50 64 64 of which, recovered paper consumption 1.6 1.6 1.8 1.9 1.8 share of total fiber use, % 45 46 50 36 36 Fiber sourcing fresh wood-based fiber by certification2) % 2025 2024 2023 2022 2021 FSC 65 62 59 59 63 PEFC 35 37 39 38 35 FSC Controlled Wood standard3) – 1 2 3 2 Total 100 100 100 100 100 Target fulfillment 99.7 98.8 98.1 97.0 98.0 1) 2023 excludes discontinued operations. Prior years are not adjusted. 2) The distribution applies to procurement by wholly owned companies. 3) Includes mainly packaging and a small amount of externally purchased mother reels. Essity | Annual Report 2025 72
Page 73
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Resource use and circular economyE Why resource use and a circular economy matter Global resource consumption is accelerating at an unsustainable pace, while linear ”take-make-dispose” models are depleting limited resources. A transition to a circular economy offers a systemic solution by preventing waste, extending the lifespan of products and materials and regenerating natural systems. This approach reduces dependence on virgin resources, lowers greenhouse gas emissions and strengthens resilience against supply chain disruptions. Essity is committed to achieving net zero greenhouse gas emissions by 2050 by integrating resource efficiency throughout the product life cycle using low-impact materials, sustainable production and circular product design. Essity’s Life Cycle Management framework drives the transition to circular practices, keeping operations within planetary boundaries while creating strategic advantages such as cost savings, innovation and regulatory compliance. Sustainability matters Value chain Material impact Financial effect Time horizon Upstream activities Own operations Downstream activities Short-term Medium-term Long-term Resource inflows (use of natural resources) Actual negative material impact No financial effect Resource outflows (products and services) Actual negative material impact Potential negative financial effect Impact, risk and opportunity management Description of processes to identify and assess material resource use and circular economy-related impacts, risks, dependencies and opportunities (E5 ESRS 2 IRO-1) Currently, Essity’s operations are largely based on a linear production and consumption model. The Group works closely with stakeholders throughout the value chain to identify risks and opportunities related to resource use and to move toward a more circular economy. This process involves internal data reviews, materiality assessments and life- cycle thinking to evaluate resource inflows, outflows and waste. For more information on the process to identify material impacts, risks and opportunities related to resource use and circular economy, see page 60. Policies related to resource use and circular economy (E5-1) Essity’s Sustainability Policy, the Global Supplier Standard and the Fresh Wood-based Fiber Procurement Policy establish requirements for responsible sourcing of all materials, low-carbon resource use as well as circularity across the Group and its supply chain. The Group has implemented processes to ensure high resource efficiency within operations, embedding low-carbon and circularity principles into its business model. These measures encompass responsible raw material procurement, resource-efficient production and sustainable products that help customers and consumers minimize material waste during and after use. In addition, engagement with stakeholders is an important component of the policies, promoting collaboration and transparency in achieving shared sustainability objectives. For more information on Essity’s Sustainability Policy, the Global Supplier Standard and Fresh Wood- based Fiber Procurement Policy, see pages 50–51. Actions related to resource use and circular economy (E5-2) Essity works to advance a circular economy by improving material efficiency in packaging and product design, increasing the use of recycled materials, and designing products to fit established circular waste streams. Across the value chain, the Group prioritizes low-carbon materials and design, while exploring circular products. Resource efficiency is a core principle in development processes. Material use is reduced through inno- vations such as lighter plastic packaging and thinner hygiene products, supported by improvements in materials and design. These innovations contribute to lower resource consumption and reduced climate impact. Another principle is to increase the use of recycled materials to further reduce the environmental impact and conserve natural resources. Integrating recycled content into production processes and Essity’s products reduces carbon emissions and contributes to a circular economy. Designing for circularity is critical to closing resource loops and reducing dependency on virgin mat erials. By embedding circular principles into product and process design, Essity enables reuse, recycling, controlled consumption and regeneration, fostering circular flows that drive long-term sustain- ability and value creation. Essity’s innovation process embeds the principles of improved resource efficiency, increased use of recycled materials, and design for circular flows. The company also uses life cycle assessments (LCAs) to guide decisions by identifying environmental impacts across the full product life cycle. These principles support Essity’s actions toward responsible fiber sourcing, reduced fossil-based plastics, minimized production waste, and the development of circular products with lower environmental impacts during and after use. They also contribute to Essity’s climate actions within Science Based Targets (SBT) to reduce Scope 3 emissions. Responsible sourcing of fibers Essity is committed to responsible fiber sourcing and the use of recycled fiber. For more information, see pages 71–72. Reduce fossil-based primary plastics Essity actively works to reduce the use of primary fossil-based plastics in packaging and to replace these with renewable or recycled plastics or new flexible paper-based packaging. In 2025, Essity launched prod- ucts containing biomass-balanced resources. The Group promotes sustainable consumption during use and has introduced reusable products to further mitigate environmental impact. Reduce production waste Reducing production waste is a key priority for Essity. Preventing waste generation is the first priority. When waste cannot be avoided, the focus is on finding solutions that give production waste a meaningful and responsible use-case. In tissue manufacturing, the main source of production waste is sludge gener- ated from the use of recycled fibers. Essity aims to recover this sludge as material or energy through waste valorization initiatives wherever feasible. When recovery is not possible, landfill may be used as a last resort. These efforts support resource efficiency and contribute to a more circular approach in operations. Essity | Annual Report 2025 73
Page 74
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Resource use and circular economyE Reducing waste after-use through circular design in practice and at scale Essity is committed to promoting sustainable consumption, which involves working together with the user. One example is TENA SmartCare, which optimizes care and product use, reduces waste through digital monitoring and enables the use of thinner products. Digital monitoring makes it easier to replace the product at the right time, leading to fewer products used. Another example is Tork dispensers, which reduce consumption by allowing users to take one product at a time. This encourages behavioral changes that minimize product use. In recent years, Essity has launched fully reusable and washable absorbent underwear and hybrid products that combine high performance with reduced environmental impact. The Group continues to develop washable, reusable and hybrid products to ensure functionality and user acceptance while reducing the need for primary materials and to generate less waste. Recyclability of paper and plastic packaging has been enhanced and the product range includes com- postable tissue products. Essity actively encourages consumers to compost food service items such as Tork napkins and Consumer Tissue household towels. Tork Paper Circle is a pioneering recycling service for hand towels and the next step is to leverage insights from this initiative to evaluate whether tissue products can be recycled within existing recycling streams. Alternative post-consumption solutions for absorbent hygiene products are currently being explored. Targets and Metrics Targets related to resource use and circular economy (E5-3, E5 ESRS 2 IRO-1) Essity’s Sustainability Policy and Global Supplier Standard set requirements for responsible sourcing, low-carbon resource use and circularity across own operations and the value chain. The following targets support these objectives by driving innovation, reducing emissions and developing circular products: • Sustainable innovations: At least 50% of Essity’s innovations shall annually contribute to social and/or environmental improvements. • Circular packaging: Essity aims for all packaging to be 100% recyclable and to consist of at least 85% renewable or recycled materials by 2025. • Zero waste to landfill from production: All production waste shall be recycled as material or energy no later than 2030. • Reduce greenhouse gas (GHG) emissions from product waste: Product waste is part of Essity’s Scope 3 emissions target, which stipulates a reduction of 35% by 2030. • Responsible procurement of fresh wood-based fiber: Essity’s target is to source 100% of fresh wood-based fiber through internationally recognized third-party certification systems, such as Forest Stewardship Council (FSC) or Programme for the Endorsement of Forest Certification (PEFC). For more information, see page 72. Targets and metrics are developed through collaboration with internal and external stakeholders such as national and multi-national trade associations. The work includes extended producer responsibility schemes for both packaging and products. Essity also engages in conversations throughout the value chain, including with partners such as the Consumer Goods Forum (CGF), European Disposals and Nonwovens Association (EDANA), Confederation of European Paper Industry (CEPI), the Ellen MacArthur Foundation (EMF) and RecyClass. The purpose is to promote implementation of circular economy solutions designed to tackle waste. Sustainable innovations The ambition is to develop innovative products that meet user needs, create business value and promote social and environmental sustainability. To achieve this goal, Essity focuses on promoting resource effi- ciency throughout the life cycle, ensuring sustainable consumption and reducing waste after use. Essity has set a target for sustainable innovations. At least 50% of all innovations each year should be classified as sustainable according to defined criteria. An innovation is considered sustainable if it delivers social and/or environmental improvements. Sales from launched innovations are tracked and assessed against defined criteria linked to environmental and social improvements. An innovation is classified as sustainable if it meets one or both criteria. Environmental assessments rely on LCAs conducted in accor- dance with ISO 14040 and Product Category Rules for tissue and absorbent hygiene products. Sustainable innovations Share that yielded social and/or environmental improvements Target: >50% Outcome: 80% Essity’s ambition is to develop innovative products that meet user needs, create business value, and promote social and environmental sustainability. To reach this goal, Essity focuses on resource efficiency throughout the entire lifecycle, sustainable consumption, and reduced post consumer waste. In 2025, for example TENA Stretch™ Plus Briefs was launched, contributing to improved sustainability. 2025202420232022 80%72% 87%85% Sustainable innovations 2025 2024 2023 2022 2021 Sustainable innovations1), % 80 87 85 72 59 of which, social, % 56 54 48 56 47 of which, environmental, % 48 55 58 38 32 1) To avoid double counting, sustainable innovations that meet both social and environmental criteria are only counted once. This means that the sum of the KPIs for social and environmental innovations may exceed the total outcome for sustainable innovations. Circular packaging Essity’s target for circular packaging is to ensure technical recyclability and increase the share of renew- able or recycled materials, contributing to resource efficiency and full circularity. The target, valid until 2025, is that all packaging should be technically recyclable. At least 85% of all packaging should be made from renewable or recycled materials and at least 25% of plastic packaging should be derived from recy- cled plastic. These plastic-related commitments are linked to Essity’s participation in the Ellen MacArthur Foundation’s New Plastic Economy initiative and are based on external standards for the definition of recyclability. Progress is measured annually for both paper and plastic packaging. Measurement of circular packag- ing includes resource inflows (share of renewable or recycled materials) and resource outflows (share of recyclable packaging), calculated as a proportion of total sold packaging. In 2025, no changes were made to targets, metrics or methodologies. Essity | Annual Report 2025 74
Page 75
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Packaging Share of packaging manufactured from renewable and/or recycled material Target 2025: 85% Outcome: 81% Essity is striving for 85% renewable and/or recycled material in the Group’s packaging. This target applies to both paper and plastic packaging for Essity’s brands. 2025202420232022 80% 80% 81%78% Resource use and circular economyE Zero waste to landfill from production Essity’s waste target is to ensure that all production waste is recovered as material or energy by 2030. This approach aims primarily to reduce waste generated in tissue mills. This leads to lower GHG emissions and also contributes to achieving Essity’s target to reduce emissions from production waste (Scope 3.5). Stakeholders involved in defining and validating the target include the Science Based Targets initiative (SBTi). The target is aligned with the Paris Agreement and uses methodologies and assumptions based on the SBTi framework and the GHG Protocol. No changes to the target or methodologies were made during 2025. Reduce greenhouse gas emissions from product waste Essity aims to reduce GHG emissions from product waste as part of the overall target to reduce absolute GHG emissions by 35% by 2030. The target is validated by the SBTi framework and based on the GHG Pro- tocol. The base year is 2016 with a baseline value of 2,304 kilotons of CO2e. The target includes estimated greenhouse gas emissions from product waste after use, including emissions from incineration, landfill and wastewater treatment. To achieve this target, Essity prioritizes minimizing waste by reducing materi- als, lowering the carbon footprint for current and new materials and promoting sustainable consumption during use. Additional measures include increasing fully reusable and hybrid products to reduce material consumption as well as encouraging alternative waste management that improves circularity. In 2025, methodology changes were implemented to improve the accuracy of GHG estimates. These changes include a Group-wide integration of activity data and an enhanced waste model that enables a higher level of detail in emissions calculations. Resource inflows (E5-4) Essity’s primary raw materials include fiber-based materials (pulp and recovered fiber) and fossil-based materials (superabsorbents and nonwoven fabrics). Essity works to reduce the use of raw materials in its products wherever possible and continues to invest in alternative fibers. Many of Essity’s products, such as tissue products, contain renewable fiber (fresh wood-based fiber, recycled fiber and alternative fibers), which together represent the largest share of total material volume. For additional information on Essity’s fiber-based materials, see pages 71–72. Plastics are used in absorbent and medical products to ensure functionality, hygiene and safety. Essity evaluates alternatives with low climate impact and circular products as well as biomass-balanced plastics from renewable sources. Efficiency improvements in production facilities are ongoing through digitaliza- tion and automation, with the goal of achieving sustainable, resource-efficient and competitive production. Packaging data1) 2025 2024 2023 2022 Packaging, total kton 186 183 182 173 of which, paper packaging 142 139 136 133 of which, plastic packaging 44 44 46 40 Technical recyclability of packaging, total % 92 91 88 85 of which, paper packaging 98 97 94 89 of which, plastic packaging 74 72 72 72 Renewable or recycled materials in packaging, total % 81 80 78 80 Renewable or recycled materials in plastic packaging, % 20 17 12 12 of which, renewable materials in plastic packaging 1 1 2 2 of which, recycled materials in plastic packaging 19 16 10 10 1) Scope is paper and plastic packaging for Essity’s brands. Resource outflows (E5-5) Essity develops, produces and sells high-quality hygiene and health products and services. Essity’s tissue products are largely designed to be technically compostable or recyclable, which supports circular resource use. The Group works to increase the acceptance of tissue products in already available recycling streams and in biowaste streams that go to composting. For other product categories, recycling opportunities are continuously evaluated to reduce environmental impact. Where composting or recycling is not yet possible, incineration with energy recovery is used as an alternative to ensure efficient resource utilization. The proportion of renewable or recycled materials was 81% (80) in 2025. 92% (91) of the total packaging was technically recyclable. For plastic packaging, which accounts for about 24% (24) of the total packaging volume, 20% (17) was manufactured from renewable or recycled materials. The proportion of recovered plastic was 19% (16). The proportion of technically recyclable plastic packaging was 74% (72). Tissue production circularity and waste streams The Group works to reduce total GHG emissions by minimizing the amount of production waste sent to landfill and instead recycling waste or recovering energy, thereby contributing to Essity’s Scope 3 emissions reduction commitment. In 2025, the total amount of production waste decreased and 72% (71; 69) was recovered. All waste data for Essity includes water content, which was approximately 50% for waste sent to landfill. Essity applies the waste hierarchy and circular economy principles in production processes to minimize environmental impact and optimize resource efficiency. The two largest production-related waste streams currently sent to landfill are deinking residues and pulper rejects from the recycling processes at Essity’s facilities. Deinking residues consist of non-recoverable fractions of recycled paper, such as short fibers and minerals from paper coatings, which are separated in on-site wastewater systems and dewatered. Essity | Annual Report 2025 75
Page 76
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Production waste Subject to material or energy recovery Target 2030: 85% Outcome: 72% Resource efficiency and the reduction of waste are important in Essity’s production facilities. The target is that all production waste will be subject to material and energy recovery by 2030, which reduces greenhouse gas emissions. 2025202420232022 63% 69% 71% 72% Resource use and circular economyE In line with circularity objectives, Essity prioritizes recovery over disposal. At several production facilities, including Lilla Edet (Sweden) and Nokia (Finland), deinking residues are used as fuel in onsite biomass boilers, supporting energy recovery. In Europe, the majority of these residues are recovered through off-site outlets such as waste-to-energy, construction and agricultural applications. In North America and Latin America, recovery options include reuse in agriculture or construction, while waste-to-energy alter- natives are less common due to high moisture and mineral content, which limit recovery potential. The Group’s Personal Care facilities generate smaller volumes of production-related waste streams, including trimmings and captured super-absorbent material, which are frequently recovered through recycling or energy recovery. Recovery rates vary across regions due to differences in national legislation, infrastructure and availability of waste-to-energy outlets. Changes in production volumes may also influ- ence the balance between material recovery and energy recovery. Of Essity’s total production waste, only a small share (0.3%) is classified as hazardous, primarily consisting of waste oil regulated under EU legislation, as well as organic solvents, batteries and used light bulbs. Essity manages hazardous waste in compliance with applicable legislation and internal procedures to ensure safe handling and disposal. Production waste, ton 2025 2024 2023 2022 2021 Waste management 354,910 377,746 426,783 530,727 466,603 Non-hazardous waste landfill 350,052 374,338 420,246 519,774 458,073 incineration without energy recovery 947 754 549 1,392 5,117 other waste management 2,955 1,903 5,372 8,466 2,552 Hazardous waste landfill 56 42 26 64 34 incineration without energy recovery 180 135 117 350 195 other waste management 720 573 474 682 632 Waste recycling 905,727 906,255 944,578 912,244 892,540 Non-hazardous waste incineration with energy recovery 137,085 101,981 205,235 237,938 207,841 recycling 376,896 368,190 368,385 380,424 340,923 other waste recycling 389,435 434,857 369,648 291,839 341,613 Hazardous waste incineration with energy recovery 448 249 184 159 254 recycling 1,408 612 637 1,581 1,458 other waste recycling 454 367 490 303 451 Total waste 1,260,637 1,284,001 1,371,361 1,442,971 1,359,143 Waste management, % 28 29 31 37 34 Subject to material or energy recovery, % 72 71 69 63 66 Essity | Annual Report 2025 76
Page 77
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Own WorkforceS Why own workforce matters Essity’s own workforce plays a crucial role in the Group’s sustainability efforts and in enhancing the Group’s long-term resilience, innovation capacity and value creation. Ensuring fair, safe and inclusive working conditions strengthens employee well-being and the social and economic sustainability of the business. An engaged and skilled workforce is essential for implementing sustainability strategies, maintaining responsible business ethics and building trust with stakeholders. Prioritizing workforce-related matters, such as health and safety and equal opportunities, is essential for fostering a respons- ible business model aligned with sustainable development objectives. Essity is committed to providing a safe, attractive and inclusive working environment while also fostering conditions for continuous skills development. By focusing on the material sustainability matters related to its own workforce, Essity strengthens employee engagement, its attractiveness as an employer and its ability to create long-term business value. Sustainability matters Value chain Material impact Financial effect Time horizon Upstream activities Own operations Downstream activities Short-term Medium-term Long-term Working conditions: Health and safety Actual/potential negative material impact No financial effect Equal treatment and opportunities for all: Diversity and Gender equality Potential positive material impact No financial effect Equal treatment and opportunities for all: Equal pay Potential negative material impact No financial effect Equal treatment and opportunities for all: Training and skills development Potential positive material impact No financial effect Strategy Material impacts, risks and opportunities and their interaction with strategy and business model (S1 ESRS 2 SBM-3) Essity’s workforce is one of the strategic pillars contributing to the Group’s ambition to become the leader in global hygiene and health. Employee engagement and competence are crucial to achieving this goal, making the impact, risks and opportunities related to Essity’s employees an integral part of the Group’s strategy and business model. Essity’s corporate culture is rooted in the Group’s Beliefs & Behaviors: Care, Courage, Collaboration and Commitment. These values form the basis for leadership, decision-making and employee engagement across the organization. While several steering documents define Essity’s commitments, in practice the culture is shaped by initiatives and everyday actions. The following sustainability matters have been identified as having a material impact: Health and safety Ensuring a healthy and safe working environment for the workforce is one of the Group’s top priorities. Providing a safe workplace increases employee satisfaction and enables Essity to more effectively mitigate negative impacts on its own workforce. Operational efficiency is strengthened when the workforce is well informed about safety protocols and capable of managing hazards. Despite preventive measures, acci- dents can occur. During the year, workplace-related incidents were reported that resulted in the fatality of a contractor and a permanent disability of an Essity employee. As a result, there was an actual negative impact from the Group’s activities during the year. Nevertheless, the likelihood of future incidents of similar severity is considered low, and such incidents are therefore classified as a potential impact going forward. To maintain focus, Essity continuously evaluates health and safety as a material sustain ability matter. At the same time, the Group continues its proactive work to prevent incidents that could com promise the health and well-being of its workforce. The assessment includes both employees and non-employees, such as contractors. Diversity, equity and inclusion (DEI) Essity believes that DEI is a strategic enabler for a high-performing culture that is firmly embedded in the Group’s Beliefs & Behaviors. This culture strengthens Essity’s ability to attract and retain talent while fostering innovation and performance; factors that are critical for long-term business success. Essity’s DEI agenda is supported by a global strategy approved by the Executive Management Team and an action plan with initiatives led and monitored by the DEI Center of Excellence in the Human Resources (HR) function in collaboration with the DEI Council. Essity is committed to fostering an inclusive culture, while recruiting employees from a broad and diverse talent pool. By combining these actions with initia- tives that enhance belonging and engagement, Essity establishes a strong foundation for diversity that fuels innovation and drives long-term success. The anticipated positive impact is expected to be material in the medium-term time horizon as the strategy matures and delivers measurable results. If Essity does not achieve its DEI ambitions, this could result in unequal treatment, exclusion or reduced employee engagement. Certain groups may be more vulnerable, but Essity assesses all employees equally in DEI-related matters, assuming that every individual can be affected. The double materiality assessment shows that non-employees, such as self-employed individuals and third-party workers, are not considered to have a material impact and are therefore not included in any DEI reporting. The implementation of DEI initiatives is a culture and performance enhancer and without them, Essity puts both employee well-being and the Group’s long-term performance at risk. Inadequate execution can hinder talent attraction and retention, weaken corporate culture and increase the likelihood of exclusionary or discriminatory practices. In severe cases, this could lead to harassment and inappropriate behavior. For more information, see pages 92–94. Insufficient inclusion could also reduce employee engagement and restrict innovation capability. Essity views DEI as a business enabler for the Group to thrive in an increasingly diverse and interconnected world. To support this belief, Essity takes proactive measures to create an inclusive work environment where qualification and recruitment related decisions are always based on competence, merit and skills. Essity follows applicable law of all jurisdictions in which it operates. Essity | Annual Report 2025 77
Page 78
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Equal pay Essity believes that equal pay for work of equal value is essential for retaining competence and attracting the most suitable candidates in the market, while also fostering diversity, motivation and productivity among employees. Gender-based pay gaps could have a potential negative impact on employee engage- ment and motivation, which in turn may increase personnel turnover and negatively impact performance. Essity conducts annual salary reviews as part of the routine compensation process. Given that no systematic or significant discrepancies were identified in the equal pay analysis, the impact is assessed as potential. Training and skills development Employee competence and engagement are critical for Essity to remain competitive, resilient and innova- tive. In a rapidly changing environment, where digitalization, sustainability demands and market dynamics continuously impact operations, it is essential that Essity’s employees develop and adapt to new requirements. To foster long-term potential positive impact, Essity provides continuous learning and development opportunities for all employees. These efforts also extend to non-employees, distributors and agents. As part of Essity’s ambition to become a learning organization, each employee is expected to set develop- ment goals aligned with strategic priorities, focusing on leadership and functional competence. This approach promotes individual growth and engagement while ensuring that Essity has the right talent and expertise to meet future challenges and deliver on its commitments. By investing in workforce develop- ment, Essity strengthens engagement, job satisfaction and employee retention. Impact, risk and opportunity management Policies related to own workforce (S1-1) Essity is committed to fostering a safe and inclusive working environment for all employees. This commit- ment is embedded in the Group’s global policies and procedures, which collectively guide Essity’s sustain- ability efforts for its workforce. The identified material impacts are managed within three global frameworks: the Risk, Environment, Safety and Health (RESH) Policy, the DEI Policy and the Remuneration Policy. The DEI Policy and Code of Conduct confirm Essity’s commitment to recruiting, evaluating and pro- moting employees based on objective criteria without regard to gender, marital or parental status, ethnic or national origin, sexual orientation, religious belief, political affiliation, age, disability or other grounds for discrimination under applicable law. These policies are implemented through a number of global employee processes as described below. Essity does not have a separate policy for training and skills development. As the issue is already covered by existing processes and governance documents, Essity does not currently intend to establish a separate policy for training and skills development. For more information on Essity’s policies related to its own workforce, see pages 50–51 and for details on Essity’s Human Rights Framework, see pages 51–52 and 92. Processes for engagement with own workers and workers’ representatives (S1-2) Essity promotes open and transparent dialogue with its employees and their representatives to ensure that employees’ voices are heard and their perspectives are considered in decision-making processes. Operational responsibility for maintaining an effective employee engagement process lies with the HR department under the leadership of the Group’s Chief Human Resources Officer. Employee perspectives are gathered through multiple channels, such as: Continuous dialogue between employee and line manager Essity encourages open and regular dialogues between employees and line managers to jointly define and document individual goals and development plans. All employees are expected to have learning object- ives linked to strategic priorities of the Group. These are reviewed at least once per year. Employee Engagement Survey MyVoice The Employee Engagement Survey MyVoice is conducted biannually to give employees the opportunity to share their experiences and views. The survey measures overall employee satisfaction. It includes questions on health and safety, diversity, gender equality and learning and development to identify employee needs. Topic-specific initiatives To strengthen employee engagement, gain insights from individuals who may be vulnerable or marginal- ized and support the DEI agenda, Essity conducts the initiative Courageous Conversations. For more information on Courageous Conversations, see page 80. Engagement on health and safety is integrated into various aspects of Essity’s operations. Through the I Care program, employees receive leadership tools and support to raise awareness and effectively address unsafe situations, conditions or behaviors. Global RESH Committee Since 2020, Essity has maintained a Global RESH Committee composed of senior executives, RESH direc- tors and worker representatives from across the organization. The Committee is responsible for health and safety matters and monitors the monthly performance of each business unit using key performance indicators (KPIs). Collaborations with unions and work councils Essity applies a structured approach to social dialogue at global, European and local levels to gain insights into employee perspectives. Regular information and consultation meetings with employee representatives are held several times per year. These meetings are particularly prioritized ahead of organizational changes and aim to ensure transparency and foster constructive dialogue between employee representatives and Essity. Topics addressed include financial performance, health and safety, employment conditions and, in some countries, salary reviews. To promote respect for human rights and fair working conditions, Essity has signed a global framework agreement with the IndustriALL Global Union and participates in the Global Deal initiative. Essity’s whistleblower system SpeakUp For details on Essity’s whistleblower system, see page 93. The effectiveness of Essity’s workforce engagement is primarily measured through the biannual global Employee Engagement Survey MyVoice. For related key metrics, see page 83. Own workforceS Essity | Annual Report 2025 78
Page 79
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Processes to remediate negative impacts and channels for own workers to raise concerns (S1-2, S1-3) Essity is committed to identifying, addressing and remediating actual and potential negative impacts on its workforce. A key element of this effort is the provision of effective and accessible channels for employees to report suspected violations or irregularities. Essity fosters an open and transparent culture, encouraging all employees to report suspected breaches of the Code of Conduct or applicable legislation. Reports can be submitted through various channels, but the externally managed whistleblower system SpeakUp serves as a dedicated and confidential process. For more information regarding whistleblower reporting, see page 93. In addition to formal reporting mechanisms, Essity regularly evaluates employee feedback through the Employee Engagement Survey MyVoice and the Courageous Conversations initiative. These insights are systematically followed up and not only measure the effectiveness of employee engagement but also serve as a foundation for the development of strategies to address identified challenges, set priorities and improve working conditions. Regarding health and safety, Essity implements annual remediation plans based on the insights from the I Care program, internal audits, technical visits to production facilities and decisions from the global RESH Committee. The objective is to continuously mitigate health and safety-related risks and improve working conditions for employees. Taking action related to material impacts on own workforce (S1-1, S1-4) Essity manages material impacts related to its workforce through strategic actions and regular assess- ments of progress and effectiveness. The effectiveness is evaluated through metrics and targets related to the material sustainability matters: Health and safety Essity takes a proactive and systematic approach to health and safety, focusing on four key areas: • Reduce the number of total recordable injuries (TRI) • Minimize situations that could result in potential serious injuries • Strengthen the health and safety culture • Foster clear safety leadership across all levels of the organization To achieve these ambitions, Essity has implemented several key actions: Embedding the I Care program Essity has implemented the I Care program as a central element in building a shared understanding of the importance of health and safety. Since its launch in 2022, the program has been rolled out across all sites, with regular follow-ups and internal audits to ensure compliance and continuous improvement. The Safety Leadership training course is a core component of the program. In 2025, 1,600 employees completed the training course, and 60 master trainers were enabled to cascade the knowledge within the organization. Since 2022, more than 15,000 employees have completed the training course and 600 master trainers have been enabled to cascade the knowledge within the organization. In 2023, the program was strengthened by introducing internal audits as a key element. To date, approximately 100 audits have been conducted, reinforcing compliance and driving continuous improvement. A key enabler of this journey is the I Care Toolbox, developed to support leaders in conducting more effective safety tours and dialogues. These tools were implemented across all facilities in 2025 and are expected to be used continuously. Throughout 2025, Essity continued to monitor the I Care program globally and reinforced its commitment to cultivating a health and safety focused workplace culture. As part of this effort, Essity updated its Life-Saving Rules, providing clearer guidelines for high-risk activities in production environments. These upgrades align with ISO 45001 principles, enabling a structured and consistent approach to health and safety. Health and well-being project In 2023, Essity launched a health and well-being project at selected production sites to improve employee well-being by exploring different opportunities, technologies and actions aimed at establishing a health and well-being standard for front-line workers. This is a first step and the project will subsequently be expanded to include all employees. This initiative supports the ongoing integration of health and well- being into operations. Insights from the project will be integrated into the I Care program. Launch of the Technical Safety Roadmap In 2024, Essity launched a Technical Safety Roadmap across all sites, focusing on primary machinery safety and other key processes such as warehouse safety, tool safety, traffic management, isolation of hazardous energy, work permits, contractor management and process safety. This roadmap is part of the broader Global RESH framework, which provides standardized guidelines to strengthen local health and safety practices. On an annual basis, Essity sets global objectives, targets, strategies and measurements for all produc- tion facilities to reduce negative impacts and drive continuous improvement. National Safety Council (NSC) Health and Safety Survey Essity conducts a comprehensive health and safety survey every three years across all production facilities to assess its safety culture and identify risks and areas for improvement. The survey evaluates management commitment, supervisor engagement and other employee involvement, providing a transparent and real- istic understanding of how Essity’s employees contribute to safety efforts and a secure work environment. Insights from the 2024 edition have served as a foundation for ongoing strategic work. In 2025, the top three priority actions identified for each site were implemented to strengthen workplace safety and well- being. Additional measures based on the survey are planned for implementation in 2026 to continuously advance Essity’s health and safety culture and reduce work-related incidents. ISO implementation In addition to already existing certificates, in 2025 Essity initiated a multi-site certification program for the development of Health & Safety Management Systems (ISO 45001) and Environmental Management Systems (ISO 14001). The program includes the implementation of a Global RESH framework to comple- ment local standards. Own workforceS Essity | Annual Report 2025 79
Page 80
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information DEI Essity’s commitment to DEI is a core component of its strategy to attract, develop and retain talent. This commitment is reinforced by ongoing dialogue and the gathering of insights from multiple channels to better understand, value and integrate each employee’s unique perspective and experiences into decision-making processes. Within DEI Essity has formulated two global goals: • Ensure an inclusive working environment for all • Achieve and maintain gender-balanced leadership, with no gender representing more than 60% To achieve these ambitions, Essity has introduced three key actions: Courageous Conversations Courageous Conversations are a global initiative designed to raise awareness, foster dialogue and drive change in DEI. The program consists of a network of 80 trained facilitators who conduct quarterly and on-demand sessions, both in-person and virtually. In 2025, more than 50 (80) sessions were held, engag- ing over 2,000 (4,500) participants. During the year, the initiative expanded to new geographic regions. Regular sessions promote inclusion, psychological safety and directly contribute to Essity’s goals to create an inclusive workplace. The initiative also includes a podcast available on Spotify and support materials for managers that en - courage inclusive practices in daily operations. These resources reflect Essity’s long-term commitment to dialogue and participation, ensuring that DEI remains an integrated and dynamic part of the organization. Inclusive leadership training Over 590 employees have participated in Essity’s Inclusive leadership training since its launch in 2022. This training supports leaders to build and leverage diverse and inclusive teams for better performance and is an ongoing effort directly related to Essity’s ambition to create an inclusive work environment for all. Effectiveness is measured through the Group’s Inclusion Index in the Employee Engagement Survey MyVoice. Mitigating bias in recruitment processes To eliminate bias, ensure fair recruitment processes and embed inclusive behavior in daily operations, inclusion principles have been integrated into recruitment training for managers and HR teams. Essity has not allocated significant financial resources for the current or future implementation of DEI-related initiatives. Essity measures and evaluates the effectiveness of actions related to workforce impacts through the gender-balanced goal at management levels, and in the Employee Engagement Survey MyVoice, which captures employee experiences of inclusion, belonging and leadership commitment. Equal pay Essity strives to identify and eliminate any potential unjustified gender pay gaps in line with the Group’s Remuneration Policy. In 2025, Essity conducted a Group-wide analysis of gender-related pay gaps for all employees. Identi- fied gaps were addressed promptly within the framework of regular salary processes. The global analysis is planned to be conducted yearly as part of preparations for the annual salary review to ensure that any pay disparities are promptly and appropriately investigated and resolved. By integrating this initiative into global HR processes, Essity promotes equal pay while reducing the material impact related to pay equity over time. In addition, a separate review of all major benefits was conducted in 2025. The review confirmed that no significant gender-based selection criteria or differences in access to benefits exist, other than those required by local legislation, such as parental leave. No substantial financial resources have been allocated to these actions. Training and skills development Essity promotes a culture of continuous learning in daily work, ensuring all employees, regardless of geography and role, are equipped for current and future responsibilities. As part of these efforts, Essity has identified three focus areas and corresponding actions: Individual development plans Essity supports the development of all employees by implementing individual development plans. For white-collar employees, individual development plans are integrated via the Group’s HR platform, enabling personalized learning aligned with the requirements of current and future roles. For blue-collar employees, integration is planned by 2027, reinforcing Essity’s commitment to inclusive skills develop- ment. These efforts are complemented by well-established processes for goal setting as well as talent and skills planning processes that are continuously refined to meet evolving business needs. HR learning and development platforms Essity prioritizes modern, scalable and future-proof learning technologies to support continuous skill development and increase employee engagement. A global AI-based Learning Experience Platform (LXP) is scheduled to be fully implemented latest by 2028 to enable data-driven development. In parallel, Essity’s digital platform for blue-collar workers, the Rubik platform, is being further developed with a focus on digital accessibility and skills-enhancing content. The Rubik platform is used to manage daily operator tasks, skills development and document standardization. The aim is to increase efficiency, knowledge and quality at the Group’s production facilities. Together with the HR platform, the Employee Engagement Survey MyVoice and digital training libraries, these solutions create an inclusive, accessible and data- driven learning environment for all employees. Ensuring governance in skills management To integrate learning into daily work and ensure continuous skills development, Essity has established a global governance model based on functional academies and Essity’s University. Essity University pro- vides a structured framework with development programs and skills development initiatives aligned with the business strategy and future skills requirements. Beginning in 2026, Essity will focus on further advancing digital learning, strengthening core competencies and increasing access to personalized learning solutions. Targeted talent programs, including mentoring and leadership development, actively promote personal growth and DEI throughout the organization. Among the various functional academies, the Leadership Academy has an essential role in ensuring that all Essity employees, especially line managers, develop relevant leadership abilities to successfully navigate in a complex and evolving business and societal environment. This is achieved through a tailored training program and a broad portfolio of solutions including Core leadership programs, advanced pro- grams for senior executives, small learning pods and trainings in strategic DEI leadership skills. A global leadership model and skills framework ensure an inclusive and consistent approach to developing leaders across the Group. The effectiveness of Essity’s training and skills development strategy is evaluated based on training metrics, skills development indicators and business-relevant KPIs, see page 83. Own workforceS Essity | Annual Report 2025 80
Page 81
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information DEI Essity’s goal for gender distribution at management levels was established in 2022. The goal is relative and measured as a percentage of women in management positions (Executive Management Team, senior management and middle management). Gender distribution is aimed to remain within the interval 40/60%, with no group exceeding 60%. The goal is outcome-based, part of Essity’s DEI Policy and aims to ensure equal opportunities, inclusive leadership and representative diversity at all levels of the Group. Targets and metrics Additional assurance No additional external assurance of any target or metric and their associated data has been conducted beyond the auditor’s review of the sustainability statements. Targets related to own workforce (S1-5) Health and safety In 2021, Essity established a relative target to decrease the total recordable incident rate (TRI-R) by 75% compared to 2019 rate of 7.7. The ambition was to achieve the target by 2025. TRI-R comprises of Fatalities (F), Permanent disabilities (P), Lost time accidents (LTA), Restricted work cases (RWC) and Medical treat- ment cases (MTC) at all of Essity’s production facilities. The target was based on an analysis of historical data, internal audit findings, as well as insights into the needs and expectations of internal and external stakeholders. To ensure relevance and competitiveness, the target was benchmarked against industry standards and industry peers. The target is directly linked to Essity’s ambition to provide safe and healthy working conditions in line with Essity’s RESH Policy. Health and safety performance is reviewed monthly by the RESH Committee. Employee representatives are not directly engaged in the target-setting process, but participate indirectly through numerous consultations and dialogues. A new health and safety target is being developed and is planned to be implemented in 2026, focusing on a zero-accident vision and a strengthened safety culture. Health and safety Decrease in total recordable injuries rate compared to 2019 Target 2025: –75% Outcome: –66% Total recordable incident (TRI) include Lost time accidents (LTA), Restricted work cases (RWC), Medical treatment cases (MTC), Permanent disabilities (P) and Fatalities (F). Gender balanced representation at management levels Goal: 40/60% Outcome: 36/64% The goal is reported at an aggregate outcome level for the three management levels. For the outcome in 2025, 36% were women and 64% were men. Talent and employment related decisions are always based on competence, merit and skill. Essity follows applicable law of all jurisdictions in which it operates. 2025202420232022 –39% –58% –66% –66% /zero.tab /two.tab/zero.tab /four.tab/zero.tab /six.tab/zero.tab /eight.tab/zero.tab /one.tab/zero.tab/zero.tab 2025202420232022 Men 68% 32% 68% 32% 66% 34% 64% 36% Women Own workforceS Equal pay Although Essity has not established a specific target for equal pay for work of equal value and currently has no plans to do so, the Group ensures that remuneration is set in a fair and transparent manner in accordance with the principle of equal pay for work of equal value. All employees are provided an ade- quate wage in line with market practices and local requirements. Essity also applies clear remuneration practices and regularly monitors pay differentials across the Group. Training and skills development Essity has not set a formal target for training and skills development but remains committed to fostering employee growth through continuous learning opportunities, digital training solutions and skills deve- lopment initiatives. Currently, there are no plans to introduce a quantitative target, but Essity monitors participation rates and learning effectiveness through established KPIs to ensure ongoing skills develop- ment and business relevance. Characteristics of employees (S1-6) The tables below describe key characteristics of the employees in Essity’s own workforce. Employees by gender Number of employees 2025 2024 Men 24,029 23,582 Women 12,296 11,911 Non-binary 12 16 Gender-not-declared 38 36 Total 36,375 35,545 Reporting principles Number of employees is shown in headcount and is calculated as an average of five quarters. Corresponding full-time equivalent (FTE) data can be found in Note B2b in the Group’s financial statements, see pages 133–134. Gender information is based on four gender alternatives used in Essity personnel data. Essity | Annual Report 2025 81
Page 82
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Employees by country Number of employees 2025 2024 Germany 5,193 5,075 Mexico 4,140 4,000 Colombia 3,681 3,561 Other countries 23,361 22,909 Total 36,375 35,545 Reporting principles Number of employees is shown in headcount and is calculated as an average of five quarters. Country level data is disclosed for countries with at least 50 employees representing at least 10% of total number of employees. Employees by contract type broken down by gender 2025 2024 Number of employees Men Women Non- binary Gender- not- declared Total Men Women Non- binary Gender- not- declared Total Permanent employees 22,696 11,569 10 29 34,304 22,379 11,248 12 28 33,667 Temporary employees 1,333 727 2 9 2,071 1,203 662 4 8 1,878 Total 24,029 12,296 12 38 36,375 23,582 11,911 16 36 35,545 Reporting principles Number of employees is shown in headcount and is calculated as an average of five quarters. Permanent employee: an employee with no set end date of employment. Temporary employee: an employee with a set end date of employment. Non-guaranteed hours employee: an employee with no guarantee of a minimum or fixed number of working hours. Essity has no non-guaranteed hours employees. Employee turnover 2025 2024 Employees who left the Group, number 4,827 5,049 Employee turnover rate, % 11 12 Reporting principles Number of employees who left the Group is accumulated for the full reporting period. Employee start and exit dates are based on employment dates. Employee turnover rate is calculated as a percentage of the number of employees who left in the reporting period (excluding end-of-contract terminations) over the average headcount of five quarters. Collective bargaining coverage and social dialogue (S1-8) Essity recognizes the right of every employee to be a trade union member and to participate in union activities. When there is no union representation, Essity establishes other channels where possible, such as an employee council. Collective bargaining % 2025 2024 2023 2022 2021 Employees covered by collective bargaining agreements 63 62 62 60 67 Reporting principles The percentage of employees covered by collective bargaining agreements is calculated by dividing the number of employees covered by collective bargaining agreements by the total number of employees as of the end of the reporting period. The change in 2022 compared to 2021 is due to additional Latin American countries being included in the HR platform in 2022. These countries have a relatively low number of employees covered by collective bargaining agreements. Diversity metrics (S1-9) The tables below describe key diversity metrics for Essity. Monitoring these metrics is important to ensure progress and deliver on the Group’s ambitions to create an inclusive working environment for all. Progress was made in 2025 for Essity’s goal for gender balanced representation on management levels (Executive Management Team, senior management and middle management). Gender distribution of Board of Directors 2025 2024 2023 2022 2021 Board members (elected by the AGM) Women, number 4 4 4 4 4 Men, number 5 5 5 6 5 Women, % 44 44 44 40 44 Men, % 56 56 56 60 56 Board members (appointed by trade unions) Women, number 2 2 1 1 1 Men, number 1 1 2 2 2 Women, % 67 67 33 33 33 Men, % 33 33 67 67 67 Board members (total) Women, number 6 6 5 5 5 Men, number 6 6 7 8 7 Women, % 50 50 42 38 42 Men, % 50 50 58 62 58 Reporting principles The number of board members is shown as of the end of reporting period. Gender distribution of the Board of Directors is calculated as of end of the reporting period. Own workforceS Essity | Annual Report 2025 82
Page 83
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Gender distribution of management levels 2025 2024 2023 2022 2021 Executive Management Team Women, number 4 4 4 4 4 Men, number 8 9 9 8 9 Women, % 33 31 31 33 31 Men, % 67 69 69 67 69 Senior management level Women, number 37 38 39 38 35 Men, number 66 71 72 71 69 Women, % 36 35 35 35 34 Men, % 64 65 65 65 66 Middle management level Women, number 255 237 215 209 195 Men, number 443 451 455 457 427 Women, % 37 34 32 31 31 Men, % 63 66 68 69 69 Overall gender distribution of management levels above, women/men, % 36/64 34/66 32/68 32/68 32/68 Reporting principles The gender distribution of management levels is calculated as of end of the reporting period. Overall gender distribution at management levels is calculated by dividing the aggregated headcount of women and men in the Executive Management Team, senior and middle management levels by the total com- bined headcount in these levels. Share of employees by age group 2025 2024 2023 2022 2021 Under 30 years old, number 6,729 6,618 6,663 9,529 9,037 Under 30 years old, % 18 18 19 20 19 30–50 years old, number 19,585 19,188 18,923 28,414 27,925 30–50 years old, % 54 54 53 58 59 over 50 years old, number 10,279 10,023 9,946 10,632 10,166 over 50 years old, % 28 28 28 22 22 Reporting principles The number of employees for each age group is shown as headcount as of the last day of the reporting period based on the employee’s date of birth. Vinda employees were included for the years 2021–2022. Nationalities Number of nationalities 2025 2024 2023 2022 2021 Employee nationalities 140 135 131 130 124 Reporting principles The data in the table above is reported as of end of the reporting period. Training and skills development metrics (S1-13) Training and skills development activities for continuous professional growth are an integrated part of employees’ everyday lives and take place through on-the-job experiences, project assignments, training and social learning activities. Essity offers individual training and development opportunities based on business and role requirements and personal strengths, including participation in various leadership and functional academies and a range of social learning programs. The Group is continuing the shift from traditional to digital learning, exploring recent technologies to enable learning to become a natural part of day-to-day work. Training and skills development 2025 2024 2023 2022 2021 Employees with individual goals, % 69 66 64 62 57 of whom, white collar employees 91 90 90 87 90 Employees with individual development plans, % 74 50 47 42 42 of whom, white collar employees 84 82 79 70 78 Average training hours per employee, number 11 11 8 7 7 Employee engagement, % 79 78 78 77 79 Reporting principles The data in the table above excludes blue collar employees who record their goals outside the HR platform. From 2025 it includes individual development plans for blue collar employees recorded outside the HR platform. Average training hours per employee is calculated by dividing total completed training hours during the reporting period by the average headcount over five quarters. The employee engagement index is based on the average result of the Employee Engagement Survey MyVoice conducted biannually. Own workforceS Essity | Annual Report 2025 83
Page 84
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Health and safety metrics (S1-14) In 2025, Essity further reduced the Lost time accidents (LTA) to its lowest level since the start of the target period in 2019. However, Essity regrets to disclose one case of a permanent disability (P) as well as increased Restricted work cases (RWC) and Medical treatments cases (MTC) which resulted in a flat total recordable incident rate (TRI-R) compared with 2024. During the reporting period, an unfortunate fatality of a contractor occurred. There were no work- related fatalities among Essity’s employees in 2025. At the end of 2025, Essity’s TRI-R was stable in comparison to the previous reporting period at 66% in comparison to the base year 2019. Work-related injuries 2025 2024 2023 2022 2021 Fatalities (F) – – – – – Permanent disabilities (P) 1 – – – – Lost time accidents (LTA) 90 104 116 157 142 Restricted work cases (RWC) 10 5 6 23 12 Medical treatment cases (MTC) 19 11 24 32 37 Total recordable incidents (TRI) 120 120 146 212 191 Total recordable incident rate (TRI-R, TRI/million WH) 2.6 2.6 3.2 4.7 4.2 Total recordable incident rate, IR (TRI-IR) (TRI/200,000 WH) 0.5 0.5 0.6 0.9 0.8 Lost time accident frequency rate (LTA-FR), (LTA/ million WH) 2.2 2.4 2.7 4.0 3.4 Lost time incident rate (LTA-IR) (LTA/200,000 WH) 0.4 0.5 0.5 0.8 0.7 Contractor fatalities (CF) 1 – – 1 2 Contractor lost time accidents, CLTA 32 21 25 31 35 Zero recordable incident sites (based on TRI) 31 35 26 20 23 Number of sites included in reporting 82 83 81 80 78 Working hours (WH), million hours 46.4 45.5 45.4 45.4 45.3 Reporting principles The data in the table refers to wholly owned production facilities of Essity, excluding sales and administrative offices. Health and safety statistics are collected monthly and follow the safety procedures and actions described under S1-1 and S1-4. Remuneration metrics (S1-16) Gender pay gap % 2025 2024 Women/Men 4 6 Reporting principles The gender pay gap is calculated on the basis of average hourly pay. The hourly pay does not take into consideration factors affecting compensation levels, such as job role, experience and education levels. Pay includes annual base salary, short-term incentive pay, sales incentive pay, long-term incentive pay, shift premium and overtime pay. Salary to the CEO is excluded. Total remuneration For the annual total remuneration ratio of the President and CEO to the median annual total remuneration of all employees, see Note C2 in the Group’s financial statements on page 143. Incidents, complaints and severe human rights impacts (S1-17) For information about the incidents reported in the human rights category via the whistleblower system, see the table on page 94. There were no financial fines, penalties or compensation for damages due to incidents concerning human rights in 2025. Own workforceS Essity | Annual Report 2025 84
Page 85
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Workers in the value chainS Why workers in the value chain matter Workers across every stage of the value chain contribute to Essity’s operations, including those employed by suppliers and business partners. As a global Group, Essity therefore has significant influence over working conditions around the world. To uphold human rights and prevent unsafe or unfair working conditions and labor practices, Essity has established frameworks designed to be implemented throughout the entire value chain. By actively managing social risks and promoting ethical labor practices, Essity strengthens stakeholder trust and contributes to the long-term sustainability of the Group. Sustainability matters Value chain Material impact Financial effect Time horizon Upstream activities Own operations Downstream activities Short-term Medium-term Long-term Working conditions: Working time Actual negative material impact No financial effect Working conditions: Health and safety Actual negative material impact No financial effect Other work-related rights: Forced labor Potential negative material impact No financial effect Strategy Material impacts, risks and opportunities and their interaction with strategy and business model (S2 ESRS 2 SBM-3) Although workers in the downstream value chain are essential for Essity to deliver high-quality goods and services, the double materiality assessment indicates that material impacts occur in the upstream value chain. These impacts result from Essity’s need to purchase raw materials and finished goods as well as other goods and services. The following areas have been identified as having a material impact: Working time Essity has identified excessive working hours as a negative impact on workers in the supply chain, particu- larly among suppliers located in regions with significant migrant labor. Excessive overtime is associated with poorer work-life balance, increased risk of fatigue-related accidents and long-term health concerns. Essity’s Global Supplier Standard requires that working hours comply with applicable national laws as well as local industry standards. Health and safety Insufficient health and safety measures at the workplace could negatively affect workers in the supply chain. This may include inadequate safety measures for managing tools and equipment, insufficient signage of emergency exits and shortcomings in the use of personal protective equipment. Essity requires its suppliers to comply with applicable local laws and the International Labour Organization (ILO) Core Conventions, as outlined in the Supplier Code of Conduct. In addition, suppliers are expected to imple- ment an occupational health and safety management system that enables continuous monitoring, evaluation and improvement of working conditions. Forced labor Within Essity’s supply chain, there is a potential risk of forced labor. A risk-based assessment, supported by internal tools and analyses, indicates that the largest risk lies with suppliers outside Essity’s direct contractual relationships, particularly in the early stages of the value chain. The risk is especially evident among suppliers operating in certain regions of Asia and Latin America. The probability of forced labor is particularly high in industries that rely heavily on migrant labor. The risk, which is not limited to the early stages of the supply chain, has also been identified in later stages, especially in regions such as Asia and parts of the Middle East. Forced labor can occur both in the produc- tion of raw materials and in the manufacturing of finished goods. For vulnerable groups such as refugees and low-skilled migrant workers, this risk is global. Therefore, enhanced due diligence is required depend- ing on the procurement category, particularly when sourcing low-skilled services. Under Essity’s Global Supplier Standard, suppliers must take measures to prevent any involvement in or support of forced labor. Impact, risk and opportunity management Policies related to value chain workers (S2-1) Essity is committed to upholding the highest standards of labor rights and working conditions throughout its supply chain. To promote responsible business practices and respect for human rights, Essity sources from suppliers who align with the principles stated in the Group’s Global Supplier Standard. This standard includes a Supplier Code of Conduct that outlines Essity’s expectations for all suppliers with respect to human rights. These expectations contain explicit prohibitions against trafficking, forced labor, compulsory labor and child labor, as well as protection against discrimination or harassment. The Supplier Code of Conduct also includes requirements regarding working time, employee relations, health and safety and other aspects of sustainable and responsible business conduct. Compliance with these principles is a key criterion in the selection of suppliers who are expected to pass these requirements on to their own supp- liers further upstream in the value chain. In response to laws in the UK, Australia and Canada, Essity has issued modern slavery statements covering the entire value chain. Essity’s Supplier Code of Conduct is based on the Group’s Code of Conduct and is anchored in interna- tionally recognized principles. Through its membership in the United Nations (UN) Global Compact, Essity further strengthens its commitment to integrate labor standards, human rights and ethical business practices. For more information on Essity’s sustainability-related policies, see pages 50–51. Essity | Annual Report 2025 85
Page 86
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Processes for engagement with value chain workers (S2-1, S2-2) The Group is committed to ensuring that workers in the supply chain are heard, that their rights are respected and that their concerns are addressed. Engagement processes aim to foster transparent com- munication, promote fair labor practices and continuously improve working conditions. Through regular audits, surveys and direct feedback mechanisms, supply chain workers actively participate in identifying and addressing impacts related to Essity’s business activities. Engagement with supply chain workers and their recognized or legitimate representatives is embedded across several processes. These cover areas such as working conditions, land rights, health and safety, and other human rights-related issues. The established processes include Essity’s regular due diligence approach, which encompasses but is not limited to the supplier approval procedure, annual risk assessment processes, various screening procedures, the whistleblowing mechanism, supplier training, collaboration in multi-stakeholder dialogues and participation in certification initiatives such as the Forest Stewardship Council (FSC) for forest fiber and Better Cotton Initiative (BCI) for cotton. Independent third-party auditors regularly conduct Sedex Members Ethical Trade Audits (SMETA) at Essity’s supplier sites to assess working conditions and ensure worker feedback is considered. These external audits help identify risks related to health and safety as well as labor rights, including working hours. In line with SMETA Best Practice Guidance, auditors also evaluate the presence of potentially vulnerable groups, such as migrant workers and conduct focus group interviews to ensure that workers’ perspectives are represented. In addition, Essity participates in industry-wide networks, such as AIM Progress, a member-led forum of fast-moving consumer goods (FMCG) companies and suppliers. In collaboration with other FMCG com- panies, Essity promotes responsible business conduct to ensure resilient supply chains as well as thriving workers and communities. As part of this initiative, selected Essity suppliers have received training on human rights and local labor laws. The aim is to strengthen their capabilities to meet the needs of both their own employees and their upstream suppliers. Essity also engages with non-governmental organizations to facilitate additional collaboration and initiatives. For instance, in Latin America, the Group has contributed to the formal recognition and legal acknowledgement of waste pickers, recognizing their essential role in advancing a more circular economy. The insights generated through these efforts are continuously integrated into Essity’s decision- making processes and contribute to strengthening the Group’s commitments to social responsibility. At the Group level, no specific role has been formally designated to engage directly with workers in the supply chain. Instead, this responsibility is integrated into Essity’s broader sustainability and risk manage- ment frameworks. Engagement with suppliers is managed by the relevant operational functions, typically Procurement. Essity is a committed partner of the Global Deal, a multi-stakeholder initiative that promotes social dia- logue and working conditions in global supply chains. In addition, the Group has affirmed its commitment to human rights through a global framework agreement with IndustriALL Global Union. The agreement establishes respect for human rights as a key criterion in the selection and management of suppliers and subcontractors. The Group assesses the effectiveness of its engagement with its supply chain workers through a combi- nation of supplier visits, supplier audits, feedback mechanisms and collaboration with credible third-party organizations. Engagement outcomes are evaluated based on improvements in working conditions, resolution of identified issues and the responsiveness of suppliers to corrective actions. Regular reviews and stakeholder dialogues help ensure that workers’ perspectives are integrated in Essity’s sustainability strategy and due diligence processes. For information on Essity’s engagement with value chain workers and their representatives, see page 57. Processes to remediate negative impacts and channels for value chain workers to raise concerns (S2-1, S2-3) Essity is committed to proactively and effectively remediating negative impacts on workers in its supply chain. The Group has established structured processes to identify, manage and address such impacts. Particular focus is placed on labor rights as well as occupational health and safety. The aim is to promote worker well-being and continuously evaluate the effectiveness of the measures taken. When SMETA audits or other due diligence mechanisms identify non-compliance with labor standards, suppliers are expected to immediately take appropriate corrective actions to remedy the violation and prevent its recurrence. Essity closely monitors the development and implementation of these corrective action plans, which include clearly defined steps, timelines and follow-up audits to ensure resolution of the identified issue. Insufficient implementation of the action plans is escalated and discussed directly at dedi- cated follow-up meetings with the supplier. Essity reserves the right to terminate the business relation ship with any supplier that materially or repeatedly violates the Global Supplier Standard. Essity requires its suppliers to establish effective grievance channels to identify issues within their own organization and to actively promote and ensure that these principles are applied throughout their supply chains. The existence of effective grievance channels is verified in SMETA audits. In 2025, no agreements with strategic suppliers were terminated due to issues related to labor rights in the supply chain. Essity promotes an open and transparent culture, encouraging all external stakeholders, including workers in the supply chain, to report suspected violations of the Supplier Code of Conduct or other appli- cable laws. To assess the awareness and trust regarding grievance mechanisms, Essity conducts supplier self-assessments, independent third-party ethical audits and regular human rights impact assessments. These processes include direct feedback from workers and evaluations of the effectiveness of the griev- ance mechanisms. Retaliation against individuals who report concerns in good faith is strictly prohibited. There are several internal and external channels available to stakeholders who wish to report concerns or grievances. For more information about these channels, see page 93. Workers in the value chainS Essity | Annual Report 2025 86
Page 87
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Taking action on material impacts on value chain workers (S2-1, S2-4) Essity takes a proactive approach to managing material impacts on workers throughout its value chain. This includes identifying and preventing human rights violations, improving working conditions as well as regularly evaluating the effectiveness of implemented actions. The following key actions are continuously applied: • All suppliers, excluding energy providers, are required to provide written confirmation of their commit- ment to the principles outlined in the Global Supplier Standard. This standard includes explicit require- ments related to human rights and environmental practices. • A comprehensive risk assessment process, aligned with OECD Guidelines and UN Global Compact principles, is applied to both new and existing suppliers. In instances where elevated risks are identified, on-site ethical audits are requested to assess supplier practices and verify compliance. Essity actively monitors changes in laws and regulations, particularly those related to due diligence obligations and trade-based regulations to ensure that internal procedures remain current and effective. These proce- dures are regularly updated and key personnel receive targeted training to secure proper execution of risk assessments, maintain relevant documentation and uphold transparency throughout the process. • Strategic and high-risk suppliers are required to complete self-assessments covering working conditions, environmental practices, business ethics and health and safety using the SEDEX platform. • All new strategic suppliers undergo initial audits focusing on topics such as quality as well as health and safety as part of the supplier qualification process. • Suppliers operating in identified high-risk areas, as determined through SEDEX data and internal risk mapping, are subject to ethical audits, preferably based on the SMETA format. These audits evaluate compliance with standards related to fundamental human rights, fair employment practices and the prevention of corruption. Findings are typically integrated into corrective action plans developed by SMETA auditors and are closely monitored by Essity to ensure timely implementation and closure. Ethical audits typically identify findings, highlighting the importance of ongoing monitoring and corrective actions. Essity supports remediation for supply chain workers affected by actual material impacts through its supplier audit and follow-up process. When non-compliance is identified, such as excessive working hours or health and safety deficiencies, Essity collaborates with suppliers and independent third-party auditors to implement corrective action plans. These efforts have resulted in concrete improvements, including updated time registration systems, enhanced safety procedures, improved signage for emergency exits and better access to grievance mechanisms for affected workers. The key actions as described above primarily apply to upstream suppliers involved in the production and processing of raw materials and finished goods. Focus regions include countries with an elevated risk of labor rights violations, identified through internal risk mapping and external indices. These typically include parts of Asia, parts of the Middle East and Latin America. The actions target particularly vulnerable worker groups such as migrant workers, temporary and subcontracted workers, women workers and informal sector participants. Essity evaluates and adjusts the scope of these actions based on risk assess- ments, audit findings and stakeholder feedback. In 2025, Essity evaluated the outcomes of 94 (75; 88) ethical supplier audits conducted in Mexico, Colombia, Sri Lanka, South Africa, Turkey, Brazil, Argentina, India, Taiwan, the United Arab Emirates and Malaysia. Eight of these audits were initiated by Essity using an independent audit firm. The remaining 86 audits, which meet Essity’s requirements, were conducted at the initiative of other customers and approved by Essity. In the event of critical observations, Essity is informed within 24 hours. In 2025, no critical violations of human rights or incidents were identified. When Essity is informed about a situation that involves excessive working hours at a supplier through an audit, the Group communicates its concerns to the supplier and actively monitors the implementation of corrective actions until the issue has been resolved. The responsible sourcing function is reminded of how Essity’s procurement practices can contribute to a solution through accurate forecasting and reasonable delivery timelines. The effectiveness of the corrective actions is tracked through follow-up audits by an independent third-party auditor and monitored during meetings with the supplier. Essity employs additional due diligence measures for raw materials associated with elevated social risks. These measures include the use of certifications, sustainability programs and third-party assurances to help safeguard workers’ rights and well-being throughout the supply chain. To reduce social and ethical risks, a risk-based supplier selection approach is applied when choosing suppliers. This means that Essity prioritizes collaborations with large multinational corporations based in Europe and the USA that operate production facilities in Asia and South America. Supplier location and the origin of raw materials and finished goods are key considerations in Essity’s risk assessments because the same material may pose different risks depending on the region in which it is produced or cultivated. In contrast, certain materials may carry similar risks regardless of geography. Other relevant factors include the automation level, production technology and skills of the workforce. As of the end of 2025, approximately 68% (54; 54) of Essity’s strategic suppliers of raw materials and finished products were located in Europe, 28% (37; 37) in North and South America, and 4% (9; 9) in Asia and Africa. A total of 1,020 (1,020; 958) suppliers shared data via SEDEX. Workers in the value chainS Essity | Annual Report 2025 87
Page 88
Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information Targets and metrics Targets related to value chain workers (S2-5) In 2021, Essity established a responsible sourcing target to address material impacts on workers in the supply chain. At the time, 88% of Essity’s purchasing spend, excluding energy, was directed toward suppliers that confirmed their compliance with Essity’s values in accordance with the Global Supplier Standard through written consent. The target has been set to increase this percentage to 95% by 2025. This approach is based on the assumption that supplier compliance with the Global Supplier Standard contributes to improved working conditions and that procurement data systems can reliably track and categorize supplier spend. It also assumes that aligned suppliers maintain their compliance throughout the reporting period. The prioritization and calibration of the target was informed by findings in mandatory qualification audits of new suppliers, insights from supplier audit interviews as well as engagement with customers and inves- tors through sustainability forums and reporting processes. Essity’s Sustainability Council systematically documents and reviews feedback from stakeholders. The Council is responsible for ensuring that stakeholder perspectives are embedded in the Group’s sustain- ability strategy and target-setting processes. No additional external assurance of the target and its associated data has been conducted beyond the auditor’s review of the sustainability statements. A new target is currently under development and is expected to be established in 2026. Responsible procurement Share of total purchase spend from suppliers that comply with Essity’s Global Supplier Standard Target 2025: 95% Outcome: 95% 2025202420232022 90% 92% 94% 95% Share of total purchasing spend1) from suppliers that comply with Essity’s Global Supplier Standard % 2025 2024 2023 2022 2021 Outcome 95 94 92 90 88 1) Excluding energy. Ethical audits conducted 2025 2024 2023 2022 2021 Audits initiated by Essity1) 8 6 12 4 14 Audits approved by Essity2) 86 69 43 41 35 Total number of audits 94 75 55 45 49 1) Audits initiated by Essity were conducted by Essity’s independent audit firm in accordance with SMETA’s 4-pillar format. 2) Customer-initiated audits have been conducted on behalf of other customers of the suppliers and approved by Essity. Geographical distribution of strategic suppliers 2025 Europe, 68% North and South America, 28% Asia and Africa, 4% Workers in the value chainS Essity | Annual Report 2025 88
Page 89
Consumers and end-usersS Why hygiene and health matter for consumers and end-users Hygiene is essential for maintaining both physical and mental health as well as for preventing the spread of infectious diseases. Comprehensive hygiene practices are based on awareness of their importance, knowledge of what needs to be done and how to do it as well as access to the right products. Every day, Essity’s innovative hygiene and health products reach one billion people worldwide. Essity enables richer lives by offering products that enhance individual well-being while creating social and economic value. Through its brands, Essity works to break taboos, raise awareness, improve accessibility and elevate hygiene and health standards. The goal is to create healthier and more inclusive societies for all. Sustainability matters Value chain Material impact Financial effect Time horizon Upstream activities Own operations Downstream activities Short-term Medium-term Long-term Hygiene and health Actual positive material impact Actual positive financial effect Strategy Material impacts, risks and opportunities and their interaction with strategy and business model (S4 ESRS 2 SBM-3) Essity has an actual positive impact on consumers and end-users by contributing to healthier and more active lives. This positive impact can also lead to financial opportunities, as Essity’s business model focuses on providing hygiene and health products that improve everyday life. The Group’s products enable consumers, patients, caregivers and businesses to overcome barriers to achieve better hygiene and health outcomes. Through continuous innovation, Essity develops products that help healthcare providers manage rising costs without compromising quality care. By challenging taboos and breaking stigmas, Essity promotes openness and inclusion, contributing to healthier societies for all. Impact, risk and opportunity management Policies related to consumers and end-users (S4-1) Essity aspires to be the global leader in hygiene and health. The Group actively supports the United Nations Sustainable Development Goals by fostering a healthier and more inclusive society while reducing Essity’s environmental footprint. Although Essity does not have a specific policy on hygiene and health related to consumers and end-users, the Group remains committed to improving hygiene and health worldwide. This commitment to social sustainability is reflected in strategic actions across four focus areas: women’s health, the care economy, hygiene and sanitation as well as infection prevention and control, with road- maps and initiatives in each area. Essity’s KPIs to track launched innovations follow the internal guidelines for assessing sustainable innovations both from a social and environmental perspective. Through partner- ships with global and regional non-governmental organizations (NGOs), Essity provides education and resources that empower individuals to participate fully in society, uphold human rights and promote inclusion. Essity contributes to better public health by driving societal and systemic change in collaboration with private sector partners, public stakeholders and civil society. Rising life expectancy and global population growth increase demand for accessible, preventive hygiene and health products and services. Whenever Essity engages with communities or other non-profit organizations, the Group is guided by the internal group instruction for charitable donations, community investments and commercial initiatives. According to the World Health Organization, approximately 50% of the world’s population still lacks adequate access to hygiene and health products. An important part of Essity’s business is to promote products that enhance individual well-being and deliver societal and economic value. These products provide consumers and end users with long-term support by improving health and quality of life, while simultaneously generating societal and economic benefits. Processes for engagement with consumers and end-users (S4-2, S4-3) Essity actively engages with customers, consumers, end-users and society through targeted initiatives. By bringing insight-based innovations to market, Essity improves well-being for consumers, patients, care- givers and customers. Further engagement includes community projects, educational programs, partner- ships with NGOs, contributions to research and the use of customer satisfaction ratings. Essity supports communities through foundations, donations, volunteering and sponsorships. To promote hygiene and health awareness, Essity collaborates with end-users and consumers, for example via social media campaigns. Since 2008, Essity’s The Hygiene and Health Report has contributed to global dialogue on the importance of hygiene and health for individual well-being and societal progress. Essity also maintains formal channels for engagement with consumers and end-users, such as the global whistleblower system SpeakUp, which is available to employees and external stakeholders to report suspected violations or non-compliance with the Code of Conduct and applicable laws. For more information, see page 93. Taking actions on material impacts and opportunities on consumers and end-users (S4-4) Essity continuously works to deliver on its purpose through three guiding pillars: • Advocating for systemic change by breaking taboos, raising standards and creating awareness through campaigns, education and global partnerships. • Developing sustainable innovations around consumer needs by embedding insights and sustainability targets into the business model to improve everyday life. • Strengthening community relations through donations, volunteering and partnerships that strengthen education and health awareness. Essity | Annual Report 2025 89 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 90
Consumers and end-usersS Advocating for systemic change Women’s health Essity closes gaps in menstrual health by ensuring access to safe, affordable products and services. Through brands and partnerships, stigmas are challenged, openness is fostered, and women are empowered to participate fully in education, work and society. In 2025, global advocacy continued to influence menstrual health policy and expand education programs in collaboration with United Nations International Children’s Emergency Fund (UNICEF). Care economy The TENA brand supports dignity and quality of life for millions of people, including older adults and care- givers. Efforts focus on closing the care gap and raising visibility for carers through education, services and advocacy. Initiatives have also been launched to support professional caregivers and improve recog- nition of their vital role in society. Hygiene and sanitation The comprehensive portfolio covers hand hygiene and surface care and actively contributes to shaping international and local handwashing guidelines to advance hygiene for all. In 2025, Tork launched a coali- tion with the American Restroom Association, International Paruresis Association and Other Tomorrows consultancy to promote inclusive hygiene in public restrooms. This coalition brings together experts and advocates to address hygiene barriers and ensure inclusive hygiene for all. Infection prevention and control Essity reduces infection risks through innovation and training. Wound care brands offer antibiotic-free products to combat antimicrobial resistance (AMR), supported by awareness campaigns and engagement in international forums. Through the Wound Warriors campaign, awareness of AMR continued to be raised and alternative treatment routines promoted globally. Sustainable Innovations Innovation is at the core of Essity’s business model. The ambition is to create products that meet user needs, deliver commercial value while at the same time advance social and environmental sustainability. Essity puts consumers and customers at the heart of everything it does. Through insights, co-creation and trend analyses, the global innovation teams identify needs and shape products that improve hygiene, health and well-being. Community Relations Essity is committed to creating value for consumers, end-users, employees and the local communities in which the Group operates. Community relations initiatives strengthen both the Essity brand and its product portfolio and reflect the purpose of breaking barriers to well-being. Essity’s steering document for community relations states that the Group shall remain politically and religiously neutral. Consequently, Essity does not make payments or product donations to political parties, candidates, institutions, agencies or their representatives. In 2025, Essity did not support any organiza- tions or projects with political or religious aims. Initiatives by Essity’s brands Product access – Essity’s Modibodi brand, in partnership with Plan International, runs a program in Laos which aims to improve access to reusable period underwear in rural areas. Access to clean water and sanitation facilities – Hygiene is our right, is a joint initiative between UNICEF Mexico and Essity’s Saba and Tork brands. It promotes menstrual hygiene and washing practices to support equal school opportunities. Access to inclusive, accurate information and education – Essity’s Saba brand enhances menstrual health literacy and information through its Mundo Saba Teens, providing inclusive and accurate information to young audiences. Taboo and stigma-free environment – Through campaigns such as V-Land in Roblox by Saba and It’s never just a period by Libresse, Essity aims to normalize menstruation and dispel stigmas surround- ing it. Partnerships for women’s health In 2024, Essity became an ambassador of the Global Alliance for Women’s Health, hosted by the World Economic Forum, to collaboratively measure the menstrual health gap and drive meaningful action. Essity contributed to the Alliance’s report on closing the women’s health gap (Blueprint to Close the Women’s Health Gap | World Economic Forum) by leading the menstrual health working group. In 2025, Essity became an ambassador of the Coalition for Reproductive Justice in Business, esta blished by the United Nations Population Fund (UNFPA). In the same year, Essity released its white paper on menstrual health (co-created with researchers from Stanford University and Karolinska I nstitutet), outlining a “menstrual health in all policies” approach to ensure that menstrual health is addressed comprehensively across topics such as education, infrastructure, gender and employment. Essity | Annual Report 2025 90 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 91
Consumers and end-usersS Targets and metrics Targets related to consumers and end-users (S4-5) Essity’s business model is centered on the actual positive impact on consumers and end-users by contri- buting to healthier and more active lives. This positive impact is leading financial opportunities, disclosed in the financial statements. In addition, Essity tracks social metrics that also form part of these positive impacts, such as sustainable innovations and Essity’s contribution to communities in which it operates. Essity has defined targets and metrics for continuously developing sustainable innovations for its customers and end-users. The sustainable innovations target is that at least 50% of the Group’s innovations are to yield social and/or environmental improvements. Essity tracks sales from launched innovations, which are assessed against both social and environmental aspects throughout the innovation lifecycle. Innovations are classified as sustainable if the environmental and/or the social aspect meets the require- ments, while the other aspect must reach the established reference level. During 2025, the social component of sustainable innovations was 56% (54; 48), meeting social inno- vation criteria such as hygiene improvements (body and hand hygiene), health (skin health, skin care, curing treatments, mobility) or other relevant benefits (ergonomics, comfort, easy-to-use, odor control). For more information on Essity’s sustainable innovations, see page 74. Sustainable innovations 2025 2024 2023 2022 2021 Sustainable innovations1), % 80 87 85 72 59 of which, social, % 56 54 48 56 47 of which, environmental, % 48 55 58 38 32 1) To avoid double counting, sustainable innovations are reported only once. This means that the sum of the KPIs for social and environmental innova- tions may exceed the total outcome for sustainable innovations. In addition to sustainable innovations, Essity monitors and measures all community relations projects. In 2025, Essity invested approximately SEK 106m (63; 81) in over 550 community relations projects. The largest amounts of these projects were related to hygiene and health and emergency relief, areas where Essity’s employees also dedicate many working hours, including staff management. Community relations, SEKm 2025 2024 2023 2022 2021 Charitable donations 77.0 46.7 53.6 29.3 28.6 Commercial initiatives 13.7 4.1 8.0 2.1 4.9 Community investments 15.0 11.8 19.3 5.8 4.3 Total 105.7 62.6 80.9 37.2 37.8 of which cash funds 35.9 19.5 25.6 14.0 21.8 of which products 69.8 43.1 55.3 23.2 16.0 Essity | Annual Report 2025 91 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 92
Business conductG Why business conduct matters Essity’s objective is to conduct its global operations in a responsible, ethical and lawful manner, which is essential for main taining the trust of customers, suppliers and other business partners. This includes complying with relevant laws, upholding ethical standards and integrating sustainability into its operations and value chains. Responsible conduct is embedded in Essity’s governance, ensuring compliance with the Group’s strategic goals and regulatory requirements. Sustainability matters Value chain Material impact Financial effect Time horizon Upstream activities Own operations Downstream activities Shortterm Mediumterm Longterm Corporate culture No material impact Potential negative financial effect Management of relationships with suppliers (excluding payment practices) No material impact Potential negative financial effect Governance The role of the administrative, supervisory and management bodies (G1 ESRS 2 GOV-1) For information on the roles of the Compliance & Ethics Department, Internal Audit function, Compliance Council, Executive Management Team and Board of Directors in relation to business conduct and its associated impacts, risks and opportunities including the responsibility allocation, see the corporate governance report on page 103. Impact, risk and opportunity management Description of the processes to identify and assess material impacts, risks and opportunities (G1 ESRS 2 IRO-1) For information on the processes to identify and assess material impacts, risks and opportunities related to business conduct, see page 60. Essity’s internal and external guidelines (G1-1) Essity’s approach to business conduct is anchored in a comprehensive framework of internal and external policies, supported by the Code of Conduct. The Code outlines the principles that guide Essity’s business practices and defines how the Group identifies, addresses and manages compliance risks. It also explicitly prohibits all forms of forced or compulsory labor, as well as child labor, reflecting Essity’s commitment to human rights and ethical standards across its operations. The Group’s approach to human rights is based on the United Nations Guiding Principles on Business and Human Rights and Essity’s Human Rights Framework aligns with these principles and reflects a commitment to the International Bill of Human Rights, the International Labour Organization (ILO) Core Conventions and the OECD Guidelines for Multinational Enterprises. For more information about Essity’s Human Rights Framework, please visit the Human Rights webpage on essity.com. For more information on Essity’s sustainabilityrelated policies, see pages 50–51. Governance (G1-1, G1-3) For defined compliance areas such as anticorruption, sanctions compliance, data privacy and AI ethics, the global Compliance & Ethics department is responsible for overseeing the implementation of com pliance programs through management systems. The department operates independently from both exe cutive and operational management. The Compliance & Ethics department provides training to the organization and reports regularly to the Compliance Council, which includes members of the Executive Management Team, as well as to the Board of Directors. Essity’s compliance management system includes guidance documents, risk assessments, training, customized communications as well as monitoring and testing activities to ensure effectiveness. Essity also has a global whistleblower system, SpeakUp, which is available to employees and external stake holders to report suspected violations or noncompliance with the Code of Conduct and applicable laws. Essity has implemented a compliance training strategy to build awareness and knowledge across the organization. As part of the onboarding program, employees must complete the Code of Conduct train ing, which is delivered through elearning and classroom training sessions. In addition, specific employee groups identified as needing more frequent and specialized training, particularly in the areas of anti corruption and competition law, receive targeted training. Essity | Annual Report 2025 92 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 93
Business conductG Free and fair competition Essity’s business is based on free and fair competition in all the markets in which the Group operates. Essity therefore takes a very serious view of any form of anticompetitive conduct in violation of applicable competition laws in the countries in which the Group operates. In order to raise awareness across the organization in general and among relevant categories of employees specifically, Essity has developed guidelines to reduce the risk of violating applicable com petition law. These guidelines complement the general requirements set out in the Code of Conduct. The guidelines are sent annually to the affected employee groups with a request for confirmation that they have been read and understood. Furthermore, Essity provides elearning on competition law for employees in Europe and North America. Corresponding training, adapted to local conditions, is also provided to employees in Latin America and Australasia. At the business area level, Essity also conducts indepth, inperson training for affected target groups. Other measures to prevent the risk of undesirable behavior include ongoing information to employees regarding current competition law issues, as well as random checks and interviews. Whistleblower reporting (S1-2, S1-3, S2-3, G1-1, G1-3) Essity is committed to maintaining a culture where everyone feels safe and empowered to report suspected breaches of the Code of Conduct or applicable laws. This culture is a cornerstone of Essity’s efforts to detect, address and prevent misconduct. Essity’s Whistleblower Policy reflects the Group’s commitment to key principles such as confidentiality, the option of anonymous reporting and a zerotolerance policy for retaliation. In addition to internal reporting channels such as Human Resources and line managers, employees and external stakeholders can raise concerns through SpeakUp, Essity’s whistleblower tool. Managed by an external party, SpeakUp allows for anonymous reporting, where permitted by law. All reports are received by Essity’s Compliance & Ethics department, which is responsible for ensuring that each case is handled in accordance with Essity’s Guideline for Managing Whistleblower Investigations. Feedback is provided to all reporters. Statistics on whistleblower reports and updates on ongoing investi gations are regularly presented to Essity’s Compliance Council. Essity’s employees complete mandatory Code of Conduct training during onboarding, which includes information about the SpeakUp tool. Additional details about SpeakUp are published on the intranet and made available at all offices and sites. Essity regularly assesses employee awareness of the SpeakUp tool and identifies areas where further training or communication may be needed. Anti-Corruption (G1-3) Corruption and other unethical business behavior are obstacles to fair competition, as well as economic and social development. Essity strictly prohibits all forms of corruption, including bribery. Essity has established a comprehensive compliance program that includes risk assessments, policies, instructions and mandatory elearning. To further mitigate risks associated with thirdparty relationships, a global due diligence screening process is in place. This process focuses on business relationships, countries and industries identified as posing higher corruption risks to Essity. The online antibribery and corruption training is available for all employees. It is mandatory for employees within sales, marketing and procurement who have frequent interactions with external partners to complete the training annually. Overall, 83% of these functions received training during the year. In 2025, 7,129 (6,467) of these employees completed the training. In relation to the Health & Medical business, Essity has a sectorspecific compliance program to ensure that all engagements with healthcare professionals and healthcare organizations are conducted in accor dance with applicable industry codes. The training program includes both mandatory elearning and indepth facetoface training sessions conducted by compliance officers. Management of relationship with suppliers (G1-2) Essity collaborates with strategic suppliers of raw materials and finished products operating across Europe, North and South America and Asia. This global presence means that the Group operates in regions with elevated risks of unethical business conduct and human rights violations. To mitigate these risks, Essity has implemented a structured supplier onboarding process that inte grates sustainability as a core component of the supplier qualification process. Prospective partners are evaluated on their adherence to Essity’s Global Supplier Standard requirements, in particular regarding human and labor rights, environmental stewardship and ethical business practices. Suppliers identified as highrisk undergo enhanced due diligence, including thirdparty audits and sustainability performance reviews, prior to contract approval. Essity fosters longterm, responsible partnerships with suppliers, guided by its Global Supplier Standard and sustainability principles. A riskbased approach underpins supplier management, enabling the Group to identify, prioritize and address potential issues based on their severity and likelihood. This includes regular evaluations, independent audits and close collaboration to tackle environmental, social and human rights challenges. Continuous improvement is central to Essity’s strategy. Through training, open dialogue and the inte gration of sustainability criteria into sourcing decisions, the Group ensures that its supply chain remains resilient, responsible and aligned with global standards. Essity | Annual Report 2025 93 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 94
Business ethics and Code of Conduct Share of new employees who received training in the Code of Conduct Target: 100% Outcome: 92% 2025202420232022 92%90% 88% 90% Business conductG Targets and metrics Confirmed incidents of breaches regarding competition law, anti-corruption principles and human rights standards (G1-4) Essity confirms that no violations of anticorruption or antibribery laws were identified during the year. No fines were received or paid, and no remedial actions were required in relation to breaches of anti corruption or antibribery procedures or standards. In addition, no severe human rights violations or related incidents were submitted to Essity’s whistle blower system. No material fines, penalties or compensation for damages as a result of violations regarding social and human rights factors were paid. No complaints were filed with National Contact Points for OECD Multinational Enterprises. Business conduct related target All new employees are expected to receive training to ensure a thorough understanding of Essity’s Code of Conduct to promote ethical behavior across the organization. The annual and continuous target is in place since 2011. External stakeholders have not been involved in the setting of this target. No additional external assurance of the target and its associated data has been conducted beyond the auditor’s review of the sustainability statements. Code of Conduct training 2025 2024 2023 2022 2021 Share of new employees who received training in the Code of Conduct, % 92 90 88 90 92 Business conduct-related metric Reported breaches of the Code of Conduct The table contains details about the reports submitted to the whistleblower system and to Essity’s Compliance & Ethics department. Reports submitted to the whistleblower system and to Essity’s Compliance & Ethics Department by category Category1) 2025 2024 2023 2022 2021 Human Resources (HR) 320 204 216 83 43 Regulatory breach, fraud and corruption 47 41 19 31 14 Security incidents 4 6 1 – – Operations 24 24 5 3 4 Sustainability – 1 – – – Human rights – – 1 – – Other 35 11 7 5 3 Total 430 287 249 122 64 1) Essity’s Compliance & Ethics Department places the submitted reports into the relevant category. The category may be changed during the course of an investigation. Of the 430 reports in 2025, 410 were closed and 20 are still under review and/or investigation. The reported cases in the HR category do not concern degrading treatment. In 2025, Essity did not receive any reports of discrimination according to ILO’s definition, Convention no. 111, during the year. No person was dismissed during the year for breaching the Group’s Anti-corruption Policy. No breaches were financially material. Internal audits conducted of the Code of Conduct Compliance with the program for regulatory compliance and the anticorruption program is ensured through audits conducted by the Internal Audit function. Internal audits conducted of the Code of Conduct 2025 2024 2023 2022 2021 In production Number of audits 5 6 8 5 5 Number of observations 54 69 118 98 52 Average number of observations per audit 10.8 11.5 14.8 19.6 10.4 In sales Number of audits 5 6 8 6 4 Number of observations 40 46 58 67 28 Average number of observations per audit 8.0 7.7 7.3 11.2 7.0 Essity | Annual Report 2025 94 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 95
Additional disclosuresA ESRS General disclosures Page BP-1 General basis for preparation of sustainability statements 48 BP-2 Specific circumstances 48–49, 97 GOV-1 Governance roles 50 GOV-2 Information provided to management 50, 58–59 GOV-3 Incentive schemes 52, 61 GOV-4 Due diligence 52 GOV-5 Risk management 52 SBM-1 Strategy, business model and value chain 53–55 SBM-2 Interests and views of stakeholders 56–57 SBM-3 Material impacts, risks and opportunities 53, 58–60 IRO-1 Processes 60, 62–63, 69, 71, 73, 74–75, 92 IRO-2 ESRS disclosure requirements covered 95–96 E1 Climate change Page E1-1 Transition plan for climate change mitigation 61–62 SBM-3 Material impacts, risks and opportunities 62 E1-2 Policies related to climate change 50–51, 64 E1-3 Actions in relation to climate change 64–65 E1-4 Targets related to climate change 65–66 E1-5 Energy consumption and mix 66–67 E1-6 Gross Scope 1, 2 and Scope 3 67–68 E1-7 GHG removals and GHG mitigation projects financed through carbon credits Not material E1-8 Internal carbon pricing Not material E1-9 Anticipated financial effects from material physical and transition risks and potential climaterelated opportunities Phasein E3 Water Page E3-1 Policies related to water 69 E3-2 Actions and resources related to water 69–70 E3-3 Targets related to water 70 E3-4 Water consumption 70 E3-5 Anticipated financial effects from material waterrelated risks and opportunities Phasein E4 Biodiversity and ecosystems Page SBM-3 Material impacts, risks and opportunities 71 E4-1 Transition plan for biodiversity 71 E4-2 Policies related to biodiversity 50–51, 71–72 E4-3 Actions related to biodiversity 72 E4-4 Targets related to biodiversity 72 E4-5 Metrics related to biodiversity 72 E4-6 Anticipated financial effects from material biodiversity and ecosystemrelated risks and opportunities Phasein E5 Resource use and circular economy Page E5-1 Policies related to resource use and circular economy 73 E5-2 Actions related to resource use and circular economy 73–74 E5-3 Targets related to resource use and circular economy 74–75 E5-4 Resource inflows 75 E5-5 Resource outflows 75–76 E5-6 Anticipated financial effects from material resource use and circular economyrelated risks and opportunities Phasein Disclosure requirements in ESRS covered by the sustainability statements (IRO-2)1) 1) Essity has chosen to adjust headers throughout the report to better summarize the content of the respective sections. Essity | Annual Report 2025 95 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 96
Additional disclosuresA S1 Own workforce Page SBM-2 Interests and views of stakeholders 56 SBM-3 Material impacts, risks and opportunities 77–78 S1-1 Policies related to own workforce 50–51, 78 S1-2 Engaging with own workers and workers’ representatives about impacts 56, 78–79, 93 S1-3 Remediate negative impacts and channels to raise concerns 79, 93 S1-4 Taking action on material impacts, risks and opportunities for own workforce 79–80 S1-5 Targets related to managing material impacts, risks and opportunities 81 S1-6 Characteristics of employees 81–82 S1-7 Characteristics of nonemployee workers in the undertaking’s own workforce Phasein S1-8 Collective bargaining coverage and social dialogue 82 S1-9 Diversity metrics 82–83 S1-10 Adequate wages Not material S1-11 Social protection Not material S1-12 Persons with disabilities Not material S1-13 Training and skills development metrics 83 S1-14 Health and safety metrics 84 S1-15 Worklife balance metrics Not material S1-16 Remuneration metrics 84 S1-17 Incidents, complaints and impacts 84 S2 Workers in the value chain Page SBM-2 Interests and views of stakeholders 57 SBM-3 Material impacts, risks and opportunities 85 S2-1 Policies related to value chain workers 50–51, 85–87 S2-2 Processes for engaging with value chain workers 86 S2-3 Remediate negative impacts and channels to raise concerns 86, 93 S2-4 Actions on material impacts related to workers in the value chain 87–88 S2-5 Targets related to managing impacts, risks and opportunities 88 S4 Consumers and end-users Page SBM-2 Interests and views of stakeholders 56 SBM-3 Material impacts, risks and opportunities 89 S4-1 Policies related to consumers and endusers 89 S4-2 Processes for engaging with consumers and endusers 89 S4-3 Remediate negative impacts and channels to raise concerns 89 S4-4 Actions on material impacts and opportunities 89–90 S4-5 Targets related to managing impacts, risks and opportunities 91 G1 Business conduct Page GOV-1 Governance roles 92 G1-1 Business conduct policies and corporate culture 92 G1-2 Management of relationships with suppliers 93 G1-3 Prevention and detection of corruption and bribery 92–93 G1-4 Confirmed incidents of corruption or bribery 94 G1-5 Political influence and lobbying activities Not material G1-6 Payment practices Not material Disclosure requirements in ESRS covered by the sustainability statements (IRO-2)1), cont. 1) Essity has chosen to adjust headers throughout the report to better summarize the content of the respective sections. Essity | Annual Report 2025 96 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 97
Disclosure requirements Data point SFDR reference Pillar 3 reference Benchmark regulation reference EU Climate Law reference Section Page ESRS 2 GOV-1 21 (d) CGR 103 ESRS 2 GOV1 21 (e) CGR 103 ESRS 2 GOV4 30 SUS 52 ESRS 2 SBM1 40 (d) i N/A N/A ESRS 2 SBM1 40 (d) ii N/A N/A ESRS 2 SBM1 40 (d) iii N/A N/A ESRS 2 SBM1 40 (d) iv N/A N/A ESRS E11 14 SUS 61 ESRS E11 16 (g) SUS 61 ESRS E14 34 SUS 65–66 ESRS E15 38 SUS 67 ESRS E15 37 SUS 67 ESRS E15 40–43 SUS 66 ESRS E16 44 SUS 68 ESRS E16 53–56 SUS 67–68 ESRS E17 56 N/A N/A ESRS E19 66 N/A N/A ESRS E19 66 (a), 66 (c) N/A N/A ESRS E19 67 (c) N/A N/A ESRS E19 69 N/A N/A ESRS E2 4 28 N/A N/A ESRS E3 1 9 SUS 51, 69 ESRS E3 1 13 N/A N/A ESRS E3 1 14 N/A N/A ESRS E3 4 28 (c) N/A N/A ESRS E3 4 29 SUS 70 ESRS 2 SBM 3E4 16 (a) i N/A N/A ESRS 2 SBM 3E4 16 (b) N/A N/A ESRS 2 SBM 3E4 16 (c) N/A N/A ESRS E42 24 (b) SUS 71–72 ESRS E42 24 (c) N/A N/A ESRS E42 24 (d) SUS 71–72 ESRS E5 5 37 (d) SUS 76 ESRS E5 5 39 SUS 76 Disclosure requirements Data point SFDR reference Pillar 3 reference Benchmark regulation reference EU Climate Law reference Section Page ESRS 2SBM 3S1 14 (f) N/A N/A ESRS 2SBM 3S1 14 (g) N/A N/A ESRS S11 20 SUS 51, 92–93 ESRS S11 21 SUS 51, 92 ESRS S11 22 SUS 51, 92 ESRS S11 23 SUS 49, 51, 79 ESRS S13 32 (c) SUS 93 ESRS S114 88 (b), (c) SUS 48, 84 ESRS S114 88 (e) SUS 48, 84 ESRS S116 97 (a) SUS 84 ESRS S116 97 (b) FSG 143 ESRS S117 103 (a) SUS 94 ESRS S117 104 (a) SUS 94 ESRS 2 SBM 3S2 11 (b) SUS 85 ESRS S21 17 SUS 51, 85–86, 92, 93 ESRS S21 18 SUS 51, 85 ESRS S21 19 SUS 51, 85 ESRS S21 19 SUS 51, 85, 87 ESRS S24 36 SUS 94 ESRS S31 16 N/A N/A ESRS S31 17 N/A N/A ESRS S34 36 N/A N/A ESRS S41 16 SUS 89 ESRS S41 17 SUS 89 ESRS S44 35 SUS 94 ESRS G11 10 (b) N/A N/A ESRS G11 10 (d) N/A N/A ESRS G14 24 (a) SUS 94 ESRS G14 24 (b) SUS 94 SUS – Sustainability statements CGR – Corporate governance report FSG – Financial statements, Group N/A – Not applicable for Essity List of data points that derive from other EU legislation (IRO-2) Additional disclosuresA Essity | Annual Report 2025 97 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 98
Disclosure requirements Section in report Page Description ESRS 2 GOV-1 § 21 (b) Information about the representation of employees in the administrative, management and supervisory bodies Corporate Governance Report 103,107 Board of Directors and composition of the Board of Directors Board members and deputies appointed by trade unions ESRS 2 GOV1 § 21 (c) Information about the experience relevant to the sectors, products and geographic locations of the undertaking in the the administrative, management and supervisory bodies Corporate Governance Report 103, 106–107 Board of Directors and composition of the Board of Directors Board of Directors and Auditors ESRS 2 GOV1 §21 (d) Percentage by gender and other aspects of diversity in the administrative, management and supervisory bodies Corporate Governance Report 103 Board of Directors and composition of the Board of Directors ESRS 2 GOV1 §21 (e) The percentage of independent board members Corporate Governance Report 103 Board of Directors and composition of the Board of Directors ESRS 2 GOV1 § 22 (b) Information on how each body’s or individual’s responsibilities for impacts, risks and opportunities are reflected in the undertaking’s terms of reference, board mandates and other related policies Corporate Governance Report 100–101 5. Board of Directors ESRS 2 GOV1 § 23, (a), (b) Description of how the administrative, management and supervisory bodies determine whether appropriate skills and expertise are available or will be developed to oversee sustainability matters Corporate Governance Report 103 Evaluation of the Board’s work ESRS 2 GOV3 § 29 (a)–(e) Integration of sustainabilityrelated performance in incentive schemes Financial statements of the Group 142 Note C2, Company’s Application of Guidelines, Variable Remuneration ESRS 2 SBM1§ 40 (a) ii Description of significant markets and (or) customer groups served Financial statements of the Group 131–132 Note B2a, Segment Reporting, Net sales – sold to E1ESRS 2 GOV3 §13 Disclosure of how climaterelated considerations are factored into remuneration of members of administrative, management and supervisory bodies Financial statements of the Group 142 Note C2, Company’s Application of Guidelines, Variable Remuneration S116 § 97 (a)–(b) Annual total remuneration ratio of the highest paid individual to the median annual total remuneration for all employees and any contextual information necessary to understand how the data has been compiled Financial statements of the Group 143 Note C2, Company’s Application of Guidelines, Variable Remuneration G1ESRS 2 GOV1 § 5 (b) The expertise of the administrative, management and supervisory bodies on business conduct matters Corporate Governance Report 103 Board of Directors and composition of the Board of Directors ESRS disclosure requirements incorporated by reference Additional disclosuresA Essity | Annual Report 2025 98 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 99
KPI Total Proportion of Taxonomy eligible activities Taxonomy aligned activities Proportion of Taxonomy aligned activities Breakdown by environmental objectives of Taxonomy aligned activities Proportion of enabling activities Proportion of transitional activities Not assessed activities considered nonmaterial Taxonomy aligned activities, year 2024 Proportion of Taxonomy aligned activities, year 2024 Climate Change Mitigation Climate Change Adaptation Water Circular Economy Pollution Biodiversity SEKm % SEKm % % % % % % % % % % SEKm % Turnover1) 138,494 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CapEx2) 8,143 0 0 0 0 0 0 0 0 0 0 0 0 0 0 OpEx3) 5,517 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1) For further information on turnover, please refer to the consolidated income statement on page 112 or Note B1 Net sales – Revenues from contracts with customers, on page 125 in the financial statements of the Group. 2) The key figure for capital expenditure comprises investments in intangible assets of SEK 423m, in property plant and equipment of SEK 6,670m and additions to rights-of-use assets of SEK 1,050m. Refer to Notes D1, D2 and G1 on pages 148, 150 and 167 in the financial statements of the Group. 3) Applies to costs of research and development as well as short-term leases where the underlying assets have a low value. EU taxonomy report The EU Taxonomy is a central instrument of the EU’s “Green Deal”. The European Green Deal is a package of policy initiatives, which aims to set the EU on the path of a green transition, with the ultimate goal of reaching climate neutrality by 2050. Within this package the EU Taxonomy is designed to promote invest ment flows from the finance sector to businesses which contribute the most to the EU’s environmental objectives. For this purpose, environmentally sustainable activities have been defined. According to the EU Taxonomy, an economic activity is considered environmentally sustainable if: • it substantially contributes to achieving one or more of the defined environmental objectives, • it does not significantly harm the other environmental objectives, • it is carried out in compliance with the minimum safeguards and • it meets the technical screening criteria defined by the EU Commission by means of delegated acts. Essity’s economic activities can mostly be attributed to the pulp and paper industry (NACE code C17.22). The EU still has to define technical screening criteria to define environmentally sustainable economic activities for this industry and the subordinated economic activities. Consequently, Essity’s turnover, capital expen diture (CapEx) and operating expenditure (OpEx) are not covered by the Taxonomy regulation for this accounting period. Nevertheless, Essity is obligated to report on its respective KPIs for turnover, CapEx and OpEx. Amounts related to CapEx and OpEx resulting from economic activities that are not core operations are considered negligible. Additional disclosuresA Essity | Annual Report 2025 99 Introduction The Essity share Strategy Business areas Group Sustainability statements General disclosures Environmental disclosures Social disclosures Governance disclosures Additional disclosures Corporate governance report Financial statements including notes Reports from the auditors Other information
Page 100
The task of corporate governance is to ensure the company’s commitments to all of its stakeholders: shareholders, customers, suppliers, creditors, society and employees. It must be structured in a way that supports the company’s long-term strategy, market presence and competitiveness. Corporate governance shall be reliable, clear, simple and business-oriented. This Corporate governance report forms part of the Board of Directors’ Report for Essity’s 2025 Annual Report. The report has been reviewed by the company’s auditors. Corporate governance Corporate governance, pages 100–109 This section describes applicable rules and regulations for the Group’s corporate governance and the company’s manage- ment structure and organization. It presents the Board of Directors’ responsibilities and its work during the year. It also contains a description of Essity’s internal control with regard to financial reporting. Essity applies the Swedish Corporate Governance Code without any deviations (corporategovernanceboard.se). Other information is available on essity.com: • Articles of Association • Information from the Nomination Committee ahead of the 2026 Annual General Meeting (composition, proposals and work) • Other information ahead of the 2026 AGM (notice, remuner- ation report and information about routines for notifying attendance at the AGM, etc.) Additional information about corporate governance is available on essity.com Risks and risk management, pages 41–46 Essity’s processes to identify and manage risks are part of the Group’s strategy work and are pursued at a local and central level. The risk management section describes the most signifi- cant risks and measures taken to eliminate or limit these risks. Sustainability related risks are described in the sustainability statements. Sustainability, pages 47–99 Essity’s sustainability work is an integral part of the company’s business model. The company’s sustainability statements form part of the Board of Directors’ Report. The sustainability work contributes to a sustainable and circular society, reduces risks, strengthens competitiveness, and attracts new employees and investors. Governance at Essity 1. Shares and shareholders Essity has engaged Euroclear Sweden AB to maintain the company’s share register. On December 31, 2025, Essity had approximately 110,000 shareholders. The five largest shareholders in terms of voting rights on this date were AB Industrivärden (29.5%), AMF and AMF Fonder (6.3%), Norges Bank Investment Management (5.4%), T. Rowe Price Funds (3.2%) and BlackRock (2.2%). Essity has two listed classes of shares: Class A and Class B shares. Every Class A share represents ten votes while every Class B share represents one vote. There are no other restrictions to voting rights in respect of shares used by shareholders at the general meeting. The two share classes carry the same entitle- ment to the company’s assets and profits. Furthermore, according to the Articles of Association, owners of Class A shares are entitled to request conversion of their Class A shares to Class B shares. The 2025 Annual General Meeting (AGM) authorized the Board of Directors, for the period until the 2026 AGM, to decide on the buyback of own Class B shares. On April 23, 2025, Essity’s Board of Directors decided to exercise the authorization and launched a buyback program totaling SEK 3bn. 2. General shareholder meeting The general shareholder meeting is Essity’s highest decision- making body, which all of the company’s shareholders are entitled to attend, to have a matter considered and to vote for all shares held by the shareholder. The company’s Board of Directors and auditor are elected at the AGM. The AGM also resolves on the remuneration of the Board members, determines guidelines for the remuneration of senior executives and approves the Board’s annual remuneration report. 3. Nomination Committee Shareholders appoint members of the Nomination Committee at the AGM, or stipulate how the members shall be appointed. The Nomination Committee represents the company’s shareholders. A majority of the members shall be independent of the company and corporate management. The President and other members of corporate management may not be a member of the Nomination Committee. The main duty of the Nomination Committee is to prepare and present proposals for the AGM’s resolutions with respect to election and remuneration matters. 4. External auditors Essity’s auditor is elected at the AGM and is responsible for reviewing the company’s Annual Report and consolidated finan- cial statements and the Board’s and President’s administration. The auditor conducts a limited review of the company’s sustain- ability statements and Corporate governance report as well as the company’s half-year report. The auditor submits an audit report from this review. The auditor also submits a statement concerning compliance with the company’s guidelines for remuneration of senior executives. The audit is performed in accordance with the Swedish Companies Act, International Standards on Auditing (ISA) and generally accepted auditing principles in Sweden. 5. Board of Directors The Board of Directors is elected by the shareholders at the AGM and has overall responsibility for the Company’s organization and administration. This responsibility is fulfilled, inter alia, through regular monitoring of the business and by ensuring the appropri- ateness of the organization and the management team, and by issuing guidelines and reporting from the internal audit. The Board approves strategies and targets, and decides on major invest- ments, acquisitions and divestments of operations, among other matters. Furthermore, the Board annually prepares a report on the remuneration that has been paid or is outstanding in accordance with the remuneration guidelines decided by the AGM. According to the Articles of Association, the Board of Directors is to consist of not less than three and not more than twelve members elected by the AGM. The Board of Directors also includes three employee representatives with deputies, who are appointed by the respec- tive employee organizations under Swedish law. The Board has set up committees with preparatory and advi- sory roles to support the Board in relation to certain issues. The Essity | Annual Report 2025 100 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Corporate governance Board of Directors and Auditors Executive Management Team Financial statements including notes Reports from the auditors Other information
Page 101
allocation of powers and tasks between the Board, its commit- tees and the President is outlined in the working procedures of the Board of Directors and in the terms of reference issued by the Board to the President. Essity’s Articles of Association contain no provisions regarding appointment or dismissal of Board members or amendments to the Articles. Chairman of the Board The Chairman of the Board is elected by the shareholders at the AGM. The Chairman of the Board leads the work of the Board and is responsible for ensuring that it is effectively organized and that work is efficiently conducted. This includes continuous monitoring by the Chairman of the company’s operations in close dialogue with the President and ensuring that other Board members receive information and decision data that will enable high-quality discussion and decisions by the Board. The Chairman leads the assessment of the Board’s and the President’s work. The Chairman also represents the company in ownership matters. 6. Audit Committee The role of the Audit Committee is to monitor the company’s financial reporting and provide recommendations and proposals to ensure the reliability of reporting. The Audit Committee also oversees sustainability reporting. With regard to reporting, the Committee oversees the effectiveness of the company’s internal control, internal audit and risk management. The Audit Committee keeps itself continuously informed about the audit of the Annual Report and consolidated financial statements and about the conclusions of the quality control by the Swedish Inspectorate of Auditors concerning the company’s external auditor. The Committee receives and addresses the supplementary report to the audit report concerning the conducted audit that the auditor submits in accordance with the EU Audit Regulation. The Audit Committee informs the Board of its observations and the results of the audit. The Audit Committee also examines and monitors the impartiality and independence of the auditor. In this respect, particular attention is paid to whether the auditor is providing the company with services other than auditing services. The Committee also assesses the work of the auditor and provides proposals to the company’s Nomination Committee concerning the appointment of auditor for the following mandate period. Members of the Audit Committee are not employed by the company and at least one member has accounting or auditing expertise. 7. Remuneration Committee The Remuneration Committee prepares the Board’s decisions on issues relating to remuneration principles, remuneration and other terms and conditions of employment for the President and is authorized to make decisions in these matters for the company’s other senior executives. The Committee monitors and assesses programs for variable remuneration, the application of the AGM’s resolution on guidelines for remuneration of senior executives and evaluates the applicable remuneration structure and remu- neration levels in the Group. The Remuneration Committee also prepares the annual remuneration report. 8. Internal audit The internal audit assists the Group in improving and protecting the organization’s value by providing risk-based, independent and objective assurance and consultancy services. The internal audit also reports to the Audit Committee and to the Board in relation to internal audit issues. The audit field encompasses both financial and operational aspects across all of Essity. The internal audit also provides investigations and consultancy services in connection with internal control matters and risk management. 9. President and Executive Management Team1) Essity’s President and CEO is responsible for the day-to-day administration of the Group and follows the Board’s guidelines and instructions. The President is supported by the Executive Management Team, see pages 108–109, the work of which is led by the President. In 2025, the Executive Management Team comprised the President, Group Function Senior Vice Presidents, Business Unit Presidents and the Presidents of the global units. Of the members of the Executive Management Team, four are women and the ages of the members range between 42 and 65. The Executive Management Team holds regular meetings during the year to discuss and coordinate matters such as the business areas’ economic development and budgets, important projects, strategy issues, sustainability issues and corporate culture. The Executive Management Team also has an advisory role for the President. The working procedures for the Board of Directors and terms of reference issued by the Board of Directors to the President detail, for example, the division of work between the Board and 9. President and CEO8. Internal audit 9. Executive Management Team 10. Business units and global units 11. Group functions 6. Audit Committee 2. General shareholder meeting 1. Shareholders 4. External auditors 3. Nomination Committee 7. Remuneration Committee5. Board of Directors Proposes Board of Directors and Auditors Exercise voting rights Elects the Board Appoints the President and CEO Audits the Annual Report and the company’s administration 1) In October 2025, Essity decided on a new organizational structure that will apply from January 1, 2026. The new organization comprises four business areas: Health & Medical, Personal Care, Consumer Tissue and Professional Hygiene, and seven central functions: Corporate Communications, Digital Transformation & Business Enablement, Finance, Human Resources, Legal Affairs & Compliance, Strategy, Business Development & Sustainability and Supply Chain Enablement. Essity | Annual Report 2025 101 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Corporate governance Board of Directors and Auditors Executive Management Team Financial statements including notes Reports from the auditors Other information
Page 102
President. In consultation with the Chairman and Secretary of the Board, the President prepares documentation and decision data for the Board’s work. 10. Business units and global units1) In 2025, Essity had four business units: • Consumer Goods Americas • Consumer Goods EMEA • Health & Medical • Professional Hygiene As well as three global units: • Global Marketing & Innovation • Global Supply Chain • Global Digital & Business Services Essity’s business units and global units adhere to the principle of distinct decentralization of responsibility and authority. The busi- ness units and the global units have a delegated responsibility for managing and developing their respective operations through established objectives and strategies, a process that is also centrally coordinated. The business units are responsible for their operating results, capital and cash flow. The business and earn- ings position is followed up by the entire Executive Management Team on a monthly basis. Each quarter, business review meetings are conducted during which the management of each business unit personally meets with the President and the CFO. These meetings function as a complement to the daily monitoring of the operations. Through working procedures and terms of reference, a number of issues of material significance are placed under the control of the President and the company’s Board of Directors. 11. Group functions In 2025, Essity had five Group functions: • Communications • Finance • Human Resources • Legal Affairs & Compliance • Strategy, Business Development & Sustainability These have a Group-wide responsibility for matters within their respective fields of responsibility, and coordinate with the corre- sponding functions in the respective business unit or global unit. Activities during the year Annual General Meeting Essity held its AGM in Stockholm on Thursday, March 27, 2025. The AGM elected the company’s Board of Directors. Further- more, the Board was authorized, for the period until the 2026 AGM, to decide on the buyback of own Class B shares. The Meeting also approved the Board’s remuneration report for 2024. The minutes from the 2025 AGM are available on essity.com. Nomination Committee The Nomination Committee of Essity is tasked with making proposals to the AGM in respect of the election of the Chairman of the Meeting, Board of Directors, Chairman of the Board and auditor, remuneration of each Board Member (divided between the Chairman of the Board and other Board Members), remuneration of the auditor and, where applicable, proposals for amendments to the instruction for the Nomination Committee. At the 2020 AGM, the following instructions to the Nomination Committee were adopted to apply until further notice: “The Nomination Committee is to comprise representatives of the four largest shareholders, who express a wish to take part in the Nomination Committee, in terms of voting rights as per the shareholders’ register maintained by the company on the final banking day of August, as well as the Chairman of the Board, who also convenes the first meeting of the Nomination Committee. The member representing the largest shareholder in terms of votes is to be appointed as Chairman of the Nomination Committee. The Chairman of the Board shall not be Chairman of the Nomination Committee. If necessary, due to subsequent ownership changes, the Nomination Committee is entitled to call on one or two additional members from among the next largest shareholders in terms of voting rights. The total number of members shall be not more than seven. In the event that a member steps down from the Nomination Committee before the task is completed and the Nomination Committee decides it would be beneficial for a replacement to be appointed, such a replacement is to be appointed by the same shareholder or, if this shareholder is no longer among the largest shareholders in terms of voting rights, by the next largest shareholder in terms of voting rights. Changes to the composition of the Nomination Committee are to be disclosed immediately. The composition of the Nomination Committee is to be announced by Essity no later than six months prior to the AGM. Rules and regulations Certain internal rules and regulations • Articles of Association • Working procedures of the Board of Directors, including instructions for the Board’s committees • Terms of reference issued by the Board to the President • Code of Conduct • Policy documents and instructions (in areas such as finance, HR, sustainability, internal control, communica- tion, pension and risk management as well as for specific issues, such as the processing of personal data, insider issues, conflicts of interest, competition law, corruption and diversity) Certain external rules and regulations • The Swedish Companies Act • The Swedish Annual Accounts Act • International Financial Reporting Standards (IFRS) • European Sustainability Reporting Standards (ESRS) • EU Market Abuse Regulation (MAR) • Nasdaq Stockholm’s rulebook for issuers • Swedish Corporate Governance Code Compliance with stock market regulations Essity complies with rules that apply in Sweden for listed companies and was not sanctioned by Finansinspektionen, the stock exchange’s disciplinary committee or any other authority or self-regulating body for violations of the rules concerning the stock market. Essity has not made any devi- ations from the Swedish Corporate Governance Code. Essity | Annual Report 2025 102 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Corporate governance Board of Directors and Auditors Executive Management Team Financial statements including notes Reports from the auditors Other information
Page 103
No remuneration is to be paid to the members of the Nomination Committee. Any expenses incurred during the work of the Nom- ination Committee are to be paid by Essity. The mandate period of the Nomination Committee extends until the composition of the next Nomination Committee is disclosed. The Nomination Committee is to submit proposals relating to the Chairman of the Meeting, the Board of Directors, the Chairman of the Board, Board fees for the Chairman of the Board and each of the other Board members, including remuneration for committee work, the company’s auditor and auditor’s fees and, to the extent deemed necessary, proposals for amendments to this instruction.” In its work, the Nomination Committee is to consider the rules that apply to the independence of Board members, as well as the requirement of diversity and breadth with the endeavor to achieve an even gender distribution and that the selection shall be based on expertise and experience relevant to Essity. All shareholders have had an opportunity to submit proposals to the Nomination Committee. The Nomination Committee’s pro- posal for the 2026 AGM is presented in the notice convening the AGM available on Essity’s website essity.com. The Nomination Committee was convened on four occasions prior to the 2026 AGM. The Chairman of the Board presented the Board evaluation and provided the Nomination Committee with information regarding Board and committee work during the year. When preparing proposals for the Board for the 2026 AGM, particular attention has been paid to the issues of diversity and an even gender distribution, and the Nomination Committee thus applied rule 4.1 of the Swedish Corporate Governance Code as its Diversity Policy. When preparing its proposal for the election of auditors, the Nomination Committee also gave consideration to the recommendation of the Audit Committee. Board of Directors and composition of the Board of Directors The 2025 AGM elected ten Board members comprising Maria Carell, Annemarie Gardshol, Magnus Groth, Jan Gurander, Alexander Lacik, Torbjörn Lööf, Katarina Martinson, Bert Nordberg, Barbara Milian Thoralfsson and Karl Åberg. Jan Gurander was elected as the Chairman of the Board. Prior to the AGM, Ewa Björling had informed the Nomination Committee that she declined re-election. On May 31, 2025, Magnus Groth resigned as President of Essity and in conjunction with this also stepped down from the Board. Accordingly, the Board of Directors has consisted of nine members elected by the AGM since June 1, 2025. Of the nine members elected by the AGM, seven (78%) are inde- pendent. The independence of each Board member is presented in the table on page 104. Essity complies with the requirements of the Swedish Corporate Governance Code that stipulate that not more than one member elected by the AGM shall be a member of corporate management, that the majority of the members elected by the AGM shall be independent of the company and company management, and that not fewer than two of these shall also be independent of the company’s major shareholders. Four of the AGM-elected Board members are women, corresponding to approximately 44% of the total number of AGM-elected Board members and the ages of members range between 44 and 69. The employees have appointed Susanna Lind, Sofia Lafqvist and Örjan Svensson as representatives to the Board for the period until and including the 2026 AGM, and their deputies Niklas Engdahl, Martin Ericsson and Andreas Larsson. All of the AGM-elected Board members have experience and a good understanding of the requirements incumbent upon a listed company. The AGM-elected Board members have broad profes- sional experience from major international companies, different industries, cultural and geographic areas, and wide-reaching expertise and experience of relevance to Essity’s areas of business and products. Accordingly, the Board has – with reference to the company’s business, stage of development and general situation – a suitable composition, and the expertise and know-how required to monitor sustainability reporting and financial reporting. The Board also utilizes the internal expertise of subject matter experts in relation to various issues as necessary. Board activities The Board was convened 12 times during the year. The Board has fixed working procedures that describe in detail which ordinary agenda items are to be addressed at the various Board meetings of the year. Recurring agenda items are finances, the market situation, sustainability, investments and adoption of the financial reports. The Board also establishes and evaluates the company’s overall targets and strategy and decides on significant internal rules. Another key task is to continuously monitor the internal control of the compliance of the company and its employees with relevant internal and external rules, and that the company has well-functioning procedures for market disclosures. On a regular basis throughout the year, the Board has also dealt with reports from the Audit and Remuneration Committees and reports on strategy, market, internal audit, internal control and financial operations. The company’s auditor regularly presents a report on its audit work and these issues are discussed by the Board. The Business Unit Presidents present their respective operations and current issues affecting them. In 2025, in addition to customary Board work, the Board of Directors maintained a strong focus on digitalization, strategy, CEO recruitment, organizational issues, efficiency programs, operational issues, sustainability, investments, M&A issues and buyback programs, and closely monitored developments in view of the global geopolitical situation and its impact on various aspects of the business. The CEO is evaluated annually by the Board in the absence of the CEO and management. Evaluation of the Board’s work The work of the Board, like that of the President and the Chairman, is evaluated annually using a systematic and structured process. The purpose of this work is to obtain a sound basis for the Board’s own development work and to provide the Nomination Committee with decision data for its nomination work. External expertise was used in the preparation of material and the evalua- tion took the form of an anonymous questionnaire and interviews as well as group and individual discussions. The evaluation covers Nomination Committee for the 2026 AGM Member Representative of Votes as of August 31, 2025 (%) Helena Stjernholm, Chairman AB Industrivärden 29.3 Anders Hansson AMF and AMF Funds 6.2 Celia Grip Swedbank Robur Funds 2.3 Anders Jonsson Livförsäkringsbolaget Skandia 2.0 Jan Gurander Chairman of the Board Essity | Annual Report 2025 103 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Corporate governance Board of Directors and Auditors Executive Management Team Financial statements including notes Reports from the auditors Other information
Page 104
1) Board meetings January 1–December 31, 2025. Committees Attendance1) Board of Directors Elected Dependence Audit Committee Remuneration Committee Board of Directors (12) Audit Committee (8) Remuneration Committee (13) Ewa Björling (until March 27, 2025) 2016 x 2/2 2/2 Maria Carell 2023 12/12 Annemarie Gardshol 2016 12/12 Magnus Groth (until May 31, 2025) 2016 4/4 4/4 2/2 Jan Gurander 2023 x Chairman 12/12 8/8 13/13 Alexander Lacik (from March 27, 2025) 2025 9/10 Torbjörn Lööf 2021 x 11/12 8/8 Katarina Martinson (from March 27, 2025) 2025 x 10/10 6/6 Bert Nordberg 2016 x 11/12 12/13 Barbara Milian Thoralfsson 2016 Chairman x 12/12 8/8 13/13 Karl Åberg 2024 x 12/12 8/8 = Dependent in relation to the company’s major shareholder, AB Industrivärden. = President of Essity, dependent in relation to the company and corporate management. areas such as the Board’s methods of work, effectiveness, exper- tise, competency and the year’s work. The Board was provided with feedback after the results were compiled. The Nomination Committee was informed of the results of the evaluation. Audit Committee The Audit Committee comprises Barbara Milian Thoralfsson (Chairman), Jan Gurander, Katarina Martinson and Karl Åberg. In 2025, the Audit Committee held eight meetings. In addition, members have also held meetings with internal audit, the audi- tors, the General Counsel and the CFO. In its monitoring of the financial reporting, the Committee dealt with relevant accounting issues, internal auditors’ reviews, auditing work, risk manage- ment, a review of various valuation matters, such as testing of impairment requirements for goodwill, and the preconditions for the year’s pension liability calculations. In addition, the Committee addressed issues relating to sustainability reporting. The Audit Committee also prepared a recommendation to be used by the Nomination Committee when deciding on its proposal to the AGM regarding the election of auditors. Remuneration Committee The Remuneration Committee comprises Jan Gurander (Chairman), Torbjörn Lööf, Bert Nordberg and Barbara Milian Thoralfsson. The Remuneration Committee held 13 meetings in 2025. Activities mainly concerned CEO recruitment, remuner- ation and other employment terms and conditions for senior executives, and current remuneration structures and remunera- tion levels in the Group. In addition, the Committee prepared the Board’s remuneration report relating to remuneration of senior executives. Internal audit The basis of the work of the internal audit is a risk analysis based on external and internal information carried out in close dialogue with management teams at Essity. The risk evaluation forms the basis of an audit plan, which is presented to the Audit Committee together with the risk analysis. In 2025, 113 audit projects were performed and reported at meetings with the Audit Committee. Work in 2025 involved follow-up of the units’ progress with process-based control, efficiency in internal governance and control, major investments, information security, sustainability and compliance with Essity’s policies. External auditor The 2025 AGM appointed the accounting firm of Ernst & Young AB as the company’s auditor for a mandate period of one year. The accounting firm notified the company that Erik Sandström, Authorized Public Accountant, would be the auditor in charge. Erik Sandström is also the auditor of and has major assignments for Atlas Copco, Epiroc and Ratos. He owns no shares in the company. In accordance with its formal work plan, the Board met with the auditor at three scheduled Board meetings in 2025. The auditor also attended each meeting of the Audit Committee. At these meetings, the auditor presented and received opinions on the focus and scope of the planned audit and delivered verbal audit and review reports. Furthermore, at the Board’s third scheduled autumn meeting, the auditor delivered an in-depth verbal report on the audit for the year. The working procedures specify a number of mandatory issues that must be addressed. These include matters of importance that have been a cause of discussion or concern during the audit, business routines and transactions where differences of opinion may exist regarding the choice of accounting methods. The auditor shall also disclose consultancy work conducted for Essity as well as other dependencies in relation to the company and its management. On each occasion, Board members have had an opportunity to ask the auditors questions. Certain parts of the discussion on the accounts take place without representatives of corporate management being present. Remuneration; Management and Board of Directors Guidelines The 2024 AGM adopted new guidelines for remuneration of senior executives that are based on a total remuneration package comprising fixed salary, variable compensation and other benefits, and pension, see Note C2 on pages 141–143. Remuneration to the President and other senior executives Remuneration to the President and other senior executives is presented in a separate remuneration report, which is available on essity.com. Furthermore, remuneration of the President and other senior executives is described in Note C2 on pages 141–143. Remuneration to the Board The total remuneration to the AGM-elected Board members amounted to SEK 12,705,000 in accordance with the AGM’s resolution. See Note C3 on page 144 for further information. Internal control and financial reporting The Board’s responsibility for internal governance and control is regulated in the Swedish Companies Act, the Annual Accounts Act and the Swedish Corporate Governance Code. The Annual Accounts Act requires that the company, each year, describes its system for internal control and risk management with respect to financial reporting. The purpose of these requirements is to create an internal framework for governance and control to reduce the risk of error in the financial reporting. Essity’s processes for internal control over financial reporting is based on the model and Essity | Annual Report 2025 104 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Corporate governance Board of Directors and Auditors Executive Management Team Financial statements including notes Reports from the auditors Other information
Page 105
principles developed by the Committee of Sponsoring Organisa- tions of the Treadway Commission (COSO). Control environment A good control environment requires clarity in relation to decision-making paths, powers and accountability, in addition to a corporate culture characterized by strong values and awareness among employees of their role in maintaining good internal control. The Board of Directors has the overall responsibility for ensuring effective internal control and has, inter alia, adopted Group-wide internal rules for the purpose of establishing a foundation for a good corporate culture and to assure the quality of the financial reporting. In this context, Essity’s Code of Conduct is an important steering document in issues concerning ethics, morality and regulatory compliance, and employees regularly receive information and training regarding the Code. Other signi- ficant steering documents for the control environment include the Finance Policy, Internal Control Policy, Communications Policy and Information Security Policy. Essity’s Financial Reporting Manual is particularly important for the Group’s financial reporting procedures as it contains a number of specific instructions and guidelines that are specially designed to ensure the quality of the financial reporting. Important steering documents are published in a separate database that also contains a process for annual updates to the documents. Risk assessment Risks relate to material errors in the financial reporting that may arise, such as incomplete disclosures, valuation issues, the reporting process and correctness. Risks also include loss of assets, unduly favoring a third party and misappropriation. Risks related to the financial reporting are evaluated and monitored by the Board via the Audit Committee, where an annual risk assessment is conducted. The risks that are identified and may result in material errors also form the basis for internal control activities that proactively manage these risks. Clear guidelines for accountability and the division of work also form part of the risk prevention efforts. Furthermore, measures are continuously taken to improve business processes and thus reduce risks. Control activities Significant instructions and guidelines related to financial reporting are prepared and updated regularly by the Group Function Finance and are easily accessible on the Group’s intranet. The Group Function Finance is responsible for ensuring compliance with instructions and guidelines. Process managers at various levels within Essity are responsible for carrying out the necessary control measures with respect to financial reporting. An important role is played by the business unit’s controller organiza- tions, which are responsible for ensuring that financial reporting from each unit is correct and complete, and is conducted within the specified time. In addition, each business unit has a Finance Manager with responsibility for the individual business unit’s financial reporting. The company’s control activities are supported by the budgets that each business unit prepares and updates during the year through continuous forecasts. Essity has a standardized system of control measures involving processes that are significant to the company’s financial reporting. These measures include company-wide controls related to the Code of Conduct, process controls and IT controls. Self-assessments are carried out based on a selection of internal key controls for the respective operations in order to assess the effectiveness of the internal control and governance. Information and communication Financial reporting to the Board The Board’s working procedures stipulate which reports and information of a financial nature are to be submitted to the Board at each scheduled meeting. The President, together with the Chairman, ensures that the Board receives the reports required to enable the Board to continuously assess the company’s and Group’s financial position. Detailed instructions specifically outline the types of reports that the Board is to receive at each meeting. Internal reporting Ahead of each interim report, the company’s finance department prepares detailed instructions regarding deadlines, changes to accounting principles and other circumstances of significance for reporting to ensure the quality of the financial statements. Furthermore, the company has a process and technical system support to limit the risk of price-sensitive information being leaked in conjunction with the submission of financial information ahead of the issue of interim reports. Accounting and reporting for the majority of units is carried out by Essity’s Shared Service Center, which ensures efficient and uniform reporting. External financial reporting The quality of external financial reporting is ensured via a number of actions and procedures. The President is responsible for ensuring that all information communicated, such as press releases with financial content, presentation material for meetings with the media, owners and financial institutions, is correct and of a high quality. The responsibilities of the company’s auditors include reviewing accounting issues that are critical for the financial reporting and reporting their observations to the Audit Committee and the Board of Directors. In addition to the audit of the annual accounts, a review of the half-year report and of the company’s administration and internal control is carried out. Monitoring activities Essity’s Board of Directors, through the Audit Committee, as well as the corporate management continuously assesses the effec- tiveness of the processes applied by the company with respect to the internal control of the financial reporting. Of particular importance to this assessment are the reports submitted by the internal audit and feedback from the company’s external auditor. The company has a structured process within the scope of its day-to-day operations for monitoring significant observations from internal control or internal audit. Such observations and the status of measures taken to address these are regularly reported to corporate management and to the Audit Committee. The results of the self-assessment in control activities are com- piled in a list of activities that require action. The internal control and governance department lead these monitoring activities. To ensure the quality of the self-assessment, internal audit conducts its own testing of the control activities. The most significant shortcomings identified in the self-assessment, and from the internal audit tests, are compiled by the internal control and governance department and reported to the units, management and the Audit Committee. The external auditor also carries out testing of internal control and governance within the scope of its audit. The results are shared with corporate management, the internal control and governance department and the Audit Committee. Contact details to the Nomination Committee and the Board of Directors can be found on page 191. Essity | Annual Report 2025 105 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Corporate governance Board of Directors and Auditors Executive Management Team Financial statements including notes Reports from the auditors Other information
Page 106
Board of Directors and Auditors Elected by the Annual General Meeting Annemarie Gardshol (1967) MSc Eng Member of the Board of Svenska Cellulosa Aktiebolaget SCA. President and CEO of PostNord AB. Former member of the Boards of Etac AB, Bygghemma AB, Ortivus AB and Semcon AB. Former President of PostNord Sverige, Postnord Strålfors Group AB and various management positions in Gambro AB and McKinsey & Company. Elected: 2016 Independent of the company, corporate management and Essity’s major shareholders. Own shareholdings and those of related persons, Class B shares: 8,100 Torbjörn Lööf (1965) Technician Chairman of the Board of AB Electrolux and Husqvarna AB. Member of the Board of Inter IKEA Holding B.V. and AB Blåkläder. Former President of Inter IKEA Group 2016–2020, Inter IKEA Systems 2013–2016 and IKEA of Sweden 2007–2013. Previously held various senior positions within IKEA. Former Chairman of the Board of IKEA Group companies, member of the Board of Inter IKEA Group and Mercer International Inc. Elected: 2021 Independent of the company, corporate management and Essity’s major shareholders. Own shareholdings and those of related persons, Class B shares: 8,500 Alexander Lacik (1965) BSc in Business administration & economics President and CEO of Pandora A/S, Denmark. Previous senior positions in Procter & Gamble and Reckitt Benckiser. Former member of the Board of Swedish Match. Elected: 2025 Independent of the company, corporate management and Essity’s major shareholders. Own shareholdings and those of related persons, Class B shares: 6,000 Maria Carell (1973) MSc Econ Member of the Board in RG Holdco, USA. Former President and CEO of RG Holdco, USA, and senior positions in, among other companies, Exeltis, Meda, Q-MED, Actavis, Novartis and Jansen-Cilag. Elected: 2023 Independent of the company, corporate management and Essity’s major shareholders. Own shareholdings and those of related persons, Class B shares: 1,5001) 1) Acquired on January 22, 2026. Jan Gurander (1961) MSc Econ Chairman of the Board since 2024. Member of the Board of Daimler Truck, Germany. Former member of the Board of Skanska AB. Former deputy CEO and CFO of AB Volvo. Previous senior positions in Volvo Cars, MAN, Scania, Investor and Swedbank Robur. Elected: 2023 Independent of the company, corporate management and Essity’s major shareholders. Own shareholdings and those of related persons, Class B shares: 15,000 Katarina Martinson (1981) MSc Econ Chairman of the Board of Indutrade. Member of the Board of LE Lundbergföretagen, Husqvarna AB and AB Industrivärden. Previously Handelsbanken Capital Markets, Strategas Research Partners LLC, New York and ISI International Strategy & Investment Group, New York. Elected: 2025 Independent of the company and corporate management. Own shareholdings and those of related persons, Class B shares: 625,000 Information regarding own shareholdings and those of related persons pertains to the situation on December 31, 2025. Essity | Annual Report 2025 106 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Corporate governance Board of Directors and Auditors Executive Management Team Financial statements including notes Reports from the auditors Other information
Page 107
Auditors Ernst & Young AB Senior Auditor: Erik Sandström, Authorized Public Accountant. Own shareholdings and those of related persons: 0 Secretary to the Board Mikael Schmidt (1960) Master of Laws Chief Group Function Legal Affairs & Compliance, General Counsel. Employed since: 1992 Own shareholdings and those of related persons: Class B shares: 41,200 Board of Directors and Auditors, cont. Karl Åberg (1979) MSc Econ Deputy CEO, head of investments and of the finance function at AB Industrivärden. Member of the Board of Ericsson and Alleima. Previously partner at Zeres Capital and CapMan, and various roles in Handelsbanken Capital Markets. Elected: 2024 Independent of the company and corporate management. Own shareholdings and those of related persons, Class B shares: 1,500 Barbara Milian Thoralfsson (1959) MBA, BA Member of the Board of Halma plc, Hilti AG and Svenska Cellulosa Aktiebolaget SCA. Former President of NetCom ASA 2001– 2005 and President of Midelfart & Co AS 1995–2000. Former Chairman of the Board of Exclusive Networks SA and member of the Boards of Cable & Wireless Plc, AB Electrolux, G4S Plc, Orkla ASA, Tandberg ASA and Telenor ASA. Elected: 2016 Independent of the company, corporate management and Essity’s major shareholders. Own shareholdings and those of related persons, Class B shares: 3,000 Sofia Lafqvist (1978) Research Engineer at Essity Hygiene and Health AB, Gothenburg. Member of the Council for Negotiation and Cooperation (PTK). Appointed: 2024 Own shareholdings and those of related persons: 0 Susanna Lind (1966) Operator at Essity Hygiene and Health AB, Falkenberg. Member of the Swedish Trade Union Confederation (LO). Appointed: 2019 Own shareholdings and those of related persons, Class B shares: 120 Örjan Svensson (1963) Senior Industrial Safety Representative at Essity Hygiene and Health AB, Edet Bruk, Lilla Edet. Member of the Swedish Trade Union Confederation (LO). Former member of the Board of Svenska Cellulosa Aktiebolaget SCA 2005–2017. Appointed: 2017 Own shareholdings and those of related persons, Class B shares: 112 Bert Nordberg (1956) Engineer Deputy Chairman of the Board of SAAB Aktiebolag and Chairman of the Board of Axis Communications AB. Previously held various management positions in Digital Equipment Corp. and Ericsson, 2009–2012 President of Sony Mobile Communications AB. Former Chairman of the Boards of Sony Mobile Communications, Vestas Wind Systems A/S and TDC Group A/S and member of the Boards of Svenska Cellulosa Aktiebolaget SCA, BlackBerry Ltd, Skistar AB and AB Electrolux. Elected: 2016 Independent of the company, corporate management and Essity’s major shareholders. Own shareholdings and those of related persons, Class B shares: 36,800 Board members and deputies appointed by trade unions Deputies Niklas Engdahl (1980) Employed at Essity Hygiene and Health AB, Lilla Edet. Member of the Council for Negotiation and Cooperation (PTK). Appointed: 2017 Own shareholdings and those of related persons: 0 Martin Ericsson (1968) Employed at Essity Hygiene and Health AB, Falkenberg. Member of the Council for Negotiation and Cooperation (PTK). Appointed: 2017 Own shareholdings and those of related persons, Class A shares: 200 Class B shares: 200 Andreas Larsson (1989) Employed at Essity Hygiene and Health AB, Gothenburg. Member of the Council for Negotiation and Cooperation (PTK). Appointed: 2018 Own shareholdings and those of related persons, Class B shares: 2,120 Information regarding own shareholdings and those of related persons pertains to the situation on December 31, 2025. Essity | Annual Report 2025 107 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Corporate governance Board of Directors and Auditors Executive Management Team Financial statements including notes Reports from the auditors Other information
Page 108
Executive Management Team Pablo Fuentes (1973) President, Professional Hygiene MSc, MBA Employed since: 2006 Own shareholdings and those of related persons, Class B shares: 33,525 Anand Chandarana (1983) President, Health & Medical BSc. (Hons) Employed since: 2020 Own shareholdings and those of related persons, Class B shares: 2,580 Andres Gomez (1977) President, Consumer Goods Americas MBA and MSc Eng Employed since: 2021 Own shareholdings and those of related persons, Class B shares: 9,867 Ulrika Kolsrud (1970) President and CEO MSc Eng Employed since: 1995 Previous experience: Other senior positions at Essity including President of Health & Medical Own shareholdings and those of related persons, Class B shares: 20,758 Jessica Alm (1977) Chief Communication Officer Group Function Communications MSc. in Geological and Earth Sciences/ Geosciences and Journalism Employed since: 2023 Own shareholdings and those of related persons, Class B shares: 729 Fredrik Rystedt (1963) CFO and Executive Vice President, Head of Group Function Finance MSc Econ Employed since: 2014 Own shareholdings and those of related persons, Class B shares: 50,500 As of January 1, 2026, the Executive Management Team consists of Ulrika Kolsrud, Jessica Alm, Anand Chandarana, Pablo Fuentes, Carl-Magnus Månsson, Fredrik Rystedt, Mikael Schmidt, Ilham Smaali, Anna Sävinger Åslund, Sahil Tesfu, Tuomas Yrjölä and Volker Zöller. Information regarding own shareholdings and those of related persons pertains to the situation on December 31, 2025. Essity | Annual Report 2025 108 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Corporate governance Board of Directors and Auditors Executive Management Team Financial statements including notes Reports from the auditors Other information
Page 109
Information regarding own shareholdings and those of related persons pertains to the situation on December 31, 2025. As of January 1, 2026, the Executive Management Team consists of Ulrika Kolsrud, Jessica Alm, Anand Chandarana, Pablo Fuentes, Carl-Magnus Månsson, Fredrik Rystedt, Mikael Schmidt, Ilham Smaali, Anna Sävinger Åslund, Sahil Tesfu, Tuomas Yrjölä and Volker Zöller. Mikael Schmidt (1960) Chief Group Function Legal Affairs & Compliance, General Counsel and Secretary to the Board Master of Laws Employed since: 1992 Own shareholdings and those of related persons, Class B shares: 41,200 Sahil Tesfu (1982) Chief Strategy Officer Group Function Strategy, Business Development & Sustainability MBA Business Administration Employed since: 2021 Own shareholdings and those of related persons, Class B shares: 7,010 Anna Sävinger Åslund (1969) Chief HR Officer Group Function Human Resources BSc Human Resources Employed since: 2001 Own shareholdings and those of related persons, Class B shares: 14,945 Volker Zöller (1967) President, Consumer Goods EMEA2) BSc BA Employed since: 1994 Own shareholdings and those of related persons, Class B shares: 25,031 2) As of January 1, 2026: President of Consumer Tissue. Tuomas Yrjölä (1978) President Global Marketing and Innovation1) MSc Econ Employed since: 2014 Own shareholdings and those of related persons, Class B shares: 19,827 1) As of January 1, 2026, President of Personal Care. Carl-Magnus Månsson (1966) Chief Digital & Information Officer Global Digital & Business Services Studies in Applied Physics Employed since: 2023 Own shareholdings and those of related persons, Class B shares: 1,607 Executive Management Team, cont. Essity | Annual Report 2025 109 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Corporate governance Board of Directors and Auditors Executive Management Team Financial statements including notes Reports from the auditors Other information
Page 110
Financial statements including notes Financial statements, Group Consolidated income statement IS ���������������������������������������������������������������������������112 Consolidated statement of comprehensive income CI ���������������������������������������������112 Consolidated balance sheet BS ����������������������������������������������������������������������������������113 Consolidated statement of change in equity EQ ��������������������������������������������������������114 Consolidated cash flow statement CF ������������������������������������������������������������������������116 Change in liabilities attributable to financing activities ���������������������������������������������117 Correlation between consolidated cash flow statement and operating cash flow statement, supplementary disclosure ���������������������������������������117 Consolidated operating cash flow statement, supplementary disclosure OCF ��������118 Auditor’s report ��������������������������������������������������������������������������������������������������������180 Group notes A. Accounting principles and use of alternative performance measures B. Sales and earnings C. Employees D. Operating assets and liabilities E. Capital structure and financing page 119–124 page 125–140 page 141–146 page 147–151 page 152–161 A1. General accounting principles, new accounting rules and basis of preparation 119 B1. Net sales – Revenues from contracts with customers 125 C1. Personnel costs 141 D1. Goodwill and intangible assets 147 E1. Financial instruments by category and measurement level 152 A2. Use of alternative performance measures 120 B2. Segment reporting 126 C2. Remuneration of senior executives 141 D2. Property, plant and equipment 149 E2. Financial assets, cash and cash equivalents 153 B3. Operating expenses 137 C3. Fees to board members in the Parent company 144 D3. Inventories 150 E3. Trade receivables 154 B4. Auditing expenses 138 C4. Remuneration after completion of employment 144 D4. Other current receivables 150 E4. Financial liabilities 155 B5. Income taxes 138 D5. Other liabilities 150 E5. Liquidity risk 156 D6. Other provisions 151 E6. Derivatives and hedge accounting 156 D7. Contracts with Supplier Finance Arrangements 151 E7. Financial income and expenses 160 E8. Equity 160 Amounts that are reconcilable to the balance sheet, equity, income statement, statement of comprehensive income, cash flow statement and the operating cash flow statement are marked with the following symbols: BS Balance sheet EQ Equity IS Income statement CI Statement of comprehensive income CF Cash flow statement OCF Operating cash flow statement Essity | Annual Report 2025 110 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 111
Financial statements, Parent company . 171 Parent company income statement Parent company statement of comprehensive income Parent company cash flow statement Parent company balance sheet Parent company statement of change in equity Group notes, cont. F. Group structure G. Other page 162–166 page 167–170 F1. Group companies 162 G1. Leases 167 F2. Investments in associates and joint ventures 163 G2. Contingent liabilities and pledged assets 168 F3. Joint operations 165 G3. Transactions with related parties 168 F4. Acquisitions and divestments of Group companies and other operations 165 G4. Assets held for sale and discontinued operations 169 G5. Events after the balance sheet date 170 Parent company notes PC. Notes to the Parent company’s financial statements page 173–178 PC1. Basis for preparation of Parent company’s annual accounts 173 PC2. Operating profit 173 PC3. Personnel and Board costs 173 PC4. Appropriations and untaxed reserves 174 PC5. Income taxes 175 PC6. Intangible assets 175 PC7. Property, plant and equipment 175 PC8. Participations in subsidiaries 176 PC9. Receivables from and liabilities to Group companies 176 PC10. Other current receivables 176 PC11. Financial instruments 177 PC12. Other current liabilities 178 PC13. Share capital 178 PC14. Contingent liabilities and pledged assets 178 PC15. Adoption of the annual accounts 178 PC16. Events after the balance sheet date 178 PC17. Proposed disposition of earnings 178 Essity | Annual Report 2025 111 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 112
Consolidated statement of comprehensive income CI SEKm 2025 2024 2023 Profit for the period, continuing operations 12,718 12,033 9,517 Profit for the period, discontinued operations IS – 9,015 279 Profit for the period, total operations IS 12,718 21,048 9,796 Other comprehensive income for the period Items that will not be reclassified to the income statement Actuarial gains/losses on defined benefit pension plans 2,420 92 1,334 Fair value through other comprehensive income 4 4 5 Income tax attributable to components in other comprehensive income –371 –36 –161 Total, continuing operations 2,053 60 1,178 Total, discontinued operations – – – Total operations 2,053 60 1,178 Items that have been or may be reclassified subsequently to the income statement Cash flow hedges: Result from remeasurement of derivatives recognized in equity –774 –3 –4,360 Transferred to profit or loss for the period 203 1,740 1,681 Translation differences in foreign operations –9,999 4,623 –270 Gains/losses from hedges of net investments in foreign operations 1,784 –1,488 572 Income tax attributable to components in other comprehensive income –243 –146 612 Total, continuing operations –9,029 4,726 –1,765 Total, discontinued operations – –557 –932 Total operations –9,029 4,169 –2,697 Other comprehensive income for the period, net of tax –6,976 4,229 –1,519 Of which, continuing operations –6,976 4,786 –587 Of which, discontinued operations – –557 –932 Total comprehensive income for the period 5,742 25,277 8,277 Of which, continuing operations 5,742 16,819 8,930 Of which, discontinued operations – 8,458 –653 Total comprehensive income attributable to: Owners of the Parent company 5,734 24,719 8,617 Non-controlling interests 8 558 –340 Consolidated income statement IS SEKm Note 2025 2024 2023 Net sales B1, B2 138,494 145,546 147,147 Cost of goods sold B3 –92,351 –97,929 –102,627 Items affecting comparability (IAC) – cost of goods sold B2, B3 –21 –483 –1,349 Gross profit 46,122 47,134 43,171 Gross profit excl. IAC 46,143 47,617 44,520 Sales, general and administration B3 –26,571 –27,351 –25,661 Items affecting comparability (IAC) – sales, general and administration B2, B3 –48 –386 –942 Share of results of associates and joint ventures1) B3 – 78 39 Operating profit before amortization of acquisition-related intangible assets (EBITA) 19,503 19,475 16,607 Operating profit before amortization of acquisition-related intangible assets (EBITA), excl. IAC 19,572 20,344 18,898 Amortization of acquisition-related intangible assets B3 –972 –1,110 –1,109 Items affecting comparability (IAC) – acquisition-related intangible assets B2, B3 – –70 –350 Operating profit 18,531 18,295 15,148 Operating profit excl. IAC 18,600 19,234 17,789 Share of results of associates and joint ventures1) B3 14 – – Financial income E7 257 593 412 Financial expenses E7 –1,641 –2,524 –2,768 Profit before tax 17,161 16,364 12,792 Profit before tax excl. IAC 17,230 17,303 15,433 Income taxes B5 –4,443 –4,331 –3,275 Profit for the period, continuing operations 12,718 12,033 9,517 Profit for the period excl. IAC, continuing operations 12,776 12,778 11,634 Profit for the period, discontinued operations G4 – 9,015 279 Profit for the period, total operations 12,718 21,048 9,796 Earnings attributable to: Owners of the Parent company Profit for the period, continuing operations 12,656 11,969 9,440 Profit for the period, discontinued operations G4 – 8,919 114 Profit for the period, total operations 12,656 20,888 9,554 Non-controlling interests Profit for the period, continuing operations 62 64 77 Profit for the period, discontinued operations G4 – 96 165 Profit for the period, total operations 62 160 242 Earnings per share – owners of the Parent company Earnings per share before and after dilution effects, continuing operations, SEK 18.37 17.09 13.44 Earnings per share before and after dilution effects, discontinued operations, SEK – 12.74 0.16 Earnings per share before and after dilution effects, total operations, SEK 18.37 29.83 13.60 Average number of shares before and after dilution, million 689.0 700.3 702.3 1) Until 2024, the share of results of associates and joint ventures was recognized in operating profit. From 2025 onwards, these results are recognized below operating profit. Essity | Annual Report 2025 112 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 113
Consolidated balance sheet BS SEKm Note 2025 2024 2023 ASSETS Non-current assets Goodwill D1 36,861 41,137 39,337 Intangible assets D1 18,273 20,734 21,345 Property, plant and equipment D2 46,308 48,304 44,909 Right-of-use assets G1 3,752 4,088 3,934 Investments in associates and joint ventures F2 307 351 294 Shares and participations 8 8 6 Surplus in funded pension plans C4 4,340 2,475 3,072 Non-current financial assets E2 142 128 117 Deferred tax assets B5 2,122 2,326 2,343 Other non-current assets 725 824 745 Total non-current assets 112,838 120,375 116,102 Current assets Inventories D3 18,153 18,914 17,546 Trade receivables E3 21,332 23,538 21,920 Current tax assets B5 1,626 1,673 1,289 Other current receivables D4 3,414 4,480 3,391 Current financial assets E2 1,266 5,342 5,259 Cash and cash equivalents E2 8,487 10,962 5,159 Total current assets 54,278 64,909 54,564 Total assets, continuing operations 167,116 185,284 170,666 Assets held for sale G4 – – 32,327 Total assets, total operations 167,116 185,284 202,993 SEKm Note 2025 2024 2023 EQUITY AND LIABILITIES Equity EQ Owners of the Parent company Share capital 2,350 2,350 2,350 Reserves E8 4,257 13,224 9,421 Retained earnings including profit/loss for the year 79,018 72,740 59,075 Equity attributable to owners of the Parent company 85,625 88,314 70,846 Non-controlling interests 415 427 8,559 Total equity 86,040 88,741 79,405 Non-current liabilities Non-current financial liabilities E4 31,386 40,674 45,336 Provisions for pensions C4 2,146 2,578 2,587 Deferred tax liabilities B5 6,272 6,978 6,935 Other non-current provisions D6 384 507 466 Other non-current liabilities D5 92 516 1,073 Total non-current liabilities 40,280 51,253 56,397 Current liabilities Current financial liabilities E4 7,246 6,424 15,648 Trade payables D7 14,437 17,098 15,119 Current tax liabilities B5 1,847 1,442 2,165 Current provisions D6 1,200 1,377 1,408 Other current liabilities D5 16,066 18,949 19,143 Total current liabilities 40,796 45,290 53,483 Total liabilities, continuing operations 81,076 96,543 109,880 Liabilities directly attributable to assets held for sale G4 – – 13,708 Total equity and liabilities, total operations 167,116 185,284 202,993 Contingent liabilities and pledged assets, see Note G2 on page 168. Essity | Annual Report 2025 113 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 114
Consolidated statement of change in equity EQ SEKm Share capital TE8:2 Reserves Retained earnings Equity attribut- able to owners of the Parent company Non- controlling interests Total equity Value, January 1, 2025 2,350 13,224 72,740 88,314 427 88,741 Profit for the period IS 12,656 12,656 62 12,718 Other comprehensive income for the period Items that will not be reclassified to the income statement Actuarial gains/losses on defined benefit pension plans1) 2,421 2,421 –1 2,420 Fair value through other comprehensive income 4 4 4 Income tax attributable to components in other comprehensive income TE8:3 –1 –370 –371 – –371 Other comprehensive income that will not be reclassified to the income statement 3 2,051 2,054 –1 2,053 Items that have been or may be reclassified subsequently to the income statement Cash flow hedges: Result from remeasurement of derivatives recognized in equity –774 –774 –774 Transferred to profit or loss for the period 203 203 203 Translation differences in foreign operations –9,946 –9,946 –53 –9,999 Gains/losses from hedges of net investments in foreign operations 1,784 1,784 1,784 Income tax attributable to components in other comprehensive income TE8:3 –243 –243 –243 Other comprehensive income that has been or may be reclassified subsequently to the income statement –8,976 –8,976 –53 –9,029 Other comprehensive income for the period, net of tax –8,973 2,051 –6,922 –54 –6,976 Total comprehensive income for the period CI –8,973 14,707 5,734 8 5,742 Transactions with owners Acquisition of non-controlling interests Divestment of non-controlling interests Transferred to cost of hedged investments 6 6 6 Revaluation effect upon acquisition of non-controlling interests 442 442 442 Dividend, SEK 8.25 per share2) CF OCF TE8:1 –5,711 –5,711 –20 –5,731 Cancellation of own shares3) –31 31 – – Bonus issue3) 31 –31 – – Buyback of own shares –3,160 –3,160 –3,160 Value, December 31 BS 2,350 4,257 79,018 85,625 415 86,040 1) Including payroll tax. 2) Dividend of SEK 8.25 per share pertains to owners of the Parent company. For the 2025 fiscal year, the Board of Directors has decided to propose a divided of SEK 8.75 per share to the Annual General Meeting. 3) A decision was taken at the Annual General Meeting on March 27, 2025 to cancel own shares, which was carried out in the second quarter. The cancellation of 9,288,000 Class B shares reduced the share capital by SEK 31m, which was subsequently restored via a bonus issue of the corre- sponding amount. Accordingly, the quotient value per share increased from SEK 3.35 to SEK 3.39. SEKm Share capital TE8:1 Reserves Retained earnings Equity attribut- able to owners of the Parent company Non- controlling interests Total equity Value, January 1, 2024 2,350 9,421 59,075 70,846 8,559 79,405 Profit for the period IS 20,888 20,888 160 21,048 Other comprehensive income for the period Items that will not be reclassified to the income statement Actuarial gains/losses on defined benefit pension plans1) 92 92 0 92 Fair value through other comprehensive income 4 4 4 Income tax attributable to components in other comprehensive income TE8:2 –3 –33 –36 0 –36 Other comprehensive income that will not be reclassified to the income statement 1 59 60 0 60 Items that have been or may be reclassified subsequently to the income statement Cash flow hedges: Result from remeasurement of derivatives recognized in equity –3 –3 –3 Transferred to profit or loss for the period 1,740 1,740 1,740 Translation differences in foreign operations 3,790 3,790 398 4,1 88 Gains/losses from hedges of net investments in foreign operations –1,641 –1,641 –1,641 Income tax attributable to components in other comprehensive income TE8:2 –115 –115 –115 Other comprehensive income that has been or may be reclassified subsequently to the income statement 3,771 3,771 398 4,169 Other comprehensive income for the period, net of tax 3,772 59 3,831 398 4,229 Total comprehensive income for the period CI 3,772 20,947 24,719 558 25,277 Transactions with owners Acquisition of non-controlling interests –8 –8 –43 –51 Divestment of non-controlling interests –8,624 –8,624 Transferred to cost of hedged investments 31 31 31 Revaluation effect upon acquisition of non-controlling interests 393 393 393 Dividend, SEK 7.75 per share2) CF OCF –5,443 –5,443 –23 –5,466 Buyback of own shares –2,224 –2,224 –2,224 Value, December 31 BS 2,350 13,224 72,740 88,314 427 88,741 1) Including payroll tax. 2) Dividend of SEK 7.75 per share pertains to owners of the Parent company. Essity | Annual Report 2025 114 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 115
Consolidated statement of change in equity, cont. EQ SEKm Share capital TE8:1 Reserves Retained earnings Equity attribut- able to owners of the Parent company Non- controlling interests Total equity Value, January 1, 2023 2,350 11,477 53,519 67,346 9,218 76,564 Profit for the period IS 9,554 9,554 242 9,796 Other comprehensive income for the period Items that will not be reclassified to the income statement Actuarial gains/losses on defined benefit pension plans1) 1,333 1,333 1 1,334 Fair value through other comprehensive income 5 5 5 Income tax attributable to components in other comprehensive income TE8:2 1 –162 –161 – –161 Other comprehensive income that will not be reclassified to the income statement 6 1,171 1,177 1 1,178 Items that have been or may be reclassified subsequently to the income statement Cash flow hedges: Result from remeasurement of derivatives recognized in equity –4,360 –4,360 –4,360 Transferred to profit or loss for the period 1,681 1,681 1,681 Translation differences in foreign operations –737 –737 –583 –1,320 Gains/losses from hedges of net investments in foreign operations 720 720 720 Income tax attributable to components in other comprehensive income TE8:2 582 582 582 Other comprehensive income that has been or may be reclassified subsequently to the income statement –2,114 –2,114 –583 –2,697 Other comprehensive income for the period, net of tax –2,108 1,171 –937 –582 –1,519 Total comprehensive income for the period CI –2,108 10,725 8,617 –340 8,277 Transactions with owners Acquisition of non-controlling interests 1 1 –0 1 Transferred to cost of hedged investments 52 52 52 Revaluation effect upon acquisition of non-controlling interests –78 –78 –78 Dividend, SEK 7.25 per share2) CF OCF –5,092 –5,092 –319 –5,411 Value, December 31 BS 2,350 9,421 59,075 70,846 8,559 79,405 1) Including payroll tax. 2) Dividend of SEK 7.25 per share pertains to owners of the Parent company. Essity | Annual Report 2025 115 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 116
Consolidated cash flow statement CF SEKm Note 2025 2024 2023 Operating activities Operating profit IS 18,531 18,295 15,148 Adjustments for non-cash items T:1 7,777 8,019 9,459 Capitalized expenditure to fulfill contracts with customers –490 –467 –466 Change in provisions relating to restructuring programs, etc. –231 –271 –203 Cash flow from changes in working capital Change in inventories –916 –946 2,505 Change in operating receivables 853 –2,218 –19 Change in operating liabilities –2,882 2,756 –1,401 Cash flow from operations 22,642 25,168 25,023 Interest paid –2,664 –2,473 –2,421 Interest received 276 569 410 Other financial items –82 –235 –320 Income taxes paid B5 –4,713 –5,860 –3,615 Cash flow from operating activities, continuing operations 15,459 17,169 19,077 Cash flow from operating activities, discontinued operations – –368 2,491 Cash flow from operating activities, total operations 15,459 16,801 21,568 Investing activities Acquisitions of Group companies and other operations F4 – –17 –178 Divestments of Group companies and other operations F4 5 17,980 1,234 Investments in intangible assets and property, plant and equipment T:2 –7,090 –7,396 –6,850 Paid interest capitalized in intangible assets and property, plant and equipment T:2 –13 –39 –40 Sale of property, plant and equipment 205 103 71 Purchase and sale of financial assets with short maturities 3,672 –1,137 –48 Cash flow from investing activities, continuing operations –3,221 9,494 –5,811 Cash flow from investing activities, discontinued operations – –87 –1,298 Cash flow from investing activities, total operations –3,221 9,407 –7,109 SEKm Note 2025 2024 2023 Financing activities Acquisition of non-controlling interests F4 – –51 – Proceeds from borrowings 999 1,397 21,163 Repayment of borrowings –5,173 –15,004 –26,509 Payment of lease liabilities G1 –1,090 –1,069 –998 Change in borrowings with short maturities, etc. –250 93 –1,226 Dividend EQ –5,711 –5,443 –5,092 Dividend to non-controlling interests –20 –23 –2 Repurchase of own shares –3,160 –2,224 – Cash flow from financing activities, continuing operations –14,405 –22,324 –12,664 Cash flow from financing activities, discontinued operations – –12 1,113 Cash flow from financing activities, total operations –14,405 –22,336 –11,551 Cash flow for the period, continuing operations –2,167 4,339 602 Cash flow for the period, discontinued operations – –467 2,306 Cash flow for the period, total operations –2,167 3,872 2,908 Cash and cash equivalents, January 1 10,962 6,927 4,288 Translation differences in cash and cash equivalents –308 163 –269 Cash and cash equivalents, total operations, December 31 E2 8,487 10,962 6,927 For information about the Group’s liquidity reserve, refer to page 46. Adjustments for non-cash items T:1 SEKm 2025 2024 2023 Depreciation/amortization and impairment of non-current assets 7,157 7,505 7,998 Depreciation of capitalized selling expenses 453 474 490 Gain/loss on sale of assets –34 –30 36 Gain/loss on divestment and liquidation 4 – 524 Non-cash items relating to restructuring programs 106 185 393 Other 91 –115 18 Total 7,777 8,019 9,459 Investments in intangible assets and property, plant and equipment including paid capitalized interest T:2 SEKm 2025 2024 2023 Measures to raise the capacity level of operations (Strategic capital expenditures) –2,166 –2,156 –1,563 Measures to uphold capacity level (Current capital expenditures) –4,937 –5,279 –5,327 Total –7,103 –7,435 –6,890 Essity | Annual Report 2025 116 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 117
Change in liabilities attributable to financing activities SEKm Note Value at January 1 Liabilities directly attributable to assets held for sale Cash flow, net Acquisitions/ divestments Translation differences Actuarial gains/losses Other changes Value at December 31 2025 Non-current and current financial liabilities E4 47,098 – –5,821 – –2,591 – –541) 38,632 Provisions for pensions including surplus in funded pension plans C4 103 – 62 – 61 –2,420 – –2,194 Assets for hedging financial liabilities included in cash flow from financing activities E2 –690 – 245 – – – – –445 Total liabilities including surplus in funded pension plans attributable to financing activities 46,511 – –5,514 – –2,530 –2,420 –54 35,993 2024 Non-current and current financial liabilities E4 60,984 – –16,509 – 1,691 – 932 1) 47,098 Provisions for pensions including surplus in funded pension plans C4 –485 – 861 – –181 –92 – 103 Assets for hedging financial liabilities included in cash flow from financing activities E2 –1,755 – 1,065 – – – – –690 Total liabilities including surplus in funded pension plans attributable to financing activities 58,744 – –14,583 – 1,510 –92 932 46,511 2023 Non-current and current financial liabilities E4 71,514 –4,372 –7,450 –11 179 – 1,1241) 60,984 Provisions for pensions including surplus in funded pension plans C4 706 –9 144 – 8 –1,334 – –485 Assets for hedging financial liabilities included in cash flow from financing activities E2 –1,491 – –264 – – – – –1,755 Total liabilities including surplus in funded pension plans attributable to financing activities 70,729 –4,381 –7,570 –11 187 –1,334 1,124 58,744 1) Other changes relate to change in accrued interest SEK –1,105m (–208; 25), change in liability related to financial leases in accordance with IFRS 16 of SEK 1,050m (1,141; 1,099), of which SEK 719m (560; 608) relates to operating assets and SEK 331m (581; 491) to non-operating assets, and other items SEK 1m (–1; –). Correlation between consolidated cash flow statement and operating cash flow statement, supplementary disclosure SEKm 2025 2024 2023 Cash flow from operating activities, continuing operations Cash flow from operating activities 15,459 17,169 19,077 Adjustments Investments in non-current assets, net –6,898 –7,332 –6,819 Accrued interest, etc. 1,087 208 –25 Investments in operating assets through leases –719 –560 –608 Other –1 – – Cash flow from current operations according to consolidated operating cash flow statement 8,928 9,485 11,625 Cash flow from investing activities, continuing operations Cash flow from investing activities –3,221 9,494 –5,811 Adjustments Investments in non-current assets, net 6,898 7,332 6,819 Purchase and sale of financial assets with short maturities –3,672 1,137 48 Acquisition of non-controlling interests – –51 – Net debt in acquired and divested companies – 5,928 11 Cash flow from acquisitions and divestments according to consolidated operating cash flow statement 5 23,840 1,067 SEKm 2025 2024 2023 Cash flow for the period, continuing operations Cash flow for the period –2,167 4,339 602 Adjustments Proceeds from borrowings –999 –1,397 –21,163 Repayment of borrowings 5,173 15,004 26,509 Payment of lease liabilities 1,090 1,069 998 Change in borrowings with short maturities, etc. 250 –93 1,226 Purchase and sale of financial assets with short maturities –3,672 1,137 48 Net debt in acquired and divested operations – 5,928 11 Investments in operating assets through leases –719 –560 –608 Accrued interest, etc. 1,087 208 –25 Other –1 – – Net cash flow according to consolidated operating cash flow statement 42 25,635 7,598 Essity | Annual Report 2025 117 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 118
Consolidated operating cash flow statement, supplementary disclosure OCF SEKm Note 2025 2024 2023 Net sales IS 138,494 145,546 147,147 Operating expenses –112,772 –119,107 –122,162 Operating surplus 25,722 26,439 24,985 Adjustment for non-cash items 579 559 584 Operating cash surplus 26,301 26,998 25,569 Change in Inventories –916 –946 2,505 Operating receivables 853 –2,218 –19 Operating liabilities –2,882 2,756 –1,401 Change in working capital –2,945 –408 1,085 Investments in non-current assets, net –6,898 –7,332 –6,819 Restructuring costs, etc. –741 –1,456 –1,542 Investments in operating assets through leases –719 –560 –608 Operating cash flow 14,998 17,242 17,685 Financial items E7 –1,384 –1,931 –2,356 Income taxes paid B5 –4,713 –5,860 –3,615 Other 27 34 –89 Cash flow from current operations 8,928 9,485 11,625 Acquisitions of Group companies and other operations F4 – –68 –182 Divestments of Group companies and other operations F4 5 23,908 1,249 Cash flow from acquisitions and divestments 5 23,840 1,067 Cash flow before transactions with shareholders 8,933 33,325 12,692 Dividend EQ –5,711 –5,443 –5,092 Dividend to non-controlling interests –20 –23 –2 Repurchase of own shares –3,160 –2,224 – Net cash flow, continuing operations 42 25,635 7,598 Net cash flow, discontinued operations – –467 866 Net cash flow, total operations 42 25,168 8,464 Net debt SEKm 2025 2024 2023 Net debt, January 1 –30,769 –53,703 –62,869 Net cash flow 42 25,168 8,464 Remeasurements to equity 2,423 96 1,339 Investments in non-operating assets through leases –331 –581 –491 Translation differences 2,092 –1,749 –146 Net debt, total operations, December 31 –26,543 –30,769 –53,703 Essity | Annual Report 2025 118 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 119
A. Accounting principles, basis of preparation and use of alternative performance measures A1. General accounting principles, new accounting rules and basis for preparation Reading instructions General accounting principles AP and new accounting rules are presented below. Other accounting principles considered material by Essity are presented in conjunction with the respective note. Key assessments and assumptions KAA are presented under the respective note, see use of assessments below. Amounts that are reconcilable to the balance sheet, equity, income statement, statement of comprehensive income, cash flow statement and the operating cash flow statement are marked with the following symbols: BS Balance sheet EQ Equity IS Income statement CI Statement of comprehensive income CF Cash flow statement OCF Operating cash flow statement Tx:x Reference to table in note Company information Essity Aktiebolag (publ), corporate identity number 556325-5511, is a public limited liability company whose shares are listed and traded on Nasdaq Stockholm (for more information, see The Essity share on page 8). The registered office of the company is Stockholm, Sweden, with the postal address PO Box 200, SE-101 23 Stockholm, Sweden. The Group mainly conducts operations in the fields of hygiene and health. Basis for preparation Essity’s financial statements are prepared in accordance with the Annual Accounts Act, IFRS® accounting standards as adopted within the EU, and the Swedish Corporate Reporting Board, Recommendation RFR 1, Supplementary Account- ing Rules for Groups. The accounts for both the Group and the Parent company relate to the fiscal year that ended on December 31, 2025. The content of the Annual Report was finalized on February 19 and signed by all members of the Board of Directors and the President on February 19, 2026. The financial statements are subject to approval by the Annual General Meeting of shareholders on March 26, 2026. New or amended accounting standards 2025 On January 1, 2025, the International Accounting Standards Board (IASB) published amendments to IAS 21, The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability, that entered into force. Essity applies this amendment, which has not had any material impact on the Group’s financial statements. For further comment, refer to the section Translation of foreign currency, Lack of Exchangeability on page 120. New or amended accounting standards after 2025 The following new and amended accounting standards have not yet come into effect and have not been applied in advance in the preparation of the Group’s and the Parent company’s financial statements. The Group intends to comply with these new and amended standards when they come into force. Most of these new standards and amendments to standards published by the IASB are not expected to have any material impact on the Group’s or the Parent company’s financial statements. As of January 1, 2026, the following amendments to standards will enter into force. IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures have been amended with regard to classifi- cation and measurement of some specific financial instruments and disclosures. A number of other standards have been amended as part of the IASB’s annual improvement process and include clarifications, simplifications, corrections and consistency improvements. On April 9, 2024, a new standard IFRS 18 Presentation and Disclosures in Financial Statements was published and will be effective from January 1, 2027 if adopted by the EU. Essity is of the opinion that this standard will impact Essity’s finan- cial statements and is currently analyzing the details in the standard and its consequences. Among other aspects, Essity has identified certain income and expense items in financial net that may need to be recognized in Operating profit or in Profit before financial expenses and tax. Essity is monitoring the discussion that is currently taking place regarding the classification of foreign exchange differences on intra-group loans. The main change in the cash flow statement is that interest income received will be recognized in Investing activities and interest expenses paid in Financing activities; both of these items are currently recognized in Cash flow from operating activities. A new standard, IFRS 19 Subsidiaries without Public Accountability, was published on May 23, 2025, with certain amendments published on September 29, 2025. The standard will come into force on January 1, 2027 if adopted by the EU and introduces relaxed disclosure requirements in annual financial statements for companies that apply IFRS in their local financial statements and that are part of a group whose parent company applies IFRS in its consolidated financial statements. Use of assessments and assumptions KAA The preparation of financial statements in accordance with IFRS accounting standards and generally accepted Swedish accounting principles requires assessments and assumptions to be made that affect recognized assets, liabilities, income and expenses as well as other information disclosed. These assumptions and estimates are often based on historical experience, but also on other factors, including expectations of future events. Actual results may differ from these assumptions and assessments. Where appropriate, climate-related issues are considered. This assessment includes a wide range of possible impacts due to both physical and transition risks. Essity is working to achieve net zero operations by 2050, with a target to reduce emissions by 35% across the value chain by 2030 – from its own operations and purchased goods and services to transportation and product and production waste. This ambition prioritizes the areas with the greatest impact, particularly tissue produc- tion, which accounts for more than 80% of Essity’s emissions from manufacturing, making it the main focus of efforts to phase out fossil fuels. Each site is analyzed separately to introduce tailored solutions, including enhancing energy effi- ciency, transitioning to lower-emission renewable energy sources, and exploring new technologies to further reduce emissions. Even though Essity believes that its business model and products will remain profitable after the transition to a low-carbon economy, climate-related issues increase the uncertainty in estimates and assumptions underlying several items in the financial statements. Items where climate-related matters mainly increase uncertainty in assumptions and estimates are deemed to relate to the useful lives of machinery and equipment and impairment testing of goodwill. No material financial effects related to the transition to a low-carbon economy were recognized in the financial statements at December 31, 2025. Below are the areas where Essity believes that the judgements made and assumptions applied have the most signifi- cant effect on the amounts reported in the financial statements: • Determination of transaction price in accounting of revenues, B1 Net sales – Revenues from contracts with customers, page 125 • Taxes, B5 Income taxes, page 138 • Pensions, C4 Remuneration after completion of employment, page 144 • Goodwill, D1 Intangible assets, page 147 • Provisions, D6 Other provisions, page 151 • Provision for doubtful receivables, E3 Trade receivables, page 154 • Leases, G1 Leases, page 167 Essity’s assessments and assumptions are presented in the respective notes. Principles for consolidation The Group’s consolidated financial statements include the Parent company and its Group companies, which comprise subsidiaries, joint ventures, associates and joint operations. Group companies are consolidated from the date the Group exercises control or influence over the company according to the definitions and accounting principles provided in Notes F1 Group companies on page 162, F2 Investments in associates and joint ventures on page 163 and F3 Joint operations on page 165. Divested Group companies are included in the consolidated accounts until the date the Group ceases to control or exercise influence over the companies. For additional information about accounting principles regarding acquisitions of Group companies and respective non-controlling interests, see Note F4 Acquisitions and divestments of Group companies and other operations on page 165. Intra-Group transactions have been eliminated. Translation of foreign currency Functional currency and translation of foreign Group companies to the presentation currency The functional currency of each Essity Group company is determined on the basis of the primary economic environ- ment in which the respective company is active which, with a few exceptions, is the country in which the individual company operates. Essity’s Parent company has Swedish kronor as its functional currency. The consolidated financial statements of Group companies are translated to the Group’s presentation currency, which is also Swedish kronor. Assets and liabilities are translated at the closing rate, while income and expenses are translated at the average rate for the respective period. Translation differences during the period on the Group’s net assets are recognized in other com- prehensive income in the translation reserve as a component of equity. Exchange rate effects arising from financial Essity | Annual Report 2025 119 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 120
A1. General accounting principles, new accounting rules and basis for preparation, cont. instruments used to hedge foreign Group companies’ net assets are recognized in the same manner in other com- prehensive income in the translation reserve as a component of equity. On divestment, the accumulated translation differences on the foreign Group company and accumulated exchange rate effects on the financial instrument used to currency hedge the net assets in the company are recognized as part of the gain or loss on disposal. Goodwill and fair value adjustments arising in connection with the acquisition of a foreign Group company are trans- lated from their functional currency to the presentation currency in the same way as the net assets in the company are translated. Transactions and balance sheet items in foreign currency Transactions in foreign currency are translated to a functional currency using the rate prevailing on the transaction date. At the balance sheet date, monetary assets and liabilities in foreign currency are translated at the closing rate and any exchange rate effects are recognized in profit or loss. In cases where the exchange rate effect is related to the opera- tions, the effect is recognized net in operating profit. Exchange rate effects pertaining to borrowing and financial invest- ments are recognized as other financial items. If hedge accounting has been applied, for example, for cash flow hedges or hedging of net investments, the exchange rate effect is recognized in equity under other comprehensive income. If a financial instrument has been classified as financial assets measured at fair value through comprehensive income, the portion of the value change pertaining to currency is recognized in profit or loss, any other unrealized changes are recognized in equity under other comprehensive income. Lack of exchangeability Essity has operations in Bolivia that purchase products in USD for sale in the local market in local currency. Due to the poor availability of USD in the country and currency regulations, only insignificant amounts of USD can be secured at official exchange rates through a market or currency exchange function providing enforceable rights and obligations. Accordingly, an estimated spot rate is used in conjunction with translation from USD to the functional currency of the subsidiary. An exchange rate is used based on published parallel market data that better reflects the actual exchange rate under prevailing economic conditions when measuring assets and liabilities in foreign currencies at the balance sheet date and when translating the income statement and balance sheet in local currency into Swedish kronor in the consolidated financial statements. Government grants Government grants are measured at fair value when there is reasonable assurance that the grants will be received and Essity will comply with the conditions attached to them. Government grants related to acquisition of assets are recog- nized in the balance sheet by the grant reducing the carrying amount of the asset. Government grants received as com- pensation for costs are accrued and recognized in profit or loss during the same period as the costs incurred. If the government grant or assistance is neither related to the acquisition of assets nor to compensation for costs, the grant is recognized as other income. Principles for consolidation of Group companies in hyperinflationary economies Essity conducts operations through wholly owned Group companies in Argentina and Turkey, defined as hyperinflation- ary economies (accumulated inflation rate of about 100% or more over a three-year period) according to the Interna- tional Monetary Fund (IMF). For these Group companies, income statements, cash flow statements and non-monetary items in balance sheets are adjusted in local currency to the price level applying at the end of the period in the consoli- dated financial statements using the consumer price index. Gains or losses on monetary net assets are recognized in the income statement in financial items. Income statements and cash flow statements are translated into Swedish kronor at the closing rate on consolidation. The effect from the date hyperinflationary accounting is applied is recog- nized in the translation reserve in equity. The relevant consumer price index used to make adjustments for inflation is sourced from Trading Economics. Reporting of discontinued operations On March 21, 2024, Essity completed the sale of its 51.59% shareholding in the Asian hygiene company Vinda Interna- tional Holdings Limited (Vinda). For additional information on the divestment, see Note G4 Assets held for sale and dis- continued operations on page 169 and Note F4 Acquisitions and divestments of Group companies and other operations on page 165. As of the fourth quarter of 2023, Essity classifies the financial reporting of Vinda as discontinued opera- tions, meaning that assets and liabilities related to Vinda are presented on separate lines in the balance sheet and that the profit or loss after tax for the period from discontinued operations is reported on a separate line in the income state- ment. The income statement and cash flow statement are adjusted for comparative periods as though the discontinued operation had already been classified as discontinued operations at the beginning of the comparative periods. A2. Use of alternative performance measures Guidelines concerning alternative performance measures for companies with securities listed on a regulated market in the EU have been issued by the ESMA (European Securities and Markets Authority). These guidelines are to be applied to alternative performance measures not supported under IFRS accounting standards. The Annual Report refers to a number of performance measures not defined in IFRS accounting standards. These performance measures are used to assist investors and company management to analyze the company’s operations and objectives. These non-IFRS measures may differ from similar terms used by other companies. Descriptions of the various measures used as a complement to the financial information required according to IFRS accounting stan- dards are presented below. The tables that present return, cash flow and performance measures refer to continuing operations. For capital measures, it is indicated in the tables whether the figures relate to continuing operations or total operations. Calculation of performance measures not included in IFRS framework Return measures Return is a financial term that describes how much the value of an asset changes from an earlier point in time Non-IFRS performance measure Description Reason for use of the measure Return on capital employed, ROCE Return on capital employed is calculated as 12-months rolling Operating profit before amortization of acquisition-related intangible assets (EBITA) as a percentage of Average capital employed (see page 121). The corresponding key figure for a single quarter is calculated as EBITA for the quarter multiplied by four as a percentage of Average capital employed. A central ratio for measuring return on capital tied up in operations. Return on capital employed, ROCE excl. IAC Return on capital employed excl. IAC is calculated as 12-months rolling Operating profit before amortization of acquisition-related intangible assets (EBITA), excl. IAC, as a percentage of Average capital employed (see page 121). The corresponding key figure for a single quarter is calculated as EBITA excl. IAC for the quarter, multiplied by four as a percentage of Average capital employed. A central ratio for measuring return on capital tied up in operations, excluding Items affecting comparability (IAC). Return on equity, ROE For the Group, Return on equity is calculated as a percentage by dividing Profit for the period with the average Equity during the five most recent quarters. The corresponding key figure for a single quarter is calculated as profit for the quarter multiplied by four as a percentage of average Equity for the two most recent quarters. Shows, from a shareholder perspective, the return that is generated on the owners’ capital that is invested in the company. Return on equity, ROE excl. IAC For the Group, Return on equity excl. IAC is calculated as a percentage by dividing Profit for the period, excl. IAC with the average Equity during the five most recent quarters. The corresponding key figure for a single quarter is calculated as Profit for the period excl. IAC for the quarter multiplied by four as a percentage of average Equity for the two most recent quarters. Shows, from a shareholder perspective, the return excluding Items affecting comparability (IAC) that is generated on the owners’ capital that is invested in the company. SEKm 2025 2024 2023 RETURN ON CAPITAL EMPLOYED, ROCE1) EBITA 19,503 19,475 16,607 Items affecting comparability (IAC) 69 869 2,291 EBITA excl. IAC 19,572 20,344 18,898 Average capital employed 113,649 115,346 115,105 Return on capital employed, ROCE % 17.2 16.9 14.4 Return on capital employed, ROCE excl. IAC % 17.2 17.6 16.4 1) Continuing operations. Essity | Annual Report 2025 120 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 121
A2. Use of alternative performance measures, cont. SEKm 2025 2024 2023 RETURN ON EQUITY, ROE1) Profit for the period 12,718 21,048 9,796 Items affecting comparability (IAC), net after tax 58 745 2,117 Other earnings attributable to divestment of Vinda – –8,798 46 Profit for the period excl. IAC 12,776 12,995 11,959 Average equity 83,935 83,604 78,169 Return on equity, ROE % 15.2 25.2 12.5 Return on equity, ROE excl. IAC % 15.2 15.5 15.3 1) Total operations. Capital measures Shows how capital is utilized and the company’s financial strength Non-IFRS performance measure Description Reason for use of the measure Equity The equity reported in the consolidated balance sheet consists of taxed equity increased by the equity portion of the Group’s untaxed reserves and non-controlling interests. The deferred tax liability in untaxed reserves has been calculated on the basis of the corporate tax rate decided to apply when the reserves are expected to be realized. Equity is the difference between the Group’s assets and liabilities, which corresponds to the Group’s equity contributed by owners and the Group’s accumulated results including the share attributable to non-controlling interests. Equity per share Equity in relation to the average number of shares outstanding excluding shares owned by Essity Aktiebolag (publ). A measure of the amount of Equity per outstanding share which is used for measuring the share against the share price. Equity/assets ratio Equity expressed as a percentage of total assets. A traditional measure for showing financial risk, expressing the percentage of total assets that is financed by the owners. Capital employed The Group’s and business areas’ Capital employed is calculated as the balance sheet’s total assets, excluding assets held for sale, interest-bearing assets and pension assets, less total liabilities, excluding liabilities directly attributable to assets held for sale, interest-bearing liabilities and pension liabilities. This measure shows the amount of total capital that is used in the operations and is thus one of the components for measuring the return from operations. Average capital employed Average capital employed, on a yearly basis, is calculated, as an average of the five most recent quarters’ closing balance. For a quarter, an average of two most recent quarters is used. A financial measure used for calculating Return on capital employed, ROCE and Return on capital employed, ROCE excl. IAC. SEKm 2025 2024 2023 CAPITAL EMPLOYED Total assets 167,116 185,284 202,993 Assets held for sale – – –32,327 Financial assets –14,235 –18,907 –13,607 Non-current, non-interest-bearing liabilities –6,748 –8,001 –8,474 Current, non-interest-bearing liabilities –33,550 –38,866 –37,835 Capital employed 112,583 119,510 110,750 Capital measures, cont. Shows how capital is utilized and the company’s financial strength Non-IFRS performance measure Description Reason for use of the measure Capital turnover Net sales for the year divided by average capital employed. Shows in a clear manner how effectively capital is employed. Together with sales growth and the operating margin, the capital turnover ratio is a key measure for monitoring value creation. Working capital The Group’s and business areas’ working capital is calculated as current operating receivables less current operating liabilities. This measure shows the amount of working capital tied up in the operations and can be put in relation to net sales to understand how effectively used the tied-up working capital is. SEKm 2025 2024 2023 WORKING CAPITAL Inventories 18,153 18,914 17,546 Trade receivables 21,332 23,538 21,920 Other current receivables 3,414 4,480 3,391 Trade payables –14,437 –17,098 –15,119 Other current liabilities –16,066 –18,949 –19,143 Other –159 –139 176 Working capital, total operations 12,237 10,746 8,771 Essity | Annual Report 2025 121 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 122
A2. Use of alternative performance measures, cont. Capital measures, cont. Shows how capital is utilized and the company’s financial strength Non-IFRS performance measure Description Reason for use of the measure Net debt The sum of consolidated interest-bearing liabilities, including pension liabilities and accrued interest less pension assets, cash and cash equivalents and interest-bearing current and non-current receivables. Net debt is the most relevant measure for showing the company’s total debt financing. SEKm 2025 2024 2023 NET DEBT Surplus in funded pension plans 4,340 2,475 3,072 Non-current financial assets 142 128 117 Current financial assets 1,266 5,342 5,259 Cash and cash equivalents 8,487 10,962 5,159 Financial assets 14,235 18,907 13,607 Non-current financial liabilities 31,386 40,674 45,336 Provisions for pensions 2,146 2,578 2,587 Current financial liabilities 7,246 6,424 15,648 Financial liabilities 40,778 49,676 63,571 Net debt, continuing operations 26,543 30,769 49,964 Net debt, discontinued operations – – 3,739 Net debt, total operations 26,543 30,769 53,703 Capital measures, cont. Shows how capital is utilized and the company’s financial strength Non-IFRS performance measure Description Reason for use of the measure Debt/equity ratio Debt/equity ratio is expressed as Net debt in relation to Equity. Shows financial risk and is the most useful measure for management to monitor the level of the company’s indebtedness. Debt payment capacity, % Debt payment capacity is expressed as 12-months rolling Cash earnings (see page 124) in relation to closing Net debt. A financial measure that shows the company’s capacity to repay its debt. Debt payment capacity excl. IAC % Debt payment capacity excl. IAC is expressed as 12-months rolling Cash earnings excl. IAC (see page 124) in relation to closing Net debt. A financial measure that shows the company’s capacity to repay its debt, adjusted for the impact of Items affecting comparability (IAC). Net debt/EBITDA Calculated as the closing balance of Net debt in relation to 12-months rolling EBITDA. A financial measure that shows the company’s capacity to repay its debt. Net debt/EBITDA excl. IAC Calculated as the closing balance of Net debt in relation to 12-months rolling EBITDA, excl. IAC. A financial measure that shows the company’s capacity to repay its debt, adjusted for the impact of Items affecting comparability (IAC). Interest coverage ratio Calculated on a net basis, according to which operating profit is divided by financial items. Helps to show the company’s capacity to pay its interest expenses. Performance measures Various types of performance measures and margin measures expressed as a percentage of sales Non-IFRS performance measure Description Reason for use of the measure Organic sales growth Underlying change in sales growth compared with the previous period attributable to changed volume, price or product mix and excluding changes attributable to exchange rate effects, acquisitions and divestments. This measure is of major importance for management in its monitoring of underlying organic sales growth driven by changes in volume, price or product mix for comparable units between different periods. SEKm 2025 2024 2023 SALES GROWTH Organic sales growth 1,382 319 7,608 Acquisitions – – 1,248 Divestments –28 –1,325 –1,692 Exchange rate effects1) –8,406 –595 8,664 Recognized change –7,052 –1,601 15,828 ORGANIC SALES GROWTH Previous period sales 145,546 147,147 131,320 Organic sales growth 1,382 319 7,608 Total organic sales for the period 146,928 147,466 138,928 Organic sales growth % 0.9 0.2 5.8 1) Consists solely of currency translation effects. Performance measures, cont. Various types of performance measures and margin measures expressed as a percentage of sales Non-IFRS performance measure Description Reason for use of the measure Gross profit excl. IAC Net sales minus cost of goods sold excluding Items affecting comparability (IAC). Gross profit shows the company’s earnings before the effects of sales, general and administration. Gross profit excl. IAC excludes Items affecting comparability (IAC). Operating profit before depreciation/amortization on property, plant and equipment and intangible assets (EBITDA) Calculated as Operating profit excluding depreciation, amortization and impairment of property, plant and equipment and intangible assets. This measure is a complement to Operating profit, as it shows the cash earnings from operations. Operating profit before depreciation/amortization of property, plant and equipment and intangible assets (EBITDA) excl. IAC Calculated as Operating profit before depreciation, amortization and impairment of property, plant and equipment and intangible assets excluding Items affecting comparability (IAC). This measure is a complement to operating profit, as it shows the cash earnings from operations adjusted for the impact of Items affecting comparability (IAC). Operating profit before amortization of acquisition- related intangible assets (EBITA) Calculated as operating profit after depreciation, amortization and impairment of property, plant and equipment and intangible assets but before amortization and impairment of acquisition-related intangible assets. The measure is a good complement to enable earnings comparisons with other companies, regardless of whether business activities are based on acquisitions or organic growth. Operating profit before amortization of acquisition- related intangible assets (EBITA) excl. IAC Calculated as operating profit after depreciation, amortization and impairment of property, plant and equipment and intangible assets but before amortization and impairment of acquisition-related intangible assets, excluding Items affecting comparability (IAC). The measure is a good complement to enable earnings comparisons with other companies, regardless of whether business activities are based on acquisitions or organic growth, and is also adjusted for the impact of Items affecting comparability (IAC). Essity | Annual Report 2025 122 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 123
A2. Use of alternative performance measures, cont. SEKm 2025 2024 2023 Operating profit before depreciation/amortization on property, plant and equipment and intangible assets (EBITDA) Operating profit 18,531 18,295 15,148 Amortization of acquisition-related intangible assets 972 1,110 1,109 Depreciation/amortization 4,994 5,028 5,000 Depreciation right-of-use assets 1,111 1,089 1,061 Impairment 45 56 65 Items affecting comparability (IAC) – net of impairment 35 152 413 Items affecting comparability (IAC) – impairment of acquisition-related intangible assets – 70 350 EBITDA 25,688 25,800 23,146 Items affecting comparability (IAC) excluding depreciation/amortization and impairment 34 717 1,878 Operating profit before depreciation/amortization on property, plant and equipment and intangible assets (EBITDA) excl. IAC 25,722 26,517 25,024 SEKm 2025 2024 2023 Operating profit before amortization of acquisition-related intangible assets (EBITA) excl. IAC Operating profit 18,531 18,295 15,148 Amortization of acquisition-related intangible assets 972 1,110 1,109 Items affecting comparability (IAC) – impairment of acquisition-related intangible assets – 70 350 Operating profit before amortization of acquisition-related intangible assets (EBITA) 19,503 19,475 16,607 EBITA margin % 14.1 13.4 11.3 Items affecting comparability (IAC) – cost of goods sold 21 483 1,349 Items affecting comparability (IAC) – sales, general and administration 48 386 942 Operating profit before amortization of acquisition-related intangible assets (EBITA) excl. IAC 19,572 20,344 18,898 EBITA margin excl. IAC % 14.1 14.0 12.8 Performance measures, cont. Various types of performance measures and margin measures expressed as a percentage of sales Non-IFRS performance measure Description Reason for use of the measure Items affecting comparability (IAC) Under Items affecting comparability (IAC), Essity includes costs in connection with acquisitions, restructuring, impairment and other specific events that are relevant when comparing earnings for one period with those of another. The item is specified in Note B3 Operating expenses on page 137. Separate reporting of Items affecting comparability between periods provides a better understanding of the company’s underlying operating activities. Restructuring costs Costs for impairment together with headcount reductions and other expenses in connection with restructuring. This measure shows the specific costs that have arisen in connection with restructuring of a specific operation, which contributes to a better understanding of the underlying cost level in the continuing operations. Gross margin excl. IAC Refers to Gross profit excl. IAC as a percentage of net sales. Gross margin excl. IAC is cleared of Items affecting comparability (IAC) and is thus a better measure than gross margin for showing the company’s margins before the effect of costs such as sales, general and administration. EBITA margin Operating profit before amortization of acquisition-related intangible assets (EBITA) as a percentage of net sales. EBITA margin is a good complement to enable Operating margin comparisons with other companies, regardless of whether business activities are based on acquisitions or organic growth. Performance measures, cont. Various types of performance measures and margin measures expressed as a percentage of sales Non-IFRS performance measure Description Reason for use of the measure EBITA margin excl. IAC Operating profit before amortization of acquisition-related intangible assets (EBITA) excl. IAC as a percentage of net sales. EBITA margin excl. IAC is a good complement to enable operating margin comparisons excluding Items affecting comparability (IAC) with other companies, regardless of whether business activities are based on acquisitions or organic growth. Operating margin Operating profit as a percentage of net sales. The Operating margin is a key measure together with Organic sales growth and Capital turnover ratio for monitoring value creation. Operating margin excl. IAC Operating profit excl. IAC, as a percentage of net sales. This measure is a complement to Operating margin, as it shows the Operating margin excluding the effects from Items affecting comparability (IAC). Operating profit excl. IAC Calculated as Operating profit before financial items and tax, excluding Items affecting comparability (IAC). Operating profit excl. IAC is a key measurement for control of the units and provides a better understanding of earnings performance of the operations than operating profit. SEKm 2025 2024 2023 OPERATING PROFIT EXCL. IAC Operating profit 18,531 18,295 15,148 Items affecting comparability (IAC) 69 939 2,641 Operating profit excl. IAC 18,600 19,234 17,789 Operating margin excl. IAC % 13.4 13.2 12.1 Performance measures, cont. Various types of performance measures and margin measures expressed as a percentage of sales Non-IFRS performance measure Description Reason for use of the measure Financial net margin Net financial items divided by net sales. This measure shows the relationship between net financial items and net sales. Profit before tax excl. IAC Profit before tax excl. IAC is calculated as profit before tax excluding Items affecting comparability (IAC). This is a useful measure for showing total profit for the company including financing costs, but not affected by taxes and Items affecting comparability (IAC). Taxes excl. IAC Tax expenses for the period excluding tax expenses relating to Items affecting comparability (IAC). A useful measure to show the total tax expense for the period, adjusted for taxes related to Items affecting comparability (IAC). SEKm 2025 2024 2023 TAXES EXCL. IAC Taxes –4,443 –4,331 –3,275 Taxes relating to Items affecting comparability (IAC) –11 –194 –524 Taxes excl. IAC –4,454 –4,525 –3,799 Essity | Annual Report 2025 123 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 124
A2. Use of alternative performance measures, cont. Performance measures, cont. Various types of performance measures and margin measures expressed as a percentage of sales Non-IFRS performance measure Description Reason for use of the measure Profit for the period excl. IAC Profit for the period excluding Items affecting comparability (IAC) and tax relating to Items affecting comparability (IAC). Shows the period’s total underlying earnings capacity excluding Items affecting comparability (IAC). Net margin Profit for the period as a percentage of net sales for the year. The net margin shows the remaining share of net sales after all of the company’s costs, including income tax, have been deducted. Earnings per share excl. IAC Profit for the period excl. IAC attributable to owners of the Parent company, excluding amortization of acquisition-related intangible assets after tax divided by the average number of outstanding shares, excluding shares owned by Essity Aktiebolag (publ). Earnings per share excl. IAC is a good measure of the company’s profitability and is used to determine the value of a company’s outstanding shares. The measure is a good complement to enable comparison of earnings per share with other companies, regardless of whether business activities are based on acquisitions or organic growth. Cash flow measures Various performance measures and costs that have impacted the company’s cash flow Non-IFRS performance measure Description Reason for use of the measure Cash earnings Cash earnings consist of the net of Operating profit before depreciation and amortization of property, plant and equipment and intangible assets (EBITDA), less financial income and expenses and income taxes. A financial measure used when calculating the company’s Debt payment capacity, see page 122. Cash earnings excl. IAC Cash earnings excl. IAC consists of the net of Operating profit before depreciation and amortization of property, plant and equipment and intangible assets (EBITDA) excl. IAC, less financial income and expenses and income taxes. A financial measure used when calculating the company’s Debt payment capacity excl. IAC, see page 122. Operating cash surplus Calculated as Operating profit with a reversal of depreciation, amortization and impairment of property, plant and equipment and intangible assets. Share of profits of associates and joint ventures, Items affecting comparability and capital gains/losses are excluded. This measure shows the cash flow generated by profit and is part of the follow-up of the cash flow. Investments in non- current assets, net Comprise investments in non-current assets, net, to maintain competitiveness, such as efficiency and replacement measures or investments of an environmental nature and strategic capital expenditures in sites. Shows the size of the capital expenditures required to maintain existing manufacturing capacity and investments in expansion and other growth measures. Cash flow measures, cont. Various performance measures and costs that have impacted the company’s cash flow Non-IFRS performance measure Description Reason for use of the measure Investments in operating assets through leases Additional right-of-use assets directly attributable to operating activities. Mainly leases for distribution centers. Investments in operating assets through leases is part of the follow-up of the cash flow that the units control. Operating cash flow Consists of the sum of Operating cash surplus and change in Working capital, with deductions for net investments in non-current assets and restructuring costs and investments in operating assets through leases. This is an important control measure of operating activities that the units control. Investments in non- operating assets through leases Additional right-of-use assets that are not directly attributable to operating activities, mainly leases for offices. Investments through leases in non-operating assets that the units do not control. These are recognized in the operating cash flow statement as an explanatory item in changes to net debt. SEKm 2025 2024 2023 CASH EARNINGS EBITDA 25,688 25,800 23,146 Financial income and expenses, net –1,384 –1,931 –2,356 Income taxes paid –4,713 –5,860 –3,615 Cash earnings 19,591 18,009 17,175 Items affecting comparability (IAC) excluding depreciation/amortization and impairment 34 717 1,878 Cash earnings excl. IAC 19,625 18,726 19,053 SEKm 2025 2024 2023 OPERATING CASH SURPLUS AND OPERATING CASH FLOW Operating profit 18,531 18,295 15,148 Depreciation/amortization and impairment 7,157 7,505 7,998 Items affecting comparability (IAC) excluding depreciation/amortization and impairment 34 717 1,878 Share of profits of associates and joint ventures – –78 –39 Adjustment for non-cash items 579 559 584 Operating cash surplus 26,301 26,998 25,569 Change in working capital –2,945 –408 1,085 Investments in non-current assets, net –6,898 –7,332 –6,819 Restructuring costs, etc. –741 –1,456 –1,542 Investments in operating assets through leases –719 –560 –608 Operating cash flow 14,998 17,242 17,685 Essity | Annual Report 2025 124 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 125
B. Sales and earnings B1. Net sales – Revenues from contracts with customers Accounting principles AP Revenue recognition Essity primarily generates revenues from the sale of finished products to, for example, the retail sector, industries and the healthcare sector. Revenue from sales of services occurs to a certain extent but only accounts for a small portion of the Group’s sales. Essity’s operations and sales are divided into various segments that sell different products in several regions. The product portfolio is diversified but the principles for revenue recognition are the same for all segments. For a description of the products, see the section on Essity’s three business areas, Health & Medical, Consumer Goods and Professional Hygiene on pages 28–34. Essity’s contracts with customers primarily comprise framework agreements without established minimum volumes, which means that a binding contract does not arise until the customer places an order. Performance obligations and timing of revenue recognition Essity’s performance obligations in the contracts consists of providing the goods specified in the contracts. The performance obligations are satisfied and the revenue recognized when control of the products is passed to the customer. The timing of when control is passed to the customer is determined by the terms of delivery applied in the contract. For most supply contracts, control is passed when the goods have been delivered to the customer’s ware- house and the customer thereby can control the use and receive the benefits of the goods. Invoicing is normally done in connection with, or directly after, delivery and recognized at a specific point in time, no revenue is recognized over time. Essity has chosen to apply the practical expedient in IFRS 15 not to disclose the remaining performance obligations that have a term of less than one year. Determination of transaction price Essity’s contracts with customers have essentially similar characteristics although specific terms may differ. The transaction price primarily comprises the agreed price for the products less any discounts, which means payments from customers include both fixed and variable amounts. Typically, discounts are provided as credit after the end of the discount period relative to the value of the pur- chased goods. Discounts may also be provided for defined marketing activities performed by the customer during the period, or when Essity takes part in targeted campaigns with discount vouchers where Essity compensates customers for loss of income as consumers redeem discount vouchers. In a few markets, conditions are in place whereby Essity is subject to penalties if the terms of delivery are not met, in terms of date and volume. Essity’s customers are normally not entitled to return products. Deliveries of faulty products are credited. A refund liability is recognized in the balance sheet under Other liabilities that includes the estimated discounts for each customer. The final discounts are determined at the end of the discount period and refund liability is reduced when the discount is credited to the customer. Trade receivables Once the goods and services have been delivered and control has been passed to the customer, a trade receivable is recognized since this is the point in time when the consideration becomes unconditional, only the passage of time is required for payment to be made. Contract liabilities Contract liabilities relate to bonuses and discounts to customers. Assets that have arisen from expenses to fulfill contracts with customers In the Professional Hygiene business area, Essity supplies dispensers to customers to fulfill contracts for delivery of the business area’s other products, refer to page 33. Expenses for these dispensers are recognized as contract assets under Other non-current assets since Essity expects to receive indirect remuneration for these expenses through the sale of the business area’s other products. The dispensers are depreciated over three years according to the average term of the contract with customers. Recognition takes place in accordance with the rules in IFRS 15 since the expense is directly linked to securing contracts with customers. The rules on Property, Plant and Equipment in IAS 16 and IAS 2 Inventories are not deemed to be applicable since there are no economic benefits associated with the dispenser after it has been delivered to the customer. Key assessments and assumptions KAA Key assessments and assumptions are required to estimate the outcome of variable remuneration. The assessment uses the expected value method, which means revenue is recognized when it is highly probable that a significant reversal will not occur. The estimate of variable remuneration is made at the beginning of the contract and is evalu- ated for each reporting period. The tables below show consolidated net sales broken down by operating segment: Health & Medical, Consumer Goods and Professional Hygiene. Sold products are distributed to consumers in Health & Medical through the health- care sector and e-commerce, in Consumer Goods through the retail trade and e-commerce and in Professional Hygiene through business-to-business. Net sales in geographic markets reflects the perspective – sold to, which is based on sales to the countries where Essity has its customers, known as its “footprint.” See pages 129–132 for further information. SEKm Health & Medical (Healthcare sector) Consumer Goods (Retail trade) Professional Hygiene (Business to Business) Other operations Total Group 2025 Revenue from contracts with customers Sale of finished products 27,451 75,081 35,881 27 138,440 Sale of services 17 14 23 – 54 Total revenues from contracts with customers IS 27,468 75,095 35,904 27 138,494 Geographical markets Europe 18,207 49,965 16,462 32 84,666 North America 4,785 2,915 14,696 –1 22,395 Latin America 1,441 19,533 3,178 –2 24,150 Asia 1,516 480 187 –2 2,181 Other 1,519 2,202 1,381 – 5,102 Total revenues from contracts with customers IS 27,468 75,095 35,904 27 138,494 Product category Incontinence Products 15,858 11,537 27,395 Baby Care 6,554 6,554 Feminine Care 13,057 13,057 Medical Solutions 11,610 11,610 Consumer Tissue 43,537 43,537 Professional Hygiene 35,904 35,904 Other 410 27 437 Total revenues from contracts with customers IS 27,468 75,095 35,904 27 138,494 Essity | Annual Report 2025 125 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 126
B1. Net sales – Revenues from contracts with customers, cont. SEKm Health & Medical (Healthcare sector) Consumer Goods (Retail trade) Professional Hygiene (Business to Business) Other operations Total Group 2024 Revenue from contracts with customers Sale of finished products 28,593 78,872 38,029 –12 145,482 Sale of services 6 20 38 – 64 Total revenues from contracts with customers IS 28,599 78,892 38,067 –12 145,546 Geographical markets Europe 18,627 52,159 16,828 –12 87,601 North America 5,079 3,218 16,282 – 24,579 Latin America 1,609 20,638 3,284 – 25,531 Asia 1,756 503 194 – 2,454 Other 1,528 2,374 1,479 – 5,381 Total revenues from contracts with customers IS 28,599 78,892 38,067 –12 145,546 Product category Incontinence Products 16,611 11,561 28,172 Baby Care 7,114 7,114 Feminine Care 13,873 13,873 Medical Solutions 11,988 11,988 Consumer Tissue 45,886 45,886 Professional Hygiene 38,067 38,067 Other 458 –12 446 Total revenues from contracts with customers IS 28,599 78,892 38,067 –12 145,546 SEKm Health & Medical (Healthcare sector) Consumer Goods (Retail trade) Professional Hygiene (Business to Business) Other operations Total Group 2023 Revenue from contracts with customers Sale of finished products 27,718 79,895 39,442 25 147,080 Sale of services 11 17 39 – 67 Total revenues from contracts with customers IS 27,729 79,912 39,481 25 147,147 Geographical markets Europe 17,981 53,258 17,538 25 88,802 North America 5,132 3,279 17,147 – 25,558 Latin America 1,465 20,562 3,171 – 25,198 Asia 1,641 472 199 – 2,312 Other 1,510 2,341 1,426 – 5,277 Total revenues from contracts with customers IS 27,729 79,912 39,481 25 147,147 Product category Incontinence Products 16,070 10,754 26,824 Baby Care 7,164 7,164 Feminine Care 13,584 13,584 Medical Solutions 11,659 11,659 Consumer Tissue 47,940 47,940 Professional Hygiene 39,481 39,481 Other 470 25 495 Total revenues from contracts with customers IS 27,729 79,912 39,481 25 147,147 Trade receivables and contractual liabilities SEKm Note 2025 2024 2023 Trade receivables TE3:1 E3 21,332 23,538 21,920 Contractual liabilities – advance payments from customers D5 6,862 7,874 7,782 Trade receivables decreased by SEK 2,206m in 2025 to SEK 21,332m mainly due to the appreciation of the Swedish krona, which strengthened compared to virtually all major currencies. The value of trade receivables in foreign cur- rency is therefore lower when translated into SEK compared with the preceding year. A lower proportion of overdue trade receivables compared with the previous year and lower sales in the final two months of 2025 compared with the corresponding period in the preceding year also reduced the value of trade receivables slightly compared with the previous year. Assets that have arisen from expenses to fulfill contracts with customers SEKm 2025 2024 2023 Value, January 1 TE3:2 695 650 691 Costs for the year 490 467 466 Depreciation –428 –487 –467 Impairment –3 – – Translation differences –116 65 –40 Value, December 31 638 695 650 B2. Segment reporting Accounting principles AP Operating segments are recognized in a manner that complies with the internal reporting according to IFRS account- ing standards submitted to the chief operating decision maker. At Essity, this function is defined as the company’s President who is responsible for allocating resources, assessing the result of the operating segments and manages the day-to-day administration of the Group in accordance with the Board’s guidelines and terms of reference. As support, the chief operating decision maker has one Executive Vice President and the Executive Management Team. Essity’s three business areas, Health & Medical, Consumer Goods and Professional Hygiene comprise the operating segments. For management purposes, the Group is organized into business areas based on the company’s customer and sales channels which lead to an expansion of the offerings to new and adjacent categories as well as extended service content on the basis of customer and consumer needs. Essity’s offering in Health & Medical comprises the categories Incontinence Products, Health Care and Medical Solutions. The offering includes incontinence products, wound care, compression therapy, orthopedics, skincare products and digital products with sensor technology under brands such as TENA, Leukoplast, Cutimed, JOBST, Actimove and Delta-Cast. Distribution channels are pharmacies, medical device stores, hospitals, distributors and care institutions and e-commerce. Essity’s offering in Consumer Goods includes the categories Incontinence Products Retail, Baby Care, Feminine Care and Consumer Tissue. The offering includes incontinence products, pads, diapers, wet wipes, skin cream, intimate soaps, leakproof apparel, menstrual cups, toilet paper, household towels, handkerchiefs, facial tissues and napkins. The products are sold under brands such as the global leader TENA and other strong brands including Libero, Libresse, Nosotras, Saba, TOM Organic, Lotus, Regio and Tempo. Distribution channels for the products are the retail trade and e-commerce. Essity’s offering in Professional Hygiene comprises complete hygiene solutions, including toilet paper, paper hand towels, napkins, hand soap, hand lotion, hand sanitizers, dispensers, cleaning and wiping products as well as service and maintenance under the globally leading Tork brand. Essity also offers digital products, such as Internet of Things sensor technology that enables data-driven cleaning. Customers consist of companies and office buildings, universi- ties, healthcare facilities, industries, restaurants, hotels, stadiums and other public venues. Distribution channels for the products consist of distributors and e-commerce. Other operations comprise Group-wide functions. Essity’s business is an integrated operation in the form of a matrix organization with four business units (Health & Medical, Consumer Goods EMEA, Consumer Goods Americas and Professional Hygiene), the independent unit Essity Australasia and three global units (Global Supply Chain, Global Digital and Business Services and Global Marketing & Innovation). The business units have limited responsibility to impact operational costs, since the global units are responsible for production, planning, technology development, sourcing and product development. Essity | Annual Report 2025 126 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 127
B2. Segment reporting, cont. The tables below show parts of the consolidated balance sheet and income statement broken down by the operating segments Health & Medical, Consumer Goods and Professional Hygiene. SEKm Health & Medical Consumer Goods Professional Hygiene Other operations Total Group 2025 Net sales IS 27,468 75,095 35,904 27 138,494 Cost of goods sold IS –15,368 –52,636 –24,298 –49 –92,351 Sales, general and administration IS –7,154 –12,854 –5,242 –1,321 –26,571 Operating profit/loss before amortization of acquisition- related intangible assets (EBITA) excl. IAC 4,946 9,605 6,364 –1,343 19,572 Amortization of acquisition-related intangible assets IS –731 –221 –21 1 –972 Operating profit/loss excl. IAC 4,215 9,384 6,343 –1,342 18,600 Items affecting comparability (IAC) TB2:1 –12 3 –16 –44 –69 Operating profit/loss IS 4,203 9,387 6,327 –1,386 18,531 Share of results of associates and joint ventures IS 14 Financial income IS 257 Financial expenses IS –1,641 Tax expense for the period IS –4,443 Profit for the period, continuing operations IS 12,718 OTHER DISCLOSURES Capital employed 31,577 53,043 25,176 2,787 112,583 Investments in associates and joint ventures BS 19 341 –54 1 307 Net investments/acquisitions –930 –4,063 –2,064 –560 –7,617 Depreciation/amortization –1,699 –3,100 –1,755 –523 –7,077 Expenses, in addition to depreciation/amortization, not matched by payments 11 103 482 –17 579 NET SALES BY REGION Europe 66 66 45 61 North America 17 4 41 16 Latin America 5 26 9 17 Asia 6 1 1 2 Other 6 3 4 4 Total % 100 100 100 100 Mature markets 81 67 83 74 Emerging markets 19 33 17 26 Total % 100 100 100 100 SEKm Health & Medical Consumer Goods Professional Hygiene Other operations Total Group 2024 Net sales IS 28,599 78,892 38,067 –12 145,546 Cost of goods sold IS –15,761 –56,144 –26,010 –14 –97,929 Sales, general and administration IS –7,329 –13,324 –5,221 –1,477 –27,351 Share of results of associates and joint ventures IS – 85 –7 – 78 Operating profit/loss before amortization of acquisition- related intangible assets (EBITA) excl. IAC 5,509 9,509 6,829 –1,503 20,344 Amortization of acquisition-related intangible assets IS –841 –247 –22 – –1,110 Operating profit/loss excl. IAC 4,668 9,262 6,807 –1,503 19,234 Items affecting comparability (IAC) TB2:1 –136 –461 –156 –186 –939 Operating profit/loss IS 4,532 8,801 6,651 –1,689 18,295 Financial income IS 593 Financial expenses IS –2,524 Tax expense for the period IS –4,331 Profit for the period, continuing operations IS 12,033 OTHER DISCLOSURES Capital employed 34,566 55,293 25,998 3,653 119,510 Investments in associates and joint ventures BS 7 371 –28 1 351 Net investments/acquisitions –967 –4,326 –2,024 –643 –7,960 Depreciation/amortization –1,786 –3,149 –1,807 –484 –7,226 Expenses, in addition to depreciation/amortization, not matched by payments 19 28 512 – 559 NET SALES BY REGION Europe 65 66 44 60 North America 18 4 43 17 Latin America 6 26 8 17 Asia 6 1 1 2 Other 5 3 4 4 Total % 100 100 100 100 Mature markets 80 67 84 74 Emerging markets 20 33 16 26 Total % 100 100 100 100 Essity | Annual Report 2025 127 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 128
B2. Segment reporting, cont. SEKm Health & Medical Consumer Goods Professional Hygiene Other operations Total Group 2023 Net sales IS 27,729 79,912 39,481 25 147,147 Cost of goods sold IS –16,548 –57,918 –28,104 –57 –102,627 Sales, general and administration IS –7,144 –12,231 –5,094 –1,192 –25,661 Share of results of associates and joint ventures IS – 34 5 – 39 Operating profit/loss before amortization of acquisition- related intangible assets (EBITA) excl. IAC 4,037 9,797 6,288 –1,224 18,898 Amortization of acquisition-related intangible assets IS –839 –248 –22 – –1,109 Operating profit/loss excl. IAC 3,198 9,549 6,266 –1,224 17,789 Items affecting comparability (IAC) TB2:1 –286 –828 –1,487 –40 –2,641 Operating profit/loss IS 2,912 8,721 4,779 –1,264 15,148 Financial income IS 412 Financial expenses IS –2,768 Tax expense for the period IS –3,275 Profit for the period, continuing operations IS 9,517 OTHER DISCLOSURES Capital employed 32,762 52,009 24,021 1,958 110,750 Investments in associates and joint ventures BS 5 303 –15 1 294 Net investments/acquisitions –1,205 –3,698 –1,886 –820 –7,609 Depreciation/amortization –1,798 –3,221 –1,888 –263 –7,170 Expenses, in addition to depreciation/amortization, not matched by payments 4 59 519 2 584 NET SALES BY REGION Europe 65 67 44 60 North America 19 4 43 17 Latin America 5 26 8 17 Asia 6 1 1 2 Other 5 2 4 4 Total % 100 100 100 100 Mature markets 81 67 85 74 Emerging markets 19 33 15 26 Total % 100 100 100 100 Items affecting comparability (IAC) allocated by operating segment TB2:1 SEKm Health & Medical Consumer Goods Professional Hygiene Other Total 2025 Items affecting comparability (IAC) – cost of goods sold –1 –15 –5 – –21 Items affecting comparability (IAC) – sales, general and administration –11 18 –11 –44 –48 Items affecting comparability (IAC) – acquisition- related intangible assets – – – – – Total –12 3 –16 –44 –69 2024 Items affecting comparability (IAC) – cost of goods sold –98 –257 –128 – –483 Items affecting comparability (IAC) – sales, general and administration 13 –185 –28 –186 –386 Items affecting comparability (IAC) – acquisition- related intangible assets –51 –19 – – –70 Total –136 –461 –156 –186 –939 2023 Items affecting comparability (IAC) – cost of goods sold –102 –241 –1,003 –3 –1,349 Items affecting comparability (IAC) – sales, general and administration –184 –587 –134 –37 –942 Items affecting comparability (IAC) – acquisition- related intangible assets – – –350 – –350 Total –286 –828 –1,487 –40 –2,641 Internal sales: No internal sales are carried out between the segments. Production in shared facilities is allocated among the segments already at the operational reporting stage. Customers: Essity had no customers in 2025, 2024 or 2023 from which it generated income that accounted for more than 10% of the company’s net sales. Essity’s ten largest customers account for 24.9% (24.3; 25.8) of the company’s sales. Essity | Annual Report 2025 128 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 129
B2a. Segment reporting, cont. Net sales – sold to1) Net sales – sold by1) 2025 2024 2023 2025 2024 2023 Group by country continuing operations TB2:2 SEKm % SEKm % SEKm % SEKm % SEKm % SEKm % Sweden 3,694 2.7 3,599 2.5 3,647 2.5 3,874 2.8 4,132 2.8 4,251 2.9 EU excluding Sweden Germany 17,131 12.4 17,831 12.3 18,276 12.4 18,591 13.4 19,248 13.3 19,303 13.1 France 10,264 7.4 11,111 7.6 12,334 8.4 11,965 8.6 12,333 8.5 12,553 8.5 Spain 9,194 6.7 8,934 6.1 8,027 5.5 7,887 5.7 8,076 5.5 8,185 5.6 Netherlands 4,863 3.5 5,192 3.6 5,165 3.5 5,026 3.6 5,397 3.7 5,295 3.6 Italy 4,393 3.2 4,717 3.2 4,651 3.2 4,704 3.4 4,860 3.3 4,804 3.3 Austria 2,842 2.1 3,014 2.1 2,952 2.0 3,095 2.2 3,342 2.3 3,327 2.3 Finland 2,127 1.5 2,161 1.5 2,180 1.5 2,122 1.5 2,155 1.5 2,149 1.4 Belgium 2,063 1.5 2,038 1.4 2,054 1.4 2,124 1.5 2,198 1.5 2,214 1.3 Denmark 1,928 1.4 1,972 1.4 1,937 1.3 1,875 1.4 1,930 1.3 1,923 1.4 Poland 1,741 1.3 1,859 1.3 1,646 1.1 1,860 1.3 2,021 1.4 1,739 1.2 Hungary 1,520 1.1 1,565 1.1 1,580 1.1 1,653 1.2 1,680 1.2 1,664 1.1 Czech Republic 1,150 0.8 1,131 0.8 1,135 0.8 1,114 0.8 1,094 0.8 1,122 0.8 Ireland 776 0.6 746 0.5 763 0.5 740 0.5 679 0.5 692 0.5 Portugal 745 0.6 634 0.4 623 0.4 422 0.3 434 0.3 432 0.3 Romania 723 0.5 726 0.5 697 0.5 629 0.5 629 0.4 606 0.4 Croatia 590 0.4 581 0.4 549 0.4 – – – – – – Slovakia 554 0.4 524 0.4 472 0.3 865 0.6 830 0.6 784 0.5 Greece 456 0.3 480 0.3 477 0.3 333 0.2 340 0.2 361 0.2 Lithuania 454 0.3 446 0.3 424 0.3 454 0.3 447 0.3 424 0.3 Latvia 275 0.2 284 0.2 250 0.2 271 0.2 279 0.2 245 0.2 Estonia 227 0.2 242 0.2 235 0.2 227 0.2 242 0.2 235 0.2 Rest of EU excluding Sweden 595 0.4 658 0.5 600 0.4 – – – – – – Total EU excluding Sweden 64,611 46.8 66,846 46.1 67,027 45.7 65,957 47.4 68,214 47.0 68,057 46.2 Rest of Europe UK 10,780 7.8 11,520 7.9 11,495 7.8 10,813 7.8 11,562 7.9 11,640 7.9 Switzerland 2,068 1.5 2,227 1.5 2,153 1.5 1,987 1.4 2,104 1.4 2,054 1.4 Norway 1,992 1.5 1,919 1.3 1,844 1.3 2,007 1.4 1,933 1.3 1,856 1.3 Ukraine 573 0.4 583 0.4 591 0.4 505 0.4 519 0.4 534 0.4 Turkey 264 0.2 276 0.2 256 0.2 252 0.2 256 0.2 241 0.2 Russia – – – – 1,166 0.8 – – – – 1,237 0.8 Rest of Europe, excluding EU 684 0.5 631 0.4 624 0.4 – – – – – – Total Rest of Europe 16,361 11.9 17,156 11.7 18,129 12.4 15,564 11.2 16,374 11.2 17,562 12.0 TOTAL EUROPE 84,666 61.4 87,601 60.3 88,803 60.6 85,395 61.4 88,720 61.0 89,870 61.1 1) Net sales have been recognized from two perspectives. The first column “Net sales – sold to” is based on sales to the countries where Essity has its customers, or Essity’s “footprint”. The second column “Net sales – sold by” takes the perspective of IFRS 8, meaning revenue from external customers where the company is domiciled. Essity | Annual Report 2025 129 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 130
B2a. Segment reporting, cont. Net sales – sold to1) Net sales – sold by1) 2025 2024 2023 2025 2024 2023 Group by country continuing operations TB2:2 SEKm % SEKm % SEKm % SEKm % SEKm % SEKm % North America USA 18,886 13.6 20,892 14.4 21,805 14.8 18,912 13.7 20,855 14.3 21,842 14.8 Canada 3,502 2.5 3,679 2.5 3,746 2.5 3,528 2.6 3,679 2.5 3,748 2.5 Rest of North America 7 0.0 8 0.0 8 0.0 – – – – – – TOTAL NORTH AMERICA 22,395 16.1 24,579 16.9 25,559 17.3 22,440 16.3 24,534 16.8 25,590 17.3 Latin America Mexico 10,669 7.7 11,493 7.8 11,090 7.5 11,722 8.5 12,542 8.6 12,060 8.2 Colombia 4,899 3.5 4,989 3.3 4,742 3.2 5,177 3.7 5,245 3.6 4,897 3.3 Ecuador 1,542 1.1 1,591 1.1 1,796 1.2 1,511 1.1 1,555 1.1 1,766 1.2 Brazil 1,389 1.0 1,457 1.0 1,404 1.0 1,389 1.0 1,457 1.0 1,404 0.9 Chile 1,173 0.8 1,212 0.8 1,408 1.0 1,203 0.9 1,233 0.8 1,426 1.0 Peru 790 0.6 755 0.5 740 0.5 771 0.6 743 0.5 722 0.5 Costa Rica 784 0.6 829 0.6 800 0.5 802 0.6 945 0.6 980 0.7 Argentina 548 0.4 813 0.6 845 0.6 555 0.4 843 0.6 856 0.6 Dominican Republic 478 0.3 536 0.4 571 0.4 456 0.3 513 0.4 556 0.4 Nicaragua 312 0.2 316 0.2 296 0.2 – – – – – – Guatemala 298 0.2 290 0.2 275 0.2 – – – – – – Puerto Rico 249 0.2 253 0.2 297 0.2 213 0.2 214 0.1 234 0.2 Panama 162 0.1 181 0.1 179 0.1 – – – – – – Rest of Latin America 857 0.6 816 0.6 754 0.5 294 0.2 268 0.2 231 0.2 TOTAL LATIN AMERICA 24,150 17.3 25,531 17.4 25,197 17.1 24,093 17.5 25,558 17.5 25,132 17.2 Asia Japan 462 0.3 495 0.3 572 0.4 380 0.3 427 0.3 538 0.4 India 257 0.2 292 0.2 272 0.2 253 0.2 287 0.2 274 0.2 Indonesia 239 0.2 299 0.2 277 0.2 236 0.2 295 0.2 277 0.2 China 183 0.1 153 0.1 32 0.0 – – – – – – South Korea 49 0.0 66 0.0 54 0.0 – – – – – – Malaysia 13 0.0 5 0.0 3 0.0 – – – – – – Singapore 6 0.0 9 0.0 2 0.0 – – – – – – Rest of Asia 972 0.7 1,135 0.8 1,101 0.7 798 0.6 497 0.3 358 0.2 TOTAL ASIA 2,181 1.5 2,454 1.6 2,313 1.5 1,667 1.3 1,506 1.0 1,447 1.0 Rest of the world Australia 3,054 2.2 3,171 2.2 3,044 2.1 3,051 2.2 3,177 2.3 3,061 2.1 New Zealand 1,136 0.8 1,301 0.9 1,378 0.9 1,124 0.8 1,291 0.9 1,368 0.9 South Africa 355 0.3 372 0.3 337 0.2 519 0.4 542 0.4 469 0.3 Other rest of the world 557 0.4 537 0.4 516 0.3 205 0.1 218 0.1 210 0.1 TOTAL REST OF THE WORLD 5,102 3.7 5,381 3.8 5,275 3.5 4,899 3.5 5,228 3.7 5,108 3.4 Total Group 138,494 100.0 145,546 100.0 147,147 100.0 138,494 100.0 145,546 100.0 147,147 100.0 1) Net sales have been recognized from two perspectives. The first column “Net sales – sold to” is based on sales to the countries where Essity has its customers, or Essity’s “footprint”. The second column “Net sales – sold by” takes the perspective of IFRS 8, meaning revenue from external customers where the company is domiciled. Essity | Annual Report 2025 130 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 131
B2a. Segment reporting, cont. Net sales – sold to1) Net sales – sold by1) 2025 2024 2023 2025 2024 2023 Group by country total operations TB2:2 SEKm % SEKm % SEKm % SEKm % SEKm % SEKm % Sweden 3,694 2.7 3,599 2.4 3,626 2.1 3,874 2.8 4,132 2.8 4,251 2.4 EU excluding Sweden Germany 17,131 12.4 17,831 11.9 18,278 10.5 18,591 13.4 19,248 12.8 19,303 11.1 France 10,264 7.4 11,111 7.4 12,335 7.1 11,965 8.6 12,333 8.2 12,553 7.2 Spain 9,194 6.7 8,934 6.0 8,027 4.6 7,887 5.7 8,076 5.4 8,185 4.7 Netherlands 4,863 3.5 5,192 3.5 5,165 3.0 5,026 3.6 5,397 3.6 5,295 3.0 Italy 4,393 3.2 4,717 3.1 4,651 2.7 4,704 3.4 4,860 3.2 4,804 2.8 Austria 2,842 2.1 3,014 2.0 2,952 1.7 3,095 2.2 3,342 2.2 3,327 1.9 Finland 2,127 1.5 2,161 1.4 2,180 1.3 2,122 1.5 2,155 1.5 2,149 1.2 Belgium 2,063 1.5 2,038 1.4 2,054 1.2 2,124 1.5 2,198 1.3 2,214 1.3 Denmark 1,928 1.4 1,972 1.3 1,937 1.1 1,875 1.4 1,930 1.4 1,923 1.1 Poland 1,741 1.3 1,859 1.2 1,646 0.9 1,860 1.3 2,021 1.3 1,739 1.0 Hungary 1,520 1.1 1,565 1.0 1,580 0.9 1,653 1.2 1,680 1.1 1,664 1.0 Czech Republic 1,150 0.8 1,131 0.8 1,135 0.7 1,114 0.8 1,094 0.7 1,122 0.6 Ireland 776 0.6 746 0.5 763 0.4 740 0.5 679 0.5 692 0.4 Portugal 745 0.6 634 0.4 623 0.4 422 0.3 434 0.3 432 0.3 Romania 723 0.5 726 0.4 697 0.4 629 0.5 629 0.4 606 0.4 Croatia 590 0.4 581 0.4 549 0.3 – – – – – – Slovakia 554 0.4 524 0.3 472 0.3 865 0.6 830 0.6 784 0.5 Greece 456 0.3 480 0.3 477 0.3 333 0.2 340 0.2 361 0.2 Lithuania 454 0.3 446 0.3 424 0.2 454 0.3 447 0.3 424 0.2 Latvia 275 0.2 284 0.2 250 0.1 271 0.2 279 0.2 245 0.1 Estonia 227 0.2 242 0.2 235 0.1 227 0.2 242 0.2 235 0.1 Rest of EU excluding Sweden 595 0.4 658 0.4 601 0.3 – – – – – – Total EU excluding Sweden 64,611 46.8 66,846 44.4 67,031 38.5 65,957 47.4 68,214 45.4 68,057 39.1 Rest of Europe UK 10,780 7.8 11,520 7.7 11,496 6.6 10,813 7.8 11,562 7.7 11,640 6.7 Switzerland 2,068 1.5 2,227 1.5 2,153 1.2 1,987 1.4 2,104 1.4 2,054 1.2 Norway 1,992 1.5 1,919 1.3 1,844 1.1 2,007 1.4 1,933 1.3 1,856 1.1 Ukraine 573 0.4 583 0.4 591 0.3 505 0.4 519 0.3 534 0.3 Turkey 264 0.2 276 0.2 256 0.1 252 0.2 256 0.2 241 0.1 Russia – – – – 1,167 0.7 – – – – 1,237 0.7 Rest of Europe, excluding EU 684 0.5 631 0.4 624 0.4 – – – – – – Total Rest of Europe 16,361 11.9 17,156 11.5 18,131 10.4 15,564 11.2 16,374 10.9 17,562 10.1 TOTAL EUROPE 84,666 61.4 87,601 58.3 88,788 51.0 85,395 61.4 88,720 59.1 89,870 51.6 1) Net sales have been recognized from two perspectives. The first column “Net sales – sold to” is based on sales to the countries where Essity has its customers, or Essity’s “footprint”. The second column “Net sales – sold by” takes the perspective of IFRS 8, meaning revenue from external customers where the company is domiciled. Essity | Annual Report 2025 131 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 132
B2a. Segment reporting, cont. Net sales – sold to1) Net sales – sold by1) 2025 2024 2023 2025 2024 2023 Group by country total operations TB2:2 SEKm % SEKm % SEKm % SEKm % SEKm % SEKm % North America USA 18,886 13.6 20,896 13.9 21,816 12.5 18,912 13.7 20,855 13.9 21,842 12.6 Canada 3,502 2.5 3,682 2.5 3,754 2.2 3,528 2.6 3,679 2.5 3,748 2.2 Rest of North America 7 0.0 8 0.0 8 0.0 – – – – – – TOTAL NORTH AMERICA 22,395 16.1 24,586 16.4 25,578 14.7 22,440 16.3 24,534 16.4 25,590 14.8 Latin America Mexico 10,669 7.7 11,496 7.7 11,090 6.4 11,722 8.5 12,542 8.4 12,060 6.9 Colombia 4,899 3.5 4,990 3.3 4,742 2.7 5,177 3.7 5,245 3.5 4,897 2.8 Ecuador 1,542 1.1 1,591 1.1 1,796 1.0 1,511 1.1 1,555 1.0 1,766 1.0 Brazil 1,389 1.0 1,457 1.0 1,404 0.8 1,389 1.0 1,457 1.0 1,404 0.8 Chile 1,173 0.8 1,212 0.8 1,409 0.8 1,203 0.9 1,233 0.8 1,426 0.8 Peru 790 0.6 755 0.4 741 0.4 771 0.6 743 0.5 722 0.4 Costa Rica 784 0.6 829 0.6 800 0.5 802 0.6 945 0.6 980 0.6 Argentina 548 0.4 813 0.5 845 0.5 555 0.4 843 0.6 856 0.5 Dominican Republic 478 0.3 536 0.4 571 0.3 456 0.3 513 0.3 556 0.3 Nicaragua 312 0.2 316 0.2 296 0.2 – – – – – – Guatemala 298 0.2 290 0.2 275 0.2 – – – – – – Puerto Rico 249 0.2 253 0.2 297 0.2 213 0.2 214 0.1 234 0.1 Panama 162 0.1 183 0.1 183 0.1 – – – – – – Rest of Latin America 857 0.6 816 0.5 755 0.4 294 0.2 268 0.2 231 0.1 TOTAL LATIN AMERICA 24,150 17.3 25,537 17.0 25,204 14.5 24,093 17.5 25,558 17.0 25,132 14.3 Asia Japan 462 0.3 569 0.4 805 0.5 380 0.3 427 0.3 538 0.3 India 257 0.2 292 0.2 273 0.2 253 0.2 287 0.2 274 0.2 Indonesia 239 0.2 300 0.2 289 0.2 236 0.2 297 0.2 289 0.2 China 183 0.1 3,847 2.6 22,805 13.1 – – 3,818 2.5 23,154 13.3 South Korea 49 0.0 123 0.1 320 0.2 – – 59 0.0 276 0.2 Malaysia 13 0.0 454 0.3 2,272 1.3 – – 472 0.3 2,487 1.4 Singapore 6 0.0 94 0.1 414 0.2 – – 76 0.1 350 0.2 Rest of Asia 972 0.7 1,269 0.8 1,824 1.0 798 0.6 603 0.4 850 0.5 TOTAL ASIA 2,181 1.5 6,948 4.7 29,002 16.7 1,667 1.3 6,039 4.0 28,218 16.3 Rest of the world Australia 3,054 2.2 3,179 2.1 3,067 1.8 3,051 2.2 3,177 2.1 3,061 1.8 New Zealand 1,136 0.8 1,306 0.9 1,380 0.8 1,124 0.8 1,291 0.9 1,368 0.8 South Africa 355 0.3 374 0.2 368 0.2 519 0.4 542 0.4 469 0.3 Other Rest of the world 557 0.4 548 0.4 530 0.3 205 0.1 218 0.1 209 0.1 TOTAL REST OF THE WORLD 5,102 3.7 5,407 3.6 5,345 3.1 4,899 3.5 5,228 3.5 5,107 3.0 Total Group 138,494 100.0 150,079 100.0 173,917 100.0 138,494 100.0 150,079 100.0 173,917 100.0 1) Net sales have been recognized from two perspectives. The first column “Net sales – sold to” is based on sales to the countries where Essity has its customers, or Essity’s “footprint”. The second column “Net sales – sold by” takes the perspective of IFRS 8, meaning revenue from external customers where the company is domiciled. Essity | Annual Report 2025 132 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 133
B2b. Segment reporting, cont. Average number of employees1) Non-current assets2) Group by country continuing operations TB2:2 2025 Of whom men, % Of whom women, % 2024 Of whom men, % Of whom women, % 2023 Of whom men, % Of whom women, % 2025 SEKm 2024 SEKm 2023 SEKm Sweden 2,156 52 48 2,079 52 48 2,027 52 48 5,540 5,588 5,279 EU excluding Sweden Germany 4,522 74 26 4,456 75 25 4,423 74 26 26,693 28,568 27,462 France 2,394 66 34 2,355 66 34 2,327 66 34 9,205 9,711 9,172 Spain 1,429 71 29 1,269 72 28 1,203 73 27 3,913 3,859 3,522 Netherlands 1,267 83 17 1,232 83 17 1,222 83 17 3,238 3,238 3,256 Slovakia 989 70 30 964 68 32 956 64 36 740 702 585 Italy 959 72 28 931 73 27 924 74 26 4,010 3,852 3,594 Poland 862 71 29 832 72 28 815 72 28 2,313 2,449 1,967 Austria 523 83 17 509 84 16 502 83 17 973 974 914 Belgium 418 82 18 441 81 19 461 82 18 668 711 693 Portugal 360 44 56 300 45 55 193 45 55 215 240 228 Finland 283 70 30 282 69 31 281 69 31 1,005 1,063 997 Denmark 115 42 58 113 41 59 115 40 60 25 29 30 Hungary 114 38 62 109 38 62 108 39 61 18 19 10 Czech Republic 58 56 44 57 55 45 58 52 48 8 9 10 Greece 44 59 41 45 60 40 45 58 42 18 15 13 Rest of EU excluding Sweden 113 44 56 110 43 57 110 41 59 61 65 64 Total EU excluding Sweden 14,450 71 29 14,005 72 28 13,743 72 28 53,103 55,504 52,517 Rest of Europe UK 1,520 75 25 1,534 76 24 1,553 76 24 5,909 6,647 6,226 Norway 78 46 54 74 47 53 80 47 53 15 18 5 Ukraine 64 38 62 62 39 61 62 40 60 12 14 10 Turkey 49 49 51 52 60 40 85 71 29 24 23 12 Russia – – – – – – 785 63 37 – – – Rest of Europe, excluding EU 37 32 68 35 29 71 39 36 64 61 66 64 Total Rest of Europe 1,748 71 29 1,757 72 28 2,604 69 31 6,021 6,768 6,317 TOTAL EUROPE 18,354 69 31 17,841 70 30 18,374 69 31 64,664 67,860 64,113 1) Within the framework of Essity’s employee data there are four ways to stipulate gender identity: woman, man, non-binary and gender-not-declared. The percentage of employees in the latter two response alternatives constitute a non-material share, which is why these groups are not reported separately. The average number of employees is calculated as an average over five quarters. 2) Information about non-current assets by country refers to intangible assets and property, plant and equipment according to Notes D1 and D2 and right-of-use assets according to Note G1. Essity | Annual Report 2025 133 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 134
B2b. Segment reporting, cont. Average number of employees1) Non-current assets2) Group by country continuing operations TB2:2 2025 Of whom men, % Of whom women, % 2024 Of whom men, % Of whom women, % 2023 Of whom men, % Of whom women, % 2025 SEKm 2024 SEKm 2023 SEKm North America USA 2,998 70 30 3,053 70 30 3,250 71 29 17,355 21,118 19,760 Canada 629 38 62 593 39 61 404 50 50 4,525 4,975 4,904 TOTAL NORTH AMERICA 3,627 64 36 3,646 65 35 3,654 69 31 21,880 26,093 24,664 Latin America Mexico 4,077 63 37 3,939 63 37 3,830 64 36 6,361 6,577 6,881 Colombia 3,567 69 31 3,426 68 32 3,386 69 31 2,370 2,395 2,461 Ecuador 889 71 29 928 70 30 959 71 29 626 748 674 Brazil 502 53 47 493 55 45 494 55 45 523 539 620 Chile 450 63 37 434 67 33 462 71 29 499 547 565 Argentina 301 63 37 321 63 37 312 62 38 184 206 11 Dominican Republic 236 69 31 247 68 32 260 67 33 209 257 247 Peru 141 45 55 136 46 54 136 46 54 385 424 388 Costa Rica 105 50 50 101 51 49 98 54 46 17 22 16 Rest of Latin America 73 53 47 67 51 49 60 42 58 20 29 2 TOTAL LATIN AMERICA 10,341 65 35 10,092 65 35 9,997 66 34 11,194 11,744 11,865 Asia India 325 89 11 313 90 10 316 91 9 106 90 65 Pakistan 192 75 25 201 76 24 218 76 24 15 9 4 Indonesia 145 63 37 144 65 35 146 64 36 294 386 384 Japan 82 44 56 92 44 56 108 46 54 31 40 48 Singapore 3 33 67 4 48 52 3 40 60 – – – China 2 50 50 2 50 50 2 50 50 – – 109 Malaysia – – – – – – – – – – – – Rest of Asia 104 48 52 88 43 57 81 40 60 182 202 161 TOTAL ASIA 853 72 28 844 72 28 874 72 28 628 727 771 Rest of the world Australia 430 52 48 426 51 49 416 51 49 4,501 5,087 5,332 South Africa 369 38 62 373 38 62 365 41 59 553 608 582 New Zealand 295 76 24 292 77 23 317 73 27 1,726 2,096 2,153 Fiji 92 76 24 89 78 22 86 77 23 47 48 45 Other Rest of the world 1 100 – 1 100 – 1 100 – 1 – – TOTAL REST OF THE WORLD 1,187 55 45 1,181 55 45 1,185 55 45 6,828 7,839 8,112 Total Group 34,362 67 33 33,604 67 33 34,084 68 32 105,194 114,263 109,525 1) Within the framework of Essity’s employee data there are four ways to stipulate gender identity: woman, man, non-binary and gender-not-declared. The percentage of employees in the latter two response alternatives constitute a non-material share, which is why these groups are not reported separately. The average number of employees is calculated as an average over five quarters. 2) Information about non-current assets by country refers to intangible assets and property, plant and equipment according to Notes D1 and D2 and right-of-use assets according to Note G1. Essity | Annual Report 2025 134 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 135
B2b. Segment reporting, cont. Average number of employees1) Group by country total operations TB2:2 2025 Of whom men, % Of whom women, % 2024 Of whom men, % Of whom women, % 2023 Of whom men, % Of whom women, % Sweden 2,156 52 48 2,079 52 48 2,027 52 48 EU excluding Sweden Germany 4,522 74 26 4,456 75 25 4,423 74 26 France 2,394 66 34 2,355 66 34 2,327 66 34 Spain 1,429 71 29 1,269 72 28 1,203 73 27 Netherlands 1,267 83 17 1,232 83 17 1,222 83 17 Slovakia 989 70 30 964 68 32 956 64 36 Italy 959 72 28 931 73 27 924 74 26 Poland 862 71 29 832 72 28 815 72 28 Austria 523 83 17 509 84 16 502 83 17 Belgium 418 82 18 441 81 19 461 82 18 Portugal 360 44 56 300 45 55 193 45 55 Finland 283 70 30 282 69 31 281 69 31 Denmark 115 42 58 113 41 59 115 40 60 Hungary 114 38 62 109 38 62 108 39 61 Czech Republic 58 56 44 57 55 45 58 52 48 Greece 44 59 41 45 60 40 45 58 42 Rest of EU excluding Sweden 113 44 56 110 43 57 110 41 59 Total EU excluding Sweden 14,450 71 29 14,005 72 28 13,743 72 28 Rest of Europe UK 1,520 75 25 1,534 76 24 1,553 76 24 Norway 78 46 54 74 47 53 80 47 53 Ukraine 64 38 62 62 39 61 62 40 60 Turkey 49 49 51 52 60 40 85 71 29 Russia – – – – – – 785 63 37 Rest of Europe, excluding EU 37 32 68 35 29 71 39 36 64 Total Rest of Europe 1,748 71 29 1,757 72 28 2,604 69 31 TOTAL EUROPE 18,354 69 31 17,841 70 30 18,374 69 31 1) Within the framework of Essity’s employee data there are four ways to stipulate gender identity: woman, man, non-binary and gender-not-declared. The percentage of employees in the latter two response alternatives constitute a non-material share, which is why these groups are not reported separately. The average number of employees is calculated as an average over five quarters. Essity | Annual Report 2025 135 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 136
B2b. Segment reporting, cont. Average number of employees1) Group by country total operations TB2:2 2025 Of whom men, % Of whom women, % 2024 Of whom men, % Of whom women, % 2023 Of whom men, % Of whom women, % North America USA 2,998 70 30 3,053 70 30 3,250 71 29 Canada 629 38 62 593 39 61 404 50 50 TOTAL NORTH AMERICA 3,627 64 36 3,646 65 35 3,654 69 31 Latin America Mexico 4,077 63 37 3,939 63 37 3,830 64 36 Colombia 3,567 69 31 3,426 68 32 3,386 69 31 Ecuador 889 71 29 928 70 30 959 71 29 Brazil 502 53 47 493 55 45 494 55 45 Chile 450 63 37 434 67 33 462 71 29 Argentina 301 63 37 321 63 37 312 62 38 Dominican Republic 236 69 31 247 68 32 260 67 33 Peru 141 45 55 136 46 54 136 46 54 Costa Rica 105 50 50 101 51 49 98 54 46 Rest of Latin America 73 53 47 67 51 49 60 42 58 TOTAL LATIN AMERICA 10,341 65 35 10,092 65 35 9,997 66 34 Asia India 325 89 11 313 90 10 316 91 9 Pakistan 192 75 25 201 76 24 218 76 24 Indonesia 145 63 37 146 64 36 155 65 35 Japan 82 44 56 92 44 56 108 46 54 Singapore 3 33 67 12 34 66 41 31 69 China 2 50 50 1,945 59 41 10,094 59 41 Malaysia – – – 271 46 54 1,394 47 53 Rest of Asia 104 48 52 145 48 52 361 53 47 TOTAL ASIA 853 72 28 3,125 61 39 12,687 58 42 Rest of the world Australia 430 52 48 426 51 49 419 51 49 South Africa 369 38 62 373 38 62 365 41 59 New Zealand 295 76 24 292 77 23 317 73 27 Fiji 92 76 24 89 78 22 86 77 23 Other Rest of the world 1 100 – 1 100 – 1 100 – TOTAL REST OF THE WORLD 1,187 55 45 1,181 55 45 1,188 55 45 Total Group 34,362 67 33 35,885 67 33 45,900 65 35 1) Within the framework of Essity’s employee data there are four ways to stipulate gender identity: woman, man, non-binary and gender-not-declared. The percentage of employees in the latter two response alternatives constitute a non-material share, which is why these groups are not reported separately. The average number of employees is calculated as an average over five quarters. Essity | Annual Report 2025 136 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 137
B3. Operating expenses Accounting principles AP Cost of goods sold includes the costs of production, purchase and distribution of goods sold, i.e. mainly the costs of raw materials, consumables, energy, repairs and maintenance, depreciation, amortization and impairment, storage, transport and production and distribution personnel. Sales, general and administration mainly includes costs for marketing, research and development, depreciation and amortization, and personnel costs within research and development, sales and administration. Items affecting comparability include costs in connection with acquisitions, restructuring, impairment and other specific events that are relevant when comparing earnings for one period with those of another. Operating expenses by function and type of cost Operating expenses by function SEKm 2025 2024 2023 Cost of goods sold IS –92,351 –97,929 –102,627 Sales, general and administration IS –26,571 –27,351 –25,661 Share of results of associates and joint ventures1) IS – 78 39 Amortization of acquisition-related intangible assets IS –972 –1,110 –1,109 Items affecting comparability IS TB3:1 –69 –939 –2,641 Total –119,963 –127,251 –131,999 1) Until 2024, the share of results of associates and joint ventures was recognized in operating profit. From 2025 onwards, these results are recognized below operating profit. Refer also to the Description of costs section on page 187. Operating expenses by type of cost SEKm Note 2025 2024 2023 Other income1) TB3:2 1,521 1,824 1,753 Change in inventory of finished products and products in progress1) –2,743 –1,890 –2,634 Raw materials and consumables –41,507 –46,087 –49,270 Personnel costs1) C1 –28,397 –28,684 –28,257 Other operating expenses1) TB3:3 –41,676 –44,987 –45,108 Amortization of intangible assets D1 –1,359 –1,464 –1,436 Depreciation of property, plant and equipment D2, G1 –5,718 –5,763 –5,734 Impairment of intangible assets1) D1 – –72 –356 Impairment of property, plant and equipment1) D2, G1 –84 –370 –590 Reversal of impairment of property, plant and equipment1) D2, G1 4 164 118 Share in profits of associates and joint ventures2) F2 – 78 39 Gain/loss on divestment and liquidation1) 3) F4 –4 – –524 Total –119,963 –127,251 –131,999 1) Including items affecting comparability. 2) Until 2024, the share of results of associates and joint ventures was recognized in operating profit. From 2025 onwards, these results are recognized below operating profit. 3) Including reversal of realized translation differences in divested companies to profit or loss. Items affecting comparability TB3:1 Distribution of items affecting comparability by type of cost SEKm 2025 2024 2023 Other income 33 – – Impairment of inventory of finished products and products in progress, net –4 –77 –167 Personnel costs –124 –219 –582 Other operating expenses 651) –421 –605 Impairment of intangible assets, net – –70 –350 Impairment of property, plant and equipment, net –35 –152 –413 Gain/loss on divestment and liquidation –4 – –524 Total –69 –939 –2,641 1) The amount primarily relates to the reversal of the provision for restructuring measures and the gain from the divestment of a previously impaired asset in restructuring measures. Distribution of items affecting comparability SEKm 2025 Costs for restructuring measures –92 Other 23 Total –69 Distribution of items affecting comparability, previous periods SEKm 2024 Costs for restructuring measures –637 Costs in conjunction with fires in Italy and the USA –184 Impairment losses Goodwill –70 Other –48 Total –939 Distribution of items affecting comparability, previous periods SEKm 2023 Costs for restructuring measures –1,948 Net loss, divestments in Russia and New Zealand –524 Transaction costs related to divestments –77 Other –92 Total –2,641 Other income TB3:2 SEKm 2025 2024 2023 Sales not included in core operations 1,521 1,824 1,753 Total 1,521 1,824 1,753 Other income includes rental income, which is recognized in the period covered by the rental contract, income from insurance compensation and similar items, which are recognized in accordance with the implied financial effect of the contract. Essity | Annual Report 2025 137 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 138
B3. Operating expenses, cont. Distribution of other operating expenses TB3:3 SEKm 2025 2024 2023 Transport expenses –10,621 –10,941 –11,142 Energy costs1) –5,848 –6,895 –8,809 Marketing costs –7,161 –7,518 –6,898 Repairs and maintenance –4,003 –4,144 –3,943 IT, telephony and lease of premises –1,426 –1,533 –1,327 Other operating expenses, production –6,230 –6,945 –6,752 Other operating expenses, distribution, sales and administration –6,353 –6,502 –5,773 Other –34 –509 –464 Total –41,676 –44,987 –45,108 1) After deduction for revenues from energy in the amount of SEK 221m (300; 167). Other disclosures Exchange rate effects had a negative impact of SEK –130m (–91; –197) on operating profit. Other disclosures1) SEKm 2025 2024 2023 Government grants received 84 77 232 Research and development 2) –1,798 –1,852 –1,704 1) These items are included in the tables above under the respective type of cost. 2) Represents Sales, general and administration in its entirety. B4. Auditing expenses Auditing expenses SEKm 2025 2024 2023 Ernst & Young Audit assignments –97 –103 –91 Auditing activities other than the audit assignment –4 –4 –2 Tax consultancy services –1 –1 –1 Other assignments –4 –3 –4 Total Ernst & Young –106 –111 –98 Other auditors Audit assignments –1 –2 –15 Tax consultancy services –1 –2 –3 Other assignments 0 0 –2 Total other auditors –2 –4 –20 Total –108 –115 –118 Of which, discontinued operations; other auditors – – –16 Of which, continuing operations –108 –115 –102 B5. Income taxes Accounting principles AP The Group’s tax expense comprises current tax and deferred tax. The recognition of tax effects is determined by the manner in which the underlying transaction is recognized. For items in profit or loss, the tax effect is recognized in profit or loss, with the same applying for transactions in other comprehensive income within equity, whereby the tax effect is subsequently recognized in other comprehensive income. Current tax is calculated on the tax rules prevailing in the countries where the Group operates. Taxation at source on Intra-Group transactions and interest attributable to income tax are recognized as current income tax. Deferred tax is calculated based on temporary differences between the carrying amounts and the tax base values of assets and liabilities and for tax loss carryforwards and other unutilized tax deductions where it is probable that these can be utilized against future taxable profits. Deferred taxes are measured in the balance sheet at their nominal amount and based on the tax rates enacted or substantively enacted on the balance sheet date. Essity does not recognize any deferred tax liability regarding temporary differences on undistributed earnings from shares in subsid- iaries, joint ventures or associates, since Essity can control the reversal of the temporary differences and it is probable that such a reversal will not take place in the foreseeable future. Essity has applied the mandatory exemption to recognize and disclose information on deferred tax assets and deferred tax liabilities arising from income taxes under Pillar 2. Tax liabilities and tax assets are recognized net when Essity has a legal right to offset. OECD Pillar 2 model rules Essity is subject to OECD’s model rules for Pillar 2. Pillar 2 applies to multinational groups with sales of more than EUR 750m and the framework aims to ensure that profits in each jurisdiction where the Group operates are taxed at a rate of at least 15%. On December 13, 2023, Sweden, the jurisdiction where the Parent company Essity Aktiebolag (publ) is located, introduced legislation on top-up tax for companies in large groups. This legislation entered into force on January 1, 2024. Under this law, the Group is obliged to pay a top-up tax on the profits of its subsidiaries that are taxed at an effective tax rate of less than 15%. Essity has performed a preliminary assessment of its potential expo- sure to Pillar 2 income taxes based on the temporary safe harbor rules. By applying the temporary safe harbor rules, multinational groups operating in low-risk countries can reduce the administrative burden for a transitional period of three years. The preliminary assessment is based on the latest available information on the financial position of the entities within the Group, which are consolidated financial statements up to the fourth quarter of the 2025 fiscal year. The assessment shows that four jurisdictions cannot apply the temporary safe harbor rules. For two of these jurisdic- tions, Switzerland and Ireland, a potential top-up tax is expected based on the full Pillar 2 rules. The top-up tax is esti- mated to amount to SEK 19m and SEK 2m, respectively. Income tax of SEK 21m (2024: SEK 15m) related to Pillar 2 is therefore included in the consolidated income statement for 2025. Key assessments and assumptions KAA The measurement of current and deferred tax assets and tax liabilities involves significant estimates that are subject to uncertainty. The most material uncertainties relate to assumptions about future taxable earnings, the date of the reversal of temporary differences and the utilization of loss carryforwards, tax credits and other tax benefits. Since Essity operates globally, these estimates are affected by changes in tax legislation, tax rates and economic conditions in the countries where the Group operates. In addition, the valuation of uncertain tax positions is based on assessments of the likelihood that tax authorities or courts will accept the company’s interpretation of the applicable rules. The outcome of such assessments may differ from the assumptions made on the balance sheet date. Changes in assumptions about future taxable earnings or in the assessment of uncertain tax positions may there- fore result in significant adjustments to recognized tax assets and tax liabilities in future fiscal years. Essity | Annual Report 2025 138 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 139
B5. Income taxes, cont. Tax expense Tax expense (+), tax income (–) SEKm 2025 % 2024 % 2023 % Current tax Income tax for the period1) 4,791 27.9 4,970 30.4 3,957 30.9 Adjustments for prior periods 356 2.1 –177 –1.1 117 0.9 Current tax expense TB5:1 5,147 30.0 4,793 29.3 4,074 31.8 Deferred tax Changes in temporary differences –341 –2.0 –414 –2.5 –629 –4.9 Adjustments for prior periods –12 –0.1 –65 –0.4 –187 –1.4 Revaluations –351 –2.0 17 0.1 17 0.1 Deferred tax expense TB5:1 TB5:2 TB5:3 –704 –4.1 –462 –2.8 –799 –6.2 Tax expense IS 4,443 25.9 4,331 26.5 3,275 25.6 1) Includes top-up tax in Switzerland and Ireland related to Pillar 2 of SEK 19m and SEK 2m, respectively. Explanation of tax expense The difference between the recognized tax expense and expected tax expense is explained below. The expected tax expense is calculated based on profit before tax in each country multiplied by the statutory tax rate in the country. Tax expense SEKm 2025 % 2024 % 2023 % Profit before tax, continuing operations IS 17,161 16,364 12,792 Profit before tax from discontinued operations – 245 295 Profit before tax 17,161 16,609 13,087 Expected tax expense 4,177 24.3 4,026 24.2 2,877 22.0 Permanent differences between accounting and taxable result Effects of subsidiary financing1) 31 0.2 25 0.1 33 0.2 Effects of acquisitions and divestments2) – – –6 0.0 162 1.2 Taxes relating to profit-taking3) 32 0.2 61 0.4 63 0.5 Other permanent effects4) 262 1.5 411 2.5 194 1.5 Taxes related to prior periods5) 344 2.0 –169 –1.0 –55 –0.4 Changes in the value of deferred tax assets6) –53 –0.3 –1 0.0 5 0.0 Changes in tax rates7) –350 –2.0 12 0.1 12 0.1 Total effective tax expense 4,443 25.9 4,359 26.3 3,291 25.1 Tax expense, continuing operations IS 4,443 25.9 4,331 26.5 3,275 25.6 Tax expense, discontinued operations – 28 16 1) The effects are principally attributable to financing of the operation in Germany. 2) Effects of acquisitions and divestments in 2023 relate to the divestment of Russian operations of SEK 162m. 3) Mainly attributable to taxation at source on profit-taking to Germany from Mexico of SEK 11m and to Mexico from Costa Rica of SEK 7m. The year 2024 mainly attributable to taxation at source on profit-taking to the Netherlands from Canada of SEK 32m. The year 2023 mainly attributable to taxation at source on profit-taking to Colombia from Ecuador of SEK 46m. 4) Other permanent effects are mainly attributable to non-deductible taxation at source on royalties and services of SEK 87m, exceptional surtax on corporate income tax and CVAE in France of SEK 52m and top-up tax in Switzerland and Ireland of SEK 21m. 2024 is mainly attributable to effects of internal restructuring of SEK 324m, non-deductible taxation at source on royalties and services of SEK 99m, and top-up tax in Switzerland of SEK 15m. The year 2023 primarily comprises the effects of state taxation in the USA of SEK 118m and the permanent tax impact from internal restructuring of SEK 75m. 5) Taxes attributable to earlier periods relate mainly to increased costs for tax audits of SEK 390m. The year 2024 relates to reduced costs for tax audits of SEK –214m and impairment of tax assets in Sweden of SEK 71m. The year 2023 relates mainly to adjustment of BEAT of SEK 76m and adjustment of capitalized research and development costs and loss carryforwards of SEK –105m in the USA. 6) The change in value of deferred tax assets relates to the capitalization of previously non-capitalized loss carryforwards in Spain of SEK 28m and Chile of SEK 13m. 7) Relates to the revaluation of a deferred tax liability in Germany of SEK 330m and in the USA of SEK 20m. The preceding year was mainly attributable to the USA with SEK 20m for 2024 and SEK 9m for 2023. Current tax liability Current tax liability (+), current tax asset (–) SEKm 2025 2024 2023 Value, January 1 –231 876 437 Current tax expense TB5:1 5,147 4,793 4,074 Liabilities directly attributable to assets held for sale – – –24 Paid tax OCF CF TB5:1 –4,713 –5,860 –3,615 Other changes from acquisitions, divestments and reclassifications – –5 25 Translation differences 18 –35 –21 Value, December 31 221 –231 876 of which current tax liability BS 1,847 1,442 2,165 of which current tax asset BS 1,626 1,673 1,289 Tax by country TB5:1 Tax expense (+), tax income (–) Tax payments made by entities in different countries (–), SEKm Country Current tax expense Deferred tax expense Total tax expense Paid tax Mexico 460 138 598 –447 USA 538 –51 487 –464 France 384 –5 379 –349 Sweden 698 –338 360 –337 Germany 718 –399 319 –960 Spain 320 –18 302 –285 UK 211 51 262 –183 Netherlands 231 –2 229 104 Colombia 208 –6 202 –368 Italy 142 20 162 –269 Austria 111 5 116 –13 Belgium 104 3 107 –94 Poland 62 29 91 –99 Slovakia 86 4 90 –80 Switzerland 73 0 73 –69 Norway 66 0 66 –55 Denmark 65 0 65 –62 Finland 51 5 56 –67 Ecuador 58 –2 56 –71 Peru 52 –2 50 –51 Canada 111 –62 49 –123 Czech Republic 45 0 45 –42 Hungary 35 0 35 –32 Argentina 18 4 22 –7 Dominican Republic 20 –1 19 –24 Philippines 14 2 16 –13 Other countries1) 266 –79 187 –253 Total OCF CF IS 5,147 –704 4,443 –4,713 1) Other countries comprise several countries where the tax expense and tax payments for the respective countries are of a low amount. Essity | Annual Report 2025 139 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 140
B5. Income taxes, cont. Deferred tax liability TB5:2 Deferred tax liability (+), deferred tax asset (–) SEKm Value, January 1 Deferred tax expense Other changes2) Translation differences Value at December 31 Intangible assets 5,105 –636 1 –401 4,069 Property, plant and equipment 3,391 23 – –313 3,101 Financial non-current assets 1,007 –159 35 –2 881 Current assets –307 –45 –2 37 –317 Provisions –1,179 –382 587 35 –939 Liabilities –2,213 339 –7 135 –1,746 Tax credits and tax loss carryforwards –1,300 9 0 95 –1,196 Other 148 147 0 2 297 Total1) 4,652 –704 614 –412 4,150 1) The net closing deferred tax liability comprises BS deferred tax assets of SEK 2,122m (2,326; 2,343) and BS deferred tax liabilities of SEK 6,272m (6,978; 6,935). 2) Other changes mainly include deferred tax recognized directly in other comprehensive income within equity according to IAS 19 Employee Benefits of SEK –370m and IFRS 9 Financial instruments of SEK –244m. Preceding periods’ deferred tax liability (+), deferred tax asset (–), SEKm TB5:3 YEAR Value, January 1 Liabilities directly attributable to assets held for sale Deferred tax expense Other changes Translation differences Value at December 31 2024 BS 4,592 0 –462 159 363 4,652 2023 6,173 –136 –799 –440 –206 4,592 Tax loss carryforwards Tax credits and tax loss carryforwards for which deferred tax assets were recognized have been reported at the tax amount on the line Tax credits and tax loss carryforwards in TB5:2 in the amount of SEK –1,196m. Loss carryforwards for which no deferred tax assets were recognized amounted to SEK 3,997m (4,768; 5,071) at December 31, 2025. The change in unrecognized tax loss carryforwards for the period includes SEK –336m in exchange rate effects, SEK 0m that has expired and SEK –435m that was either utilized or capitalized. The tax value of non-capitalized tax loss carryforwards amounted to SEK 1,184m (1,345; 1,438). The useful lives of these tax loss carryforwards are distrib- uted as follows: Loss carryforwards for which no deferred tax assets were recognized, SEKm Year of maturity 2025 2024 2023 Within 1 year 9 – 74 2 years 11 8 – 3 years 28 8 7 4 years 7 – 7 5 years or more 34 59 51 Indefinite useful life 3,908 4,693 4,932 Total 3,997 4,768 5,071 Essity | Annual Report 2025 140 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 141
C. Employees C1. Personnel costs The tables below present the Group’s personnel costs for continuing operations and the Group’s personnel costs total operations. Information concerning the average number of employees by country is presented in Note B2b on page 133. Personnel costs, continuing operations SEKm Note 2025 2024 2023 Salaries and remuneration –20,511 –20,902 –20,465 of which Executive Management Team TC2:1 C2 –1712) –191 –144 of which Board of Directors C3 –13 –12 –12 Pension costs –1,404 –1,475 –1,415 of which defined benefit pension costs C4 –290 –361 –316 of which other pension costs –1,114 –1,114 –1,099 Other social security costs –4,152 –4,017 –4,535 Other personnel costs –2,330 –2,290 –1,842 Total1) –28,397 –28,684 –28,257 1) Of which items affecting comparability of SEK –124m (–219; –582). 2) Excluding compensation to former CEO during notice period of SEK 18m. Personnel costs, total operations SEKm Note 2025 2024 2023 Salaries and remuneration –20,511 –21,344 –22,733 of which Executive Management Team TC2:1 C2 –1712) –191 –144 of which Board of Directors C3 –13 –12 –12 Pension costs –1,404 –1,523 –1,660 of which defined benefit pension costs C4 –290 –361 –318 of which other pension costs –1,114 –1,162 –1,342 Other social security costs –4,152 –4,049 –4,704 Other personnel costs –2,330 –2,362 –2,210 Total1) –28,397 –29,278 –31,307 1) Of which items affecting comparability of SEK –124m (–219; –582). 2) Excluding compensation to former CEO during notice period of SEK 18m. C2. Remuneration of senior executives Accounting principles AP Incentive programs Essity has the following remuneration programs: Short Term Incentive (STI) and Long Term Incentive (LTI). Variable remuneration is capped at a specific percentage of fixed salary and is recognized as an expense and non-current pro- vision, respectively, during the earning period in accordance with IAS 19 Employee Benefits. The programs are conti- nuously evaluated and reported in the annual accounts. Payment is made in cash the year following the vesting period. Description of incentive programs The STI program consist of financial targets and non-financial targets that support the achievement of financial targets. Typically targets consist of operating cash flow, cost efficiency, EBITA margin, organic sales growth and consolidated profit before tax, as well as innovation goals. Essity has adopted a long-term incentive program to enable the company to recruit and retain key individuals and to promote the common interest of participants and shareholders in generating long-term returns. The LTI program consist of two goals. The first goal is based on the performance of the company’s Class B share, measured as TSR (Total Shareholder Return) compared with a weighted TSR index of competing companies with operations in Essity’s business areas of Consumer Goods, Health & Medical and Professional Hygiene over a three- year period, where the performance target is higher TSR for the company than the index for the benchmark group (maximum outcome requires a 5% better outcome than index for the benchmark group). The second goal is a relative goal for reduction in carbon emissions. For maximum outcome, a reduction of 7.5% on a linear basis in carbon emis- sions is required compared with the estimated target that applied in the year immediately preceding the start of the measurement period. Variable remuneration under LTI is paid in cash to employees and accordingly does not have any dilutive effect. Senior executives who participate in the LTI program are required to purchase shares in Essity for the entire amount of the LTI outcome after tax and must not divest these shares for a period of three years. Annual General Meeting guidelines for remuneration of senior executives These guidelines shall govern remuneration to directors, the President, Executive Vice President and other members of the executive team (below referred to as “senior executives”). The guidelines do not include remuneration decided upon by the General Meeting. Remuneration principles Successful implementation of the company’s business strategy and the fostering of the company’s long-term inte- rests, including its sustainability, require that the company is able, through competitive remuneration on market terms, to recruit, incentivize and retain skilled employees. The total remuneration package must therefore be on market terms and competitive on the executive’s field of profession, and must be related to the executive’s responsi- bilities, powers and performance. The remuneration may comprise fixed salary, short and long-term variable remune- ration, other benefits and pension. The company’s business strategy is described in the Annual Report. Variable remuneration Variable remuneration shall be based on results relative to short- and long-term targets for Essity’s incentive program, which shall contribute to the fulfilment of the objectives established by the company or to the performance of the company’s share. Remuneration shall be aimed at promoting the company’s business strategy and long-term inte- rests, including its sustainability. Furthermore, variable remuneration shall be paid as cash remuneration and shall not be included in the basis for pension computation. The short-term element shall not exceed 100% of annual fixed salary and the long-term element shall not exceed 100% of annual fixed salary. The maximum variable remuneration level shall be determined per individual, taking into account the total remuneration in relation to the specific role, the local market, the terms of employment or the individual performance. Short-term performance targets shall include either organic growth, product development, earnings, cash flow, capital efficiency, return or individual targets or a combination thereof. Long-term performance targets shall include either sustainability, total shareholder return (TSR) or a combination thereof and – in order to create a long-term perspective – be combined with requirements for senior executives to use the compensation net of tax to invest in the Essity share with a minimum holding period of three years. The company shall have the possibility to withhold payment of variable remuneration where necessary and pos- sible according to law, provided there are special reasons for so doing and such a measure is necessary to meet the com pany’s long-term interests, including its sustainability. Furthermore, the company shall have the possibility provi- ded by law to demand repayment of any variable remuneration paid based on erroneous grounds. Pension and other benefits Pension benefits shall be defined contribution, and the annual premium shall not exceed 40% of the fixed annual salary. Other, lesser benefits may include medical insurance, company car, fitness allowance as well as membership and service fees, training/education and other support. Essity | Annual Report 2025 141 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 142
A notice of termination period of not more than two years shall apply upon termination of the employment relations- hip where the termination is initiated by the company, and of not more than one year where the termination is initia- ted by the executive. Severance pay should not exist. Decision-making process and reporting Matters relating to remuneration of senior executives shall be addressed by the Board’s Remuneration Committee and, with respect to the President, decided upon by the Board. The duties of the Remuneration Committee shall also include preparing board decisions regarding proposals for guidelines for remuneration of senior executives, perfor- ming oversight as well as monitoring and assessing the application thereof. When the Board or the Remuneration Committee addresses and decides on remuneration-related matters, senior executives may not be present insofar as the matter relates to them. With respect to the calculation of variable remuneration, an audit certificate must be obtained before any decision is taken regarding payment. In the preparation of the remuneration guidelines, conside- ration has been given to salary and employment conditions for the company’s other employees, such as information regarding total remuneration, components of the remuneration as well as the increase in remuneration and the rate of increase over time, and the company’s equality of opportunity policy. The Board shall prepare a remuneration report. Application of, and deviation from, the guidelines The Board may decide to temporarily deviate from the guidelines, wholly or in part, if there are special reasons for so doing in an individual case and deviation is necessary to satisfy the company’s long-term interests, including its sus- tainability. The duties of the Remuneration Committee include preparing board decisions on remuneration issues, including decisions regarding deviations from the guidelines. With respect to employment relationships governed by rules other than Swedish rules, appropriate adjustments shall take place with respect to pension benefits and other benefits to ensure compliance with such rules or local practice, whereupon the overarching purpose of these guide- lines shall be attained as far as possible. The guidelines shall not take precedence over mandatory terms or employment law legislation or collective agreements. Nor shall they apply to already executed agreements. Description of significant changes compared to previous guidelines The changes are only editorial and are proposed for clarification purposes.These guidelines shall apply from the Annual General Meeting 2024 until further notice. Company’s application of guidelines The company applied the guidelines approved by the AGM in the following manner. Fixed salary The fixed salary is to be in proportion to the individual’s position and the authority and responsibilities this entails, as well as performance. It is set individually at a level that, combined with other remuneration, is assessed as a market rate and competitive in the labor market in which the executive works. Variable remuneration After 31 May 2025 variable remuneration of the CEO is maximized to a total of 130% and for the Executive Vice Presi- dent is maximized to a total of 100% of the fixed salary. Up until 1 June 2025, variable remuneration for both was maxi- mized to a total of 100%. For the Business and Global Unit Presidents the maximum outcome is 100% –130% of fixed salary. The corresponding limit for other senior executives is 50%–100%. The program for variable remuneration is divided into short-term and long-term portions. The short-term portion (“Short Term Incentive”, or “STI”) for the CEO may after 31 May 2025 amount to a maximum of 80% and for the Executive Vice President to a maximum of 50% of fixed salary. Up until 1 June 2025, STI outcome for both was maximized to 50% of fixed salary. For the Business and Global Unit Presidents, the maximum outcome is 50%–80% of the fixed salary, while the corresponding limit for other senior executives is 50%. For one Executive in Sweden the STI program has been replaced by a fixed annual allowance. The STI targets set for the Business Unit Presidents are mainly based on organic sales growth, EBITA margin and operating cash flow for each business unit and Group-wide cash flow, return on capital and innovation targets. The targets for the CEO and senior executives within the global units and central functions are based primarily on the group’s organic sales growth,return on capital, operating cash flow, and profit. Furthermore, for certain senior executi- ves, targets for strategic projects and innovation also apply, accounting for 10%–20% of the STI as part of variable remuneration. The long-term portion (“Long Term Incentive”, or LTI) of the program may amount to a maximum of 50% of the fixed salary. The TSR target accounts for a maximum of 80% of the LTI as part of variable pay. The sustainability target, Science Based Targets Scope 1 and 2, which aims to reduce emissions of carbon dioxide in energy utilization and purchased electricity, accounts for a maximum of 20% of the variable remuneration. The senior executive is to invest all of the variable LTI compensation, after tax withholdings, in Essity shares. The shares may then not be sold within three years from the purchase date of shares in the relevant LTI program. Outcome, variable remuneration For the CEO, STI resulted in 33.7% and for the previous CEO and the Executive President STI resulted in 21,1% of fixed salary for 2025. For the heads of the central functions, STI resulted in 20,8% of fixed salary. STI resulted in variable remuneration corresponding to 18,7–57.6% of fixed salary for the Business Unit and Global Unit Presidents. The out- come for all senior executives from the LTI program amounted to 50% of fixed salary. Based on 2025 salaries of 13 senior executives, the maximum outcome of variable remuneration would result in a cost for the Group, excluding social security costs, of approximately SEK 96,0m. Other benefits Other benefits consist of, in some cases, a company car, commuter reimbursement and health insurance. Pension The CEO has a defined contribution pension based on an annual payment, to be paid by the company, amounting to 35% of the employee’s fixed salary, in addition to the agreed contribution for the basic pension benefits in the ITP plan (supplementary pensions for salaried employees), with retirement pension benefits limited to a maximum salary income of 7.5 income base amounts. Six other executives are covered by corresponding defined contribution pen- sion benefits with an annual premium of approximately 30% and pension age of 65. One senior executive in Sweden has a combined defined benefit and defined contribution plan. Five senior executives that are employed in com- panies outside Sweden are encompassed by defined contribution pension plans on local market-based terms. Notice period and severance pay The agreement with the CEO stipulates a period of notice of termination of two years if such notice is given by the company. The CEO has a corresponding right with a period of termination of one year. If notice is given by the com- pany, the CEO is not obligated to serve during the notice period. The agreement has no stipulations with regard to severance pay. Between the company and other senior executives, a period of notice of termination of one to two years normally applies, if such notice is given by the company. The executive has a corresponding right with a period of notice of termination of six months to one year. The executive is normally expected to be available to the company during the notice period. The agreements have no stipulations with regard to severance pay. Preparation and decision process for remuneration During the year, the Remuneration Committee submitted recommendations to the Board regarding the principles for remuneration of senior executives. The recommendations encompassed the ratio between fixed and variable remu- neration and the size of any salary increases. In addition, the Remuneration Committee expressed an opinion on the criteria for assessing variable remuneration and pension terms. The Board discussed the Remuneration Committee’s proposal and decided on the basis of the Committee’s recommendations. The remuneration of corporate manage- ment for the fiscal year was based on the Remuneration Committee’s recommendation and, with regard to the CEO, decided by the Board. The executives concerned did not participate in remuneration matters pertaining to themsel- ves. When it was deemed appropriate, the work of the Remuneration Committee was carried out with the support of external expertise. C2. Remuneration of senior executives, cont. Essity | Annual Report 2025 142 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 143
Remuneration and other benefits during the year 2025 TC2:1 SEK Fixed salary Variable remuneration1) Other benefits Total salaries and remuneration President and CEO Magnus Groth (January 1–May 31, 2025) 7,583,333 5,387,5962) 78,514 13,049,4435) President and CEO Ulrika Kolsrud (June 1–December 31, 2025) 9,464,052 7,809,4203) 263,288 17,536,760 Other senior executives (13 people) 70,595,593 56,779,2524) 13,038,484 140,413,329 Total 87,642,978 69,976,268 13,380,286 170,999,532 1) Variable remuneration covers the 2025 fiscal year but is paid in 2026. 2) Of which LTI program SEK 3,791,667. 3) Of which LTI program SEK 4,666,667.. 4) Of which LTI program SEK 35,303,486. 5) Total Salary and total remuneration including payment for notice period until 31 May 2026 is SEK 31,437,875. Pension costs 20251) SEK President and CEO Magnus Groth (January 1–May 31, 2025)2) 3,160,0905) President and CEO Ulrika Kolsrud (June 1–December 31, 2025)3) 3,785,687 Other senior executives (13 people)4) 17,821,793 Total 24,767,570 1) The pension costs pertain to the costs that affected profit for 2025, excluding special payroll tax. 2) Outstanding pension obligations amount to SEK 20,360,948. 3) Outstanding pension obligations amount to SEK 5,995,303. 4) Outstanding pension obligations amount to SEK 78,386,487. 5) Total pension costs including pension costs for notice period until 31 May 2026 is SEK 10,744,306. Remuneration and other benefits during the year 2024 TC2:1 SEK Fixed salary Variable remuneration1) Other benefits Total salaries and remuneration President and CEO Magnus Groth 17,500,000 17,180,9312) 192,894 34,873,825 Other senior executives (12 people) 72,827,316 76,533,4123) 7,047,255 156,407,983 Total 90,327,316 93,714,343 7,240,149 191,281,808 1) Variable remuneration covers the 2024 fiscal year but is paid in 2025. 2) Of which LTI program SEK 8,750,000. 3) Of which LTI program SEK 36,588,842. Pension costs 20241) SEK President and CEO Magnus Groth2) 7,302,869 Other senior executives (12 people)3) 28,392,266 Total 35,695,135 1) The pension costs pertain to the costs that affected profit for 2024, excluding special payroll tax. 2) Outstanding pension obligations amount to SEK 22,076,312. 3) Outstanding pension obligations amount to SEK 90,348,333. Remuneration and other benefits during the year 2023 TC2:1 SEK Fixed salary Variable remuneration1) Other benefits Total salaries and remuneration President and CEO Magnus Groth 17,000,000 11,018,6262) 150,979 28,169,605 Other senior executives (13 people) 65,135,658 48,807,8803) 2,581,682 116,525,220 Total 82,135,658 59,826,506 2,732,661 144,694,825 1) Variable remuneration covers the 2023 fiscal year but is paid in 2024. 2) Of which LTI program SEK 0, BIP program SEK 5,108,500. 3) Of which LTI program SEK 0, BIP program SEK 19,573,265. Pension costs 20231) SEK President and CEO Magnus Groth2) 7,095,675 Other senior executives (13 people)3) 15,670,674 Total 22,766,349 1) The pension costs pertain to the costs that affected profit for 2023, excluding special payroll tax. 2) Outstanding pension obligations amount to SEK 20,659,029. 3) Outstanding pension obligations amount to SEK 80,762,166. Outcome of the long-term incentive program 2025 for the President and CEO and other senior executives SEK Target Target’s relative weight(%) Target out- come (%) Remuneration President and CEO Magnus Groth Total Shareholder Return (TSR) 40 40 3,033,334 (January 1–May 31, 2025) Science-based targets, Scope 1 and 2 10 10 758,333 President and CEO Ulrika Kolsrud Total Shareholder Return (TSR) 40 40 3,733,334 (June 1–December 31, 2025) Science-based targets, Scope 1 and 2 10 10 933,333 Other senior executives (13 people) Total Shareholder Return (TSR) 40 40 28,242,789 Science-based targets, Scope 1 and 2 10 10 7,060,697 Annual total remuneration ratio of the President and CEO to the median annual total remuneration for all employees (excluding the President and CEO) SEKm Total remuneration1) 2025 Ulrika Kolsrud, President and CEO 42.7 Median total remuneration excluding the President and CEO2) 0.56 Annual Total Remuneration Ratio 76.3 1) Total Remuneration was calculated as all payments (annualized) made to the employee through the payroll system including pension contributions (annualized), variable remuneration (annualized) covers the 2025 fiscal year but is paid in 2026. 2) The total remuneration of the median employee of all employees recorded in the HRIS system. The table shows the annualized total remuneration for the President and CEO divided by the total remuneration of the median employee. For 2025, the median employee is selected from all employees captured in the global HR platform. In previous Annual Reports up until 2023, the total remuneration of the President and CEO was compared to the average total remuneration for employees in Essity Aktiebolag (publ) excluding senior executives. The change in the remuneration ratio was mainly due to the updated methodology used to identify the median employee. Obligations in relation to former presidents and CEOs For former presidents and CEOs, Essity has outstanding, non-funded obligations amounting to SEK 94m. These costs were recognized in previous years and comprise pension obligations that Essity assumed from Svenska Cellulosa Aktiebolaget in conjunction with the split of the Group. C2. Remuneration of senior executives, cont. Essity | Annual Report 2025 143 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 144
C4. Remuneration after completion of employment Accounting principles AP Defined benefit pension plans Defined benefit pension plans are characterized by the fact that payment is based on the period of employment and the employee’s salary at, or just prior to, retirement. The actuarial and investment-related risks associated with defined benefit pension plans are carried by the company. The defined benefit obligations are calculated annually by independent actuaries using the Projected Unit Credit Method. Calculations are based on actuarial assumptions. Actuarial assumptions comprise the company’s best assessment of the variables that determine the final cost for providing the benefits. The obligation is measured at the present value of the anticipated future cash flows using a discount rate (see Key assessments and assumptions below). Actuarial gains and losses (remeasurements) are recognized directly in equity under other comprehensive income in the period in which they arise. The recognized cost for the defined benefit plans includes personnel costs, as well as net interest items. Net interest items comprise the discount rate calculated on the average net pension lia- bility for the period, taking fee and remuneration payments into consideration. The difference between the calculated interest income (discount rate) on the plan assets and Essity’s actual return on the plan assets is included in the remeasurement of the defined benefit net liability or net asset recognized in equity under other comprehensive income. Past service costs are recognized in profit or loss in the period in which they arise. The liability recognized in the balance sheet for defined benefit pension plans is the present value of the obligation on the balance sheet date minus the fair value of the plan assets. Funded plans with net assets, meaning plans with assets exceeding obligations, are recognized as a financial non-current asset provided they are not limited by the “asset ceiling” under IAS 19. Other pension plans, which are not fully funded or unfunded, are recognized as Provisions for pensions. In certain countries, pension payments are subject to taxes or fees. In such cases, these are included in the calcula- tion of the obligation for the defined benefit pension plans. These taxes or fees are recognized as an expense in profit or loss, except in cases where they are attributable to actuarial gains or losses, in which case they are recognized directly in equity under other comprehensive income. Defined contribution pension plans Plans where the employer’s obligation is limited to the premiums the company has undertaken to pay are classified as defined contribution plans. In these plans, it is the employee who bears the investment risk, meaning the risk that the invested assets could be insufficient to generate the anticipated compensation. The Group’s payments relating to defined contribution plans are recognized as an expense during the period the employees carry out the service to which the payment relates. Other post-retirement benefits Some Group companies provide post-retirement healthcare benefits. The obligation and anticipated costs for these benefits have been calculated and recognized in a similar manner to the defined benefit pension plans. Severance pay Severance pay is recognized as a payroll expense when the Group has an obligation to compensate employees whose employment was terminated early. Key assessments and assumptions KAA The calculation of recognized expenses and provisions for defined benefit pension plans, where the size of the future compensation is unknown and payment will occur far in the future, is dependent on assumptions and assessments. Key assumptions and assessments include the discount rate, future salary increases, inflation and life expectancy. Essity determines the discount rate based primarily on AA-rated corporate bonds issued in the currency in which the payments will be made that match the duration of the obligations. If no such corporate bonds are available, govern- ment bonds or mortgage bonds are used. Inflation assumptions are based on a combination of central bank targets, implicit market expectations and long-term analyst forecasts. Assumptions regarding salary increases are based on market expectations and market research forecasts. Key actuarial assumptions are presented in TC4:5 . The sensitiv- ity of the recognized provision with respect to key actuarial assumptions is described in TC4:6 . C3. Fees to board members in the Parent company Remuneration to non-executive Board members of Essity Aktiebolag (publ) refers to the fees approved at the AGM on March 27, 2025 for the period until the next AGM in March 2026. No remuneration is paid to the President and CEO and other employees. Board fee Audit Committee fee Remuneration Committee fee Portfolio Development Committee fee Total SEK 2025 2024 2023 2025 2024 2023 2025 2024 2023 2025 20243) 2023 2025 2024 2023 Jan Gurander (Chairman)1) 2,880,000 2,730,000 875,000 350,000 320,000 300,000 170,000 160,000 300,000 3,400,000 3,210,000 1,475,000 Pär Boman (Chairman)2) 2,625,000 300,000 155,000 300,000 3,380,000 Ewa Björling 910,000 875,000 320,000 300,000 1,230,000 1,175,000 Annemarie Gardshol 960,000 910,000 875,000 960,000 910,000 875,000 Maria Carell 960,000 910,000 875,000 960,000 910,000 875,000 Bert Nordberg 960,000 910,000 875,000 145,000 135,000 130,000 425,000 1,105,000 1,495,000 1,430,000 Barbara Milian Thoralfsson 960,000 910,000 875,000 490,000 450,000 425,000 145,000 135,000 130,000 1,595,000 1,535,000 1,430,000 Torbjörn Lööf 960,000 910,000 875,000 145,000 300,000 1,105,000 1,230,000 1,175,000 Karl Åberg 960,000 910,000 350,000 320,000 1,310,000 1,230,000 Alexander Lacik 960,000 960,000 Katarina Martinsson 960,000 350,000 1,310,000 Total 10,560,000 9,100,000 8,750,000 1, 540,000 1,410,000 1,325,000 605,000 430,000 415,000 1,325,000 12,705,000 11,750,000 11,815,000 1) Chairman from March 21, 2024. 2) Chairman until March 21, 2024. 3) The committee ceased 2024. Essity | Annual Report 2025 144 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 145
C4. Remuneration after completion of employment, cont. Provisions for pensions and similar obligations SEKm 2025 2024 2023 Defined benefit obligations TC4:2 22,183 25,179 25,050 Fair value of plan assets TC4:3 –26,200 –26,767 –28,632 Effect of asset ceiling TC4:4 1,823 1,691 3,097 Provisions for pensions, net TC4:1 –2,194 103 –485 Surpluses in funded plans recognized as financial non-current assets amounted to BS SEK 4,340m (2,475; 3,072) on the balance sheet date and provisions for pensions totaled BS SEK 2,146m (2,578; 2,587). Defined benefit obligations include obligations in an amount of SEK 2,311m (2,503; 2,413) pertaining to unfunded plans. Essity has both defined contribution and defined benefit pension plans in a number of Group companies. The most significant defined benefit pension plans in the respective countries are described below. Provisions for pensions and similar obligations per country TC4:1 SEKm Country Active Paid-up pension policies Pensioners Total obligation Plan assets, fair value Effect of asset ceiling Net Duration of obligation, years UK – 5,013 5,966 10,979 –11,125 164 18 12 Sweden 1,348 859 1,317 3,524 –5,491 1,659 –308 15 Germany 1,684 450 1,510 3,644 –6,504 – –2,860 12 USA 140 599 1,932 2,671 –2,693 – –22 9 Other 1,104 4 257 1,365 –387 – 978 10 Total 4,276 6,925 10,982 22,183 –26,200 1,823 –2,194 Costs for the period for defined benefit plans SEKm 2025 2024 2023 Current service cost, after deduction for premiums paid by the employees –341 –339 –296 Past service cost 30 –9 –24 Pension-tax expense –26 –27 –26 Remeasurement, net 21 –13 4 Net interest income/expense –27 –24 –66 Pension costs –343 –412 –408 UK The plan is a defined benefit plan with contributions paid by the company. The plan is based on final salary and con- sists of retirement pension, beneficiaries’ pension and disability pension. The plan was closed to new participants in July 2007 and closed for future accrual in September 2018. The plan is managed by an independent trust and assets are held separately, according to UK law. Surpluses in the pension fund remain in the fund’s assets. An asset ceiling has from 2021 been imposed on the surplus in the plan under the rules in IAS 19, since Essity is of the view that it will be unable to absorb the current surplus. The plan is obligated to meet the minimum funding level according to an agreement with the pension plan. In 2024, an insurance policy was taken out with an independent insurance com- pany to reduce the risk of the pension obligation. The policy protects Essity from essentially all risks that may affect the size of the pension obligation. Sweden In Sweden, the defined benefit obligation is mainly covered by the ITP2 plan and executive pensions. The ITP2 plan (supplementary pensions for salaried employees) encompasses employees born before 1979 and is a defined benefit plan that provides retirement pension based on final salary, as a percentage of various salary intervals. The ITP2 plan is safeguarded by a fund, and the company may compensate itself using any surpluses in the plan assets. The pen- sion plans for executives are largely retirement and beneficiaries’ pension plans based on final salary and are closed to new participants. The liability largely comprises paid-up pension policies or pensions in payment. The pension plans for executives are largely unfunded and are credit-insured with PRI Pensionsgaranti. Germany In Germany, the defined benefit obligation comprises a number of different pension plans offering retirement pension, beneficiaries’ pension and disability pension. Plans based on final salary exist but these are closed to new participants and the benefit depends on the length of service and final salary at retirement. Defined contribution plans are also offered in which the benefit depends on provisions made by the company and, in certain plans, even by the employee during the period of service, and guaranteed return on the provisions. The obligations are largely financed by two different funds and the company may, in certain instances, compensate itself using any surpluses in the plan assets. USA In the USA, the defined benefit obligations comprise retirement pensions in which the premiums are paid by the company and the benefit is based on a standard amount per service year. Only one plan is still open for new accrual for about 200 employees. The benefits are financed via a pension fund that is obligated to meet the minimum legislated funding level. Surpluses in the pension fund can be utilized in the form of premium discounts. Defined benefit obligations TC4:2 SEKm 2025 2024 2023 Value, January 1 25,179 25,050 23,817 Less discontinued operations – – –21 Current service cost 348 345 302 Interest expense 1,076 1,107 1,136 Past service cost –30 9 24 Pension-tax expense 26 27 26 Settlements and transfers –21 13 –2 Benefits paid –1,289 –1,290 –1,299 Pension taxes paid –9 5 –10 Remeasurement: financial assumptions –782 –2,096 1,130 Remeasurement: demographic assumptions 60 –95 –50 Remeasurement: experience-based assumptions –17 578 48 Pension taxes pertaining to remeasurement –206 –2 –41 Translation differences –2,152 1,528 –10 Value, December 31 22,183 25,179 25,050 Remeasurements in the defined benefit obligations comprise changes in financial assumptions, such as changes to the discount rate, any changes in demographic assumptions and experience-based deviations. Experience-based deviations include for example unexpectedly high or low employee turnover or salary increases. Essity | Annual Report 2025 145 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 146
C4. Remuneration after completion of employment, cont. Plan assets TC4:3 SEKm 2025 2024 2023 Fair value, January 1 –26,767 –28,632 –26,377 Less discontinued operations – – 12 Interest income –1,107 –1,190 –1,191 Contributions by plan participants –7 –6 –6 Contributions by the employer –279 292 –330 Benefits paid 1,282 1,283 1,290 Return in excess of recognized interest income –1,576 3,150 –2,086 Administrative expenses for pension obligations 41 45 38 Translation differences 2,213 –1,709 18 Fair value, December 31 –26,200 –26,767 –28,632 The plan assets are distributed according to the following classes of assets: 2025 2024 2023 Shares and mutual funds 41 35 38 Interest-bearing securities 14 14 50 Properties 1 1 1 Insurance 42 47 – Other 2 3 11 Total 100% 100% 100% At the balance sheet date 57% (52; 99) of the plan assets were traded on active markets for which market quotations were used for the valuation. 42% of the assets consist of an insurance policy for pension obligations in the UK measured at the value of the pension obligations covered by the insurance. As in the preceding year, no financial instruments issued by Essity are included in the fair value of plan assets at December 31, 2025. Effect of asset ceiling TC4:4 SEKm 2025 2024 2023 Value, January 1 1,691 3,097 3,266 Interest expense 58 107 121 Other changes to asset ceiling 101 –1,628 –337 Translation differences –27 115 47 Value, December 31 1,823 1,691 3,097 The value at the end of the period pertaining to the effect of the asset ceiling relates to funds in the UK pension plan amounting to SEK 164m (297; 1,803) and funds in one Swedish foundation that can be used for possible future under- takings for early retirement for certain categories of employees amounting to SEK 1,659m (1,394; 1,294). Principal actuarial assumptions TC4:5 Sweden UK Germany USA 2025 Discount rate 3.80 5.60 3.96 4.93 Expected salary increase rate 3.00 N/A 3.25 N/A Expected inflation 2.00 3.25 2.25 N/A Life expectancy, men1) 23 22 21 20 Life expectancy, women1) 24 25 24 22 2024 Discount rate 3.33 5.4 3.22 5.13 Expected salary increase rate 3.00 N/A 3.25 N/A Expected inflation 2.00 3.25 2.00 N/A Life expectancy, men1) 22 22 21 20 Life expectancy, women1) 24 25 24 21 2023 Discount rate 3.47 4.62 3.23 4.56 Expected salary increase rate 3.25 N/A 3.50 N/A Expected inflation 2.25 3.50 2.25 N/A Life expectancy, men1) 22 21 21 20 Life expectancy, women1) 24 25 24 21 1) Life expectancy, expressed in years, for an individual currently aged 65. The sensitivity of the defined benefit obligations with respect to changes in the principal actuarial assumptions is as follows: Change of obligation, increased obligation (–) TC4:6 SEKm Discount rate +0.25% 617 Price inflation, including salary inflation +0.25% –540 Life expectancy +1 year –747 The above sensitivity analysis is calculated by changing one assumption while the others remain constant. Multiemployer plans Essity has obligations for disability and family pensions for salaried employees in Sweden, secured through insurance with the insurance company Alecta. The company also has employees in Finland who are covered by the country’s statutory TyEL pension plan. These obligations are secured through the insurance company Varma. These benefits are reported as defined contribution plans, since there is no basis for allocating the obligations, plan assets and costs to the individual companies covered by the plan. Budgeted contributions The budgeted contributions for the Essity’s defined benefit pension plans for 2026 are calculated at SEK 539m. Contributions for multiemployer plans for 2026 are calculated at SEK 48m. Essity | Annual Report 2025 146 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 147
D. Operating assets and liabilities D1. Goodwill and intangible assets Accounting principles AP Goodwill Goodwill arises in connection with business combinations where the consideration transferred exceeds the fair value of the acquired net assets. Goodwill is measured at cost less accumulated impairment. Goodwill is tested annually for impairment and when there is a possible impairment requirement. All goodwill is allocated to the cash-generating units that are expected to benefit from the synergies from the business combination. In connection with the sale of Group companies, the remaining carrying amount of the goodwill attributable to the divested unit is included in the capital gain or loss. Goodwill that arises in acquisitions of associates or joint ventures is included in the carrying amount of the respective associate or joint venture. Intangible assets Trademarks Trademarks can only be recognized when they have been acquired through a separate transaction or through the acquisition of an entire business that includes one or several trademarks. Trademarks are measured at cost after any accumulated amortization and accumulated impairment. Trademarks that have an indefinite useful life are not amortized, but rather tested annually for impairment along with the impairment testing of goodwill. Trademarks with a limited useful life are amortized on a straight-line basis during their anticipated useful life, which varies between 3–25 years. Licenses, patents and similar rights Intangible assets also include patents, licenses and other similar rights. Acquired assets of this type are measured at cost and are amortized on a straight-line basis during their anticipated useful life, which varies between 3–20 years. Customer relations Customer relations are measured at fair value at the time of the acquisition. The value of these customer relations is amortized over their useful life, which is considered to be between 3–15 years. Research and development Research expenditure is recognized as an expense as incurred. Identifiable expenditure for development of new prod- ucts and processes is capitalized to the extent it is expected to provide future economic benefits. In cases in which it is difficult to separate the research phase from the development phase in a project, the entire project is treated as research and expensed immediately. Development costs for packing and packaging materials are expensed directly. In general, development projects are conservatively assessed due to the difficulty in determining what will lead to commercial success. Capitalized expenditures are amortized on a straight-line basis over the estimated useful life, from the date when the asset is ready for use. The amortization period is between 5–10 years. Impairment testing Goodwill is tested annually for impairment and when there is an indication of an impairment need. When testing for impairment the goodwill is allocated to cash-generating units, or groups of cash-generating units, which for Essity coincide with the operating segments Health & Medical, Consumer Goods and Professional Hygiene. The test com- pares the carrying amounts of the cash-generating units with the recoverable amounts. The recoverable amount of each cash-generating unit is determined by discounting future cash flows in order to determine their value in use. The calculation of future cash flows is based on the strategic plans adopted by the Executive Management Team for the next three years. The carrying amount for the cash-generating unit includes goodwill, trademarks with indefinite use- ful lives and assets with definite useful lives, such as non-current assets, trademarks and working capital. Effects of expansion investments are excluded when calculating the value in use. The value of amortized assets is tested for impairment whenever there are indications that the carrying amount might not be recoverable. In cases in which the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount, an impairment loss is recognized on the asset down to the recoverable amount. An impairment loss recognized earlier is reversed, if the reasons for the impairment no longer exist. The carrying amount after the reversal is limited to what it would have been had no past impairment been recognized. Impairment losses on goodwill are never reversed. Emission allowances and costs for carbon dioxide emissions Essity participates in the European system for emission allowances. When emission allowances relating to carbon dioxide emissions are received from an individual EU state, they are recognized as an intangible asset and as deferred income (liability). Allowances are received free of charge and rec- ognized at market value as of the date when the allocation is received. During the period, Essity provides for carbon dioxide emissions made. At the same time the deferred income is reversed by the corresponding amount thereby resulting in no net effect in profit or loss. If the emission allowances received do not cover emissions made, Essity makes a provision for the deficit valued at the market value on the balance sheet date. Sales of surplus emission allowances are recognized as income on the delivery date. If the market price of emission allowances on the balance sheet date is less than recognized cost, any surplus emission allowances that are not required to cover emissions made are impaired to the market price applying on the balance sheet date. In conjunction with this, the remaining part of the deferred income is recognized as income by a corresponding amount and therefore no net effect occurs in profit or loss. The emission allowances are used as pay- ment in the settlement with the state regarding liabilities for emissions. Key assessments and assumptions KAA In connection with the annual impairment testing of goodwill, the recoverable amount is calculated. The recoverable amount for the cash-generating units is determined by calculating value in use. Calculation of the value in use is based on the strategic plans for the next three years adopted by the Executive Management Team, which in turn is based on assessments and assumptions. The most important assessments and assumptions pertain to forecasts for organic growth, the profit margin and the discount rate used. The growth assumptions are in line with historic out- come and expected global market growth. Profit margin assumptions in the strategy plans are based on current market prices and costs adjusted for anticipated price and cost changes as well as assumed productivity develop- ment for which an adjustment is made in impairment testing for the part generated from forecasted strategic invest- ments. The discount rate used in the present value calculation of the anticipated future cash flows is the current weighted average cost of capital (WACC) established within the Group for the markets in which the cash-generating units conduct operations. The expected sustained future cash flow for periods that are beyond the planning horizon of the strategy plan are extrapolated from the final year of the strategy plan using assumed sustained growth of 2% (2; 2). Goodwill SEKm 2025 2024 2023 Value, January 1 41,138 39,337 44,786 Assets held for sale – – –4,361 Company acquisitions – – –14 Impairment – –70 –356 Translation differences –4,277 1,871 –718 Value, December 31 BS 36,861 41,138 39,337 Essity | Annual Report 2025 147 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 148
D1. Goodwill and intangible assets, cont. Intangible assets Trademarks Technologies, Customer relations and similar rights Capitalized development costs Total Intangible assets SEKm 2025 2024 2023 2025 2024 2023 2025 2024 2023 2025 2024 2023 Accumulated costs 14,377 15,525 14,986 15,331 16,128 15,001 716 781 671 30,424 32,434 30,658 Accumulated amortization –1,055 –1,099 –921 –10,946 –10,609 –8,850 –411 –424 –289 –12,412 –12,132 –10,060 Accumulated impairment –128 –113 0 –80 –85 –80 –188 –199 –193 –396 –397 –273 Total 13,194 14,313 14,065 4,305 5,434 6,071 117 158 189 17,616 19,905 20,325 Value, January 1 14,313 14,065 17,157 5,434 6,071 7,236 158 189 213 19,905 20,325 24,606 Assets held for sale – – –2,861 – – –332 – – – – – –3,193 Investments1) – 7 – 417 484 513 6 7 15 423 498 528 Sales and disposals – – – –1 – – – – – –1 – – Reclassifications – – – 13 18 20 –6 –6 – 7 12 20 Amortization2) –59 –126 –117 –1,267 –1,299 –1,282 –33 –39 –37 –1,359 –1,464 –1,436 Impairment – –1133) – – –2 – – – – – –115 – Translation differences –1,060 480 –114 –291 162 –84 –8 7 –2 –1,359 649 –200 Value, December 31 13,194 14,313 14,065 4,305 5,434 6,071 117 158 189 17,616 19,905 20,325 Emission allowances, net value TD1:1 657 829 1,019 Value, December 31 including emission allowances BS 18,273 20,734 21,344 1) In 2025, interest expenses were capitalized in Capitalized development costs in the amount of SEK 5m (6; 6). The average interest rate used was 4%. 2) Amortization of other acquisition-related intangible assets such as Trademarks, Customer relations and Technologies is recognized on separate lines in the income statement while amortization of Other intangible assets is included in Cost of goods sold and Sales, general and administration. 3) Impairment of trademarks in Essity related to Vinda is included in Profit for the period, discontinued operations, in the amount of SEK –89m after tax, see Note G4 on page 173. Impairment testing Annual testing for impairment of goodwill and intangible assets is carried out in the fourth quarter. The testing showed that no impairment was needed for 2025, 2024 or 2023. The WACC before tax used in the impairment testing of goodwill is presented in the table below. Sensitivity analyses show that reasonable changes to key parameters do not give rise to any impairment requirement. In addition to annual impairment testing of the cash-generating units, outlined above under the section Impairment testing, cash-generating units and individual assets are also tested when there is an indication of an impairment need. Distribution by operating segment Goodwill Trademarks WACC, before tax % SEKm 2025 2024 2023 2025 2024 2023 2025 2024 2023 Health & Medical 16,106 17,823 16,948 7,446 8,088 7,837 12.2 12.1 12.1 Consumer Goods 13,143 14,429 14,135 5,679 6,141 6,153 12.6 11.9 12.4 Professional Hygiene 7,612 8,886 8,254 69 83 75 12.1 11.1 11.1 Total BS 36,861 41,138 39,337 13,194 14,312 14,065 Emission allowances TD1:1 SEKm 2025 2024 2023 Value, January 1 829 1,019 740 Emission allowances received 463 546 837 Purchases 66 48 151 Sales 0 –84 0 Impairment –2 –36 0 Settlement with the government –646 –702 –695 Translation differences –53 38 –14 Value, December 31 657 829 1,019 Essity | Annual Report 2025 148 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 149
D2. Property, plant and equipment Accounting principles AP Property, plant and equipment Property, plant and equipment is measured at cost less accumulated depreciation and any impairment. In cases where an investment in foreign currency has been recognized using hedge accounting, the gain/loss from the hedge is recognized as part of the acquisition cost. In major projects, costs for running-in and start-up are included in the cost for properties and production facilities. Borrowing costs are included in the cost of investments exceeding SEK 250m that take more than 12 months to complete. Expenses for repairs and maintenance are expensed directly in profit or loss. Depreciation and impairment Land is not subject to depreciation. Buildings, machinery and equipment are depreciated on a straight-line basis over the expected useful lives of the assets. If, at the balance sheet date, there is an indication that property, plant and equipment has declined in value, impairment testing is carried out. Expected useful lives Type of asset Number of years Buildings 15–50 Energy plants 15–30 Pulp and paper mills 10–25 Land improvements 10–20 Converting machines, other machinery 7–18 Office equipment 5–10 Vehicles 4–5 Tools 3–10 Computers 3–5 Property, plant and equipment Buildings Land and land improvements Machinery and equipment Construction in progress SEKm 2025 2024 2023 2025 2024 2023 2025 2024 2023 2025 2024 2023 Accumulated costs 23,407 24,273 22,515 4,225 4,564 4,329 85,566 89,910 84,186 6,537 7,382 7,197 Accumulated depreciation –13,107 –13,483 –12,553 –773 –809 –755 –57,218 –60,661 –57,441 – – – Accumulated impairment –330 –506 –424 –24 –41 –38 –1,936 –2,284 –2,068 –38 –41 –39 Total 9,969 10,284 9,538 3,428 3,714 3,536 26,412 26,965 24,677 6,499 7,341 7,158 Value, January 1 10,284 9,538 14,662 3,714 3,536 4,164 26,965 24,677 33,105 7,341 7,158 5,540 Assets held for sale – – –4,884 – – –610 – – –7,784 – – –799 Investments 474 259 147 15 14 4 1,941 1,576 1,134 4,240 5,055 5,094 Sales and disposals –47 –5 –26 –20 –1 –5 –87 –60 –65 –1 –2 –4 Company divestments – – – – – – – – –1 – – – Reclassifications 779 1,019 375 12 92 7 3,754 3,952 2,365 –4,552 –5,075 –2,767 Depreciation1) –710 –721 –724 –37 –39 –37 –3,860 –3,914 –3,912 – – – Impairment –12 –60 –156 – – –15 –72 –307 –415 – –2 –2 Reversal of impairment – – 22 – – – 3 149 57 1 15 2 Translation differences –799 254 122 –256 112 28 –2,232 892 193 –530 192 94 Value, December 31 9,969 10,284 9,538 3,428 3,714 3,536 26,412 26,965 24,677 6,499 7,341 7,158 1) Included primarily in Cost of goods sold. Essity | Annual Report 2025 149 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 150
D2. Property, plant and equipment, cont. Total property, plant and equipment SEKm 2025 2024 2023 Accumulated costs 119,735 126,129 118,227 Accumulated depreciation –71,098 –74,953 –70,749 Accumulated impairment –2,328 –2,872 –2,569 Total 46,308 48,304 44,909 Value, January 1 48,304 44,909 57,471 Assets held for sale – – –14,077 Investments1) 6,670 6,904 6,379 Sales and disposals –155 –68 –100 Company divestments – – –1 Reclassifications –7 –12 –20 Depreciation2) –4,607 –4,674 –4,673 Impairment –84 –369 –588 Reversal of impairment 4 164 81 Translation differences –3,817 1,450 437 Value, December 31 46,308 48,304 44,909 1) Government grants received in 2025 reduced recognized investments by SEK 3m (2; 0). 2) Included primarily in Cost of goods sold. Impairment losses for the year totaling SEK 84m are related mainly to impairment in Consumer Goods in the UK. During the period, interest was capitalized in machinery and equipment in an amount of SEK 4m (21; –) and in construction in progress in an amount of SEK 4m (12; 34). The average interest rate used was 4% (4; 4). Contract obligations relating to the acquisition of property, plant and equipment amounted to SEK 3,415m (3,215; 4,048) at year-end. D3. Inventories Accounting principles AP Inventories are measured at the lower of cost and net realizable value. Cost is calculated mainly by applying the first-in, first-out (FIFO) principle or weighted average cost formula. The cost of inventories and work in progress includes raw material costs, direct labor, other direct expenses and production-related overheads, based on a normal capacity utilization. The net realizable value is the calculated sales price received for normal business transactions less calculated sales costs. Inventories SEKm 2025 2024 2023 Raw materials and consumables 3,917 4,270 4,022 Spare parts and supplies 3,022 2,901 2,519 Products in progress 1,676 1,759 1,772 Finished products 9,510 9,899 9,210 Advance payments to suppliers 28 85 23 Total BS 18,153 18,914 17,546 Impairment of inventories amounted to SEK 648m (686; 1,084), of which SEK 4m (77; 167) was recognized in conjunc- tion with restructuring as a cost affecting comparability, refer to Note B3 Operating expenses on page 137. D4. Other current receivables Other current receivables SEKm 2025 2024 2023 VAT receivables 1,313 1,318 951 Prepaid expenses and accrued income 1,044 1,122 986 Suppliers with debit balance 93 91 103 Receivables for electricity and gas 220 326 282 Receivables from authorities 167 121 89 Derivatives1) 42 356 228 Other receivables 535 1,146 752 Total BS 3,414 4,480 3,391 1) For more information see Note E1 Financial instruments by category and measurement level on page 152. D5. Other liabilities Other liabilities SEKm 2025 2024 2023 Other non-current liabilities Derivatives1) 80 9 155 Other non-current liabilities 12 507 918 Total BS 92 516 1,073 Of which items that fall due for payment later than within five years 4 15 21 Other current liabilities Derivatives1) 374 181 1,755 Accrued expenses and prepaid income TD5:1 12,790 15,402 14,497 VAT liabilities 1,539 1,604 1,348 Other operating liabilities 1,363 1,762 1,543 Total BS 16,066 18,949 19,143 1) For more information, refer to Note E6 Derivatives and hedge accounting on page 156. Essity | Annual Report 2025 150 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 151
D5. Other liabilities, cont. Accrued expenses and prepaid income TD5:1 SEKm 2025 2024 2023 Bonus and discounts to customers 6,862 7,874 7,782 Accrued vacation pay liability 1,009 1,060 996 Accrued social security costs 446 531 496 Other liabilities to personnel 1,672 2,344 2,000 Other items 2,801 3,593 3,223 Total 12,790 15,402 14,497 D6. Other provisions Accounting principles AP Provisions are recognized in the consolidated balance sheet when there is a legal or informal obligation arising from past events and it is probable that payments will be required to settle the obligation. It must also be possible to reliably estimate the amount to be paid. The provision is valued at the present value of the anticipated future expen- diture to settle the obligation. A provision for restructuring measures is recognized when the Group has established a detailed plan and either implementation has begun or the main features of the measures have been communicated to the parties involved. Restructuring costs include, for example, costs for plant closures, impairment of production machinery and costs for personnel reductions. Provisions for environment contain provisions for carbon dioxide emissions as well as provi- sions for site restorations. See Note D1 Goodwill and intangible assets for accounting principles on carbon dioxide emission rights and cost for carbon dioxide emissions. Key assessments and assumptions KAA The amount of the provisions made relating to legal disputes is based on the company’s best assessment, which was determined in consultation with local expertise in the field. Other provisions 2025 SEKm Restructuring program Environment Legal disputes Other Total Value, January 1 502 696 126 560 1,884 Provisions 222 565 65 254 1,106 Utilizations –249 –649 –58 –206 –1,162 Reclassifications – – – –3 –3 Reversals –82 – –39 –32 –153 Translation differences –32 –11 –13 –32 –88 Value, December 31 361 601 81 541 1,584 Provisions comprise: Current provision BS 1,200 Non-current provision BS 384 Other provisions, previous periods SEKm 2024 2023 Value, January 1 1,874 1,708 Provisions 1,408 1,876 Utilizations –1,332 –1,535 Reversals –112 –141 Translation differences 46 –34 Value, December 31 1,884 1,874 Distribution of other provisions by maturity, SEKm Year of maturity 2026 1,200 2027 267 2028 76 2029 and later 41 Total 1,584 Of the provision for Environment, SEK 563m pertain to a liability for carbon dioxide emissions, which will be settled in 2026. The provisions recognized at the end of the period attributable to Restructuring programs relate to restructur- ing measures in all business areas. The provision for Legal disputes consists of several cases of minor monetary value. Other provisions mainly comprise reserves linked to the LTI programs. D7. Contracts with Supplier Finance Arrangements The Group has contracts with supply chain finance (SCF) in a few selected countries. Under the SCF, a bank or finance company agrees to pay amounts to a participating supplier in respect of invoices owed by the Group and the bank receives payment from the Group at a later date. The main purpose of these arrangements is to facilitate effi- cient payment processing and enable participating suppliers to receive payments from the bank before the invoice’s maturity date. There are no guarantees or other types of security provided by the Group to the banks related to the SCF. Carrying amount of financial liabilities 2025, SEKm Value at December 31 Value at January 1 Recognized in trade payables 609 581 of which suppliers have received payment from financing provider 327 383 The companies’ payment terms are on average 19 days longer for suppliers participating in the SCF, compared to suppliers providing similar products and services, but not participating in the SCF. There were no material business combinations or foreign exchange differences or other non-cash transfers relating to the carrying amount of liabilities subject to supplier finance arrangements. Essity | Annual Report 2025 151 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 152
E. Capital structure and financing E1. Financial instruments by category and measurement level Accounting principles AP Financial instruments recognized in the balance sheet include cash and cash equivalents, securities, other financial receivables, trade receivables, trade payables, loans and derivatives. Current investments and derivatives are recognized on the trade date. Financial assets and loans are recognized on the settlement date. Trade receivables and trade payables are recognized in the balance sheet once the invoice has been sent or received, respectively. Financial assets are initially recognized at fair value, and transaction costs are included for instruments that are not measured at fair value. Financial assets are recognized in the balance sheet until the rights in the agreement have been realized or the company no longer has the rights to the asset. Financial assets measured at amortized cost are continuously reviewed according to the expected credit loss model to assess the need for credit loss provisions. Financial liabilities are measured at amortized cost, except in cases where they are recognized at fair value using hedge accounting. Financial liabilities are derecognized from the balance sheet when Essity has met its commit- ments. Essity recognizes financial instruments with a remaining maturity of less than 12 months as current assets and liabilities and those that exceed 12 months as non-current assets and liabilities. Fair value measurement For the financial instruments for which market quotations are available, actual prices are used for fair value measure- ment (Level 1). In the absence of market quotations for the instruments, Essity determines fair values with the aid of common valuation models, using quoted prices of similar assets or liabilities in active markets (Level 2). The fair value of non-current loans measured at prevailing market interest rates is presented in Note E4 Financial liabilities on page 155. The fair value of current financial liabilities and investments is considered to correspond to the carrying amount, since a change in market interest rates does not have a significant effect on market value. Classification and subsequent recognition Under IFRS 9 Financial instruments, financial assets are to be classified on the basis of the company’s business model and the purpose of contractual cash flows. Amortized cost Financial assets held to collect contractual cash flows, and whose cash flows only consist of interest and the principal amount, are to be measured at amortized cost. The main rule is that financial liabilities are measured at amortized cost with the exception of the liabilities described in the measurement categories below. Since the majority of Essity’s financial assets is held to collect contractual cash flows and are held to maturity, they are recognized at amortized cost according to the effective interest method. All liabilities, excluding derivatives and the liabilities included in a hedging relationship, are measured at amortized cost. Fair value through comprehensive income Financial assets, which are held for the purpose of collecting contractual cash flows (only interest and principal amount) and which are to be sold before maturity, are measured at fair value through other comprehensive income with reclassification to profit or loss. Essity did not recognize any assets in this category during the year. For financial assets comprising an equity instrument, the company can, on initial recognition, make an irrevocable choice to recognize the asset at fair value through other comprehensive income without the option of reclassification to profit or loss. Essity has an asset valued at SEK 106m recognized in this category. Fair value through profit or loss Financial assets that do not fulfill the requirements as stated in the categories described above are to be measured at fair value through profit or loss. Derivatives are recognized at fair value through profit or loss. During the year, Essity did not recognize any financial assets or liabilities, except for derivatives and liabilities that are part of a hedging rela- tionship, in this category. For more information, refer to Note E6 Derivatives and hedge accounting on page 156. Accounting for derivatives used for hedging purposes All derivatives are initially and continuously recognized at fair value in the balance sheet. Gains and losses on remeasurement of derivatives used for hedging purposes are recognized in accordance with the accounting principles stated in Note E6 Derivatives and hedge accounting on page 156. Financial instruments by category and measurement level SEKm Note Measurement level 2025 2024 2023 Financial assets measured at fair value through profit or loss Derivatives – Non-current financial assets E2 2 20 – – Derivatives – Current financial assets E2 2 92 633 461 Derivatives – Other current receivables D4 2 25 76 78 Total 137 709 539 Financial liabilities measured at fair value through profit or loss Non-current financial liabilities E4 2 4,744 22,234 24,993 Current financial liabilities E4 2 5,448 4,312 – Derivatives – Non-current financial liabilities E4 2 – 278 167 Derivatives – Current financial liabilities E4 2 321 314 1,780 Derivatives – Other current liabilities D5 2 81 83 277 Total 10,594 27,221 27,217 Loan and trade receivables measured at amortized cost Non-current financial assets E2 – 16 19 19 Current financial assets E2 – 841 4,652 3,504 Trade receivables E3 – 21,332 23,538 21,920 Cash and cash equivalents E2 – 8,487 10,962 5,159 Total 30,676 39,171 30,602 Financial assets measured at fair value through other comprehensive income Non-current financial assets E2 1 106 109 98 Financial liabilities measured at amortized cost Non-current financial liabilities E4 – 22,948 12,728 14,068 Non-current lease liabilities E4 – 2,983 3,302 3,326 Current financial liabilities E4 – 381 383 12,907 Current lease liabilities E4 – 975 1,025 812 Trade payables – – 14,437 17,098 15,119 Total 41,724 34,536 46,232 Derivatives used for hedge accounting Non-current financial assets E2 2 – – – Other non-current assets – 2 19 56 6 Other current receivables D4 2 17 280 150 Current financial assets E2 2 333 57 1,294 Total 369 393 1,450 Essity | Annual Report 2025 152 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 153
E1. Financial instruments by category and measurement level, cont. SEKm Note Measurement level 2025 2024 2023 Non-current financial liabilities E4 2 712 2,132 2,781 Other non-current liabilities D5 2 80 9 155 Current financial liabilities E4 2 120 390 150 Other current liabilities D5 2 293 98 1,478 Total 1,205 2,629 4,564 These financial instruments are measured at fair value, with the exception of loans and trade receivables and financial liabilities measured at amortized cost. According to Essity’s assessment, the fair value essentially corresponds to the carrying amount, with the exception of non-current liabilities, the fair value of which is disclosed in Note E4 Financial liabilities on page 155. Measurement levels Level 1: Quoted prices on an active market for identical assets or liabilities, such as shares or bonds quoted on a stock exchange. Level 2: Other observable inputs for the asset or liability than quoted prices included in Level 1, either directly (price quotations) or indirectly (obtained from price quo- tations), such as currency forward contracts or interest rate swaps. Financial instruments in other notes to the balance sheet 2025 2024 2023 SEKm Note Financial instruments Of which derivatives Financial instruments Of which derivatives Financial instruments Of which derivatives Assets Financial assets, cash and cash equivalents E2 9,895 445 16,432 690 10,535 1,755 Other non-current assets – 19 19 56 56 6 6 Trade receivables E3 21,332 – 23,538 – 21,920 – Other current receivables D4 42 42 356 356 228 228 Total 31,288 506 40,382 1,102 32,689 1,989 Liabilities Financial liabilities E4 38,632 1,153 47,098 3,114 60,984 4,878 Other non-current liabilities D5 80 80 9 9 155 155 Trade payables – 14,437 – 17,098 – 15,119 – Other current liabilities D5 374 374 181 181 1,755 1,755 Total 53,523 1,607 64,386 3,304 78,013 6,788 E2. Financial assets, cash and cash equivalents Accounting principles AP Cash and cash equivalents are defined as cash and bank balances as well as current investments with a maturity of less than three months from the acquisition date. Restricted deposits are not included in cash and cash equivalents. Loan receivables are recognized at amortized cost. Financial assets measured at amortized cost are continuously reviewed to assess the need for credit loss provi- sions. For a description of the methods used by Essity to manage its liquidity risk, refer to the Risks and risk management section on page 46. Financial assets, cash and cash equivalents Carrying amount SEKm 2025 2024 2023 Non-current financial assets Financial assets measured at fair value through other comprehensive income 106 109 98 Financial assets measured at amortized cost Loan receivables, other 16 19 19 Derivatives 20 – – Total BS 142 128 117 Current financial assets Financial assets measured at amortized cost Financial assets 841 2,352 3,504 Current investments – 2,300 – Derivatives 425 690 1,755 Total BS 1,266 5,342 5,259 Cash and cash equivalents Cash and bank balances 7,456 9,462 3,055 Current investments <3 months 1,031 1,500 2,104 Total BS 8,487 10,962 5,159 Total financial assets, cash and cash equivalents 9,895 16,432 10,535 Financial assets measured at fair value through comprehensive income relate to an equity instrument which was irrevocably classified without any option of reclassification due to the long-term nature of the holding. The holding relates to shares in pension assets attributable to certain pension obligations. These assets are not included in the normal pension calculations, as set out in Note C4 Remuneration after completion of employment on page 144. Changes in value excluding exchange gains and losses are recognized in equity under other comprehensive income, while exchange gains and losses are recognized in profit or loss. Cash and cash equivalents at December 31, 2025 include SEK 1,829m (2,241; 2,790) that is not fully available for use by Essity or for which other limitations exist, primarily cash and cash equivalents in countries that are subject to exchange restrictions and other legal restrictions. Accordingly, it is not possible to immediately use these cash and cash equivalents in other areas of the Group, although it is normally possible to use them in the operations of the respective country. The cash and cash equivalents can also be used to repay local debts in these countries. Such liabilities in these countries amount to SEK 172m (223; 501). Financial instruments by category and measurement level, cont. Essity | Annual Report 2025 153 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 154
E3. Trade receivables Accounting principles AP Trade receivables are measured at amortized cost after a provision is made for doubtful receivables. Provisions for doubtful receivables are made using the simplified impairment method in IFRS 9 Financial instruments for trade receivables, meaning the provision is measured at an amount that corresponds to the expected credit losses for the remaining terms of all outstanding trade receivables as per the balance sheet date. An impairment of trade receivables due to a possible credit loss impacts Essity’s operating profit as a selling cost in profit or loss and as a reduction of trade receivables by increasing the provision for doubtful receivables in the balance sheet. When the credit loss has been confirmed, the trade receivable is written off against the provision for doubtful receivables. A credit loss is regarded as confirmed when it has been determined that the customer is unable to fulfill the legal obligation to pay Essity, when debt-collection measures are no longer cost efficient, the customer’s operations have ceased or the customer has been declared bankrupt and this process has ended. Essity’s trade receivables are generally current and are not discounted. Key assessments and assumptions KAA The measurement of the provision for doubtful receivables is based on a combination of a collective and individual assessment. The collective assessment is based on the historical confirmed credit loss level in relation to net sales in the most recent five-year period, adjusted for changes in credit risk based on current and forward-looking informa- tion regarding macroeconomic factors that can impact the payment capacity of customers. These adjustments are made when necessary to take into account changed credit risk due to material changes in financial stability, GDP and employment in the countries where Essity conducts the majority of its sales. Individual assessment of the need to impair doubtful receivables is made in cases when it has been determined that the customer is experiencing financial problems, when no payment has been received for receivables that have long fallen due or because of other signifi- cant events, such as financial crises or natural disasters. Trade receivables SEKm 2025 2024 2023 Trade receivables, gross 21,617 23,829 22,162 Provision for doubtful receivables TE3:2 –285 –291 –242 Total BS TE3:1 21,332 23,538 21,920 Analysis of credit risk exposure in Trade receivables TE3:1 SEKm 2025 2024 2023 Trade receivables after provision for doubtful receivables 21,332 23,538 21,920 Whereof overdue < 30 days 1,882 2,506 2,054 30–90 days 603 958 459 > 90 days 638 723 600 Trade receivables, overdue 3,123 4,187 3,113 Credit risk in trade receivables and provisions for doubtful receivables Credit risk in trade receivables is managed through credit checks of customers using credit rating companies. The credit limit is set and regularly monitored. Essity’s customer structure is dispersed, with customers in many different areas of business. In 2025, Essity’s ten largest customers accounted for 24.9% (24.3; 25.8) of Essity’s sales. The single largest customer accounted for 4.6% (4.4; 4.4) of sales. Of the outstanding trade receivables on the balance sheet date 2025, the ten largest customers accounted for 22.5% (22.5; 21.7). Comparative figures for sales and trade receiv- ables have been adjusted and exclude discontinued operations. During 2025, confirmed credit losses on trade receivables amounted to 0.03% (0.03; 0.02) of net sales, confirmed credit losses on trade receivables over the past five years amounted to an average of 0.02% (0.02; 0.01) of net sales. Recognized bad debt losses remain at a low level and despite increased risks arising from increased inflation and geopolitical unrest in the surrounding world, Essity’s overall assessment is that the credit risk within the customer segments in the countries where Essity conducts the majority of its sales has not changed materially during 2025. No adjustment was therefore made in the collective assessment (see accounting principles, key assessments and assumptions above) regarding the expected impair- ment requirement for doubtful receivables in the 2025 year-end accounts. However, Essity continues to monitor development of GDP, financial stability and unemployment and will increase its provision for doubtful receivables if the situation deteriorates. In total, the Group has collateral mainly in the form of credit insurance taken out amounting to SEK 711m (785; 1,125). Of this amount, SEK 13m (12; 25) relates to the category trade receivables overdue. Provision for doubtful receivables TE3:2 SEKm 2025 2024 2023 Value, January 1 –291 –242 –326 Liabilities directly attributable to assets held for sale – – 63 Provision for expected credit losses –93 –128 –33 Written off confirmed losses 37 44 26 Decrease due to divestments – – 23 Decrease due to reversal of provisions for expected credit losses 47 36 4 Translation differences 15 –1 1 Value, December 31 –285 –291 –242 The expense for the period for doubtful receivables amounted to SEK –46m (–92; –29). Essity | Annual Report 2025 154 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 155
E4. Financial liabilities Accounting principles AP The main principle for recognition of Essity’s financial liabilities is that they are initially measured at fair value, net after transaction costs, and subsequently at amortized cost according to the effective interest method. In cases where loans with fixed interest rates are hedged using derivatives, both the loan and the derivative are measured at fair value through a fair value hedge. Non-current loans that are subject to hedge accounting are discounted to the market interest rate without a credit spread. The cash flows from the interest rate derivatives are discounted to the market interest rate and the changes in value are recognized in profit or loss. Financial liabilities SEKm 2025 2024 2023 Non-current financial liabilities Bond issues 21,180 28,032 32,763 Derivatives 712 2,410 2,949 Non-current lease liabilities 2,983 3,302 3,326 Other non-current loans with maturities > 1 year < 5 years 4,509 4,930 971 Other non-current loans with maturities > 5 years 2,002 2,000 5,327 Total BS 31,386 40,674 45,336 Current financial liabilities Amortization within one year 153 84 55 Bond issues 5,443 4,312 6,632 Derivatives 441 704 1,930 Current lease liabilities 975 1,025 812 Loans with maturities of less than one year 112 176 5,989 Accrued financial expenses 122 123 230 Total1) BS 7,246 6,424 15,648 Total financial liabilities 38,632 47,098 60,984 Fair value of financial liabilities excluding leases 34,053 41,862 55,984 1) Fair value of current loans is estimated to be the same as the carrying amount. Borrowing Essity has a Euro Medium Term Note (EMTN) program with a program size of EUR 6,000m (SEK 64,798m) for issuing bonds in the European capital market. As of December 31, 2025, a nominal EUR 2,785m (3,149; 3,952) was outstanding in public and bilateral issues with a remaining maturity of 3.4 years (3.9; 4.0). Public bond issues Issued Maturity Carrying amount, SEKm Fair value, SEKm Interest rate, % Notes EUR 500m 2026 5,443 5,443 3.00 Notes EUR 500m 2027 5,394 5,341 1.63 Notes EUR 600m 2029 5,876 5,855 0.25 Notes EUR 300m 2030 2,932 2,920 0.50 Notes EUR 700m 2031 6,978 6,514 0.25 Total 26,623 26,073 Non-current financial liabilities Carrying amount, SEKm Fair value, SEKm Other non-current loans with maturities > 1 year < 5 years 4,509 4,474 Other non-current loans with maturities > 5 years 2,002 2,028 Total 6,511 6,502 Essity has a Swedish and a Belgian commercial paper program that can be utilized for current borrowing. Commercial paper program Program size Issued SEKm Commercial paper SEK 15,000m – Commercial paper EUR 1,200m – Total – Essity has syndicated bank facilities to limit the refinancing risk and maintain a liquidity reserve. Contracted bilateral credit facilities with banks are used to supplement these syndicated bank facilities. Credit facilities Nominal Maturity Total SEKm Utilized SEKm Unutilized SEKm Syndicated credit facilities EUR 2,000m1) 2026 21,599 – 21,599 EUR 938m2) 2027 10,125 – 10,125 EUR 1,000m 2030 10,800 – 10,800 Total 42,524 42,524 1) In January 2026, Essity canceled the credit facility that matures in 2026. 2) The syndicated credit facility maturing in 2027 was refinanced in January 2026. The new credit facility matures in 2031 and amounts to EUR 750m (SEK 8,100m). Maturity profile of gross debt1), SEK m Total 2026 2027 2028 2029 2030 2031 2032+ Commercial paper program – – – – – – – – Bond issues –28,079 –5,400 –5,400 0 –6,480 –3,240 –7,559 0 Other borrowings –6,590 –664 85 –915 –3,138 20 24 –2,002 Total –34,669 –6,064 –5,315 –915 –9,618 –3,220 –7,535 –2,002 1) Gross debt includes accrued interest in the amount of SEK 181m. SEKm –15,000 –10,000 –5,000 0 5,000 2032+203120302029202820272026 Commercial papers Bond issues Other borrowings Maturity profile of gross debt1) 1) Gross debt includes accrued interest in the amount of SEK 181m. After additions for net pension provisions and lease liabilities and with deductions for cash and cash equivalents, interest-bearing receivables and equity instruments, the net debt was SEK 26,543m (30,769; 49,964). For a descrip- tion of the methods used by Essity to manage its refinancing risk, refer to the Risks and risk management section on page 41. Essity | Annual Report 2025 155 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 156
E5. Liquidity risk The table below shows the Group’s liquidity risk regarding financial liabilities (including interest payments), net settled derivatives that constitute financial liabilities and negative cash flows from gross settled derivatives. The amounts refer to undiscounted cash flows. For a description of the methods used by Essity to manage its liquidity risk, refer to the Risks and risk management section on page 41. Liquidity risk SEKm Less than 1 year Between 1 and 3 years Between 3 and 5 years More than 5 years 2025 Loans including interest 6,009 5,448 13,519 9,671 Net settled derivatives 121 241 221 10 Energy derivatives 307 65 2 – Lease liabilities 1,110 1,505 834 1,016 Trade payables 14,434 3 – – Total 21,981 7,262 14,576 10,697 Gross settled derivatives1) 79,118 816 21 519 2024 Loans including interest 5,017 4,730 7,276 24,399 Net settled derivatives 643 1,226 1,065 357 Energy derivatives 155 6 3 – Lease liabilities 1,165 1,692 895 1,054 Trade payables 17,090 8 – – Total 24,069 7,662 9,239 25,810 Gross settled derivatives1) 109,710 1,079 579 326 2023 Loans including interest 13,409 10,545 7,123 23,431 Net settled derivatives 928 1,565 1,386 746 Energy derivatives 1,634 155 – – Lease liabilities 1,019 1,508 926 1,291 Trade payables 15,119 0 – – Total 32,109 13,773 9,435 25,468 Gross settled derivatives1) 102,341 914 812 590 1) The gross settled derivatives have, largely, corresponding positive cash flows and therefore, in the opinion of Essity, do not constitute any real liquidity risk. E6. Derivatives and hedge accounting Accounting principles AP Accounting for derivatives used for hedging purposes All derivatives are initially and continuously measured at fair value in the balance sheet. Gains and losses on remeasurement of derivatives used for hedging purposes are recognized as described below. When using hedge accounting, the relationship between the hedging instrument and the hedged item is documented. Assessment of the effectiveness of the hedge is also documented, both when the transaction is initially executed and on an ongoing basis. Hedge effectiveness is the extent to which the hedging instrument offsets changes in value in a hedged item’s fair value or cash flow. The ineffective portion is recognized directly in profit or loss. Cash flow hedges Gains and losses on remeasurement of derivatives intended for cash flow hedges are recognized in equity under other comprehensive income and reversed to profit or loss at the rate at which the hedged cash flow affects profit or loss. If a hedge relationship is interrupted and cash flow is still expected, the result is recognized in equity under other comprehensive income until the cash flow affects the result. If the hedge pertains to a balance sheet item, the result is transferred from equity to the asset or liability to which the hedge relates when the value of the asset or liability is determined for the first time. In cases in which the forecast cash flow that forms the basis of the hedging transaction is no longer assessed as probable, the cumulative gain or loss that is recognized in equity under other comprehensive income is transferred directly to profit or loss. Cash flow hedges relating to energy are recognized as energy costs, that is, cost of goods sold. Cash flow hedges related to transaction exposure are recognized in consolidated net sales and expenses. Hedges of net investments in foreign operations Gains and losses on remeasurement of derivatives intended to hedge Essity’s net investments in foreign operations are recognized in equity under other comprehensive income. The cumulative gain or loss in equity is recognized in profit or loss in the event of divestment of the foreign operation. Fair value hedges The gain or loss from remeasurement of a derivative relating to fair value hedges is recognized in profit or loss together with changes in fair value of the hedged asset or liability. For Essity, this means that non-current loans that are subject to hedge accounting are discounted without a credit spread to the market interest rate and meet inherent interest rate derivatives’ discounted cash flows at the same interest rate. Economic hedges When Essity conducts hedges and the transactions do not meet requirements for hedge accounting according to IFRS 9, changes in fair value of the hedging instrument are recognized directly in profit or loss. Outstanding derivatives Of which SEKm Total Currency1) Interest rate Energy 2025 Nominal 95,296 81,525 10,800 2,971 Asset 506 458 13 35 Liability 1,607 526 712 369 2024 Nominal 145,583 114,450 28,355 2,778 Asset 1,102 788 – 314 Liability 3,304 976 2,164 164 2023 Nominal 138,632 106,756 27,386 4,490 Asset 1,989 1,810 – 179 Liability 6,788 2,218 2,781 1,789 1) Nominal SEK 81,525m (115,162; 108,717) is outstanding before the right of set-off. Essity | Annual Report 2025 156 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 157
E6. Derivatives and hedge accounting, cont. Derivatives with hedge accounting The various risk management strategies are presented in the Risks and risk management section on page 41. The derivatives to which hedge accounting is applied are presented below. Essity also continuously hedges the transac- tion exposure and energy price risks for the risks that are recognized in the balance sheet and profit or loss. Hedge accounting is not applied in respect of these risks. For currency derivatives, the revaluation from the risks meets derivatives in the financial positions. For energy derivatives, the result is recognized in profit or loss. IFRS 9 provides the option of hedging risk components. In 2025, Essity did not utilize this option except for energy where Essity in the Nordic region hedges the system price, which is a sub-component. The hedging ratio for the various risks for which hedge accounting is prepared is consistently 1:1. On account of the ongoing Interest Rate Benchmark Reform, Essity has evaluated the potential impact on existing hedging relationships. Essity has a number of fair value hedges that use Euribor as basis for the variable interest rate in the derivative. In the event Euribor ceases to exist, the hedging relationships are covered by the exemption rules in IFRS 9, thus resulting in no material effects in connection with the transition to a new interest rate benchmark. The nominal amount of the hedging relationships in question is presented in the tables below. Cash flow hedges Cash flow hedges for currency risk are prepared for transaction exposure, large investments and energy price risks in connection with purchases of electricity and gas. For cash flow hedges, hedges are prepared whereby critical terms match the hedged item. For the cash flow hedges prepared, this means that the change in fair value of the hedging instruments and the change in the hedged item are very highly correlated. Any ineffectiveness could, for example, be due to the time or the amount of the forecast cash flow mismatching with the cash flow of the derivative. In 2025, SEK 0m (0; 0) was recognized in profit or loss as ineffectiveness concerning the cash flow hedges. Currency deriva- tives mature until August 2027. Energy derivatives mature until December 2029 but most mature in 2026 and 2027. Hedging of net investments Essity has hedged net investments in a number of selected legal entities in order to achieve the desired currency distribution of net debt relative to assets so that key figures that are important to the company’s credit rating can be protected in the long-term. The result of hedging positions affected equity by a total of SEK 1,784m (–1,488; 720) during the year. This result is largely due to hedges of net investments in USD and GBP. In 2025, SEK 0m (0; 0) was recognized in profit or loss as ineffectiveness. The fair value of outstanding hedging transactions at the end of the period was SEK 199m (–281; 1,143). In total at year-end, Essity hedged net investments outside Sweden amounting to SEK –2,949m (–10,080; –16,870). Essity’s total foreign net investments at year-end amounted to SEK 87,556m (96,858; 82,972). Fair value hedges For fair value hedges, the hedges have the same nominal amount, maturity dates and fixed interest as the hedged item. Hedge ineffectiveness is attributable, for example, to the various discount curves for the hedging instrument and the hedged item. Hedge ineffectiveness per maturity date is presented in the table below. Ineffectiveness is recognized in financial items under Fair value hedges, unrealized. See Note E7 Financial income and expenses on page 160. During the year, three fair value hedges were discontinued and the interest rate swaps were sold. The market value of the interest rate swaps and bonds and loans is updated continuously in profit or loss and the closures therefore had only a marginal impact on earnings. The fair value adjustment on these bonds and loans at year-end amounted to SEK 915m, which will be amortized over the remaining term of the bonds and loans until maturity in 2029 and 2030. Balance sheet Essity uses financial derivatives to manage currency, interest rate and energy price risks. For a description of how Essity manages these risks, refer to the section on Risk and risk management on page 41. The table above shows the derivatives that impacted the Group’s balance sheet on December 31, 2025. For more information relating to deriva- tives in the balance sheet, see Note E1 Financial instruments by category and measurement level on page 152. Offsetting of outstanding derivatives SEKm Assets Liabilities December 31, 2025 Gross amount 506 1,607 Offsetable amount – – Net amount recognized in the balance sheet 506 1,607 Collateral received/paid –9 –815 ISDA agreements whose transactions are not offset in the balance sheet –358 –358 Net after offsetting in accordance with ISDA agreements 139 434 December 31, 2024 Gross amount 1,122 3,324 Offsetable amount –20 –20 Net amount recognized in the balance sheet 1,102 3,304 Collateral received/paid –64 –2,323 ISDA agreements whose transactions are not offset in the balance sheet –683 –683 Net after offsetting in accordance with ISDA agreements 355 298 December 31, 2023 Gross amount 1,989 6,788 Offsetable amount 0 0 Net amount recognized in the balance sheet 1,989 6,788 Collateral received/paid –7 –3,476 ISDA agreements whose transactions are not offset in the balance sheet –1,442 –1,442 Net after offsetting in accordance with ISDA agreements 540 1,870 Profit or loss Hedges pertaining to transaction exposure had an impact of SEK –278m (134; –268) on operating profit for the period. At year-end, fair value amounted to SEK –29m (74; –34). Currency hedges increased the cost of non-current assets by SEK 6m (increased: 31; increased: 52). At year-end, fair value amounted to SEK –30m (–1;–32). Energy derivatives had an impact of SEK –237m (–1,625; –2,288) on operating profit for the period. Energy derivatives had an outstanding fair value of SEK –334m (150; 1,610) at year-end. Derivatives impacted net interest items for the period in an amount of SEK –752m (–1,244; –1,290). The fair value of outstanding interest rate derivatives amounted to SEK –699m (–2,164; –2,781) at year-end. For further information relating to financial items, see Note E7 Financial income and expenses on page 160. Sensitivity analysis Essity has performed sensitivity analysis calculations on the financial instruments’ risk at December 31, 2025 using assumptions on market movements that are regarded as reasonably possible in one year’s time. If the Swedish krona had unilaterally weakened/strengthened by 5% against all currencies, outstanding financial hedges, trade payables and trade receivables would have decreased/increased profit for the period before tax by SEK 30m (35; 51). If the Swedish krona had unilaterally weakened/strengthened by 5%, currency hedges relating to the cost of non-current assets would have increased/decreased equity by SEK 1m (1; 1). If energy prices had increased/decreased by 20%, outstanding financial hedges relating to natural gas and electricity, all other things being equal, would have decreased/increased energy costs for the period by SEK 347m (378; 464). In addition to the earnings impact, equity would have increased/decreased by SEK 160m (176; 79). However, the total energy cost for the Group would have been affected differently if the price risk related to supply contracts was taken into account. Essity | Annual Report 2025 157 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 158
E6. Derivatives and hedge accounting, cont. 2025 2024 2023 Currency and energy derivatives, SEKm Line in the balance sheet Nominal amount Carrying amount Nominal amount Carrying amount Nominal amount Carrying amount Currency derivatives – cash flow hedges Other non-current assets – – 148 1 – – Currency derivatives – cash flow hedges Other current receivables 181 5 1,098 36 355 6 Currency derivatives – cash flow hedges Other non-current liabilities 84 16 – – – – Currency derivatives – cash flow hedges Other current liabilities 1,328 32 387 5 1,722 61 Energy derivatives – cash flow hedges Other non-current assets 201 19 545 56 63 5 Energy derivatives – cash flow hedges Other current receivables 225 12 1,244 244 272 144 Energy derivatives – cash flow hedges Other non-current liabilities 618 65 166 9 556 155 Energy derivatives – cash flow hedges Other current liabilities 1,678 261 567 93 3,212 1,417 Currency derivatives – hedging of net investments Current financial assets 13,240 319 5,841 57 25,908 1,293 Currency derivatives – hedging of net investments Current financial liabilities 10,278 120 23,571 358 7,013 150 Interest rate derivatives – hedging of fair value, SEKm Line in the balance sheet Maturity date Nominal amount Change in fair value, hedged item Change in fair value, derivatives Ineffectiveness Financial assets Financial liabilities Variable interest 2025 Current derivatives 2026 5,400 3 1 4 13 – Euribor 6m +0.5902–0.5904 Non-current derivatives 2030 1,080 –269 270 1 – –111 Euribor 6m +0.5102 2031 4,320 –69 75 6 – –601 Euribor 6m +0.4298 Total 10,800 –335 346 11 13 –712 2024 Current derivatives 2025 4,288 –115 111 –4 – –32 Euribor 6m +0.514–0.5168, Stibor +0.3375 Non-current derivatives 2026 5,730 –54 46 –8 – –5 Euribor 6m +0.5902–0.5904 2029 10,315 –228 226 –2 – –1,009 Euribor 6m +0.0517–0.3449 2030 3,438 –82 80 –2 – –416 Euribor 6m +0.5077–0.5102 2031 4,584 –109 108 –1 – –702 Euribor 6m +0.4298 Total 28,355 –588 571 –17 – –2,164 2023 Non-current derivatives 2025 4,167 –117 110 –7 – –150 Euribor 6m +0.514–0.5168, Stibor +0.3375 2026 5,528 –137 120 –17 – –64 Euribor 6m +0.5902–0.5904 2029 9,951 –612 581 –31 – –1,248 Euribor 6m +0.0517–0.3449 2030 3,317 –212 210 –2 – –501 Euribor 6m +0.5077–0.5102 2031 4,423 –303 299 –4 – –818 Euribor 6m +0.4298 Total 27,386 –1,381 1,320 –61 – –2,781 Essity | Annual Report 2025 158 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 159
E6. Derivatives and hedge accounting, cont. Derivatives with hedge accounting1) SEKm Asset Liability Net Tax Hedge reserve after tax Recirculated before tax Line in profit or loss/ balance sheet 2025 Derivatives with hedge accounting in hedge reserve Cash flow hedges Energy risk 31 –326 –295 75 –220 187 3) Currency risk 5 –48 –43 14 –29 22 4) Total 36 –374 –338 89 –249 Derivatives with hedge accounting without hedge reserve Hedges of net investments in foreign operations Currency risk 319 –120 199 Fair value hedges Interest rate risk 13 –712 –699 Total 368 –1,206 –838 89 –249 2024 Derivatives with hedge accounting in hedge reserve Cash flow hedges Energy risk 300 –102 198 –26 172 1,762 3) Currency risk 37 –5 32 –10 22 9 4) Total 337 –107 230 –36 194 Derivatives with hedge accounting without hedge reserve Hedges of net investments in foreign operations Currency risk2) 77 –358 –281 Fair value hedges Interest rate risk – –2,164 –2,164 Total 414 –2,629 –2,215 –36 194 2023 Derivatives with hedge accounting in hedge reserve Cash flow hedges Energy risk 149 –1,572 –1,423 386 –1,037 1,665 3) Currency risk 6 –63 5) –57 16 –41 68 4) Total 155 –1,635 –1,480 402 –1,078 Derivatives with hedge accounting without hedge reserve Hedges of net investments in foreign operations Currency risk2) 1,293 –150 1,143 Fair value hedges Interest rate risk – –2,781 –2,781 Total 1,448 –4,566 –3,118 402 –1,078 1) Outstanding derivatives with hedge accounting are included in the table Outstanding derivatives. 2) Derivatives before offsetting. 3) Cost of goods sold. 4) Cost of goods sold, Net sales and Property, plant and equipment. 5) Of which SEK –2m is realized and included in cash and cash equivalents. Essity | Annual Report 2025 159 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 160
E6. Derivatives and hedge accounting, cont. The results from hedging of net investments in foreign operations are recognized in the translation reserve, refer to Note E8 Equity. The results from fair value hedges are recognized directly in profit or loss. Hedge reserve in equity Currency derivatives relating to hedging of transaction exposure mature mainly during the first half of 2026. At unchanged exchange rates, profit after tax will be affected in an amount of SEK –8m (23; –16). Currency derivatives relating to hedging of the cost of non-current assets mature until August 2027. At unchanged exchange rates, the cost of non-current assets will increase by SEK 21m (increase by 1; increase by 25) after tax. The derivatives intended to hedge energy costs in the Group mature primarily during 2026 and 2027. At unchanged prices, the Group’s profit after tax will be affected negatively in an amount of SEK 220m (positive 172; negative 1,037). E7. Financial income and expenses Financial income and expenses SEKm 2025 2024 2023 Result from non-current financial assets Dividend – 1 1 Interest income and similar profit items Interest income, investments 257 592 411 Total financial income IS 257 593 412 Interest expenses and similar loss items Interest expenses, borrowings –630 –889 –1,259 Interest expenses, derivatives –775 –1,227 –1,220 Interest expenses, lease liabilities –177 –154 –138 Fair value hedges, unrealized 23 –17 –70 Other financial expenses –82 –237 –81 Total financial expenses IS –1,641 –2,524 –2,768 Total OCF –1,384 –1,931 –2,356 Other financial income and expenses include foreign exchange differences of SEK –17m (–123; –43). Sensitivity analysis If interest rate levels had been 1 percentage point higher/lower, with unchanged fixed-interest terms and volumes in the net debt, interest expenses for the period would have been SEK 118m (269; 219) higher/lower. Sensitivity analysis calculations have been performed on the risk to which Essity was exposed at December 31, 2025 using assumptions on market movements that are regarded as reasonably possible in one year’s time. For a description of the methods used by Essity to manage its interest rate risk, refer to the Risks and risk manage- ment section on page 46. E8. Equity Accounting principles AP Total equity is defined as equity attributable to owners of the Parent company and non-controlling interests. Equity attributable to owners of the Parent company includes reserves and retained earnings. Reserves Hedge reserve Gains and losses on remeasurement of derivatives intended for cash flow hedges are recognized in the hedge reserve as a component of other comprehensive income and reversed to profit or loss at the rate at which the hedged cash flow affects profit or loss. If the hedge pertains to a balance sheet item, the result is transferred from equity to the asset or liability to which the hedge relates when the value of the asset or liability is determined for the first time. See also Note E6 Derivatives and hedge accounting on page 156 for further information on the accounting principles for derivatives used to hedge cash flows. Fair value through other comprehensive income Essity has a financial asset that consists of an equity instrument for which an irrevocable choice was made to, from initial recognition, recognize the asset at fair value in the fair value reserve in other comprehensive income without the option of reclassification to profit or loss. Translation reserve Exchange rate differences arising upon the translation of the financial statements of foreign operations, that have prepared their financial statements in a currency other than the currency in which the Group’s financial statements are presented, are recognized in the translation reserve as a component of other comprehensive income. Gains and losses on remeasurement of derivatives intended to hedge Essity’s net investments in foreign operations are also recognized in the translation reserve as a component of other comprehensive income. The cumulative gain or loss in the translation reserve is recognized in profit or loss in the event of divestment of the foreign operation. Retained earnings Retained earnings includes profits for the period and previous years earned in the Parent company, subsidiaries and associates. Non-controlling interests Non-controlling interests are recognized as a separate item in consolidated equity. Refer also to accounting principles in Note F1 Group companies on page 162 and Note F4 Acquisitions and divest- ments of Group companies and other operations on page 165. Call/put options issued for future acquisitions of non-controlling interests A call option gives Essity the right to buy the seller’s remaining share either at a fixed price or at fair value at the future time when the option is exercised. A put option gives the seller the right to sell the remaining share either at a fixed price or at fair value at the future time when the option is exercised. The amount to be paid is initially recorded at present value as a liability. The liability is revalued and the change is reported in equity. If the options are not exercised at maturity, the liability will be reclassified to equity. Accordingly, in accounting terms, the acquisition is treated as though 100% of the company had been acquired. Repurchase of shares Expenditure for the purchase of own shares reduces retained earnings in equity in the Parent company and the portion of consolidated equity that pertains to owners of the Parent company. If these shares are sold, the sales proceeds are included in retained earnings in the equity pertaining to owners of the Parent company. Essity | Annual Report 2025 160 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 161
E8. Equity, cont. The Annual General Meeting on March 27, 2025 resolved to distribute SEK 8.25 per share as an ordinary dividend to shareholders, or a total of SEK 5,711m. For the 2025 fiscal year, the Board of Directors proposes an ordinary dividend of SEK 8.75 per share, or a total of SEK 5,977m, the total dividend amount may change due to the ongoing buyback pro- gram described on page 8. Equity totaled SEK 86,040m (88,741; 79,405) at December 31, 2025. For more information see Consolidated statement of change in equity on pages 114–115. The tables below show specifications of reserves and income tax attributable to components in other compre- hensive income. At December 31, 2025, the debt/equity ratio amounted to 0.31 (0.35; 0.68). Changes in liabilities and equity are described in the Financial position section on page 39. Essity’s target for capital structure is to establish an effective capital structure, while at the same time ensuring long-term access to loan financing. Cash flow in relation to net debt is to be taken into consideration with the aim of maintaining a solid investment grade rating. Essity has a credit rating for long-term debt of Baa1 from Moody’s and BBB+ from Standard & Poor’s. Essity’s finan- cial risk management is described in the Risks and risk management section on page 41. The Essity share section on page 8 outlines Essity’s dividend policy and buyback program, and the target for Essity’s capital structure is described in the Targets and outcomes section on page 25. Dividend – owners of the Parent company TE8:1 2025 2024 2023 Paid dividend per share, SEK 8.25 7.75 7.25 Dividend paid, SEKm 5,711 5,443 5,092 Proposed dividend per share, SEK 8.75 8.25 7.75 Proposed dividend, SEKm 5,9771) 5,733 5,443 1) Based on the number of shares outstanding, December 31, 2025. The final dividend amount will be based on the number of shares outstanding on the record date of March 26, 2026. Equity, specification of reserves TE8:2 Hedge reserve1) Fair value through other comprehensive income Translation reserve Total reserves in equity SEKm 2025 2024 2023 2025 2024 2023 2025 2024 2023 2025 2024 2023 Value, January 1 194 –1,078 779 4 3 –3 13,026 10,496 10,701 13,224 9,421 11,477 Fair value through other comprehensive income 4 4 5 4 4 5 Cash flow hedges: Result from remeasurement of derivatives recognized in equity –774 –3 –4,360 –774 –3 –4,360 Transferred to profit or loss for the period 203 1,740 1,681 203 1,740 1,681 Translation differences in foreign operations2) –3 –43 59 –9,943 3,833 –796 –9,946 3,790 –737 Gains/losses from hedges of net investments in foreign operations3) 1,784 –1,641 720 1,784 –1,641 720 Tax on items recognized directly in/transferred from equity4) 124 –453 711 –1 –3 1 –367 338 –129 –244 –118 583 Other comprehensive income for the period, net of tax –450 1,241 –1,909 3 1 6 –8,526 2,530 –205 –8,973 3,772 –2,108 Transfer to cost of non-current assets concerning hedged investments, net of tax 6 31 52 6 31 52 Value, December 31 –250 194 –1,078 7 4 3 4,500 13,026 10,496 4,257 13,224 9,421 1) See also Note E6 Derivatives and hedge accounting on page 160 for details of when gains or losses are expected to be recognized. 2) Transfer to profit or loss of realized translation difference relating to divested and liquidated companies is included in the amount of SEK –1m (–627; 1,102). 3) Transfer of realized results from hedging of net investments in foreign operations regarding divested and liquidated companies to the income statement is included in the amount of SEK –m (–152; –). 4) Transfer of tax on items recognized directly in equity regarding divested and liquidated companies to the income statement is included in the amount of SEK –m (31; –). Specification of income tax attributable to components in other comprehensive income TE8:3 2025 2024 2023 SEKm Before tax Tax effect After tax Before tax Tax effect After tax Before tax Tax effect After tax Actuarial gains/losses on defined benefit pension plans 2,421 –370 2,051 92 –33 59 1,334 –162 1,172 Fair value through other comprehensive income 4 –1 3 4 –3 1 5 1 6 Cash flow hedges –571 124 –447 1,737 –453 1,284 –2,679 711 –1,968 Translation differences in foreign operations –9,946 –9,946 4,623 4,623 –270 –270 Gains/losses from hedges of net investments in foreign operations 1,784 –367 1,417 –1,488 307 –1,181 572 –99 473 Total, continuing operations –6,308 –614 –6,922 4,968 –182 4,786 –1,038 451 –587 Total, discontinued operations –588 31 –557 –902 –30 –932 Total operations –6,308 –614 –6,922 4,380 –151 4,229 –1,940 421 –1,519 Essity | Annual Report 2025 161 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 162
F. Group structure F1. Group companies Accounting principles AP Group companies The companies which Essity has control over are consolidated as Group companies. Control means that Essity has sufficient influence to control the relevant activities of the Group company, and that Essity has the right to, and can influence, its variable returns from its participation. Essity owns 100% of most of the Group companies, which means that Essity has control. Non-controlling interests Non-controlling interests are recognized as a separate item in the consolidated statement of change in equity. Profit or loss and every component of other comprehensive income are attributable to the owners of the Parent company and to non-controlling interests. Losses attributable to non-controlling interests are recognized even if this results in a negative share. In acquisitions of less than 100%, when a controlling influence is achieved, non-controlling interests are determined either as a proportional share of the fair value of identifiable net assets excluding goodwill or at fair value. Subsequent acquisitions up to 100% and divestments of participations in a Group company that do not lead to a loss of controlling influence are recognized as an equity transaction. Call and put options issued to Essity and holders of non-controlling interest in acquisitions of Group companies The call option gives Essity the right to acquire the seller’s remaining share either at a fixed price or at fair value at the future time when the option is exercised. Similarly, the put option gives the seller the right to sell the remaining share under the same conditions. The amount to be paid when redeeming these options is initially recorded as a financial liability at present value in the balance sheet. If the options are not exercised at maturity, the liability will be reclassified to equity. Accordingly, in accounting terms, the acquisition is treated as though 100% of the company had been acquired. List of major Group companies The Group’s participations in major Group companies at December 31, 2025 are presented below. The following selection of wholly owned Group companies or Group companies with significant non-controlling interests includes companies with external and internal sales that exceed SEK 1,000m in 2025. Company name Corp. Reg. No. Domicile Share of equity at December 31, 2025 Share of equity at December 31, 2024 Share of equity at December 31, 2023 Essity Australasia Limited 1470756 Auckland, New Zealand 100 100 100 Essity Australasia Pty Ltd 005 442 375 Springvale, Australia 100 100 100 Essity Austria Vetriebs GmbH FN613904 a Vienna, Austria 100 100 100 BSN medical GmbH HRB 124187 Hamburg, Germany 100 100 100 BSN Medical Inc. 3269728 North Carolina, USA 100 100 100 Essity Austria GmbH FN 49537 z Vienna, Austria 100 100 100 Essity Belgium SA-NV BE0405.681.516 Stembert, Belgium 100 100 100 Essity Canada Inc. 10470 9431 Ontario, Canada 100 100 100 Essity Centroamérica S.A. 3-101-211115 San José, Costa Rica 100 100 100 Essity Chile S.A. 94.282.000-3 Santiago de Chile, Chile 100 100 100 Essity Czech Republic s.r.o. 485 36 466 Prague, Czech Republic 100 100 100 Essity Denmark A/S DK20 638 613 Allerød, Denmark 100 100 100 Essity Distribution B.V. 75490080 Amsterdam, Netherlands 100 100 100 Essity do Brasil Indústria e Comércio Ltda 72.899.016/0001-99 Jarinu, Brazil 100 100 100 Essity France SAS 509 395 109 Saint-Ouen, France 100 100 100 Company name Corp. Reg. No. Domicile Share of equity at December 31, 2025 Share of equity at December 31, 2024 Share of equity at December 31, 2023 Essity Germany GmbH HRB 713 332 Mannheim, Germany 100 100 100 Essity Higiene y Salud México S.A. de C.V. SCM-931101-3S5 Mexico City, Mexico 100 100 100 Essity HMS North America Inc. 23-3036384 Delaware, USA 100 100 100 Essity Holding Netherlands B.V. 30-135 724 Zeist, Netherlands 100 100 100 Essity Hungary Kft. 01-09-716945 Budapest, Hungary 100 100 100 Essity Hygiene and Health AB 556007-2356 Gothenburg, Sweden 100 100 100 Essity Italy S.p.A. 3 318 780 966 Altopascio, Italy 100 100 100 Essity Norway AS 915 620 019 Oslo, Norway 100 100 100 Essity PLD France 509 599 619 Saint-Ouen, France 100 100 100 Essity Operations Allo, S.L. B31235260 Allo, Spain 100 100 100 Essity Operations France SAS 702 055 187 Saint-Ouen, France 100 100 100 Essity Operations Mainz-Kostheim GmbH HRB 5301 Wiesbaden, Germany 100 100 100 Essity Operations Mannheim GmbH HRB 3248 Mannheim, Germany 100 100 100 Essity Operations Neuss GmbH HRB 14343 Neuss, Germany 100 100 100 Essity Operations Poland Sp. z.o.o. KRS No. 0000086815 Olawa, Poland 100 100 100 Essity Operations Wausau LLC 41-2218501 Wisconsin, USA 100 100 100 Essity PLD Belgium SA/NV 0794400504 Stembert, Belgium 100 100 100 Essity PLD Germany GmbH HRB 745270 Mannheim, Germany 100 100 100 Essity PLD Italy SpA 12142310155 Porcari, Italy 100 100 100 Essity PLD Netherlands BV 86987496 Zeist, Netherlands 100 100 100 Essity Poland Sp. z.o.o KRS No. 0000427360 Warsaw, Poland 100 100 100 Essity Professional Hygiene Germany GmbH HRB 710 878 Mannheim, Germany 100 100 100 Essity Professional Hygiene North America LLC 58-2494137 Delaware, USA 100 100 100 Essity Slovakia s.r.o. 36590941 Gemerska Horska, Slovakia 100 100 100 Essity Spain, S.L. B28451383 Puigpelat, Spain 100 100 100 Essity Switzerland AG CH-020.3.917.992-8 Schenkon, Switzerland 100 100 100 Essity UK Ltd. 3226403 Dunstable, UK 100 100 100 Productos Familia Sancela del Ecuador S.A. 1791314379001 Quito, Ecuador 96 96 96 Familia del Pacifico S.A.S. 8170006802 Guachene Cauca, Colombia 96 96 96 OY Essity Finland AB 0165027-5 Espoo, Finland 100 100 100 Productos Familia S.A. Colombia 8909001619 Medellin, Colombia 96 96 96 Essity | Annual Report 2025 162 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 163
F2. Investments in associates and joint ventures Accounting principles AP Joint arrangements Essity classifies its joint arrangements as joint ventures or joint operations, which are presented in Note F3 Joint oper- ations on page 165. Associates Associates are companies in which the Group exercises a significant influence without the partly owned company being a Group company or a joint arrangement. Normally, this means that the Group owns between 20% and 50% of the votes. Accounting for associates is carried out according to the equity method and they are initially measured at cost. Valuation of acquired assets and liabilities is performed in the same manner as for Group companies and the carrying amount for associates includes any goodwill and other Group adjustments. For further information see Note F4 Acquisitions and divestments of Group companies and other operations on page 165. The Group’s share of profit after tax arising in the associate after the acquisition is recognized as a component of one line in the consolidated income statement “Share of results of associates and joint ventures”. Share of profits is calculated on the basis of Essity’s share of equity in the respective associate. Joint ventures Joint ventures are defined as companies in which Essity together with other parties through an agreement, has shared control over operations. A joint venture entitles the joint owners to the net assets of the investment. Joint ventures are recognized in accordance with the equity method, meaning that a net item including the goodwill will be recognized for each joint venture in the balance sheet. A share in profits is recognized in the income statement as a component of “Share of results of associates and joint ventures”. Share of profits is calculated on the basis of Essity’s share of equity in the respective joint venture. Joint arrangements recognized in accordance with the equity method are initially measured at cost. Measurement of acquired assets and liabilities is carried out in the same way as for Group companies. Carrying amounts of investments in associates and joint ventures SEKm 2025 2024 2023 Associates Value, January 1 105 62 60 Assets held for sale – – –3 Share of results of associates 11 67 23 Dividends received –16 –27 –17 Translation differences –5 3 –1 Value, December 31 95 105 62 Joint ventures Value, January 1 246 232 231 Share of results of joint ventures 3 11 16 Dividends received –11 –6 –14 Divestments1) –10 – – Translation differences –16 9 –1 Value, December 31 212 246 232 Value, December 31, investments in associates and joint ventures BS TF3:1 307 351 294 1) In September 2025, Essity divested its 50% ownership in the joint venture American Fiber Services LLC, see Note F4 Acquisitions and divestments of Group companies and other operations on page 165. Associates and joint ventures Associates Cartografica Galeotti S.p.A. (Cartografica Galeotti) in Italy manufactures and sells handkerchiefs and facial tissues. Essity’s ownership is 33% and was unchanged during the comparative periods. Cartografica Galeotti has its regis- tered office in Lucca, Italy and its corporate registration number is 1333330464. Joint ventures Bunzl & Biach GmbH (Bunzl & Biach) Vienna is Essity’s single largest investment in a joint venture that operates in the recovered paper market and supplies raw materials to Essity’s business. Ownership is 49% and was unchanged during the comparative periods. Bunzl & Biach has its registered office in Vienna, Austria and its corporate registration number is FN 79555 v, see also Note G3 Transactions with related parties on page 168. Essity’s investment in ProNARO GmbH is not material, but the company performs an important function by opti- mizing inventory levels and reducing lead times and costs when purchasing timber, see also Note G3 Transactions with related parties on page 168. Essity | Annual Report 2025 163 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 164
F2. Investments in associates and joint ventures, cont. Material investments in associates and joint ventures, 100% of operations TF3:1 Associates Joint ventures Cartografica Galeotti Bunzl & Biach Total SEKm 20251) 20242) 2023 2025 2024 2023 2025 2024 2023 Condensed income statement Net sales 792 959 901 1,272 1,572 1,310 2,064 2,531 2,211 Depreciation 25 27 26 –22 –23 –21 3 4 5 Operating profit 118 198 69 5 35 40 123 233 109 Interest income – – – 1 4 – 1 4 – Interest expenses – – – –1 –2 – –1 –2 – Other financial items 3 –1 –1 – –1 2 3 –2 1 Tax expense –30 –50 –9 –3 –9 –14 –33 –59 –23 Profit for the period 91 147 59 6 29 28 97 176 87 Comprehensive income for the period 91 147 59 6 29 28 97 176 87 Condensed balance sheet Non-current assets 58 79 95 231 244 232 289 323 327 Cash and cash equivalents 78 140 38 84 148 90 162 288 128 Other current assets 340 375 467 217 267 256 557 642 723 Total assets 476 594 600 532 659 578 1,008 1,253 1,178 Non-current financial liabilities 3 21 54 50 94 95 53 115 149 Other non-current liabilities 7 8 8 6 17 10 13 25 18 Current financial liabilities 181 260 79 11 5 15 192 265 94 Other current liabilities 14 15 4 162 205 149 176 220 153 Total liabilities 205 304 145 229 321 269 434 625 414 Net assets 271 290 455 303 338 309 574 628 764 Group share of net assets 90 96 150 148 166 151 238 262 301 Surplus value1) 4 8 –89 53 56 50 58 64 –39 Carrying amount of the companies 94 104 61 201 222 201 295 326 262 Carrying amount of other associates 1 1 1 1 1 1 Carrying amount of other joint ventures 11 24 31 11 24 31 Carrying amount of investments in associates and joint ventures BS TF3:2 95 105 62 212 246 232 307 351 294 1) As of 2025, Essity has reverted to reporting Cartografica Galeotti with a one-year delay, see footnote 2 for further explanation. The share of profits reported in Essity for 2025 is therefore based on Essity’s share of profits for Cartografica Galeotti for the last 6 months of 2024 less dividends received in 2025. The stated results and balance sheet for 2025 refer to the published annual report for 2024 for Cartografica Galeotti. Essity is reverting to the previous accounting principles for reporting the share of profits as Essity cannot publish the annual accounts for six months in Cartografica Galeotti as this is not official. 2) The results from the share in Cartografica Galeotti for the year 2023 have been reported with a one-year delay. This means that Essity’s share of the results for the year 2023 is based on Cartografica Galeotti’s annual report for 2022, as stated in the above summary of results and balance sheet for 2023. However, Essity’s reported value in the balance sheet of Cartografica Galeotti as of the end of December 2023 has been reduced by the dividends received during 2023, which is why the reported value of Cartografica Galeotti is lower than the reported share of net assets according to the above summary. From 2024 onwards, the results from the share in Cartografica Galeotti will be reported with a six-month delay, which means that the share of results for the year 2024 is based on Cartografica Galeotti’s annual report for 2023 and the estimated preliminary results for the first half of 2024, i.e., for 18 months. However, the stated results and balance sheet for 2024 refer to the published annual report for 2023 for Cartografica Galeotti. Essity’s reported value in the balance sheet of Cartografica Galeotti as of the end of December 2024 is therefore based on the annual report for 2023, with deductions for dividends received during 2024 and additions for the estimated preliminary results for the first half of 2024. Essity | Annual Report 2025 164 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 165
F3. Joint operations Accounting principles AP Joint operations are defined as companies in which Essity, together with other parties through an agreement, has shared control over operations. In joint operations, parties to the agreement have rights to the assets and obligations for the liabilities associated with the investment, meaning that the operator must account for its share of the assets, liabilities, revenues and costs according to the proportional method. Measurement of acquired assets and liabilities according to the proportional method is carried out in the same way as for Group companies. Essity recognizes its proportional share of the company’s assets, liabilities, revenues and costs in its financial statements. For more information on joint operations, refer to Note G3 Transactions with related parties on page 168. Joint operations Company name Corp. Reg. No. Domicile Share of equity at December 31, 2025 % Share of equity at December 31, 2024 % Share of equity at December 31, 2023 % Uni-Charm Mölnlycke B.V. 02-330 631 Hoogezand, Netherlands 40 40 40 Nokianvirran Energia Oy (NVE) 213 1790-4 Kotipakka, Finland 27 27 27 Uni-Charm Mölnlycke Uni-Charm is classified as a joint operation since the parties to the agreement purchase all products produced by the company. The products are priced in a manner that allows the operations to receive full cost recovery for their pro- duction and financing costs. This means that the company in the joint operation is operated with near-zero profit and thus is not exposed to commercial risk. This joint operation has operations in Hoogezand, the Netherlands, and Kentucky, USA. Nokianvirran Energia Essity has entered into an agreement with two other stakeholders to form a joint so-called mankala company in the Finnish energy market, where the joint parties produce heat and steam from biofuel. Each party in the joint operation is obligated to bear a portion of the fixed costs in proportion to its holding in the company and to pay for the raw materials used in the production of heat and steam in proportion to its consumption. Accordingly, the company is not profit-driven since the parties themselves bear their respective costs. The company is expected to generate near-zero profit and thus is not exposed to any commercial risk. F4. Acquisitions and divestments of Group companies and other operations Accounting principles AP Acquisitions of Group companies and other operations Essity applies IFRS 3 Business Combinations for acquisitions. In business combinations, acquired assets and assumed liabilities are identified and recognized at fair value on the date of acquisition (also known as purchase price alloca- tion). The purchase price allocation also includes an assessment of whether there are any assets that are intangible in nature, such as technologies, trademarks, patents, customer relations or similar assets that are not recognized in the acquired unit. If the purchase consideration paid is higher than the net value of the acquired assets and assumed liabilities, the difference is recognized as goodwill. Any surplus value on property, plant and equipment is depreciated over the estimated useful life of the asset. Goodwill and strong trademarks with indefinite useful lives are not amor- tized; instead, they are subjected to annual impairment testing. Some trademarks and customer relations are amortized over their estimated useful lives. A purchase price allocation is considered preliminary until it is confirmed. A preliminary purchase price allocation is changed as soon as new information regarding assets/liabilities on the acquisition date is obtained, although the acquisition balance sheet must be confirmed not later than one year from the date of the acquisition. If the transferred consideration is contingent on future events, it is measured at fair value and any changes in value are recognized in profit or loss. Transaction costs in conjunction with acquisitions are expensed when they occur. Companies acquired during the period are included in the consolidated financial statements as of the acquisition date. Divested companies are included in the consolidated financial statements until the divestment date. Non-controlling interests Acquisitions of non-controlling interests are measured on an acquisition-by-acquisition basis, either as a proportional share of the fair value of identifiable net assets excluding goodwill (partial goodwill) or at fair value, which means that goodwill is also recognized on non-controlling interests (full goodwill). In step acquisitions in which a controlling influence is achieved, any net assets acquired earlier in the acquired units are remeasured at fair value and the result of the remeasurement is recognized in profit or loss. If the controlling influence is lost upon the divestment of an operation, the result is recognized in profit or loss and the portion of the divested operation that remains in the Group is measured at fair value on the divestment date, with the remeasure- ment effect recognized in profit or loss. Increases in the ownership stake of Group companies after controlling influence is achieved are recognized as an equity transaction, meaning the difference between the purchase consideration paid and the carrying amount of the non-controlling interests is recognized as an increase or decrease in equity attributable to owners of the Parent company. The same accounting procedure applies for divestments that take place without the loss of a controlling influence. Acquisitions in 2025 Essity completed no acquisitions in 2025. In the last quarter 2025, Essity entered into an agreement to acquire Edgewell’s feminine care business, including the brands Carefree, Stayfree and o.b. in North America and Playtex globally. The acquisition was completed on February 2, 2026. Acquisitions in 2024 Essity completed no acquisitions in 2024. In November 2024, the Colombian hygiene company Productos Familia S.A. (“Familia”) offered its shareholders to buyback its own shares for a value of approximately SEK 1bn. Of this amount, SEK 51m was paid to non-controlling shareholders who accepted the offer, which entailed a corresponding decrease in Essity’s equity. Essity’s shareholding in the company increased marginally. Acquisitions in 2023 Essity completed no acquisitions in 2023. Essity | Annual Report 2025 165 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 166
F4. Acquisitions and divestments of Group companies and other operations, cont. Knix On July 8, 2022, Essity announced that the company had acquired 80% of the Canadian company Knix Wear Inc., a leading provider of leakproof apparel for periods and incontinence. The transaction was finalized on September 1, 2022. The agreement with the seller includes a call/put option to buy/sell the remaining shares in three years. The options can be redeemed at fair value during the exercise period from September 1, 2025 to August 31, 2026. The amount to be paid if the option is exercised is initially recorded at present value as a liability in Essity’s balance sheet. Accordingly, in accounting terms, the acquisition is treated as though 100% of the company had been acquired. The purchase price amounted to CAD 430m (SEK 3.5bn) on a cash and debt-free basis for 80% of the company. Acquisitions of Group companies and other operations The table below shows the fair value of acquired net assets recognized on the acquisition date, recognized goodwill and the effect on the Group’s cash flow statements. Acquisition balance sheets SEKm 2025 2024 2023 Property, plant and equipment and right-of-use assets – – 4 Other non-current assets – – 26 Operating assets – – –3 Provisions and other non-current liabilities – – –16 Net debt excluding cash and cash equivalents – – –4 Operating liabilities – – 3 Fair value of net assets – – 10 Goodwill – – –14 Non-controlling interests – 43 – Acquisition of non-controlling interests recognized in equity attributable to owners of the Parent company – 8 – Consideration transferred – 51 –4 Consideration transferred – –51 4 Settled debt pertaining to acquisitions in earlier years – –17 –182 Effect on Group’s cash and cash equivalents, acquisition of Group companies and other operations CF – –68 –178 of which recognized as acquisitions in investing activities – –17 –178 of which recognized as acquisitions of non-controlling interests in financing activities – –51 – Acquired net debt excluding cash and cash equivalents – – –4 Acquisitions of Group companies and other operations during the period, including net debt assumed OCF – –68 –182 Divestments of Group companies and other operations In September 2025, Essity divested its 50% ownership in the joint venture American Fiber Services LLC for a purchase consideration of SEK 5m. Until this divestment, the company was recognized using the equity method. The earnings impact amounted to SEK –5m excluding the reclassification of accumulated currency translation differences. Includ- ing the reclassification of accumulated currency translation differences totaling SEK 1m, the net loss amounted to SEK –4m, which was recognized as IAC in profit or loss. On March 21, 2024, Essity completed the sale of its 51.59% shareholding in the Asian hygiene company Vinda International Holdings Limited (Vinda). The sales proceeds amounted to approximately HKD 14.6bn (SEK 19,360m). Total capital gain, excluding the reclassification of accumulated currency translation differences, amounted to SEK 8,366m. Including the reclassification of realized currency translation differences of SEK 748m after tax, the net gain amounted to SEK 9,114m, which is recognized in discontinued operations. See also Note G4 Assets held for sale and discontinued operations on page 169 for information on additional transaction costs of SEK –227m and impair- ment of intangible assets in Essity related to Vinda after tax of SEK –89m, which is also included in discontinued operations. On July 17, 2023, Essity divested its operations in Russia for a purchase price of SEK 1,171m on a debt-free basis. The earnings impact amounted to SEK 549m excluding the reclassification of accumulated currency translation differences. Including the reclassification of accumulated currency translation differences, earnings amounted to SEK –553m. In 2022, Essity’s net sales in Russia corresponded to about 2% of its total consolidated net sales. In September 2023, Essity divested a separate manufacturing and sterilization facility in New Zealand, pertaining to bandages for post-operative wounds intended for the local market, for a purchase price of SEK 63m. The earnings impact amounted to SEK 29m. Total capital gain, excluding the reclassification of accumulated currency translation differences for divestments in Russia and New Zealand, amounted to SEK 578m. Including the reclassification of realized negative currency transla- tion differences totaling SEK –1,102m, the net loss amounted to SEK –524m, which is reported as an IAC in profit or loss. Assets and liabilities included in divestments of Group companies and other operations SEKm 2025 20241) 2023 Intangible assets – 7,404 – Property, plant and equipment and right-of-use assets – 14,724 10 Other non-current assets 10 1,090 – Operating assets – 8,901 1,100 Cash and cash equivalents – 1,380 895 Provisions and other non-current liabilities – –1,107 – Net debt excluding cash and cash equivalents – –5,928 –15 Operating liabilities – –6,846 –439 Non-controlling interests – –8,624 – Gain/loss on divestment2) –5 8,366 578 Compensation received 5 19,360 2,129 Less: Cash and cash equivalents in divested companies – –1,380 –895 Impact on Group’s cash and cash equivalents, divestments of Group companies and other operations CF 5 17,980 1,234 Add: Divested net debt excluding cash and cash equivalents – 5,928 15 Divestments of Group companies and other operations during the period, including net debt transferred OCF 5 23,908 1,249 1) Divestments in 2024 pertain to the divestment of Vinda, see Note G4 Assets held for sale and discontinued operations on page 169. 2) Excluding reversal of realized translation differences of SEK 1m (775; –1,102) in divested companies that was reclassified to the income statement. Gain/loss on divestment in 2025 is included in IAC in the income statement. Gain/loss on divestment in 2024 is included as part of profit for the period, discontinued operations in the income statement. Gain/loss on divestment in 2023 is included in IAC in the income statement. Essity | Annual Report 2025 166 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 167
G. Other G1. Leases Accounting principles AP When a contract is signed it is assessed if the contract is or contains a lease. A contract is or contains a lease if: • it contains an identified asset • Essity is entitled to essentially all economic benefits arising from the use of the identified asset • Essity is entitled to control the use of the asset If any of the above conditions are not met, the contract is not regarded as a lease or containing a lease and is there- fore classified as a service contract. On the commencement date of the lease, meaning when the asset becomes available for use by Essity, a right- of-use asset and a financial liability are recognized in the balance sheet. The right-of-use asset is measured at cost and includes the following: • the value of the amount of the lease liability • lease payments made on or before the commencement date, after deductions for any benefits received in conjunction with signing the lease • initial direct fees • an estimate of expenses expected to be paid to restore the asset to the condition as stipulated in the terms of the lease The right-of-use asset is depreciated on a straight-line basis over the shorter period of the asset’s anticipated useful life and the lease term. The lease term is assessed on the basis of the length of the underlying contract taking into consideration the cancellation and renewal options. The lease liability is measured at the present value of the following lease payments: • fixed fees, less any incentive receivables • variable lease payments due to an index or rate • amounts expected to be paid in accordance with residual value guarantees • the exercise price for a purchase option, if Essity is reasonably certain of exercising the option • financial penalties to be paid on termination of the lease, if the lease term reflects that Essity will utilize this option Lease payments are normally discounted using Essity’s incremental borrowing rate as the implicit rate of the lease cannot be readily determined in most cases. The incremental borrowing rate used is determined on the basis of the contract currency of the agreement and the length of the lease. The lease liabilities are recognized under the headings Non-current financial liabilities or Current financial liabilities. Lease liabilities are measured at amortized cost according to the effective interest method. The liability is remeasured when future payments are amended by index or by other means, such as a new assessment of future residual value commitments, or the exercise of purchase, renewal or cancellation options. When the lease liability is remeasured as described above, a corresponding adjustment of the value of the right-of-use asset is made. When making lease pay- ments, the contribution is allocated between interest expense and repayment of the lease liability. In the consolidated cash flow statement, payments pertaining to the amortization of the lease liability are recognized in financing activi- ties and payments pertaining to interest expenses are recognized as interest paid. In profit or loss, depreciation of the right-of-use asset is recognized in operating profit while interest expense is recognized in financial expenses. Essity enters into leases on a continuous basis for office buildings, distribution centers and vehicles, such as trucks, forklifts and passenger cars. Lease terms for properties are generally between 3–15 years, while lease terms for vehicles are generally between 3–5 years. Essity also has leases with a shorter lease term than 12 months and leases pertaining to assets of low value, such as office equipment. For these, Essity has chosen to apply the exemption rules in IFRS 16 Leases, meaning the value of these contracts is not part of the right-of-use asset or lease liability. There are no significant extension periods not taken into account in the lease liability. Key assessments and assumptions KAA Assessments and assumptions must be used when reporting leases in accordance with IFRS 16 Leases. The two most significant assessments concern the length of the lease term and the discount rate to be used. The implicit rate of the leases cannot be readily determined and lease payments are therefore discounted over the expected lease term using Essity’s incremental borrowing rate. The incremental borrowing rate corresponds to what Essity would need to pay to use a loan to finance the purchase of an equivalent asset for a similar duration in the contract currency of the lease. The duration of the lease is determined as the non-cancellable lease term together with periods that may be covered by an option to extend a lease if it is reasonably certain that the contract will be renewed and periods covered by an option to terminate the lease if it is reasonably certain that a possibility to cancel the lease will not be utilized. When assessing if it is reasonably certain that a renewal option or cancellation option will be used, all relevant facts and circumstances that create economic incentives or deterrents are taken into account. The assessment of the lease term is reviewed in cases where facts and circumstances have significantly changed. TG1:1 Right-of-use assets SEKm Properties Vehicles Other Total Lease liabilities Value, January 1, 2025 3,652 429 7 4,088 4,327 Additional right-of-use assets, net 718 313 19 1,050 1,050 Depreciation –861 –245 –5 –1,111 Impairment – – – – Interest expenses 177 Payments1) –1,275 Translation differences –245 –29 – –274 –322 Value, December 31 3,264 468 21 3,753 3,958 1) Of which SEK –185m relates to interest payments and SEK –1,090m relates to amortization of the lease liability. In addition to the expenses in the table above, Essity recognized SEK 320m (382; 343) relating to costs for short-term leases, leases of low-value assets and variable lease payments. The total earnings impact of leases, including depreci- ation, impairment and interest expenses, was SEK 1,608m (1,625; 1,507). Lease payments totaled SEK 1,595m (1,605; 1,468). The maturity structure concerning undiscounted future lease payments during future lease terms is presented in Note E5 Liquidity risk on page 160. Essity has entered into binding leases regarding office properties where the lease term has yet to begin, future lease payments for these contracts are SEK 184m distributed over the next ten years. TG1:1 Right-of-use assets SEKm Properties Vehicles Other Total Lease liabilities Value, January 1, 2024 3,577 348 9 3,934 4,138 Additional right-of-use assets, net 828 310 3 1,141 1,141 Depreciation –846 –238 –5 –1,089 Impairment –1 – – –1 Interest expenses 154 Payments1) –1,223 Translation differences 94 9 – 103 117 Value, December 31 3,652 429 7 4,088 4,327 1) Of which SEK –154m relates to interest payments and SEK –1,069m relates to amortization of the lease liability. Essity | Annual Report 2025 167 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 168
G1. Leases, cont. TG1:1 Right-of-use assets SEKm Properties Vehicles Other Total Lease liabilities Value, January 1, 2023 5,038 374 15 5,427 4,281 Assets held for sale –1,540 –9 – –1,549 Liabilities directly attributable to assets held for sale –208 Additional right-of-use assets, net 868 228 3 1,099 1,099 Leases included in acquisitions 3 – – 3 3 Disposals –8 – – –8 –8 Depreciation –808 –244 –9 –1,061 Impairment –2 0 – –2 Reversal of impairment losses 37 – – 37 Interest expenses 138 Payments –1,125 Translation differences –11 –1 – –12 –42 Value, December 31 3,577 348 9 3,934 4,138 G2. Contingent liabilities and pledged assets Accounting principles AP A contingent liability is recognized when there is a potential or actual obligation arising from past events that is not recognized as a liability or provision, either because it is improbable that an outflow of resources will be required to settle the obligation or because the amount cannot be calculated in a reliable manner. Contingent liabilities SEKm 2025 2024 2023 Guarantees for associates 1 1 1 customers and others 60 57 57 Other contingent liabilities 2681) 3181) 3331) Total 329 376 391 1) Including a tax-related dispute in Columbia. With reference to infringements of competition rules, claims for damages have been brought against the company. The company contests its responsibility and does not expect the claim to have a material impact. In December 2024, certain bond investors initiated proceedings against Essity in English court in relation to Essity’s sale of its shares in Vinda. These investors withdrew their action in January 2026. Pledged assets Total SEKm Pledged assets related to financial liabilities Other 2025 2024 2023 Real estate mortgages – – – – Endowment insurances – 199 199 191 245 Total – 199 199 191 245 Liabilities for which some of these assets were pledged as collateral amounted to SEK 199m (191; 200). G3. Transactions with related parties Essity has dealings with related parties’ shareholdings primarily in joint ventures and joint operations. The trans- actions occur in the operating activities and mainly consist of the purchase of finished goods for resale and raw materials for use in production based on commercial terms and market prices. Cartografica Galeotti S.p.A. in Italy manufactures and sells handkerchiefs and facial tissues. Essity’s ownership is 33% and was unchanged during the comparative periods. Bunzl & Biach GmbH sells recovered paper to Essity. ProNARO GmbH’s main task is to negotiate prices, optimize inventory levels and reduce lead times and costs when purchasing timber. Uni-Charm Mölnlycke BV manufactures and sells incontinence and diaper products to Essity. 40% of the trans- actions between Uni-Charm Mölnlycke BV and Essity are eliminated as intra-Group transactions and 60% are recog- nized as external transactions. See also Note F2 Investments in associates and joint ventures on page 163 and Note F3 Joint operations on page 165. External transactions and dealings with significant related parties are presented below. Information on the remu- neration of the Board of Directors and senior executives is provided in Note C2 on page 141. Transactions and dealings with related parties 2025 SEKm Cartografica Galeotti Bunzl & Biach ProNARO Uni-Charm Mölnlycke Sales 51 – – – Purchases 23 338 670 1,246 Trade receivables 11 – – 87 Trade payables 6 28 14 94 Transactions and dealings with related parties 2024 SEKm Cartografica Galeotti Bunzl & Biach ProNARO Uni-Charm Mölnlycke Sales 60 – – – Purchases 18 386 652 1,407 Trade receivables 16 – – 91 Trade payables 7 33 9 145 Transactions and dealings with related parties 2023 SEKm Cartografica Galeotti Bunzl & Biach ProNARO Uni-Charm Mölnlycke Sales 75 – – – Purchases 25 331 824 1,426 Trade receivables 18 – – 77 Trade payables 5 28 19 109 Essity | Annual Report 2025 168 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 169
G4. Assets held for sale and discontinued operations Accounting principles AP Assets are classified as held for sale if their value, within one year, will be recovered through a sale and not through continued use in the operations. This means that the assets are presented on a separately line in the balance sheet. On the reclassification date, the assets and liabilities are measured at the lower of fair value minus selling costs and the carrying amount. The assets are no longer depreciated after reclassification. The gain is limited to the amount equivalent to previously made impairment. Gains and losses recognized on remeasurement and divestment are rec- ognized in profit or loss for the period. When an asset held for sale represents an independent significant business segment or a significant operation within a geographical area, it is classified as discontinued operations. This means assets and liabilities related to this operation are presented on separate lines in the balance sheet. The divestment date, or the point in time when the operation fulfills the criteria for classification as held for sale, determines when the operation is classified as discontinued operations. Profit or loss for the period after tax from discontinued operations is recognized on a separate line in the income statement. Internal dealings and transactions between continuing operations and discontinued operations have been eliminated. The income statement is adjusted for the comparative period as though the discontinued operations had already been classified as discontinued operations at the beginning of the comparative period. Profit or loss for the period attributable to discontinued operations was excluded in notes relating to the income statement for comparative years. Public offer for all of the shares in Essity’s former subsidiary Vinda Isola Castle Ltd, a company indirectly wholly owned by Asia Pacific Resources International Limited (APRIL), announced on 15 December 2023 that it intended to make a public offer to the shareholders of Vinda International Holdings Limited (Vinda) for all shares in Vinda. The offer was equivalent to a price of HKD 23.50 per share. Essity supported the offer and signed an irrevocable undertaking to accept the offer for its entire holding of 51.59% share- holding. As of the fourth quarter of 2023, Essity has classified Vinda’s financial reporting as a discontinued operation. The offer was announced on 8 March 2024 and Essity accepted the offer in accordance with its undertaking. The public offer was equivalent to a total value of the shares in Vinda of approximately HKD 28.3bn (SEK 37.3bn). On March 21, 2024, Essity announced that the company had completed the sale of all shares in Vinda. The transaction generated cash proceeds to Essity of HKD 14.6bn (approximately SEK 19bn). Statement of profit for the period, discontinued operations SEKm 2025 2024 2023 Earnings for the period relating to Vinda – 217 279 Other earnings attributable to divestment of Vinda – 8,798 – Earnings from discontinued operations – 9,015 279 Other earnings attributable to divestment of Vinda SEKm 2024 Gain/loss on sale 8,366 Reclassification of realized currency translation differences after tax 748 Transaction costs –227 Impairment of intangible assets in Essity related to Vinda after tax –89 Total 8,798 Profit or loss SEKm 2025 2024 2023 Net sales – 4,533 26,770 Operating expenses – –4,261 –26,318 Operating profit – 272 452 Financial items – –27 –157 Profit before tax – 245 295 Income taxes – –28 –16 Profit for the period, discontinued operations – 217 279 Profit from discontinued operations attributable to: Owners of the Parent company – 8,919 114 Non-controlling interests – 96 165 Earnings per share from discontinued operations – owners of the Parent company Earnings per share from discontinued operations before and after dilution effects, SEK – 12.74 0.16 Average number of shares before and after dilution, million – 700.3 702.3 Balance sheet SEKm 2023 ASSETS Intangible assets 7,080 Property, plant and equipment 14,300 Financial assets excluding cash and cash equivalents 1 Operating receivables 9,178 Cash and cash equivalents 1,768 Total assets held for sale 32,327 LIABILITIES Financial liabilities 5,508 Operating liabilities 7,283 Deferred tax liabilities 917 Total liabilities directly attributable to assets held for sale 13,708 Net assets held for sale 18,619 Non-controlling interests attributable to discontinued operations 8,145 Net assets held for sale including non-controlling interests attributable to discontinued operations 10,474 Essity | Annual Report 2025 169 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 170
G5. Events after the balance sheet date On January 8, 2026, Essity announced that the funds that had brought an action against Essity in the English courts regarding bonds issued by the company had chosen to discontinue their action. The case is therefore closed. On January 29, 2026, Essity announced that it had secured a EUR 400m loan at favorable terms with the European Investment Bank (EIB). The loan has a tenor of seven years and will support the company’s research, development and innovation initiatives across all business areas. On February 2, 2026, Essity acquired 100% of assets and liabilities in Edgewell Personal Care’s feminine care busi- ness, including the brands Carefree, Stayfree and o.b. in North America, global rights for the Playtex brand in feminine care as well as a production facility in the USA. Edgewell’s feminine care business offers liners, pads and tampons. The business has approximately 500 employees. The total purchase price for the assets amounts to USD 339m (SEK 2,994m) on a cash and debt-free basis. For the period October 1, 2024 to September 30, 2025, the business reported net sales of approximately USD 261m (approximately SEK 2,650m) EBITDA excl. IAC of approximately USD 26m (approximately SEK 270m) and EBITA excl. IAC of approximately USD 16m (approximately SEK 160m). The acquisition supports Essity’s strategy to focus on high-margin categories and to strengthen market positions in the USA. No other significant events, with impact on the financial statements, have occurred after the balance sheet date. Specification of preliminary acquisition balance sheet Edgewell SEKm Edgewell Intangible assets 1,099 Property, plant and equipment 603 Operating assets 534 Operating liabilities –53 Fair value of net assets 2,183 Goodwill 811 Purchase price 2,994 Essity | Annual Report 2025 170 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 171
Financial statements, Parent company Income statement IS SEKm Note 2025 2024 Administrative expenses –979 –1,090 Other operating income 393 688 Operating loss PC2 –586 –402 Financial items PC11 Result from participations in Group companies1) 14,221 23,502 Interest income and similar profit items 545 691 Interest expenses and similar loss items –3,165 –4,248 Total financial items 11,601 19,945 Profit after financial items 11,015 19,543 Appropriations1) PC4 1,625 –1,300 Income taxes PC5 –406 –92 Profit for the period 12,234 18,151 1) As of the fiscal year 2025, the Parent company applies the alternative rule in accordance with RFR 2 Accounting for Legal Entities when reporting Group contributions, and recognizes the net of Group contributions paid and received as Appropriations. The comparative period has been restated. Group contributions were recognized under Financial items in previous years. Statement of comprehensive income SEKm 2025 2024 Profit for the period 12,234 18,151 Other comprehensive income – – Total comprehensive income 12,234 18,151 Cash flow statement CF SEKm 2025 2024 Operating activities Profit after financial items1) 11,015 19,543 Adjustment for non-cash items T:1 –1,959 –2,127 Paid tax –2 –385 Cash flow from operating activities before changes in working capital 9,054 17,031 Change in operating receivables2) –1,839 1,515 Change in operating liabilities2) –1,747 1,725 Cash flow from operating activities 5,468 20,271 Investing activities Investments in non-current assets –2 –4 Investments in subsidiaries – –375 Cash flow from investing activities –2 –379 Financing activities Proceeds from borrowings 1,131 – Repayment of borrowings – –10,923 Dividend paid –5,711 –5,443 Group contributions1) 2,274 –1,301 Buyback of own shares –3,160 –2,225 Cash flow from financing activities –5,466 –19,892 Cash flow for the period 0 0 Cash and cash equivalents, January 1 0 0 Cash and cash equivalents, December 313) 0 0 Adjustment for non-cash items T:1 2025 2024 Depreciation of non-current assets 3 2 Change in accrued items –1,934 –2,059 Change in provisions –28 –70 Total –1,959 –2,127 1) See footnote 1 below the Parent company’s statement. 2) Dealings of the Parent company with the Swedish Group companies relating to Group contributions and internal tax are recognized as Change in operating receivables or Change in operating liabilities, respectively. 3) The company’s current account is a sub-account and is recognized in the balance sheet as liabilities to Group companies. Supplementary disclosures Interest and dividends paid and received 2025 2024 Dividends received 14,221 23,502 Group contribution received 455 1,874 Group contribution paid –1,756 –15 Interest paid –3,583 –4,543 Interest received 1,017 580 Total 10,354 21,398 Essity | Annual Report 2025 171 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 172
Change in liabilities attributable to financing activities SEKm Value, January 1 Cash flow Translation difference Value, December 31 Non-current interest-bearing liabilities 24,186 –51 –1,280 22,855 Non-current interest-bearing liabilities to Group companies 12,572 –5,450 –661 6,461 Current interest-bearing liabilities 4,288 –3,790 –500 –2 Current interest-bearing liabilities to Group companies 47,217 10,427 –62 57,582 Current interest-bearing receivables to Group companies – –5 – –5 Total 88,263 1,131 –2,503 86,891 Balance sheet BS SEKm Note 2025 2024 Assets Non-current assets Capitalized development costs 0 0 Intangible assets PC6 0 0 Machinery and equipment 11 12 Property, plant and equipment PC7 11 12 Participations in subsidiaries PC8 176,111 176,111 Receivables from Group companies PC9 – 484 Other non-current receivables 268 253 Deferred tax assets PC5 301 304 Financial non-current assets 176,680 177,152 Total non-current assets 176,691 177,164 Current assets Receivables from Group companies PC9 2,484 684 Current tax assets PC5 – 7 Other current receivables PC10 76 79 Total current assets 2,560 770 Total assets 179,251 177,934 Balance sheet BS SEKm Note 2025 2024 Equity, provisions and liabilities Equity PC13. Share capital 2,350 2,350 Statutory reserve 0 0 Total restricted equity 2,350 2,350 Retained earnings 73,142 63,862 Profit for the period 12,234 18,151 Total non-restricted equity 85,376 82,013 Total equity 87,726 84,363 Untaxed reserves PC4 1,477 827 Provisions Provisions for pensions1) PC3 774 787 Other provisions 56 57 Total provisions 830 844 Non-current liabilities Liabilities to Group companies PC9 7,173 13,691 Non-current interest-bearing liabilities PC11 22,855 24,186 Total non-current liabilities 30,028 37,877 Current liabilities Liabilities to Group companies PC9 58,421 49,268 Current tax liabilities PC5 394 – Current interest-bearing liabilities PC11 –2 4,288 Trade payables 57 40 Other current liabilities1) PC12 320 427 Total current liabilities 59,190 54,023 Total equity, provisions and liabilities 179,251 177,934 1) As of the 2025 fiscal year, the provision for special payroll tax on pension obligations outside the rules of the Pension Obligations Vesting Act is included in Provisions for pensions. The comparative period has been restated. In previous years, the provision was recognized under Other current liabilities. Change in equity (Refer also to Note PC13) SEKm Share capital Statutory reserve Retained earnings and profit/loss for the period Total equity Equity at December 31, 2023 2,350 0 71,530 73,880 Comprehensive income for the period 18,151 18,151 Buyback of own shares –2,225 –2,225 Dividend, SEK 7.75 per share –5,443 –5,443 Equity at December 31, 2024 2,350 0 82,013 84,363 Comprehensive income for the period 12,234 12,234 Buyback of own shares –3,160 –3,160 Cancellation of shares –31 31 0 Bonus issue 31 –31 0 Dividend, SEK 8.25 per share –5,711 –5,711 Equity at December 31, 2025 2,350 0 85,376 87,726 Essity | Annual Report 2025 172 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 173
PC. Notes to the Parent company’s financial statements PC1. Basis for preparation of Parent company’s annual accounts The Parent company has prepared its financial statements in accordance with the Swedish Annual Accounts Act (1995:1554) and RFR 2 Accounting for Legal Entities. According to RFR 2, the Parent company is to apply all the IFRS accounting standards adopted by the EU as far as this is possible within the framework of the Swedish Annual Accounts Act. The same accounting principles are usually applied in both the Parent company and the Group. In some cases, the Parent company applies principles other than those used by the Group and, in such cases, these principles are speci- fied under the respective note in the section about the Parent company. PC2. Operating profit Operating profit/loss by type of cost SEKm Note 2025 2024 Other operating income 393 688 Other external costs –547 –730 Personnel and Board costs –429 –358 Depreciation of property, plant and equipment PC7 –3 –2 Total IS –586 –402 The item Other external costs includes primarily consultancy fees, travel expenses, lease expenses and management costs. Auditing expenses SEKm 2025 2024 EY Audit assignments –13 –12 Auditing activities other than the audit assignment –2 –4 Total –15 –16 Leases Accounting principles AP RFR 2 contains an exception allowing all leases to be recognized in profit or loss. Future payment commitments for non-cancellable operating leases are as follows: SEKm 2025 2024 Within 1 year 38 37 Between 2 and 5 years 108 141 Later than 5 years – – Total 146 178 Cost for the period for leasing of assets amounted to SEK –43m (–42). Leased assets comprise means of transporta- tion and office premises. PC3. Personnel and Board costs Salaries and remuneration SEKm 2025 2024 Board of Directors1), President, Executive Vice President and senior executives (5 (5)) people) –117 –103 of which variable remuneration –38 –43 Other employees –128 –147 Total –245 –250 1) Board fees decided by the Annual General Meeting amounted to SEK –13m (–11). For further information, see Notes C1–C4 on pages 141–146. Social security costs SEKm 2025 2024 Total social security costs –157 –94 of which pension costs1) –85 –23 1) Of the Parent company’s pension costs, SEK –27m (–24) pertains to the Board, President, Executive Vice President and senior executives. Former Presidents and Executive Vice Presidents and their survivors are also included. The company’s outstanding pension obligations to these individuals amount to SEK 136m (122). Pension costs SEKm 2025 2024 Self-administered pension plans Costs excluding interest expense –31 26 Interest expense (recognized in personnel costs) –19 –19 Sub-total –50 7 Retirement through insurance Insurance premiums –37 –39 Other 16 12 Sub-total –21 –27 Policyholder tax 0 0 Special payroll tax on pension costs –12 –2 Cost of credit insurance, etc. –2 –1 Pension costs for the period –85 –23 Premiums during the year for disability and family pension insurance with Alecta amounted to SEK –1m (–1). Premiums for 2026 are expected to amount to SEK 1m, see also Provisions for pensions in this note. Personnel costs also include other personnel costs in the amount of SEK –27m (–14). Average number of employees 2025 2024 Sweden 104 109 of whom women, % 61 62 of whom men, % 39 38 Breakdown of employees by age groups, % 2025 21–30 years 31–40 years 41–50 years 51–60 years 61+ years 5 17 26 41 11 Women comprised 50% (50) of Board members and 42% (31) of senior executives. Essity | Annual Report 2025 173 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 174
PC3. Personnel and Board costs, cont. Provisions for pensions Accounting principles AP The Parent company’s provisions for pensions are secured by the regulations in the Pension Obligations Vesting Act (Tryggandelagen) and via endowment insurances. Recognition complies with the simplification rule for defined bene- fit pension plans in accordance with the voluntary exception in RFR 2 regarding IAS 19. The main difference compared with IAS 19 is that Swedish GAAP disregards future increases in salaries and pensions when calculating the present value of the pension obligation. This present value includes, however, a special reserve for future payments of pension supplements indexed for inflation. Both defined contribution and defined benefit plans exist in the Parent company. PRI Pensions Pension liabilities pertaining to PRI pensions have been secured through a common Swedish Essity pension fund. The market value of the Parent company’s portion of the foundation’s assets at December 31, 2025, amounted to SEK 397m (339). In 2025, compensation was received in an amount of SEK 9m (9). The capital value of the pension obligations at December 31, 2025 amounted to SEK 300m (287). Pension payments of SEK –9m (–9) were made in 2025. In 2025, the assets exceeded pension obligations by SEK 97m (52). Other pension obligations The Group’s Note C2 Remuneration of senior executives on page 141 describes the other defined benefit pension plans of the Parent company. As of the 2025 fiscal year, the provision for special payroll tax on pension obligations outside the rules of the Pension Obligations Vesting Act is included in Provisions for pensions. The comparative period has been restated. In previous years, the provision was recognized under current liabilities. Amounts trans- ferred for 2024 amount to SEK 26m. The table below shows the change between years. Capital value of pension obligations relating to self-administered pension plans SEKm 2025 2024 Provisions under Pension Obligations Vesting Act 626 653 Provisions outside the rules of the Pension Obligations Vesting Act 148 134 Value, December 31 BS 774 787 Capital value of pension obligations under the Pension Obligations Vesting Act SEKm 2025 2024 Value, January 1 653 701 Compensation received for assumption of pension obligations – 20 Costs excluding interest expense 21 –26 Interest expense (recognized in personnel costs) 15 17 Payment of pensions –63 –59 Value, December 31 626 653 Capital value of pension obligations outside the rules of the Pension Obligations Vesting Act SEKm 2025 2024 Value, January 1 134 137 Costs excluding interest expense 11 –1 Interest expense (recognized in personnel costs) 3 3 Payment of pensions – –5 Value, December 31 148 134 PC4. Appropriations and untaxed reserves Accounting principles AP As of the fiscal year 2025, the Parent company applies the alternative rule in accordance with RFR 2 Accounting for Legal Entities when reporting Group contributions, and recognizes the net of Group contributions paid and received as appropriations. The comparative period has been restated. Group contributions were recognized under financial items in previous years. Due to the links between accounting and taxation, the deferred tax liability on untaxed reserves is recognized in the Parent company’s annual accounts as a component of untaxed reserves. Appropriations SEKm 2025 2024 Group contributions received from Group companies 2,275 455 Group contributions paid to Group companies –1 –1,756 Provisions to tax allocation reserve –650 – Depreciation in excess of plan 1 1 Total IS 1,625 –1,300 Untaxed reserves SEKm 2025 2024 Accumulated depreciation in excess of plan 7 7 Provisions to tax allocation reserves 1,470 820 Total BS 1,477 827 Out of the total pension liability in 2025 amounting to SEK 774m (787), SEK 148m (134) comprises a direct pension liability including payroll tax secured via endowment insurances. The direct pension liability is not secured in accor- dance with the Pension Obligations Vesting Act. Endowment insurances are reported as other non-current receiv- ables in the balance sheet. For the remaining portion of the pension liability, external actuaries have carried out capi- tal value calculations pursuant to the provisions of the Pension Obligations Vesting Act. The discount rate is 2.4% (2.4). The defined benefit obligations are calculated based on salary levels valid on the respective balance sheet dates. Next year’s expected payments for the above defined benefit pension plans amount to SEK 64m. Essity | Annual Report 2025 174 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 175
PC5. Income taxes Accounting principles AP Due to the links between accounting and taxation, the deferred tax liability on untaxed reserves is recognized in the Parent company’s annual accounts as a component of untaxed reserves. Tax expense Tax expense (+), tax income (–) SEKm 2025 2024 Deferred tax 3 89 Current tax 403 3 Total IS 406 92 Explanation of tax expense The difference between the recognized tax expense and expected tax expense is explained below. The expected tax expense is calculated based on profit before tax multiplied by the current tax rate. 2025 2024 Reconciliation SEKm % SEKm % Profit before tax IS 12,640 18,243 Tax expense IS 406 3.2 92 0.5 Expected tax 2,604 20.6 3,758 20.6 Difference –2,198 –17.4 –3,666 –20.1 The difference is due to: Taxes related to prior periods – – – – Non-taxable dividends from subsidiaries –2,929 –23.2 –4,842 –26.6 Non-taxable Group contributions from Group companies1) 0 0.0 –2 0.0 Non-deductible Group contributions to Group companies1) 177 1.4 362 2.0 Other non-taxable/non-deductible items 554 4.4 816 4.5 Total –2,198 –17.4 –3,666 –20.1 1) Non-taxable and non-deductible Group contributions relate to repayment from/to Group companies amounting to 79.4% (79.4) of the Group contribution. The Parent company participates in the Group’s tax pooling arrangement and as of 2021, pays the majority of the Group’s total Swedish taxes. These are recognized as Group contributions paid and received in profit or loss. The net of paid and received Group contributions per Group company amounts to 20.6% (20.6) and represents the respective Group company’s share of the Group’s total tax expense. The gross amounts are recognized as taxable income and deductible expenses and the repayable amounts are recognized as non-taxable income and non-deductible expenses. Current tax expense (+), tax income (–) SEKm 2025 2024 Income tax for the period 403 3 Adjustments for prior periods – – Total 403 3 Current tax liability (+), tax asset (–) SEKm 2025 2024 Value, January 1 –7 375 Current tax expense 403 3 Paid tax –2 –385 Value, December 31 BS 394 –7 Deferred tax expense (+), tax income (–) SEKm 2025 2024 Changes in temporary differences 3 89 Adjustments for prior periods – – Total 3 89 Deferred tax assets (–) SEKm Value, January 1 Deferred tax expense Value, December 31 Provisions for pensions –156 3 –153 Non-current and current receivables from Group companies 100 –89 11 Non-current liabilities to Group companies –236 90 –146 Other –12 –1 –13 Total BS –304 3 –301 PC6. Intangible assets Capitalized development costs SEKm 2025 2024 Accumulated costs 0 0 Accumulated amortization 0 0 Residual value according to plan 0 0 Value, January 1 0 0 Value, December 31 BS 0 0 PC7. Property, plant and equipment Equipment SEKm 2025 2024 Accumulated costs 30 28 Accumulated depreciation –19 –16 Residual value according to plan 11 12 Value, January 1 12 10 Investments 2 4 Sales and disposals 0 0 Depreciation for the period –3 –2 Value, December 31 BS 11 12 Essity | Annual Report 2025 175 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 176
PC8. Participations in subsidiaries Accounting principles AP The Parent company recognizes all holdings in subsidiaries at cost after deduction of any accumulated impairment losses. Impairment testing occurs annually. Participations in subsidiaries Subsidiaries SEKm 2025 2024 Accumulated costs 176,987 176,987 Accumulated impairment –876 –876 Carrying amount 176,111 176,111 Value, January 1 176,111 175,736 Investments – 375 Value, December 31 BS TM8:1 176,111 176,111 In 2024, the Parent company made an unconditional shareholder contribution to Essity Försäkringsaktiebolag amounting to SEK 375m. The Parent company’s holdings of shares and participations in subsidiaries, December 31, 2025 TM8:1 Company name Corp. Reg. No. Domicile No. of shares Share of equity, % Carrying amount, SEKm Swedish subsidiaries: Fastighets- och Bostadsaktiebolaget FOBOF 556047-8520 Stockholm, Sweden 1,000 100 0 Essity Försäkringsaktiebolag 516401-8540 Stockholm, Sweden 140,000 100 389 Essity TC AB 556643-7298 Stockholm, Sweden 1,000 100 3 Foreign subsidiaries: Essity Group Holding B.V. 33181970 Amsterdam, Netherlands 246,347 100 175,698 Essity Capital B.V. 82525897 Amsterdam, Netherlands 2,000,000 100 21 Total carrying amount of subsidiaries 176,111 German Group companies that are subject to disclosure exemptions The following German companies are fully consolidated by Essity Aktiebolag (Publ) and subject to disclosure exemp- tions pursuant to SEC. 264 para. 3 of the German Commercial Code (“HGB”). 1. Essity GmbH, domicile in Mannheim, Germany 2. Essity Holding GmbH, domicile in Aschheim, Germany 3. Essity Operations Mannheim GmbH, domicile in Mannheim, Germany 4. Essity Operations Mainz-Kostheim GmbH, domicile in Wiesbaden, Germany 5. Essity Germany GmbH, domicile in Mannheim, Germany 6. Essity Professional Hygiene Germany GmbH, domicile in Mannheim, Germany 7. Essity Hygiene Holding GmbH, domicile in Mannheim, Germany 8. Essity Hygiene Holding 2 GmbH, domicile in Mannheim, Germany 9. Essity Operations Neuss GmbH, domicile in Neuss, Germany 10. Essity Operations Witzenhausen GmbH, domicile in Witzenhausen, Germany 11. Essity PLD Germany GmbH, domicile in Mannheim, Germany 12. BSN medical GmbH, domicile in Hamburg, Germany 13. BSN medical IP GmbH, domicile in Hamburg, Germany 14. BSN-Jobst GmbH, domicile in Emmerich am Rhein, Germany PC9. Receivables from and liabilities to Group companies Receivables from and liabilities to Group companies SEKm 2025 2024 Non-current assets Derivatives – 484 Total BS – 484 Current assets Financial derivatives 55 101 Interest-bearing receivables 5 – Trade receivables 149 125 Other receivables 2,275 458 Total BS 2,484 684 Non-current liabilities Interest-bearing liabilities 6,461 12,572 Derivatives 712 1,119 Total BS 7,173 13,691 Current liabilities Interest-bearing liabilities 57,582 47,217 Financial derivatives 718 214 Trade payables 65 22 Other liabilities 56 1,815 Total BS 58,421 49,268 PC10. Other current receivables Other current receivables SEKm 2025 2024 Prepaid expenses and accrued income TM10:1 64 65 Other receivables 12 14 Total BS 76 79 Prepaid expenses and accrued income TM10:1 Prepaid lease of premises 11 10 Prepaid financial expenses 35 26 Prepaid user licenses and subscriptions 7 16 Other items 11 13 Total 64 65 Essity | Annual Report 2025 176 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 177
PC11. Financial instruments Accounting principles AP The Parent company’s financial instruments are recognized in accordance with the Group’s accounting principles. Refer to Notes E1–E4 on pages 152–155. Hedge accounting was not applied by the Parent company. Financial items SEKm 2025 2024 Result from participations in Group companies Dividends from subsidiaries 14,221 23,502 Interest income and similar profit items Interest income, external 1 1 Interest income, Group companies 544 690 Interest expenses and similar loss items Interest expenses, external –367 –659 Interest expenses, Group companies –2,737 –3,484 Other financial expenses1) –61 –105 Total IS 11,601 19,945 1) The item other financial expenses includes financial fees and exchange rate differences. Exchange rate differences amounted to SEK 1m (4), net. Interest-bearing liabilities Non-current interest-bearing liabilities Carrying amount Fair value SEKm 2025 2024 2025 2024 Bond issues 16,143 17,110 14,767 15,338 Other non-current loans with a term > 1 yr < 5 yrs 6,712 7,076 6,547 6,993 Total BS 22,855 24,186 21,314 22,331 Current interest-bearing liabilities Carrying amount Fair value SEKm 2025 2024 2025 2024 Bond issues –2 4,288 –2 4,288 Loans with maturities of less than one year – – – – Total BS –2 4,288 –2 4,288 Bond issues Issued Maturity Carrying amount, SEKm Fair value, SEKm Interest rate % Upfront fee, Notes EUR 500m 2026 –2 –2 – Notes EUR 500m 2027 5,394 5,341 1.63 Upfront fee, Notes EUR 600m 2029 –9 –8 – Notes EUR 300m 2030 3,224 2,920 0.50 Notes EUR 700m 2031 7,534 6,514 0.25 Total 16,141 14,765 Financial instruments by category Accounting principles AP In 2025, the categories of financial instruments in the Parent company comprise, in accordance with IFRS 9, financial assets and liabilities measured at fair value through profit or loss and amortized cost. All of the Parent company’s financial assets and liabilities measured at fair value through profit or loss are assessed according to measurement level 2. A definition is provided in Note E1 Financial instruments by category and measurement level on page 153. Financial assets measured at amortized cost are continuously reviewed to assess the need for credit loss provisions. If there is a material need for credit loss provisions, a provision is made in accordance with the expected loss model. Financial instruments by category SEKm Note 2025 2024 Financial assets measured at fair value through profit or loss Derivatives with Group companies – Non-current financial assets PC9 – 484 Endowment insurances – Other non-current receivables 268 252 Derivatives with Group companies – Current financial assets PC9 55 101 Total 323 837 Financial liabilities measured at fair value through profit or loss Derivatives with Group companies – Non-current financial liabilities PC9 712 1,119 Derivatives with Group companies – Current financial liabilities PC9 718 214 Total 1,430 1,333 Loan and trade receivables measured at amortized cost Trade receivables with Group companies PC9 149 125 Trade receivables – Other current receivables 0 0 Total 149 125 Financial liabilities measured at amortized cost Non-current interest-bearing liabilities to Group companies PC9 6,461 12,572 Non-current interest-bearing liabilities 22,855 24,186 Current interest-bearing liabilities to Group companies PC9 57,582 47,217 Current interest-bearing liabilities –2 4,288 Trade payables to Group companies PC9 65 22 Trade payables 57 40 Other current liabilities to Group companies 54 58 Other current liabilities 129 184 Total 87,201 88,567 The nominal value of the derivatives before the right of set-off is SEK 87,790m (131,557). The nominal value of the derivatives after the right of set-off is SEK 87,790m (131,557). Essity | Annual Report 2025 177 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 178
PC12. Other current liabilities Other current liabilities SEKm 2025 2024 Accrued expenses and prepaid income TM12:1 304 386 Other operating liabilities 16 41 Total BS 320 427 Accrued expenses and prepaid income TM12:1 SEKm 2025 2024 Accrued interest expenses 129 184 Accrued social security costs 42 40 Accrued vacation pay liability 13 17 Other liabilities to personnel 85 106 Other items 35 39 Total 304 386 As of the 2025 fiscal year, the provision for special payroll tax on direct pension liabilities secured through endow- ment insurance is recognized under provisions for pensions. The comparative period has been restated. In 2024, these provisions were recognized in accrued expenses and prepaid income. Amounts transferred for 2024 amount to SEK 26m. PC13. Share capital The change in equity is shown in the financial report relating to Equity presented on page 172. The Parent company was formed in 1988. The share capital and number of shares have increased since the formation via new issues and bonus issues as set out below: YEAR Event No. of shares Change in share capital Cash payment, SEKm 1988 Number of shares issued in connection with formation 500 0.1 0.1 1995 New issue 1:1, issue price SEK 100 500 0.1 0.1 2016 New issue 1:4, issue price SEK 100 4,000 0.4 0.4 2017 Bonus issue 702,337,489 2,349.9 0.0 2025 Cancellation –9,288,000 –31.1 0.0 2025 Bonus issue – 31.1 0.0 2025 Number of shares, December 31, 2025 693,054,489 2,350.4 0.5 The quotient value of the company’s shares amounts to SEK 3.39 (3.35). In 2025, Essity Aktiebolag (publ) repurchased 11,895,826 (7,398,000) own Class B shares for a total value of SEK 3,160m (2,225). 9,288,000 own shares were canceled during the fiscal year. Accordingly, holdings of treasury shares amounted to 10,005,826 (7,398,000) shares at year-end. The buybacks are part of the buyback programs of SEK 3bn each announced by Essity on June 17, 2024 and April 23, 2025, respectively, and which extend for the period June 17, 2024 until the Annual General Meeting 2025 and for the period April 24, 2025 until the Annual General Meeting 2026. The holdings of treasury shares corresponded to 1.4% (1.1) of outstanding shares at December 31, 2025. The repurchased shares are expected to be canceled. PC14. Contingent liabilities and pledged assets Contingent liabilities SEKm 2025 2024 Guarantees for Group companies 6,723 16,229 Other contingent liabilities 21 21 Total 6,744 16,250 Pledged assets SEKm 2025 2024 Endowment insurances 199 191 Total 199 191 Liabilities for which these assets were pledged as collateral amounted to SEK 199m (191). PC15. Adoption of the annual accounts The annual accounts are subject to adoption by Essity’s Annual General Meeting and will be presented for approval at the Annual General Meeting on March 26, 2026. PC16. Events after the balance sheet date No significant events, with impact on the financial statements, have occurred after the balance sheet date. PC17. Proposed disposition of earnings Annual accounts 2025 Disposition of earnings Essity Aktiebolag (publ) Non-restricted equity in the Parent company: retained earnings 73,141,695,834 net profit for the year 12,233,992,788 Total 85,375,688,622 The Board of Directors and the President propose: to distribute to shareholders, a dividend of SEK 8.75 per share 5,976,675,8011) to be carried forward 79,399,012,8212) Total 85,375,688,622 1) Based on the number of shares outstanding, December 31, 2025. The final dividend amount will be based on the number of shares outstanding on the record date, March 30, 2026. 2) The company’s equity would have been SEK 1,091,909,955 higher if assets and liabilities had not been measured at fair value in accordance with Chapter 4, Section 14a of the Swedish Annual Accounts Act. Essity | Annual Report 2025 178 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 179
Stockholm February 19, 2026 Maria Carell Board member Annemarie Gardshol Board member Jan Gurander Chairman Ulrika Kolsrud, President and CEO Barbara Milian Thoralfsson Board member Bert Nordberg Board member Örjan Svensson Board member, employee representative Karl Åberg Board member Our audit report was submitted on March 2, 2026 Ernst & Young AB Erik Sandström Authorized Public Accountant Auditor in charge Alexander Lacik Board member Sofia Lafqvist Board member, employee representative Susanna Lind Board member, employee representative Torbjörn Lööf Board member Katarina Martinson Board member The Board of Directors and President declare that the consolidated financial statements have been prepared in accordance with the Inter national Financial Reporting Standards adopted by the EU and that disclosures herein give a true and fair view of the Group’s position and results of operations. The Parent company’s annual accounts have been prepared in accordance with generally accepted accounting principles in Sweden and give a true and fair view of the Parent company’s position and results of operations. The annual and consolidated accounts have been prepared in accordance with the European Sustainability Reporting Standards (ESRS) and the specifications of the Taxonomy Regulation, as adopted by the EU. The statutory Board of Directors’ Report provides a fair review of the Parent company’s and Group’s operations, position and results of operations and describes material risks and uncertainties facing the Parent company and the companies included in the Group. Essity | Annual Report 2025 179 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Contents Financial statements, Group Financial notes, Group Financial statements, Parent company Financial notes, Parent company Reports from the auditors Other information
Page 180
Auditor’s report To the general meeting of the shareholders of Essity Aktiebolag (publ), corporate identity number 5563255511 Opinions We have audited the annual accounts and consolidated accounts of Essity Aktiebolag (publ) except for the corporate governance statement on pages 100–109 and the statutory sustainability report on pages 47–99 for the year 2025. The annual accounts and consolidated accounts of the company are included on pages 8–10, 28–46, and 110–186 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 2025 and its financial performance and cash flow for the year then ended in accordance 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 December 2025 and their financial performance and cash flow for the year then ended in accordance with IFRS Accounting Standards, as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement on pages 100–109 and the statutory sustainability report on pages 47–99. 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 (537/2014) Article 11. Basis for Opinions We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted audi ting standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsi bilities 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 accordance with these require ments. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) 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. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial state ments section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial state ments. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements. Valuation of goodwill and intangibles assets with indefinite useful life Description How our audit addressed this key audit matter The value of goodwill and intangibles assets with an indefinite useful life as of 31 December 2025 amounted to 49,3 billion SEK. The company performs annual impairment tests as well as whenever impairment indi cators have been identified. The recoverable amount for each cashgenerating unit is determined as the value in use, which is calculated based on the discoun ted present value of future cash flows. The impairment tests for 2025 did not result in any impairment write off. Key assumptions in these calculations include future growth rates, gross profit development and the dis count rate applied and are presented in Note D1 Intan gible assets. An impairment test is a complex process and contains a high degree of judgment regarding future cash flows and other assumptions, not least because it is based on estimates of how the compa ny´s business will be affected by future market deve lopments and by other economic events. In addition, the underlying calculations are in themselves complex. Therefore, we have assessed valuation of goodwill and intangibles assets with an indefinite useful life to be a key audit matter. In our audit of the fiscal year 2025, we have evaluated the company’s process for preparing impairment tests. We have evaluated and reviewed key assumptions, the application of recognized valuation practices, discount rate and other source data that the company has app lied as well as the company’s identification of cash generating units. We have also evaluated the signi ficant assumptions related to future cash flows and forecasts used in the impairment test by comparing to historical outcome, as well as performing sensitivity analyzes. In order to assess the company´s historical precision in its estimates and assessments we have also evaluated the company´s historical estimates with actual amounts that were subsequently reported. With support from our internal valuation specialists, we have evaluated the valuation methods used. Finally, we have evaluated if disclosures provided in Note D1 Intangible assets in the company´s notes are appropriate. Report on the annual accounts and consolidated accounts Essity | Annual Report 2025 180 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Auditor’s report Auditor’s review reports of the sustainability statements Other information
Page 181
Accruals for related sales incentives Description How our audit addressed this key audit matter Accounting for sales incentives (bonuses and rebates) related to revenues is an area with a greater degree of estimation and assessment. Incentives related to sales are reported as reduction of the company´s revenue. We have noted that bonuses, rebates and other adjust ments of sales prices in some cases can be material. The company calculates an estimate of final incentives based on the information available the end of the period. We have therefore assessed accounting for sales incentives related to revenues to be a key audit matter. In our audit we have evaluated the company’s process for revenue recognition of related sales incentives (bonuses and rebates). We have also reviewed the accrued costs for sales incentives to customers as of December 31, 2025, which amounted to 6,9 billion SEK against samples of underlying customer agreements and performed analytical procedures. Our audit has also included review of credit invoices and other adjustments to trade receivables that have taken place after December 31, 2025. Finally, we have evaluated if disclosures provided in D5 in the company´s notes are appropriate. Other Information than the annual accounts and consolidated accounts This document also contains other information than the annual accounts and consolidated accounts and is found on pages 3–7 and 11–27. The other information also includes the remuneration report and were obtained before the date of this auditor’s report. The Board of Directors and the Managing Director are responsible for this other information. Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance 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 misstated. If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsible for the preparation 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 Accounting Standards as adopted by the EU. The Board of Directors and the Managing Director 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. In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director 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 Managing Director intends to liquidate the company, to cease operations, or has no realistic 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 auditor’s report that inclu des 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 misstate ment when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepti cism throughout the audit. We also: • Identify and assess the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of the company’s internal control relevant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors and the Managing Director. • Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting in preparing the annual accounts and consolidated accounts. We also draw a conclusion, based on the audit evidence obtained, as to whether any material uncertainty exists related to events or conditions that may cast significant doubt on the company’s and the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the annual accounts and consolidated accounts or, if such disclosures are inadequate, to modify our opinion about the annual accounts and consolidated accounts. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company and a group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including the disclosures, and whether the annual accounts and consolidated accounts represent the underlying transactions and events in a manner that achieves fair presentation. • Plan and perform the group audit to obtain sufficient and appropriate audit evidence regarding the financial infor mation of the entities or business units within the group as a basis for forming an opinion on the consolidated accounts. We are responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We remain solely responsible for our opinions We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform of significant audit findings during our audit, including any significant deficiencies in internal control that we identified. We must also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or related safeguards applied. From the matters communicated with the Board of Directors, we determine those matters that were of most signi ficance in the audit of the annual accounts and consolidated accounts, including the most important assessed risks for material misstatement, and are therefore the key audit matters. We describe these matters in the auditor’s report unless law or regulation precludes disclosure about the matter. Essity | Annual Report 2025 181 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Auditor’s report Auditor’s review reports of the sustainability statements Other information
Page 182
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 Managing Director 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 Essity Aktiebolag (publ) for the financial year 2025. Our examination and our opinion relate only to the statutory requirements. In our opinion, the Esef report has been prepared in a format that, in all material respects, enables uniform electro nic reporting. Basis for opinion We have performed the examination in accordance with FAR’s recommendation RevR 18 Examination of the Esef report. Our responsibility under this recommendation is described in more detail in the Auditors’ responsibility section. We are independent of Essity Aktiebolag (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 appropriate to provide a basis for our opinion. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsible for the preparation of the Esef report in accor dance with Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), and for such internal control that the Board of Directors and the Managing Director 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 reasonable 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 guarantee that an engagement carried out accor ding to RevR 18 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Esef report. Report on other legal and regulatory requirements Report on the audit of the administration and the proposed appropriations of the company’s profit or loss 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 Managing Director of Essity Aktiebolag (publ) for the year 2025 and the proposed appropriations of the company’s profit or loss. We recommend to the general meeting of shareholders that the profit be appropriated (loss be dealt with) in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year. A separate list of loans and collateral has been prepared in accordance with the provisions of the Companies Act. Basis for opinions We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have other wise 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 Managing Director The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss. At the propo sal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company’s and the group’s type of operations, 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 Managing Director shall manage the ongoing administration according to the Board of Directors’ guidelines and instructions and among other matters take measures that are necessary to fulfill the company’s accounting in accordance with law and handle the manage ment 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 Managing Director 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 accordance 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. As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional scepticism throughout the audit. The examination of the administration and the proposed appropriations of the company’s profit or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and materiality. This means that we focus the examination on such actions, areas and relationships that are material for the operations and where deviations and violations would have particular importance for the company’s situation. We examine and test decisions undertaken, support for decisions, actions taken and other circumstances that are relevant to our opi nion concerning discharge from liability. As a basis for our opinion on the Board of Directors’ proposed appropriations of the company’s profit or loss we examined the Board of Directors’ reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act. Essity | Annual Report 2025 182 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Auditor’s report Auditor’s review reports of the sustainability statements Other information
Page 183
The audit firm applies ISQM 1 Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or other Assurance or Related Services Engagements which requires the firm to design, implement and operate a system of quality management, including policies and procedures regarding compliance with professional ethical requirements, professional standards and applicable legal and regulatory requirements. The examination involves obtaining evidence, through various procedures, that the Esef report has been prepared in a format that enables uniform electronic reporting of the annual and consolidated accounts. The procedures selec ted 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 circumstances, 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 Managing Director, but not for the purpose of expres sing 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 Managing Director. The procedures mainly include a validation that the Esef report has been prepared in a valid XHTML format and a reconciliation of the Esef report with the audited annual accounts and consolidated accounts. Furthermore, the procedures also include an assessment of whether the consolidated statement of financial per formance, financial position, changes in equity, cash flow and disclosures in the Esef report have been marked with iXBRL in accordance with what follows from the Esef regulation. The auditor’s examination of the corporate governance statement The Board of Directors is responsible for that the corporate governance statement on pages 100–109 has been prepared in accordance with the Annual Accounts Act. Our examination of the corporate governance statement is conducted in accordance with FAR´s standard RevR 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 Inter national Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examina tion has provided us with sufficient basis for our opinions. A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2–6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act. Ernst & Young AB, with Erik Sandström as auditorin charge, Box 7850, 103 99 Stockholm, was appointed auditor of Essity Aktiebolag (publ) by the general meeting of the shareholders on the 27 March 2025 and has been the com pany’s auditor since the 27 May 2016. Stockholm March 2, 2026 Ernst & Young AB Erik Sandström Authorized Public Accountant Essity | Annual Report 2025 183 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Auditor’s report Auditor’s review reports of the sustainability statements Other information
Page 184
Auditor’s limited assurance report on Essity Aktiebolag (publ)’s sustainability statement This is the translation of the auditor´s report in Swedish. To the general meeting of the shareholders of Essity Aktiebolag (publ), corporate identity number 5563255511 Conclusion We have conducted a limited assurance engagement of the sustainability statement prepared by Essity Aktiebolag (publ) (the company) for the financial year 2025. The sustainability statement is included on pages 47–99 of this document. Based on our limited assurance engagement as described in the section Auditor’s Responsibility, nothing has come to our attention that causes us to believe that the sustainability statement is not, in all material respects, prepa red in accordance with the Swedish Annual Accounts Act, which includes: • Whether the sustainability statement meets the requirements of ESRS, • Whether the process carried out by the company to identify reported sustainability information has been con ducted as described in the sustainability statement; and • Compliance with the reporting requirements in Article 8 of the EU’s Green Taxonomy Regulation. Basis for conclusion We have conducted the limited assurance engagement in accordance with FAR’s recommendation RevR 19 – Revisorns översiktliga granskning av den lagstadgade hållbarhetsrapporten. Our responsibility under this recommen dation is described in more detail in the section Auditor’s Responsibility. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Other information than the sustainability statement This document also contains other information than the sustainability statement, found on pages 2–46 and 100–191, with the exception of the page references on page 98 and pages 180–186. The Board of Directors and the Managing Director are responsible for this other information. Our conclusion on the sustainability statement does not cover this other information, and we do not express any conclusion with assurance regarding this other information. In connection with our limited assurance engagement on the sustainability statement, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the sustaina bility statement. In this procedure we also take into account our knowledge otherwise obtained in the limited assu rance engagement and assess whether the information otherwise appears to be materially misstated. If we based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Other matter The disclosures in the sustainability statement regarding the previous financial year have, in certain cases, been subject to a limited assurance engagement in accordance with ISAE 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information, applied together with RevR 6 Assurance of Sustainability Information in accordance with the assurance report issued February 28, 2025. Other comparative figures in the sustainability statement for the year 2025 have not been subject to a review. Responsibilities of the Board of Directors and the Managing Director The Board of Directors, and the Managing Director, are responsible for the preparation of sustainability statement in accordance with Chapter 6, Sections 12–12 f of the Swedish Annual Accounts Act, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of the sustainability statement that is free from material misstatements, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express a conclusion whether the sustainability statement is prepared in accordance with Chapter 6, Sections 12–12 f of the Swedish Annual Accounts Act based on our limited assurance engagement. The limited assurance engagement has been conducted in accordance with FAR’s recommendation RevR 19 Revisorns översiktliga granskning av den lagstadgade hållbarhetsrapporten. This recommendation requires that we plan and perform our procedures to obtain limited assurance that the sustainability statement is prepared in accordance with these requirements. The procedures in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engage ment is substantially lower than the assurance that would have been obtained had a reasonable assurance engage ment been performed. This means that it is not possible for us to obtain such assurance that we become aware of all significant matters that could have been identified if a reasonable assurance engagement had been performed. Our firm applies ISQM 1 (International Standard on Quality Management), which requires the firm to design, im plement, and manage a quality management system including guidelines or procedures regarding compliance with ethical requirements, standards of professional practice, and applicable laws and regulations. We are independent of Essity Aktiebolag (publ) in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities according to these requirements. A limited assurance engagement involves performing procedures to obtain evidence to support the sustainability statement. The auditor selects the procedures to be performed, including assessing the risks of material misstate ments in the sustainability statement, whether due to fraud or error. In this risk assessment, the auditor considers the parts of the internal control that are relevant to how the Board of Directors and the Managing Director prepares the sustainability statement, in order to design procedures that are appropriate under the circumstances, but not for the purpose of providing a conclusion on the effectiveness of the company’s internal control. The review consists of making inquiries, primarily of persons responsible for the preparation of the sustainability statement, performing analytical review, and conducting other limited review procedures. The review procedures primarily include: Our review procedures regarding the process the company has undertaken to identify sustainability information to report included, but were not limited to the following: • Obtaining an understanding of the process by conducting inquiries to understand the sources of the information used by management (e.g., stakeholder dialogues, business plans, and strategy documents), and • Reviewing the company’s internal documentation of its process; and • Evaluating whether the information obtained from our procedures regarding the process implemented by the company aligns with the description of the process on page 60 in the sustainability statement. Our review procedures regarding the sustainability statement included, but were not limited to the following: • Through inquiries, obtaining a general understanding of the internal control environment, reporting processes, and information systems relevant to the preparation of the information in the sustainability statement. • Evaluating whether information identified as material through the process the company has undertaken to identify the content of the sustainability statement is also included. • Evaluating whether the structure and presentation of the sustainability statements are consistent with the require ments of ESRS; • Conducting inquiries with relevant personnel and analytical review procedures regarding selected disclosures in the sustainability statements; • Performing substantive review procedures of selected disclosures in the sustainability statements; • Obtain, through inquiries and analytical review procedures, support for the methods used for preparing material estimates and forwardlooking information and on how these methods were applied; Essity | Annual Report 2025 184 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Auditor’s report Auditor’s review reports of the sustainability statements Other information
Page 185
Our review procedures regarding the taxonomy disclosures included, but were not limited to the following: • Obtaining an understanding of the process for identifying economic activities that are covered by and are consistent with the EU Green Taxonomy and the corresponding disclosures in the sustainability statement. • Conducting inquiries to relevant personnel and analytical review procedures on the taxonomy disclosures; • Conducting inquiries to understand the sources of the information used in the taxonomy disclosures; • Evaluating whether the presentation of the taxonomy disclosures is consistent with the requirements of the EU Taxonomy Regulation. Inherent limitations In reporting forwardlooking information in accordance with ESRS, the board and management of Essity Aktiebolag (publ) must prepare forwardlooking information based on specified assumptions about events that may occur in the future and possible future activities of Essity Aktiebolag (publ). Actual outcomes are likely to differ as expected events often do not occur as anticipated. Stockholm March 2, 2026 Ernst & Young AB Erik Sandström Authorized Public Accountant Essity | Annual Report 2025 185 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Auditor’s report Auditor’s review reports of the sustainability statements Other information
Page 186
Auditor’s report on the audit of Essity Aktiebolag (publ)’s sustainability information This is the translation of the auditor’s report in Swedish. To the general meeting of the shareholders of Essity Aktiebolag (publ), corporate identity number 5563255511 Opinion We have been engaged by the Board of Directors and the Managing Director to audit selected sustainability informa tion, consisting of fossil fuels and grid supply data (“the sustainability information”) for Essity Aktiebolag (publ) for the financial year 2025. The sustainability information is included on pages 66–67 of this document. Based on our audit, described in the section Auditor’s Responsibility, the sustainability information has been prepared in accordance with the relevant parts of the ESRS (European Sustainability Reporting Standards) that are applicable to the Sustainability Report, as well as the accounting and calculation principles that the company has developed. Basis for Opinion We have performed the audit in accordance with ISAE 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information. Our responsibilities under this standard are further described in the Auditor’s Responsibility section. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsible for ensuring that the sustainability information has been prepared in accordance with the applicable criteria, as defined on page 48, and consist of the relevant parts of ESRS (European Sustainability Reporting Standards) that are applicable to the Sustainability Report, as well as the company’s own developed accounting and calculation principles. This responsibility also includes ensuring that the internal controls deemed necessary by the Board of Directors and the Managing Director exist to prepare a sustain ability report that is free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express a conclusion on the sustainability information based on our audit. The audit has been conducted in accordance with ISAE 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information. This standard requires that we plan and perform procedures to obtain reasonable assurance that the sustainability information has been prepared in accordance with the criteria stated under the section Responsibilities of the Board of Directors and the Managing Director. The audit firm applies ISQM 1 (International Standard on Quality Management), which requires the firm to design, implement, and operate a system of quality management, including policies or procedures regarding compliance with ethical requirements, professional standards, and applicable legal and regulatory requirements. We are independent of Essity Aktiebolag (publ) in accordance with professional ethics for accountants in Sweden and have fulfilled our ethical responsibilities in accordance with these requirements. The audit includes obtaining evidence regarding the sustainability information through various procedures. The auditor selects which procedures to perform, including assessing the risks of material misstatement in the sustain ability information, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control relevant to how the Board of Directors and the Managing Director prepare the sustainability information, in order to design procedures that are appropriate under the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. Our audit has covered the following: • Fossil fuels and grid supply data. Our audit is based on the criteria selected by the Board of Directors and the Managing Director, as defined above. Stockholm March 2, 2026 Ernst & Young AB Erik Sandström Authorized Public Accountant Essity | Annual Report 2025 186 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Auditor’s report Auditor’s review reports of the sustainability statements Other information
Page 187
Description of costs Raw materials Group Health & Medical Pulp consumption Recovered paper consumption Consumer Goods Professional Hygiene Of which Pulp 10% Recovered paper 3% Super absorbents 1% Nonwoven 3% Other4) 18% Total raw materials and consumables 35% Of which Pulp 14% Recovered paper 2% Super absorbents 1% Nonwoven 3% Other4) 19% Total raw materials and consumables 40% Of which Pulp 6% Nonwoven 4% Super absorbents 2% Other4) 15% Total raw materials and consumables 27% Of which Recovered paper 8% Pulp 5% Other4) 18% Total raw materials and consumables 31% 1) Excluding items affecting comparability. 2) Sales, general and administration includes costs for marketing of 6 percentage points. 3) The two largest items of Other costs of goods sold comprise personnel (12 percentage points) and depreciation/amortization (4 percentage points). 4) The item Other in raw materials and consumables includes costs for chemicals, packaging material and plastic material. Råvaror Massa Consumer Goods, 80% Professional Hygiene , 14% Health & Medical, 6 % Professional Hygiene, 64% Consumer Goods, 36% Råvaror Returpapper 1.9 million tons Essity’s own pulp production corresponded to 9% of the pulp consumption and is primarily related to an integrated tissue plant in Mannheim, Germany. 1.6 million tons Sales, general and administration 2) , 22% Energy , 5% Transport and distribution expenses, 12% Other costs of goods sold 3) , 26% Raw materials and consumables, 35% Total operating expenses 1): SEK 119,894m Group Consumer goods Sales, general and administration, 19% Energy , 6% Transport and distribution expenses, 12% Other costs of goods sold, 23% Raw materials and consumables, 40% Total operating expenses 1): SEK 65,711m Health & Medical Sales, general and administration, 31% Energy , 1% Transport and distribution expenses, 12% Other costs of goods sold, 29% Raw materials and consumables, 27% Total operating expenses 1): SEK 23,253m Professional hygiene Sales, general and administration, 18% Energy , 6% Transport and distribution expenses, 13% Other costs of goods sold, 32% Raw materials and consumables, 31% Total operating expenses 1): SEK 29,561m Essity | Annual Report 2025 187 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information Description of costs and Raw materials Production facilities Financial tenyear summary Calendar and contact points
Page 188
1) At December 31, 2025. 2) Nonwoven production. Country/Region Production facility1) Tissue capacity Argentina Buenos Aires Australia Springvale Austria Ortmann 132 Belgium Stembert 75 Brazil Jarinu Canada Drummondville Chile Santiago 28 Colombia Cajica 70 Colombia Cali Colombia Caloto Colombia Medellin 30 Colombia Rio Negro Dominican Republic San Cristobal Ecuador Inpaecsa 15 Ecuador Lasso 26 Egypt Cairo Fiji Islands Fiji Finland Nokia 42 France Gien 145 France Hondouville 55 France Kunheim 52 France Le Theil 65 France Radiante France Vibraye Germany Emmerich Germany Hausbruch Germany Kostheim 127 Germany Mannheim 283 Germany Neuss 112 Germany Witzenhausen 32 India Goa Italy Altopascio 25 Italy Collodi 42 Italy Lucca 100 Jordan Amman Mexico Ecatepec Mexico Monterrey 80 Mexico Reynosa Mexico Sahagun 95 Mexico Uruapan 40 Netherlands Assen Netherlands Cuijk 52 Netherlands Gennep Netherlands Hoogezand Netherlands Suameer2) 9 New Zealand Kawerau 60 Pakistan Karachi Country/Region Production facility1) Tissue capacity Poland Olawa Slovakia Gemerská Hôrka South Africa Pinetown Spain Allo 120 Spain Telde Spain Valls 137 Sweden Askersund Sweden Falkenberg Sweden Lilla Edet 100 Sweden Mölnlycke UK Manchester 50 UK Oakenholt 45 UK Prudhoe 94 Country/Region Production facility1) Tissue capacity UK Skelmersdale UK Stubbins 55 USA Barton 180 USA Bordentown USA Bowling Green USA Harrodsburg 55 USA Manchester (CT) USA Menasha 145 USA Middletown 100 USA Neenah Total 2,873 Production facilities Capacity is stated in thousands of tons, unless otherwise indicated, and per year. Essity | Annual Report 2025 188 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information Description of costs and Raw materials Production facilities Financial tenyear summary Calendar and contact points
Page 189
Financial tenyear summary SEKm 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 INCOME STATEMENT1) Net sales 138,494 145,546 147,147 131,320 101,466 121,752 128,975 118,500 109,265 101,238 EBITA excl. IAC 19,572 20,344 18,898 12,047 11,451 17,626 15,840 12,935 13,405 11,992 Health & Medical 4,946 5,509 4,037 2,904 3,800 3,668 3,734 Consumer Goods 9,605 9,509 9,797 6,354 5,767 11,538 8,333 Professional Hygiene 6,364 6,829 6,288 3,843 2,673 3,317 4,463 Other operations –1,343 –1,503 –1,224 –1,054 –789 –897 –690 –591 –620 –577 Items affecting comparability (IAC) –69 –869 –2,291 –2,171 371 –59 –713 –1,375 –855 –2,645 EBITA 19,503 19,475 16,607 9,876 11,822 17,567 15,127 11,560 12,550 9,347 Amortization of acquisitionrelated intangible assets –972 –1,110 –1,109 –1,111 –844 –809 –778 –732 –560 –159 Items affecting comparability (IAC) – –70 –350 –274 – – – –69 –85 –180 Operating profit 18,531 18,295 15,148 8,491 10,978 16,758 14,349 10,759 11,905 9,008 Share of results of associates and joint ventures2) 14 – – – – – – – – – Financial income 257 593 412 141 81 108 106 91 158 202 Financial expenses –1,641 –2,524 –2,768 –1,461 –648 –1,066 –1,415 –1,248 –1,340 –1,037 Profit before tax 17,161 16,364 12,792 7,171 10,411 15,800 13,040 9,602 10,723 8,173 Income taxes –4,443 –4,331 –3,275 –2,006 –2,398 –4,053 –2,828 –1,050 –1,938 –3,931 Profit for the period 12,718 12,033 9,517 5,165 8,013 11,747 10,212 8,552 8,785 4,242 BALANCE SHEET Noncurrent assets (excluding financial receivables) 108,356 117,772 112,913 137,492 122,196 107,974 116,779 110,370 105,398 77,238 Receivables and inventories 44,525 48,605 44,146 61,791 45,949 37,141 38,486 38,646 34,664 29,917 Noncurrent assets held for sale – – – – – – 42 69 42 156 Financial receivables 4,482 2,603 3,189 2,088 1,851 3,555 3,535 1,751 1,700 1,052 Current financial assets 1,266 5,342 5,259 4,941 1,150 993 525 422 1,105 1,677 Cash and cash equivalents 8,487 10,962 5,159 4,288 3,904 4,982 2,928 3,008 4,107 4,244 Assets held for sale, discontinued operations – – 32,327 – – – – – – – Total assets 167,116 185,284 202,993 210,600 175,050 154,645 162,295 154,266 147,016 114,284 Equity 85,625 88,314 70,846 67,346 59,874 54,352 54,125 47,141 42,289 33,204 Noncontrolling interests 415 427 8,559 9,218 8,633 8,990 8,676 7,758 7,281 6,376 Provisions 10,002 11,440 11,396 13,097 12,855 12,671 14,017 15,696 14,659 11,961 Interestbearing debt 38,632 47,098 60,984 71,515 58,189 46,890 52,062 54,327 54,838 36,873 Operating and other noninterest bearing liabilities 32,442 38,005 37,500 49,424 35,499 31,742 33,415 29,344 27,949 25,870 Liabilities directly attributable to assets held for sale – – 13,708 – – – – – – – Total equity and liabilities 167,116 185,284 202,993 210,600 175,050 154,645 162,295 154,266 147,016 114,284 Average capital employed 113,649 115,346 115,105 110,727 92,227 112,473 114,663 107,575 90,167 73,145 Net debt, including pension liabilities 26,543 30,769 53,703 62,869 55,433 42,688 50,940 54,404 52,467 35,173 1) Income statement and operating cash flow statement for the 2021–2024 period refer to continuing operations. 2) Until 2024, the share of results of associates and joint ventures was recognized in operating profit. From 2025 onwards, these results are recognized below operating profit. Essity | Annual Report 2025 189 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information Description of costs and Raw materials Production facilities Financial ten-year summary Calendar and contact points
Page 190
SEKm 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 OPERATING CASH FLOW STATEMENT 1) Operating cash flow 14,998 17,242 17,685 7,680 9,744 16,018 15,639 9,900 10,622 10,998 Cash flow from current operations 8,928 9,485 11,625 4,088 5,991 11,175 13,208 6,363 6,644 6,530 Cash flow before transactions with shareholders 8,933 33,325 12,692 –867 –5,807 10,795 13,285 5,737 –19,372 359 Investments in noncurrent assets, net –6,898 –7,332 –6,819 –5,362 –5,182 –6,439 –5,707 –6,781 –6,012 –6,255 Acquisitions of Group companies and other operations – –68 –182 –4,955 –11,813 –747 –143 –694 –26,045 –6,540 Divestments of Group companies and other operations 5 23,908 1,249 – 15 367 220 68 29 369 KEY FIGURES Equity/assets ratio, % 51 48 35 32 34 35 33 31 29 29 Interest coverage ratio 3) 13.4 9.5 6.4 6.4 19.4 17.5 11.0 9.3 10.1 10.8 Debt payment capacity, including pension liabilities, %3) 74 59 34 24 26 46 38 25 26 29 Debt/equity ratio, including pension liabilities 0.31 0.35 0.68 0.82 0.81 0.67 0.81 0.99 1.06 0.89 Debt/equity ratio, excluding pension liabilities 0.33 0.35 0.68 0.81 0.77 0.63 0.76 0.92 0.99 0.76 ROCE, %3) 17.2 16.9 14.4 8.9 12.8 15.6 13.2 10.8 13.9 12.8 ROCE excl. IAC, %3) 17.2 17.6 16.4 10.9 12.4 15.7 13.8 12.0 14.9 16.4 ROE, % 15.2 25.2 12.5 8.1 15.0 18.2 17.4 16.1 19.8 9.3 EBITA margin, %3) 14.1 13.4 11.3 7.5 11.7 14.4 11.7 9.8 11.5 9.2 EBITA margin excl. IAC, %3) 14.1 14.0 12.8 9.2 11.3 14.5 12.3 10.9 12.3 11.8 Operating margin, %3) 13.4 12.6 10.3 6.5 10.8 13.8 11.1 9.1 10.9 8.9 Operating margin excl. IAC, %3) 13.4 13.2 12.1 8.3 10.5 13.8 11.7 10.3 11.8 11.7 Net margin, %3) 9.2 8.3 6.5 4.0 7.8 9.7 7.9 7.2 8.0 4.2 Capital turnover rate3) 1.22 1.26 1.28 1.19 1.10 1.08 1.12 1.10 1.21 1.38 Cash flow from current operations per share, SEK3) 12.96 13.54 16.55 5.82 8.53 15.91 18.81 9.06 9.46 9.30 Earnings per share, SEK 18.37 29.83 13.60 7.93 12.27 14.56 13.12 11.23 11.56 5.41 Dividend per share, SEK 8.754) 8.25 7.75 7.25 7.00 6.75 6.25 5.75 5.75 1) Income statement and operating cash flow statement for the 2021–2024 period refer to continuing operations. 2) Until 2024, the share of results of associates and joint ventures was recognized in operating profit. From 2025 onwards, these results are recognized below operating profit. 3) The key figure for the 2021–2024 period refers to continuing operations. 4) Board of Directors’ dividend proposal. Financial ten-year summary, cont. Essity | Annual Report 2025 190 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information Description of costs and Raw materials Production facilities Financial ten-year summary Calendar and contact points
Page 191
This Annual Report was produced by Essity in collaboration with Hallvarsson & Halvarson. Photos: Lena Granefelt, Juliana Fälldin and Essity. Printing: ÅTTA45 2026. Follow Essity: Annual General Meeting on March 26, 2026 Essity’s Annual General Meeting will be held on Thursday, March 26, 2026. For further information about the Annual General Meeting 2026, see page 10 and essity.com. Contact points Investor Relations: Sandra Åberg Tel: +46 70 564 96 89 E-mail: ir@essity.com Public Relations: Per Lorentz Tel: +46 8 788 52 20 E-mail: media@essity.com Nomination Committee and Board of Directors: Essity Aktiebolag (publ) Secretary to the Nomination Committee and Board of Directors – Mikael Schmidt, General Counsel PO Box 200 SE-101 23 Stockholm, Sweden E-mail: info@essity.com Essity Aktiebolag (publ) PO Box 200, SE-101 23 Stockholm, Sweden Visiting address: Klarabergsviadukten 63 Tel: +46 8 788 51 00 Corp. Reg. No.: 556325-5511 Financial information 2026–2027 Annual General Meeting 2026 March 26, 2026 Interim report, quarter 1 2026 April 23, 2026 Interim report, quarter 2 2026 July 16, 2026 Interim report, quarter 3 2026 October 22, 2026 Report for quarter 4 and full-year 2026 January 21, 2027 Annual Report 2026 February/March 2027 Annual reports and financial statements are published in Swedish and English (in the event of differences between the English translation and the Swedish original, the Swedish text shall prevail) and can be downloaded from essity.com. Calendar and contact points Essity | Annual Report 2025 191 Introduction The share Strategy Business areas Group Sustainability statements Corporate governance report Financial statements including notes Reports from the auditors Other information Description of costs and Raw materials Production facilities Financial tenyear summary Calendar and contact points
Page 192
Essity Aktiebolag (publ) PO Box 200, SE-101 23 Stockholm, Sweden Visiting address: Klarabergsviadukten 63 Tel: +46 8 788 51 00 Corp. Reg. No.: 556325-5511