The climate transition presents one of the most significant long-term opportunities for growth in modern history Much like the internet revolution, which created a wave of winners and losers, this transition promises even greater change. Companies that lead the charge are not only opening new growth opportunities, but also creating lasting competitive advantages, disrupting legacy business models in the process. BCG estimates the market for green technologies and solutions at more than $5 trillion in 2024, headed for nearly $14 trillion by 2030.51 It spans sectors and value chains, with the largest segments being alternative energy (49%), sustainable transport (16%) and sustainable consumer products (13%). All are growing well above GDP , at annual rates ranging from 10% in consumer products to 20% for alternative energy. Companies are seeing successes and setbacks – no surprise given the landscape of regulatory change and uncertainties, technology competition and evolving consumer preferences. 4.1 Climate leadership still pays off The advantages of being an early mover start with growth, but do not end there These advantages were explored in more detail in the World Economic Forum’s 2022 report Winning the Race to Net Zero: The CEO Guide to Climate Advantage.52 Overall, green premiums seem to be persisting today but can be hard to realize amid uncertainties around the expansion of green policies, inflation and geopolitical implications – as well as amid the need to access new customers outside existing customer segments, develop new product propositions and establish novel, green pricing. For certain hard- to-abate industries, transitioning to low-carbon operations will present significant challenges and risks, but underestimating the risks of inaction is dangerous. Companies that delay action risk not only falling behind more proactive competitors but also missing out on the economic opportunities tied to climate leadership. Sustainability frontrunners are positioned to create clear advantages in a range of areas (see Figure 20), including the following: –Deeper talent pools: Sustainability is a magnet for top talent, with 24% percent of job candidates reporting that they would reject offers from what they perceive as unsustainable companies.53 –Top-line growth: Green products often outperform, with sustainable consumer goods growing at 9.9% CAGR, driving one-third of consumer goods growth despite being only 18.5% of the current market.54 –Saving cash and carbon: Operational efficiencies alone can cut emissions by 10%, reducing costs as carbon prices rise, even for carbon-intensive sectors. Across sectors, approximately half of companies’ operational scope 1 and scope 2 emissions can be eliminated at no net cost. –Reduced regulatory risk: The EU’s carbon border adjustment mechanism (CBAM) will take full effect by 2026. Companies reducing emissions by 55% could see EBITDA margins improve by 2-6 percentage points by 2030 compared with those that take no action.55 –Lower cost of capital: Top environmental performers benefit from a lower weighted average cost of capital (WACC) compared with their peers.56 However, the gap has narrowed since 2022, making it harder to measure the full financial benefit with certainty. However, the pace and scale at which opportunities develop will vary significantly in different scenarios and industries, particularly where legacy grey assets and infrastructure are deeply embedded. New markets, such as hydrogen, also face higher financing costs due to higher interest rates and risks tied to unproven projects. In these sectors, the transition will likely require incremental steps and may progress more slowly as risks and opportunities materialize. Companies transitioning from grey assets to greener technologies must carefully navigate this balance, ensuring that investments in green technologies and assets are aligned with the scale and timing of future risks and policy shifts across various climate scenarios. Within IKEA and through the Alliance of CEO climate leaders, we are demonstrating the financial upside of climate-smart strategies, showing that climate transformation can reduce costs and drive significant returns. Jesper Brodin, Chief Executive Officer, Ingka Group (IKEA) Sustainability frontrunners are positioned to create clear advantages in a range of areas. The Cost of Inaction: A CEO Guide to Navigating Climate Risk 33

The Cost of Inaction 2024