Guaranteeing a Greener Future at Ericsson

Ericsson has taken a clear step in integrating sustainability across its financial operations, converting a long-standing umbrella guarantee facility with BNP Paribas into a sustainability-linked structure. The move not only strengthens its climate commitments but also signals a broader shift in how trade finance can contribute to the net-zero transition.

When Ericsson signed its first umbrella guarantee facility with BNP Paribas more than 15 years ago, it was a relatively straightforward tool to backstop the company’s contractual obligations worldwide. Guarantees are practical and functional but rarely associated with innovation.

That changed in December 2024. The guarantee facility was converted into a sustainability-linked one, directly tying financial terms to the company’s environmental performance. For Ericsson, one of the world’s leading providers of 5G and connectivity technology, the deal reflects a broader ambition to embed sustainability into relevant aspects of its finance operations.

Annette Ericsson, Head of Trade Finance, Ericsson, underlines: “Sustainable trade finance facilities represent a strategic step forward for our area, and linking our guarantee facility is a direct consequence of our work to integrate sustainability into our finance operations.”

That integration succeeds because the targets the company has chosen are robust and independently audited.

Anchoring finance in climate science

Ericsson’s climate strategy has long been grounded in science. Its net-zero 2040 target, validated by the Science Based Targets initiative (SBTi), spans the entire value chain. Milestones along the way include cutting Scope 3 emissions in half and reducing Scope 1 and 2 emissions by 90% by 2030. Progress is tracked against the Greenhouse Gas (GHG) Protocol, the global standard for measuring and reporting emissions.

Jenny Sandahl, Ericsson’s Head of Environmental Sustainability, explains: “While our long-term target is to become net-zero across the value chain by 2040, we need these 2030 milestones. Targeting energy performance, the biggest driver of our footprint, and reducing emissions both within our operations and across the value chain fits directly into our strategy.”

The facility stands out because those targets are embedded within a trade finance instrument, not just listed on a policy page. Guarantees are typically treated as routine back-office tools. By tying them to the company’s most significant sources of emissions, Ericsson is signalling that even the most functional parts of its financing will be held accountable to climate goals.

The significance of this approach lies not only in its ambition but also in its rigour. “We follow the GHG Protocol and all the definitions in there,” Sandahl adds. “We measure annually and report progress in our sustainability report.”

While there are no industry-wide standards for measuring the sustainability of radio base stations and other telecoms equipment, Ericsson has made significant strides in defining this. Crucially, its numbers are independently assured.

“Our annual report is reasonably assured by third-party auditors,” Sandahl reveals. “During the last couple of years we have defined and improved data measures and created more stringent reporting procedures and data quality checks.”

The details matter because linking a guarantee facility to performance indicators can appear to be mere box-ticking unless the metrics are credible. By choosing hard-to-move emissions measures and subjecting them to third-party assurance, Ericsson has established an arrangement that withstands scrutiny.

Confidence from the bank

BNP Paribas is a core relationship bank for Ericsson across a range of trade finance products, including its sustainability-linked revolving credit facility. Extending the sustainability framework into guarantees was therefore a natural next step, supported by the bank’s conviction that Ericsson’s climate targets carry real weight.

Leone Bertacchi, Trade Manager, Global Trade Solutions Nordics, BNP Paribas, points to the credibility behind those goals: “We believe in the near-term and long-term targets Ericsson has set. They are ambitious, not only in the ICT [information and communications technology] industry, but also among corporates more broadly. The fact that SBTi has validated them and they cover the entire value chain confirms the relevance of their goals.”

For the bank, the conversion also aligns neatly with its broader strategy of supporting client transitions with bespoke product structures. “We are committed to supporting clients in their sustainability journey, tailoring products as best as possible,” Bertacchi adds.

That made the decision to convert the umbrella guarantee facility a logical step for the bank. “When Ericsson approached us, we were delighted to proceed with the conversion of the facility,” enthuses Bertacchi.

For the communications giant, BNP Paribas’ readiness to pioneer sustainability in trade finance was clear.

Torsteinn Sigurdsson, Trade Finance Advisor, Ericsson, comments: “In this process we have observed different levels of maturity among banks when it comes to sustainability-related trade finance products. BNP Paribas has been at the forefront, particularly in relation to this sustainability-linked guarantee facility.”

How the mechanism works

Structurally, the umbrella guarantee facility mirrors Ericsson’s sustainability-linked Revolving Credit Facility (RCF), with annual performance against agreed-upon KPIs determining the margin. The mechanism is deliberately simple, designed to keep the focus on outcomes rather than complex structuring.

“In practice, the facility directly links financial rewards and penalties to sustainability performance,” explains Sigurdsson. “It encourages Ericsson to actively work towards its sustainability goals, while giving the bank confidence in the company’s commitment to becoming net-zero in 2040.”

In addition to financial incentives and consequences, the design is also about credibility. The performance data being independently assured and tied to Ericsson’s established reporting processes allows this. By keeping the mechanics simple and aligned with existing facilities, the structure avoids complexity while still driving behavioural change.

“It’s a straightforward way to do this,” remarks Sigurdsson. “It goes back to the RCF we have in place, where the targets are already embedded. So for us, it’s a structure that works very well.”

Why it matters

The conversion of the guarantee facility is more than a symbolic gesture. By integrating sustainability into a part of finance often treated as routine, Ericsson is demonstrating how trade finance can be leveraged to support its climate strategy.

Johan Ericsson, Senior Trade Finance Advisor, Ericsson, explains: “This shows it is of high value for us to broaden the scope and also integrate sustainability into other areas besides pure financing. Signing this guarantee facility with BNP Paribas highlights how trade finance can play a meaningful role in delivering on our sustainability ambitions.”

The move also strengthens Ericsson’s alignment with the United Nations Sustainable Development Goals (SDGs). Climate Action, which is SDG 13, is the most obvious connection, but the company views the impact as broader. By tying a trade finance instrument to its climate targets, Ericsson is extending the logic of its sustainability strategy into operational finance, linking it to goals related to resource efficiency and biodiversity.

“Ericsson has a focus on clean energy innovation through its energy-efficient products and infrastructure, but this also ties to better resource management,” Sandahl says. “Given that climate impact is closely linked to many other environmental aspects you could indirectly say it supports several of the other 17 goals but, given the value chain approach to climate SDG 17, “Partnerships for the Goals” is a critical one and of course SDG 12, Responsible Consumption and Production.”

The company’s perspective is rooted in three decades of sustainability research. Rather than narrowing its focus to a single metric, the company examines the interconnections between climate action, biodiversity, resource use, and long-term innovation.

“We like the holistic approach where, rather than focusing on one aspect and ignoring the rest, we instead use research-based facts and figures to decide where to put our focus,” affirms Sandahl. “This facility supports us in that approach.”

A competitive signal

In sustainability-linked finance, relative progress matters. While Ericsson prefers to avoid direct comparisons, it recognises that peers and competitors are watching.

“We have been interested to see what our competitors, or even other Swedish exporters, are doing in this area,” admits Johan Ericsson. “That curiosity is natural.”

For corporates, these initiatives serve as both internal milestones and external markers. Signing a sustainability-linked guarantee facility signals to the market, from customers to investors, that climate goals are integrated into the corporate financial structure.

That signal is also brought to bear in recruitment. Demonstrating a clear social conscience helps Ericsson appeal to younger finance professionals looking for purpose as well as career progression.

“Trade finance is often seen as an old-school banking business,” reflects Annette Ericsson. “By linking it to our sustainability agenda, we hope to make this area more attractive to young financial professionals as well.”

Alignment is critical

Converting the guarantee facility into a sustainability-linked facility was never going to be a perfunctory exercise. As Ericsson’s first sustainable transaction in trade finance, it demanded cross-company mobilisation, drawing in expertise from multiple disciplines to ensure the structure would hold up in practice.

“This was our first sustainable transaction in trade finance, so it required close internal co-ordination and engagement with multiple teams, including Legal,” recalls Sigurdsson. “We had a lot of support from the ESG team with Jenny and her colleagues, and also the corporate finance team that are responsible for the overall relationship with the banks. This milestone was only possible through close collaboration and alignment across all those different teams.”

That level of co-ordination is not incidental, but a defining feature of how large corporates make sustainability-linked finance work. In a company of Ericsson’s scale, even seemingly modest changes can ripple across multiple business lines and reporting structures.

As Annette Ericsson observes: “Alignment is critical, particularly within such a large company. You need that clear line of sight around all the stakeholders.”

Lessons from the front line

Breaking new ground in trade finance inevitably generates insights from which other corporates can learn. Ericsson’s experience highlights three lessons in particular.

The first is the value of clarity. Establishing a single point of contact within the ESG team created a direct channel for questions and decisions. “Early on, we established a contact within the ESG team, one point of contact that we could reach out to and discuss matters. That is extremely valuable in a large company,” says Johan Ericsson.

The second is persistence. ESG may not rank as the top priority in every department, making it essential to maintain momentum and bring colleagues along. As Johan Ericsson explains: “You need to consider that ESG might not be the priority for all departments. Keep up the perseverance, don’t let go, because you need the support from different areas.”

The third lesson underlines Annette Ericsson’s observation on stakeholder alignment. No sustainability-linked facility can succeed without broad internal consensus across finance, legal and business teams. “Make sure you are 100% aligned with all internal stakeholders before you go ahead with any kind of facility,” Johan Ericsson advises.

These lessons resonate beyond Ericsson. For corporates contemplating their own sustainability-linked facilities, persistence, co-ordination, and clarity of ownership are vital for success.

Taking sustainability further

The sustainability-linked guarantee facility is not the end of Ericsson’s journey. The trade finance team is already exploring other applications.

“We are continuously investigating how we could apply similar mechanisms or other alternatives to support our sustainability efforts,” says Sigurdsson. “From a trade finance point of view, one example is including sustainability in the scope of letters of credit. It will not be the same mechanism, but we would also like to be able to do that.”

This ambition encompasses the entire spectrum of financing activities at the company. “That covers the whole spectrum, from paper-handling documents to green projects within Ericsson, where letters of credit are part of the financing solution,” Annette Ericsson says.

Ericsson’s sustainability-linked guarantee facility may be just one instrument, but its significance is broader. It signals how sustainability is becoming embedded not only in strategic financing but in the day-to-day mechanics of trade finance

As corporates seek to align their operations with net-zero commitments, instruments once considered routine are being reimagined as drivers of change. Ericsson’s case shows that the tools of trade finance can do more than mitigate risk. They can help guarantee a greener future.