2021 sustainability report

Opinion of RSPP Council
on Non-Financial Reporting

Opinion of the RSPP Council on Non-Financial Reporting on Norilsk Nickel Group’s 2021 Sustainability Report for the purposes of public assurance

Свидетельство

The Council on Non-Financial Reporting of the Russian Union of Industrialists and Entrepreneurs (the “Council”), established as per the Management Bureau’s Resolution dated 28 June 2007, reviewed, at the request of MMC Norilsk Nickel (the “Company”, the “Group”, “Nornickel”), Nornickel Group’s 2021 Sustainability Report (the “Report”).

The Company requested the RSPP to arrange for the public assurance of the Report, with the Council on Non- Financial Reporting providing an opinion on the materiality and completeness of the Report’s information about the Company’s operations from the perspective of the Social Charter of the Russian Business. The Charter sets out key principles of responsible business conduct aligned with those of the UN Global Compact, as well as domestic and international CSR and sustainability standards and guidelines.

From 30 April to 27 May 2022, the Council members reviewed the content of the Company’s Report and passed this Opinion in accordance with the Council’s Procedure for Public Assurance of Corporate Non-Financial Reports.

The Council members possess all the required competencies in corporate responsibility, sustainable development and non-financial reporting, comply with the ethical requirements for independence and impartiality, and provide their personal expert opinion rather than the opinion of organisations they represent.

The Report was assessed based on the below-listed criteria of information completeness and materiality.

Information is considered to be material if it reflects the company’s efforts to implement the principles of responsible business conduct set out in the Social Charter of the Russian Business (see www.rspp.ru).

Completeness implies that the company provides a comprehensive overview of its operations, including the underlying values and strategic benchmarks, governance systems and structures, accomplishments and key results, and the stakeholder relationship framework.

The procedure for the public assurance of the Report factors in the Company’s application of international reporting frameworks; this Opinion does not, however, purport to assess the Report’s compliance with such international frameworks.

The Company is responsible for the information and statements provided in the Report. The accuracy of the Report’s information is beyond the scope of the public assurance procedure.

This Opinion has been prepared for MMC Norilsk Nickel. The Company may use it for both corporate and stakeholder communication purposes by publishing the original version without any changes.

CONCLUSIONS

Based on the review of the Report and the information publicly available on the Company’s official website, and following a collective discussion of the results of the Report’s independent assessment undertaken by the members of the Council on Non-Financial Reporting, the Council confirms as follows.

Nornickel Group’s 2021 Sustainability Report covers the key areas of responsible business conduct in accordance with the principles set out in the Social Charter of the Russian Business, and provides sufficient information about the Company’s operations in relation thereto.

The recommendations made by the Council following the public assurance of Nornickel Group’s 2020 Report were addressed in the 2021 Report. The Report covers the Company’s progress on UN SDGs and targets under national projects, an action plan to implement an ESG agenda in 2021–2023, a roadmap for TCFD compliance, digital initiatives and targets of the Holistic Environmental Strategy. It also shows changes in a majority of key indicators over three to five years.

The Company’s 2021 Report contains relevant information relating to the below-listed aspects of responsible business conduct.

Economic freedom and responsibility. The Report presents Nornickel’s development strategy through 2030, including key targets and projects, assesses the Company’s contribution to the Russian and global economy, and analyses long-term global trends related to the demand for the relevant metals, factoring in the climate agenda, among other things. Nornickel discloses financial and operational results in the reporting year, information on key products, in particular the first batch of carbon-neutral nickel, long-term targets of the investment programme and key domains and initiatives of the Company’s digital transformation. Available is data on the most important areas of production upgrade, including the comprehensive development of all mines, ESG strategy, which integrates the Environmental and Climate Change Strategy through 2031, social strategy and corporate governance and supply chain management initiatives, and an action plan to implement an ESG agenda in 2021–2023. The Report dwells on the corporate governance and risk management framework, including with respect to sustainable development, the Board of Directors and its newly established Sustainable Development and Climate Change Committee, and including ESG targets in the top management’s KPIs. The Company indicates responsibilities of various governance bodies as regards sustainability, and efficiency improvement measures, while also reporting on having its quality, environmental and health and safety management systems certified for compliance with international standards. The Report covers key programmes and initiatives contributing towards UN SDGs and national projects, a series of employee training programmes on the amended Business Ethics Code, as well as anti-corruption practices and efforts.

Business partnerships. As stated in the Report, the Company has approved a Stakeholder Engagement Policy and Stakeholder Engagement Plan. It also discloses engagement mechanisms, a stakeholder map and stakeholder participation in defining the Report’s material topics. Nornickel said it maintained a dialogue with stakeholders in line with international standards. The Report also describes the operation of the Corporate Trust Line, a permanent tool to manage complaints and queries and quickly respond to matters of importance for stakeholders, and tells of holding ESG events and communicating the Company’s ESG achievements to investors on a regular basis. Its topics include a Corporate Healthcare project, remuneration system, training and social programmes for staff, social partnerships, and measures to reduce injury rates. Additionally, the Report covers areas of customer relations and regular customer satisfaction surveys, while also dwelling on the Company’s efforts to integrate ESG principles into supply chain management, approval of the Supplier Code of Conduct, Responsible Sourcing Policy, and supplier and contractor cooperation mechanisms, including as regards responsible consumption of precious metals, and health and safety. When it comes to the HPP-3 clean-up efforts, the Company defines its priorities in engaging with Taimyr’s indigenous peoples and reports on signing a relevant cooperation agreement with the Federal Agency for Ethnic Affairs. The Report gives an account of Nornickel’s participation in committees, commissions and working groups created by government agencies and business community representatives to implement socially important projects, and regular communications with local communities through targeted research, surveys, focus groups and regional development centres.

Human rights. As indicated in the Report, Nornickel has aligned its Human Rights Policy with the international and Russian laws and added a new provision on obtaining a free, prior, and informed consent as a basis for relations with indigenous minorities. The Company has updated all of its key by-laws on human rights to ensure alignment with global best practices and the Company’s public commitments. The Report mentions that the Company regularly assesses the potential impact of its operations on human rights and checks new projects for compliance with the applicable Russian and international laws. A focus is placed on respecting labour rights, in particular as part of personnel development and social support programmes and the social partnership framework, with collective bargaining agreements covering 94% of the workforce. The Company informs the public about its efforts to collect information on alleged human rights violations via Nornickel’s Corporate Trust Line, regular employee polls, and sentiment surveys of local populations. There are details on the performance of offices for operating, social and labour relations, the first comprehensive employee training course in human rights, and partnership with the Women in Mining Russia non-profit organisation.

Environmental protection. The Report covers the Company’s progress against the Environmental and Climate Change Strategy adopted in 2020, which saw strategic goals set across the board and annual and long-term KPIs updated. The Company outlines corporate regulations and measures to improve environmental and climate change management, while also disclosing changes in key metrics of its environmental footprint and key related workstreams. There is data on major projects, such as the Sulphur Programme, establishment of an Environmental Monitoring Centre to cover the Company’s regions of operation, and response to the HPP-3 incident in Norilsk in 2020. The Company said it launched a pilot project on assessing physical climate change risks and the per-unit carbon footprint of its products. The Report gives an account of climate risk management along with developed and planned measures on the climate agenda, including activities to keep greenhouse gas emissions at the lowest level in the metals and mining industry, increase the output of metals essential for the global transition to a green economy, and draft a roadmap to comply with TCFD recommendations. It also highlights Nornickel’s initiatives to improve energy efficiency, and states that the Company included an investment programme to fully upgrade the Norilsk Industrial District’s energy infrastructure in its strategy, stepped up industrial consumption of its own renewable energy, and purchased certificates for externally sourced renewable energy. The Company gives a summary of how it works with nature reserves to help conserve and restore biodiversity and preserve the unique Arctic nature, and collaborates with researchers in addressing environmental and climate change challenges.

Contribution to the development of local communities. The Report provides an overview of the Company’s activities broken down by regions of operation, discloses significant results of these activities, outlines areas of cooperation, showcases the tools for working with local communities, and discloses information on the key initiatives in each region. The regional breakdown provides data on tax and non-tax payments to budgets of all levels, unemployment rates in the context of job creation, and the development of entrepreneurship. Improvement of access to remote locations through using Nornickel’s transport infrastructure is listed as a priority area in supporting local communities. The Report highlights the Company’s role in approving the Comprehensive Social and Economic Development Plan for Norilsk until 2035. It also includes information about the Company’s support of its regions of operation amid the COVID-19 pandemic, and spending on healthcare initiatives. There is a mention of the opening of the first of the Company’s five medical centres planned for launch in the Norilsk Industrial District and Dudinka. The Report describes the implementation of Nornickel’s key projects on improving the well-being of local communities and provides information about the performance of regional development institutions supported by the Company, including the Norilsk Development Agency, Second School Centre for community initiatives of the Pechengsky District, and Monchegorsk Development Agency. Also noted is the launch of a large-scale programme in Norilsk to clean up areas contaminated with industrial and construction waste. Information about the priorities and principles of the external social policy, implementation of social programmes for local communities, and interaction with indigenous northern minorities is also included in the Report. The World of Taimyr grant competition is listed as one of the key initiatives for supporting indigenous northern minorities. In addition, the Report tells of assessing the performance of social projects via a dedicated system.

Final provisions

The information contained herein generally describes the Group’s strategy, business practices and results in sustainable development and corporate social responsibility as well as the supporting governance systems. The Report provides a detailed overview of the results of the Company’s efforts to help achieve UN SDGs by 2030 and targets set out in Russia’s national projects. It covers Nornickel’s continued activities to eliminate damage caused by environmental industrial incidents that occurred in 2020 and the Company’s response to the pandemic while disclosing a significant number of economic, social and environmental performance indicators, and presents stakeholder engagement on sustainable development matters, including as part of the definition of material topics and the reporting process.

The Report was prepared using internationally and domestically recognised reporting tools (e.g. the GRI Standards, Comprehensive option, GRI Sector Disclosures), which ensures comparability of the Group’s information with that of other Russian and international companies. In drafting the Report, the Company also relied on the following documents: the UN Global Compact, the UN 2030 Agenda for Sustainable Development, ISO 26000:2010, SASB, Accountability Standards АА1000SES (2015) and AA1000AP (2018), the UNCTAD Guidance on core indicators for entity reporting on contribution towards implementation of the UN Sustainable Development Goals, and TCFD recommendations on climaterelated risk disclosures.

The 2021 Report is the Company’s eighteenth non-financial report, which demonstrates its determination to consistently develop reporting processes and enhance transparency. The Company uses various forms of independent assessment and confirmation of disclosed information (professional audit and public assurance). This reflects the Company’s commitment to maintaining the high quality of disclosures.

RECOMMENDATIONS

While acknowledging the Report’s strengths, the Council calls attention to some aspects of disclosures’ materiality and completeness, which should be addressed in the future reporting cycles.

The Council notes that the recommendations made following the review of the previous reports remain valid and good for use going forward.

This specifically relates to the recommendation to show a more detailed and consistent comparison between planned objectives for the reporting period and the actual results and disclose the next year’s and midterm targets across all sustainability areas. For better communication, it is recommended that all sections of the Report follow a consistent approach to explaining performance, especially in cases of material changes.

It is recommended that the Company’s future reports go into further detail about which of its sustainability regulations and procedures extend to its subsidiaries and how it controls their activities in this area and define the relevant key performance indicators.

The topic of industrial safety was included in the list of material topics and given a high priority; however, it was compared only with the health and safety GRI standards. At the same time, the topic’s second component, which relates to the reliability of equipment, technological processes, as well as accidents and their impact on the environment and local communities, is equally important. Information on industrial safety is provided in several sections of the Report (heath and safety, climate risk management, and 2020 spill clean-up). To provide a holistic view of the Company’s OHS management, organisation and performance, it may be worth taking a uniform approach to the analysis and presentation of the topic and complementing key information with references to the sections where these issues are addressed in relation to specific areas of activity.

It is proposed that future reporting of the Company’s biodiversity conservation and restoration activities focus more on their end results and systemic approach, and less on the support of specific organisations involved.

Given the Company’s role in the Russian economy, it is recommended to enhance and detail the presentation of Nornickel’s contribution to national development goals until 2030 and the goals of national projects.

It would be useful if the Company could add an analysis of the social impact to the section relating to its social programmes. It is recommended that the Company disclose data on the social progress, positive shifts in the social environment, improvements in the local labour market and living conditions of people resulting from these programmes. Given the significant volume of social investments and the variety of projects implemented by the Company, it is recommended that this area of activity be covered more extensively in the next report due to its relevance to different stakeholder groups.

Following the 2020 fuel spill, the Company published a White Paper that outlined specific plans for improving safety and preventing similar accidents in the future. Going forward, it would be reasonable to expand the disclosure of information on the activities carried out, as well as the implementation of publicly announced plans and commitments related to the accident response and associated risks mitigation, taking into account the high-profile nature of such events.

The Report includes targets for reducing GHG emissions. It is recommended to provide information on the programmes and efforts enabling the Company to achieve these targets.

It is also recommended that future reports cover more extensively the ESG matters considered and subsequently decided upon by the Board of Directors to provide a more complete picture of the integration of sustainability management into the Company’s corporate governance framework.

It is important to consider the context in which the reported information will be perceived by stakeholders if, at the time of the reporting, any events have occurred outside the reporting period which could lead to a significant increase in risks that the Company, region or country might face in the near future. In order to meet stakeholder expectations, it could prove useful to highlight the Company’s permanent overriding priorities, as well as those that emerge because of new challenges.

It is also recommended that the next report focus on the risks that stakeholders may potentially face in the forthcoming reporting period in connection with the Company’s activities and that the Company can mitigate.

The RSPP Council on Non-Financial Reporting hereby takes a positive view of this Report, supports the Company’s commitment to responsible business practices, notes consistency in developing the reporting process, and confirms that Nornickel Group’s 2021 Sustainability Report has passed the public assurance procedure.

RSPP Council on Non-Financial Reporting