2021 sustainability report

Supply chain

Managing the ESG aspects at all value creation chain stages is an essential element of Nornickel’s management culture which helps manage relevant risks and respond to growing consumer needs. The continuity of the operations and operating results of the entire Group hinges on a sustainable supply chain.

Nornickel’s supply chain management processes include both interaction with feedstock suppliers in the upstream sector and control over sustainability of their practices and procedures and ensuring high product quality and promoting innovative technologies in the downstream sector aiming to confirm product “history” and its ESG characteristics, including the carbon footprint. In the future, supply chain management processes will also cover suppliers of goods, works, and services.

Responsible procurement

Nornickel’s key responsible procurement priorities are to ensure that its key suppliers and contractors comply with the main ESG requirements that the Company follows in its operations and exclude interaction with any counterparties that grossly violate the principles of sustainable development.

In 2021,MMC Norilsk Nickel approved its Responsible Sourcing Policy* and its Supplier Code of Conduct* which reflect the Company’s responsible sourcing principles. If any violation of the policy and code principles by any supplier is discovered, the Company applies a set of measures to reduce the risks of interacting with that counterparty, including suspending or terminating interaction with such counterparty, depending on the severity of the violation.

To mitigate the operational and financial risks and costs, reduce the working capital, make supplies more reliable, and improve the delivery cycle, Nornickel relies on a wide range of adopted documents establishing mandatory unified procurement principles and approaches.

Checking suppliers and contractors for compliance with ESG requirements

In 2021, to ensure responsible sourcing for all individual supply chains in accordance with the ESG requirements, Nornickel approved the Supplier Code of Conduct. The Code establishes mandatory, targeted, and expected requirements for suppliers which are revised on an annual basis or as significant changes occur in the relevant supply chain.

If suppliers refuse to comply with the Code or do not clearly demonstrate their continuous improvement in terms of compliance with its requirements, Nornickel may reconsider its relationship with such suppliers, up to and including the complete termination of engagement.

To monitor suppliers’ compliance with the requirements of the Supplier Code of Conduct and select the best suppliers based on the ESG criteria, Nornickel started developing a due diligence management system (DDMS) in 2021. The system is focused on compliance with the requirements and guidelines of:

  • the London Metal Exchange for responsible sourcing;
  • the standards and principles of industry-leading sustainability initiatives: ICMM, IRMA, RMI, JDDS;
  • the Company’s major customers.

The methodological basis for developing the DDMS is the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas as well as the Five-Step Framework for Risk-Based Due Diligence in the Mineral Supply Chain.

In 2021, as part of the first step from the Five-Step Framework for Risk-Based Due Diligence of Supply Chain, Nornickel developed and released the Supplier Code of Conduct and the Responsible Sourcing Policy, which are public documents available on the Company’s official website, and revised the Human Rights Policy*.

In 2021, Kola MMC developed the Due Diligence System standard (part of DDMS), conducted a supply chain due diligence procedure and issued a supply chain due diligence report* and a 2021 due diligence report*. In February 2022, the Corporate Trust Line Procedure was updated.

Nornickel is planning to complete the development of all DDMS tools in 2022, roll out the system at other divisions, and implement the entire five-step framework, introducing the DDMS for feedstock suppliers at the first stage with further expansion to suppliers of goods, works, and services. To implement the DDMS into business processes across the entire group, Nornickel is developing a Code Implementation Roadmap and training the employees of Nornickel’s head office and divisions.

In addition to the DDMS, Nornickel traditionally carries out detailed sustainability compliance control procedures as part of its major procurement procedures.

Key elements of Nornickel’s supply chain

GRI 102-9 GRI 306-1

Key elements of Nornickel’s supply chain Key elements of Nornickel’s supply chain

Nornickel’s by-laws on responsible procurement

Key procurement by-laws

  • Regulation on the Product Procurement Procedure for MMC Norilsk Nickel’s Enterprises
  • Procurement policies by category (group of similar products)
  • A standard master agreement signed with every supplier*
  • MMC Norilsk Nickel’s Policy Regarding Support for Small and Medium Enterprises
  • Norilsk Nickel Group’s efficiency improvement programme

Policies setting out ESG requirements for the Company’s suppliers and contractors*

  • MMC Norilsk Nickel’s Responsible Sourcing Policy
  • MMC Norilsk Nickel’s Supplier Code of Conduct
  • Business Ethics Code of MMC Norilsk Nickel
  • Community Engagement Policy
  • Renewable Energy Sources Policy
  • Occupational Health and Safety Policy
  • Working Conditions Policy*
  • Indigenous Peoples’ Rights Policy
  • Human Rights Policy
  • Anti-Corruption Policy of MMC Norilsk Nickel

Monitoring ESG factors in interaction with suppliers and contractors as part of procurement procedures

Procurement procedure stage
Key control tools
Control of ESG factors

Procurement procedure stage

Procurement initiation

Key control tools

Scope of supply/work: legal and regulatory requirements of the Company, mandatory and recommended specifications of products and services, covering health, safety and environment, etc.

Control of ESG factors

Key control tools

Procurement documents: provisions for no signs of bankruptcy, overdue taxes and charges, and no criminal records in the biographies of top managers

Control of ESG factors

Key control tools

Procurement policies for certain product categories: quality assurance procedures for supplies

Control of ESG factors

Procurement procedure stage

Procurement procedure

Key control tools

Qualification of suppliers: default risk assessment and compliance with the Company's initial requirements (scope of supply/work, specifications, etc.)

Control of ESG factors

Key control tools

Corporate Security's checks: into business reputation, reliability and solvency of potential counterparties

Control of ESG factors

Key control tools

Analysis and evaluation of bids submitted, including track record of similar projects and qualifications of key employees

Control of ESG factors

Procurement procedure stage

Contracting procedure

Key control tools

Inclusion of an anti-corruption clause in the contract

Control of ESG factors

Key control tools

Inclusion of product and service specifications in the scope of supply/work

Control of ESG factors

Procurement procedure stage

Contract performance by suppliers

Key control tools

Corporate Procedure for Organising and Conducting High-Hazard Operations: control over contractors’ compliance with health and safety requirements

Control of ESG factors

Key control tools

Control over compliance with the Company’s initial requirements scope of supply/work, specifications, etc.) and environmental regulations during work and upon acceptance

Control of ESG factors

ESG factors

Quality of products, works and services

Environmental protection

Occupational health and safety

Legal compliance

In 2021, Nornickel continued the practice of selecting suppliers based on the analysis of equipment life-cycle costs (ownership, operation, and disposal) by including appropriate provisions in the statement of work or draft contract. It is important for Nornickel to develop relationships with reliable suppliers who strive to improve the environmental component of production operations. Nornickel takes into account suppliers’ efforts to secure responsible resource consumption and reduce environmental impacts, in particular by using modern equipment and technological materials, regular pilot testing, and production upgrade.

Ensuring procurement efficiency and transparency

Nornickel’s procurement operations are carried out in accordance with internal procedures and policies. The Company’s procurement process is certified for compliance with ISO 9001 and ISO 14001.

In 2021, the Company signed over 4,700 contracts for centralised procurement of materials and equipment worth around RUB 130.2 bn.

To handle both centralised (through MMC Norilsk Nickel) and decentralised (at the Group’s Russian business units) procurement activities, we use SAP SRM, an automated system for supplier relationship management. By 2021, 26 companies affiliated with the Group and MMC Norilsk Nickel divisions had joined the SAP SRM system and over 15,000 potential suppliers had registered in it, of which over 7,000 had been accredited. Nornickel’s current and potential suppliers can communicate online with procurement specialists for all categories of products purchased through Nornickel’s SRM Procurement Management System and can receive up-to-date information regarding ongoing procurement. Sign-up for the Supplier Relationship Management (SRM) system is free of charge and does not impose any obligations on users.

To maintain an ongoing dialogue with suppliers, our website has a dedicated Suppliers page, which provides key information on the Group’s procurement principles and procedures and planned material requirements. The page also features announcements and invitations to participate in the Company’s tenders. For more details on SAP SRM-based procurement, please see the Procurement Procedures tab in the Suppliers section on Nornickel’s official website.

Transparent procurement. Participation in RSBN initiative

To improve procurement transparency, Nornickel joined the international Responsible Sourcing Blockchain Network (RSBN) in January 2021. This initiative brings together sellers and buyers of across the minerals supply chain. With Nornickel joining the RSBN, a series of its supply chains will be audited annually against key responsible sourcing requirements by RCS Global. An independent audit will be conducted in 2021, with its results to be recorded in the blockchain network without any changes.

Support for domestic producers

Support for domestic producers is a part of Nornickel’s responsible sourcing efforts. To increase competition and phase out imported equipment with that manufactured locally, the Company has a centralised pilot testing mechanism in place. Foreign suppliers are mainly engaged for delivering unique equipment or systems that have no Russian alternatives.

share of domestic suppliers in 2021

Breakdown of Nornickel Group's suppliers and contractors, number of companies

Breakdown of Nornickel Group's suppliers and contractors, number of companies

Product quality and supply reliability

Product quality assurance

As a product manufacturer, Nornickel is responsible for compliance with the laws, environmental and occupational health and safety requirements during its production process. Product quality related goals and objectives are in line with the Company’s strategic goals and are formulated in the management’s resolutions based on annual performance reviews of the Corporate Integrated Management System.

The key production operations of the Group, i.e. MMC Norilsk Nickel, Kola MMC, Gipronickel Institute, Norilsk Nickel Harjavalta, are certified to ISO 9001:2015. The Company has put together, implemented, and is dynamically developing a corporate integrated management system as per ISO 9001, ISO 14001, and ISO 45001.

Nornickel Group’s products are not subject to mandatory certification. Consumer properties of each product are defined in the relevant specifications and contractual documentation in full compliance with Russian and international laws.

The Company’s goods are labelled to keep the customers and carriers informed about key properties of the products (including those meant for exports). The labelling rules are set out in product-specific regulations and take into account the GOST 4192-96 (Labelling) requirements and contractual obligations.

GRI 102-2

NORILSK brand copper cathodes produced by MMC Norilsk Nickel’s Polar Division are registered on the London Metal Exchange and meet the requirements of GOST 546- 2001, “Copper Cathodes. Technical Specifications”, GOST 859-2014 “Copper. Grades”, for the M00k grade.

Electrolytic nickel of the H-1u, H-1, and NORNICKEL grades produced by Kola MMC is listed at the London Metal Exchange, with the H-1u and H-1 nickel grades also listed at the Shanghai Futures Exchange. Electrolytic cobalt was listed on the London Metal Exchange in 2019.

Nickel brands of NORILSK NICKEL HARJAVALTA CATHODES and NORILSK NICKEL HARJAVALTA BRIQUETTES are also registered on the London Metal Exchange.

In 2021, the Company faced no major fines for a failure to comply with product supply rules and requirements.

Corporate Integrated Management System (CIMS)

Corporate Integrated Management System (CIMS)

Ensuring reliable and uninterrupted supplies

Nornickel’s sales strategy is focused on ensuring sustainable positioning in the market, with the Company seeking to achieve a balanced ratio of nickel supplies to stainless steel producers and other industries. As the largest palladium producer, Nornickel is implementing a strategy of direct long-term contracts with its end users (with a focus on the automotive industry) in order to maintain a long-term and sustainable demand for palladium.

Nornickel Group’s production operations ensure reliable and uninterrupted supplies of products to consumers driven by:

  • efficient self-developed product delivery planning and monitoring system;
  • its existing quality management system certified to ISO standards;
  • professional qualifications of the sales and production personnel;
  • close coordination between marketing, production and delivery units;
  • availability of corporate cargo fleet and unique logistics competencies;
  • regular monitoring of customer satisfaction and feedback.

Throughout the history of the Norilsk Nickel Group, it never once failed to meet its obligation to deliver products to consumers

In 2021, Nornickel’s customer base included 356 companies, mostly industrial consumers. Nornickel sells its products on all key markets, with its footprint spanning 36 countries as at the end of 2021.

Revenue from key metal sales in 2021 by region, %

GRI 102-6

Revenue from key metal sales in 2021 by region

Customer satisfaction

The Company conducts annual surveys to analyse and evaluate customer satisfaction with its core products. Compliance with contractual obligations is audited and analysed on an ongoing basis.

The key to positive survey results is maintaining or exceeding target customer satisfaction level at 2.50 points (out of 3 points). Surveys cover key customers accounting for at least 50% of total product sales.

According to the 2021 survey, the customer satisfaction level stood at 2.88 points out of 3.

ln 2021, the Company received 18 complaints and grievances about its product or service quality and achieved out of court settlement for all of them by meeting the demands of consumers (eight complaints were deemed unfounded), with remedial action plans developed to address twelve complaints (including six that had been rejected).

Customer satisfaction on a 3-point scale

Customer satisfaction on a 3-point scale