SOCIAL and ENVIRONMENTAL REPORT 2018 ALROSA • Social and Environmental Report 2018
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SOCIAL AND ENVIRONMENTAL REPORT 2018 ALROSA • Social and environmental report 2018 Social and environmental report of the ALROSA Group (PJSC ALROSA, ALROSA, Company, Entity) for the year 2018 includes the results of activities of PJSC ALROSA, and on certain sub- stantial matters, of its diamond mining subsidiaries, together referred to as ALROSA Group. Terms PJSC ALROSA, ALROSA Group, Group, ALROSA, Company, used herein are regarded equivalents and relate to the entire ALROSA Group, PJSC ALROSA and/or its subsidiaries depending on the context. PJSC ALROSA is the corporate parent of the ALROSA Group and provides consolidated information on operations and financial activi- ties of strategic business lines for this report. The report is developed according to the review of the operational data of the consolidated figures for IFRS (unless stated otherwise). In terms of disclosure, the report conforms to the requirements of the Global Reporting Initiative — GRI Standards, “basic” edition. ALROSA • Social and environmental report 2018 FORWARD-LOOKING STATEMENTS This report presents actuals for the past period, as well as some forward-looking statements. Such statements include, but are not limited to, statements of future operational performance, plans and/or forward-looking statements about future economic and financial metrics, development plans, goals and tasks of the Company, including those on products and services. Statements on future performance include, but are not limited to, information of the forecasted or expected income, profit (loss), net profit (loss), of the shares, dividends, capital structure, and other financial issues. Content of such statements is forward-looking and is expressed through the words “expected”, “supposed”, “planned”, “intended” etc. By nature, forward-looking statements are related to general and particular risks and uncertainties. There is the risk that future actual performance may differ significantly from the plans, goals, expectations, estimates, and intentions expressed in such forward-looking statements, or may fail to be implemented due to a variety of factors. 4 • 5 ALROSA • Social and environmental report 2018 TABLE OF CONTENTS Message from Chief Executive Officer — Chairman of the Executive Committee,8 05 ENVIRONMENTAL RESPONSIBILITY 122 Key numbers of 2018, 14 ESG Indicators, 14 Environmental Policy of the Company, 125 Key Events in 2018, 17 Environmental activities financing,132 Environmental performance, 138 Discharges and waste, 143 Emissions, 147 01 ABOUT ALROSA GROUP 24 Environmental activity of PJSC ALROSA’s subsidiaries, 160 About ALROSA Group, 26 Geography, 28 Production chain, 30 06 SOCIAL RESPONSIBILITY 162 ALROSA Group Strategy, 40 Our people, 167 HR formation and development of the personnel, 177 Investing in people, 190 02 SUSTAINABLE DEVELOPMENT 44 Social partnership and human rights, 199 Regional development and charity projects, 200 Sustainable development policy, 46 Integration of the UN Sustainable Development Goals into ALROSA's business, 50 Corporate Governance System for Sustainable Development, 64 Risk Management Committee, 72 07 ABOUT THIS REPORT 212 Stakeholder engagement, 75 Ethics and anti-corruption activities, 80 Overview, 214 Innovative development, 84 Essential topics to be included in the Report, 215 Report scope defining,220 Independent Certification of the Report. Report of Auditing Organization,222 03 ECONOMIC EFFICIENCY 92 Economic performance for 2018, 94 APPENDICES 224 Creation and distribution of economic value, 96 ALROSA Group Investment Program, 100 Appendix 1. Scope of essential topics, 226 Appendix 2. Compliance with the GRI standards, 230 Appendix 3. Recording table of stakeholders proposals, 249 Appendix 4. Social рerformance, 252 04 OCCUPATIONAL HEALTH AND SAFETY 104 Appendix 5. Environmental рerformance, 258 Appendix 6. Glossary, 264 Occupational Health and Safety Policy, 107 Contact form, 268 Efficiency of OHS activities,116 Contact Information, 269 6 • 7 ALROSA • Social and environmental report 2018 MESSAGE FROM CHIEF EXECUTIVE OFFICER — CHAIRMAN OF THE EXECUTIVE COMMITTEE Observance of sustainable development principles We see the sustainable development of ALROSA not only as high performance on a regular basis, but we also make a point of devel- oping the regions of our presence, as well as the Company itself. Our priority is to establish in our company-based cities practices, providing citizens with jobs and fair salaries, conforming to levels of Russian cities with a million-plus population, to save the best for next generations — comfortable well-developed infrastructure, social programs, and clean environment. We approach sustainable development as a continuous process of perfecting in accordance with the best advanced international practices and standards in the realm of sustainable development, incorporated in all aspects of Company’s operations and are always considered during strategic decision-making. The importance and relevance of such an approach are strongly supported by the man- agement of ALROSA, as well as representatives of all the parties concerned. Influence of the commitment to the principles of sustainable development on the corporate strategy of ALROSA ALROSA has been continuously following the strategy accepted by its shareholders in 2013. Fall 2018 has seen the revision of the strategy considering new trends. However, its principle ideas GRI 102-14 remain unchanged. The Company will focus on diamond prospect- ing and mining and will strive to keep and consolidate its status of Dear partners, shareholders, and employees! the global leader in mining and resource base volumes. ALROSA will continue working on quitting its non-core assets, improving its I am glad to present you the eighth annual social and environmental performance in all fields of operation, executing its social respon- report for 2018, containing key issues and operational results. Our sibilities within regions of presence. Company’s activities shall be report has been developed in accordance with the best advanced oriented at the effective management of the socially responsible Russian and international practices and reporting standards in business with the purpose of executing long-term interests of its the realm of sustainable GRI development. The report reflects the shareholders. BILLION RUBLES main performance outcomes of ALROSA in 2018 including finan- cial, production, social and ecological aspects of its operation and In 2018 together with the Development Strategy, the Long-term SPENT TO SOCIAL sustainable development. Company’s management fully accepts and Development Program of the ALROSA Group for the period of INVESTMENTS undertakes its liability for the provision of the integrity of the ren- 2018-2024 has been updated. Its main focus is obtaining the stra- dered report, created by a large number of specialists and frontline tegic goals and it includes 20 program policies, more than half of managers. which relate to sustainable development. 8 • 9 ALROSA • Social and environmental report 2018 Creating value for the concerned parties Social responsibility is very important for the Company, performing ALROSA successfully implements the program of enhancing the operational mining activities in challenging northern region. ALROSA-based efficiency and cost cutting. In 2018, the productivity increased by 17% com- cities are home to about 50 thousand people. In fact, the Company is pared to 2014. 2018 specific operating expenses were reduced by 5% in real Yakutia’s region-setting enterprise. 2018 dividend and tax payments terms against the previous year and are supposed to show 2% annual reduc- by ALROSA to Yakutia amounted to about 80 billion rubles, which tion during the next five years. comprises almost half of the republic’s budget revenue. BILLION RUBLES With revenue growth and business profitability efforts, by results of the year Moreover, the Сompany also sponsors certain environmental and DIVIDEND AND TAX 2018 ALROSA has demonstrated strong financial indicators, while by the end social projects. In 2018 alone ALROSA has forwarded 9.3 bln rubles PAYMENTS OF THE COMPANY of the year the net profit increased by 15 % up to 90 bln rubles. Free cash flow to social investments. ALROSA stands among the leading Russian has shown 26% growth and amounted up to 92 bln rubles, which, in its turn, TO THE REGIONAL BUDGET companies regarding this factor. It provides execution of about gave options to considerably reduce the debt load. 500 charity and other social initiatives annually. OF YAKUTIA Diamond mining volume in 2018 totaled 36.7 mln carats. Reduced diamond In 2018, the Company managed to keep its global diamond-min- mining against the year 2017 was expected and was mostly conditioned by ing leadership, as well as perform some crucial steps towards the production halting at Mir underground mine. This loss was partially compen- improvement of its production efficiency and financial stability. sated through increased ore treatment in other mining sites. Besides, after ALROSA demonstrated the record-breaking financial performance some years of preparation, the mining in Verkhne-Munskoye deposit was in spite of reduced activities observed in the diamond market during launched past autumn. It is expected to provide about 1.8 mln carats of dia- Q4. Revenues, EBITDA and net profit increased considerably against monds per year for more than 20 years. the previous year. The operational and financial performance currently demonstrated by ALROSA