Staying focused on sustainable development

Sustainability Report 2016 Introduction Staying focused on sustainable development

EuroChem is one of the world’s leading We have a 15 year record of consistent Our Clean Water Program is also improving producers of mineral fertilizers. We have improvements in environmental performance. the quality of waste water management achieved this position through sound financial This is exemplified by our investment in at all production sites in Russia. These and and economic governance, industry-leading a state-of-the-art ammonia plant at our other investments in environmental controls employee relations and safety culture, Phosphorit site in Russia. The ammonia plant make us one of the leading adopters of BAT community investment and sophisticated construction project was started in 2015 within the agrochemicals sector in Russia/CIS. environmental management. and is currently expected to be completed in Q3 2018. This plant will use Best Available Technologies (BAT) to significantly reduce energy consumption and waste water.

Contents

Introduction Environmental responsibility 1 About our business 2 Sustainability timeline Read more page 30 4 Staying focused on implementing best available technologies 6 Staying focused on achieving zero waste water 8 Staying focused on promoting safety culture Health and safety 10 Staying focused on responsible product stewardship Read more page 38 12 Staying focused on improving the social environment 14 Challenges of food security 16 Sustainability strategy 18 Governance and ethics Social responsibility 22 Stakeholder engagement

Read more Additional information page 40 54 GRI disclosure tables 56 Key facts 57 Awards 58 Corporate information Economic sustainability

Read more page 50

B EuroChem Sustainability Report 2016 About our business Introduction At at glance

Environmental responsibility

EuroChem, headquartered in Zug, Switzerland, The Group is vertically integrated, with Production at Usolskiy is set to commence is a leading global agrochemical company activities spanning mining, hydrocarbon from late 2017, while VolgaKaliy is expected producing primarily nitrogen and phosphate extraction, fertilizer production, logistics to start in 2018. The Group operates fertilizers, as well as certain organic and distribution. EuroChem is currently production facilities in Belgium, China, synthesis products and iron ore, more developing two sizeable, greenfield potash Kazakhstan, Lithuania, and Russia and than 100 products in total. deposits at VolgaKaliy and Usolskiy in Russia. employs more than 25,000 people globally. As one of the fastest growing fertilizer majors, we aim to become a top five producer by nutrient capacity.

2016 highlights H&S

Sales EBITDA Customers globally (US$) (US$) Social responsibility Social 4.38bn 1.1b n >6,000

EBITDA margin Lost time injury frequency rate Fertilizer sales volume (LTIFR; per 1m man-hours)

25% 0.97 13.6 mmt Economic sustainability

Divisions

Mining Oil and Gas Fertilizers We have secured access to a low-cost, Natural gas is the primary raw material We manufacture a broad range of quality high-quality resource base, which used to produce ammonia, the main nitrogen, phosphate and complex includes an estimated 10 billion tonnes component of nitrogen-based fertilizers. fertilizers. From basic to high-end, our of potash reserves and resources in two Our own oil and gas operations help products provide the right solution for key Russian deposits; magnetite-apatite reduce natural gas costs, boost our every application. Configured to retain ore in the Kola Peninsula, and phosphate ammonia gas efficiency and strengthen their nutrient properties longer, our line rock in southern Kazakhstan. our cost advantages. of specialty fertilizers ensures an optimal Additional information supply of nutrients to plants, especially during critical phases of growth. Throughout our production chain, our production processes also yield Logistics Sales a wide range of industrial, mining Our sophisticated and flexible logistics Our efficient global distribution and feedstock products, which add infrastructure supports our business network enables us to serve our considerable depth and value to model and ultimately ensures that our extensive customer base of more our product portfolio. products are delivered to customers than 6,000 clients in over 100 countries. in the most efficient way. It comprises It also plays a key role in advising trucks, storage and port facilities, customers on the selection and use rail rolling stock, chartered river barges of fertilizers to optimize their crop yields. and warehouses.

EuroChem Sustainability Report 2016 1 Sustainability timeline Continuous improvement of our environmental management system

We aim to minimize our impact on the environment through the operation of effective management systems and processes that are aligned with leading international standards.

••Embracing sustainable development ••1st generation emissions reduction program ••GRI reporting

••Understanding environmental footprint and responsibility 2004–2007

2001–2003

2 EuroChem Sustainability Report 2016 Introduction

Environmental responsibility

••Leading in Best Available Technologies (BAT) ••Clean Water Program (3rd generation emissions reduction program)

••Equator Principles financing for major projects H&S (potash, Baltic ammonia) ••Building corporate citizenship ••Responsible care ••ISO 14001 (along with ISO 9001 ••Environmentally friendly and OHSAS 18001) crop enhancing solutions Social responsibility Social ••Outreach to international best practices ••Product stewardship ••2nd generation emissions reduction program ••Global reach and internationalization ••REACH compliance

2013 –2016 Economic sustainability 2008–2012 Additional information

EuroChem Sustainability Report 2016 3 Spotlight Staying focused...... on implementing the best available technologies

4 EuroChem Sustainability Report 2016 Introduction

Planned investment in the Kingisepp ammonia project (US$)

1bn Environmental responsibility H&S Social responsibility Social

CASE STUDY Employing the newest Economic sustainability technology

We are applying Best Available and each year requires more BAT is also widely deployed at our Technologies (BAT) across all than 100,000 tonnes of ammonia new potash projects, which will see three segments of our business. feedstock. This material is brought in production from two key deposits from other EuroChem sites, however begin in 2017/18. The state-of-the-art Throughout 2016 we continued the US$1 billion investment in the mine design, leading edge water and to deploy BAT across our nitrogen, new plant (due to start operating solid waste management systems, phosphate and potash segments. in 2018), will make Phosphorit self low energy costs and proximity Additional information We are now a leading exponent sufficient. It is the first of five such to our own ports should generate of BAT within the agrochemicals plants planned by the Group. The the lowest ‘delivered to’ costs and sector in Russia/CIS. BAT applied at the plant includes highest environmental performance the KBR Purifier process, renowned in the industry. The ammonia plant that we are for its high levels of reliability and building at our Phosphorit site sets a flexibility, with world class energy new standard in BAT for our industry. efficiency. The plant will also operate Construction began in August 2015 a state-of-the-art closed loop on this state-of-the-art, 1 million water use and treatment system, tonne ammonia plant in Kingisepp, significantly reducing the volume near the Baltic Sea. The plant of treated waste water entering produces phosphate-based the Luga River by up to 75%. fertilizers and associated products There will also be a significantly lower demand for fresh water.

EuroChem Sustainability Report 2016 5 Spotlight Staying focused...... on achieving zero waste water

6 EuroChem Sustainability Report 2016 Introduction

Fresh water consumption Effluent discharge reduced by reduced by (m3/year) (m3/year)

11m 12.5m Environmental responsibility H&S Social responsibility Social Economic sustainability

CASE STUDY Clean Water Program Additional information Our Clean Water Program Our aim is to reduce volumes our fresh water consumption in has been recognized as industry of water used in production and production by 11 million m3/year. leading by Russia’s Ministry deploy technologically advanced Volumes of waste water have also of Natural Resources and industrial waste water treatment been reduced by 12.5 million m3/year. Environmental Protection. and management systems. We are also investing in the creation In 2016, we received an ‘Evolution The program focuses on the of drinking water supply systems Award’ from the Minister of Natural application of state-of-the-art in local communities, working in Resources and the Environment water conservation and treatment partnership with public authorities in the Russian Federation. This technologies across our production and local government agencies. recognized the program as the base. It has operated since 2013 best application of green technology at our key plants across six regions To date, our total investment in the private sector. in Russia. has been US$34 million. As a consequence, we have reduced

EuroChem Sustainability Report 2016 7 Spotlight Staying focused...... on promoting a culture of safety

8 EuroChem Sustainability Report 2016 Introduction

Environmental responsibility H&S Social responsibility Social Economic sustainability

CASE STUDY We are creating a working culture focused on safety Additional information

Safety is a strategic priority for In 2015–2016 we piloted an Since the results have been the business, measured against improved approach to working extremely positive, the Head of increasingly challenging Group-wide at height, which we identified as our Fertilizer Division is leading targets. These targets reflect our a major cause of incidents. Based an extension of the project to experience in elimination of workplace at Nevinnomysskiy, the pilot project Novomoskovskiy, followed by injuries through leadership, robust incorporated the new approach to a roll-out to all of our plants. management systems, procedures risk assessment, primarily through and a strong safety culture. improved checks on the quality of scaffolding and other equipment.

EuroChem Sustainability Report 2016 9 Spotlight Staying focused...... through responsible product stewardship

CASE STUDY Investment in new technologies and value-added products

There is growing global interest Farmers in Southern Russia are also Additionally, in 2015, EuroChem in premium fertilizer products. The benefitting from our new product, became the first company in Russia modern farmer wants fertilizers that Sulphoammophos®, which targets to produce aqueous urea solution – are more targeted, generating higher the specific soil conditions of the AdBlue® – a fuel additive used yields with a lower environmental Northern Caucasus. to reduce emissions of oxides impact. This reflects growing concerns of nitrogen from diesel exhausts. about soil productivity, nutrient We are now developing more efficiency and farming practices. innovative specialty and environmentally friendly products. EuroChem is addressing these Our partnership with Agrinos AS concerns through our value added reflects this ambition by combining products ENTEC® and UTEC®, our traditional strengths in which offer longer nitrogen availability, mineral-based products with higher nitrogen efficiency and fewer innovative microbial and specialty application cycles. nutrient technologies to create new crop-enhancing solutions.

10 EuroChem Sustainability Report 2016 Introduction

Sales network Types of products

26 >10 0 countries Environmental responsibility H&S Social responsibility Social Economic sustainability Additional information

EuroChem Sustainability Report 2016 11 Spotlight Staying focused...... through improving the social environment

12 EuroChem Sustainability Report 2016 Introduction

Social investments Sporting venues built in 2016 by EuroChem in Russia (US$) and Lithuania

17. 8 m 6 Environmental responsibility H&S Social responsibility Social

CASE STUDY New infrastructure for our local communities and sport-led regeneration

Our widely acclaimed sports This enabled us to provide hockey

investment program has had and figure skating tuition for Economic sustainability a significant, positive impact 1,300 children. Sports centers have across Russia and internationally. also been built in Kovdor (Murmansk The program has three main Region), Belorechensk (Krasnodar components – construction of Region) and Kedainiai (Lithuania). ice arenas and sports centers, support for youth sports at all levels These venues, together with the of ability, locally and internationally, more than 60 smaller facilities and linking regional sporting (sports grounds, gyms and soccer activity with international and fields) built and reconstructed, have professional programs. radically improved levels of access to sport for young people in these We have built three ice sport communities. We are currently arenas in the cities of Novomoskovsk planning to build facilities in other (Tula Region), Nevinnomyssk locations over the next few years. (Stavropol Territory) and Kingisepp Additional information (Leningrad Region).

EuroChem Sustainability Report 2016 13 Challenges of food security Global food security

The issue of global food security comprises Greater frequency or severity of a number of complex challenges and global weather-related occurrences will inevitably have an adverse effect trends. In the face of incessant and growing on agricultural productivity. demand for food and feed products, Over the last ten years, the number these combine to place extreme pressure of extreme weather events affecting on agriculture producers – and underpin the world’s major food producing regions has risen, contributing to fertilizer demand. the volatility – and overall increase – in the price of crops. Weather shocks Weather

As farming methods have become Global fertilizer consumption1 more intensive, soil fertility has (MMT) reduced. 200 Erosion also depletes nutrient content, which in turn leads to a decline in potential crop yield. Fertilizers play an essential role in restoring nutrients lost to intensive 150 cultivation methods and shorter fallow periods. Improved management, advanced products and more precise 100 application are widely acknowledged to be key factors in promoting better yields. Soil productivitySoil

50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0

N P2O5 K2O Source: United Nations (UN) World Population Prospects Report; World Bank; FAO-OECD Agricultural Outlook 2015–2024 1 Represents nutrient consumption for fertilizer use in a calendar year. Projections based on IFA material.

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Environmental responsibility

The world’s population is growing by more than Rising prosperity inevitably leads 200,000 every day and the UN estimates it will to changes in dietary habits. reach 9.7 billion by 2050. The populations of relatively wealthy By this time, the actual rate of food production is expected to economies increasingly demand fall short of what’s required by some 3–4%. Whilst improved a more sophisticated, protein-rich trade links and better crop yields will partially narrow this diet. This generally comprises high gap, our products help to ensure soils retain their essential proportions of meat, poultry and dairy nutrients and help farmers increase their yields. products, which are resource-intensive H&S to produce. The quantity and the quality Forecast of daily protein intake per capita of food consumed in developed (g/day/person) countries has also increased. 4%

106.2 Rising prosperity Social responsibility Social Population growthPopulation 8% 102.4 84.8 8% 78.5

53.0 57.1

Least developed Other developing Developed countries countries countries 2012–2014 2024 Economic sustainability

With energy policies driven partly Global population by greenhouse gas reductions, (bn) the demand for biomass-based energy sources is growing.

The use of biomass as a source of World 7.3 2.4 9.7 electricity and heat – as well as fuel for road transport – is on the increase 0.1 in order to help countries meet renewable High-income 1.4 1.5 energy targets. This has an inevitable countries impact on land use trends and patterns of fertilizer demand. Middle-income Additional information 5.3 1.5 6.8 countries Crop substitution

Low-income 0.6 0.8 1.4 countries

2015 Addition by 2050

EuroChem Sustainability Report 2016 15 Sustainability strategy Our sustainability strategy in action

Strategic goals 2016 outcomes Promote and support ••We participate in agrochemical conferences and events sustainable agriculture across Europe and Russia and we play an active role in creating the agrochemical industry agenda 1. ••Developed new environmentally efficient products Meet and exceed Increased our distribution and advisory footprint: Economic customer expectations ••Strategic acquisition of leading Brazilian fertilizer sustainability distributor Fertilizantes Tocantins ••Opening a new distribution operation in Hungary ••Opening a new blending facility for premium slow release fertilizers in Greece ••Opening of new distribution center in Russia ••Broadening of offering of advisory services in Russian market ••Creation of educational YouTube channel for farmers in Russia/CIS Invest in new technologies, ••Continued investment in state-of-the-art EuroChem products and Northwest ammonia plant at Phosphorit vertical integration ••Increased investment in Best Available Technologies (BAT) ••Deployed first mining machinery at Usolskiy Ensure financial stability ••Increased sales volumes by 20% year-on-year and shareholder returns Maintain excellent ••Continued to audit and work with suppliers that operate working relationships to the highest international standards with suppliers

Our long-term growth strategy focuses on further developing a vertically integrated business, from raw materials to production and distribution. Sustainable growth is a key measure of success, alongside industry leading systems for human resources, safety, environmental stewardship and community engagement.

The Group Board and CEO define the sustainability strategy, which is managed by board committees, the Directors of Finance and Administration and Heads of Communication, HR and HSE. They work with counterparts in each operating company, and actively assist these colleagues where new assets are developed and or acquired. Economic, environmental and social performance is communicated to the Board through regular meetings and updates.

16 EuroChem Sustainability Report 2016 Introduction

Environmental responsibility

Strategic goals 2016 outcomes Reduce our ••Continued to invest in water, emissions and environmental footprint effluent reduction ••Focus on water reduction and efficiency measures through the Clean Water Program (EuroChem Northwest 2. ammonia plant, Phosphorit) Environmental ••Continued to be recognized as a leading exponent of BAT in Russia/CIS stewardship H&S

Strategic goals 2016 outcomes responsibility Social Recruit and retain ••Increased the number of permanent employees motivated employees by 6% (compared to 2015) ••Reduced staff turnover at production units by 21% 3. Create a safe and healthy ••Continued to strengthen safety culture across the Group Social working environment ••Expanded the reach of new working at height procedures ••Group lost time injury frequency rate (LTIFR), decreased responsibility from 1.08 per million man hours in 2015 to 0.97. Maintain excellent ••Signed special investment contracts with Russia’s working relationships Ministry of Industry and Trade in three Russian regions Economic sustainability with government ••Agreements with Ministry of Investments and Development of the Republic of Kazakhstan and the Akimat of the Jambyl Region of Southern Kazakhstan Support and invest ••Invested US$17.8 million in community development, in local communities including sports schools, chemistry classes, social infrastructure and charities ••Sponsored the International Chemistry Forum for school teachers in Russia and Kazakhstan Additional information

EuroChem Sustainability Report 2016 17 Governance and ethics Responsible decision making

01 02 03 Alexander Landia Andrey Melnichenko Dmitry Strezhnev Non-Executive Director Non-Executive Director Executive Director

04 05 06 Kent Potter Jürg Seiler Manfred Wennemer Independent Director Independent Director Independent Director

07 08 Garth Moore Sergey Vasnetsov Independent Director Independent Director

Composition of EuroChem Group AG Committees

Audit 04 05

Strategy 01 02 07 08

Nomination and Remuneration 06 08

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Environmental responsibility

Chairman’s statement Our approach to governance Making informed decisions Our approach to corporate governance The Board has timely access to all relevant In a market environment dominated by is based on the following principles: information, including sight of all documents lower prices, greater capacity and higher ••Treating our shareholders fairly; prepared for formal quarterly meetings. demand, the Group continued to expand recognizing and protecting their rights. Ongoing access is provided to management its sales volumes and maximize the benefits accounts, flash reports, updates on health ••Operating an effective system and safety, legal proceedings, media of its cost base, international footprint and of internal control and audit. vertical integration. coverage, corporate events and reviews of ••Ensuring access to Company strategic projects. Board members are the At the same time, the Group’s investments information and financial transparency. first to obtain status reports on significant H&S in Best Available Technologies continued, ••Applying the highest levels of events via the management team. This which should generate significant long-term business ethics. protocol is defined in a communications benefits in terms of energy use, water policy and associated procedures. efficiency and a continued reduction in ••Providing an excellent working environment, career progression and environmental footprint. This is exemplified Board work plans are agreed 12 months responsibility Social effective communication mechanisms by a state-of-the-art ammonia plant at in advance, reflecting the cycle for budget for all employees. Phosphorit and associated Clean Water setting, financial reporting and strategy. Program. The latter is generating significant The timing, expectations and goals of reductions in water use and effluent The Board’s role Board meetings are set by the Board and volumes – benefitting the business and The Board of Directors of EuroChem the management team and include strategy, the local environment. Group AG defines the corporate strategy, operational updates, investment projects and The Group also ensures that its key monitors performance and ensures that annual goal setting and performance review. strategic investment projects in ammonia we are addressing our principal risks, and potash comply with international responding to the needs of our stakeholders The Board reviews and evaluates its own standards of environmental and social and maintaining sustainable business performance annually. In 2016, these governance. Bringing these projects to life growth. The Board ensures that we adopt assessments focused on business strategy and operating mining, production, logistics international standards and best practice, governance, the Board’s contribution Economic sustainability and distribution businesses safely and and monitors our finance processes, to EuroChem’s success and the quality sustainably is vitally important to the risk assessments, management controls of Board-management communications. business, to its employees and the many and governance framework. Overall, it was concluded that the Board local communities benefitting economically. and its Committees are operating effectively. All Board Directors are expected to have The 25,000 employees across the world a clear understanding of the dynamic and Understanding the business and in the Group’s key Russian sites international nature of our business and We provide every new Director with a are culturally, professionally and socially our industry. They develop sound working thorough introduction to the Group and diverse. They are key agents of sustainable relationships with the management team, its operations. This includes an overview of growth and have an important say in how through which they can access information Board procedures and regulations, standing the Group improves safety standards on strategy implementation, risk monitoring agenda items and face-to-face meetings or works with local communities. In an and the assessment of key material issues. with the management team. They also visit industry competing for technical and We make full use of each Board member’s Group plants and meet key members of professional talent, programs such as skills and experience, and they are fully the on-site team.

E-generation and our work with schools empowered to express their opinions and Additional information and universities are vital for the Group’s contribute to ongoing discussions on strategy We aim to support and generate future growth. and operations. opportunities for Board Directors to develop EuroChem has a 15-year track record their professional competence and acquire of leading on social responsibility and greater knowledge of the sector and environmental sustainability. I have every Group business. confidence that, with the support of a diverse and experienced Board, the Group will continue to work to the highest standards of governance, human resources, environmental stewardship, safety and community engagement in order to support its continued growth. Alexander Landia, Chairman and Non-Executive Director

EuroChem Sustainability Report 2016 19 Governance and ethics Responsible decision making continued

Independent scrutiny Additionally, the Committee oversees the Sustainability governance Company’s relationship with the External The Group has adopted the UK The Board and the CEO are responsible Auditor. The CFO and Head of Internal Audit Corporate Governance Code definition for the sustainability strategy. Economic, attend all meetings with active participation of ‘independent’ Director. environmental and social performance from external auditors. is communicated to the Board through The Director must be free of conflicts scheduled meetings and periodic updates Strategy Committee of interest, however, if actual or potential on health and safety performance, legal The Strategy Committee reviews and conflicts arise, the individual is officially processes, corporate events and approves Group, divisional and departmental notified and is required to act appropriately. strategic projects. strategy, development projects, acquisitions New Directors are required to declare and significant investment decisions. This conflicts of interest and sign up to Board We operate to the highest ethical standards, requires environmental and social impact Regulations. This dictates that they avoid aligned to the Group’s values, goals and competence, as our investment activity making decisions from which a conflict of objectives. Our Code of Conduct is a can impact the local environment and interest may arise. If it does, they must inform key reference point for all Directors and create infrastructure and opportunities the Chairman as soon as possible. employees, during induction and throughout for local employment. their time at EuroChem. At the end of 2016, five of the Board’s Nomination and eight Directors were independent. Their Following the appointment of a Chief Remuneration Committee status is confirmed by the Board after Compliance Officer in 2015, we further The Nomination and Remuneration each election or re-election using standard developed the Group compliance system Committee focuses on remuneration and questions relating to declarations of interest. in 2016. This included the adoption of incentive programs, with a strong emphasis All Directors are required to inform the Group five new policies on Antitrust, Sanctions, on health and safety performance indicators, of any circumstance that could compromise Conflicts of Interest, Insider Information and as well as staffing requirements for their independent status. Trading and HSE. The policies are available ongoing investment projects and ensuring on the Group’s intranet site and the Code management continuity. The Committee of Conduct and Conflict of Interest Policy Leading by example is also tasked with reviewing and updating are available on the corporate website. The Chairman is responsible for Board the Company’s Code of Conduct. effectiveness, the operation of mutual respect To support the Code, our Group HR team and constructive debate. Further details on the Group’s Board and is introducing a system that will ensure that Committees are available in the Corporate all employees have understood the Code The Board defines company strategy Governance section of EuroChem’s of Conduct and associated policies. This is and monitors performance. The CEO annual report. supported by a training program run by the and members of the Management Board Group Compliance team. Further checks have primary responsibility for company Improving diversity on compliance are provided by our Security performance. The Management Board We aim to attract the best people with function, Internal Affairs and Internal Audit consists of managers with responsibility the right talent to complement our skills, units and transaction monitoring procedures. for finance, fertilizer production, mining, irrespective of age, gender, ethnicity oil and gas, sales, logistics, marketing or religion. and administration. Managing sustainability Our sustainability strategy is enacted and Our current Board demonstrates diversity The Board appoints the CEO and the monitored through independently certified of experience, opinion and nationality. Given members of the Management Board quality, environment, health and safety the nature of the Group’s activities, gender and determines the length of their terms. management systems, as well as through imbalance remains an ongoing issue, which The Board has established the following our financial and human resources processes. we continue to address. Board Committees: We are increasingly integrating these systems in line with international standards and Audit Committee deploying BAT across all of our sites. Our The Audit Committee oversees the quality systems have clear objectives and targets of financial and sustainability reporting and require that we maintain records of and the integrity of information disclosure. procedures, actions and responsibilities. The Committee also ensures the adequacy of the company’s compliance activities, All managers have responsibility for our including risk management. sustainability performance and are subject to annual reviews. To support them we offer industry-leading training and professional guidance.

20 EuroChem Sustainability Report 2016 Introduction

“We have a range of experience on the Board that supports our ambitious investment and international growth strategy.”

Environmental responsibility Board of Directors H&S Social responsibility Social Economic sustainability

We run a program of site visits for our business partners and sector experts. For example, in June 2016, our partners from the UK, USA, Malaysia, India, China, Spain, Brazil, Switzerland, Japan and Singapore were given a tour of our VolgaKaliy potash project in Kotelnikovo. Each tour provided ample opportunities for our visitors to see construction and HSE systems at first hand as well as understand the leading-edge technologies deployed on site. Additional information

EuroChem Sustainability Report 2016 21 Stakeholder engagement Responding to our stakeholders

Defining material issues CASE STUDY The process for defining material issues draws on the following: ••Group business strategy and planning Stakeholder Our stakeholders and the key issues of (as described in this document and the concern in 2016 are summarized in the Annual Report) tables on pages 26–29. The relationship dialogue that we have with all stakeholders is driven ••Group risk assessment and definition by a regulatory need or as part of ongoing (as described in the Governance sections operations. It may be planned or ad hoc. of this document and the Annual Report) For example, each of our sites has ••Objectives and targets as defined in a community investment committee the safety, environmental and quality (involving EuroChem managers and local management systems (as described representatives) that identifies projects in this document) in local towns and surrounding regions. ••Community investment strategy and local The committees meet regularly and the plans (as described in this document) individuals involved also have frequent and informal dialogue as projects progress. ••Ongoing dialogue with internal and All engagement is recorded, along with external stakeholders (see pages 26–27) the views of stakeholders, and action taken where required. We have provided a snapshot of the engagement at some of our sites in 2016 below. The issues raised have guided us in defining the material issues that we have addressed in this report.

01 Customers

Managed by: Engagement in 2016: ••Head of Marketing and Sales Division ••Grew our customer base, e.g. ••Sales teams and agricultural advisers partnership with Agrinos AS, acquisition of Brazilian distributor Channels: Fertilizantes Tocantins and opening ••Meetings of a new distribution center in Hungary ••Exhibitions Focus areas: ••Site visits ••Value ••Trade associations ••Product quality and safety ••Delivery

22 EuroChem Sustainability Report 2016 Introduction

02 Employees

••Digital media Managed by: Environmental responsibility ••Administrative Director ••E-generation program ••Plant management Engagement in 2016: ••HR teams Grew our employee base, completed Channels: Workplace Hazard Assessments at all Russian plants ••Training ••Recruitment Focus areas: ••Orientation ••Health and safety ••Team meetings ••Career pathways ••Corporate newspaper ••Salaries/benefits ••Events ••Working conditions

03 National authorities H&S

Managed by: Engagement in 2016: ••Chief Executive Officer EuroChem and Russia’s Ministry of ••Government Relations Director Industry and Trade signed memoranda for special investment contracts with Channels: three Russian regions; we also signed responsibility Social ••Public-private partnerships a Memorandum of Understanding and ••Meetings Partnership with the Kazakh authorities ••Conferences Focus areas: ••Launches ••Economic development ••Partnerships, e.g. ice sports ••Legal compliance

04 Young people

Managed by: Engagement in 2016: Economic sustainability ••Head of HR & MSD Expansion of E-generation with ••Head of Communication and more pupils, students and teachers; associated teams student visits to EuroChem plants Channels: Focus areas: ••E-generation program with ••Skills development schools and universities ••Access to employment ••Family days ••Personal and professional ••Sports events development ••Career pathways

05 Shareholders and investors Additional information

Managed by: Engagement in 2016: ••Chief Financial Officer Completed RUB15 billion bond placement; ••Head of Investor Relations signed new US$800 million pre-export ••Communications teams finance club facility; attended investor conferences. Completed tender offer and Channels: US$500 million Eurobonds placement ••Investor meetings Focus areas: ••Roadshows ••Strategy ••Trading updates ••Governance ••Annual reports ••Risk management ••Financial performance

EuroChem Sustainability Report 2016 23 Stakeholder engagement Responding to our stakeholders continued

06 Local communities

Managed by: Engagement in 2016: ••Administrative Director Investments in communities, e.g. housing ••Head of Communications and social infrastructure in Kotelnikovo ••Plant management and Usolye and the new ice sports stadium in Kingisepp Channels: Focus areas: ••Joint working groups ••Employment ••Liaison offices ••Environment ••Public and one-to-one meetings ••Security ••Site visits ••Development ••Volunteering ••Media

07 Professional bodies and universities

Managed by: Engagement in 2016: ••Head of HR & MSD Engagement with universities and ••HR teams schools, E-generation program, ••Specialists Chemistry Olympiad Channels: Focus areas: ••Joint projects/sponsorships ••Skills and knowledge enhancement ••Meetings ••Career development ••Site visits ••Opportunity for students

08 Media

Managed by: Engagement in 2016: ••Head of Communications Media releases, website, press briefings, ••Head of Investor Relations site visits to report on investments, partnerships, results or environmental Channels: performance and Corporate ••Media releases Sustainability Report ••Interviews Focus areas: ••Press calls ••Trust ••Launches ••Access ••Website ••Social media

09 Non-profit organizations

Managed by: Engagement in 2016: ••Head of Communications We engaged with more than ••Plant management 70 non-governmental organizations (NGOs) in our countries of operation Channels: ••Meetings Focus areas: ••Conferences ••Trust ••Joint projects ••Co-operation ••Volunteering ••Mutual benefit

24 EuroChem Sustainability Report 2016 Introduction

10 Trade unions

Managed by: Engagement in 2016: Environmental responsibility ••Administrative Director Maintained constructive dialogue, ••HR teams considered recommendations and maintained all collective agreements Channels: in place across all of our sites ••Meetings Focus areas: ••Conferences ••Workplace safety ••Salaries/benefits

11 Partners and suppliers H&S

Managed by: Engagement in 2016: ••Head of Marketing and Sales Division Expanded our distribution network, ••Procurement Director which requires working partnerships. ••Plant management Advanced relationships with new and existing contractors and suppliers responsibility Social Channels: Focus areas: ••Meetings ••Trust ••Conferences ••Alignment of objectives ••Contract delivery ••Mutual benefits and synergies ••Fairness

12 Regional and local authorities

Managed by: Engagement in 2016: Economic sustainability ••Administrative Director Site visits, liaison meetings, partnerships ••Plant management and events to review new sports clubs, ••Head of Communications arenas, schools, kindergartens, and housing projects Channels: Focus areas: ••Public-private partnerships ••Social development and environment ••Meetings ••Legal compliance ••Conferences ••Investment ••Launches

13 Environmental organizations Additional information

Managed by: Engagement in 2016: ••Plant management Public hearings and site visits in ••Head of Communications Kingisepp, Karatau and Zhanatas, Usolye and Kotelnikovo; ongoing liaison Channels: with reputable environmental NGOs ••Working groups and specialists ••Meetings Focus areas: ••Conferences ••Planning ••Site visits ••Monitoring ••Reporting

EuroChem Sustainability Report 2016 25 Stakeholder engagement Stakeholder dialogue snapshot – 2016

EuroChem team Stakeholders Nature of the dialogue

Group Finance, IR and International lenders ••EuroChem signed special investment contracts with Communications the Russian Ministry of Industry and Trade for three large-scale projects. ••Memorandum of Understanding and Partnership with Kazakh authorities. ••US$800 million pre-export finance club facility.

Group HSE and International Fertilizer Association (IFA), ••Partnered the IFA in organizing its first annual Communication customers, industry conference in Russia (Moscow, May 2016).

Group HSE Russian Association of Mineral Fertilizer ••Led the development of the Russian Best Available Producers and Russian Federal Technology (BAT) documentation for controlling Government the environmental impact of ammonia and fertilizer production.

Group functions and Lifosa Employees, local government and ••Site visits for city residents and environmental NGOs. trade unions

Group functions, Phosphorit NGOs, government agencies, ••EuroChem, Maire Tecnimont and Velesstroy signed and EuroChem Northwest independent experts an agreement for the construction of the Kingisepp ammonia plant. The plant will use BAT in line with the Equator Principles.

Group functions and Employees, contractors, local/national ••Further development of the Kotelnikovo garden city. VolgaKaliy government ••Modernization of the domestic water supply system in Kotelnikovo. ••Various local community projects.

CASE STUDY

EuroChem and Russia’s Ministry of Industry and The memoranda were signed by EuroChem Public Private Trade signed memoranda on special investment CEO, Dmitry Strezhnev, the Minister of Industry contracts for three large-scale projects: the and Trade, Denis Manturov, on behalf of the Partnership Kingisepp ammonia plant and our two potash Government of the Russian Federation, and in action developments, EuroChem-VolgaKaliy (Volgograd the governors of the Perm, Leningrad and Region) and EuroChem-Usolskiy (Perm Region). Volgograd regions where the projects are located. The signing ceremony took place at the St. Petersburg International Economic Forum and was attended by Sergei Ivanov, the Chief of Staff of the Presidential Executive Office of the Russian Federation.

26 EuroChem Sustainability Report 2016 Introduction

Environmental responsibility

EuroChem team Stakeholders Nature of the dialogue

EuroChem-BMU Education providers, NGOs, young people ••Public hearings and site visits for city residents and students at Belorechensk Industrial Process College. ••Participated in the conference for young environmentalist within the 2016 International Investment Forum (Sochi).

Group functions and Government agencies and NGOs ••Partnered with the Design Office of High-Rise and H&S Kovdorskiy GOK Underground Structures of St. Petersburg and the Institute of Spatial Planning ‘Urbanika’ to create and adopt a master plan for the city of Kovdor.

Nevinnomysskiy Azot City government and NGOs ••Provided the city government of Nevinnomyssk

with financial support and expertise. Key projects responsibility Social included the creation of 13 children’s sports grounds, upgrading the water and sewerage system and planting 1,100 trees.

Novomoskovskiy Azot Young people, national and regional ••Hosted the ‘EuroChem Cup’ International Ice Hockey government, sports federations, media Tournament, with 12 teams from seven countries.

Tuapse Bulk Terminal Employees, national government ••Site visits for city residents and environmental organizations. ••Ongoing support for the ‘Ecological squad’ youth project, in partnership with the local administration. Economic sustainability

CASE STUDY

EuroChem and the Lomonosov Moscow State In his welcoming remarks, the Dean of the International University (MSU) Faculty of Chemistry held MSU Faculty of Chemistry, academician of the an International Chemistry Forum for school Russian Academy of Sciences, Valery Lunin, Forum for teachers from Russia and Kazakhstan. Part stated: ‘The mission of the MSU Faculty Chemistry of Global Fertilizer Day, the forum focused on the of Chemistry is the promotion of chemical ‘Fundamentals of Chemistry for Students’. Its sciences and fundamental education, and the Teachers aims were to promote professional development, selection and education of the best chemists. improve chemistry teaching in secondary I thank EuroChem, our strategic partner, in this schools and allow for experiences to be shared. important endeavor. Our common goal is to create favorable conditions for the admission Additional information of talented students to universities for the advancement of chemical sciences.’

EuroChem Sustainability Report 2016 27 Stakeholder engagement Defining what’s important

We have described our approach and The reporting process is as follows: 3. Prioritization and review performance against material sustainability 1. Reporting group review ••The reporting group discusses all topics, issues relating to our environmental footprint, ••Review stakeholder engagement records consults further with stakeholders health and safety, people and community across our business segments and and finalizes key material aspects and investment and economic performance. from the CEO to department heads associated indicators in line with GRI G4 We look at how well our approach enhances and site managers. the sustainability of our business and how it is We assessed the records of communications ••Assess business decisions, investments viewed by our stakeholders. In 2016, we have with internal and external stakeholders during and announcements in the reporting year. given particular prominence to environmental the reporting period (calendar year 2016). sustainability due to the significant investments ••Extract data and performance records This process covered all operational sites, in BAT across the business and in relation to from our bespoke management including the new ammonia plant at our new ammonia plant and potash projects. information system. Phosphorit. The resulting topics covered in this report are deemed to be material across Process for defining report content 2. Reporting group analysis our Group business and in varying degrees This report is generated and managed and comparison at all operating sites. primarily by our Heads of Social ••Identify the issues that are material Responsibility, Environment, Health & to stakeholders. Issues of interest for our stakeholders Safety and Communications. They and The following tables identify the aspects ••Map stakeholder interests alongside their teams compile relevant data and and indicators on which we are reporting. our strategic business priorities. contextual information, as well as agreeing More detail on management approach and report content and the focus in 2016. As in ••Review against material issues identified performance is provided in the relevant 2015, we are reporting in line with the core in the 2015 report. section of this report. criteria of GRI G4 (see page 54 for full GRI reporting tables).

Aspect Who has a stake Indicator

Water

Some of our operations require Communities, utilities, suppliers, ••Water consumption, m3 per tonne large volumes of water for production local government, national government of production

Air

We operate complex processes that Employees, communities, NGOs, ••Air emissions, kg per tonne emit a range of gases which can be local government, national government of production harmful to humans and the environment responsibility

Environmental Waste and effluent

We produce and manage significant Employees, communities, NGOs, ••Effluent, m3 per tonne of production volumes of solid waste and effluent, local government, national government e.g. phosphogypsum

Health and safety

We operate hazardous facilities Employees, national government, ••Lost Time Injury Frequency Rate which pose health and safety risks local government, trade unions, ••Piloting lead indicators

suppliers, management, the Board Safety Health &

28 EuroChem Sustainability Report 2016 Economic Social sustainability responsibility of young professionals cohort our particularly talent, retain and to attract ability our on predicated is The sustainable growth of our business Training and education Aspect internationally and employees 25,000 than more have Employee relations are crucial as we Employee relations operational territory each in sector the for average above are that wages to pay aim we people, best the retain and to attract order In Remuneration of demanding and requires a high level is work The countries. 22 in working representing 55 different nationalities, We employ more than 25,000 people, and equality Diversity local and environments local on impact asignificant have can operations its and EuroChem is a significant employer Local communities stakeholders where we operate local with engage we way the and presence market to our relates It Indirect economic impact plans investment and growth our of It is a fundamental measure Economic performance cooperation and communication business continue to grow our business economies health and supports institutions The Board, employees, educational communities, educational institutions government, local government, The Board, employees, national local suppliers, national government, investors, employees, Board, The The Board, employees Board, The local suppliers, NGOs educational and social, institutions, government, national government, Employees, communities, local Who has astake has Who government, local communities national government, local suppliers, employees, Board, The The Board, employees, investors employees, Board, The government, utilities, communities EuroChem • • • • • • • • • • • • • • • • • Indicator • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Teaching standards Training partnerships centers training in Investment management positions in women of Percentage Employee numbers of investment Level Personnel costs Production per person employee per Sales turnover Employee ratio to employee Management Changes in average monthly wage monthly average in Changes wage equivalent full-time Average remuneration Fixed Variable remuneration officials andofficials leaders community government local from Feedback investment of community Levels and government from Feedback of investment Level Credit ratings ratio debt/EBITDA Net EBITDA Annual sales communities Sustainability Report 2016 Sustainability Report

29

Additional information Additional sustainability Economic responsibility Social H&S responsibility Environmental Introduction Our strategy and associated Environmental systems drive continuous improvement in environmental performance. These systems responsibility and procedures are all aligned with best practice and international standards.

30 EuroChem Sustainability Report 2016 Introduction How we manage water, Group HSE management is structured as follows emissions, effluent and waste In 2016 we continued to deploy Best Business level Responsible people Approach Available Technologies (BAT), linked to EU environmental standards, to maintain Corporate Board of Directors, CEO, HSE is always the first agenda Management Board item for the Management

the trend of improved performance. Environmental responsibility Continued reductions in water consumption, Head of HSE Board (weekly) and Board of effluent discharges, air emissions are the Directors (quarterly). HSE is responsibility of the Group’s Divisional recognized as a core business Directors. The technical and practical work process and performance is supported by our HSE (Health, Safety and indicator. Environment) Department. The Department Division Divisional Directors HSE is a core Divisional manages Divisional and site HSE groups Divisional HSE Managers function alongside finance consisting of more than 120 professionals. and HR.

The approach adopted across the Group Plant Managing Directors Plant HSE programs conform has evolved over the past 15 years to support Plant HSE groups with the Group HSE Policy the growth and internationalization of the and Framework. business. We are now a leading exponent of BAT within the agrochemicals sector in Russia/CIS and are taking an innovative approach to resource efficiency, as evidenced by our Clean Water Program. ••Registration, Evaluation, Authorization Our key objectives are to: H&S Major projects such as our potash & Restriction of Chemicals (REACH) ••Reduce air emissions and waste water developments and new ammonia plants Regulation year-on-year in the Baltic region satisfy the Equator ••Responsible Care Principles, a framework that allows ••Reduce solid waste and increase recycling

financial institutions to assess and manage ••Best Available Technologies Guidance year-on-year responsibility Social environmental and social risks. We are also Documents ••Continuously improve environmental investing in the creation of environmentally management systems and levels of benign products. The HSE Policy clearly states a commitment compliance to legal compliance and continuous Policies and guidelines improvement. The associated environmental We have identified water use, air emissions, and safety management systems (ISO 14001 waste and effluent as our key material issues. ••Business strategy and OHSAS 18001) are audited by internal We also focus on energy efficiency and the ••HSE Policy and Framework teams and are subject to annual verification measurement of Greenhouse Gas (GHG) by an independent certification company. ••ISO 14001 Environmental Management emissions. System (EMS) (upgrading to ISO14001: 2015) Targets and objectives Our strategy is to demonstrate industry

••Environmental laws in our countries Economic sustainability of operation leadership through the highest standards of compliance and the application of ••Equator Principles world class technology to reducing our environmental footprint.

Aspect Aspect Aspect Water Air Waste and effluent

Why it is important Why it is important Why it is important Additional information Some of our operations require large We operate complex processes that emit We produce and manage significant volumes of water for production a range of gases which can be harmful volumes of solid waste and effluent, to people and the environment e.g. phosphogypsum Who has a stake ••Communities/Employees Who has a stake Who has a stake ••Authorities ••Communities/Employees ••Communities/Employees ••Utilities ••Authorities ••Authorities ••Suppliers ••NGOs ••NGOs

Indicator Indicator Indicator 3 Water consumption, m3 per tonne Air emissions, kg per tonne of production Effluent, m per tonne of production of production

EuroChem Sustainability Report 2016 31 Environmental sustainability Environmental responsibility continued

Water use Air emissions Waste and effluent Water is sourced from a mixture of surface The main air emissions from our plants are The most significant solid wastes from and groundwater sources and is used for sulphur oxides, carbon monoxide, nitrogen our plants are phosphogypsum from the production and energy generation. We oxides, sulphuric acid, ammonia, particulates production of phosphate fertilizer and continue to investment in water reduction and hydrocarbons. overburden/concentration tailings from and efficiency measures as exemplified mining operations. We are constantly by our Clean Water Program at our new We apply BAT to emitting processes in order exploring ways of finding alternative uses, ammonia plant at our Phosphorit plant to meet our continual emission reduction, where practicable. in Kingisepp (see case study on page 36). linked to a traditionally strong monitoring capability. This is exemplified by our Effluent (waste water) generated at our plants In 2016, across the Group we used networks of air quality monitoring stations may contain petroleum products, suspended 2.25 m3 of non-recycled water per tonne of at Belorechensk, Nevinnomyssk, Tuapse, matter, ammonium, nitrates, sulphates, production, a reduction of 10% compared to Kotelnikovo, Novomoskovsk, Kingisepp and chlorides, fluorine and phosphorous. 2015. This reflects the ongoing effectiveness Usolye. The data generated by these network of our investments in closed-loop water use of sensors is made available to government In 2016 our Group operations generated and treatment systems at Kovdorskiy GOK agencies, communities and the media. an average of 2.21 m3 of effluent per tonne and Phosphorit. The data from these networks and our of production, a reduction of 12%. This other emissions monitoring units is constantly performance further reflects the impact monitored by the HSE teams at each plant, of our investments in state-of-the-art water with performance reported to Plant Managers use and treatment systems. and the Corporate HSE Department. All of our waste and effluent generation and In 2016, our Group operations generated an handling processes are governed by national average of 0.8 kg of air emissions per tonne regulations. The systems are maintained of production, a reduction of 13% compared and monitored by plant HSE teams, reporting to 2015. into Plant Managers and the Corporate HSE Department.

Non-recycled water consumption Air emissions Effluent discharge (m3 per tonne of production) (kg per tonne of production) (m3 per tonne of production)

3.30 3.30 1.16 3.20 3.26 3.10 1.09 3.12 2.91 2.87 1.04 1.04 1.02 2.93 2.90 2.58 0.92 2.50 2.25 0.77 2.21 2011 2014 2011 2012 2015 2013 2011 2010 2014 2016 2012 2014 2015 2013 2012 2010 2015 2013 2010 2016 2016

32 EuroChem Sustainability Report 2016 Introduction Environmental responsibility

Energy and Greenhouse Gas Key stakeholders (GHG) emissions We engage with a wide range of stakeholders about environmental, safety and Our ongoing investments in the latest quality management. and best environmental management technologies promote energy efficiency Regional and local Cooperation and partnership agreements signed with and drive the continued reduction in government regional and local government authorities address Group-wide energy consumption. In 2016 environmental and social issues. energy consumption was 113 kWh per tonne of production, compared to 118.4 kWh Our sales and agricultural teams advise retail and wholesale Customers H&S per tonne in 2015. customers on safe and appropriate use of our fertilizer and chemical products. Feedback from them and our knowledge A prime example of this is the new ammonia of the market drives our investments in products with a plant at Phosphorit which uses the KBR lower environmental impact. Purifier process to deliver world-class energy efficiency, flexibility and reliability. National government Our production plants are regulated and monitored by more responsibility Social than 20 government agencies in Russia, Kazakhstan and the EU, including Belgium and Lithuania. We work closely with these agencies to ensure that we comply with all relevant laws and provide positive economic and social benefits.

Shareholders We maintain an active dialogue with shareholders about many aspects of our business. They are updated on environmental management performance, including technology investment, energy use, atmospheric emissions, fresh water use and effluent discharge.

Suppliers/ We require all suppliers and contractors to meet specified

contractors environmental and social standards and comply with our Economic sustainability management systems. We also ensure that equipment used across the Group is fully certified, calibrated and carries all appropriate safety and usage permits.

Trade unions Collective bargaining agreements operate across our operating companies. These agreements include commitments to provide employees with guidance Energy consumption and equipment in order that they comply with our (kWh per tonne of production) management systems.

Employees All employees are trained and certified to meet their 132.9 129.6 129.5 125.1 126.6 responsibilities to their colleagues, suppliers and 118.4 113.2 the environment.

Local communities Our community liaison teams organize regular site visits Additional information for local people. They can discuss many aspects of our performance, from community investment to environmental quality. The data from our air quality monitoring stations is also made available via government agencies and local media. 2011 2014 2012 2015 2013 2010 2016

EuroChem Sustainability Report 2016 33 Environmental sustainability Our Clean Water Program

Our plant modernization program has included water saving technologies, in cooperation with public authorities and local government.

01

04 03

01 02 03 05

06 02

Upgrading the water Continuing improvements to The ‘Big Water Project for management system. water processing systems. Novomoskovsk’ project involves upgrades to water and Kovdorskiy GOK Kovdorskiy sewerage systems in Novomoskovsk, in partnership with the Tula Region council Nevinnomysskiy Azot Nevinnomysskiy Novomoskovskiy Azot Novomoskovskiy and Novomoskovsk municipal administration.

Fresh water Effluent Fresh water consumption discharge consumption reduction 6.5m reduction 0.75m reduction 2.2m (m3/year) (m3/year) (m3/year)

Effluent Effluent discharge discharge reduction 4.7m reduction 0.9m (m3/year) (m3/year)

34 EuroChem Sustainability Report 2016 Introduction

04 05 06 Environmental responsibility

Construction of a new ammonia Completed modernization of the A new effluent discharge production unit using Best domestic water supply system system has improved Available Technologies (BAT) for Kotelnikovo. environmental quality at the in compliance with the Equator EuroChem-BMU plant and in the surrounding Principles. This will recycle watercourses. The system has up to 75% of the waste completely eliminated effluent EuroChem NorthwestEuroChem water generated at the VolgaKaliy EuroChem discharges into the adjacent Phosphorit plant. Pshekha River.

Effluent Water supply for 20,000 people Fresh water discharge in Kotelnikovo consumption reduction 3.0m reduction 2.2m (m3/year) (m3/year)

20,000 H&S Effluent discharge reduced to zero 3.2m (m3/year) Social responsibility Social

01

04 03 Economic sustainability 05

06 02 Additional information

Recognized as the industry’s leading program by Russia’s Ministry of Natural Resources and Environmental Protection

EuroChem Sustainability Report 2016 35 Environmental sustainability Environmental responsibility continued

CASE STUDY

In August 2015, construction began on system, significantly reducing the volume Best Available a state-of-the-art, 1 million tonne ammonia of treated waste water entering the Luga plant at our Phosphorit site in Kingisepp, River by up to 75%. The plant will also Technology near the Baltic Sea. Phosphorit produces have a significantly lower demand for phosphate-based fertilizers and associated fresh water. in action at products, and each year requires more Kingisepp than 100,000 tonnes of ammonia More than 2,000 people are currently feedstock. This material is brought in building the plant, which will generate from other EuroChem sites, however, the 250 jobs once it is operational. In line US$1 billion investment in the new plant with our Group strategy to develop local (due to start operations in 2018), will make infrastructure and skills, we have designed Phosphorit self sufficient. It is the first of an educational program with Kingisepp five such plants planned by the Group. College. This will provide young people in the local area with an opportunity to learn The new EuroChem Northwest ammonia the technical skills that we require. This plant will use the KBR Purifier process that investment in the community follows the is renowned for its high levels of reliability creation of the Kingisepp ice arena in 2015, and flexibility, with world class energy which is now home to local youth hockey efficiency. It will also operate a state-of-the- and figure skating schools. art closed loop water use and treatment

Photo has been enhanced with illustrations

36 EuroChem Sustainability Report 2016 Introduction Environmental responsibility

CASE STUDY

At a local level we organize and support Our strong focus on protecting local water Local ecological public meetings and site visits, investments resources includes continuous monitoring in independent environmental monitoring of fish stocks and reproduction around our programs and projects with local NGOs. For example, key sites, in conjunction with national, in 2016, we organized eleven local briefings regional and local institutions. In 2015/16, as part of Global Fertilizer Day. the monitoring work led us to transfer young fish into reservoirs and rivers in the Perm, Tula and Leningrad regions of Russia. H&S Social responsibility Social Economic sustainability

CASE STUDY

We promote sustainable agriculture through there is widespread recognition that Responsible use our network of agrocenters in the CIS and improved management practices, EuroChem Agro sales offices in Germany, advanced fertilizers and more precise of fertilizers France, Spain, Italy, Greece, Turkey, Mexico, application will be required. EuroChem China and Singapore. can tailor products for specific crops and soils, thereby providing optimal nutrition Additional information Fertilizers help to counter the soil with minimal application. This is cost- nutrient losses associated with intensive effective for our customers and encourages agriculture. To increase yields further, sustainable agricultural practices.

EuroChem Sustainability Report 2016 37 Our operations and working conditions Health are hazardous, in particular within primary extraction, fertilizer production and construction. We are therefore and safety focused on the continued development of a strong and robust safety culture, improve management systems and promote awareness and competence.

38 EuroChem Sustainability Report 2016 Introduction

How we manage health Policies and guidelines Aspect and safety ••Business strategy Health and safety We work to a Health, Safety and ••HSE Policy and Framework Environment (HSE) Policy and Framework, Why it is important published in 2013 and upgraded in 2016, ••H&S Management System We operate hazardous facilities which (compliant with OHSAS 18001)

which links to detailed procedures and pose health and safety risks Environmental responsibility management systems. ••H&S laws and regulations in countries of operation Who has a stake The HSE Policy and Framework applies ••Equator Principles to all of our operational sites, employees ••Employees ••Industry best practice and on-site contractors. Implementation ••Management is monitored by the Board of Directors. ••The Board Operational managers have primary Health and safety performance responsibility for health and safety at in 2016 Indicator each site. Their key responsibilities include: The Group recorded 49 lost time injuries ••Defining and monitoring health and (LTIs) in 2016, 40 LTIs in 2015 and 32 in 2014. ••Lost Time Injury Frequency rate safety behavior ••Identifying health and safety champions Health and safety priorities In 2016, the Lost Time Injury Frequency ••Securing resources for 2017 Rate (LTIFR) reduced from 1.08 (2015) ••Initiating and maintaining systems ••Lead indicators to 0.97 per million man hours. and processes

••Key risks management Lost Time Injury Frequency Rate ••Achieving targets ••Contractor management indicator (LTIFR) ••Cooperating with other operational units H&S EuroChem Group 0.97 All employees and all on-site contractors Fertilizers Division 0.61 are required to: Mining Division 1.56 responsibility Social ••Understand and comply with health and safety requirements LTIFR per 1m man-hours ••Ensure colleagues are safe (employees) ••Act according to guidelines 1.11 1.17 1.14 ••Know how to use all relevant 1.05 1.08 1.00 0.97 equipment properly 0.88 ••Communicate with managers and colleagues 2011 2014 2012 2015 2013 2010 2016 2009 Economic sustainability

CASE STUDY

Historically, working at height has been The new approach specifies that work An integrated a significant cause of safety incidents can only proceed once the scaffolding across Group operations. Consequently, has been passed as 100% safe by our approach throughout 2015–16, we have piloted an internal repair and maintenance team. improved approach at Nevinnomyssk, This program is supported by the Head to safety which has identified the quality of of our Fertilizer Division and is currently scaffolding and temporary working being extended to Novomoskovsk, structures as a key weakness. prior to a Group-wide roll-out. Additional information

EuroChem Sustainability Report 2016 39 We recognize that to maintain long- Social term economic and financial success our relationships with employees and communities must be positive, responsibility constructive and transparent. Our large-scale investment projects and international growth generate a steady demand for qualified and experienced people with the right technical and managerial qualities.

40 EuroChem Sustainability Report 2016 Introduction Our approach to Key stakeholders Human Resources Employees, including All employees are given access to management and EuroChem is an international business with technical courses based on the highest environmental a growing geographic footprint. Our mining young professionals and professional standards. and operational assets are located in Russia,

Kazakhstan, Ukraine, Belarus, Lithuania, Environmental Ongoing consultation and site visits to review operations Environmental responsibility Belgium, China, US and Brazil. Our primary organizations and data from environmental monitoring stations. markets include Russia and other CIS countries, Europe, North America, Latin Local authorities Partnerships to develop sports arenas, support health America and Central and Southeast Asia. and education institutions and report on environmental Our logistics and sales network serves over monitoring activities. 6,000 clients in more than 100 countries. Local community Informal and formal meetings, including site visits, reviewing The Group Human Resources (HR) operation representatives investment projects and HSE systems. is a key component of the business. The HR Policy defines key indicators and priorities Universities and E-generation program provides chemistry and engineering and sets quantitative and qualitative targets. educational tuition for school pupils, students and teachers. It applies across the Group and focuses on institutions recruitment, rewards, training, development and social support. Our Head of HR oversees Non-profit Working closely with local partners to provide financial a network of HR Managers in all of the organizations and volunteering support. subsidiary companies. Media Providing access to company personnel to review community H&S As we continue to expand internationally, investments and environmental monitoring activity. we require more professional and qualified managers to oversee all business functions, including HR. A key challenge is the ongoing Aspect need to attract and retain highly skilled and Training and education responsibility Social motivated professionals with the right mix of technical and managerial skills. Why it is important The sustainable growth of our business is predicated on our ability to attract and retain talent, particularly Key focus areas our cohort of young professionals. ••Ensuring staff development, processes, organizational structure, corporate culture Who has a stake ••Employees and service levels are effective and best ••The Board in class. ••Educational institutions ••Refining annual performance reviews and introducing key performance indicators. Indicator ••Investment in training centers ••Defining a new HR strategy that promotes Economic sustainability professionalism and addresses all current ••Training partnerships and emerging issues. ••Teaching standards ••Reviewing employment systems and processes with the aim of making them clear, transparent, understandable, CASE STUDY effective and results-oriented. ••Developing a corporate culture that As we internationalize, so our standards promotes and embraces a global Redefining our of corporate governance and corporate outlook and ambitions. culture need to evolve. A key element corporate culture is the need to ensure that multinational Policies and guidelines teams are able to work effectively together. ••Human Resources Policy Consequently, over the past few years we have rolled out a Group-wide program of

••E-generation program Additional information English-language training that is available ••Employment laws in countries of operation to all employees. This is improving ••Industry best practice communication across our international operations and is helping employees We are working with external educational to move between different parts of institutions to enhance opportunities for the business. potential recruits and our employees.

EuroChem Sustainability Report 2016 41 Social responsibility Employees

Employee relations, diversity, All training and professional development Recruiting motivated equality and remuneration programs are managed by our Heads graduates and developing of HR, HSE, Business Support and In 2016 we employed over 25,000 people, Communications. The HR Departments employee capabilities consisting of 55 nationalities, working in in the operating companies, in turn, have All of the students that we support through 22 countries at 75 enterprises (including responsibility for delivering and monitoring university subsequently join our three-year 47 in Russia). In 2016 we started building the success of these programs. ‘Young Employee’ scheme. This gives a new state-of-the-art ammonia plant, them access to mentors from the business, made further strides with our potash projects We have long standing relationships with a fast track to careers across the Group and expanded our distribution network – many educational institutions. They assist and the chance to network with their peers. recruiting new people, working with new us in delivering continuing professional contractors and inducting employees in development and working with students From 2014, we have run a professional our new distribution business in Brazil. to encourage them to take science, development scheme for our internal technology, engineering and mathematics mentors, which further enhances We comply with all relevant labor laws and (STEM) subjects. their capabilities and effectiveness. codes upholding the rights of employees, including international labor conventions. We also retain good relationships with We operate seven professional training We do not use forced, compulsory, child or national and regional media, through which centers which engaged with 68% of agency labor and respect all human rights we promote our offer to students and their our employees in 2016. Our succession under the laws and conventions of the parents in key regions. planning program includes skills countries where we operate. development for employees prior Working with schools to promotions. Policies and guidelines and universities 1,142,748 man-hours of training were ••Human Resource Policy In Russia, we fund a network of laboratories delivered in 2016. ••Employment laws in countries of operation in schools and technical colleges which teach chemistry, natural sciences and ••Industry best practice Due to the nature of our operations, gender environmental studies. These offer a imbalance remains an ongoing issue. Our scholarship pathway to a chemistry degree Employee relations, diversity and equality E-Generation program, which identifies bright and subsequent career with EuroChem. and remuneration are important measures and motivated young men and women within Our scholarships and engineering training of management competence and success. the business, is a catalyst in our drive to programs encourage young people to empower women and prepare them for pursue technical and scientific subjects. EuroChem is committed to diversity across leadership roles within EuroChem. These programs operate in Russia, Belgium its international business. Through our and Germany, working with: E-generation and internal development Gender diversity programs we continually work to bring more ••Baden-Württemberg Cooperative State (%) women into the business and ensure that University (Germany) 70 71 71 72 they are able to move into senior management ••KU Leuven (Belgium) and supervisory roles. While the gender ratio ••Moscow State Lomonosov University has remained static over the past few years, (Russia) we are starting to see more of our young women recruits moving into management. ••National University of Science and We will communicate their success to create Technology (Russia) a positive impact on others joining the ••Moscow State University of Mechanical 30 29 29 28 business and improve the gender balance Engineering (Russia) over the next few years. ••St. Petersburg Mining University (Russia) 2013 2014 2015 2016 ••South-Russian State Polytechnic University Training and education Male Female (Russia) Our long-term sustainable growth will ••Ivanovo State University of Chemistry depend on our ability to attract and retain Technology (Russia) talented people, particularly a cohort of young professionals. Our growing geographic ••Perm National Research Polytechnic reach and continued need for skills means University (Russia) that we work hard to create an excellent working environment for our employees. In 2016, we supported 402 students, with a further 109 receiving EuroChem scholarships.

42 EuroChem Sustainability Report 2016 Introduction

Aspect Aspect Aspect Employee relations Diversity and equality Remuneration

Why it is important Why it is important Why it is important Maintaining harmonious and positive Diversity and equality are key In order to attract and retain the

relationships between more than characteristics of a progressive, best people, we have an attractive Environmental responsibility 25,000 employees is a key challenge international business. reward system. as we continue to grow the business internationally.

Who has a stake Who has a stake Who has a stake ••Employees ••Employees ••Employees ••The Board ••The Board ••The Board ••Utilities ••Communities ••Suppliers ••Educational institutions ••Communities ••Local government ••Investors ••National government ••National government ••Local government H&S

Indicator Indicator Indicator ••Management to employee ratio ••Level of investment ••Variable remuneration ••Employee turnover ••Employee numbers ••Fixed remuneration

••Sales per employee ••Percentage of women in ••Average full-time equivalent wage responsibility Social ••Production per person management positions ••Changes in average monthly wage ••Personnel costs

CASECASE STUDY STUDY

Our international expansion and increasing As a consequence of this ongoing demand Developing talent integration offers employees many careers for talent, we invest in the employee ‘value in different divisions and a growing list of chain’ from early intervention in schools and enhancing skills countries. While these careers could be through to university education, enhancing Economic sustainability in management, marketing, distribution, teachers’ capabilities and developing the finance, HR or environmental control, skills of our recruits and employees. we retain a significant core requirement for engineering and technical skills. The program, ‘E-generation leaders of the For example, our potash operations new industrialization’, operates through will support 6,000 jobs, including schools and universities in Russia, Belgium 2,000 chemical and mining engineers. and Germany. It augments Government efforts or fills a gap where there are no incentives for students to study chemistry or other technical/engineering subjects. Additional information

EuroChem Sustainability Report 2016 43 Social responsibility Employees continued

The table describes the trend in our Our remuneration policy factors in regular We regularly analyze our compensation employee Key Performance Indicators (KPIs) salary increases in accordance with data to ensure that employer and employee over an eight-year period. The indicators can international best practice. Salary levels alike can agree on and attain competitive be influenced by our investment and M&A are based on industry levels in the countries remuneration rates. activity, currency movements, inflation and where we operate. product prices.

Key HR indicators* 2008 2009 2010 2011 2012 2013 2014 2015 2016 Full-time equivalent employee numbers (people)** 21,585 20,102 19,671 20,843 22,119 22,327 22,468 23,459 24,819 Management to staff ratio (%) 13.4 13.5 12.7 12.3 12.6 12.9 12.9 13.1 13.2 Staff turnover at production facilities (%) 5.7 2.6 3.4 4.1 5.0 4.6 4.0 3.6 2.8 Group sales per employee (US$/person) 209,084 115,380 163,691 214,357 242,063 248,831 226,433 193,544 176,280 Productivity per main type of product per person, average (tonnes) 1,051 1,173 1,360 1,358 1,471 1,603 2,148 2,193 2,391 Personnel costs (US$m) 387.4 296.4 393.2 448.3 530.6 597.1 564.3 443.7 462.6 Changes in personnel costs (% year-on-year) 35.9 (23.5) 32.6 14.0 18.4 12.5 (5.5) (21.4) 4.2 Fixed remuneration (US$m) 263.4 234.0 301.1 333.3 416.0 446.5 410.5 276.5 287.5 Variable remuneration (US$m) 124.0 62.4 92.1 115.0 114.6 150.6 153.8 167.3 175.1 Average full-time equivalent wage (US$/month) 1,015 939 1,044 1,195 1,321 1,516 1,400 1,034 1,050 Changes in average monthly wage (% year-on-year) 27.8 (7.5 ) 11.2 14.5 10.5 14.8 (7.7) ( 26.1) 1.5

* HR indicators were calculated according to PwC Saratoga methodology; financial indicators were prepared in accordance with IFRS. ** Including temporary employees; all related indicators are calculated based on this figure; average number of employees for the year.

44 EuroChem Sustainability Report 2016 Introduction

CASE STUDY

Our continued growth will be supported by locations. This ability to identify and fill Developing an our ability to attract and retain high-quality opportunities for people with particular candidates in a competitive labor market. skill sets, from within the business, is incentive program We therefore aim to build professional and increasingly important. These changing Environmental responsibility managerial competence, while ensuring patterns of employment have to be that our policies and standards are matched by our incentives structures. innovative and align with international Consequently, in 2016 our HR Department best practice. For example, we have to continued to redesign the employee understand and accommodate a growing motivation and incentives system so international and mobile workforce with that it has a Group-wide reach, rather different expectations and motivations. than being set locally. This new system will be more closely matched to performance Our employees may be local or in order to motivate and engender international and the latter may be positive competition. stationed for fixed periods in particular H&S Social responsibility Social

CASE STUDY Economic sustainability The EuroChem Engineering Case This competition aims to develop the EuroChem Solving Championship, established in knowledge and skills required to address 2014, is gaining momentum. In 2016, two specific EuroChem production challenges. Annual Engineering leagues operated, one for Mining and one The expert judging panel provides for Fertilizers. More than 500 participants feedback on the knowledge and skills Case Solving from eleven leading technical universities of participants. In turn, the students gain Championship participated in the preliminary rounds. a better understanding of the Group and In 2016, the Kazakh National Technical are then able to make more informed University was selected to join the career choices. EuroChem Case Championship. Additional information

EuroChem Sustainability Report 2016 45 Social responsibility Communities

The commitment that we give local Our approach to working Aspect with communities communities is that we will provide stable employment, meet all local tax and Local communities For the past 15 years, EuroChem has environmental obligations and pay industry developed sustainable, long-term benefits for leading salaries. These decisions are Why it is important the communities neighboring and supporting open to scrutiny from within and outside the EuroChem is a significant employer its operations. This focus is exemplified by Group, for example, from local stakeholders, and its operations can have a significant high-quality urban environments and ‘garden international experts, academics and all impact on local environments and local cities’, modern water supply and treatment relevant government authorities. economies. infrastructure, university-based training programs for young engineers from Russia’s Some of our investments, particularly Who has a stake regions and significant investments in sports those in recreation, sports and rehabilitation ••Employees arenas and children’s ice hockey programs. facilities for employees, also benefit local residents. Our third ice arena, opened ••Communities Between 2014–2016, we invested more than in Kingisepp, exemplifies this approach. ••Local government US$38 million in community infrastructure, In addition, our energy generation, transport ••National government services and organizations. The community infrastructure and environmental monitoring investment program is overseen by our systems also assist and protect local ••Educational and social Group Board of Directors. Specifically, our communities. ••Institutions Administrative Director works closely with ••Local suppliers corporate and plant management teams to Policies and guidelines engage with community representatives and ••NGOs define investment priorities. These investments ••Human Resource Policy are made on a co-financing basis (public- ••Employment laws in countries of operation Indicator private and private-NGO) and projects are ••Levels of community investment ongoing in all of our operating regions. ••Industry best practice ••Feedback from local government The relationship with communities and development of local infrastructure and services is a strategic issue for EuroChem. Social investments in community sports, health, education, CASE STUDY environment, charities and NGOs in 2016 (US$) We are investing in the creation of Modernization of drinking water supply systems for local communities. We built a new water supply municipal water system for 20,000 people in Kotelnikovo supply systems (Volgograd Region) and participated 17. 8 m in rebuilding the municipal water and sewerage systems for 130,000 people in Novomoskovsk (Tula Region).

46 EuroChem Sustainability Report 2016 Introduction Environmental responsibility

CASE STUDY

EuroChem’s potash projects play a school, district hospital, clinic, hotel, Committed to important roles in their respective regions. sports center, swimming pools and an We have been actively involved in the ice rink, as well as numerous upgrades responsible urban social and economic development of to local infrastructure. The resulting garden the Berezniki (Usolskiy Potash) and city has received awards for its design development Kotelnikovo (VolgaKaliy) regions. While and the quality of its construction. the construction phase of our two potash sites requires over 9,000 people, positively To support our Usolskiy potash H&S contributing to local economies, we expect project (Berezniki region), we plan to each site to provide around 3,000 quality develop 32 five-story apartments and employment opportunities once both related infrastructure on a 38.5-hectare are completed. In parallel with site plot, with co-financing from regional

development and to support their long- and municipal authorities. responsibility Social term operations, we have designed and built high quality housing developments. Also in 2015–2016, EuroChem supported the development of master plans for In Kotelnikovo, for example, we are Kovdor and Kingisepp in Russia and for investing in one of Russia’s biggest Karatau in Kazakhstan. The plans and urban development projects, providing regeneration projects were developed apartments and houses for more than with local government agencies 10,000 people, effectively doubling the and communities. size of the town. We are creating these safe, healthy and comfortable living These urban developments will have environments as an investment in our a major positive effect on local economies business and our future employees and through the provision of high quality their families. Our development projects employment and living conditions Economic sustainability around VolgaKaliy include kindergartens, for our employees, their families and existing communities. Additional information

EuroChem Sustainability Report 2016 47 Social responsibility Communities continued

CASE STUDY

Our widely acclaimed sports investment (Murmansk Region), Belorechensk International scale program has had a significant, positive (Krasnodar Region) and Kedainiai impact across Russia and internationally. (Lithuania). In 2016 we built 13 children’s of sport-led The program has three main components sports grounds in the city of – construction of ice arenas and sports Nevinnomyssk. These facilities have regeneration centers, support for youth sports at all radically improved access to sport for levels of ability (locally and internationally) young people in these communities. and linking regional sporting activity with As well as the infrastructure, we have international and professional programs. provided a pathway for those taking part in We have built three ice sport arenas in regional sport to transition to international the cities of Novomoskovsk (Tula Region), and elite level. For example, the ‘EuroChem Nevinnomyssk (Stavropol Territory) and Cup’ International Ice Hockey Tournament Kingisepp (Leningrad Region). This has been held for the past five years in enabled us to provide hockey and figure Novomoskovsk. 12 teams take part in this skating tuition for 1,300 children. Sports competition: Russia, Finland, Lithuania, centers have also been built in Kovdor Switzerland, Belgium, Estonia, Kazakhstan and Germany.

Russia Belgium

Kazakhstan Germany

Estonia Switzerland

Finland Lithuania

48 EuroChem Sustainability Report 2016 Introduction Environmental responsibility

CASE STUDY

Our Clean Water Program has been Program highlights in 2016 included: Clean Water recognized as industry leading by ••A new water supply system for Russia’s Ministry of Natural Resources 20,000 people in Kotelnikovo. Program and Environmental Protection. Within the program, we are investing in the ••Continued investment in a community creation of drinking water supply public water and sewerage system systems for local communities, working in Nevinnomyssk. in partnership with public authorities ••The large-scale ‘Big Water Project’ H&S and government agencies. for 130,000 people in Novomoskovsk, involving upgrades to water and sewerage systems and an expansion of the pipe, pumping and treatment

network, in partnership with the Tula responsibility Social Region council and Novomoskovsk municipal administration. Economic sustainability Additional information

EuroChem Sustainability Report 2016 49 Our talented team, working together Economic and employing a wide range of skills and experience, is the foundation sustainability of our long-term financial success.

50 EuroChem Sustainability Report 2016 Introduction Economic performance Investing in our future Growth through potash We are targeting the creation of significant The Board of Directors oversees our The highlights of our strategic investment low-cost potash capacity, plus the capability business and financial operations. Overall and M&A program in 2016 included: to process this into NPK, NK and SOP. management responsibility is in the hands ••Continued development of the VolgaKaliy Our Usolskiy and VolgaKaliy projects will of the Chief Financial Officer, to whom potash project provide this capacity as they come on-stream the finance heads of our operating in 2017 and 2018 respectively. Both sites Environmental responsibility companies report. ••Commencement of ore beneficiation at the Usolskiy potash project will produce 8.3 MMT KCI (5.0 MMT K2O) when operating at capacity. Financial performance is linked to continued ••Our phosphate rock operation in consumption of fertilizers at a sustainable Kazakhstan reached full capacity In 2017, we will: price. This consumption is driven by a ••Started construction of the new ammonia growing population, changing diets and plant at Kingisepp with BAT for production, ••Commence ore beneficiation at Usolskiy land use shifts, and the price is influenced energy and water management ••Finalize the revised VolgaKaliy mining by a economic development, agricultural ••Acquired fertilizer distributor in Brazil plan and resume sinking of the cage shaft commodity prices, industry capacity, ••Optimize our potash market entry and raw material and fuel costs. ••Opened distribution center in Hungary strategy and positioning EuroChem has certain advantages that Our Focus ••Refine the configuration of potash product storage support its sustainable growth, chiefly Cost leadership through access to competitively priced raw materials vertical integration and fuel, operations across all segments We are targeting self-sufficiency in ammonia, of the fertilizer industry (with potash coming phosphate rock and potash to support on-stream in 2017), a highly developed our cost advantages and reduce the risks H&S international logistics and distribution of variable prices and earnings. These network, and a vertically integrated business advantages are driven by the ownership that spans raw materials through to and control that we have over manufacturing production, distribution and application. and distribution, which reflects the continued

strengthening of our vertically integrated responsibility Social Policies and guidelines business model. ••Business strategy ••European and Russian financial regulators In 2017, we will: ••Federal Law on Natural Monopolies ••Further maximize use of phosphate rock from our Kazakhstan and Kovdor operations ••Federal Law on Electric Power Industry ••Improve the production efficiency of our ••Code of Conduct natural gas operations ••Code of Ethics ••Make progress with our Kingisepp ammonia plant Aspect boundary – ••Start exploring new gas fields Internal and External

Our business supports employment, provides Economic sustainability community services and pays taxes in its main areas of operation.

Aspect Economic performance Financial performance and processes in 2016

Why it is important Total CAPEX Total sales It is a fundamental measure of business (US$) (US$) health and supports our growth and investment plans Additional information Who has a stake? ••The Board 1. 3 4 b n 4.38bn ••Employees ••Investors Mining CAPEX Net debt/EBITDA Indicator (US$) ••Annual sales ••EBITDA ••Net debt/EBITDA ratio ••Credit ratings 684m 2.88x

EuroChem Sustainability Report 2016 51 Economic sustainability Economic sustainability continued

Indirect economic impacts How we manage indirect Kazakhstan. The Memorandum commits EuroChem to further investing in Kazakhstan Policies and guidelines economic impacts We work hard to build and maintain excellent through its existing phosphate rock mining ••Business strategy working relationships with governments, operation and construction of a fertilizer ••European and Russian financial regulators NGOs and local residents in order to deliver production plant, as well as ongoing improvements to community facilities ••Federal Law on Natural Monopolies community investments that are relevant and effective. As in previous years, we have and transport infrastructure. ••Federal Law on Electric Power Industry focused on sport, environment, health, ••Code of Conduct education and charities. The Group Board defines our community ••Code of Ethics investment strategy. It is delivered through As our international footprint grows, so our Chief Financial Officer, Head of HR, Aspect boundary – External does the range of government, regulatory, HSE and Business Support, Head of We operate in areas where our plants are commercial and community partnerships. Communications, working with Managing amongst the most significant employers. For example, in October 2016, we signed Directors in the operating companies. While drawing on energy and natural a Memorandum of Understanding with the resources we also generate significant Ministry of Investments and Development of economic opportunities. the Republic of Kazakhstan and the Akimat of the Jambyl Region of Southern

CASE STUDY

In September 2016, we acquired Expanding our a controlling interest in Fertilizantes Tocantins, a leading Brazilian fertilizer international distribution company. Fertilizantes footprint Tocantins’ market knowledge, blending facilities and network of 2,000 customers considerably strengthens our presence in Latin America. Founded in 2003, the company operates across Brazil’s Aspect emerging farming regions in the North, Indirect economic impacts North-East and Mid-West, and in 2015 sold 740,000 tonnes of fertilizer. Why it is important We also announced the opening It relates to our market presence and the of a new distribution center in Hungary. way we engage with local stakeholders It will distribute EuroChem premium where we operate fertilizers and specialty products from Fertilia Ltd, a leading Hungarian producer. Who has a stake ••The Board ••Employees ••Suppliers ••National government ••Local government ••Local communities

Indicator ••Level of investment ••Feedback from government and communities

52 EuroChem Sustainability Report 2016 Introduction Environmental responsibility

CASE STUDY

In June 2016 we signed a US$255 million governments, the Leningrad Region Partnership to agreement to finance the construction government and the Ministry of Industry of our new ammonia plant in Kingisepp and Trade of the Russian Federation deliver our new which commenced in 2015. The agreement, (Minpromtorg). The Kingisepp ammonia between EuroChem, Maire Tecnimont, plant will be the first of potentially five ammonia plant an Italian technology, engineering and ammonia-urea projects to be delivered in contracting business, and Velesstroy, Russia, the United States and Kazakhstan a Russian construction company, focuses over the next 10 years under the H&S on the creation of the plant with a design Memorandum of Understanding signed capacity of 2,700 tonnes per day. We will between Eurochem, Maire Tecnimont and invest US$1 billion in the project, which SACE in April 2015. These new projects should start operating in 2018, creating are expected to add 5 million tonnes of

250 jobs locally. Credit agency SACE is ammonia and 7.5 million tonnes of urea responsibility Social providing a loan guarantee and the project capacity per annum. is supported by the Russian and Italian Economic sustainability Additional information

EuroChem Sustainability Report 2016 53 Additional information GRI disclosure tables

Summary table of standard disclosures under GRI G4 reporting The Global Reporting initiative (GRI) is a global, multi-stakeholder organization that has developed guidelines for sustainability reporting. Known as the G4 Guidelines, these include a list of indicators that companies should consider reporting against. The index below lists each of the GRI G4 indicators and whether we report against them.

Indicator Response Indicator Response Indicator Response Strategy and analysis Report profile Ethics and integrity G4-1 ✓ G4-28 ✓ G4-56 ✓ G4-2 ✓ G4-29 ✓ G4-57 ✓ Organizational profile G4-30 ✓ G4-58 ✓ G4-3 ✓ G4-31 ✓ Disclosures on G4-4 ✓ G4-32 ✓ management approach G4-5 ✓ G4-33 ✓ G4-DMA ✓ G4-6 ✓ Governance Indicators by aspects G4-7 ✓ G4-34 ✓ Category: Economic G4-8 ✓ G4-35 ✓ Economic performance G4-9 ✓ G4-36 ✓ G4-EC1 ✓ G4-10 ✓ G4-37 ✓ G4-EC2 ✓ G4-11 ✓ G4-38 ✓ G4-EC3 ✓ G4-12 ✓ G4-39 ✓ G4-EC4 ✓ G4-13 ✓ G4-40 ✓ Market presence G4-14 ✓ G4-41 ✓ G4-EC5 ✓ G4-15 ✓ G4-42 ✓ G4-EC6 ✓ G4-16 ✓ G4-43 ✓ Indirect economic impacts Identified material aspects G4-44 ✓ G4-EC7 ✓ and boundaries G4-45 ✓ G4-EC8 ✓ G4-17 ✓ G4-46 ✓ Procurement practices G4-18 ✓ G4-47 ✓ G4-EC9 ✓ G4-19 ✓ G4-48 ✓ Category: Environmental G4-20 ✓ G4-49 ✓ Materials G4-21 ✓ G4-50 ✓ G4-EN1 ✓ G4-22 ✓ G4-51 ✓ G4-EN2 ✓ G4-23 ✓ G4-52 ✓ Energy Stakeholder engagement G4-53 ✓ G4-EN3 ✓ G4-24 ✓ G4-54 ✓ G4-EN4 ✓ G4-25 ✓ G4-55 ✓ G4-EN5 ✓ G4-26 ✓ G4-EN6 ✓ G4-27 ✓ G4-EN7 ✓

54 EuroChem Sustainability Report 2016 Introduction

Indicator Response Indicator Response Indicator Response

Water Labor/Management relations Human rights grievance G4-EN8 ✓ G4-LA4 ✓ mechanisms

G4-EN9 ✓ Occupational health and safety G4-HR12 ✓ Environmental responsibility G4-EN10 ✓ G4-LA5 ✓ Society Biodiversity G4-LA6 ✓ Local communities G4-EN11 ✓ G4-LA7 ✓ G4-SO1 ✓ G4-EN12 ✓ G4-LA8 ✓ G4-SO2 ✓ G4-EN13 ✓ Training and education Anti-corruption G4-EN14 ✓ G4-LA9 ✓ G4-SO3 ✓ Emissions G4-LA10 ✓ G4-SO4 ✓ G4-EN15 ✓ G4-L A11 ✓ G4-SO5 ✓ G4-EN16 ✓ Diversity and equal opportunity Public policy G4-EN17 ✓ G4-LA12 ✓ G4-SO6 ✓

G4-EN18 ✓ Equal remuneration for Anti-competitive behavior

G4-EN19 ✓ women and men G4-SO7 ✓ H&S G4-EN20 ✓ G4-LA13 ✓ Compliance

G4-EN21 ✓ Supplier assessment G4-SO8 ✓ for labor practices Effluents and waste Supplier assessment for Social responsibility Social G4-EN22 ✓ G4-LA14 ✓ impacts on society G4-EN23 ✓ G4-LA15 ✓ G4-SO9 ✓ G4-EN24 ✓ Labor practices grievance G4-SO10 ✓ mechanisms G4-EN25 ✓ Grievance mechanisms for G4-LA16 ✓ G4-EN26 ✓ impacts on society Human rights Products and services G4-SO11 ✓ Investment G4-EN27 ✓ Product responsibility G4-HR1 ✓ G4-EN28 ✓ Customer health and safety G4-HR2 Compliance G4-PR1 ✓

Non-discrimination Economic sustainability G4-EN29 ✓ G4-PR2 ✓ G4-HR3 ✓ Transport Product and service labeling G4-EN30 ✓ Freedom of association and G4-PR3 ✓ collective bargaining Overall G4-PR4 ✓ G4-HR4 ✓ G4-EN31 ✓ G4-PR5 ✓ Child labor Supplier environmental Marketing communications G4-HR5 ✓ assessment G4-PR6 ✓ Forced or compulsory labor G4-EN32 ✓ G4-PR7 ✓ G4-HR6 ✓ G4-EN33 ✓ Customer privacy Security practices Environmental grievance G4-PR8 ✓

G4-HR7 ✓ mechanisms Compliance Indigenous rights G4-EN34 ✓ G4-PR9 ✓ Additional information G4-HR8 ✓ Category: Social Assessment Labor practices and decent work G4-HR9 ✓

Employment Supplier human rights Response key G4-LA1 ✓ assessment Fully reported ✓ G4-LA2 ✓ G4-HR10 ✓ Partially reported ✓ G4-LA3 ✓ G4-HR11 ✓ Information not reported*

*Not considered material to business operation

EuroChem Sustainability Report 2016 55 Additional information Key facts

Health, safety EuroChem’s global Economic sustainability and environment ranking

Non-recycled Customers Operating water -10 % globally >6,000 cash flow 1.11b n consumption (US$) (per tonne of production)

Air emissions (per tonne of -13 % Number of Total sales production) countries >100 (US$) 4.38bn consuming EuroChem products Effluent discharge -12 % (per tonne of production) % of world’s Fertilizer production of 2.2% sales 13.6 MMT fertilizers used volume in agriculture Lost-time injury (in nutrient frequency rate -10 % content) (per 1 million man-hours)

Globally Growth in in potash Top 5 fertilizer +20% ISO reserves sales (since 2009) 9001 volumes

ISO (since 2009) 14001 Social responsibility

Employees Investment (+6%) 24,819 in our 18m OH communities 18001 and charities (US$) +50%

56 EuroChem Sustainability Report 2016 Introduction Awards Environmental responsibility H&S Social responsibility Social

EuroChem’s Clean Water Program EuroChem’s sustainability programs and recognized as best in Russia reporting recognized as best in Russia

EuroChem recognized as a one of leaders of Vector of EuroChem received an ‘Evolution Award’ from Sergey Donskoy, Sustainable Development Index among the largest Russian the Minister responsible for Natural Resources and the companies, such as Gazprom, Rosneft, Aeroflot and Russian Environment in the Russian Federation. This recognized the Railways. This Index is annually organized by the Russian Union program as the best application of green technology in the of Industrialists and Entrepreneurs (RUIE). private sector. Economic sustainability

Additional information

EuroChem Sustainability Report 2016 57 Additional information Corporate information

This document covers the calendar year 2016. The content and data continue on from that provided in the 2015 report. This document covers all current operating sites. It also refers to the activities of employees and contractors at these sites as well as interactions with local communities, government agencies, customers, suppliers and other key stakeholders.

Since 2013, we have reported in accordance with the ‘core’ requirement of the GRI G4 Guidelines. The latter requires us to identify and disclose aspects of sustainability that we assess to be of material importance to the business. This report also follows the GRI G4 ‘core’ and its conventions. It describes how we decide on material issues, incorporating the views of our stakeholders, key changes in the business and the territories in which we operate, as well as a review of the wider business and regulatory environment for the agrochemical industry.

The performance data relates to all sites operating in 2016, excluding our joint-venture in China, our planned site in the US, activities of our new US distribution business, and assets that were consolidated in 2016 (Brazil, Hungary and Greece). In most cases the data is linked to tonnes of production, a EuroChem KPI. This allows us to maintain continuity with previous reports, particularly as the business has grown and we have added new production and distribution capacity.

The data used in the report is derived from our management information system. Where conversion factors have been used, these are stated within the document or the data book published separately.

There has been no restatement of information contained in previous reports.

Contacts

EuroChem Group AG Address: Alpenstrasse 9, 6300 Zug, Switzerland Tel: + 41 (41) 727 16 00 Fax: + 41 (41) 727 76 06 Website: www.eurochemgroup.com

Vladimir Torin Head of Communications, Russia and CIS Vladimir Kuznetsov Social Responsibility Tel: +7 (495) 795 2527 E-mail: [email protected]

58 EuroChem Sustainability Report 2016 Designed and produced by Instinctif Partners www.creative.instinctif.com www.eurochemgroup.com