ǶǨǶ SIBUR Holding
Social Report for 2008
Our Development Continues
2009
1 The World Around Us...... 4 Statement by the Chairman of the Board Alexander Dyukov and SIBUR President Dmitry Konov ...... 5 About the Company...... 6 SIBUR – 2008: Social Profile ...... 7 SIBUR and the Global Economic Recession.... 8 Consumption Crisis...... 8 Global Problems...... 9 Domestic Background...... 9 SIBUR’s people speak...... 9 SIBUR’s anti-crisis policy...... 11 Rolling With the Punch ...... 11 Mobilization Model ...... 13 The Crisis Chronology...... 14 Adjusting the Investment Program ...... 17 SIBUR’s people speak...... 19 Personnel Development...... 23 Being More Effective ...... 23 Growth of Wages and Salaries ...... 25 Protecting the Standard...... 26 Health Care...... 27 Sports...... 27 Own Home...... 28 Collective Agreements ...... 28 Career Opportunities ...... 29 New People ...... 30 Becoming the Best...... 30 Improving Competence ...... 31 Corporate Sociology ...... 32 Red Dates ...... 33 Sign of Recognition ...... 34 Corporate Code ...... 34 SIBUR’s people speak...... 35 Programme of Social Initiatives ...... 38 Helping the Right Way...... 38 “Small-scale Assistance” ...... 38 SIBUR Alleys...... 39 Chemical Knowledge ...... 39 Personal Initiative ...... 40 Our Safety Is Our Life ...... 41 Collective Value ...... 41 Inspections and Outcomes...... 43 Stars of Safety...... 43 SIBUR’s people speak...... 44 Environmental Practice ...... 46 Greater Benefit ...... 46 Systemic Contribution...... 47 2 Green Certificate...... 48 European Regulations ...... 49 SIBUR’s people speak...... 49
3 The World Around Us
In today’s world, man relies on petrochemical processes hidden from view by fences of production plants. He keeps performing familiar tasks and using objects without giving a second thought as to their nature. Man-made materials, for instance various plastics and plastic goods, synthetic rubber have become pervasive. We deal with petrochemical products when we speak on the phone, get into a car or a subway wagon, buy packaged food and water in plastic bottles, turn on a computer or a TV set, withdraw money from an ATM, in fact just by living. Though not obvious to a layman, the relationship between creature comforts and the development of petrochemistry becomes stronger with each passing year. Man keeps building and improving his artificial environment based on natural raw materials. Among other things, petrochemistry is based on associated petroleum gas (APG), a by- product of oil extraction. Left unprocessed, it would burn in oil rig flares destroying a non-renewable resource and vastly damaging the environment. Utilizing APG is a major environmental function performed by petrochemical companies. SIBUR is Russia’s major processor of associated petrochemical gas. To this end it builds and upgrades production facilities, implements projects to convert carbohydrates into high value added products, primarily polymers and plastics. The company’s mission is to make people’s life more protected and comfortable while easing the burden on the environment and using natural resources in the most efficient manner.
4 Statement by the Chairman of the Board Alexander Dyukov and SIBUR President Dmitry Konov
Dear reader! SIBUR Holding is presenting its third social report.
The last few years were highly successful for SIBUR: the company demonstrated robust financial and production performance. The Group actively developed corporate social programmes and kept raising wages. However petrochemistry has been hit hard by the global economic crisis. In the fourth quarter of 2008 the Company found itself in an unprecedentedly complex situation. We were forced to cut wages dramatically, focus on operational efficiency, and revise our investment programme. The situation could not but affect the Group’s social policy, making the crisis and the company’s response the main themes of this report. Our major achievement is that we have managed to maintain the key social indicators: we did not cut wages, we have retained the key personnel, and have continued with the basic social programmes. In the coming years it is essential to consolidate the progress and to move forward. We shall continue to implement and develop our social programmes despite the unfavorable industry cycle and global economic problems. It is important to not roll back the industrial safety policy as a value for all SIBUR personnel. SIBUR has entered the crisis as a close-knit professional and mobilized team capable of rolling with the punch and clearing the space for continued development. The company will thus continue with its consistent strategy of developing the resource base and creating new production facilities. In these difficult times the company has made a special effort to communicate. By reporting to its personnel and partners about achieving the goals of sustainable development SIBUR demonstrates its openness to dialogue and confidence in the future.
5 About the Company
SIBUR1 is a major Russian petrochemical company producing over 100 different products. The Group’s production chain includes gas processing, production of monomers and polymers, plastics and rubber, mineral fertilizers and tyres. The Group brings together 34 Russian enterprises in 3 operationally dependent business units: Hydrocarbons Directorate, Plastics and Organic Synthesis Directorate, and Synthetic Rubbers Directorate – and 2 legally autonomous business units: ǶǨǶ SIBUR-Mineral Fertilizers and ǶǨǶ SIBUR-Russian Tyres. The corporate management center is located in Moscow. In 2008 the company employed a total of 75 thousand people. Shareholders of ǶǨǶ SIBUR Holding are ǶǨǶ Gazprombank (70% less 1 share) and NPF Gazfond (25% plus 1 share). The sole executive body is the management company ǶǶǶ SIBUR. Over the last few years the company has demonstrated positive financial and production performance. In 2008, SIBUR plants produced 14.8 million tons of petrochemical products and 13.3 billion m3 of dry stripped gas. According to the consolidated financial statement for 20082, ǶǨǶ SIBUR Holding’s revenue increased by 22% to 173.5 billion roubles, and EBITDA3 went up 22% to 40.8 billion roubles. Profit went down 29% to 16 billion roubles. Among the factors that drove down our net profit: greater overall tax burden, higher cost of servicing loans, and losses from transactions due to a considerable change in foreign exchange rates.
1 Here and thereafter the names “ǶǨǶ SIBUR Holding”, “SIBUR”, “Group”, “Company” are used as synonyms.
2 Consolidated financial report of 2008 of ǶǨǶ SIBUR Holding according to IFRS
3 EBITDA is earnings before interest, taxation, depreciation and amortization
6 SIBUR – 2008: Social Profile
Key parameters x Growth of salaries and wages – 21% x Productivity growth – 28% x Growth of spending on social programs – 19% x Reduction of personnel – 9%, including at the Corporate Center – 25%
Major events x Adoption of the OOO SIBUR’s Code of Corporate Ethics – of the management organization of ǶǨǶ SIBUR Holding x Launch of systematic monitoring of social climate in labor collectives through sociological surveys x Participation in The Best Employer in Russia project which ranked SIBUR 8th out of 25 Russian companies x Formation of corporate staff reserve which at end of 2008 included 163 staff members. x Vocational training or retraining of over 30 thousand employees of the Group x Launch of the Low Interest Home Loans Programme in cooperation with ǶǨǶ Gazprombank x Inclusion of 90% of the Group’s enterprises in the VMI programme x Participation of over 15 000 employees and family members in sports and cultural events x Corporate prizes were given to 169 employees of the Group
The environment x Confirmation of conformity of the Corporate Environmental Management System (CEMS) to international standard ISO 14001:2004 x Receipt of the honorary diploma of the Russian Union of Industrialists and Entrepreneurs For the Best Solution in the Utilization of Associated Petroleum Gas x Increased processing of associated petroleum gas by 15% - to 15 billion m3 x Increased spending on nature conservation measures by 28 %
Industrial safety x Development of the Corporate Program for the Development of Safety Culture ending in 2012, together with DuPont consultants x Reduction of the overall level of injuries over a year by 38%, yet 2 persons died x No accidents and fires at SIBUR enterprises x Increase to 526 million roubles of funding for labor and industrial safety
7 SIBUR and the Global Economic Recession
Consumption Crisis A company’s fortunes depend on successful sales. This is what drives the dynamics of its financial and production performance, as well as social indicators. In the 4th quarter of 2008, for the petrochemical industry in general, and SIBUR in particular, the global economic crisis meant a much weaker demand from key customers, primarily construction and the automotive industry. These industries experience plummeting production volumes and record losses. At year end, European demand for cars dropped 15%, in the USA – by 1/3. In October-November, the recession hit Russian companies. As a result, in 2008, KamAz cut production by 11%, GAZ - by 20%, AvtoVAZ - by 25%. The world automotive industry’s demand for petrochemical products dropped more than 15% at year end. The worsening market situation also placed the construction industry in a very complicated situation. Housing construction in the USA went down to the 1991 level, home loans in the UK plummeted 70% at year end. According to Rosstat, Russia’s statistics agency, growth rates in the Russian construction industry were five times lower than in 2007. At the end of 2008, construction companies’ demand for petrochemical products in Russia was eight times lower than in 2007. The decline in demand coincided with the commissioning of a lot of new capacity, especially in the Near East and China. The growth in petrochemical production was much faster than the growth of demand. In a crisis situation it is only competitive producers who can maintain high output, others face an inevitable fall in production volumes. Chart. Lowered demand for petrochemicals in major industries
8 Global Problems The consumers’ problems were quickly felt by the global petrochemical industry. US petrochemical majors felt the pain of declining share prices already during the initial market downturns in 2007. But the global recession struck a year later. In the autumn of 2008, BASF announced preparations for the hard times to come: some 80 plants would be shut down, production would be cut at another one hundred enterprises, and some 20 thousand jobs would be cut. The German giant’s net earnings dropped 28.4% at year end. Another major European concern – Bayer – saw its net profit plummet 63.5% compared to the previous year. Dow Chemical, the leader of the US petrochemical industry, earned just 20% of its previous year’s net earnings. The management announced plans to close 20 plants, suspend operations at another 180, and to fire some 11 thousand people. Polymer producers were hit the hardest – up to 70% of European companies admit that their economic results for 2008 were worse. Producers of catalyzers, fertilizers, specialty and fine chemicals suffer substantial losses.
Domestic Background 2008 started pretty optimistically for Russian petrochemical companies. At the end of the first quarter the Ministry of Trade and Industry reported 4% growth of petrochemical production and export prices of all major goods. The only slightly negative dynamics was observed in agrochemicals, chemical fibers and threads, polyvinylchloride resin and vinyl chloride copolymers, polystyrene and styrene copolymers. By mid-summer their production fell 10%. In August, mineral fertilizer producers found themselves in a very hard financial situation due to declining demand on the world market. Simultaneously, polymer prices on the world market started to fall. On the whole, from the beginning of 2008 production of major petrochemical products in Russia decreased by 1.2-18%, with prices falling 1.6-2.5 times. By the end of 2008 the Russian petrochemical industry found itself in a situation where falling oil and petrochemical prices made exports unprofitable, while the key domestic players – agribusiness, construction and car manufacturers experienced stagnation. In 2009, most petrochemical producers face the challenge of cutting costs, finding new markets and keeping their business. All market payers are not capable of upgrading their production and developing investment projects, the order of the day is survival in worsening conditions.
SIBUR’s people speak...
Natalia Kruchkova, Senior Chemist at Science and Technology Center) (emulsion type rubber laboratory) of ǶǶǶ Tolyattikauchuk. In 2008 she presented a paper at the 12th International Conference of Young Scientists, Students and Post- graduate Students “Synthesis, Research on Features, Modification and Processing of VMC” in Kazan (Kazan State Technology University), ranking second in the section of “Polymer Chemistry and Technology”. - We have felt the economic troubles as a thinner family budget. Prices have gone up in shops, and by the way, the first to be hit was the paycheck – we had to take unpaid days off, or work four days a week, there were no traditional bonuses.
9 I have to do justice to the management: even in the times of a severe economic crisis all measures were taken to launch the plant. The plant may not be working at full capacity, but people have jobs and receive their paychecks on time. True, it worries me that the volume of research has been dramatically cut. We used to have a research plan for 5 themes in the past, now we hardly have 2 – with complete feasibility study, and being able to introduce our findings within the shortest time possible and with minimal costs. Grand plans have to be cut back to the bare minimum. But one should not give up hope. I love research and I shall try to finalize what I started, despite the current crisis situation.
Elena Borisova, technologist of the calendering shop of ǶǨǶ Voltyre-Prom. In 2008, she participated in the commissioning of the AMB 30-70 assembly at the steel wire cord section of the calendering shop. - I live at my mother’s place, there are two of us. The crisis did affect our budget, just like other families. Moreover, I have a loan to repay. But we are not giving up. My mom laughs and says we’ll get more slender. Of course, like all other people, during the first few months we were worried because of the uncertainty. There was a sense of panic in talks with colleagues: “How are we going to live, where do we get the money to repay the loans, etc”. But we have all settled down somewhat, we have reconsidered our views, our finances, we have started to analyze our actions thoroughly. Like what we buy, and other things, and I know all will be OK. You just can’t sit on your hands – in 2008 I went to get a second higher education degree. This is exactly how the company works – looking into the future. The company’s engineers went on a six-hour working day in 2008. Social programmes had to be cut. But the trade union and management of ǶǨǶ Voltyre-Prom have developed an anti- crisis agreement which hopefully will help us all go through these difficult times. The important thing is that the plant has survived and the people can come back and work even more productively than in the past.
Vladimir Prazdnitsin, NDT inspector, category 6, non-destructive control in the hazardous objects diagnosis at ǶǨǶ Azot, captain of the KVN team (KVN – Club of Merry and Inventive People – a team participating in a TV entertainment program requiring a sense of humor and inventiveness). Major projects in 2008 – upgrade of the fractionation-3 shop of the caprolactam line, technical inspection of isothermal storage of ammonia for 10000 tons in the ammonia shop-1. – The economic crisis has affected me and my family, but not as severely as other people. As an example, at some other companies in the city people work three days a week, others have to accept late payment or smaller paychecks. I think the plant’s substantial social support has kept us from feeling the real impact of the crisis. I understand the measures taken by SIBUR to combat the crisis. As for such consequence of the crisis as a reduction of work hours or job optimization, it is clear to everybody that there cannot be no “sacrifices” in such a serious situation! I am sure that together we can overcome any hurdles. Somebody said: a crisis is not in the economy, a crisis is in one’s mind. Because of my job I have to visit the plant’s various shops almost every day, and I can say with certainty: there is no crisis in the plant employees’ minds! People work together, when needed they stay after hours, go to work on weekends, all of them understand that this is necessary.
10 Maxim Lenkov, leading production automation specialist of the Principal Metrologist Service of ǶǶǶ Tomskneftekhim. In 2008, he was awarded the title of Professional Engineer of Russia, and a citation of the Tomsk oblast governor. - The crisis made me reconsider some of my views: family expenses had to be reallocated, a monetary reserve had to be created: less was spent on recreation and food, we had to give up the planned vacation trip. Of course, prices have grown considerably, but the family suffers more from the psychological built-up around the crisis. Otherwise we are pretty confident about the future! The situation was rather tense at the end of 2008 - plants around here were being shut. In my view, the situation at the plant now is quite stable. The workers have felt this stability and have come to value their jobs! Russian are traditionally wary of any calls from the management. But life being what it is, the people start paying heed to what the management says, especially when words are supported by concrete deeds rather than stay on paper. Sure, one can feel that SIBUR is taking determined steps to minimize the crisis’ impact on the company. Right now is the time to reconsider one’s views on the effectiveness of management and production.
SIBUR’s anti-crisis policy
Rolling With the Punch SIBUR has been affected by the main risks and challenges of the Russian economy today. A sharp drop in product prices and the remaining price level of associated petroleum gas have driven down earnings of the Hydrocarbon Directorate and made the segment’s profit razor-thin. During the fourth quarter the Plastics and Organic Synthesis Directorate had to send virtually all its output to the warehouse. Over the year rubber prices fell almost six-fold, causing many of the Rubber Directorate’s plants to close. Graph. A fall in prices of some main petrochemical products
11 At the same time, financial results were positive thanks to the company’s successful operations during the first three quarters, helping SIBUR earn record profits in 2008 although the company saw losses in the fourth quarter. Profits were equal to 0 already in November, and in December 2008 and January 2009 EBITDA4 was -8% Ȑ - 17%, respectively. The positive financial balance was restored only in February 2009. According to consolidated financial results, ǶǨǶ SIBUR Holding’s earnings in 2008 were up 21.6%, compared to the previous period, to 173.5 billion roubles, EBITDA grew 22.6% to 40.7 billion roubles. Net profit was down 29.2% to 16 billion roubles. Among the factors that reduced net profits were the greater tax burden, higher cost of servicing loans, and losses from transactions related to considerable fluctuations in foreign exchange rates. Graph. Dynamics of main indicators of ǶǨǶ SIBUR Holding. Earnings, billion roubles
200
180 173,5
160 142,7 140 121,9 120 106,6 100 84,6 80
60
40
20
0 2004 2005 2006 2007 2008
Graph. Dynamics of main indicators of ǶǨǶ SIBUR Holding. EBITDA, billion roubles.
45 40,8 40
35 33,2 31,8
30
25 22,6
20
15 13,1
10
5
0 2004 2005 2006 2007 2008
4 EBITDA is earnings before interest, taxation, depreciation and amortization
12 Graph. Dynamics of main indicators of ǶǨǶ SIBUR Holding. Net profit, billion roubles5.
25 22,6 21,5
20
16
15
10,9
10
4,7 5
0 2004 2005 2006 2007 2008
The Group found itself on the list of the 295 systemic companies that the government intends to support. SIBUR’s long-term goal is to get out of the crisis with minimal losses for innovations and its personnel. SIBUR’s business turned out to be more resilient than its many competitors in Russia, some of whom found themselves on the verge of bankruptcy. Thanks to its balanced asset structure, its own resource base, a considered credit policy and management’s actions, the company possesses the resources to move forward and retain its key personnel. But to keep the situation under control SIBUR has to take determined, and sometimes very unpopular measures, to reduce costs.
Mobilization Model Even in these difficult times the company has not given up the principles of open internal dialogue. In the autumn of 2008, president Dmitry Konov sent a Memorandum on the Company’s Actions in Crisis Conditions to all of SIBUR’s employees, calling for cost and structural optimization. “In every location the management has to identify additional possibilities for reducing costs, despite their scale and purpose. All managers shall form in their activities a tough system of priorities and should cut off all that is not in conformity with the current mobilization model of management”, wrote Dmitry Konov in that document. SIBUR is aware of its responsibility to the people who may be made redundant in these difficult times. The company assumes a heavy burden of moral problems because for many people losing a job is not their fault. In some cases this is a consequence of inefficient processes and new challenges. Yet the company management sees no other way out and is forced to cut jobs under pressure of the extraordinarily difficult conditions. Optimization, including job optimization, is not just a response to unfavorable environment, it is a continuation of the corporate strategy pursued over the last few years. According to the Corporate Code, higher productivity is a must: “Understanding leadership is not reduced to the benefits of scale, it also requires excellence in
5 Data in the schematics is presented according to IFRS.
13 technology, effectiveness and reliability of all processes. For SIBUR, leadership is above all the ability to perform some processes more effectively and better than its immediate competitors. The company understands leadership as a norm and a goal, realizing that many processes need to be improved”.
Table. Measures taken by ǶǨǶ SIBUR Holding to mitigate the crisis.
The Crisis Chronology A turning point can be identified in the key events around the Group when the global crisis began to affect individual Directorates, shops and people. The timing of SIBUR production stoppages shows how the company absorbed the impact of a depressed market and when its anti-depression policy began to produce a result.
Tobolsk-Neftekhim Last ten days of December – stoppage of butadiene production. The line works at 75% capacity in February.
Novokuibyshev Petrochemical Company November - hemiterpene production is shut down.
Tomskneftekhim 19 November. Airspeed head shut down HDPE assembly line - 4 December. Production resumed.
14 SIBUR-Neftekhim 13 December. Benzol production put into recycling mode. - 22 December. Normal production resumed. 15 December. Electrolytic process shut down at Kaprolaktam plant. - 19 December. Electrolytic process resumed.
SIBUR-Khimprom 17 November. 2-ethylhexanoic acid facility shut down. - 22 December. Process resumed. 13 November. 1st stage of synthesis block shut down at butyl alcohol facility. - 27 December. Block restarted. 12 November. 2-ethylhexanoic acid facility shut down. - 26 December. Facility restarted. 13 November 2008. Propane-propylene fraction processing stopped. – 8 March 2009. Processing resumed.
Plastik 18 November 2008. Styrene production stopped. - 15 February 2009. Production resumed. 1 October. ABS plastic production stopped. - 31 October. Production resumed. 30 December 2008. Polystyrene production stopped. - 31 January 2009. Production resumed.
SIBUR-Geotekstil 31 December 2008. Production stopped. - 11 January 2009. Production resumed.
Voronezhsintezkauchuk From October 2008 production of thermo electronic engines was repeatedly interrupted.
Toliattikauchuk December 2008. 1st plant suspended operations. – Production resumed in March 2009. From November 2008 hemiterpene production suspended at 2nd plant. From October 2008 3rd plant shut down. In October 2008 4th plant shut down. – Production resumed in February 2009.
Krasnoyarsk Synthetic Rubber Plant December 2008. Production shut down. – Plant resumed operation in March 2009.
Corporate Center – ǶǶǶ SIBUR 25% of employees made redundant in November-December.
Conclusions: Here is how company and plant managers commented on the situation at the end of the year.
15 Hydrocarbons Directorate
Mikhail Karisalov, vice-president – head of the Hydrocarbons Directorate: - We set a social minimum – a list of benefits and guarantees which is a basis of the social package for every employee and should be maintained even in the times of a crisis. This is primarily the VMI programme. Our task today is to keep, to retain at the plant those people without whom the plant cannot do. Not just to retain them but to motivate them by providing decent conditions of work.
Leonid Zhernakov, Director General of ǶǶǶ Tobolsk-Neftekhim: - This time, optimization will affect not just support units but everybody, main production units and plant management. The company has spun off the printing-office, the building structures shop, there will be reductions in the construction and repairs shop, Butadien and Izobutilen and MTBE will be merged as of 1 February 2009.
Roman Tumasiev, Director General, ǶǶǶ Nyagangazpererabotka: - No duplication means 80% of contribution to staff reduction. As far back as the autumn of 2008 we reduced such management levels as deputy shop manager and section manager. Moreover, the plant resorted to outsourcing (transport of hazardous substances cleaning, catering). In 2009, productivity will grow 16% just thanks to optimization.
Plastics and Organic Synthesis Directorate
Sergey Merzlyakov, vice-president – head of Plastics and Organic Synthesis Directorate: - There has been a reconsideration of the tasks facing the management regarding production efficiency under the new conditions. We need to learn to work efficiently and reduce costs at minimal capacity without prejudice to the existing production complex. Moreover, we should change our approach to the qualifications of our workers and their production culture. In 2009 we need to focus on additional training, mentoring, a search for more qualified workers in the labor market. Now we can choose the best.
Igor Klimov, Director General, ǶǶǶ Tomskneftekhim: - The plant’s employees have brainstormed and come up with some 40 proposals for optimization with a potential of 50 thousand to several million roubles. At all meetings on anti-crisis measures at the plant I try to show to the managers that the actions we take are not an agony during a crisis or a desire to survive. It is an opportunity to demonstrate one’s best qualities.
Pyotr Krupnov, Director General, ǶǨǶ SIBUR Neftekhim:
- We can’t work the way we used to work. We have started to quickly get rid of the ballast – those who breach production discipline and practices. We’ve become more active in outsourcing. Former employees of SIBUR Neftekhim who joined organizations
16 to which the plant’s functions were transferred, will keep their right to membership in the SIBUR Inter-regional trade union.
Rubbers Directorate Andrei Zhvakin, vice-president – head of the Synthetic Rubbers Directorate: - Many of the Directorate’s plants operate on a reduced scale. Some of the freed- up workers are employed in maintenance required to relaunch the equipment, some are on forced leave. Managers and support personnel at some of our plants work a 4-day week. In addition, some reductions were carried out both in the Directorate and at enterprises.
Sergey Polonyankin, Director General, Tolyattikauchuk: - Tolyattikauchuk is simplifying the structure of its shops, doing away with duplication of functions and extending the employees’ zone of responsibility. Tolyattikauchuk saved 37 million roubles in 2008 thanks to reductions, outsourcing and the fact that the services of the plant management worked a 4-day week. Another 22 million were brought by the rationalization contest started in early October.
Alexander Gusev, Director General, Voronezhsintezkauchuk: - The plant resorts to outsourcing, without applying radical measures. The first step was to spin off the repairs unit, then the cafeteria, we shall be merging the instruments and meters shop, automatic process control system, communication and information technology unit into one division and apply internal self-financing.
Trade Union Vyacheslav Khomich, Chairman of the SIBUR Inter-regional Trade Union: - If we stop production it will be very difficult to relaunch it later. We have to retain only those we cannot do without. Yes, it hurts those who are made redundant. But if a plant is shut down altogether, is this better? But we insist that people remain protected. The employer must pay to an employee all that is stipulated by law and the collective bargaining agreement.
Adjusting the Investment Programme Even after adjustment, SIBUR’s investment programme for 2008, was the group’s biggest in history and amounted to 33.6 billion roubles. The biggest projects included an increase in the capacity of the Nizhnevartovsk and Belozerny gas processing plants. Design works continued to construct a polypropelene complex in Tobolsk and a polyvinyl chloride complex in Nizhny Novgorod oblast, and to expand the Yuzhno-Balyksky gas refinery. The crisis and liquidity shortage hit primarily those companies that were willing to take loans for new projects. “If you look at companies the size of ours – in terms of earnings – in the West, they invest, as a rule, 3 to 4 times less than SIBUR. Our Western competitors have gone through a number of cycles and are therefore more conservative,”- said Alexey Filippovski, SIBUR’s vice-president for economics and finance. “But on the whole SIBUR suffered less than other Russian companies because we are a holding company, and did not have time to get the machinery of investment loans up to full speed, given the inertia of a big company”.
17 Yet the recession brought into question the implementation of some of the planned projects that were supposed to ensure the company’s development over the next few years. SIBUR predicts a sharp drop in earnings in 2009, and is revising the timeline of its investment programme. Graph. Investment programme revised.6
SIBUR has extended the term of its main investment projects – from mid-2011 to 2013. Projects with a quick return will be continued in the near future. “We continue to finance our investment programme to the extent we can afford them and at the level of risk of which we were able to convince our shareholders”, - says Dmitry Konov in his Memorandum. The preservation of this investment portfolio for 2009-2012 will enable SIBUR to become a company with totally different prospects. Table. Main development strategies of the company.
6 Net of VAT. As of January 2009.
18 SIBUR’s people speak...
Sergey Uchuvatov, polymerization operator in Shop No. 802 of PVC resin, Kaprolaktam plant. In 2007, he was awarded a certificate of merit for his achievements by the Legislative Council of Nizhny Novgorod Region. - Our family has to cut some expenses. But we do not skimp on the basic necessities – food and medicines. In the conditions of crisis we were particularly affected by a 30% hike in the costs of housing and utilities, and a 50% increase in the price of medicines. We do hope the crisis will not last many years because life will be pretty hard for us during a crisis – we have two daughters, the younger one is 4 years old. I would like optimization to mean automation and modernization rather than banal reduction of personnel.
Andrey Vishnevski combines the duties of a head of the synthesis and distillation unit in the carbamide shop with the functions of a volunteer labor safety inspector at ǶǨǶ Azot. He became the Best Labor Safety Representative of ǶǨǶ SIBUR Holding in 2008. –There was a time when most facilities were shut down because of the lack of demand. But thanks to efficient actions of the management of the enterprise and SIBUR Mineral Fertilizer Company, sales of the main products, except for caprolactam, were resumed. Wages and salaries are paid on time. As for the carbamide shop, we continue to work at full capacity, and send all production to our customers. There are
19 no products in the warehouse, which shows, among other things, that there is demand for our products. This infuses the collective with confidence.
Alexey Malkovski, electrical/gas welder, category 5, repairs equipment in shop No. 23 of ǶǶǶ Tolyattikauchuk. In 2008, he took part in a corporate contest of professional skills and won 2nd place. The Malkovski dynasty has worked at the plant over 100 years. - Our family has been mostly affected by growing prices, especially of children’s clothes, and growing housing and utilities bills. I am the only one who works in our family, my wife is on child-care leave. She wants to work but child-care facilities are a big problem in the city. The crisis mostly affected the technological shops. Some of them were closed in 2008 because there was no demand for their products and the cost of energy was high. But some of the shops are now back in operation. If shops are reopened after staying idle, it means the company has plans for the future. My grandfather Misha worked at the Kuibyshev synthetic rubber plant, my parents work here. They have gone through several crises, and with God’s help we shall survive this one.
Victor Lyskov, deputy manager of production for ethyl benzene and styrene of =ǨǶ SIBUR-Khimprom. Winner of the title of Best Innovator of Perm oblast. - In anticipation of hard times I started to look into the future more often. For instance, I wanted to carry out capital repairs in my kitchen but decided to postpone them a little. The crisis has hit the hardest those who were made redundant. Although most of them are retirees. Moreover, they received six average monthly wages. They took it well when they were fired. What I liked about SIBUR at once is that it is a solid company. It has brought stability and motivation to develop at the enterprise. So I believe in our future. The call for optimization will help, and in addition, a programme needs to be developed at every site, every installation, to reduce costs, for instance losses of energy.
Roman Shapovalov, Head of Optimization Section, ǶǨǶ SIBUR-Volzhsky. Member of a worker dynasty. His section is in charge of optimization of production and management processes. The 8 projects already on board promise an annual saving of 25 million roubles. - The crisis has affected the wellbeing of both workers and managers. I had to drastically change my financial planning, to postpone, or maybe even cancel a honeymoon trip. Therefore my attitude to a possible reduction of costs by way of reduction of wages is unequivocally negative, but from the viewpoint of strategy, it is clearly a measure of last resort. We need to carry on production optimization. This is not easy because the psychological climate got markedly worse, especially at the beginning of the forced down time. It has become harder to keep the personnel fully occupied. But if somebody thinks only of holding on to his job, this is not the time for such thoughts. We need to change our mentality, break down stereotypes, and increase productivity. We can do it only if we are together. I have trust in the company.
Gennadi Chinenov, Head of the Steam Supply Shop, ǶǨǶ Plastik. In 2008 he marked his 20th anniversary of working at the plant.
20 - Problems of the economy do affect the family purse. We have to help our children more – my daughter has taken a loan. We have to make do with what we have. The company is also trying to minimize losses. As an example, outside organizations used to be hired to carry out some repairs. Given the current situation, the company tries to engage its own employees to do this. This is a huge plus because the production plans were cut, and rather than pay 2/3 of wages the company engages people to do non-core work. Optimization of all processes has become more active. But in our joint work with the SIBUR project group to improve management systems we see that either the people do not understand their tasks or their immediate bosses fail to formulate assignments correctly. So I believe that before we start optimization we need to analyze in depth all details of the production process.
Irina Pavlyuk, Leading Specialist of the Personnel Motivation Section, Chairperson of the trade union committee of ǶǶǶ Noyabrsk GPP. - Because of the crisis, in 2008 many people saw their income go down and their expenses go up. Housing and utilities bills have grown considerably, as well as prices of staple foods. My husband and I have not been affected by those changes yet, we both work, we are used to living within our means, and we plan our budget. I regard SIBUR’s measures to counter the crisis as correct. I do not completely agree with staff reductions because it is difficult to find a job when unemployment continues to grow, and many people have children, bank loans.
Natalya Khomyakova, Treasurer, ZǨǶ SIBUR-Khimprom. In 2008, she got on the staff reserve list of SIBUR, and started her studies at the International Management Institute. - I and my husband work at the same plant, the economic crisis affected us in 2008 in equal measure - minimally. The company continues to produce its products, we receive our salaries and bonuses. But as head of the treasury I notice that the nature and volume of financial streams reflect the crisis situation. It is a pity that social life, cultural events for the people, and material assistance have to suffer. Investment projects need to be developed further to evolve from production of raw materials and semi-finished goods to finished products. Then we can hope to become stronger and more influential in the global market in the long run.
Vitaly Zhila, machine operator of the gas compression and processing shop No. 1, ǶǨǶ Yuzhno-Balyksky GPP. A member of a worker dynasty. - So far I and my family have not been affected by the recession. But in the second half of 2008 I began to save more on current expenditures, and I refrain from any major purchases. Our enterprise has not been heavily affected either. In 2008, construction works continued to expand production, a new booster compression station is being commissioned. But the psychological climate has changed due to uncertainty and lack of security rather than the changes already brought on by the crisis.
Vasily Sosnin, fitter of instruments and meters, ǶǶǶ ITSK (ǶǶǶ Tomskneftekhim). In 2008, he was elected chairman of the youth committee of the Tomskneftekhim trade union chapter, and won the city contest “Young Family – 2008”.
21 - I have not noticed the impact of the crisis. Salary is paid on time, the plant is working, buses are running. Overall, the crisis has not changed the mood in the collective. As for the management’s calls to optimize the work process, my attitude has changed. A crisis is a powerful argument to work more efficiently. One constantly assesses the situation and makes comparisons - other plants are shut but we continue working. One has to make an extra effort to keep profitability up during a crisis. The important thing is to not overdo things in optimization calls.
22 Personnel Development
Despite the crisis SIBUR continues to regard its personnel as its main asset which requires priority attention. As an employer SIBUR is responsible for creating favorable conditions for work, providing competitive wages and salaries, implementing social projects and personnel development programmes.
Table. SIBUR’s human resources policy.
Being More Effective Extremely low productivity is a major challenge for SIBUR today. Leading international petrochemical concerns similar to SIBUR employ four to five times fewer people who, as a rule, produce more. Average wages in the Group are already comparable to those in Eastern Europe. This problem comes to the foreground during a global crisis. SIBUR is solving it in two ways. Firstly, it modernizes existing operations and builds new capacities. Secondly, it optimizes all business processes, eliminates duplicated functions, expands zones of responsibility, etc. This results in reduction of personnel which is carried out in accordance with Russian laws. At a meeting in December 2008 SIBUR’s top managers recognized the idea of cost reduction and optimization of business processes as a dominant one in current conditions. This is why consistent and step-by-step reduction of personnel is a major human resources policy of SIBUR’s. Thanks to the management’s efforts it was possible to achieve stable annual growth of productivity which is higher than that of wages and personnel reduction. 23 Chart. Dynamics of personnel numbers, persons7.
79927 73947 67584
2006 2007 2008
2006 2007 2008
Graph. Productivity dynamics, 1000 roubles. year/man.
3000
2460 2500
2000 1929
1526 1500
1000
500
0 2006 2007 2008
2006 2007 2008 Chart. Dynamics of average wages, rouble/month.8
25000
19563 20000
16216
15000 13127
10000
5000
0 2006 2007 2008
2006 2007 2008
7 Number of production units.
8 Including bonuses paid by management companies (ǶǶǶ SIBUR, ǶǨǶ SIBUR-Mineral Fertilizers, ǶǨǶ SIBUR – Russian Tyres)
24 Growth of Wages and Salaries Wages are the main issue in relations between employers and employees. Apart from cost cutting, optimization of production and organizational structure is aimed at ensuring constant growth of wages and salaries. Egalitarianism in compensation for work has long proven its ineffectiveness. By looking for a fair balance between basic pay and bonuses SIBUR seeks to enhance the motivational function of compensation that takes into account every employee’s and unit’s contribution to the Company’s success. Thus, the share of the flexible part of compensation should grow as an employee’s responsibility increases. The Group seeks to tie bonuses of managers and supervisors to the performance of the entire enterprise, and bonuses to workers to quality performance of tasks and fulfillment of the production plan. In 2008, average wages at the Group’s enterprises increased by 21% to 19563 roubles per month. In 2009, wages will grow more slowly because of the difficult economic situation. The Group continues to improve its compensation scheme.
“Speaking of the compensation system as a whole, we still see cases where compensation in SIBUR is tied to hierarchy, to the title, the legacy of distributing bonuses equally”, - notes Svetlana Chekalova, SIBUR’s Human Resources Director. – “But we have less and less of this disparity. We want compensation to be tied to the weight of a position – the level of responsibility and contribution to the company’s development.” According to SIBUR’s Corporate Code, “the Company does not seek to form excessive expectations with regard to compensation and social programmes, recognizing that their growth is directly linked to SIBUR’s business results and the market environment”. In particular, the overall growth of compensation in 2008 was achieved largely through optimization of personnel because the total labor compensation fund remained unchanged. In 2008, the Corporate Center became an important target of optimization and reduced its personnel by 25%. An important signal was thus sent to the regions. The Company realizes that it is important not only to raise wages but also to make employees understand how they are formed. Corporate sociological studies have clearly shown that the more an employee understands the compensation system the more fair – depending on quality of work – it is perceived.
25 Chart. Correlation “understandability of compensation/dependence of pay on quality
10.6 7.7 15.9 15.3 18.3 39.4 12.4 27.6 23.8 18.2 26.4 20.5 24.5 9.6 15.8 16.2 33.0 22.3 16.8 14.5
Protecting the Standard The main task set by the Company is to make social services available to the greatest number of employees, to ensure affordability and optimal cost of such services. In 2008, over 1 billion roubles was spent on the social sphere. Table. ǶǨǶ SIBUR Holding’s spending on social programmes, million roubles.
Social Sphere 2007 2008 Work safety 367. 0 391. 1
Training 94.0 187. 7
Spending on social sphere and social 1361.4 1 589.3 benefits Spending on social facilities (without 57.2 63. 9 payroll) Payments of social nature 316.2 470.8
Spending on resort vouchers 75.1 65.9
Charities, including: 623.7 630.5
- Social investment as part of regional 392.5 352.3 partnership - Corporate charity 231.2 278.2
Services of outside social organizations 48.6 68.0 (medical facilities, etc.) Spending on other social needs 240.6 275.8
26 Housing programme - 14. 5
1822.4 2 168.1
SIBUR’s enterprises maintain over 30 social infrastructure facilities. The Company believes it expedient to close small unprofitable social facilities and to invest in well- equipped complexes that can be used by workers of all of the Group’s enterprises. The volume of social benefits enjoyed by the employees will not be reduced – for instance, they will receive assistance in paying for resort vouchers or cultural events. Rest and recreation is accessible not only to employees but their families, especially children. In taking decisions about social facilities SIBUR is guided by the social standard which is understood as the main social programmes aimed at improving the wellbeing of employees. This approach is in line with the Company’s obligations as recorded in collective bargaining agreements. The social standard necessarily means the following services provided to employees by the Company: x Health care; x Meals at workplace; x Health promotion and rehabilitation. In April 2009, Svetlana Chekalova confirmed at a meeting with employees of SIBUR-Neftekhim that all obligations assumed by the company and enterprises within the framework of concluded collective bargaining agreements will be fully honored.
Health Care Expanding the voluntary medical insurance schemes (VMI) is a key policy in preserving employees’ health. The Company offers a voluntary medical insurance scheme whose main objective is to protect employee health and reduce the risk of occupational diseases. The scheme included outpatient care, hospital care for emergencies and planned interventions, dental care, and diagnostic and laboratory tests, home care, and annual flu inoculations. In 2008, the VMI scheme covered 90% of the Group’s enterprises. At a later stage of development VMI will cover all regional enterprises, and health care programs will be extended to include specialist preventive screening. Table. VMI funding, million roubles.
Year 2007 2008 VMI cost 126.7 132.2
Sports To consolidate ties among enterprises and encourage healthy lifestyles the Company organizes sports events all year round. In 2008, over 15 thousand employees and family members took part in sports events. Major events include: “SIBUR Ski trail” in Tobolsk, summer Olympics of enterprises of the Siberia-Urals and Central Regions, Final Olympics in Moscow, the Volga Autumn in Tolyatti, an international soccer championship, a chess open championship.
27 “SIBUR Ski trail” competition was held on 22-24 February 2008 in Tobolsk. Over 170 skiers from 19 enterprises of the Group took part. The team of OAO Azot (Kemerovo) came in first, with the hosts – OOO Tobolsk-Neftekhim – second, and ZAO SIBUR-Khimprom (Perm) third. Encouragement prizes for the 4-6th places were given to teams from Tolyatti (ǶǶǶ Tolyattikauchuk), Novokuibyshevsk (ZǨǶ Novokuibyshevsk Petrochemical Company) and Chaikovsky (ǶǨǶ Uralorgsintez), respectively. The fourth SIBUR Summer Olympics were held on 2 August 2008 in Moscow. Over 200 people from 18 enterprises of the Group who passed qualifying rounds took part in the finals. The best team was that of ǶǶǶ Tomskneftekhim. It met with tough competition from ǶǶǶ Tolyattikauchuk which lost at the very last moment. The third- ranking team at the Olympics was that from Novokuibyshevsk. Volga Autumn, SIBUR’s fifth anniversary corporate championship, ended on 28 September 2008 in Tolyatti. 19 teams and over 280 sportsmen participated in Volga Autumn-2008. 4 teams more than in 2006, and 6 teams more than in 2004. Unlike previous years, the tournament included one more sport - hockey. The golden medal in hockey was won by the sportsmen from Tolyatti. Second and third were teams of SIBUR (Moscow) and ǶǨǶ Omskshina (Omsk), respectively. Moscow sportsmen came first, and the team from Tolyatti came second in basketball, with players from the Novokuibyshev Petrochemical Company (NPC) coming in third. The chess tournament was won by the teams of Mineral Fertilizers (Perm), NPC, and Azot (Kemerovo). The best teams took part in the 7th Winter Olympics of ǶǨǶ Gazprom in Izhevsk, and a soccer tournament in Antalya (Turkey). The Sports Council holds an annual review of year-end results. Prizes are given out to the best enterprises-organizers of sports and recreation events.
Own Home Within the system of its employee social support, SIBUR attaches great importance to the development and implementation of a housing programme, being aware of how acute this problem is for many employees. In 2008, in cooperation with Gazprombank it launched a pilot project called Preferential Home Loans Programme allowing employees to pay no interest on loans for 15 years, on a case-by-case basis. The programme in 2008 was not a success mainly because of the very rapidly growing housing prices and the banking crisis at the end of 2008. Petrochemistry is not a high-margin industry, and the Company is now unable to compensate its employees the substantially higher interest on mortgages. The suspended home loans programmes will be resumed upon stabilization of the financial market, and provided housing prices go down.
Collective Bargaining Agreements The trade union at the Company operates on the basis of the Agreement concluded between the Inter-regional Trade Union and the Group. The Agreement governs a guaranteed minimum of social benefits, above those stipulated in effective laws, which may be revised only upwards. Social obligations of individual enterprises are recorded in collective agreements. Given the crisis, in the 4th quarter of 2008 some obligations under the collective agreements proved to be too heavy a burden for enterprises that had to shut down some production lines due to lower demand. The law says that in such cases bilateral
28 commissions may adopt additions and changes in collective agreements. There is one condition: changes may be effective only for a certain, explicitly stated period, e.g. bonuses maybe cut 10% for three months starting on a certain day. Such things happened but this cannot be regarded as deviation from a collective agreement. Furthermore, those were isolated cases and the workers understood. In the 1st quarter of 2009, the situation returned to normal as regards fulfillment of obligations under collective agreements. In 2008, to preclude legal and economic risks and to unify the minimal social obligations at all enterprises, the trade union and SIBUR management developed a unified standard for collective agreements for enterprises. Its preamble says that a new collective agreement may not contain benefits and guarantees lower than those included in a previous agreement. Changes and additions in a new collective agreement may not worsen the condition of workers compared to previous obligations. The unified form and structure of collective agreements within the Group does not mean that they must be uniform. Each plant has its specific features – different profits, different productivity, different local climate, a different scope of previous arrangements. Collective agreements will necessarily vary. On the other hand, a unified standard of a collective agreement facilitates comparative analysis of workers’ conditions at different enterprises. There are plans to adopt in 2011 a single date for renewal of collective agreements in order to introduce necessary changes across the Company quickly. The economic crisis has demonstrated the importance of quick response and corporate flexibility in today’s economy. Chairman of SIBUR’s Inter-regional Trade Union Vyacheslav Khomich: - Spending on sports, culture, health care for employees and their families will not be reduced. But we realize quite well that prices are going up and this spending should be increased, though we are not yet insisting on this because we understand that the company has to survive the crisis. Our task therefore is to prevent degradation of what is already in place, and we are coping. When the situation at the company becomes better than now, we shall be negotiating more spending on the employees’ social needs.
Career Opportunities “Professional development of people is task number one for all divisions. The Company believes it normal when an employee relates his or her professional competence to a realization of weaknesses and a desire to improve his or her function”, - says SIBUR’s Corporate Code. Financial motivation is not the only form of encouragement. The scale of SIBUR’s activities makes the Company an excellent platform for achieving one’s professional ambition, accumulating experience, and improving one’s qualifications. The possibility to build a career within the company is a powerful motivator. As regards career development, SIBUR guarantees equal opportunity to all employees regardless of age, sex, race, nationality, religion, or political leanings, handicap or other features provided they do not impede performance, are in conformity with effective laws, and are not contrary to society’s moral values. The Company closely watches it internal potential, trying to fill vacancies not by engaging outsiders but by developing internal rotation programs. In 2008, 30 vacancies of directors general and deputies were filled this way at the Company’s enterprises. The Holding plans its human resource needs for a three year horizon. Candidates are
29 specifically groomed for their positions. All preparatory work has been completed and, according to plans, the system of human resource reserve will be fully operational by mid-2009, it now includes 163 people. Some of them study at the Stockholm School of Economics and Open University LINK. “Our Company needs people who want to build a career”, - says SIBUR’s president Dmitry Konov. – “We shall help them develop; we shall help them understand what it is to be a professional in the broadest sense of the word. We are willing to make efforts to develop a next wave of managers, and we hope we achieve this”. Mikhail Karisalov, head of the Hydrocarbons Directorate, says: “The Company has been moving systemically and purposefully toward a situation where it could select people on whom it could place its bets”. According to SIBUR’s Corporate Code, ambitious employees should be ready to be professionally mobile: “The ability to change position or function within the Company endows employees with additional social and professional mobility which is essential for discovering new opportunities and increases an employee’s overall value”.
New People The changing economic trend has not impacted on an essential corporate need: SIBUR cannot do without new people who bring with them fresh ideas and open new opportunities. The company personnel should not age, and experienced and qualified employees should be able to pass on their skills and corporate traditions to their younger colleagues. In addition to improving its personnel reserve programme, the Company implements a programme to replenish its engineering and technical personnel. All of the Group’s enterprises interact in one way or another with regional educational institutions, but the existing practice is very heterogeneous and sometimes ineffective. The Group has developed a model of optimal interaction with higher educational institutions to achieve a number of objectives: how to launch a new discipline so that graduates be required at a plant, how to organize internships, what kind of agreements should be concluded, how to retain the best graduates, and so on. In 2008, a model of interaction with regional higher educational establishments was successfully implemented at a pilot enterprise - ZǨǶ SIBUR-Khimprom. Curricula were developed specifically for SIBUR: a master’s program “Chemical Technology of Organic Substances” and a targeted retraining program “Technology of Organic Synthesis”. Corporate stipends were allocated, as well as grants of ZǨǶ SIBUR– Khimprom for the best students and professors of the chemical technology department (CTD) of PGTU. The Company has repaired auditoriums and laboratories of the CTD for skills building sessions. 46 students of 3rd and 4th year and 32 graduates of the 5th year were provided internships within the framework of the project. An important task is to form an attractive image of the chemist and to demonstrate the prestige of this profession to the younger generation. The programme of cooperation with higher educational establishments tested in Perm will be extended in 2009 to 8 regions of Russia where the Company has its main facilities.
Becoming the Best In 2008, SIBUR participated for the first time in a study “Best Employer in Russia” and ranked 24th out of 72 companies, including Western companies, and took
30 8th place among the 25 Russian companies. The involvement indicator9 of SIBUR’s personnel - 67% (best Russian practice – 84%). Companies with an involvement indicator below 40% are in an uncertainty zone, from 40% to 60% - in the indifference zone, and from 60% upwards – a results zone. SIBUR achieved quite an impressive result but 33% still separates it from 100% involvement, which means there is more work to be done.
Improving Competence Tough global and domestic competition inspires SIBUR to look for market alternatives, future technologies, ways of cost cutting, and other optimization opportunities. SIBUR’s key value is constant development of the Company and each individual employee. It is a priority task of all divisions to ensure professional growth of every person – from top managers to shop floor workers. Every person has to realize that his or her success within the Company depends on how much better he or she will be tomorrow compared to today or yesterday. SIBUR’s corporate culture speaks of always moving forward. A manager’s effectiveness is measured by his and his subordinates’ professional growth. In 2008, a priority human resources policy was the development of in-house expertise, mentoring and knowledge transfer. A successful company of SIBUR’s size is unimaginable without a developed system of in-house training. Such a system strengthens the Company’s resistance to economic fluctuations. In 2008, over 30 000 employees went through training or retraining, received additional education, or raised their qualifications.
Chart. Number of SIBUR Holding employees trained in 2008, persons.
A major project in 2008 was to improve the enterprises’ effectiveness. Some 100 employees of 25 enterprises of the Group were trained in diagnostics of optimization potential of business units, and optimization skills. They shared the best practices and trained to become leaders of change.
9 According to the Hewitt methodology, involvement is a combination of three behavioral models: willingness of employees to speak well of the company; employees’ desire to work for the company for a long time, and employees’ desire to achieve excellent results for the company’s success.
31 Using internal resources and outsourcing SIBUR conducted the following corporate seminars for managers in 2008: “Project Management”, “Personnel Management”, “Down with Language Barriers”, and “Petrochemistry for Laymen”. Directors General also have access to training and opportunities to communicate with their counterparts. Two modules for top managers were organized in 2008. Another four modules will be conducted in 2009. There is another initiative that contributes to the optimization project as well as to training and development: centers of competence. In 2008, active efforts were made to develop and set up 5 pilot centers of competence: CC Mechanics, CC R&D and STC, CC Power Engineering, CC Accounting, and CC Logistics. The centers are to consolidate the best in-house practices and internal expertise. They can considerably increase the share of in-house training within the corporate training system.
Corporate Sociology A company audit includes analysis of not only financial and economic indicators, and production. Sociological surveys produce an objective picture of employees’ socio- psychological condition and are part of harmonious internal communication. Knowledge of psychological climate in a company is highly relevant for conflict-free optimization measures that will inevitably gain momentum as the economic situation continues to deteriorate. Of the projects undertaken in 2008, two can be identified as the most significant ones. First, a study of relationships between the Corporate Center and regional managers. Most respondents underlined that a group is the most optimal form for the Company. The study showed that the structure possesses both frictions and positive elements. The positive tendencies included smooth elimination of local isolation and expansion of corporate horizons, recruitment for work in Moscow of professionals from regional divisions who preserve ties with their floor level production, considerable reduction of the volume of financial accounting, growing partnership between enterprises and a number of units of the Corporate Center. The most common problem situations were an excessive number of queries sent to the regions, disregard for requests from enterprises, insufficient communication of some actions taken by the Head Office, duplication of functions of units of the Corporate Center, and the “punitive” slant in motivation. The study shows that a considerable number of SIBUR’s employees think in terms of common corporate space. “The Company’s employees have to realize that working in Moscow does not provide any additional advantages, and is not a cause for any discrimination, - says the Corporate Code. – In their relationship with the regions all employees of the Company should demonstrate a collegial and team spirit thus forming a positive image of the management company”. One of the study’s recommendations was to develop a special document to govern this sphere of corporate relations. It should be of recommendatory nature, and should help the staff of the Corporate Center in their contacts with their regional counterparts. It is essential to make this relationship as comfortable for both sides as possible and as productive as possible in the interests of the Company. The rules were developed and published in corporate publications. They are in line with the SIBUR Corporate Code of Ethics and are its distillation in the area of communication with regional colleagues. The second study aimed at investigating the overall atmosphere at enterprises covered some 4000 employees at 11 enterprises, its objective was to describe the best
32 corporate practices and identify problem areas. It demonstrated the employees’ considerable involvement in the Company’s affairs and relatively low satisfaction with compensation. The study demonstrated an extraordinary fact: work is the main source of satisfaction among the many things that can provide satisfaction. It is a most important stimulus in life. If a person is satisfied with work, the weight of material factors decreases somewhat. The greatest contributors to job satisfaction are relations among workers, relations between workers and managers, industrial safety, and children’s recreation. Based on the findings, recommendations were drawn up to maintain the favorable factors and reduce the problem areas. The Company takes into account social diagnostic findings in developing its social policy tools and will extend the practice of sociological surveys.
Table. The best practices as identified by social diagnosis at plants
Parameter Best indicator Job satisfaction Yuzhno-Balyksky GPP, Gubkinsy GPP, Kauchuk, SIBUR – Khimprom. Outfitting of workplace Gubkinsky GPP, SIBUR –Khimprom (equipment, work clothes) Level of industrial safety Tobolsk-Neftekhim, Kauchuk, Gubkinsky GPP, SIBUR – Khimprom Relations among workers, Uralorgsintez, Kauchuk, Voronezhsintezkauchuk psychological atmosphere in collectives Relations between managers and Tobolsk-Neftekhim, Kauchuk, Voronezhsintezkauchuk workers Career opportunities Yuzhno-Balyksky GPP, Gubkinski GPP, Job security Yuzhno-Balyksky GPP, Kauchuk, Krasnoyarsk Synthetic Rubber Plant, Voronezhsintezkauchuk, Tomskneftekhim Organization of children’s Gubkinsky GPP, Yuzhno-Balyksky GPP, Tobolsk-Neftekhim, recreation Kauchuk, Voronezhsintezkauchuk, Tomskneftekhim Social conditions at work (and Gubkinsky GPP, Krasnoyarsk Synthetic Rubber Plant their change) Catering at workplace Yuzhno-Balyksky GPP, Uralorgsintez, Tomskneftekhim, SIBUR –Khimprom Health care Gubkinsky GPP, Yuzhno-Balyksky GPP, Kauchuk, SIBUR – Khimprom
Red Dates Corporate events play an important role in maintaining a comfortable emotional and psychological climate, especially during a crisis and forced redundancies. Each enterprise of the Group organizes celebration of the Day of the Chemist, New Year, Mother’s Day, Old People’s Day, 8 March, 23 February. Presents were distributed to all children of SIBUR’s personnel on the New Year’s eve, and by 1 September first-year school children were given backpacks. Within the framework of the project called “I am a small SIBUR person”, arts and computer design contests were organized for employees’ children. An exhibit of the
33 best works was held in Moscow, and winners went on a “Northern Cruise” – a trip in the Ladoga and Onega seas on a pleasure boat.
Sign of Recognition The current system of motivation provides not only for material rewards but also various types of non-material encouragement. Table. Awards to employees of ǶǨǶ SIBUR Holding in 2008.
In 2008, the Ministry’s wards were given to 169 employees of the Copmany: Honorary mention 119 persons Certificate of honor 40 persons Honorary chemist 3 persons Honorary petrochemist 7 persons
In 2008, awards of the Union of Chemists were given to 23 people: Plaque – Order for Services to the Chemical 5 persons Industry Honorary Diploma of the Union of Chemists 8 persons Certificate of honour 10 persons
There is also a corporate system of recognition. In 2008, the three best enterprises of the Group received awards, three employees were awarded the title “Merited Worker of SIBUR”, two – the title of “Best Specialist of SIBUR”, three received a badge “For Contribution to the Development of the Group”. The Best Division, the Best Top Manager, and the Best Leader of SIBUR were also recognized in 2008. Certificates of honor and letters of acknowledgement were given to 304 employees.
Corporate Code The first step in an analysis and consolidation of corporate values was the development of the Corporate Code of Ethics of OOO SIBUR – the management organization of ǶǨǶ SIBUR Holding. The next step is to involve all enterprises in describing such values according to common corporate standards. The work on the Code started in 2008, and the Code was adopted in early 2009. The document is effective only in the management company but it may be taken into account by the Holding’s enterprises. In the document, SIBUR recorded a period of its development as a community of professionals, and noted the maturity of its business environment. The behavior approved in the Code underscores SIBUR’s features as a corporation: team spirit, openness and tolerance, innovation and rationalization, integrity and obligatoriness, and reflect the Holding’s production specificity by emphasizing safety. The document is of a recommendatory nature, though compliance with the Code is encouraged. On commitment to development: “Orientation to the ability to improve one’s performance and to acquire new skills – is the main indicator of an employee’s value to the Company. Work and career in SIBUR is a sphere of fair competition of talent, knowledge, and effort. SIBUR expects its employees to initiate their own development, primarily by proposing novel ideas and projects which the Company is prepared to support financially, technologically and organizationally”. On the culture of dialogue: “SIBUR stands for open interaction between various 34 levels of the overall management structure. Management decisions are mandatory for execution but free and rational discussion is encouraged until a decision is taken. Adoption of a decision, in its turn, does not mean a veto on introduction of proposals or improvements regarding a given matter, but is mandatory for implementation. Despite the collegiate nature of discussion, a concrete employee is assigned personal responsibility for a decision”. On intra-corporate equality: “Relations between the Company and enterprises of ǶǨǶ SIBUR Holding are based on mutual respect and understanding that the team spirit principle extends to the entire “corporate space” of the SIBUR Group. SIBUR has no preferred or non-preferred enterprises – there are the effectiveness criteria common to all, a unified strategy, and an understanding of the role of every asset in the overall development of business. The Company’s employees have to realize that work in Moscow does not create any additional advantages, nor is it a cause for any discrimination. In their relationship with the regions all employees of the Company should demonstrate a collegial and team spirit thus forming a positive image of the management company… Manifestations of arrogance, snobbery, “blind” and ineffectual administration undermine the integrity of the corporate space. Such facts may be discussed not only within the framework of management procedures but also publicly – by authority of public opinion”. On conflict of interest: “It is recommended that SIBUR employees refrain from actions potentially fraught with conflict of interest. Thus, grounds for such a conflict may become inclusion by an employee of family members in the sphere of SIBUR’s commercial activity, or his or her direct or indirect participation in structures having business with enterprises of ǶǨǶ SIBUR Holding. SIBUR strives to ensure fair and unbiased treatment of all its commercial partners. The Company’s employees must not accept tangible or intangible valuables if their receipt may affect the Company’s commercial decisions or may be construed as an attempt to influence its activity”.
SIBUR’s people speak...
Sergey Maniakov, electrical/gas welder of Shop No. 23, ǶǶǶ Tolyattikauchuk, expert in categorized material, holder of the highest labor grade - 6. In 2008, he participated in a contest “The Best Welder in the Middle Volga Region -2008”, and was ranked the 4th. - Specialists of the level like myself and my wife were not made redundant or offered 2/3 of their wages. The only thing that negatively affected the family budget was higher housing and utilities bills. And also higher food prices. Of course, during optimization, when there was talk everywhere – in buses, in the cafeteria – of reductions, people were worried because nobody wants to lose his job. There was a bit of nervousness, but it did not upset normal relations in the collective. Because we are all in the same boat.
Oleg Poputin, maintenance foreman, Shop 28, ǶǨǶ Voronezhsintezkauchuk. He was promoted to this position in 2008, working previously as a fitter. - The crisis has seriously affected my family’s finances. On the whole, the entire population of our country saw their life worsen. But there is no panic. Yes, the first months of the crisis were very difficult for the plant: we were put on a 4-day week. The situation has stabilized. By the way, there are reference points now. It has become
35 clearer: if you want to live and earn well you need to grow professionally. I, for instance, will improve my qualifications.
Denis Ganyukov, shift supervisor, Shop I-2-3, dehydration of isobutane and separation of isobutane-isobutylene fraction, ǶǨǶ Kauchuk. In 2008, he underwent training and passed exams to work as shift supervisor. - Economic difficulties in 2008 did not affect my family. I work at a plant, not for a tiny company. But my relatives have felt the crisis: they used to work for a small private firm and they were fired. Our shop has two big divisions, shift supervisors were made redundant and equipment operators have a heavier load now. The shop deals in large volumes of explosive material. The safety inspection log has the most notes. Inspections never end! Of course we have special people working at our plant: we always understand our responsibility for the environment. Crisis or no crisis, we always perform our functions conscientiously. But overall, the shop and equipment are old, of course, made in the 1960s, and require capital investment.
Ludmila Yankova, laboratory technician of chemical analysis, Technical Control Section, ǶǨǶ Plastik. In 2008 she took part in a Best in the Profession contest and won it. - In 2008 the crisis hit the purse in a hard way; alas, the salary is lagging behind the inflation. We were planning to go on vacation in summer, looks like we have to give it up, which is a pity. The work load has remained the same. As a result of reductions in our laboratory (almost by half), work has to be done by the remaining personnel. One person finds it hard to cope with the load that used to be shared by two people. People get exhausted not only physically but morally, there is a risk of resurgence of a couldn’t-care-less attitude among workers. We have a shortage of younger people, the plant needs people with experience but there is nobody we can share our skills with. But having participated in The Best in the Profession contest, I have come to trust the Company for which I work. I was immensely impressed by the organization and scale of events conducted by Sibur.
Dina Maranina, head of laboratory of ethylene oxide and glycols (Shop No. 612, ZOEiG, ǶǨǶ SIBUR-Neftekhim). In 2008, Shop No. 612 came out on top in a contest on labor safety, fire safety, production culture, and environmental protection, among production divisions of ǶǨǶ SIBUR-Neftekhim. - The economic crisis is beginning to affect the family. Expenses are high: my daughter will graduate from gymnasium this year and is preparing for university exams, the son will go to school next year; we need to help our retired parents. My career plans changed because of the crisis. I was supposed to fill the vacancy of shop supervisor in February 2009 when the supervisor of Shop 612 was to retire. But the position was reduced in our Shop, so I remained head of laboratory and am preparing for a qualification test to be acting shop supervisor. But I believe that ǶǨǶ SIBUR-Neftekhim is going through the current situation with dignity. The plant management has to reduce financing of PPOF, employee training costs, and to optimize personnel numbers. Replacement of worn and obsolete equipment has to be postponed. If such measures are required to help the plant work steadily in the crisis conditions, we shall have to live through this period.
36 Boris Chernyshev, shift foreman, Shop DK 14, ǶǨǶ Voronezhsintezkauchuk. A member of the third generation of plant workers. In 2008 he graduated from the Moscow Academy of Fine Chemical Technology under SIBUR’s training program. - Young people do not feel the crisis so acutely. We are focused on finding new technology solutions that will take the plant on to a new level. Sooner or later the crisis will end – the management of the plant and the Holding realize this quite well. So my work at the Youth Science and Technology Center does not allow me to be despondent. There is just no time for that.
37 Programme of Social Initiatives
Helping the Right Way Good will initiatives in respect of the public have long become part of today’s corporate style, the right thing to do for companies that embark on the road of stable development. SIBUR is no exception. Being socially active, the Holding assists thousands of people, improves quality of life in its regions, and maintains working relations with regional administrations. In 2008, SIBUR’s spending on charity amounted to 630.497 million roubles, including 352.308 million roubles spent within the framework of regional cooperation. The Company believes that its substantial expenditures on improvement of social infrastructure in the regions of its presence are not a noble gestures, it is justified business behavior. SIBUR’s Code of Corporate Ethics emphasizes that: “To be a decent partner in a region of presence is to work together to improve the life of local communities in the long run, recognizing our mutual interest in the development of the territory and its economic potential”. By helping the regions the Company builds effective relationships with local authorities, experts and the public, taking advantage of the opportunity to develop its business in a specific territory, implement new projects, and to engage qualified personnel. The Company strives to achieve optimal balance between its social obligations and capabilities by striking a balance between the region’s requirements and its business interests. The Holding has been carrying out centralized and targeted charity projects under a special regional program. In 2008, OOO SIBUR distributed a total of 25 million roubles among 33 recipients. The following priority areas of corporate charity have been identified: ecology, support for chemical education, and social facilities in the Holding’s territories (so-called “small-scale assistance”). In addition, the Holding’s enterprises assist individuals and support social infrastructure facilities in their regions. The enterprises are free to select those whom they assist, and autonomously form their package of charity programs.
“Small-scale Assistance” In accordance with the Company’s charity concept, assistance is rendered first of all to social infrastructure facilities around enterprises where most employees live. The so-called “small-scale assistance” program in 2008 was not so small. By request from OOO Tomskneftekhim, SIBUR has been helping day-care centers for the second year running. Finding a place in a kindergarten is a problem in Tomsk, like in many other big cities. The problem has been largely resolved for Tomskneftekhim employees thanks to SIBUR’s assistance. In Novokuybyshevsk, SIBUR helped the municipal library to equip a literary salon where ǶǨǶ NNK holds many of its events. The Holding’s money was used to repair a sports gym at School 19 where the plant’s sports teams train. The children’s’ and adolescents’ sports school “Basketball” of Tolyatti has been the Holding’s partner in conducting the Volga Autumn competitions for several years. SIBUR helps the school to buy sports uniforms and equipment for young sportsmen.
38 In 2008, SIBUR was approached by a Tyumen social organization called Tobolskoe Zemlyachestvo many of whose members are veterans and retirees from among former builders and employees of the Tobolsk Petrochemical Plant. The organization used SIBUR’s money to conduct celebrations for veterans on the Victory Day and the Old Persons Day. Some of the funds were used to assist those whose houses needed repairs.
SIBUR Alleys
Environmental projects are traditional efforts to minimize possible environmental risks and improve the Company’s environmental reputation. In Novokuibyshevsk, SIBUR’s money helped build a garden with various species of lilac in the city park. The saplings were also planted by employees of ǶǨǶ NNK. A mountain ash alley was planted in the Industrial District of Perm. The main participants in that event were local children and children of employees of ZǨǶ SIBUR- Khimprom. Inhabitants of the town of Volzhskiy enjoyed a rose garden in the town park all summer. The money to plant the roses and care for them was allocated by SIBUR. Assistance was rendered to the Environmental Protection Department of KhMAO. The money disbursed for the environmental action “Save and Protect” was spent to plant a memorial alley in the “City Forests” stow of Hanty-Mansiisk, to clear natural springs, and organize environmental inspections by young foresters around seven settlements of the region. Two projects in Nizhny Novgorod were aimed at environmental education of the local population. The first one was a contest of articles on the subject of Ecotour-2008. Over 100 works were received from 30 oblast and district publications for the contest. The second educational project addressed children. SIBUR sponsored an environmental nomination “We Are Your Children, Earth” within the framework of a contest “A Child’s Voice” conducted by a popular Nizhny Novgorod publication “The City and Its Inhabitants” together with the oblast Legislative Assembly and the Government of Nizhny Novgorod oblast. In 2008, SIBUR allocated funds to equip a biochemical laboratory at the Young Natural Scientists Station in Volzhsky. The laboratory will help children to regularly carry out environmental and biological tests of soil, water and air.
Chemical Knowledge Petrochemistry and gas processing are among the most complex technologies. The program to support training in chemistry is designed to highlight the nature of SIBUR’s activities. The Perm State Polytechnic University is ǶǨǶ SIBUR-Khimprom’s constant partner in the training of highly qualified specialists for the enterprise. The University used SIBUR’s money to repair the laboratory of analytical chemistry and physical- chemical methods of analysis. The Russian Academy’s Institute of Petrochemical Synthesis received funds from SIBUR to conduct an International School-Conference of Young Researchers on Petrochemistry. The Holding’s employees were among the participants.
39 With SIBUR’s money the non-profit partnership “Assistance to Chemical and Environmental Education” prepared a video on “Demonstration Tests in Chemistry” designed for chemistry teachers – participants in the seminar on Chemistry for The Life of Future Generations. The seminar is scheduled for the spring of 2009. Moreover, we should note the targeted assistance rendered to the Lomonosov Moscow State Academy of Fine Chemical Technology (MITKhT). SIBUR implements joint programs with MITKhT to develop the company employees and satisfy the acute need for information on modern achievements in chemistry and chemical technology experienced by university professors and school teachers.
Personal Initiative It is symbolic that in these hard times, in the autumn of 2008, a new area emerged in SIBUR’s charitable works – personal participation of employees in charity. A Charity Foundation operates as a volunteer corporate entity of ǶǶǶ SIBUR – the management organization of ǶǨǶ SIBUR Holding. The Foundation’s first appeal was sent to employees on 25 September 2008. By the end of the year the Foundation received 79950 roubles, and over 50 people took part in the work. The Foundation raised 27850 roubles for a soldier who lost a leg in Tskhinvali. The assistance was rendered on the initiative of colleagues from Krasnodar where the injured soldier was born. Having learned from the SIBUR electronic news bulletin of the action undertaken by their Moscow colleagues, employees of Tomskneftekhim joined the fund raising campaign and collected 23450 roubles. 24500 roubles were raised for a gravely ill girl who was in intensive care. The request to help the girl was sent out by a female employee of the Moscow office. The money was needed to buy expensive medicines. Six employees of the Moscow Office donated blood for a child of an employee of OO Tomskneftekhim who was treated at the N.N. Blokhin Oncology Center of the Russian Academy of Medical Sciences. Those who were unable to donate blood for various reasons collected money – 9500 roubles. SIBUR has been a corporate member of the program “Illustrated Books for Little Blind Children” for a few years. Employees got involved in the program in 2008. 18100 roubles was collected. The main outcome of the Charity Foundation’s work has been the development of a mechanism of efficient assistance to people. When a security guard of an enterprise died leaving three children in February 2009, over 60 employees of the Corporate Center responded to an appeal of the Charity Foundation. Over 250 000 roubles was collected and handed over to the family in two weeks. The crisis has generated another idea: channel some corporate funds into charity. The first example was the Charity Instead of Gifts campaign. On 16 February 2009, the SIBUR Charity Foundation asked employees of the Corporate Center to state their opinion on the idea to use the 700 000 roubles allocated for celebration of 23 February and 8 March for charity. A poll conducted on the corporate internet portal showed that 90% of the Corporate Center’s employees supported the idea. Beneficiaries of that assistance were 11 day-care centers in 6 regions of the Company’s presence.
40 Our Safety Is Our Life
Collective Value Effective processing of hydrocarbons and other inputs is a priority at SIBUR. “For the purpose of the Company’s sustainable development all its projects and initiatives must unconditionally include safety, for the workers, for society, and the environment”, - says SIBUR’s Corporate Code. – “No consideration of economic gain may bring into question human lives and health. SIBUR seeks to turn safety into a value reference point for each employee, requiring them to be constantly mindful of possible risks of petrochemical production and to consciously obey all safety requirements”. Speaking in late 2008 at a meeting on labor protection and production safety, SIBUR’s vice-president Vladimir Razumov referred to the outcomes of “a not very successful year of 2007”: “The situation was extraordinary. Since that meeting there emerged a realization that a positive result can be achieved by administrative measures alone only for a short period.” In 2008, SIBUR made an active effort to adapt international experience that showed that fostering loyalty to a corporate system of labor protection and industrial safety management can do away with formalism and buck slips, and create truly safe working conditions for people. The Company does not skimp on safety policies - in 2008, expenditures to finance labor protection and industrial safety measures reached 526 million roubles. No accidents or fires were reported in the Group in 2008. The Company has set itself the task of ensuring openness and transparency in respect of all incidents. Responsibility for late reporting or concealment of incidents at SIBUR’s facilities was substantially toughened. So over a year the number of reported incidents increased from 92 to 105. As a result, in 2008 there was a spike of 14% in the number of reported incidents at SIBUR’s production facilities: from 92 to 105 cases. In 2008, the injuries index in SIBUR, according to the LTIFR international system, was 0.47, which is a good indicator for big petrochemical and chemical companies. In 2008, the total level of injuries among SIBUR’s employees dropped by 38% compared to 2007 (from 63 to 39 injuries). Nevertheless 2 people were fatally injured in 2008. Assistant locomotive driver at the Kaprolaktam plant of ǶǨǶ SIBUR-Neftekhim was injured in the cooling chamber of the locomotive because of the absence of a guard housing on the revolving ventilator gearing. Such a guard housing is required by operational rules, and the deputy director general for production and other responsible people were punished for their negligence. Appropriate accident prevention measures were taken at the plant, and an information note was sent to all of the Holding’s plants to prevent similar occurrences. The second case of fatal injury was due to a breach of traffic rules: a driver of ǶǶǶ Nyagangazpererabotka got into an accident, he was not wearing a safety belt and his injuries proved fatal. The plant’s drivers went through an information and education course, and administrative measures were also taken.
41 Schematics are identical to those of last year: Chart. Incidents.
250 233
200
150
105 100 92
70
51 50
0 2004 2005 2006 2007 2008
Chart. Accidents
4
3 3
2 2 2 2
1
0 0 2004 2005 2006 2007 2008
Chart. Fires
42 Chart. Injuries (including fatal), man.
Inspections and Outcomes The year of 2009 was scheduled to be a stage of development and implementation of updated corporate safety standards and instructions, e.g. Requirements for Work wear, Special Footwear and Other Personal Protective Equipment will be implemented. In this sense, 2008 was a preparatory year. Experts examined the most effective international measures and audited SIBUR’s practices. Every tenth production incident is caused by the absence or incorrect use of personal protective equipment (PPE). That is why 3M-Russia, a company with extensive experience in PPE, conducted a series of training seminars at the Company’s plants. The deliverables included recommendations on PPE that ensure maximum protection of the organs of hearing, breathing and sight. DuPont’s experts diagnosed occupational safety management at Tomskneftekhim and Toliattikauchuk; Tobolsk-Neftekhim and SIBUR-Neftekhim were audited by in-house experts. Rostechnadzor also participated in inspections of SIBUR’s enterprises. The inspection identified Tobolsk-Neftekhim as a positive example. Only five minor breaches were identified and no compliance orders were issued. “Only” means that there were 50 or more violations at some other enterprises. “Based on the findings, we had meetings with heads of enterprises, chief engineers, chiefs of occupational safety services. The findings were seriously discussed”, - says Aleksandr Moroz, Director of the Occupational Safety and Environment Department. The auditors’ recommendations were included in the approved program for the development of a safety culture and occupational safety management system for the period ending in 2012.
Stars of Safety Occupational safety and labor protection is a recurrent theme in the Company’s communications, both internal and external. It is expounded most convincingly and in a more motivating manner in presentations by top managers. So safety promotion 43 occupies more and more time in the managers’ schedule both at the Corporate Center and regional companies. The Company rewards both the information activity and its results. “We have included in the bonuses criteria for 10 top managers of an enterprise specific indicators of occupational safety and labor protection”, - says Roman Tumasiev, Director General of ǶǶǶ Nyagangazpererabotka. – “We have seen a significant effect – a drop by 14-15% of breaches of occupational safety and labor protection.” Involvement of employees at all levels in safety management has proved more difficult. “Here success has not been that great yet”, - admits Aleksandr Moroz. – “Discussion of corporate occupational safety policy has begun at the plants, much attention is being paid introductory briefings, some employees have participated in the development of programs.” How to motivate an employee to participate in day-to-day enhancement of occupational safety? Progressive motivation schemes have been implemented at some enterprises. One of the testing grounds for innovation in occupational safety and labor protection is ǶǶǶ Yugragazpererabotka. Director General Aleksandr Sleptsov says: “In 2008, we upgraded a number of installations under the program of risk and performability assessment at the GPP. In addition, we have implemented occupational safety education and motivation programs such as “5 Stars”, and “Work wear”. This way, we not only minimize risks, we accept and take them into account, which makes it possible to look into the future with confidence.” At the beginning of each period of the “5 Stars” program, each employee is issued with all the five stars. If an employee breaks safety rules, a star will be taken away by decision of a special committee. If an employee loses a star, he or she has to work for three months without breaking occupational safety, labor protection and environmental management rules, the star will be restored to the employee. Withdrawal of all the five stars entails dismissal. The program has another side to it - rewards: if an employee has prevented some incidents that might have had dangerous consequences, if an employee is active and keeps coming up with proposals for improvements in the occupational safety system, he or she receives first a silver star, then a gold star, then a diamond one. These stars are normally accompanied by bonuses. The emphasis on rewards is a distinguishing feature of the “3 Stars” (analogous to “5 Stars”) at Tobolsk-Neftekhim. SiburTyumenGaz implements a system of collective motivation in the area of occupational safety: if a team does not commit a breach, all its members receive bonuses based on results of a period. In 2009, these and other pilot projects will be extended to the entire Holding.
SIBUR’s people speak...
Evgeni Ogorodnikov, distillation operator, worker category 6, Shop No. 602, Ethylene Oxide and Glycols, ǶǨǶ SIBUR-Neftekhim. In 2008, the shop was closed for repairs for a very limited time (8 days instead of the usual 30). - The main thing during a crisis to continue working and not to stop production. You need to maintain a relationship with partners and not to lose sales. The company has managed to achieve all of this: virtually all plants are working, though not at full capacity. In 2008, the management and safety specialists toughened controls over compliance with requisite norms: possession of required protective equipment; work
44 wear in good condition; hardhats, gasmasks, goggles, etc. Foreign objects and production waste are regularly removed from production sites, equipment performance control has been enhanced. Requisite exercises to train personnel in action to be taken in accident situations are conducted both in daytime and nighttime. But rapid and effective mitigation requires a certain number of well-trained people. Fortunately, we still have such people. I hope this will be so in future. I would also suggest more thorough medical check-ups, and timely treatment for people. And we should not forget about healthful and dietary meals.
Andrei Litvinov, operator, monomers production, ǶǶǶ Tomskneftekhim. In 2008, he was awarded the title of “Past Master” (based on two consecutive victories in a professional contest at the enterprise). In 2008, he was named the best equipment operator in SIBUR. - The crisis can be seen in a whole number of things happening at the enterprise. There are inspections in warehouses – unscheduled stocktaking, a search for reserves. Logistics have been optimized, the sales department has worked hard, and we managed to preserve our sales volumes despite the decreased prices of our products. We are tightly linked to the global situation – if the price of plastics does not fall below the critical level, a big company like SIBUR has every chance of battling through.
45 Environmental Practice
Greater Benefit SIBUR makes an important contribution to utilization of non-renewable natural resources, being Russia’s biggest processor of associated petroleum gas (APG) which accompanies extraction of oil. According to official data, of the 55-60 billion m cubic of APG produced in Russia some 20 billion m cubic is burned in oil-fields10. Only 26% of APG is sent for processing, and most of it is processed at SIBUR’s enterprises. Burning of associated gas is unacceptable for two reasons. Firstly, burning of APG results in substantial emissions of pollutants and degradation of the environment in oil producing regions. Secondly, burning means destruction of a valuable resource for the production of petrochemicals. Utilization of APG thus helps to solve economic and social tasks, and to mitigate damage to human health by reducing noxious emissions. The task of efficient utilization of APG is resolved by SIBUR together with the oil companies ǶǨǶ TNK-BP, ǶǨǶ Rosneft and ǶǨǶ Gazprom neft. The volume of APG processed by the company is constantly growing. While in 2007 the company accepted for processing 13 billion m3, in 2008 – 15 billion m3. The plans for 2009 provide for increasing the processed volume to 16.5 billion m3. The petrochemical company thus recompenses society and nature for the damage necessarily caused by its activity. Chart. Dynamics of accepting APG for processing, billion m3
In April 2009, SIBUR was awarded an honorary diploma of the Russian Union of Industrialists and Entrepreneurs “For the Best Solution in the Utilization of Associated
10 Yazev V.Ǩ., Chairman of the RF State Duma Committee for Energy, Transport and Communications. Proceedings of the International Conference on Utilization of Associated Petroleum Gas in Russia, 9-10 October 2007. P. 14
46 Petroleum Gas”. According to Mikhail Karisalov, Vice-President of SIBUR and Head of the Hydrocarbons Directorate, “the award confirms the effectiveness of SIBUR’s efforts regarding competent processing of raw materials and reduction of environmental risks through utilization of APG”. SIBUR continues its policy of attaining the level of environmental safety practiced by the world’s leading petrochemical companies. In 2008, SIBUR’s enterprises produced 14.8 thousand tons of petrochemical products, 7% more than in 2007. The output of dry stripped gas (DSG) in 2008 amounted to 13306 million m3, which is 17% more than 2007. Despite the overall growth of production at the Holding’s enterprises, man-made impacts on the environment increased on a smaller scale. Atmospheric emissions grew 4% (from 54.3 to 56.9 thousand tons), the volume of household and production waste – 6.8% (from 101.8 to 108.6 thousand tons). And the volume of wastewater dropped 4.9% (from 48.9 to 46.5 thousand tons).
Systemic Contribution SIBUR sets itself an explicit goal – to reduce payments for negative environmental impacts as a share of total environmental management costs. In 2008, that share was just 0.7% - some 29 million roubles. By contrast, actual funding of the targeted program “Regulation of the Quality of the Environment”, with account taken of completed unscheduled environmental protection measures, grew 2.5 times to over 2.2 billion roubles. This notable growth is largely due to considerable investment in the implementation of modern technologies at ǶǨǶ SIBUR-Khimprom and ǶǨǶ Voronezhsintezkauchuk. Chart. Environmental protection expenditures, million roubles
ɦɥɧ. ɪɭɛ
4500 4162,4 4000
3500 3258,3 2921,8 3000
2500
2000
1500
1000
500
0 2006 2007 2008
47 Chart. Dynamics of environmental protection expenditures, million roubles
2500 2246
2000
1500
1000 900 828
500
0 2006 2007 2008
In 2008, the Holding carried out a number of important environmental measures: regulations were developed to operate and fill pits with industrial waste; design and exploration work was carried out to transition to modern zeolite technology for the production of ethyl benzene; technology was developed for reclamation of industrial waste pits; more effective methods of decontamination of effluent waters were investigated. A number of enterprises carried out upgrades and repairs of equipment and buildings, as well as treatment plants; local treatment plants were built; cooling towers were renovated; flares were repaired; fish protecting installations were improved; installations and equipment for entrapment and decontamination of air polluting noxious substances were overhauled. The Holding also started preparing itself for compliance with international conventions and protocols on environmental management. An inventory was carried out of electrotechnical equipment containing polychlorinated biphenyls (PCBs), recommendations are developed on safe use of equipment and optimal utilization of PCBs in accordance with the Stockholm Convention on Persistent Organic Pollutants.
Green Certificate In 2008, a number of seminars and training programs were held for SIBUR employees on labor protection and environmental management within the framework of the Corporate Environmental Management System (CEMS). An independent audit carried out at the Holding’s enterprises and divisions demonstrated that CEMS was successfully implemented, has been maintained, continues to develop and fully complies with ISO 14001:2004. A supervisory audit was conducted in 11 divisions of the Corporate Center and at 5 enterprises: Nyagangazpererabotka, SIBUR-Geotekstil, Tomskneftekhim, Tobolsk-Neftekhim and Voronezhsintezkauchuk. No non-compliance was observed during the audits. A certificate was thus obtained from BV Certification, a certification entity, that covers 23 sites of the subsidiaries. It was confirmed in 2009. BV Certification auditors noted such a strong feature of SIBUR’s environmental management as the personnel’s interest and involvement in the identification of 48 environmental aspects of production, priority planning of environmental measures, and modernization of production.
European Regulations The European regulations on safety of chemical products - REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) came into effect on 1 June 2007. In pursuance of REACH, in 2008 SIBUR carried out pre-registration of 77 substances on the list of exports to EU countries. REACH regulates production of chemicals, their marketing, and all aspects of their use in the nations of the European Union. The requirements of REACH, which should be observed by all manufactures, are driven by dangerous properties of substances, their impact on the environment and human health. Compliance with the strict European norms is an important indicator of the high quality and environmental safety of SIBUR’s products.
SIBUR’s people speak...
Pavel Kolkutin, engineer, Environmental Safety and Labor Protection Section, =ǨǶ SIBUR Khimprom. In 2008, he joined the company and received an advanced training certificate, and a certificate for participation in the performance of the KVN team of ZǨǶ SIBUR-Khimprom in Dzerdzhinsk. - In fact, I did not notice any strong impact of the economic crisis on daily life. Whether mine or my relatives. Thank God, there are no problems with the salary, it is paid on time, it has not been cut. The only financial implication of the crisis is bonuses. They were slightly cut, but it is not that important. In general I am proud of my enterprise because I have never seen that retirees are paid average monthly wages for six month after retirement. Our company is not a pinch-gut.
Olga Kondratenko, machine operator, raw material preparation and release of semi-finished and finished products, Flammable Liquids Unit, Shop I-1-4, FL acceptance, storage, release of hydrocarbon gases, ǶǨǶ Kauchuk. In 2008, she passed an exam to qualify as shift foreman. - There are no families unaffected by the crisis. We have to plan our family budget more carefully because prices of food, housing and utilities bills, transport fare are going up, and the salary is not indexed. My husband also works at the OAO Volzhskiy Sintez. My son is a student. It is encouraging that despite the economic vicissitudes the level of labor protection is constantly growing. For instance, we used to pour MTBE without protection. We now have standpipes for airproof loading of the product. This improves environmental safety because MTBE vapor does not evaporate into the air. The crisis is not forever, and clean air, water and soil will be needed for our children and grand children.
49 You can send your views on this report and suggestions for future reports: Corporate Communication Department ǶǨǶ SIBUR Holding 16, bldg 1, Kzhizhanovzkogo Street, Moscow, Russia
Tel. (495)937.17.26
E-mail: [email protected]
You can find the Company’s Social Reports for 2006 and 2007 at www.sibur.ru on the page “Social Responsibility”
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