TAIF GROUP Sustainability Report 2012 Member of Russian Business Social Charter www.nknh.ru Sustainability Report 2012 KEY FIGURES of 2012 RUB 125,2 billion sales of products Over 500 thousand tons total value of rubber shipped for export 88% aggregate share of rubber and plastics sales in the export structure 102,7% industrial production growth rate RUB 33 864 average wage of personnel (8.3% higher than in 2011) 209 business events to the amount of RUB 3 billion executed under the Ecological program for 2007-2015 (in 2012 – 76 business events for RUB 829 million) In the past 6 years hazardous emissions to atmosphere were reduced by more than 16 thousand tons; waste water discharges in water basins decreased by 1,8 million cubic meters RUB 128 million economic effect of the Company’s entrance to the electric power wholesale market RUB 1,4 billion social benefits and transfers to the Company’s employee KEY EVENTS of 2012 45th anniversary of the first production Completion of a number of projects for expansion of rubber production plants, and revamping of ethylene oxide plant, and construction of ABS- plastics production plant Conclusion of first contracts under the largest project within the Strategic Program – construction of the new 1,000 kta olefins complex, including polyolefin facilities Absolute fulfillment of commitments to the government under the state contract both in terms of creation of new elastomers, and in the project of the catalyst production for isoamylene dehydrogenation jointly implemented with Kazan State University The Company is again among the leaders in the rating of the most efficient companies and enterprises of Russia Several awards won for development of products with improved characteristics, for the introduction of energy-saving and environmentally friendly technologies, and for active work in the labor market Development of the Corporate Social Responsibility Certificate of the member of the Social charter of Russian business TABLE OF CONTENTS ADDRESS OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ADDRESS OF THE GENERAL DIRECTOR ABOUT THE REPORT ABOUT THE COMPANY 10 12 Structure of the Company 14 Company’s development strategy 16 Economic efficiency 17 Products 19 World market standings CORPORATE SOCIAL RESPONSIBILITY 22 25 Risk management 27 Interaction with stakeholders THE COMPANY AND SHAREHOLDERS 32 34 Corporate management 34 Management bodies of the Company THE COMPANY AND BUSINESS PARTNERS 36 39 The Company activities in the field of produce quality and safety 40 Practical approach to procurement activities 41 Customer satisfaction 42 Marketing communications THE COMPANY AND EMPLOYEES 44 46 Personnel management 50 Personnel development system 57 Social partnership 60 Social programs for Company employees SAFETY AND HEALTH OF EMPLOYEES 68 70 Occupational and industrial safety policy 71 Occupational and industrial safety training system 72 Employees’ life and health preservation is the Company priority 73 Program for improvement of working conditions and support of employees 2 OAO Nizhnekamskneftekhim | Sustainability report | 2012 ENVIRONMENTAL ACTIVITIES 76 78 Environmental image of the Company 80 Arrangement of environmental activities 81 Main events relevant to environmental protection 88 Environmental monitoring 89 Results of environment-related activity THE COMPANY AND COMMUNITY 90 93 Social programs developed jointly with the community 100 The Company and the science 103 45 events in honor of 45th anniversary of the first production output 110 Awards of the Company INDEPENDENT AUDITOR’S OPINION ON CERTIFICATION 112 OF THE SUSTAINABLE DEVELOPMENT REPORT 116 TABLE OF STANDARD GRI ELEMENTS 121 FEEDBACK QUESTIONNAIRE 123 LIST OF ABBREVIATIONS 125 APPENDICES 128 CONTACT INFORMATION 3 ADDRESS OF THE CHAIRMAN OF THE BOARD OF DIRECTORS Dear readers, colleagues, partners and friends, Following the principles of corporate social responsibility, OAO Nizhnekamskneftekhim presents the Sustainability Report for 2012. In implementing its strategic objectives, the Company fully understands that a prerequisite for sustainable and effective development of business in the long term is the unconditional adherence to the principles of social responsibility. The main mission of Nizhnekamskneftekhim is production of high-quality and competitive chemical products by the most environmentally friendly methods that are demanded at the global market, thus ensuring the growth of society welfare, and development of the regional economy, and improving the living standards of the Republic of Tatarstan and the Russian Federation in general. The Company achieved the best ever results in the reporting year. In spite of the favorable market environment, most of the credit for getting such high operating and financial performance should be given to the highly professional personnel of the Company. OAO Nizhnekamskneftekhim is now the largest petrochemical complex in Russia and Europe owing to commitment of all employees. At the same time, though there was a tremendous increase in the volume of production for the last 10 years, the optimum balance between its export and supplies 4 OAO Nizhnekamskneftekhim | Sustainability report | 2012 ADDRESS OF THE CHAIRMAN OF THE BOARD OF DIRECTORS to domestic market is maintained, The Sustainability Report of OAO which is about 50/50. Increased Nizhnekamskneftekhim for 2012 production of high-quality and most presented to your attention contains all popular petrochemicals creates the detailed information about the synergetic effect – growth of domestic Company's activities in the field of market, development of small and social partnership with the employees, medium business enterprises, with residents of Nizhnekamsk and the strengthening the position of the Republic of Tatarstan, which is enterprises of our business partners inextricably linked to its production and our customers. New jobs are potential. created and social conditions are improved in our country, prosperity of Sustainable development of OAO the population of Russia and Tatarstan Nizhnekamskneftekhim based on trust is growing. This is our primary and cooperation, improvement of objective. transparency, greater public awareness of the Company's activities, increase in OAO Nizhnekamskneftekhim pays the quality and standard of living of special attention to participation in workers, residents of Nizhnekamsk, the social and charitable projects aimed at Republic of Tatarstan and the Russian development of education, and Federation, would in the future serve children and youth sports, and creative as a guarantee to achieve the strategic activities, the programs are goals and challenges for continuation implemented to improve the quality of of a dynamic and sustainable health services in the city of development of the Company. Nizhnekamsk, the issues of maximum preservation of the nature and the environment are of paramount importance. During the reporting year, OAO Nizhnekamskneftekhim spent more than 3.7 billion rubles on social A. Shigabutdinov services, environmental protection, The Chairman of the Board of Directors charity, sponsored financing of OAO Nizhnekamskneftekhim preferential tariffs for thermal energy for the population. Nizhnekamskneftekhim group of companies paid more than 6.7 billion rubles into the consolidated budget of the Tatarstan Republic, which is about 5 times the amount of the wage fund of cultural workers of the Tatarstan Republic. 5 ADDRESS OF THE GENERAL DIRECTOR Dear partners, colleagues and friends, I would like to bring to your notice the Sustainability Report of OAO Nizhnekamskneftekhim for the year 2012, in which the Company has taken further steps in disclosure of information on various aspects of its activities in areas related to sustainable development. During the reporting period, the Company has successfully fulfilled the production plan, and revenue from sale of products amounted to 125.2 billion rubles. Industrial production growth rate was 102.7 percent. Production in excess of plan and the earned profit made it possible to pay in December the annual bonuses at year-end. Average salary in 2012 was 33,864 rubles, which is 8.3% higher than last year. As part of the Company’s Strategic Development Program until 2020 the most significant events in the reporting period include the completion of a number of projects for expansion of rubber production plants, and revamping of the ethylene oxide plant. The most important of these is completion of ABS-plastics plant construction. During 2012, the first license agreements for all technologies have been concluded as well as Basic Engineering and Extended Basic Engineering Contracts under the largest project within the Strategic Program – construction of the new 1,000 kta olefins complex, including polyolefin facilities. While working on improving the efficiency of operations, we attach great importance to the social responsibility of business. Our priorities in the area of corporate social responsibility (CSR) are focused on five main areas: the environment, education, health, personnel and charity. 6 OAO Nizhnekamskneftekhim | Sustainability report | 2012 ADDRESS OF THE GENERAL DIRECTOR Preservation and development of the Company cooperates with the relevant The hockey team Neftekhimik is a environment is one of the top priorities institutions of higher and secondary special pride of the Company’s sports of the Company. We continuously special education, organizes life that plays in the Kontinental Hockey improve the system of environmental